General Motors Co ($GM) Q1 2026 Earnings Call

Thank you, Mary, and we appreciate everyone joining us this morning. The GM team delivered another outstanding quarter. Thanks to their hard work and strong execution, Q1 EBIT-adjusted was $4.3 billion, surpassing expectations even after excluding the $0.5 billion tariff adjustment. Once again, we demonstrated discipline in our approach to both pricing and inventory. In the first quarter, our US incentive spend per vehicle as a percentage of MSRP remained more than two points below the industry average. US dealer inventory ended the quarter at 516,000 units, down 6% year-over-year overall, and down 9% for full-size pickups. Even against the difficult comparison created by outsized pre-tariff March deliveries last year. While we further strengthened our leadership in US full-size pickups this quarter, leaner inventory constrained retail sales. Looking ahead, we are working to increase inventory levels of key products and believe that we can take this higher over the next several quarters while being mindful of the broader demand environment. Let me now provide more details on our strong first quarter results. For the total company, revenue was down year-over-year by approximately $400 million in the first quarter. As expected, driven primarily by lower EV wholesale volumes. ICE wholesales were flat year-over-year with higher GMI volumes being offset by lower North American volumes, which were constrained by the end of production of certain Cadillac crossovers, lower imported volumes from Korea, and full-size pickup downtime. As I mentioned earlier, our Q1 EBIT adjusted came in better than our expectations driven by solid execution across all of the businesses and good expense management. Year-over-year, Q1 EBIT adjusted was up approximately $750 million driven by the IEPA tariff adjustment, lower EV losses, an FX benefit, lower warranty expense, and emissions-related regulatory savings. These tailwinds were partially offset by a full quarter of tariffs. Let's expand on a couple of these items. In the first quarter, we incurred $200 million of incremental gross tariff costs including the tariff adjustment compared to minimal tariff costs last year. EV losses were down several hundred million dollars year-over-year in the first quarter driven by lower volumes, manufacturing efficiencies, and lower fixed costs. On warranty, we continue to expect a year-over-year tailwind of $1 billion with first quarter results improving roughly $200 million versus the prior year. Q1 results included $400 million of lower warranty liability reserve adjustments, partially offset by higher warranty rate accruals on new vehicle sales. We continue to pursue a comprehensive, multi-pronged approach to reduce our warranty expenses from product development and current production all the way to repairs at our dealers. Let's turn next to an update on our EV charges. Last year, as you know, we reassessed our EV capacity and manufacturing footprint to better align with softer demand and elimination of US tax incentives. As previously indicated, we are transitioning Orion assembly from EV to ICE production and resolving associated supplier contracts. With the exception of the BrightDrop EV van, we have not recorded impairments to our current EV portfolio. Our focus remains on improving EV profitability and scaling our business as market adoption grows, albeit at a slower expected pace than we had previously seen. In the second half of 2025, GM recorded a total of $7.6 billion in EV-related charges. This breaks down into $4.6 billion of estimated cash charges and $3 billion in non-cash impairments. In the first quarter, we took an additional $1.1 billion in EV charges, driven mainly by contract cancellations and supplier commercial claims. We expect about $1 billion of this will have a future impact. We're moving quickly to finalize claims. To date, we've already recorded around 90% of the expected total supplier commercial claim costs, and we anticipate reaching agreements in principle on most of the remainder during the second quarter. Separately, we continue to work expeditiously through right-sizing our battery supply chain with our joint venture partners. Of the total $5.6 billion dollars EV-related cash charges recorded since the second half of 2025, $2.6 billion has been paid as of March 31. In April, we've already paid an additional $600 million, and we continue to expect most of the remaining cash flows to occur in 2026. We remain steadfast in our desire to get these claims resolved quickly and fairly for our business partners and our shareholders. Now, let's turn to a regional perspective. In North America, Q1 EBIT-adjusted was $3.7 billion with a 10.1% margin, including an approximately 1.5 point benefit from the tariff adjustment, which nets to 8.6%. We're off to a terrific start to deliver a North American margin in the 8 to 10% range for the full year. Excluding the plant sale gain, China equity income was $100 million. This shows ongoing resiliency from our prior restructuring, as well as discipline in production and inventory management in the face of softer macroeconomic conditions. GM International, excluding China equity income, delivered approximately $40 million in EBIT-adjusted despite the Iran conflict disruptions in the latter part of the quarter. We have been and will continue to divert some full-size SUVs and pickups from the Middle East back to North America, helping to alleviate low domestic inventory levels. GM Financial continued its stable performance, delivering EBT-adjusted of $700 million for the quarter. Now, let's look ahead to 2026 guidance. While the US economy has been