10-QPeriod: Q2 FY2019

General Motors Co Quarterly Report for Q2 Ended Jun 30, 2019

Filed August 1, 2019For Securities:GM

Summary

General Motors (GM) reported its financial results for the second quarter and first half of 2019, showing a notable increase in net income attributable to stockholders for both periods compared to the prior year. The company's total net sales and revenue saw a slight decrease, primarily driven by lower automotive sales in North America and internationally, though this was partially offset by growth in GM Financial's revenue. Key to the improved profitability were significant cost reductions and operational efficiencies, particularly in the automotive segment, including benefits from transformation activities and favorable pricing. GM also benefited from substantial recoveries related to indirect taxes in Brazil. While revenue from international operations declined, equity income from Automotive China joint ventures saw a significant decrease, impacting overall segment profitability. Investors should monitor GM's ongoing transformation efforts, its strategic investments in GM Cruise, and the potential impacts of ongoing litigation and regulatory matters.

Financial Highlights

43 data points
Beta

Revenue

$36.06B

Net Income

$2.40B

6.7% Net Margin

EPS (Diluted)

$1.66

Total Assets

$233.74B

Cash & Equivalents

$17.07B

Free Cash Flow

$3.61B

Financial Statements
Beta
Revenue$36.06B
Operating Expenses$33.57B
Operating Income$2.49B
Net Income$2.40B
EPS (Basic)$1.68
EPS (Diluted)$1.66
Shares Outstanding (Basic)1.42B
Shares Outstanding (Diluted)1.44B

Key Highlights

  • 1Net income attributable to stockholders increased significantly to $2.418 billion for Q2 2019 and $4.575 billion for the first six months of 2019, up from $2.390 billion and $3.436 billion respectively in the prior year.
  • 2Total net sales and revenue decreased by 1.9% to $36.060 billion in Q2 2019 and by 2.6% to $70.938 billion for the first six months of 2019, mainly due to lower automotive sales in GMNA and GMI.
  • 3GM Financial revenue grew by 4.3% to $3.639 billion in Q2 2019 and by 5.2% to $7.259 billion for the first six months, driven by increased finance charge income.
  • 4EBIT-adjusted for the automotive segments increased to $2.758 billion in Q2 2019, a significant improvement from $2.309 billion (adjusted for noncontrolling interests) in the prior year, primarily due to cost savings from transformation activities and favorable pricing.
  • 5The company recorded a substantial benefit of $380 million from retrospective recoveries of indirect taxes in Brazil during the second quarter, positively impacting results.
  • 6GM Cruise Holdings received $1.1 billion in new investment in May 2019, with $0.7 billion from General Motors Holdings LLC, for working capital and general corporate purposes, underscoring continued investment in autonomous vehicle technology.
  • 7Inventories increased to $11.447 billion at June 30, 2019, up from $9.816 billion at December 31, 2018, while cash and cash equivalents decreased to $17.072 billion from $20.844 billion.

Frequently Asked Questions

The primary drivers for the increase in net income were significant cost savings from ongoing transformation activities, favorable pricing, and a substantial benefit from the retrospective recoveries of indirect taxes in Brazil. These factors more than offset the decline in revenue and lower equity income from Automotive China joint ventures.

Total net sales and revenue decreased primarily due to lower wholesale vehicle volumes in GM North America (GMNA) and GM International (GMI), driven by factors such as a decrease in passenger car sales, planned downtime for full-size pickup trucks, and lower industry volumes in certain international markets. This decline was partially offset by growth in GM Financial's revenue.

GM Financial showed strong performance, with revenue increasing by 4.3% in the second quarter of 2019, driven by growth in retail and commercial finance receivables. Its contribution is significant, providing financing services that support vehicle sales and generating profits, though its EBT-adjusted saw a slight decrease in the first six months of 2019 due to increased interest expenses.

Investors should be aware of ongoing litigation, particularly related to ignition switch recalls and other recalls, which could lead to material damages, fines, or penalties. Other contingencies include potential future restructuring charges, government investigations, and risks associated with international operations, currency fluctuations, and the evolving automotive market, including investments in autonomous vehicles.