General Motors (NYSE:GM) said that it lost $758 million in the second quarter, much less than expected, thanks to resilient pickup-truck sales, strong results in China, and aggressive cost cutting before and during the quarter. 

On an adjusted basis, excluding one-time items, GM lost $0.50 per share in the second quarter. GM's revenue fell 53% from a year ago, to $16.8 billion, on lower shipments as its factories in North America were closed for 8 of the 13 weeks in the quarter. 

GM's earnings result beat Wall Street's consensus estimate, though its revenue fell a bit short of expectations. Analysts polled by Thomson Reuters had expected a loss of $1.77 per share on revenue of $17.31 billion, on average. 

The raw numbers

Metric Q2 2020 Change vs. Q2 2019
Revenue  $16.8 billion (53%)
Global deliveries 1.47 million (24.3%)
EBIT-adjusted (loss) ($536 million) (118%)
EBIT-adjusted margin (3.2%) (11.5 pp)
Net income (loss)  ($758 million) (132%)
Adjusted earnings per share ($0.50) (130%)
Automotive operating cash flow  ($8.0 billion) $11.8 billion lower
Adjusted automotive free cash flow ($9.0 billion) $11.6 billion lower

Data source: General Motors. "EBIT" is earnings before interest and tax. "Adjusted" figures exclude one-time items. GM took $92 million in restructuring-related one-time charges in the second quarter of 2020, versus a net credit of $19 million in the second quarter of 2019. "Automotive" results exclude results related to GM's captive-financing subsidiary, GM Financial. "Pp"= percentage points. 

Key points from GM's second-quarter report

  • GM North America lost $101 million on an EBIT-adjusted basis, down from a profit of $3.02 billion in the second quarter of 2019. Revenue fell to $11.6 billion from $28.3 billion a year ago as wholesale shipments declined 62% due to the extended production halt amid the COVID-19 outbreak. 
  • GM's loss in North America could have been much worse had it not prioritized production of high-profit pickups and SUVs when its factories reopened in May. (GM, like most automakers, records revenue when its vehicles are shipped to dealers.)
A 2020 GMC Sierra Denali, a full-size luxury pickup truck.

GM prioritized production of high-profit versions of its pickups and SUVs when its factories reopened in May; that helped offset losses from the factory shutdowns. Image source: General Motors.

  • GM had about 444,000 vehicles in its U.S. inventory as of the end of the second quarter, down from about 668,000 on March 31. While GM's shipments declined 62%, its sales only declined 35.5%, as dealers were able to sell down inventory shipped before GM idled its factories in March.  
  • GM International, which includes all of GM's operations outside of North America and China, lost $270 million, versus a loss of $48 million a year ago. Revenue fell to $1.7 billion from $4 billion a year ago as wholesale shipments fell 65%.
  • GM's joint ventures with Chinese automakers generated $9.2 billion in revenue in the second quarter, up slightly from a year ago. Wholesale shipments of about 733,000 vehicles were roughly flat from the year-ago period.
  • GM's equity income from its China joint ventures was $169 million in the second quarter, versus $235 million a year ago. 
  • Cruise, GM's self-driving subsidiary, lost $195 million in the second quarter, versus a loss of $279 million a year ago. 
  • GM Financial earned $226 million in pre-tax income, down from $536 million a year ago, on a steep drop in loan and lease originations as vehicle sales in North America declined amid the pandemic. 

Special items, cash, and debt

GM took one-time charges totaling $92 million in the second quarter, all related to ongoing restructuring efforts in its International unit. 

GM ended the second quarter with $28.3 billion in cash available to its automotive business, along with $2.3 billion in undrawn credit lines, for total automotive liquidity of $30.6 billion. That's down from $34.6 billion as of December 31, 2019, and down about $9 billion from March 31. GM drew down about $16 billion from its credit lines in March. 

(That $9 billion cash burn was expected as GM's "working capital" unwound. Think of it this way: With its factories closed, GM wasn't shipping vehicles, and therefore wasn't recording revenue and income, but it still had to pay suppliers for the parts and services that it had used in the weeks before the shutdown. GM expects to make up much of that -- to "rewind" its working capital -- by the end of the year.) 

Against that, GM had total automotive debt of $34.9 billion, including $19.1 billion in bonds and $15.9 billion drawn down from its credit lines. GM issued $4 billion in senior unsecured notes in the quarter and entered into a new $2 billion revolving-credit facility. 

Looking ahead: what GM said about the second half of 2020

CFO Dhivya Suryadevara declined to provide updated guidance for 2020. But in an early morning call with reporters, she offered what she called a "scenario": Assuming that the global economy remains stable and that GM can keep its factories open and running, she said that auto investors can expect GM to deliver between $4 billion and $5 billion in EBIT-adjusted earnings in the second half of the year.