GM Q3 2019 Earnings: $2.3 Billion Income On $35.5 Billion Revenue

General Motors Company reported third-quarter 2019 financial performance today. The GM Q3 2019 earnings were headlined by $2.3 billion in income on $35.5 billion in revenue.

Compared to the third quarter of 2018, these results represent a $200-million (8.7-percent) decrease in income and a $300-million decrease in revenue (0.9 percent).

“Our new labor agreement maintains our competitiveness, preserves our operating flexibility and allows us to continue improving our quality and productivity. We remain focused on strengthening our core business and leading in the future of personal mobility,” said GM Chairman and CEO Mary Barra.

Adjusted GM Q3 2019 earnings before interest and taxes (EBIT) was $3.0 billion (5.9-percent decrease), earnings per share (EPS) diluted were $1.60 (8.6-percent decrease) and EPS-diluted-adjusted was $1.72 (8.0-percent decrease).

The GM Q3 2019 earnings were highlighted by the following:

• Strong North America EBIT-adjusted margin of 10.8 percent, driven by full-size trucks, record crossover sales and cost savings
• EPS-diluted of $1.60 and EPS-diluted-adjusted of $1.72
• Net strike impact to GM North America was negative $1.0 billion during Q3 2019, including +$300 million in favorable timing items

“Our underlying third-quarter performance demonstrates the ongoing resilience and earnings power of our company, building on our leading truck and crossover franchises, and transformational cost actions. Our focus going forward will continue to be the disciplined execution of our business plan,” said GM CFO Dhivya Suryadevara.

GM Q3 2019 Earnings Summary

Segment Results

Here’s how GM’s four segments performed during the quarter:

• North America: $3.0 billion EBIT-adjusted vs. $2.8 billion in Q3 2018. Results were highlighted by strong HD pickup and crossover sales and cost actions. They were partially offset by the strike impact.
• International: $(0.1) billion EBIT-adjusted vs. $0.1 billion in Q3 2018. China equity income was $0.3 billion, down $0.2 billion, driven by lower wholesales, partially offset by favorable mix including from product launches.
• GM Financial: $0.7 billion EBT adjusted vs. $0.5 billion in Q3 2018 on revenue of $3.659 billion, a record. Performance was driven by consistent execution of the full captive strategy and portfolio growth.
• GM Cruise: $(0.3) billion EBIT-adjusted vs. $(0.2) billion in Q3 2018. GM says that the spend is “on plan as Cruise continues to make significant progress toward commercialization gated by safety and regulations.”

Strike Impact

The work stoppage in the U.S. as a result of the UAW strike negatively affected GM’s North American business results in the third quarter as well as expected results for the year. In the third quarter, about two weeks of vehicle production was lost.

The net strike impact on the EBIT-adjusted of GM North America in Q3 was $(1.0) billion including $0.3 billion of favorable timing items, or $(0.52) per diluted share. GM says that it expects the 2019 calendar-year impact of the strike to be approximately $(2.00) per diluted share.

The strike ended late last week as UAW members ratified the new agreement.

Full-Size Truck Update

GM says that its full-size pickup trucks continued to build sales momentum in the quarter, with the launch of light-duty (LD) diesels and more heavy-duty (HD) variants. Since January, GM’s full-size LD and HD pickups have gained more than 8 percentage points of retail market share in the segment through September, based on J.D. Power PIN data.

Sales of the Chevrolet Silverado LD increased 18 percent and those of the GMC Sierra LD models jumped 38 percent year-over-year. The trucks have gained retail market share sequentially each month during the third quarter, also based on J.D. Power PIN data. Early production of HD models was focused on Crew Cabs, and those deliveries were up 19 percent. Overall pricing of GM’s all-new pickups remained strong, up about $2,200 year to date versus 2018 (based on J.D. Power PIN data).

Updated Full-Year Guidance

GM expects full-year capital expenditures to be lower than originally projected, approximately $7.5 billion, due to actions taken to accelerate the achievement of its Capex target. Given this, and the impact of the strike, GM has revised its full-year outlook, as follows:

• EPS-diluted: $4.28 to $4.69
• EPS-diluted-adjusted: $4.50 to $4.80
• Auto Operating Cash Flow: $5.5B to $7.5B
• Adjusted Auto Free Cash Flow: $0B to $1B

U.S. Performance

GM Q3 2019 earnings are the result of nearly 739,000 vehicle deliveries during the quarter in the U.S., an increase of 6 percent year-over-year. Results were led by GM’s all-new full-size pickups and fresh crossover lineup. Deliveries increased for all brands.

Crossover sales were the best-ever for any quarter, growing 29 percent:

• Chevrolet crossover sales increased 35 percent, led by Traverse and Trax, which set quarterly records.
• Buick crossover sales were up 17 percent, led by Envision and Encore, which were up 39 percent and 18 percent, respectively.
• GMC sales increased 11 percent, led by the Acadia, which was up 51 percent.
• Cadillac crossover deliveries rose 67 percent, led by the XT4 and the all-new XT6.

To build on the momentum of GM’s industry-leading truck franchise, the company’s next-generation full-size SUVs, which dominate the segment, will arrive in dealerships in 2020.

China Performance

In China, year-over-year industry vehicle sales declined nearly 11 percent during Q3 2019. GM China underperformed relative to the industry, which GM attributes to “segment shifts and lower demand for outgoing models.”

Despite the continued softening of the overall vehicle market in China, Cadillac’s third-quarter sales increased 11 percent, driven by the XT4 and XT5. With them now in the lineup, GM says that “Cadillac will strengthen its foothold in the steadily-growing luxury SUV segment.”

Cost Actions

GM has achieved $2.4 billion in transformation cost savings since 2018, and is on track to realize its 2019 target. As a result of the company’s decision to invest in its Detroit-Hamtramck plant with plans to build an all-electric pickup truck, GM will incur operating costs outside of the scope of its original transformation plan. With this, GM is revising its year-end 2020 cost savings target to $4.0 to $4.5 billion.

Cash Flow And Liquidity

GM’s adjusted automotive free cash flow in the quarter was $3.8 billion, up significantly year over year primarily due to the timing of working capital flows, lower capital expenditures and the receipt of a portion of the dividend from China joint-ventures. Total liquidity stood at $37.2 billion, up $3.4 billion versus year-end 2018, and up $3.2 billion compared to the second quarter of 2019.

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