GM Largest Revenue Source And Most Profitable Subsidiary

The Interior of a GM Cadillac CTS. Source: Flickr Image.

General Motors (NYSE: GM) is a global automobile company with sales offices located around the world. The company has a major operation in China.

GM reported its financial results according to three subsidiaries: Automotive, Cruise, and GM Financial:

• Automotive
• GM North America (GMNA)
• GM International (GMI)
• Corporate
• Cruise
• GM Financial

The automotive subsidiary is divided into smaller segments, including GMNA, GMI, and GM Corporate.

In this article, we will briefly go through every GM’s subsidiary to determine the respective revenue, profitability, and margin.

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Definitions

To help readers understand the content better, the following terms and glossaries have been provided.

Adjusted EBIT: GM defines the adjusted EBIT as earnings before interest and taxes, net of non-controlling interests.

The adjusted EBIT is a non-GAAP metric used by management. Investors can use it to review the company’s consolidated operating results because it excludes automotive interest income, automotive interest expense, income taxes, and certain additional adjustments that are not considered part of GM’s core operations.

Examples of adjustments to EBIT include but are not limited to, impairment charges on long-lived assets and other exit costs resulting from strategic shifts in operations or discrete market and business conditions and certain costs arising from legal matters.

The corresponding measure for the GM Financial segment is EBT-adjusted or adjusted earnings before taxes because interest income and interest expense are part of GM Financial’s operating results when assessing and measuring this segment’s operational and financial performance.

Equity Income: In accounting, equity income refers to the portion of a company’s net income attributed to a particular investor or group of investors, based on their ownership stake in the company.

This income is typically derived from the company’s ongoing operations and is distributed to shareholders through dividend payments. Equity income is recorded on the investor’s income statement as a portion of their overall investment portfolio income.

It is important to note that equity income is not a guarantee and can fluctuate based on the performance of the company and the overall market conditions.

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GM North America (GMNA)

GMNA’s financial results are obtained from GM’s annual reports.

A definition of the adjusted EBIT is available here: adjusted EBIT.

GM North America (GMNA) oversees the company’s operations in the United States, Canada, and Mexico. The division’s portfolio includes well-known automotive brands such as Chevrolet, Cadillac, GMC, and Buick.

GMNA earns over US$100 billion in automotive revenue in most fiscal years. The revenue figure came in at US$141.4 billion in fiscal 2023, the highest over the last four years.

GMNA delivered over 3 million vehicles in fiscal 2023, up slightly from 2022.

In terms of profit, GMNA delivered an adjusted EBIT of US$12.3 billion in fiscal 2023, down slightly from US$13 billion in 2022.

Although revenue and profit increased in fiscal 2023, the EBIT-adjusted margin decreased to 8.7%, demonstrating lower profitability in the latest result than all prior years.

At over US$12 billion in adjusted EBIT, GMNA is easily the largest profit contributor to General Motors.

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GM International (GMI)

GMI’s financial results are obtained from GM’s annual reports.

A definition of the adjusted EBIT and equity income is available here: adjusted EBIT and equity income.

General Motors International (GMI) is a subsidiary of General Motors (GM), one of the world’s largest automobile manufacturers. GMI manages the company’s operations outside North America, including its sales, marketing, and manufacturing activities in Asia, Europe, Africa, and the Middle East.

The company has a long and rich history that dates back over a century, with its roots in the early days of the automobile industry. Today, GMI is a global player in the automotive market, with a strong presence in emerging economies and a portfolio of popular brands such as Chevrolet, Cadillac, Buick, and GMC.

In China, GMI has joint ventures with local automobile companies to produce and market various Chinese brand vehicles in addition to its vehicles. Popular brand names in China sold under GMI’s automotive joint ventures are Baojun, Buick, Cadillac, Chevrolet, Jiefang, and Wuling.

As of fiscal 2022, GMI’s investment in China joint ventures was valued at as much as $6.7 billion, according to this article: GM China Sales And Market Share.

While GMI doesn’t wholly own these joint ventures, it gets a fair share of the revenue through equity income. The equity income from China automotive joint ventures is consolidated as part of the parent company’s earnings.

As of fiscal 2022, the equity income from China automotive joint ventures totaled as much as US$677 million, according to the same article. However, this figure is far from the US$2 billion of equity income reported in fiscal 2018.

The significant decline in GMI’s equity income from China joint ventures is primarily attributed to the decreasing sales and profits in China over time, as shown in this article: GM Sales And Market Share By Country.

Nevertheless, GMI still contributed a sweet $16 billion in automotive revenue in fiscal 2023 to the parent company, a record figure over four years. The record revenue figure was made possible when GMI delivered over 600,000 vehicles outside North America in the same period.

