Tear Sheet: General Motors Co.'s Earnings Indicate Strong Execution Despite Looming Macroeconomic Risks

Despite ongoing macroeconomic uncertainty and industry supply chain and logistical challenges, GM?s earnings guidance supports our expectations for above-average EBITDA margins of about 10% in 2023 and 2024. The company?s production discipline and upcoming product launches will likely minimize the need for significant sales incentives and could limit pricing pressure. We expect the company to benefit from better fixed-cost absorption on higher production volumes, but commodity and logistic costs could be higher than our prior expectations. We now expect FOCF to sales of 1%-2% for 2023 compared with our prior expectation of 2%-3%. The company will likely incur high capex of $12 billion-$13 billion for 2023, including funding for its battery joint ventures and investments towards its autonomous vehicle (AV)

...General Motors Co.'s (GM) first-quarter earnings demonstrate inventory discipline with strong margins and support a solid rating cushion. Despite ongoing macroeconomic uncertainty and industry supply chain and logistical challenges, GM's earnings guidance supports our expectations for above-average EBITDA margins of about 10% in 2023 and 2024. The company's production discipline and upcoming product launches will likely minimize the need for significant sales incentives and could limit pricing pressure. We expect the company to benefit from better fixed-cost absorption on higher production volumes, but commodity and logistic costs could be higher than our prior expectations. GM's high growth capital expenditure (capex) and restructuring will pressure its free operating cash flow (FOCF) before improving beyond 2024. We now expect FOCF to sales of 1%-2% for 2023 compared with our prior expectation of 2%-3%. The company will likely incur high capex of $12 billion-$13 billion for 2023, including...

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