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General Motors' Q4 Profit Beat Estimates Despite Huge Strike Costs

By John Rosevear - Updated Feb 5, 2020 at 3:39PM

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Demand for GM's new pickups helped save the quarter and the year.

General Motors (GM 3.28%) said that it lost $194 million in the fourth quarter, down from a $2 billion profit a year earlier, after a nationwide strike that ended late in October left it scrambling to make up production volumes. 

Excluding one-time charges, GM earned $0.05 per share in the quarter, beating Wall Street's estimate of $0.01 as reported by Thomson Reuters. But GM's fourth-quarter revenue of $30.8 billion fell slightly short of the analysts' $31.04 billion estimate. 

For the full year, GM earned $6.7 billion in net income, down 17.4% from 2018. 

A 2020 GMC Sierra AT4 pickup truck.

A 2020 GMC Sierra AT4 pickup. GM took a big hit from the UAW strike, but strong demand for its new pickups helped soften the blow. Image source: General Motors.

The raw numbers

Metric Q4 2019 Change (Decline) vs. Q4 2018 2019 Change (Decline) vs. 2018
Revenue $30.8 billion (19.7%) $137.2 billion (6.7%)
Global deliveries 2,034,342 (9.4%) 7,717,930 (8%)
EBIT-adjusted $105 million (96.2%) $8.4 billion (28.8%)
EBIT-adjusted margin 0.3% (7.0 pp) 6.1% (1.9 pp)
Net income (loss) ($194 million) $2.2 billion lower $6.7 billion (17.4%)
Adjusted earnings per share $0.05 (96.5%) $4.82 (26.3%)
Automotive operating cash flow $769 million (87.8%) $7.4 billion (37%)
Adjusted automotive free cash flow ($1.312 billion) $5.467 billion lower $1.1 billion $2.7 billion lower

Data source: GM. EBIT = earnings before interest and tax. Adjusted figures exclude the effects of one-time items; GM took one-time charges of $358 million in Q4 2019 and $1.33 billion in Q4 2018. Automotive results exclude results related to GM's captive-financing subsidiary. Pp = percentage points.

What happened at GM in the fourth quarter

All profit and loss figures in this section are on an EBIT-adjusted basis, except as noted. 

  • GM North America earned $263 million in the fourth quarter, down from $3.04 billion in the fourth quarter of 2018. The decline was more than explained by a 24% year-over-year drop in wholesale shipments, a result of the strike that closed U.S. factories for most of October. GM's pricing, and demand for its new pickups, remained strong in the quarter. 
  • GM North America's EBIT-adjusted margin was 1.2% in the fourth quarter, down from 10.2% a year ago. For the full year, it was 7.7%, down from 9.5% in 2018. 
  • GM announced a joint venture with LG Chem to produce electric-vehicle battery cells in a new factory in Lordstown, Ohio. The factory is expected to open next year. 
  • GM International, which includes all of the company's automotive businesses outside of North America, lost $120 million in the fourth quarter versus a loss of $48 million a year ago. The decline was due largely to the slumping new-car market in China and currency-related headwinds in South America, partly offset by cost reductions and pricing gains. Equity income from GM's joint ventures with Chinese automakers fell to $239 million from $307 million in the fourth quarter of 2018. 
  • GM Cruise, the self-driving subsidiary, lost $305 million in the fourth quarter versus a loss of $194 million a year ago.
  • GM Financial, the captive-financing subsidiary, earned $498 million in adjusted earnings before tax (EBT adjusted), versus an EBT-adjusted figure of $416 million in the fourth quarter of 2018. Credit metrics remained steady (and good). 

Special items, cash, and debt

GM took $194 million in restructuring-related charges in the fourth quarter, as well as a $164 million writedown related to the sale of its share of a truck-making joint venture in China. 

As of Dec. 31, GM had $17.3 billion in cash available to its automaking business, along with another $17.3 billion in available credit lines, for total liquidity of $34.6 billion. Against that, GM had $14.4 billion in well-structured long-term debt, up from $14 billion at the end of 2018. 

GM said that its pension portfolios were underfunded by $11.8 billion as of Dec. 31, versus $11.5 billion at the end of 2018.

Looking ahead: Guidance for 2020

For 2020, GM currently expects:

  • Adjusted earnings per share between $5.75 and $6.25.
  • Adjusted automotive free cash flow between $6.0 billion and $7.5 billion.

In a nutshell, the company expects the slump in China to continue, with those effects largely offset by new products that should drive pricing and margin improvements in North America.

John Rosevear owns shares of General Motors. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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