resilient, we haven't seen any material changes to demand or mix thus far. There remains considerable uncertainty, and therefore we want to be prudent as we think about the future. Based on what we know today, and assuming the SAAR remains in the low 16 million unit range, we are raising our overall EBIT adjusted guidance to $13.5 to $15.5 billion, up from $13 to $15 billion. Likewise, we are raising our EPS diluted adjusted guidance to $11.50 to $13.50 per share, up from $11 to $13. While our execution and discipline helped drive first quarter outperformance, we now expect incremental commodity and freight costs versus our original guidance. At the same time, our FX outlook is improved from a small headwind to neutral for the full year. As a result of these changes, we are increasing our full year guidance for year-over-year commodity inflation, including logistics and higher DRAM costs to $1.5 to $2 billion. The incremental $500 million is expected to be more or less equally weighted across the remaining three quarters. In light of that, we're continuing to take proactive steps to ensure that we are efficiently allocating our resources and are ready to quickly adjust as needed. Meanwhile, our gross tariff costs are now expected to be $2.5 to $3.5 billion for the year, down from our original guidance of $3 to $4 billion because of the tariff adjustment we took in Q1. We expect 2025 self-help offsets to continue in 2026 and are pursuing additional opportunities to further mitigate these costs. Relative to our international regions, we expect China to remain profitable and to deliver results consistent with 2025. However, we anticipate some softness in our international operations outside of China due to the impact of the conflict in Iran on Middle East wholesales in particular. There is no change to our other 2026 key guidance assumptions. On price, we continue to expect to be flat up half a percent benefiting from model year 2026 price increases. ICE volumes are expected to be flat to modestly up, though production is constrained due to the major refresh on full-size pickups, as well as the end of production of the Cadillac XT6. For EVs, we expect volumes to be lower as the market shows early signs of stabilizing around 6% of US industry sales. We continue to expect a benefit of $1 to $1.5 billion for the calendar year as we right-size our EV capacity and run at substantially lower EV wholesale volumes. The production pause at Ultium Cells means lower benefits from production tax credits flowing through material costs, but this is largely offset by positive inventory adjustments from lower cell inventory levels. On regulatory costs, we continue to expect a $500 to $750 million tailwind year-over-year. The endangerment finding repeal in February was already assumed in our plan. GM Financial continues to expect EBT adjusted in the $2.5 to $3 billion range, including accelerated depreciation on its EV lease portfolio. As part of our disciplined risk management, GM Financial regularly evaluates the estimated residual values and proactively adjusts depreciation accordingly. We're maintaining our adjusted auto free cash flow guide of $9 to $11 billion with a heavier weighting to the second half. Note that this guidance excludes the IEPA tariff refund given uncertainty around payment timing. Our capital allocation policy remains unchanged. We are committed to investing in the business, maintaining a robust balance sheet, and returning the remainder to shareholders. We believe that repurchasing GM stock at the current valuation remains one of the most effective ways to deploy capital and create long-term value for our shareholders. In Q1, in addition to distributing $164 million in dividends, we made $800 million in open market stock repurchases, retiring approximately 11 million additional shares at an average price of $75.02 per share. We ended Q1 with $19 billion of cash and $5.5 billion remaining on our share repurchase authorization. Before I open the call for Q&A, I want to highlight our OnStar digital service business. This includes Super Cruise, but also a broader suite of connected services that we highlighted earlier in the quarter. It's an under-appreciated asset that is growing and margin accretive. In Q1, we saw recognized revenue of over $750 million, up over 20% year-over-year. For the calendar year, we expect $3.1 billion of recognized revenue, up 15% year-over-year. We are on track to reach 13 million subscribers by the end of 2026, up by 1 million year-over-year, with a monthly average revenue per subscriber of around $20. Those subscribers are driving ongoing deferred revenue growth as well. In Q1, the deferred revenue balance ended at $5.8 billion, up $2 billion over 50% year-over-year. For the calendar year, we expect deferred revenue to approach $7.5 billion, up more than 35% year-over-year. In conclusion, I have tremendous confidence in the GM team's ability to successfully navigate the evolving geopolitical landscape. Our broad ICE and EV portfolios remain key competitive advantages versus our peers, and our disciplined approach to inventory and incentives keep us agile. Just like we've done with other macro headwinds, we are proactively planning for a range of potential outcomes. We are working to identify additional profit improvement opportunities and have begun taking initial no regret steps to moderate spending. As events continue to unfold, we will remain flexible and execute the right playbook to optimize profitability, maximize free cash flow, and continue to deliver strong returns for our shareholders. Thank you for your continued support, and with that, we can now begin our Q&A portion of the call.

