GM Could Turn a Profit on EVs This Year With Plan to Fix Production Issues

Top of the agenda for the new year for General Motors: profitable electric vehicle growth, fixing software issues, and relaunching Cruise, the self-driving division that halted all operations in October after a pedestrian crash in San Francisco that is still under investigation. These are the focus areas outlined by GM CEO Mary Barra on a call to report fourth-quarter 2024 financial results.

The Software Services team is in the process of resolving instability issues some customers have experienced with the Chevy Blazer EV that impacted their screens and charging experience. They are working with extreme urgency to lift the stop-sale soon. " We disappointed these customers and we know it," Barra said. "We are determined to get the software right and we will."

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GM has already made organizational and process improvements. A software quality division was established in the software and services team and it has been performing a retrospective on the Blazer EV that has improved the current software development and test processes across the enterprise. Outcomes are being applied to all programs going forward. They include improved standardization of software development and release processes and increased quality gates for software at the vehicle level.

GM Vehicles Coming in 2024

New vehicle launches this year, on the internal combustion side, include the redesigned Chevy Equinox, Traverse, Tahoe, and Suburban as well as the GMC Acadia and next-generation Buick Enclave. On the EV side: Silverado EV and GMC Sierra EV, Equinox EV, Cadillac Escalade IQ and Celestiq all continue production or launch.

Barra said there are more than 100,000 reservations for electric pickups that the automaker expects to fill this year and next. Overall, GM is hoping to deliver 200,000-300,000 EVs this year, depending on demand. The pace of EV demand has slowed, creating some uncertainty, but Barra said she still thinks EV share in the U.S. will increase from 7 percent in 2023 to 10 percent in 2024 in the U.S.  If GM EV sales surpass 200,000 EV sales, GM will record variable profit on them, says Chief Financial Officer Paul Jacobson.

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Ultium Logjams Being Fixed

Getting EVs from the Ultium platform has been plagued with production logjams which are being addressed. Battery module production is on schedule, Barra said. There is now improved automated equipment at assembly plants and installation of the new high-capacity assembly lines should be complete by mid-year. In terms of battery supply, the Ohio joint venture plant is now running at full capacity and the new plant in Tennessee will start shipping chips this quarter.

As for importing plug-in hybrids from other markets, Barra says they will only do so when needed for compliance. But for 2024, the focus is on EVs. GM has the technology and knows the segments it will apply it to, it just isn't ready to do it this year.

Getting Cruise Cruising Again

GM has received a third-party review of the Cruise self-driving program incident, is embracing the conclusions and spending the next few weeks developing a new plan. It will be a more deliberate go-to market strategy, spending will be decreased by $1 billion this year. But Barra says she remains committed to Cruise, the tech is safer than human drivers, and a timetable for the robotaxis to return to the road will be forthcoming soon. One lesson learned: GM needs to work more closely with regulators at all levels as well as first responders to understand the tech and its benefits.

On a lesser level, Barra said GM is deploying Super Cruise as quickly as it can. In hindsight, in 2018 the automaker should have put it on more vehicles initially as it does require some engineering and sensors to add to a new vehicle. There were plans to make it standard on more vehicles but the semiconductor shortage stalled some of that. The upgraded Ultra Cruise version of Super Cruise was previously reportedly cancelled, with renewed focus on improving Super Cruise capability going forward.

Competing with China

Tesla CEO Elon Musk recently said that, in the absence of trade barriers, China will demolish the competition when it comes to EV sales in the U.S. Barra said GM must have the right vehicles at a competitive cost base. But the automaker also needs a level playing field. If it is level, "I put our products and cost structure against any."

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Asked if GM would consider pulling out of China, the way it exited the European market, Barra said leaving Europe was the right move. And while leadership evaluates strategy regularly, for now China, which is the largest automotive market in the world, is a good place to play.

GM Q4 Earnings

Despite 2023's six-week UAW strike, GM's net income increased by 5.2 percent to $2.1 billion in the fourth quarter of 2023, largely due to reduced costs in marketing and engineering. But profit margins and pretax earnings fell substantially and revenue was also down, the result of lost production from the temporary shutdown of five plants and 18 distribution centers, as well as losses related to Cruise.

For the full year, GM also saw net income increase by 1.9 percent to $10.1 billion, which is higher than the forecast. Revenue was also up to 171.8 billion but adjusted earnings were down 15 percent. The number unionized workers care about: North American pretax profit was down slightly to $12.3 billion, which means employees will get profit-sharing payments of up to $12,250. For 2024, GM is forecasting $9.8 billion to $11.2 billion in net income.