General Motors (GM) recently held its annual investor day, laying out its outlook for 2025 amid shifting market conditions and ambitious plans to expand its electric vehicle (EV) lineup. During the event, which took place on October 8, 2024, GM executives aimed to showcase their strengths and future strategies, but left some investors wanting more clarity.
CEO Mary Barra, speaking from the company’s manufacturing operations in Spring Hill, Tennessee, emphasized GM's commitment to scale, capital efficiency, and cost discipline. She confidently stated, "It all starts there: scale, capital efficiency and cost discipline. These will differentiate us from others in our industry, and frankly, from our own past performance." Despite her assertions, the stock market barely moved, indicating investor skepticism.
Several analysts were not swayed; they maintained their ratings on GM, expressing mixed feelings about the direction of the company. Bernstein analyst Daniel Roeska described the event as “a missed opportunity” for failing to reveal long-term strategies. Roeska noted, "GM's investor day showcased many of the company's current achievements but did not provide much insight on strategy." Likewise, Barclays’ analyst Dan Levy remarked on the lack of sharp shifts, but also acknowledged GM's balanced approach between ramping up EV production and focusing on cost efficiency.
One bright point for GM is its expected adjusted earnings for 2025, which are predicted to be similar to this year’s results, hovering around $13 billion to $15 billion before interest and taxes. CFO Paul Jacobson commented on these projections, indicating stable performance could carry over to the next fiscal year, which is particularly noteworthy considering the current downturns affecting the automotive market.
The company’s continued investment in electric vehicles is also anticipated to be a significant contributor to earnings. GM expects narrower losses on EVs next year, projecting reductions between $2 billion and $4 billion, thanks to lower raw material and production costs and increased efficiencies. They plan to manufacture about 200,000 EVs within North America by year’s end, which, though slightly below earlier estimates, demonstrates their commitment to electric mobility.
Despite these optimistic forecasts, GM faces considerable challenges within the broader automotive industry, where sales and consumer spending have been tepid. Analysts are predicting significant hurdles for car manufacturers, which can affect everything from production to demand for new vehicles.
GM also highlighted its strategy for traditional gas-powered vehicles, or internal combustion engine (ICE) vehicles. Jacobson mentioned they expect continued growth and profitability from ICE sales, with plans for cost-cutting measures, including consolidations of parts and options, projected to bolster profit margins for these models.
One notable change discussed was GM's decision to drop the “Ultium” branding for its battery technologies, which had been marketed as the cornerstone of its electric vehicle strategy. This move reflects the company’s shift to a more flexible approach to battery chemistry and cell design, as noted by Kurt Kelty, GM's vice president of battery.
Wall Street analysts seemed less impressed with the updates on GM's initiatives, particularly concerning its autonomous vehicle division, Cruise, and operations within China, which have struggled with declining earnings over the past decade. Barra maintained, "You'll begin to see evidence of a turnaround this year, with a significant reduction in dealer inventory and modest improvements in sales and share" concerning the company’s performance in China.
Overall, GM acknowledges the obstacles they face but remains focused on their dual path of traditional models and electric vehicles. Barra stated, "We believe our EV losses peaked this year, and we're focused on significantly improving profitability next year," indicating resilience amid adversity.
Finally, investors were informed about GM's plans for share buybacks, signaling confidence as the company aims to reduce its outstanding share count significantly. By the end of 2024, GM expects to have returned approximately $20 billion to shareholders through buybacks and dividends, reinforcing their commitment to delivering value to investors.
This investor day encapsulated the fine balance GM seeks to maintain as it ventures through the tumultuous terrain of modern automotive manufacturing. By balancing innovation with cost-efficiency and leveraging its extensive experience, GM is setting the stage for future success.
