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How General Motors’ Balance Sheet Looks Going into 4Q15

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Oct. 27 2015, Updated 2:06 p.m. ET

Balance sheet

Automotive companies have been working to strengthen their balance sheets. Having optimum liquidity and leverage levels has been a key focus area for companies following the 2008–2009 financial crisis. In this part of the series, we’ll explore how General Motors’s balance sheet looks following the company’s 3Q15 financial results.

Together, General Motors and Delphi Automotive (DLPH) form ~3% of the Consumer Discretionary Select Sector SPDR ETF (XLY).

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Share buybacks

  • General Motors ended 3Q15 with total liquidity of $34 billion. This includes cash and marketable securities of $21.9 billion and available credit facilities of $12.2 billion. Note that both General Motors and Ford (F) have negative net debt. This basically means that the cash on their balance sheets is more than their outstanding debt obligations. Fiat Chrysler (FCAU) has higher financial leverage as compared to Ford and General Motors.
  • General Motors had available liquidity of $37.2 billion at the beginning of the year. However, the company has returned $4.6 billion to shareholders since the beginning of the year. This includes dividends of $1.7 billion and share buybacks of $2.9 billion.
  • The company generated strong operating cash flows of $3.3 billion in the quarter. The graph above shows the trend in GM’s operating cash flows.
  • General Motors expects cash capital expenditure of $8 billion in fiscal 2015. Previously, the company gave a guidance of $9 billion. The change in guidance is due only to the timing of cash outflow. On an accrual basis, capital expenditure is expected to be $9 billion this year.

Outlook

General Motors expects capital expenditure to be 5%–5.5% of revenue on an ongoing basis.

The company has been able to address some of the impending obligations related to ignition switch recalls and the related penalty to government authorities. However, according to GM’s CEO (chief executive officer) Mary Barra, the company still has “a handful of open items” that it would like to resolve in a timely and correct way.

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