The GM logo is seen on the facade of General Motors' headquarters in Detroit on March 16, 2021.
Rebecca Cook | Reuters
DETROIT — Wall Street responded General Motors' Investor Day on Tuesday with a shrug.
Executives used the automaker's event in Detroit to focus on broad, short-term updates to the company's operations in an effort to differentiate itself from its competitors amid more challenging market and economic conditions. But it did little to move the company's stock.
GM believes it is uniquely positioned to outperform the industry and Wall Street expectations with its all-electric and traditional internal combustion vehicles. The company expects to improve profits for both types of vehicles as it aims for adjusted profits next year to be similar to 2024.
“That's where it all starts: scale, capital efficiency and cost discipline. These will differentiate us from others in our industry, and frankly, from our own past performance,” GM CEO Mary Barra said during the approximately three-hour event from manufacturing operations. in Spring Hill, Tenn.
GM President Mark Reuss even lashed out at his traditional crosstown rivals Ford engine And Stellantis. Without naming them, he said GM doesn't need a “skunkworks” team to develop affordable EVs like Ford and that cutting profitability, as Stellantis appears to be doing, won't work.
Nevertheless, investors have largely failed to reward GM as it leads the way in domestic EV production and outperforms many automakers in the profitability of its traditional gasoline and diesel vehicles.
Several Wall Street analysts were unchanged in their opinions and assessment of the automaker after the event, citing continued optimism but a lack of detail in the overall strategy.
Shares of GM, Ford and Stellantis in 2024
“A missed opportunity – no strategy, just tactics. GM's investor day showcased much of the company's current performance, but didn't provide much insight on strategy,” Bernstein analyst Daniel Roeska wrote in an investor note on Wednesday.
Others, such as Dan Levy of Barclays and John Murphy of BofA Securities, said that while the event lacked some details, it strengthened GM's positioning against competitors.
“GM's Investor Day yesterday didn't yield much in the way of sharp shifts in strategy. However, we believe it served as a strong reminder of GM's balanced and pragmatic approach – a thoughtful combination of ramping up electric vehicles alongside a sharp focus on execution while continuing to generate robust shareholder returns,” Levy wrote in an investor note on Wednesday.
GM shares closed essentially unchanged at $46.01 on Tuesday. The stock continues to rise nearly 30% this year, but 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 the event:
2025
GM expects 2025 adjusted earnings to be in a “similar range” to the company's results this year, CFO Paul Jacobson said.
Target adjusted earnings before interest and taxes for 2024 were between $13 billion and $15 billion, or $9.50 and $10.50 per share, compared to the previous guidance of $12.5 billion to $14.5 billion, or $9 to $10 per share share earlier this year.
Through the first half of 2024, GM earned $8.3 billion in EBIT-adjusted and generated $6.4 billion in adjusted auto free cash flow.
Jacobson said GM's capital spending is expected to be consistent with this year in 2025. GM's 2024 financial guidance includes expected capital expenditures between $10.5 billion and $11.5 billion.
Peak EV losses?
Jacobson said GM's earnings next year are also expected to show smaller losses for electric vehicles — predicting they will fall by $2 billion to $4 billion.
The EV tailwind for GM next year is split between savings from increases in volume and emissions and EV production credits, and lower costs, including for raw materials and battery production.
“We believe our EV losses peaked this year, and we are focused on significantly improving profitability next year,” Barra said.
GM said it has cut battery costs by $60 per kilowatt hour this year starting in 2023. Next year, GM expects to save another $30 per kilowatt hour.
Barra said the automaker is on track to produce and wholesale approximately 200,000 electric vehicles for North America by 2024, and will achieve profitability on a production or contribution margin basis by the end of this year. That guideline has been lowered from a previous target of 200,00 to 250,000 electric vehicles, which had been reduced from as much as 300,000 units.
Ultium
Ultium, which GM once touted as the ultimate solution for electric vehicles, is ultimately dead.
GM will drop the “Ultium” name for its electric vehicle batteries and supporting technologies, after years of promoting the brand as it rethinks its EV and battery businesses.
The company said the batteries and technologies will remain, but the name will disappear, except in manufacturing operations such as the “Ultium Cells” joint venture factories with LG Energy Solution.
Instead, GM plans to use a variety of battery chemistries and cell designs, former Kurt Kelty said Tesla director who joined GM earlier this year as vice president of Battery.
“GM is moving toward a multifaceted approach,” he said. “This should only help GM strengthen our position by producing more EV models than any other automaker.”
ICE costs, profits
GM also expects to continue growing sales and profits for traditional vehicles with internal combustion engines, or ICE, in the coming years.
“We expect the ICE industry to have a long tail and be an important part of our future,” Jacobson said.
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GMC
Earnings increases are expected to be supported by some cost savings, including consolidation of parts and options.
On average, GM experiences a reduction of about 10% in the total number of parts per vehicle, Reuss said.
Shareholder returns
Jacobson said GM will remain “active” in share buybacks following the completion this quarter of a previously announced initiative that is expected to retire about 250 million shares of the automaker's stock.
From 2022 to the end of 2024, GM will have returned about $20 billion to shareholders through share buybacks and dividends, Barra said.
The automaker aims to have fewer than 1 billion shares outstanding by early 2025, Jacobson said. According to FactSet, the company has more than 1.1 billion shares outstanding as of Wednesday morning.
Cruise and China
Wall Street was impressed by GM's updates on its controversial Cruise autonomous vehicle unit and its operations in China.
GM's China operations have suffered a decade of profit declines, and executives said they are discussing restructuring options with their China-based partners.
“In China, you will start to see signs of a turnaround this year, with significant reductions in dealer inventory and modest improvements in sales and market share,” Barra said.
As for Cruise, GM said next year's spending is not expected to exceed this year's. The company provided no updates on its long-term plans for the troubled robotaxi sector.
Since GM's investor day was two days before Tesla's highly anticipated robotaxi day, Wall Street analysts were expecting some sort of update on the company, especially regarding future financing or capital expenditures for the company.
Other comments
- Hyundai engineWhen 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.”
- Chevy Bolt: GM said the next-generation Chevrolet Bolt EV, expected to arrive next year, will be only slightly higher than the 2023 Bolt, which started at $28,795.
- PHEVs: GM reaffirmed plans to introduce plug-in hybrid electric vehicles, or PHEVs, in 2027. In the meantime, Reuss, citing single-digit market share, said GM “isn't missing anything right now without PHEVs.”
-CNBCs Michael Bloom contributed to this report.