'We've retooled our ICE portfolio' to fund EV transition, GM exec says
GM stock is on the move following its investor day, at which the company raised its full-year profit guidance and gave investors an update on its EV transformation from the automaker’s investor day in New York City.
CFO Paul Jacobson said the company now sees full-year 2022 adjusted automotive free cash flow of $10 billion to $11 billion, updating prior guidance of $7 billion to $9 billion. GM raised the bottom end and lowered the top end of its 2022 adjusted EBIT to $13.5 billion to 14.5 billion, compared to its previous guidance of a range of $13 billion to $15 billion.
Looking head to 2023 – 2025, GM now expects revenue to grow at a 12% compound annual rate through 2025, reaching more than $225 billion as EV volumes and software revenue grow. The company expects revenue from EVs to be more than $50 billion in 2025.
As for its EV game plan, the automaker says its EV portfolio will be “solidly profitable in 2025” in North America, as the company scales EV capacity to more than 1 million units annually. GM seeing the EV business as profitable by 2025 is years ahead of schedule, when it originally expected margins for EVs to be comparable to gas-powered cars by 2030.
The company is citing the effect of the Inflation Reduction Act (IRA) and its incentives to build EVs and batteries in North America.
“It’s clear these credits are going to help usher in a new era of technology innovation and job creation that’s going to achieve what was intended,” GM CEO Mary Barra said during a presentation at the company's investor day in New York. “It will be good for the American economy. It’ll be good for American families. It’ll be good for the environment, and frankly, General Motors is well poised.”
But GM's profit boost isn't all the result of the IRA. The company is also improving operationally to boost profitability in the near term and fund EV initiatives for the future.
"We've retooled our ICE portfolio, to fund the transition to an all-electric in the future in the out years," GM President Mark Reuss told Yahoo Finance from GM's investor day. Reuss noted changes to its pickup truck business, where GM is number one with its Silverado and Sierra sales combined and with its SUV offerings such as the Terrain and Equinox helping the bottom line. GM is also launching production of its updated mid-size pickup trucks, which is a growing segment, at its Wentzville, Missouri, plant.
GM is also changing the way customers will order cars, with a new streamlined process in which customers will eventually purchase them online, with GM providing delivery through its own distribution network. Reuss says the new "buy your way" strategy will save GM around $2,000 for every vehicle sold.
GM is also innovating on how it plans to make next generation of vehicles. Take the $300,000 Cadillac CELESTIQ for example. It is essentially a handmade car, using bespoke parts, with Cadillac designers working hand in hand with clients to make these one-off cars. At low volume it would be very expensive to make, but Cadillac is implementing new production techniques, like the use of additive manufacturing, which is similar to 3D-printing.
"We've installed a complete additive manufacturing facility with lots of machines, whether its metallic or non-metallic, at our tech center in Warren," Reuss said. Even custom requests, like fusing a client's flowers into laminates for the car's interior panels or guitar strings in the center console for musician Lenny Kravitz's CELASTIQ, are possible.
"A lot of that is enabled by the true bespoke nature of additive manufacturing, and as an engineer that's incredible exciting for me," Reuss said.
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Pras Subramanian is a reporter for Yahoo Finance. You can follow him on Twitter and on Instagram.
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