Cash is the lifeline of a business.
It is no exception for General Motors (NYSE: GM).
Therefore, in this article, we will look at several cash metrics of General Motors such as the cash on hand, cash flow from operations, free cash flow, etc.
Total Cash On Hand
GM’s total cash on hand consists of cash & cash equivalents, marketable securities (investments), and a current portion of restricted cash.
GM put a big part of its cash and cash equivalents in fixed deposits, U.S. government bonds, and corporate and sovereign debts which are relatively safe.
Similarly, GM’s marketable securities are invested in US government bonds, corporate and sovereign debt as well as a small amount of mortgage-backed securities.
These investments produce interest incomes for General Motors and are liquid assets that can be converted to cash immediately whenever the company needs them.
That said, GM’s cash on hand has been on a steady rise over the years as shown in the plot above.
As of 2Q 2023, GM had cash on hand totaling $36 billion, a record figure over the past several quarters and was roughly 20% higher than the same quarter a year ago.
Of this amount, the majority was cash and cash equivalents.
On a side note, GM significantly increased its cash on hand during the onset of the COVID crisis in 2020.
As shown in the plot above, GM’s total cash assets hit nearly $50 billion in 1Q 2020 but the figure had slowly declined in subsequent quarters.
General Motors’ record cash position in 2020 was to keep the company with a high degree of liquidity and to have financial flexibility in case of a credit crunch.
Cash On Hand Breakdown
A big portion of GM’s cash on hand has been in cash and cash equivalents.
As of 2Q 2023, GM’s cash and cash equivalents totaled $23 billion, up significantly over a year ago.
Marketable securities came in at $10 billion in the same period while restricted cash totaled only $3.7 billion.
Both marketable securities and restricted cash had remained relatively stable over the periods shown but cash and cash equivalents rose considerably during the COVID crisis.
As seen in the plot above, GM’s cash and cash equivalents reached nearly $40 billion in 2020 when the pandemic was just about to start.
Ratio Of Cash On Hand To Current Assets
GM’s ratio of cash on hand to current assets has been on a steady rise from fiscal 2015 to 2023, indicating that the company’s cash position has indeed been increasing with respect to the current assets.
As of 2Q 2023, GM’s cash-to-current assets ratio was 34% compared to 32.8% measured a year ago and was much higher than the ratio in 2015.
Net Cash From Operations
A discussion of GM’s cash without involving the company’s operating cash flow would be meaningless.
The reason is that the huge cash pile would not mean anything if the automaker is bleeding cash on a massive scale.
That said, GM seems capable of generating strong operating cash flow.
On average, GM produces about $16 billion of net cash from operations on a TTM basis, a rather massive amount for a company with a market cap of only $40 billion as of September 2023.
As of fiscal 2023 Q2, GM’s net cash from operations clocked $21.5 billion on a TTM basis, a significantly higher figure compared to the historical average.
Also, GM’s cash flow from operations looks unaffected during the COVID-19 pandemic and by any other disruptions, including a high inflationary environment, a shortage of materials, and an ongoing war in Ukraine.
In short, GM produces solid operating cash flow irrespective of any environment.
Free Cash Flow
Similar to net cash from operations, GM generates solid free cash flow.
On average, GM produces about $8 billion of free cash flow on a TTM basis.
As of 2Q 2023, GM’s free cash flow came in at $11 billion on a TTM basis, a record figure in the last several quarters, and was much higher than the figure a year ago.
Also, GM’s free cash flow looks immune to the COVID disruptions and any other adversity encountered subsequently.
As seen, the automaker’s free cash flow only declined in one quarter and quickly recovered afterward.
Operating Cash Flow Margin
The operating cash flow margin measures the percentage of net cash from operations being squeezed out of revenue on a TTM basis.
That said, GM has a growing operating cash flow margin for the periods shown in the chart.
The rising ratio is good for the company and shareholders because GM is getting more efficient at producing operating cash flow.
As of 2Q 2023, GM had an operating cash flow margin that came in nearly 13%, a significantly higher ratio compared to the same quarter a year ago.
GM’s ratio is almost comparable with Tesla’s ratio as shown in this article – Tesla Cash Flow And Cash Position.
Free Cash Flow Margin
Similarly, GM’s free cash flow margin also has been on a steady rise for the periods shown in the plot above.
As of Q2 2023, GM’s free cash flow margin topped nearly 7%, a significant rise over the same quarter a year ago.
The rising ratio indicates GM’s growing efficiency in producing free cash flow.
Also, GM’s free cash flow margin is comparable with that of Tesla as presented in this article – Tesla Cash Flow And Cash Position.
Net Cash From Financing Activities
The net cash from financing activities depicts whether cash is used for debt repayment (negative numbers) or cash is added from debt borrowings (positive numbers).
Keep in mind that the data presented in the plot above is net of cash arising from capital returns such as dividend payments and share buyback to rule out the effect of capital returns.
That said, GM’s net cash from financing activities is mostly positive in most quarters, implying that the company has been taking on debt.
The only time the company had negative net cash from financing activities was 2021 when GM paid down most of the debt borrowed during the onset of the COVID-19 crisis.
Since GM has been taking on debt, the automaker’s total debt has ballooned to $115 billion as of 2023.
In short, General Motors produces solid cash flow and has tonnes of cash on hand.
More importantly, the company’s cash flow generation looks immune to most crises, including the COVID-19 disruptions, a material shortage, and an ongoing war in Ukraine.
References and Credits
1. All financial figures presented in this article were obtained and referenced from GM’s SEC filings, earnings reports, news releases, shareholder presentations, quarterly and annual reports, etc., which are available in GM SEC Filings.
2. Featured images in this article are used under a Creative Commons license and sourced from the following websites: raymondclarkeimages.
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