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Nowadays it’s good to be a big technology player. But it’s also good to be an old giant looking to get back on the radar if you’re General Motors (GM).
After a slump during the COVID-19 years, “without a doubt we will be at record levels for GM on earnings, EBITDA and free cash flow,” Bank of America analyst John Murphy told Yahoo Finance Executive Editor Brian. Sozzi during the Opening Bid podcast (see video or listen below).
“That’s the level that no one thought would ever be achieved consistently and it looks like they will achieve that in the coming years.”
That execution led to GM earning the 2024 Yahoo Finance Surprise of the Year award.
Murphy praised veteran GM Chairman and CEO Mary Barra for her leadership over time. Barra, he said, recognized the “need to strengthen your core and make the core business that much stronger so that you can finance the future.”
Founded in Flint, Michigan, in 1908, GM is a member of the “Big Three” automakers alongside Ford (F) and Stellantis (STLA), formerly Chrysler.
GM shares hit a 52-week high of $61.24 in December and are up 47% year to date – well ahead of the Big Three.
Ford shares are down 15% through 2024, while Stellantis shares are down almost 40%. Stellantis just fired its CEO due to poor execution.
Some strength for GM comes from its crossover vehicles and a sharper eye on electric vehicle profits, Murphy said. What has surprised Barra this year is how electric cars like the Cadillac Lyriq have been embraced by consumers, she told Sozzi in an exclusive interview.
GM’s third-quarter earnings beat Wall Street estimates on both the top and bottom lines. Revenue was $48.76 billion, beating estimates of $44.69 billion. Adjusted earnings per share came in at $2.96, above expectations of $2.43.
The automaker also raised its full-year outlook for the third time this year.
“Importantly, when we get to calendar years ’27 and ’28, they have their pickups and full-size SUVs, which are an incredible franchise,” Murphy said, adding that no competitor has achieved this feat. “We might reach 18 million units in ’27 and ’28. I think there is a huge amount of upside in the cycle,” he said.
However, it wasn’t all rosy at GM. Earlier this month, it announced a $5 billion restructuring in China to support business struggles in the ultra-competitive country. It also shared plans to close Cruise, its robotaxi division, in the first half of next year.
Barra said it would have been too expensive to pursue a robotaxi fleet competing with Elon Musk’s Tesla (TSLA).
Other potential headwinds in 2025 include external competitors in electric vehicles and the Trump administration’s proposed tariffs on Mexico and Canada, both of which are major auto supply regions.
As for upstart EV disruptors like Tesla, the Big Three have turned around and added electric vehicles to their lineup. At GM, “They have a very robust EV launch schedule, which unfortunately, especially in the US, the market really isn’t for right now,” Murphy said.
Read more: This is why Walmart won Yahoo Finance’s 2024 Company of the Year award
More tariffs also remain an elephant in the room. The new Trump administration may crack down on enforcement of the rule of origin, which currently imposes a 2.5% tax on non-compliant products, Murphy said.
Trump has also imposed additional tariffs, including a 25% levy on key auto supplier countries Mexico and Canada.
Barra warned in a new exclusive interview that Sozzi tariffs could lead to higher car prices and possibly softer demand.
Rate risks aside, Murphy remains confident in the auto industry. “Four years is quite a short time frame,” he said. “Splitting up the company for something that could be a four-year policy is really difficult to do.”
“I think the reality is the revenue and cash flow that you’re getting now [at GM] are sustainable for at least the next four years,” says Murphy.
Three times a week, Yahoo Finance Executive Editor Brian Sozzi fields full of insights and chats with the biggest names in business and markets Opening bid. You can find more episodes on our videohub or check your favorite streaming service.
Grace Williams is a writer for Yahoo Finance.
Read more about Yahoo Finance’s 2024 business awards:
