GM reports upbeat earnings, smashes expectations

Yahoo Finance Live anchors discuss the rise in stock for GM following quarterly earnings.

Video transcript

- Well, thing number two this morning that you need to know-- General Motors reported upbeat earnings in its latest quarter, profits rising 16%, revenue up 28% year over year. This performance comes against the backdrop of a slowing economy as rising interest rates affect things like auto loans. And Soz, I know you talked to the CFO over at GM to kind of figure out what some of the things they're watching.

- Yeah, lots going on this quarter. They uncorked a new $2 billion cost cutting measure, Paul Jacobson telling me that January is off to a good start. That is after a strong December.

Lots of puts and takes here, but I think the market is trading off this very strong outlook from GM here, well above consensus estimates. But you know, key to them hitting that result is maybe not discounting cars as much as we've been hearing-- or EVs, I should say, like we've been seeing now this week from Ford and Tesla. I asked Jacobson about this.

PAUL JACOBSON: It's a matter of really putting vehicles across all classes, and I think some of our competitors have struggled with the cost of battery cells, et cetera. Obviously, Tesla is doing incredibly well, and a lot of lessons that I think everybody can learn from them. But at the end of the day, it's about driving efficiencies, and we think with the Ultium platform and with our scale of manufacturing, we can offer vehicles in different classes and different segments at different price points that are better than anything out there and to be able to do it while hitting our margin targets.

- And Paul makes a good point. GM has made a different bet compared to some of its rivals. They've seemed to spread out the price points of their electric vehicles. Of course, you have the Bolt there as well.

I think they will have nine new EV launches this spring alone, more high end and low end for, I would argue, focus a little more on higher end. Of course, Tesla is high end.

Yeah, and this is all going to come down to their cash flows as well, or it's going to greatly impact what those cash flows look like, especially if you do see more of a pricing war start to move forward in the EV landscape among some of the largest manufacturers, Tesla and those legacy automakers and how it contributes to that cash flow, at least the projections right now that they're expecting. Net automotive cash flows provided by some of their operating activities.

They're expecting that to come in for the calendar year in a range of $16 to $20 billion and then adjusted automotive free cash flow of $5 to $7 billion. And so that's something that you could look at potentially being invested back into the business later on even if those cash flows remain solid or come in above those targets. But then it's also the battery.

This is something that we had teed up at the beginning of this week as well. And they made a significant deal with lithium. This is going to be a $650 million equity investment that is going to come through their Thacker Pass in Nevada operation, and they're expecting it to actually ramp up or add on about a million vehicles, EVs, per year.

So that is significant. EVs, they had already had a 1 million vehicle target by 2025. And so this just adds on to some of the projections that GM is putting forward at this point too.

- And interesting. He also said they will have the team make V8 engines, which I thought was very interesting. But we'll have more from this interview with Paul Jacobson, the CFO of General Motors, later on in the show.