GM's raised cash forecast is mostly money it has already collected

General Motors raised its forecast for this year's adjusted automotive free cash flow, the cash its car business generates after capital spending and before items it treats as special, to $11.5 billion to $12.5 billion. The new range is less generous than it looks. In the first nine months of the year the company had already produced $12.2 billion. It also said it had completed its earlier buyback and that its board had approved a new $20 billion multi-year repurchase authorisation. For a holder, the useful thing to understand is what this year's cash was made of, and what next year's will be made of.

Subtracting the nine months from the new range leaves the fourth quarter guided to somewhere between an outflow of about $0.7 billion and an inflow of about $0.3 billion, calculated from the reported figures. Last quarter alone brought in $5.9 billion. Chief financial officer Paul Jacobson credited the improvement to better execution, capital spending running below plan and the timing of tariff payments. He added that this year's cash includes refunds of tariffs levied under emergency-powers legislation, which the company does not expect to recur. Part of the raise, in other words, is cash collected earlier or only once.

Profit did not move the same way. GM narrowed its range for EBIT-adjusted, its measure of earnings before interest and taxes excluding special items, and kept the midpoint at $15 billion. Nine months produced $12.3 billion, so the new range implies a fourth quarter well below the third by the same subtraction, as the chart shows. Some of that dip is planned. GM is changing over its full-size pickup plants and expects to sell about 35,000 fewer of those trucks than a year earlier, a loss it said higher prices in North America should largely make up.

The bigger swing in next year's cash sits outside the adjusted figure. GM is paying suppliers and partners to unwind the electric-vehicle capacity it had planned, and it adds those payments back when it reports adjusted free cash flow: $4.2 billion of them in the nine months. Jacobson said cash charges for the EV pullback since the middle of last year come to $7.4 billion, most of it already paid, with about a billion more due in the fourth quarter and the rest next year. That leaves roughly $1.8 billion for next year, by subtraction.

That step-down is the basis for Jacobson's view that cash available for investment should be much higher next year, as the bulk of the EV restructuring payments falls away. He said the cash available to return to shareholders next year should benefit from that step-down. Repurchases have already cut the shares outstanding to 849 million at the end of September, down from the end of last year.

Earnings are the less certain half. In July GM expected commodity, logistics and memory-chip costs to weigh on this year by up to $2 billion. It now expects about that full amount, with most of the extra cost since July landing in the fourth quarter. If the increases since July simply persisted for a full year, Jacobson said, they would add another $1 billion to $1.5 billion of cost next year. Chief executive Mary Barra said GM still expects next year to be "another strong year and better than 2026, assuming customer demand remains strong, and commodity, logistics and other recent cost pressures moderate." Asked about it, Jacobson said metal prices would need to ease somewhat before the company could be confident of growth.

The two halves of the outlook rest on different ground. The fall in EV payments is a sum GM has already counted, and most of it has been paid. The commodity bill depends largely on steel and copper prices, which the company does not set. It approves its budget with the board in December and gives guidance for the next year in January.