Key takeaways from GM’s fourth quarter results and 2022 guidance

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DETROIT — General Motors’ fourth-quarter earnings beat Wall Street expectations and its 2022 forecast pleased analysts, after CEO Mary Barra assured analysts the company would deliver near-record profits this year even if it spends billions on electric and self-driving vehicles.

“We can and will maintain our aggressive pace backed by strong results,” Barra said on a call with analysts on Tuesday. “We plan to follow our record EBIT-adjusted earnings in 2021 with another year of record or near-record results in 2022, while investing significantly more year-over-year to accelerate our growth.”

Barra, among others, announced that GM was planning a “significant investment” in the second half of the decade in a $35 billion investment plan in electric and autonomous vehicles through 2035. She said the company aimed to sell 400,000 electric vehicles in North America by 2023.

GM will expand its Chevrolet EV lineup in fall 2023 to include the Equinox EV, starting at around $30,000.

GM

The plans were welcomed by Wall Street analysts but did little for GM shares. Shares fell about 3% during Wednesday’s midday session. Evercore analyst Chris McNally described GM as a “swing out”, while RBC Capital Markets raised its price target for the automaker from $74 to $85 per share.

“While the guidance for 2022 is mostly in line with expectations (although the mix is ​​different), overall we are still encouraged. GM continues to show strong profitability while investing for the future,” wrote RBC analyst Joseph Spak in a note to investors Tuesday evening.

Here are additional details on GM’s new EV plans as well as other key takeaways from the company’s fourth quarter results.

Advice

GM said it expects to generate operating profit this year between $13 billion and $15 billion, or earnings per share of $6.25 to $7.25. That’s in line with its earnings last year as well as most Wall Street expectations.

What has surprised many analysts is the projected 25-30% production increase this year by GM, which continues to manage a global shortage of semiconductor chips.

Net income this year is expected to be between $9.4 billion and $10.8 billion, also in line with its $10 billion profit in 2021, GM said.

GM chief financial officer Paul Jacobson said some of its profits this year could be hurt by an increase in sales of low-margin vehicles as chip supplies improve. Over the past year, the company has prioritized building highly profitable pickup trucks and SUVs over small crossovers and cars.

No dividend

Barra said GM is not reinstating its dividend at this time to preserve capital to spend on its electric and autonomous vehicle projects. GM plans to spend between $9 billion and $10 billion per year over the medium term, including 2022.

“As we move forward, we will review all opportunities to return excess capital to shareholders, but we will not reinstate a dividend at this time,” Barra said. “Our clear priority is to accelerate our EV plan and drive growth.”

GM cut its dividend at the start of the coronavirus pandemic in April 2020.

EV reservations

Barra on Tuesday gave the most detailed review of GM’s electric vehicle reservations to date. She said the company had 110,000 reservations for its electric Silverado; 59,000 for the GMC Hummer EV pickup and SUV; and 25,000 vans for its new BrightDrop electric utility vehicle business.

Initial “strong demand” is one reason GM is accelerating its electric vehicle plans, Barra said. She said the company will announce a third plant to produce battery electric trucks in the foreseeable future as well as the location of a fourth battery cell production plant with LG Energy Solution in the first half of this year.

GM’s first battery cell production plant through a joint venture with LG Energy Solution is scheduled to go live later this year in Ohio, followed by two more plants in Tennessee and Michigan over the course of consecutive years.

1 million sales of electric vehicles

GM previously said it was waiting for its electric vehicle sales will reach one million worldwide by 2025. Given new targets, including increasing production capacity to over one million vehicles in North America and China by mid-decade, this sales target is probably exceeded.

Asked about the sales target on Wednesday, a GM spokesperson referenced Barra’s comments about accelerating its electric vehicle plans. She did not mention the 1 million sales goal, first announced several years ago.

2024 Chevrolet Silverado EV RST

GM

“We’re just going to continue to run flat out as we see the opportunity for substantial EV volume growth over this period,” Barra said.

Last year alone, GM and joint venture partner Wuling Motors sold nearly 400,000 four-seat subcompact electric vehicles in China.

Cruise

The growing importance of GM’s majority-owned autonomous vehicle subsidiary, Cruise, was evident on the call Tuesday.

Barra made a point of specifically discussing Cruise’s ongoing operations, including an announcement Tuesday that it would open its fleet of self-driving vehicles to members of the public.

Cruise co-founder and interim CEO Kyle Vogt also appeared on Tuesday’s earnings call, signaling greater alignment between the companies after the ousting last month of Dan Ammann, a former GM executive charged with running Cruise.

Cruise is awaiting its final permit from regulators to market its robotaxi fleet in San Francisco.

GM expects the operations to potentially contribute up to $50 billion in annualized revenue by the end of this decade.

– CNBC”s Michael Bloom contributed to this report.

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