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GM seeks to ease shareholders' nerves at investor day

GM to deliver message focused on stability over aggressive growth

Published: Wed 2 Oct 2024, 5:16 PM

Updated: Wed 2 Oct 2024, 6:18 PM

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  • Reuters

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Engines arrive on the assembly line at the General Motors (GM) manufacturing plant in Spring Hill, Tennessee. — Reuters file

Engines arrive on the assembly line at the General Motors (GM) manufacturing plant in Spring Hill, Tennessee. — Reuters file

General Motors will assure investors next Tuesday that there is no need to panic about decelerating demand for electric vehicles and the US automaker could even improve its profits in 2025, according to two people familiar with the plans. The message at the company’s investor day is a dramatic contrast from the one GM CEO Mary Barra laid out at the same event in 2021, when she highlighted ambitious goals that included doubling revenue to about $280 billion by 2030, fueled in part by its autonomous unit Cruise and expected EV sales growth. Investors are worried about automakers’ profits as they face significant losses on EVs, worries about plateauing sales of gas-engine vehicles and intensifying pressure from Chinese automakers like BYD.

The slower-than-anticipated EV transition has caused many automakers to adjust plans, and GM’s messaging on Tuesday is expected to focus less on aggressive growth and more on stability.

“I’m not going to disclose what we’re going to say at investor day, but if you looked at it, it’s a very strong quarter 3,” Rory Harvey, GM’s president of global markets, said of third-quarter sales. “From that point of view, you’d have to say that that is a positive platform leading into investor day.”

However, executives speaking at the Detroit automaker’s operations in Spring Hill, Tennessee, will emphasise that profit margins have not topped out with internal-combustion engine (ICE) vehicles and EV profits are closer than investors think, said the two people, who asked not to be identified.

GM will paint a rosy picture for its ICE models, touting the launch of eight refreshed SUV models — including the Chevrolet Equinox, Buick Enclave and Cadillac Escalade — between now and the end of 2025 as a reason those profit margins can still improve, the sources said. GM will not boost its stock buyback or dividend during the meeting, but it will reduce its cash on hand target — now at $18 billion to $20 billion — by $2 billion, one of the sources said. The move is meant to signal that the company will look to build upon its $6 billion stock buyback programme.

Queasy investors

Shareholders have grown queasier about the broader auto market in the US too, resulting in GM’s stock plummeting even after posting upbeat earnings results in recent quarters, and raising guidance. They want assurances that EV investments will not become a bottomless pit of losses.

“Shareholders in general want the company to be restrained with how much capital intensity and [research and development] intensity they’re willing to put into some of these technologies that don’t have a proven business model yet,” said Tim Piechowski, portfolio manager at ACR Alpine Capital Research, a GM investor.

Morgan Stanley analyst Adam Jonas recently downgraded GM and cross-town rival Ford’s stock, citing climbing US inventories, stretched affordability and the competitive threat from China.

For GM, China and Cruise — formerly strengths — have now become pain points that investors want a clearer direction on. Cruise last year was embroiled in controversy after a pedestrian in San Francisco was dragged by one of its robotaxis. Since that October accident, GM halted use of its autonomous vehicles and has slowly begun resuming operations with a small fleet of human-driven vehicles in some parts of the US Barra has said operations in China, which used to be a profit engine for the company, are “unsustainable” without a restructuring. GM recorded a $104 billion loss in the region during the second quarter.

Shareholders are also eager to hear more on how GM intends to bring down costs on its EVs as it races against EV giant Tesla and Chinese rivals. Last month, GM and Hyundai signaled a potential collaboration, signing a non-binding memorandum of understanding to consider ways to “leverage their complementary scale and strengths to reduce costs and bring a wider range of vehicles and technologies to customers faster.”

GM’s Ultium Cells battery technology will be front and center for the investor event, which will include tours of the Tennessee plant’s battery and EV assembly operations.



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