GM focuses on stability and efficiency: New strategies for profitable growth

The General Motors plant aims to reassure investors next Tuesday and present perspectives that demonstrate there is no reason to panic regarding the slowed demand for electric vehicles (EVs). The U.S. company might even increase its profits by 2025, according to two people familiar with the plans. The company’s message on Investor Day stands in stark contrast to the ambitious goals presented by GM CEO Mary Barra in 2021. Back then, she highlighted ambitious targets, including a doubling of sales to about $280 billion by 2030, driven by the autonomous unit Cruise and the expected growth in EV sales. Investors are concerned about the automakers' profits since they have to incur significant losses in EVs. Additionally, there are worries about stagnant sales of combustion vehicles and the intense pressure from Chinese automakers like BYD. Due to the slower-than-expected EV transition, many automakers have adjusted their plans. GM is expected to focus more on stability than aggressive growth on Tuesday. Rory Harvey, President of Global Markets at GM, said regarding third-quarter sales: “I won’t reveal what we will say on Investor Day, but looking at it, it was a very strong third quarter.” Managers speaking at the Spring Hill, Tennessee, plant will emphasize that profit margins with internal combustion engines (ICE) have not yet peaked and that EV profits are closer than investors think. GM will also cite the launch of eight revised SUV models, including the Chevrolet Equinox, Buick Enclave, and Cadillac Escalade, by the end of 2025 as a reason for improved profit margins. During the meeting, GM will neither increase its stock buybacks nor its dividends; however, the cash target will be lowered by $2 billion from the current $18 to $20 billion. This measure is intended to signal that the company aims to expand its $6 billion buyback program. Investors are unsettled by the overall U.S. auto market, leading to a plunge in GM shares despite the company announcing positive earnings and an raised forecast in recent quarters. They seek assurance that EV investments will not become an endless loss-making venture. Tim Piechowski, Portfolio Manager at ACR Alpine Capital Research, stated, “Shareholders generally want the company to be cautious regarding the capital and research intensity invested in technologies that do not yet have a proven business model.” Morgan Stanley analyst Adam Jonas recently downgraded the stocks of GM and rival Ford, citing rising U.S. inventories, limited affordability, and competition from China. For GM, China and Cruise—once strengths—now present challenges, where investors demand clearer direction. Following an accident involving a robotaxi in San Francisco, GM halted the deployment of autonomous vehicles and began slowly implementing human-driven vehicles. Barra has stated that the China operations are “not sustainable” without restructuring, leading to a $104 billion loss in the second quarter. Shareholders also want to know more about how GM plans to reduce the costs of its EVs to compete with EV giant Tesla and Chinese competitors. Last month, GM and Hyundai signed a non-binding Memorandum of Understanding to explore cost-reduction collaboration opportunities and faster provision of a broader range of vehicles and technologies. The Ultium Cells battery technology will be the focal point of the investor event, with tours of the battery and EV assembly plants in Tennessee.