GM Making Transition to All-Electric Software-Driven Vehicle World

Sector Strategist

David Whiston

Revenue segments as reported by the company.

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An operating expense is an expense a business incurs through its normal business operations. Often abbreviated as OPEX.

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We see General Motors with a competitive lineup in all segments it competes in, combined with a reduced cost base, finally enabling it to have the scale to match its size. We think GM's earnings potential is excellent because the company has a healthy North American unit and a nearly mature finance arm with GM Financial. Moving hourly workers' retiree healthcare to a separate fund and closing plants drastically lowered GM North America's breakeven point to U.S. industry sales of about 10 million-11 million vehicles, assuming 18%-19% share. We expect more scale to come from GM moving its production onto vehicle sets over the next few years and a joint venture making EV batteries for even more flexibility and scale. 

GM makes products that consumers are willing to pay more for than in the past. It no longer has to overproduce trying to cover high labor costs and then dump cars into rental fleets (which hurts residual values). GM now operates in a demand-pull model where it can produce only to meet demand and is structured to do no worse than break even at the bottom of an economic cycle when plants can be open. The result is higher profits than under old GM despite lower U.S. share. It now seeks roughly $300 billion in total revenue by 2030 with about $80 billion from many new high-margin businesses such as insurance, subscriptions, and selling data, while targeting 2030 total company adjusted EBIT margin of 12%-14%, up from 9.2% in 2022, 11.3% in 2021 and 7.9% in 2020.

We think actions such as buying Cruise, along with GM’s connectivity and data-gathering via OnStar, position GM well for this new era. Cruise is offering autonomous ride-hailing with its Origin vehicle, and GM targets $50 billion of Cruise revenue in 2030 after just $1 billion targeted in 2025. GM is investing over $35 billion in battery electric and autonomous vehicles for 2020-25 and is launching 30 BEVs through 2025 with two thirds of them available in North America. Management also targets over 2 million annual BEV sales by mid-decade and in early 2021 announced the ambition to only sell zero-emission vehicles globally by 2035.

Business Strategy & Outlook

GM does not have an economic moat, and we do not expect that to change. Vehicle manufacturing is a very capital-intensive business, but barriers to entry are not as high as in the past. The industry is already full of strong competition, so it is nearly impossible for one firm to gain a durable advantage. Automakers from China and India may soon enter developed markets such as the U.S., and South Korea's Hyundai and Kia have become formidable competitors. Plus many battery electric startups are emerging in addition to Tesla, such as Lucid, Rivian, and Fisker. Furthermore, the auto industry is so cyclical that in bad times even the best automakers cannot avoid large declines in return on invested capital and profit. Cost-cutting helps ease the pain, but it does not restore all lost profit in bad times.

None

Economic Moat

General Motors

GMC is a division of the American automobile manufacturer General Motors (GM) that primarily focuses on trucks and utility vehicles. GMC sells pickup and commercial trucks, buses, vans, military vehicles, and sport utility vehicles marketed worldwide by General Motors.

Chevrolet is an American automobile division of the American manufacturer General Motors (GM). Chevrolet-branded vehicles are sold in most automotive markets worldwide.

Chevrolet

Cadillac is a division of the U.S.-based General Motors (GM) that markets luxury vehicles worldwide. Its primary markets are the United States, Canada, and China, but Cadillac-branded vehicles are distributed in 34 additional markets worldwide. Historically, Cadillac automobiles have always held a place at the top of the luxury field within the United States. In 2017, Cadillac's U.S. sales were 156,440 vehicles and its global sales were 356,467 vehicles.

Cadillac

Buick is an upscale automobile brand of the American manufacturer General Motors (GM). For much of its existence in the North American market, Buick has been marketed as a premium automobile brand, selling luxury vehicles positioned above GM's mainstream brands, while below the flagship luxury Cadillac division. Buick-branded vehicles are also known for reliability, ranking high in Consumer Reports' brand reliability ratings.

Buick

General Motors Co. engages in the designing, manufacturing, and selling of trucks, crossovers, cars, and automobile parts and in providing software-enabled services and subscriptions. It operates through the following segments: GMNA, GMI, Cruise, and GM Financial. The company was founded by William C. Durant on September 16, 1908, and is headquartered in Detroit, MI.

Earnings data Q4 2023

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Ford Motor Company

Stellantis N.V. 

United Auto Workers strikes at more plants belonging to General Motors, Stellantis and Ford could reportedly come Friday, depending on the status of negotiations.

GM, Ford, Stellantis could reportedly see more UAW strikes this week

The UAW said it is prepared to announce more strike targets on Friday, "barring significant progress."

More UAW Strikes Could Be Coming. Why This Might Not End Soon.

United Auto Workers President Shawn Fain is scheduled to address union members at 10 a.m. Eastern time on Friday and could announce new strike targets if there's no progress in the negotiations, the union said Wednesday.

