Charges Tied to China Weigh on GM in Q4, but Profit and Revenue Top Expectations

General Motors (GM) reported its fourth-quarter 2024 earnings on Jan. 28, with the company facing significant challenges in its China operations. Despite a $5 billion charge related to its joint venture with SAIC Motors, GM managed to top analysts' expectations for both profit and revenue. Here's a closer look at the company's performance and the implications of the China-related charges.

GM's Restructuring Efforts in China
GM's restructuring efforts in China, which include a $2.6-$2.9 billion write-down of the value of its SGM joint venture and a $2.7 billion restructuring charge, are expected to have a significant impact on the company's long-term profitability and market share in the region. The restructuring efforts are aimed at improving the competitiveness of the company's products and retail experience, as well as reducing dealer inventory and improving sales and share. The company has also been focusing on improving its product strength and retail experience, which has led to a significant increase in sales in recent quarters.

In the fourth quarter of 2024, GM's sales in China jumped 40.6% quarter on quarter to nearly 600,000 units, following a 14.3% sequential sales gain in the third quarter. This was the highest quarter-on-quarter increase since the second quarter of 2022. In 2024, the company delivered over 1.8 million vehicles in China. The company's joint ventures in China offer the most comprehensive NEV lineup among global OEMs, with NEV deliveries up 50% year on year in 2024, accounting for almost half of annual sales. The Buick GL8 family continued to dominate China's premium MPV market, becoming the first model series to break 2 million units in production and sales in September. The all-new Cadillac XT5, launched in September, booked deliveries of nearly 15,000 units in the fourth quarter, its first complete quarter. The Wuling Hong Guang MINIEV family achieved sales of over 100,000 units in the fourth quarter, with total annual sales exceeding 260,000 units.

GM's Financial Performance
Despite the challenges in China, GM managed to top analysts' expectations for both profit and revenue in the fourth quarter. The company reported adjusted earnings of $2.12 per share, surpassing the Zacks Consensus Estimate of $1.68. Revenues of $43,108 million beat the Zacks Consensus Estimate of $41,313 million. The company recorded adjusted earnings before interest and taxes (EBIT) of $3,799 million, higher than $2,839 million in the prior-year quarter. GM's share in the GM market was 9.2% in the fourth quarter of 2022, up from the year-ago quarter's 8.9%.

GM's North America segment generated fourth-quarter net revenues of $35,471 million, up from $26,865 million recorded in the corresponding period of 2021. Also, revenues from the unit outpaced the Zacks Consensus Estimate of $34,277 million. The region's wholesale vehicle sales of 787,000 units increased from 579,000 units reported in the year-ago quarter. The segment's operating profit came in at $3,654 million, increasing from $2,165 million witnessed in the year-earlier period. The segmental profit also beat the consensus mark of $3,367 million.

GM International's (GMI) net revenues in the reported quarter came in at $4,319 million, up from the year-ago quarter's $3,451 million. The metric, however, fell short of the consensus mark of $4,479 million. The segment's wholesale vehicle sales of 180,000 units increased from 163,000 units in the year-ago quarter. The unit reported an operating profit of $272 million, declining from the year-ago profit of $275 million. The metric also lagged the consensus mark of $288 million.

GM Financial generated net revenues of $3,277 million in the quarter, up from $3,232 million recorded in the year-ago period and came ahead of the consensus mark of $3,258 million. Also, the segment recorded an EBIT-adjusted operating profit of $775 million, down from $1,180 million and in line with the consensus mark. GM Cruise recorded net revenues of $25 million in the fourth quarter, unchanged from the prior-year quarter’s level but missed the consensus mark of $49.84 million. The segment posted an operating loss of $524 million, wider than a loss of $349 million reported in the prior-year quarter. The reported loss also came in wider than the consensus mark of a loss of $445 million.



Conclusion
GM's restructuring efforts in China, despite the significant $5 billion charge, have led to improved sales and market share in the region. The company's focus on improving its product strength and retail experience, as well as reducing dealer inventory and improving sales and share, has resulted in positive feedback from customers. However, the company's struggles in the region have been attributed to intense competition from domestic manufacturers, a price war, and regulatory shifts. In order to address these challenges, GM is restructuring its operations in China and is expecting a $5 billion hit to its fourth-quarter adjusted pretax earnings. Despite these challenges, GM managed to top analysts' expectations for both profit and revenue in the fourth quarter, demonstrating the company's resilience and ability to adapt to changing market conditions.