Hey, good morning, Itay. Thanks for kicking us off today. So, I think when you look at the inflation, the pressures that we're seeing, the offsets come in a couple different forms. Number one, we put a little bit in the bank in Q1 from our outperformance from what we've seen. Some of that was timing, but there was some good core movement on many of the staples that we've talked about, whether it's warranty or EV profitability, regulatory costs, et cetera. But then there was also the playbook that we referenced in our comments, which is similar to what we've done, whether it was tariffs or chip shortage or COVID, et cetera. That's worked really well for us. So, we're looking at doing that. What we don't want to do, we don't want to rush into a lot of things that are going to jeopardize or otherwise put at risk longer-term strategic initiatives by overreacting to what's going around us. So, we have sort of degrees of freedom in terms of what we're going to do starting with relatively low-hanging fruit. Maybe deferring some hiring or things like that. But overall, I think we're going to be measured about it. So, while we have this uncertainty, I think holding our numbers consistent net of EBITDA, I think is the prudent thing to do with all this uncertainty. And if things abate, then we could potentially see upside in the future.

Well, you know, I think, Itay, you look at the momentum we have and I appreciate you pointing it out. We've started to lean more into disclosing a lot of what's going on here and I think what we're really focused on right now is the attachment rates and delivering value to the customer. As we roll out SDV 2.0, the number of opportunities out there starts to magnify pretty significantly in terms of what the digital offerings that we can put out there. You'll hear more information about that over the coming months as we lean into when SDV 2.0 comes. But clearly, when you look at, we might have a lower average revenue per unit today than say Tesla does, but we already have significantly higher volumes, higher deferred revenue, more realized revenue. And that's where the real scale benefit comes across the portfolio. So, we think that this is a growing and soon to be really influential piece of the business going forward.

Yeah, thanks, Joe. You know, I would say it's largely in line with what our expectations have been. There have been some really unique things that I think have played out this year among the competitive set that we haven't seen historically. But we continue to be very disciplined in our approach. I think a lot of the share data that people saw during the quarter was probably more a result of some of the challenges we had with inventory on lots. We came into the quarter light on our targeted inventory levels primarily because we'd had such a really strong December, for example. And then, with the storm and some other challenges that we had, we weren't really able to catch up. Wholesales caught up towards the end of the quarter, but that really didn't show up in showrooms. So, we're optimistic that as we get more product out to the dealers in Q2 that we can help to reverse some of the share losses that we saw without getting into heavy discounting across the board. So, I think nothing has changed in our playbook. We're going to continue to be tactical and we're going to continue to be disciplined.

Yeah, so let me cover the tariff question first. So, all we've done here is taken the IEPA direct tariff that we paid last year that was subject to the Supreme Court decision and credited that back as a receivable. And as we said, we haven't changed our free cash flow guidance because we don't know when the refunds are going to be received or how that window might work going forward, but that's all we've assumed. Now, keep in mind most of our tariff burden comes from 232. So, IEPA versus our size is relatively small, but because of that entry, that's why we took the guidance down. We're not projecting any other change to our tariff bill. When I said guidance down, I meant the tariff bill guidance down. And then on the cost side, I think it's a couple of things. FX was obviously a benefit for us, primarily the peso, Canadian dollar, and also Korea and some of our imports getting better treatment there. We think that will hold. When you look at other cost items, we made progress on warranty, a couple hundred million dollars of warranty in line with what we said we're going to do for the year. EV profitability improved largely as a result of better, more efficient use of the capacity as the write-offs that we took took hold. And then also on the regulatory side, around GHG. So, I think many of those are going to hold. When you look at the cost pressures, the onshoring costs are going to be really heavily weighted towards the back half of the year, as expected, as we start to hire people to get the plants running in early '27.

Thanks for your question.

