General Motors (NYSE:GM) will report its first-quarter 2020 earnings before the market opens on Wednesday, May 6. What should auto investors look for?

What Wall Street expects

Wall Street analysts polled by Thomson Reuters expect GM to post a profit, but a small one. They are looking for adjusted earnings of $0.33 per share, down from $1.41 in the first quarter of 2019. (Adjusted earnings exclude one-time items.) 

The analysts expect GM to report revenue of $31.12 billion, down 10.8% from $34.9 billion in the year-ago period.

How GM's U.S. sales fared amid the coronavirus

  • GM's U.S. sales fell 7% in the first quarter from a year ago, with much of the decline happening after the coronavirus spread in March. 
  • Sales of GM's full-size pickups, which were all-new for 2019, rose a combined 32% in the quarter (and the pickups may have continued to sell well in April). 
  • Sales of the midsize Chevrolet Malibu and small Chevrolet Trax crossover, both commonly purchased by rental-car companies, also rose in the first quarter.
  • But all of GM's brands posted year-over-year declines, with almost all of GM's crossover SUVs (its mainstays for the last several quarters) posting declines.
A Cadillac CT6 at the end of the production line at GM's plant in Shanghai, China.

GM's Cadillac factory in Shanghai reopened several weeks ago. But when will GM's U.S. plants restart? Image source: General Motors.

How GM performed in China, where the virus struck earlier

  • GM's deliveries in China fell 43% in the first quarter. Most of China's auto factories were shut down from late January until late February. 
  • GM's Chinese dealers adopted new tactics to keep sales going through the pandemic, when consumers in many parts of the country were sheltering at home. These included live-streaming sales demonstrations and events, and "touch-free" vehicle services and deliveries. 
  • GM's Chinese factories have all reopened. It said that its busy new-product schedule for China remains mostly on track. 
  • Sales in China appeared to be on the rebound in April. The company's two largest joint ventures with Chinese automakers both reported that sales were up 14% from April of 2019.

How GM has bolstered its balance sheet since the outbreak began

  • GM withdrew its guidance for 2020 and drew down about $16 billion from its existing credit lines on March 24, days after it began shutting down its factories in North America.
  • It told employees on March 27 that all salaried employees would begin deferring a portion of their compensation as of April 1. The deferred percentage varies, from 20% for the rank and file, to 25% for executives, and 30% for the senior leadership team. Deferred amounts will be paid back in a lump sum by March 15, 2021, CEO Mary Barra said. 
  • GM has slowed or suspended some of its future-product programs to conserve cash while its factories in North America are closed. But its upcoming full-size SUVs, its electric-vehicle programs, and the Cruise Origin self-driving taxi remain on track. 
  • GM said on April 27 that it has suspended its dividend, after it extended a $3.6 billion revolving line of credit to April of 2022. 
Barra, wearing a mask and safety glasses, toured GM's improvised mask-making operation in April.

CEO Mary Barra has put idled factories to work making supplies to fight the pandemic. But she hasn't yet said when GM expects to return to building cars and trucks in the U.S. Image source: General Motors.

What to expect when GM reports tomorrow

I expect GM to report a small profit on an adjusted basis, in part because its profit margins on the new pickups have been excellent, and (admittedly) in part because GM hasn't warned that it would post a loss. Rival Ford Motor Company (NYSE:F) warned in early April that it would post a first-quarter loss, and it did. 

Perhaps more important under the circumstances, I'm hoping to hear that GM has ample liquidity to ride out the pandemic while keeping its key future products on track. 

I'm also hoping to hear that GM and the United Auto Workers have agreed on a plan to reopen U.S. factories soon. GM is believed to be aiming to reopen its North American factories during the week of May 18, but the UAW has yet to say that it's on board with that plan. 

Mostly, I expect Barra and her team to reassure investors that the company is in good shape, and that it expects to ride out the pandemic without too much damage. We'll find out tomorrow morning.