The GM logo is seen on the facade of General Motors headquarters in Detroit on March 16, 2021.
Rebecca Cook | Reuters
DETROIT — Wall Street reacted to General engines investor day Tuesday with a shrug.
Executives used the event hosted by the Detroit automaker to focus on general and short-term updates of the company’s operations, with the aim of standing out from competitors in a market context and more difficult economic conditions. But that didn’t do much to move the company’s stock.
GM believes it is in a unique position to outperform industry and Wall Street expectations with its all-electric and traditional internal combustion engine vehicles. The company expects to improve earnings for both vehicle types as it targets adjusted earnings next year similar to 2024.
“It all starts here: scale, capital efficiency and cost discipline. These will differentiate us from others in our industry and, frankly, from our own past performance,” said GM CEO Mary Barra , during the approximately three-hour event from its manufacturing operations. in Spring Hill, TN.
GM Chairman Mark Reuss even went after his traditional crosstown rivals. Ford engine And Stellantis. Without naming them, he said GM doesn’t need a team of “skunkworks” to develop affordable electric vehicles like Ford and that cutting into profitability, as Stellantis appears to be doing, doesn’t work.
Still, investors have largely failed to reward GM for its lead in domestic electric vehicle production and for outperforming many automakers in the profitability of its traditional gasoline and diesel vehicles.
Several Wall Street analysts remained unchanged in their opinion and ratings on the automaker after the event, citing continued optimism but a lack of details on its overall strategy.
GM, Ford and Stellantis stocks in 2024
“A missed opportunity – no strategy, just tactics. GM’s investor day showcased many of the company’s current accomplishments, but didn’t provide much insight into strategy,” l Bernstein analyst Daniel Roeska in a note to investors.
Others, like Dan Levy of Barclays and John Murphy of BofA Securities, said that while the event lacked some details, it strengthened GM’s positioning relative to its competitors.
“GM’s investor day yesterday didn’t bring much in terms of radical changes in strategy. However, we believe it served as a strong reminder of GM’s balanced and pragmatic approach – a thoughtful combination of “increasing the number of electric vehicles and a particular focus on execution and cost while continuing to generate strong returns for shareholders,” Levy wrote in a note to investors Wednesday.
Shares of GM closed Tuesday virtually unchanged at $46.01. The stock remains up nearly 30% this year, but it has been under pressure lately due to several downgrades and price target adjustments by Wall Street analysts.
Here are several topics investors should know about at the event:
2025
GM expects its 2025 adjusted profit to be in “a similar range” to the company’s results this year, said Chief Financial Officer Paul Jacobson.
Its adjusted earnings before interest and taxes target for 2024 was between $13 billion and $15 billion, or $9.50 and $10.50 per share, up from the previous forecast of $12.5 billion at 14, $5 billion, or $9 to $10 per share, earlier this year.
During the first half of 2024, GM earned $8.3 billion in adjusted EBIT and generated $6.4 billion in adjusted automotive free cash flow.
Jacobson said GM’s capital spending should also be consistent in 2025 compared to this year. GM’s financial guidance for 2024 includes planned capital spending of between $10.5 billion and $11.5 billion.
Peak EV losses?
Jacobson said GM’s profits next year are also expected to show smaller losses for electric vehicles – they are expected to decline by $2 billion to $4 billion.
The benefits of electric vehicles for GM next year are split between savings from increased volume and emissions and electric vehicle production credits, as well as lower costs, including for raw materials and production of batteries.
“We believe our EV losses peaked this year and we are focused on significantly improving profitability next year,” Barra said.
GM said it has reduced the cost of its batteries by $60 per kilowatt hour this year compared to 2023. It plans to reduce another $30 per kilowatt hour next year.
Barra said the automaker is on track to produce and wholesale about 200,000 electric vehicles for North America in 2024, reaching profitability based on production, or contribution margin, d by the end of this year. These forecasts are down from the previous target of 200,000 to 250,000 electric vehicles, which was lowered from 300,000 units.
Ultium
Ultium, which GM once touted as the ultimate solution for electric vehicles, finally died.
GM will drop the “Ultium” name for its electric vehicle batteries and supporting technologies after spending years promoting the brand as it overhauls its electric vehicle and battery operations.
The company said the batteries and technologies would remain, but the name would disappear except in production operations such as its “Ultium Cells” joint venture factories with LG Energy Solution.
Instead, GM plans to use a variety of battery chemistries and cell designs, said Kurt Kelty, former Tesla executive who joined GM as vice president of battery earlier this year.
“GM is moving toward a multifaceted approach,” he said. “This should only help GM strengthen its position of producing more EV models than any other automaker.”
ICE costs and benefits
GM also plans to continue growing its sales and profits of traditional vehicles powered by internal combustion engines, or ICE, in the years to come.
“We believe the ICE industry will have a long tail and will be an important part of our future,” Jacobson said.
2025 GMC Yukon AT4 Ultimate
GMC
The profit increase is expected to be helped by some cost reduction, including consolidation of parts and options.
On average, GM experiences about a 10% reduction in total parts per vehicle, Reuss said.
Shareholder returns
Jacobson said GM would remain “active” in share buybacks after concluding this quarter a previously announced initiative that is expected to retire approximately 250 million shares of the automaker.
From 2022 to the end of 2024, GM will have returned about $20 billion to shareholders in the form of stock buybacks and dividends, Barra said.
The automaker aims to get below 1 billion shares outstanding by early 2025, Jacobson said. It had more than 1.1 billion shares outstanding as of Wednesday morning, according to FactSet.
Cruise and China
Wall Street was disappointed by GM’s updates to its struggling Cruise autonomous vehicle unit and operations in China.
GM’s operations in China have seen declining profits for a decade, and executives said they were discussing restructuring options with their China-based partners.
“In China, you will start to see signs of a turnaround this year, with a significant reduction in dealer inventories and modest improvements in sales and market share,” Barra said.
Regarding Cruise, GM said its spending next year should not exceed this year’s. It did not provide updates on its long-term plans for the struggling robotaxis sector.
With GM’s Investor Day coming two days before Tesla’s highly anticipated Robotaxi Day, Wall Street analysts were expecting some sort of update on the company, particularly regarding future financing or the company’s capital expenditures.
Other remarks
- Hyundai engine: Asked about GM’s announced non-binding memorandum of understanding with Hyundai, Barra said the teams are “working closely and making progress every week on what will become final agreements.”
- Chevrolet Bolt: GM said its next-generation Chevrolet Bolt EV, due next year, will be only slightly higher than the 2023 Bolt, which started at $28,795.
- PHEV: GM has reconfirmed plans to introduce plug-in hybrid electric vehicles, or PHEVs, in 2027. Meanwhile, Reuss, citing single-digit market share, said GM is “not missing anything at the moment without PHEV”.
—CNBC Michael Bloom contributed to this report.