Yeah, Emmanuel, what we've done is essentially taken the curve where it sits today, net of our hedges. Remember, it's not all direct and linear because we've got steel contracts. If you'll recall, we have about a third at spot, a third expiring within a year, and a third over two years. So that's helped us quite a bit. During times when prices go down, we pay a little bit more, but we pay a little bit less when prices go up. So we're really looking at the current environment persisting for the year, and to Mary's point, if we see conflict end and commodity prices and oil prices returning back down to pre-conflict levels, then we could potentially see upside in that scenario.

Yeah, thanks for the questions.

Yeah, good morning, Mark. Thanks for that. We had some significant downtime in the quarter primarily related to heavy duty trucks. I think a lot of that is behind us. There may be some selective downtime, but I think a lot of it can be done during shutdown etc. So we're not anticipating any material downtime at this point. But that's what we're going to need to lean into a little bit to try to get our inventory levels back into the targeted range from where they've been, because even when we ended the quarter, we were still down below our target levels. So we're hoping that we can get that back. The team's done a really good job of managing through all of the logistical challenges.

So what I would say, Mark, we're continuing to trend at about that 40% attachment rate after the subscription period. We do it differently. Other competitors put the hardware on every vehicle and they're bearing that cost. For us, consumers who have purchased Super Cruise prepaid for a 3-year period and we see that in terms of the hardware cost. So we have the deferred revenue that comes with the vehicle and then we have the subscription afterwards. So we're starting to see escalation in terms of the number of vehicles that are coming off of that 3-year prepaid period and we're still holding attachment rates in that 40% range. So we're very optimistic about what that means. I think that's what I was hearing in the earlier question. You look at the ARPU, you've got to really take into account the scale advantage that we have, especially as we start growing into SDV 2.0 and expanding that across the portfolio. But Super Cruise is a really strong leading indicator, and we're continuing to invest in delivering more value to customers that we think are going to make that even more attractive in the future.

Yeah, James, a couple of things. First on GMF, we saw an opportunity in the first quarter largely as a result of GMF's cash position to step up the dividend from our traditional level. We're not changing the full year expectation of the dividend. So pretty consistent there for the full year, but from a timing perspective, we saw that opportunity and we took it. On the EV cash charges, as we laid out, we're going very hard and aggressively at the commercial relationships. We're approximately 90% done with those, and we expect to have substantially all of that cash paid out before the end of this quarter, the second quarter. We still have a couple of battery raw material negotiations that we're working through. They're obviously more complex, but those will come in over time as we continue to work with our partners. But our goal here is to try to put as much of this behind us as quickly as we can so that we can be focused with our supply chain partners on tomorrow and stop having conversations about yesterday, which I think is way ahead of the expectations that many of our competitors have placed. So we're focused on that. We also don't want it to be an overhang for cash flow. Despite that significant cash outflow that we've seen as a result of those restructuring charges, we were still able to repurchase $800 million of shares in the quarter and we remain committed to our capital allocation going forward. So I think the team's done a really good job of managing through those challenges and conflicts.

Yeah, I would say that a lot of that is really being driven by the Middle East. In the quarter, we actually reallocated about 7,500 full-size SUVs that were originally slated to deliver to Middle East operations under GMI. We reallocated them to North America partly because of the conflict and the logistical challenges of getting them to market, but also partly to help bolster some of our lower inventory levels here in the US. So from an enterprise perspective, we're largely mitigating that impact as we've said, but depending on how long the conflict goes and how long we see challenges in the Middle East, that's what's going to ultimately determine the pressure on GMI.

Well, I would say, as we look at that ramp, it will start in the third quarter and then accelerate. So depending on how successfully we accelerate, there's a tremendous amount of work going on. I'm really pleased with where the truck is from a quality perspective right now. But there may be a small impact, especially since we're running so lean from the current year. It's a good thing though that there's still such strong demand for our current generation trucks. So we think it's going to be a pretty smooth changeover, but there could be a small amount of impact as we get into the latter part of the year.

