GM Q3 net income jumps 37% on record revenue

DETROIT -- General Motors on Tuesday said it expects to build fewer electric vehicles by the end of next year than it previously forecast, citing a slow start to production at a new battery plant in Ohio.

But the automaker said it was able to clear most of its backlog of gasoline-powered vehicles awaiting parts in the third quarter, helping push net income up 37 percent and revenue to a record high.

GM posted net income of $3.3 billion in the quarter ended Sept. 30 on improved truck production, better microchip supply and rising prices. Global revenue rose 56 percent to $41.9 billion, and adjusted earnings before interest and taxes rose 47 percent to $4.3 billion. As a result, the company’s net margin slid to 7.9 percent from 9 percent a year earlier.

GM earned $3.9 billion in North America before interest and taxes, an 83 percent increase, and its adjusted margin for the region rose to 11.2 percent from 10.3 percent.

"While the operating environment remains challenging, our team continues to adjust quickly when and where it needs to. This is especially true of our supply chain and manufacturing teams,” CEO Mary Barra told analysts on GM’s quarterly earnings call.

“As we’ve moved through the year, we have seen gradual improvement in the supply chain, including semiconductors,” Barra said. “Short-term disruptions will continue to happen, but we're taking concrete steps to minimize them and build long-term resiliency. This includes signing several strategic supply agreements for mature nodes where supply is most constrained. We're also working directly with semiconductor suppliers and sharing long-term forecasts to increase transparency and ensure their planning cycles include our volume."

In July, GM said it would hold about 95,000 vehicles awaiting microchips and other parts that were in short supply. CFO Paul Jacobson said Tuesday that the automaker cleared out about three quarters of those unfinished vehicles in the third quarter.

“Chips are getting better, certainly, than they were a year ago,” Jacobson said. He said GM is still building some vehicles without certain parts but not at the volume seen earlier in the chip shortage.

GM shares rose 3.6 percent to close at $37.01 on Tuesday.

Barra told analysts that construction is ongoing at two new Ultium Cells battery cell manufacturing plants as part of its joint venture with LG Energy Solution.

GM will open a battery plant in Spring Hill, Tenn., by the end of 2023 and one near Lansing, Mich., by 2024. The joint venture is looking at Indiana as a possible location for a fourth plant.

At the joint venture’s first Ultium battery cell factory in Warren, Ohio, the launch of production has been slower than expected, Barra said. The company now expects to produce 400,000 EVs in North America mid-2024, rather than by the end of 2023 as it outlined in February.

"We had a very aggressive plant launch plan when we started to build the plant,” she told analysts, citing employee training as one element that has taken longer than anticipated.

“With everything that we're learning, it gives me great confidence that we're going to be able to start plant two, three and beyond on time,” Barra said. “And I have even greater confidence in our ability to scale to the million units of annual EV capacity in 2025 in the U.S. and similarly in China.”

GM has said it will invest $35 billion in electric and autonomous vehicle development through 2025, as part of a plan to launch 30 EVs globally during that period.

The automaker on Tuesday confirmed its previous full-year guidance of $9.6 billion to $11.2 billion in net income and adjusted EBIT of $13 billion to $15 billion. Jacobson said that the company is tracking toward the midpoint of its guidance with one quarter to go.

GM said its U.S. dealers had 359,000 vehicles in inventory at the end of the third quarter, nearly triple the number they had a year ago.

“The number of vehicles physically on dealer lots is well below historical levels, and continues to be tight at around 20 days,” Jacobson said, while demand is strong for GM’s highest-margin vehicles.

“We’re seeing inventories trend a little bit higher,” he said, “but that’s not a surprise given the speed and the volume at which we’ve been cranking out vehicles.”