GM Gains in Q3 Despite Problems With Warranties, China

General Motors expects to use its pricing power to fight off challenges, including a fourth-quarter drop in production, rising warranty costs and more losses from its operations in China, which the company is attempting to restructure.

Chairman and CEO Mary Barra, responding to analysts’ questions about China during a conference call on GM’s third-quarter financial report, emphasizes the automaker has no plans to withdraw from China where North American and European automakers are seeing their once-robust market share whittled away by an array of Chinese competitors.

“It’s a very complex situation,” says Barra. But GM is holding meetings with its Chinese partners about restructuring the business there after losing another $100 million in the third quarter. Through the first three quarters of 2024, GM has lost $300 million in China.

Barra, however, says China remains a great vehicle market, and GM expects to remain “disciplined and resilient” as it reorganizes in China.  

GM CEO Barra at unveiling of Cadillac Celestiq in October 2022.

The CEO presents an overall positive outlook for the company: “In the third quarter, GM and our JVs grew sales 14 percent from second quarter for our best performance since the third quarter of 2022. Our growing portfolio of EVs and plug-in hybrids played a key role. In fact, our new-energy vehicles outsold ICE models for the first time,” Barra adds.

GM also remains committed to its money-losing Cruise autonomous-vehicles business and hopes to resume testing driverless vehicles by the end of the year, Barra says, but it is open to bringing in a partner.

Cruise expenses were $400 million in the quarter, down $350 million from a year-ago, reflecting a reduction in operational activities.

“We believe in autonomy in general, but I think we want to make sure we’re investing in autonomy as efficiently as possible,” Barra says. “And there are several conversations that we’re having with partners that I think just allows us to manage that investment more wisely.

However, GM’s traditional business in North America remains based on internal-combustion-engine vehicles. “We have been able to grow our retail market share in the U.S. with above-average pricing, well-managed inventories and below-average incentives,” notes Barra. “The new Chevrolet Traverse, GMC Acadia and Buick Enclave continue to grow their volumes in retail market share with very strong pricing.”

“We’ve seen month-over-month gains in retail segment share for the Equinox, ATPs are about $6,000 higher than the outgoing models and we are attracting younger buyers. Without a doubt, these vehicles, along with our new fullsize SUVs, are some of the best we have ever delivered,” says Barra, adding Cadillac’s portfolio is expected to be another driver of volume and share growth, conquest sales and EV profitability improvements as GM goes forward.

Chief Financial Officer Paul Jacobson says during the conference call GM is maintaining strong pricing compared to the industry while the company’s highly profitable fullsize pickup and fullsize SUVs continue to gain market share in their respective segments.

“We’ve been able to achieve these market share gains with significantly lower incentives than our competitors,” Jacobson adds.

“For example, in the third quarter, our U.S. incentives were approximately 2.4 percentage points lower than the industry average, a gap that has widened from last year’s third quarter,” Jacobson notes.

Jacobson says GM’s pricing power, along with increasing volume in both ICE and EV segments, increased the company’s third-quarter revenue 10% to $49 billion. The higher wholesale volumes in the third quarter are also supported by three consecutive years of retail market share growth along with conquest rates at 60% or above for EV sales, he adds, supporting $4.1 billion in EBIT-adjusted, 8.4% percent EBIT-adjusted margins and $2.96 a share in EPS diluted adjusted, up roughly 30% year-over-year, he adds.

“The strong sales helped offset continued inflationary pressures, which, combined with warranty claims on a few of our high-volume vehicles, led to a $700 million year-over-year adjustment in the third quarter from both reserve and rate adjustments,” Jacobson says.

The fourth quarter, however, will be more of a challenge: “Our guidance assumes lower earnings in the fourth quarter, in part due to the $400 million worth of production we pulled forward from the fourth quarter into the third, ” the CFO says. Additionally, GM also lost production earlier in October at key truck and SUV plants when Hurricane Helene shut down the factory operated by a carpet supplier in North Carolina.

The anticipated results for the fourth quarter should not be seen as a reflection of the company’s full-year earnings potential, Jacobson says: "In fact, we are expecting full-year results for 2025 to be in a similar range to our robust performance in 2024.”