GM’s Ended The Year With High Yield Said WSJ Print Subscription

GM finished the last quarter with high profits. The quarterly performance easily hurdled analysts’ expectations on pretax and revenue, sending the stock up 8.3% declared WSJ Print Subscription. Fourth-quarter net profit rose 15% from $1.7 billion in the prior-year period, when factory production was constrained by parts-supply snags.

GM executives told analysts the company doesn’t plan to get drawn into a price war on electric vehicles, following large cuts recently from Tesla Inc. TSLA 3.94% increase; green up pointing triangle and Ford Motor Co. “We think right now we’re priced where we need to be,” GM Chief Executive Mary Barra said on an earnings call.

For the full year, GM reported a total of $14.5 billion in pretax profit, an annual record and the high end of a range it forecast in November.

Revenue rose 28% to $43.1 billion, as GM shook off a shortage of semiconductors. GM’s vehicle output in North America jumped 37% in the fourth quarter from a year earlier

For 2023, GM said it expects pretax profit to total between $10.5 billion and $12.5 billion.

GM executives announced to WSJ Print Subscription, plans to cut $2 billion in costs over the next two years. The cuts will come from vehicle-development programs, general overhead and employee attrition, although executives said no layoffs are planned.

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GM said it would make a record $500 million in profit-sharing payments to hourly employees represented by the United Auto Workers union. That works out to an average check of $12,750 for eligible employees, the union said. The company later this year is scheduled to negotiate a new four-year labor contract with the union.

In an effort to secure future EV battery supplies, GM said it is making a $650 million equity investment in Lithium Americas Corp. as part of its plans to develop a mine in Nevada. GM said the site, called Thacker Pass, is the largest known source of lithium in the U.S., and it plans to use lithium carbonate extracted from the location in GM’s electric-vehicle batteries. Lithium Americas shares rose nearly 15% Tuesday.

WSJ Print Subscription, announced Investors are closely watching the resilience of GM’s pricing power. Like other car companies, GM has commanded strong prices for the past two years, with buyers paying top dollar as tight vehicle supplies created a seller’s market. The company curbed the output of less-profitable models in favor of its biggest moneymakers, pickup trucks, and large SUVs.

Wall Street Analysts

Wall Street analysts and auto executives generally predict buyers will pull back on what they are willing to pay this year. The question is by how much and how fast.

Tesla in mid-January cut U.S. prices across several models, followed Monday by Ford’s price reduction on the Mustang Mach-E electric SUV. Some analysts said the cuts could add downward pressure on pricing power already expected to drop as inventories are rebuilt and interest rates pinch consumer budgets.

GM finance chief Paul Jacobson said the company isn’t planning to alter its EV pricing in response to those moves. “Our customers are saying that our vehicles are priced well, based on the demand that we’re seeing,” he told reporters during a conference call. Last year, GM cut the price of its Chevrolet Bolt EV by about 18%.

Chevrolet Blazer

GM plans to launch several new EV models this year, including the Chevrolet Blazer, which is a similar size as the Tesla Model Y and Ford Mach-E, and priced below both, starting around $36,000.

GM fell behind key rivals in EV sales last year, partly because it has taken longer than others to roll out new models, such as the GMC Hummer pickup truck and Cadillac Lyriq SUV. GM executives have said those EV launches have been held back by tight battery supplies. The ramp-up of production at GM’s first battery-cell factory, a plant in Ohio jointly run with Korea’s LG Energy Solution, has taken longer than expected.

GM Vehicle

Executives said the bulk of this year’s EV sales will happen later in the year, once battery output has accelerated. “This is the breakout year” for GM’s EV efforts, Ms. Barra said.

GM Executives

GM executives have said they are confident a solid backlog of prospective buyers will remain intact despite rising interest rates, falling used-car prices

“From an early read in January, it’s pretty positive,” Ms. Barra said.

The average price paid for a GM vehicle in the fourth quarter was $51,770, down about $2,000 from a year earlier.