Key takeaways from GM’s Q4 results and 2022 guidance

DETROIT – General Motors’ fourth-quarter earnings beat Wall Street’s expectations and its 2022 guidance pleased analysts, after CEO Mary Barra assured analysts the company would earn near-record profits this year even while it spends billions on electric and autonomous vehicles.

“We can and we will keep up our aggressive pace backed by strong results,” Barra said Tuesday during an analyst call. “We expect to follow our record EBIT-adjusted earnings in 2021 with another year of record or near-record results in 2022, while investing significantly more year-over-year to accelerate our growth.”

Barra, among other things, announced GM is pulling ahead “significant investment” from the second half of the decade into a $35 billion investment plan in electric and autonomous vehicles through 2035. She said the company is targeting to sell 400,000 EVs in North American through 2023.

The plans were well-received by Wall Street analysts but did little for GM’s stock. Shares fell by about 3% during trading midday Wednesday. Evercore analyst Chris McNally described GM as coming “out swinging,” while RBC Capital Markets raised its price target for the automaker from $74 to $85 a share.

“While 2022 guidance mostly in line with expectations (even if different composition), on balance we still walk away encouraged. GM continues to show strong profitability while investing for the future,” RBC analyst Joseph Spak wrote in an investor note Tuesday night.

Here’s additional details on GM’s new EV plans as well as other key takeaways from the company’s fourth-quarter results.

GM said it expects to generate an operating profit this year of between $13 billion and $15 billion, or $6.25 to $7.25 earnings per share. That falls in line with its earnings last year as well as most Wall Street expectations.

What surprised many analysts was GM’s projected production increase of 25% to 30% this year as it continues to manage through a global shortage of semiconductor chips.

Net income this year is expected to fall between $9.4 billion and $10.8 billion, also in line with its $10 billion profit in 2021, GM said.

GM CFO Paul Jacobson said some of its profits this year could be hindered by an increase in sales of lower-margin vehicles as chip supplies improve. The company over the last year has prioritized building highly profitable pickups and SUVs over smaller crossovers and cars.

Barra said GM is not reinstating its dividend at this time to preserve capital to spend on its electric and autonomous vehicle plans. GM plans to spend between about $9 billion and $10 billion a year in the medium term, including in 2022.

“As we move forward, we will consider all opportunities to return excess capital to shareholders, but we will not reinstate a dividend at this time,” Barra said. “Our clear priority is to accelerate our EV plan and drive growth.”

GM cut its dividend during the early days of the coronavirus pandemic in April 2020.

Barra on Tuesday gave the most detailed look at GM’s electric vehicle reservations to date. She said the company has 110,000 reservations for its electric Silverado; 59,000 for the GMC Hummer EV pickup and SUV; and 25,000 cargo vans for its new BrightDrop electric commercial vehicle business.

The initial “strong demand” is among the reasons for GM accelerating its EV plans, Barra said. She said the company will announce a third plant to produce battery-electric trucks in the foreseeable future as well as the location of a fourth production facility for battery cells with LG Energy Solution during the first half of this year.

GM’s first battery cell production facility through a joint venture with LG Energy Solution is expected to come online later this year in Ohio, followed by two other plants in Tennessee and Michigan in the sequential years.

GM had previously said it expects its electric vehicle sales to top 1 million globally by 2025. Given the new targets, including increasing production capacity to more than 1 million vehicles in both North America and China by middecade, that sales target is likely outdated.

When asked about the sales target Wednesday, a GM spokesperson referred to Barra’s comments about accelerating its EV plans. She did not mention the 1 million sales goal, which was first announced several years ago.

“We’re just going to keep going full-out because we see the opportunity for substantial EV volume growth in this period of time,” Barra said.

GM and its joint venture partner Wuling Motors sold nearly 400,000 four-seat subcompact full electric vehicles last year alone in China.

The increasing importance of GM’s majority-owned autonomous vehicle subsidiary Cruise was apparent on the call Tuesday.

Barra made it a point to specifically discussed Cruise’s ongoing operations, including a Tuesday announcement of opening its self-driving vehicle fleet to members of the public.

Cruise co-founder and interim CEO Kyle Vogt also was on the Tuesday earnings call, signaling more alignment between the companies following the ousting last month of Dan Ammann, a former GM executive who was tasked with leading Cruise.

Cruise is awaiting its last permit from regulators to commercialize its robotaxi fleet in San Francisco.

GM expects the operations to potentially contribute up to $50 billion in annualized revenue by the end of this decade.

– CNBC”s Michael Bloom contributed to this report.