GM shares surged after record earnings and a new stake in a lithium company

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General Motors reported a much stronger-than-expected fourth-quarter profit, lifting full-year results to record levels for the second straight year.

The largest U.S. automaker also said Tuesday it is buying a $650 million equity stake in Lithium Americas, which will give it access to the raw material needed to build batteries to power 1 million electric vehicles a year in the first phase of production.

For the quarter, GM earned adjusted earnings of $3 billion, or $2.12 per share, up from $1.35 per share a year earlier and well ahead of the $1.69 per share forecast by analysts polled by Refinitiv . That lifted full-year adjusted income to $11 billion, up from the $10.4 billion earned in 2021, which was its previous record.

The company said it expects strong earnings in 2023, although it expects them to be down slightly from just-reported levels, coming in between $8.7 billion and $10.1 billion. But the company’s CFO Paul Jacobson said its auto business is expected to remain strong, with much of the decline likely to be at GM Financial. This is because of the hit it will take from higher interest rates and the falling value of used cars, as well as higher interest rates taking an accounting hit on pension income.

“Actually this [guidance] is a strong statement about where we see things going, stronger than others,” he told reporters on a call on Tuesday.

Jacobson told reporters that GM does not expect to follow Tesla and Ford in lowering the prices of its electric vehicles.

“I don’t think there’s any surprise that there’s increasing competition in the EV space,” he said. “Our customers say our prices are good based on the demand we’re seeing.”

The company’s investment in Lithium Americas is part of the company’s efforts to limit supplies of the raw materials it will need to convert traditional gasoline-powered cars into electric vehicles. The Lithium Americas deal won’t supply the company with any lithium until 2026, but Jacobson told the media that “we’ve already achieved all the lithium we need until 2025.”

GM expects to produce 70,000 EVs this year, a tiny fraction of total car production. It sold 5.9 million vehicles in 2022, down about 6% from 2021 due to a shortage of parts needed to make all the vehicles it was in demand for.

“We continue to face some supply chain and logistics issues, but overall things remain on track,” Jacobson said.

But the company expects to quickly ramp up EV supply and demand with a new battery plant opened last year, two more under construction and a fourth planned soon. GM aims to produce 400,000 electric vehicles by mid-2024 and 1 million a year by 2025.

CEO Mary Barra predicts more deals like Lithium Americas are coming soon.

“We continue to pursue strategic sourcing agreements and partnerships to further secure our long-term needs,” she told investors.

GM said it would cut staff in 2023, part of its effort to cut costs by $2 billion over the next two years. But unlike a number of major companies that have announced layoffs in recent months, company officials stressed that GM will not shrink through layoffs. Instead, the reduction will be driven by attrition.

GM did not disclose how many jobs may be cut, with Jacobson saying the company will end the year with a “slightly lower” number of employees.

GM has 167,000 employees worldwide, with 124,000 in North America. That includes more than 42,000 members of the United Auto Workers union. Those workers will receive profit-sharing bonuses of an average of $12,750 for the year, up nearly 25 percent from the $10,250 they received a year earlier.

Shares of GM ( GM ) jumped more than 5% in premarket trading after the results.

This story is evolving and will be updated.

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