GM reports revenue and income surge, but challenges remain

Jamie L. LaReau
Detroit Free Press

General Motors released its third-quarter earnings results Tuesday. Here are the key takeaways:

The quarter in a snapshot

The automaker that owns the Chevrolet, Buick, GMC and Cadillac brands reported a $15 billion gain in revenue to $42 billion compared with the year-ago quarter as parts constraints loosened and new-vehicle inventory improved. GM said its net income rose to $3.3 billion compared with $2.4 billion. But note that in the year-ago quarter, GM saw net income plummet 40% as it struggled with production constraints from a global shortage of chips used in car parts that resulted in thin new car inventory. For the third quarter, GM reported adjusted earnings before interest and taxes (EBIT) at $4.3 billion up from $3 billion a year-ago. 

What helped

GM can credit its gains to a 24% boost in U.S. new-vehicle sales in the quarter, which helped lift GM's U.S. market share to 16.2% from 13% in the year-ago quarter, according to Cox Automotive. In China, GM's second most important market, GM and its joint ventures delivered about 630,000 new cars in the quarter, a 1% rise year-over-year as sales steadily recovered from the effects of COVID-19-related restrictions there in the first half of the year. GM China equity income rose to $330 million from $270 million in the year-ago period.

The challenges

GM showed weaker results from GM Financial amid inflation and higher interest rates. GM Financial's EBT-adjusted income dropped by $182 million from the previous year's quarter to $911 million. But GM CFO Paul Jacobson told reporters that while higher interest rates factored into some the decline, it was also expected this time of year. Last year, high used car prices provided a lift in revenue, but this year, lease customers are keeping their vehicles instead of turning them in. "We still see a lot of good out of GM Financial," Jacobson said, adding, "They have positioned their portfolio for challenging times."

Also, GM's autonomous vehicle unit Cruise has yet to deliver a profit. GM, like all automakers, has seen significantly higher commodity costs, surging inflation and ongoing parts shortages that continue to present challenges. But GM continues to stick to its strategy of prioritizing the production of expensive large-SUVs and pickups when given the limited supply of components. This ensures a rich revenue stream.

Wall Street reacts

Wall Street liked GM's results. GM stock closed Tuesday up $1.29 at $37.01. Analyst's initial reaction was positive. "GM continued its pattern of beating analysts’ expectations for earnings," said Michelle Krebs, executive analyst with Cox Automotive. "Inventories, while much improved in the third quarter, remain tight compared to historical norms, allowing GM to command higher prices, particularly on its high-profit SUVs and pickup trucks, while drastically reducing what it spends on incentives."

The upshot

The company said it had $20.8 billion in combined cash on hand at the end of the quarter. GM slashed incentives by 55% to an average of $1,353 per vehicle in the quarter, according to Cox Automotive. Its average transaction price climbed to $51,911 compared with $50,387 a year earlier. Tidbit: Just five years ago, GM's average transaction price was $40,053, Cox data shows.

What analysts expected

Forbes forecast that GM's earnings would be about $1.90 per share, slightly higher than Wall Street consensus of $1.89. GM reported earnings for the quarter of $2.25 per share. GM continues to roll out new EVs such as the GMC Hummer pickup and Cadillac Lyriq this year. The Hummer SUV comes to market early next year followed by 2024 Chevy Blazer EV and Equinox EV SUVs and the Silverado EV and GMC Sierra EV pickups. GM's gasoline-powered full-size pickup trucks are on track to surpass sales of Ford Motor's F-Series this year. 

Any surprises?

On Monday, GM announced it would again pay a dividend in the fourth quarter on the company's outstanding common stock of 9 cents per share payable Dec. 15 to all common shareholders of record as of the close of trading on Dec. 2. GM restored quarterly dividend payouts in August after a two-year suspension.

Detroit Three

Ford Motor Co. reports its third-quarter results Wednesday and Stellantis reports its results Nov. 3.

More:GM reveals $107K Sierra EV pickup — and Denali owners will get first dibs

More:GM to bring salaried workers back to office 3 days a week starting Jan. 30

Contact Jamie L. LaReau: Follow her on Twitter @jlareauan. Read more on General Motors and sign up for our autos newsletterBecome a subscriber.