Yeah, so Mike, this gets a little bit technical. I'll try to summarize it best I can. When we sell a vehicle with Super Cruise, all the hardware gets expensed right away, and then the revenue associated with that gets deferred over the three-year trial period. So that's coming on at a very sizable margin because we've already recognized the costs going forward. And then when you look at the other digital services and OnStar, there are some hardware costs that are expensed with the vehicle. There's some service costs that go in. So the margins aren't quite as robust as if you expense everything because there are service costs associated with it, but they're still pretty sizable. So as we ramp up that deferred revenue base, and it starts to amortize into the P&L at increasing rates, that's where you start to see the impact. If you go back to Investor Day several years ago, we talked about that having an impact and growing to a point where it has an impact on the overall margins of the company, and we're starting to see that take hold. We've got a lot of excitement about the potential of what SDV 2.0 and the future improvements to Super Cruise and ultimately autonomy can do for us when you look at it across scale.

Yeah, thanks, Andrew. Appreciate that. So when we talk about the car park that's out there in the universe of GM vehicles, that really is meant to signal the opportunity that exists going forward. As we continue to put SDV 2.0 and other capabilities, many of the vehicles that are out there today don't have the hardware capabilities to be able to deliver that. So we're looking at that as growth potential and really sizing the box for the future as we continue to expand that. With Super Cruise, it really is a case where the hardware is on there for people that buy it. As we continue to get the cost down, we can look to potentially approach the market differently on that. But we see a ton of potential here because we're already driving approximately $7.5 billion of deferred revenue by the end of this year with what we have. So it really speaks to the opportunity that's ahead of us.

It really is both. In many cases, we have lit our map with the current system. And it's also we've really focused on highway and major roads. So it's a focus that we continue to look at as we expand. As you've seen from when we first launched Super Cruise and it started at a certain amount of roads, we continue to expand that over time. So we are now on additional roads, not just highways, and we'll continue to look at the opportunities to do that and make sure we do the technology correctly because one of the things we're most proud of from a Super Cruise perspective is it's viewed as extremely safe and the customers have built a lot of trust with Super Cruise as we do that, which I think will also play well as we launch our next generation with the Escalade IQ with the eyes off, hands off.

Yeah, Dan, you're right. It is way too early to speculate on 2027. The pressure that we're seeing right now is a function of the forward curve. That forward curve is going to change 200 times between now and 2027. So it's way too early. But if you think about where we are, we started to outline at prior presentations that the momentum we have in '26 and what we're starting with warranty improvement, EV profitability improvement, regulatory cost improvement should all continue to be tailwinds in 2027 for us as well. In addition, we've basically stopped production at many of our cell plants to work down our inventory levels, which means we're not capturing the production tax credits that we have in prior years. When we get battery cell inventory to a normal level, that will get us to a point where we can start to collect those going forward as well as the improved profitability of EVs. And then you look at the product portfolio with the new pickups coming in 2027, end of this year and into 2027. You start to see some momentum, but way too early to speculate. At the end of the day, we're executing on what we see and planning for future contingencies should we need to do that.

Well, I think because of some of the issues of ending the year so strong that we were low on inventory and then with the plant downtime we took, we still had very strong demand for our trucks. We're seeing strong demand across the board in the upside, but we want to welcome every truck customer. I think because of our lean inventories and if you look at some of the incentive rates of some of the competitors, you can see how disciplined we are and still selling every truck that we can. So I think that's the formula and the recipe that we're going to continue to do: work to earn every truck buyer in a disciplined way because of the strength of our products. So it's across the board.

Yeah, good morning, Alex. Thanks for the question. We vary our hedge levels based on commodities. We're kind of seeing pressure a little bit across the board as you would expect, primarily driven by higher energy prices etc. We're not projecting or worried about any shortages right now and think the supply chain team has continued to prove their resolve through yet another challenge as we've seen them do in years past. So no shortages. On the commodity side, it depends. 25% hedged. That certainly helped us in the aluminum space this year, but overall, I think it's pretty manageable from that standpoint. We're just going to continue to watch it. The hedges and the staggered steel contracts buy a little bit of time to adjust the business, which is why we do it that way. But overall, no real concerns right now.

Yeah, no change to our pricing guide. I would say no change to the regular cadence on wholesale across the board. We do have the opportunity, I think, to get a little bit of made-up deficit on the inventory shortfalls that we've had. We saw some of that come in late in the quarter that are making their way into showrooms or have made their way into showrooms this month. But we're going to continue to work and try to manage it in that 50-to-60-day range. The team's done a really good job of trying to make that up.

Thanks, Alex.

No, I think the team has done a really good job from that standpoint. There's still some final tugging and tying going on some of the actions that we've taken, but nothing material that we expect.