North America Division Continues To Carry GM, Accounted For All Earnings Before Interest And Taxes In Q3 2016

For the third quarter 2016, General Motors reported earnings consisting of a net income of $2.8 billion, earnings per share (EPS) diluted of $1.76, and earnings before interest and tax adjusted (EBIT-adjusted) of $3.5 billion on net revenue of $42.8 billion. During that time frame, the automaker’s North America (GMNA) division — which consists of operations in the United States, Canada, and Mexico — contributed the full $3.5 billion in EBIT-adjusted, setting a Q3 record in the process. Here’s a closer look at GMNA‘s performance during the quarter.

GM North America Q3 2016 At-A-Glance

GM North American divisional performance for the quarter was as follows:

• Net revenue: $31.1 billion
• EBIT-adjusted margin: 11.2 percent
• Sales volume: 1.03 billion units
• North America market share: 16.5 percent

GM North America Q3 2016 EBIT-Adjusted Notes Of Interest

Following are highlights and notes of interest associated with GMNA’s Q3 2016 EBIT-adjusted performance. All figures vs. Q3 2015, unless otherwise specified:

• North America Q3 record EBIT-adjusted grew to $3.5 billion for the quarter, up $0.2 billion year-over-year
• EBIT-adjusted margins remained strong at 11.2%, well-positioned to meet GM’s full-year 2016 target of 10%+ margins.
• GMNA has averaged EBIT-adjusted margins of 10.6% for the last four quarters and delivered EBIT-adjusted of $12.2 billion during that period.
• U.S. dealer inventory has increased 111,000 units, improving the availability of recently launched products. GM is well positioned at 79 days supply to meet seasonally strong Q4 demand and expect days supply to fluctuate before moderating at year-end.
• Wholesales increased 92,000 units, primarily due to strong retail demand for full-size trucks as well as successful new launch vehicles like the Chevrolet Cruze and Malibu.
• Total market share for North America was essentially flat at 16.5%. However, retail share is up 40 bps for the quarter and 50 bps YTD. This reflects GM’s continued focus on retail sales.
• Daily rental sales in the U.S. are down 95,000 units YTD, in line with plan.

Drivers of North America EBIT-adjusted improvement include:

• Volume – favorable due to 92,000 unit increase in wholesales, driven by primary drivers such as strong retail demand for full-size trucks and successful launch vehicles such as the Chevrolet Cruze and Malibu.
• Mix – unfavorable primarily due to increased volumes of recently launched vehicles into less profitable passenger car segments, partially offset by a decrease in off-lease rental car sales.
• Price – favorable price due to the all new Chevrolet Malibu, Camaro, and Cruze and Cadillac XT5. Strong price performance on majors expected to continue due to the strong 2016 launch cadence. Carryover price performance is unfavorable, as expected.
• Cost – unfavorable due to incremental material majors cost of $0.4 billion on launch products, as well as fixed costs of $0.6 billion related to incremental engineering, marketing, and depreciation and amortization which include launch costs, partially offset by favorable carryover material and logistics performance of $0.5 billion.
• Other – unfavorable foreign exchange (FX) primarily due to the weakening of the Mexican Peso.

GM North America Q3 2016 Key Performance Indicators

Following are factors that contributed to GMNA’s Q3 2016 EBIT-adjusted performance. All figures vs. Q3 2015, unless otherwise specified:

• Market share in the U.S. was 17.0% during Q3, essentially flat year-over-year
• Retail market share increased 40 bps in Q3 2016 based primarily on the successful launches of the Chevrolet Malibu and Cruze.
• GM’s incentive spending as a percentage of ATP (GM% / Industry%) increased during the quarter but was near the industry average for Q3 (1.04) and YTD (1.02) and significantly below that of domestic competitors.
• Incentive spending as a percentage of ATP is expected to be moderate in Q4 2016, relative to Q3 2016.
• Q3 average transaction prices across all models and brands increased nearly $1,500 per unit year-over-year including the impact of increased incentive spending.