UAW could expand strike again on Friday

The United Auto Workers union is preparing to announce a possible expansion of its strike against General Motors, Stellantis and maybe Ford this Friday if there isn't more progress in talks, a union source familiar with plans said Wednesday.

Autoworkers union may expand its strike again

The Teamsters union said on Wednesday it has asked the National Highway Traffic Safety Administration to deny General Motors' request to exempt the company's autonomous vehicle unit Cruise Origin from the federal government's vehicle safety standards.

Teamsters union asks NHTSA to deny GM's bid to exempt Cruise from safety standards

Auto workers initially went on strike on Sept. 15, shutting down one assembly plant each for GM, Ford and Stellantis.

UAW again threatens to expand strikes at Detroit automakers if progress isn't made by Friday

The United Auto Workers (UAW) union plans to strike additional Detroit Three automotive facilities on Friday absent serious progress, a source told Reuters.

UAW plans to strike additional auto targets absent serious progress Friday -- source

Dubai is rolling out its first round of robotaxis next month, as a part of a plan to alleviate congestion and accidents.

Dubai to start robotaxi trials next month in major autonomous push

General Motors Company (GM) has been one of the stocks most watched by Zacks.com users lately. So, it is worth exploring what lies ahead for the stock.

Investors Heavily Search General Motors Company (GM): Here is What You Need to Know

Adient

Lear

Magna International

In the face of prolonged strikes, some smaller suppliers are cutting workers or announcing plans to do so.

UAW strikes threaten already vulnerable auto parts suppliers

Tesla

Elon Musk said demands by the United Auto Workers could quickly bankrupt the big auto makers as the strike by the UAW drew unprecedented support from President Joe Biden.

Elon Musk says UAW demands will ‘bankrupt' auto makers ‘in the fast lane'

Elon Musk hit out at the United Auto Workers in a post on X on Tuesday.  The Tesla CEO said the union's demands would "drive GM, Ford and Chrysler bankrupt".

Elon Musk says the UAW's strike demands will drive America's big 3 automakers 'bankrupt'

Five UAW members who were striking outside of a General Motors plant near Flint suffered minor injuries after being struck by a vehicle, reports say.

Striking UAW members hit by car outside Michigan GM plant

Rivian Automotive

Ford Motor's decision to hit the brakes on a planned $3.5 billion battery plant in Michigan highlights a challenge for Tesla's growing crowd of rivals in the U.S. market: Tesla is pushing most of them into unprofitable, low-volume niches.

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The Biden administration's decision on a $7,500 tax credit could determine China's role in the U.S. electric-vehicle industry.

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President Biden supported the UAW's demands for a 40% pay increase as he joined the picket line in Michigan.

Tesla CEO Elon Musk Says UAW Demands Could Bankrupt Ford, GM

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NextEra Energy

Although the major stock indexes have rallied in 2023, they remain well below record-closing highs. Most online brokerages have removed investment barriers, making it easier than ever for everyday investors to put their money to work.

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The United Auto Workers strike has brought the threat of service and maintenance disruptions, just as wait times at the dealerships were already getting long.

UAW strike brings fight to consumers, worsening car-parts shortages already plaguing the industry

The United States is experiencing a significant surge in labor strikes, involving various unions and industries. The result of these strikes is a cumulative 4.1 million lost workdays last month, the highest in over two decades.

The UAW Strike Is Not All Bad News for Consumers: Here's Why

Aptiv

The United Auto Workers (UAW) strike is expanding in a move that will surely hurt the U.S. economy and auto stocks as a whole. Investment bank Morgan Stanley (NYSE: MS ) recently estimated that a full month of lost automotive production would cost General Motors (NYSE: GM ), Ford Motor (NYSE: F ) and Stellantis (NYSE: STLA ) combined $7 billion to $8 billion in lost profits.

UAW Unrest: 3 Auto Stocks to Avoid as the Labor Strike Drags On

Ford is doing better with labor than either GM or Stellantis. How Come? And is that good news for the stock?

Why Ford Has Been More Willing to Work With the UAW Than GM or Stellantis.

Investors may be wondering if they should still buy General Motors (GM) and Ford (F) stock for longer-term opportunities or stay clear at the moment.

Time to Buy or Stay Clear of General Motors and Ford Stock as UAW Strike Continues?

DETROIT — Canadian auto workers say General Motors will be their next target after members ratified a new three-year labor contract with Ford.

Canadian auto workers to target GM next, after union ratifies deal with Ford

GM and Stellantis are grappling with a widening U.S. auto workers' strike. Ford has been spared the strike's expansion to auto parts plants.

Auto Workers' Strike Hits 11 Days. The Economic Cost Is Spiraling.

Canadian union Unifor on Monday announced General Motors as its second bargaining "target" in contract talks with the Detroit Three, a day after ratifying a new three-year contract with Ford Motor.

News for General Motors Stock (GM)