General Motors reported a much stronger than expected fourth-quarter profit, lifting full-year results to record levels for the second straight year.
The largest US automaker also said Tuesday it is buying a $650 million equity stake in Lithium Americas, which will give it access to the raw material needed to build batteries to power 1 million electric vehicles a year in the first phase of production.
For the quarter, GM earned adjusted earnings of $3 billion, or $2.12 a share, up from $1.35 a share a year earlier and far better than forecasts of $1.69 a share from analysts surveyed by Refinitiv. That lifted full-year adjusted income to $11 billion, up from the $10.4 billion it earned in 2021, which had been its previous record.
The company said it expects strong earnings in 2023, though it expects it to slip a bit from the just posted levels, coming in at between $8.7 billion to $10.1 billion. But company CFO Paul Jacobson said its automotive business is expected to remain strong, with much of the decline likely to be at GM Financial. That’s due to the hit it will take from higher interest rates and the sinking value of used cars, as well as the higher interest rates resulting in an accounting hit to pension earnings.
“Actually that [guidance] is a strong statement about where we see things going, stronger than others” he told journalists on a call Tuesday.
No EV price cuts expected
Jacobson told journalists that GM does not expect to follow Tesla and Ford in cutting the prices for its electric vehicles.
“I don’t think there’s any surprise there’s increasing competition in the EV space,” he said. “Our customers are saying we’re priced well based on the demand that we’re seeing.”
The company’s investment in Lithium Americas is part of the company’s efforts to lock-up the supply of raw materials it will need to convert from traditional gasoline powered cars to electric vehicles. The Lithium Americas deal will not supply any lithium to the company until 2026, but Jacobson told media that “we’ve already achieved all the lithium we need through 2025.”
GM expects to build 70,000 EVs this year, a small fraction of its overall vehicle output. It sold 5.9 million vehicles in 2022, down about 6% from 2021 due to the shortage of parts needed to build all the vehicles for which there was demand.
“We continue to face some supply chain and logistics issues, but overall, things remain trending in the right direction,” said Jacobson.
But the company expects to be rapidly increasing its EV supply and offerings, with a new battery plant that opened last year, two more under construction and a fourth planned soon. GM has a target to build 400,000 EVs through the middle of 2024, and 1 million annually by 2025.
CEO Mary Barra predicted there will be more deals like the Lithium Americas one to be announced soon.
“We continue to pursue strategic supply agreements and partnerships to further secure our long-term needs,” she told investors.
Staff trims without layoffs
GM said it will reduce its staff in 2023, part of its effort to cut $2 billion in costs over the next two years. But unlike a number of major companies that have announced layoffs in recent months, company officials stressed GM would not be shrinking through layoffs. Instead the reduction would be handled through attrition.
GM did not disclose how many jobs might be trimmed, with Jacobson saying the company would end this year “slightly lower” in headcount.
GM has 167,000 employees globally, with 124,000 in North America. That includes more than 42,000 members of the United Auto Workers union. Those workers will get profit sharing bonuses of an average of $12,750 for the year, up nearly 25% from the $10,250 they received a year earlier.
Shares of GM (GM) soared more than 5% in pre-market trading on the results.
This story is developing and will be updated.