GM beat forecasts and raised its cash outlook, and the shares still fell 6.84%

General Motors closed Tuesday at US$77.09, down 6.84%. Its adjusted earnings rose 32% to US$3.70 a share in the September quarter, on revenue of US$50 billion.

So why did the shares fall? The answer is costs. GM expects US$1.5 billion to US$2 billion of commodity and related inflation this year, on top of US$2.5 billion to US$3.5 billion in tariffs. GM says copper is at a record and steel at a four-year high.

Memory chips are on the list too. Data centres are buying them up, and a modern car is full of them. Chief executive Mary Barra named memory alongside logistics and commodities as a pressure on the business.

Chart: GM's September-quarter sales reach US$50.0bn. Revenue (columns) and net income (dots) in each July-to-September quarter, 2010 to 2026, in US$bn. The shares fell 6.84% on Tuesday on GM's cost outlook. — This story’s chart of the day: the numbers, the dark version and the animated version are on its own page. The chart’s page →

Next year brings more of the same. GM expects commodities alone to add US$1 billion to US$1.5 billion of costs in 2027.

The cash outlook went the other way. GM now expects US$11.5 billion to US$12.5 billion of automotive free cash flow, the cash left after running and investing in the business, up from US$9.5 billion to US$11.5 billion. It also approved a US$20 billion buyback, worth more than a quarter of the company.

The tell

pricing in 2027. GM sets none of the prices for copper, steel or chips. I'd want to see whether it can pass those costs on to buyers, because the US$20 billion buyback gets paid for out of that profit.

This story ran in Ad Break Wednesday 21 October’s edition, with the market snapshot, the other two stories, the numbers and the week ahead. Read the whole edition →

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