As revenue has significantly recovered in the last several years, GMI has also become profitable. In fiscal 2023, GMI’s adjusted EBIT clocked US$1.2 billion, a record high over the four years.

Margin-wise, GMI’s EBIT-adjusted margin reached 7.6% as of 2023, roughly in line with 2022’s result but slightly lower than GM North America’s.

Therefore, GMI is not as profitable as GMNA.

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GM Corporate

GM Corporate’s financial results are obtained from GM’s annual reports.

According to GM’s annual reports, GM Corporate includes certain centrally recorded income and costs such as interest, income taxes, corporate expenditures, and revenues and expenses not part of a reportable segment.

That said, GM Corporate is not a profitable subsidiary because this segment incurs losses almost every fiscal year.

For example, GM Corporate’s gross profit came in at -US$240 million in fiscal 2023, while revenue totaled only US$274 million.

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Cruise

Cruise’s financial results are obtained from GM’s annual reports.

A definition of the adjusted EBIT is available here: adjusted EBIT. Cruise is a new reportable segment since 2019.

Generally, Cruise is responsible for developing and commercializing autonomous vehicles and self-driving technology.

Similar to the GM Corporate, Cruise is not a profitable segment. Unlike GM Corporate, Cruis’s EBIT-adjusted losses are worsening, as shown in the table above.

As seen, Cruise’s EBIT-adjusted losses have increased from US$887 million in 2020 to US$2.7 billion as of 2023. In addition, Cruise hardly derives any sales, as revenue totals only around US$100 million in most fiscal years.

Despite having massive losses, it’s not all doom and gloom for Cruise.

The good news is that Cruise received multiple capital injections between 2018 and 2019, which totaled more than $4 billion. It issued preferred shares to different parties, including Softbank Vision Fund, Honda, and GM.

In Jan 2021, Cruise issued preferred shares to multiple investors, one of them Microsoft, in exchange for $2.2 billion of cash.

GM chipped in US$1.0 billion in the latest round of funding for Cruise in 2021.

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GM Financial

GM Financial’s financial results are obtained from GM’s annual reports.

GM Financial is a global captive automotive finance company and a global provider of automotive finance solutions. It conducts business in North America, South America, and through joint ventures in the Asia Pacific.

The primary function of GM Financial is to provide retail loans and lease lending across all credit spectrums and offer commercial lending products to dealers who require working capital to finance new store openings or improvements to dealership facilities, as well as loans to purchase dealership real estate.

Other than dealer loans, GM Financial offers a sub-prime lending program in North America to customers with a FICO score or its equivalent of less than 620.

GM Financial is a more stable and predictable business than GM’s automotive segment, with revenue averaging around US$13.0 billion in the past four years.

As of fiscal 2023, GM Financial earned US$14.2 billion in revenue, up 11% from 2022. Of this amount of revenue, GM Financial squeezed out an adjusted EBT or earnings before taxes of US$3.0 billion, down 25% over 2022.

Despite earning more revenue in 2023, GM Financial’s profitability was down by as much as 25%, primarily affected by increases in interest expenses and decreases in leased vehicle income net of leased vehicle expenses, according to the 2023 annual report.

As a result, GM Financial’s adjusted EBT margin was down to 21% as of fiscal 2023, the lowest level since 2020.

While GM Financial may not be the largest profit contributor, it is the most profitable subsidiary, with an average EBT margin of 28% since 2020, beating all other segments.

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Conclusion

In short, GMNA contributes the most revenue to the parent company, at over US$100 billion annually. GMNA’s profit also is among the highest, totaling over US$12 billion in adjusted EBIT in fiscal 2023. Its EBIT-adjust margin reached 8.7% as of 2023.

On the other hand, GMI contributed nearly US$16 billion in revenue in fiscal 2023. GMI has become profitable after having a loss in 2020. Its EBIT-adjusted margin reached 7.6% as of 2023.

GM Financial earned US$14 billion in revenue in fiscal 2023, while the EBT-adjusted reached nearly US$3 billion. Its EBT-adjusted margin reached 21% as of 2023, the highest among all General Motors’ subsidiaries.

Cruise earns only US$100 million in revenue and produces no profit. GM Corporate also is not a profitable subsidiary.

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References and Credits

1. All financial figures presented in this article were obtained and referenced from GM’s quarterly and annual reports, SEC filings, investor presentations, press releases, etc., which are available on this page: General Motors Investor Relations.

2. Featured images in this article are used under Creative Commons licenses and sourced from the following websites: GmanViz and Alan Gore.

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Disclosure

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