GM upbeat on 2024, betting on a ‘resilient’ US economy

General Motors on Tuesday reported a decline in fourth-quarter pretax profit, but gave investors a positive outlook for 2024 and suggested more capital could be returned to shareholders.

“There is a growing consensus that the U.S. economy, job market and auto sales remain resilient,” GM Chief Executive Officer Mary Barra told investors in a letter.

In contrast, Tesla CEO Elon Musk said last week that he expects the world’s most valuable automaker to continue experiencing slow growth over the next year, with Tesla’s market capitalization at $80 billion. It warned investors that it had triggered a declining sell-off.

GM is banking on strong demand for internal combustion trucks and SUVs in North America after 2023 deliveries fell short of previous plans, and hopes to cut costs and increase sales of a new generation of electric vehicles. It’s coming. GM expects overall EV sales to increase from 7% of the U.S. market in 2023 to 10% this year.

GM Chief Financial Officer Paul Jacobson said on a call with reporters that the company expects its electric vehicle business to start reporting variable profits by the second half of this year.

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In a letter to shareholders, Barra highlighted the automaker’s move to return $12 billion in cash in 2023 through a $10 billion share buyback and a 33% dividend increase.

GM “will continue to return excess free cash flow to shareholders,” the company said in a presentation.

The automaker expects adjusted pretax profit to be in the range of $12 billion to $14 billion this year, compared with $12.4 billion in 2023. GM plans to keep capital spending roughly flat from last year’s $10.7 billion.

GM said its forecast for 2024 is in the range of $8.50 to $9.50 per share, compared to $7.68 in 2023. Due to the reduction in stock through share buybacks, the company is expected to increase its stock by $1.45 per share in 2024. This will be offset by tax and interest payments of 50 cents per share.

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For the fourth quarter, GM reported sales of $43 billion and net income of $2.1 billion, an increase of 5.2%. Adjusted pre-tax profit fell 54% to $1.8 billion. The company said the decline reflected the impact of last fall’s United Auto Workers strike, higher costs at Cruise and a $1.1 billion writedown related to EV battery cells in inventory.

Spending at the company’s troubled cruise robo-taxi division will be cut by $1 billion, the company said. Cruise Corp. has suspended operations after one of its self-driving cars dragged a woman down a San Francisco street.

On July 24, 2023, unmanned robot taxi “Cruise” operates in San Francisco, California. ((Photo Credit: Tayfun Coskun/Anadolu Agency via Getty Images) / Getty Images)

An outside law firm’s report released last week found faults in Cruise management’s response to the Oct. 2 incident. The U.S. Department of Justice and the Securities and Exchange Commission are investigating. GM and Cruise said they are working together and intend to make the changes recommended in the law firm’s report.

Barra said GM would “restart with a renewed focus on cruise,” but did not provide a timeline in a letter to shareholders. GM reported that Cruise suffered a loss of $2.7 billion in 2023, which does not include $500 million in restructuring costs incurred in the fourth quarter due to layoffs in the division.

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Separately, GM faces growing challenges in China, once its largest market. China’s domestic automakers and Tesla are gaining market share with electric vehicles, cutting-edge infotainment technology and aggressive price cuts. Chief Financial Officer Paul Jacobson said GM expects to report a loss this quarter.

In China, he said, “we have a lot of inventory and we are dealing with the first quarter.”