Do GM’s latest earnings reflect its vast global market share?

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GM’s earnings

If GM is driving for sales and has significant global market share, is this showing up in the company’s earnings?

GM first quarter 2014 summary slide

This chart is from GM’s first-quarter earnings call slide deck. As you can see from the chart above, GM’s earnings are driven by earnings in North America and China. South America was negatively impacted by the Venezuelan devaluation and slowdown in Brazil.

GM makes the majority of its operating income in the North America, which is driven by the U.S. As we discussed in a prior article on the automobile industry, the U.S. market is 49% cars and 51% light trucks, which is comprised of cross-overs, minivans, and SUVs. In 2013, GM had 24% of the U.S. light truck market, 14% of the car market, and an overall share of 18% in the U.S. In 2013, GM’s $8.6 billion operating income was driven by its $7.5 billion U.S. operating income. The U.S. market is driven by truck sales. GM sold 1.1 million trucks and 0.7 million crossovers that drive GM’s profitability. This is why GM introduced new trucks and SUVs in early 2014, to maintain this cash flow to invest in their car operations, improving product offering and manufacturing efficiency. To summarize, GM’s revenues are driven by light trucks in the U.S. and cars in China. Earnings are pulled down by inefficient operations. Let’s see how they compare to the industry.

EBITDA Margin chart

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As you can see in the chart above, the answer is no. GM does not compare well against its peers Ford Motor Company (F), Toyota Motor Corporation (TM), Volkswagen AG (VOW), and BMW Group (BMW). As we saw before in our industry series, GM’s average selling price is low and its manufacturing costs are high. Much of this trouble focuses in Europe, where GM continues to post losses as it reorganizes its global operations. Maintaining the European operations is important to GM for its engineering and design facilities as well as maintaining a global manufacturing base to absorb corporate overhead.

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