General Motors Targets High End of 2026 Outlook, Sees Stronger Cash Flow in 2027

Key Points

• GM remains on track to finish 2026 near the high end of its raised outlook, supported by resilient demand for trucks and SUVs, disciplined inventory management and below-industry discounting.
• The company expects substantially stronger cash flow in 2027 as EV restructuring payments decline and benefits emerge from improved EV profitability, lower warranty costs, new truck launches and digital revenue growth.
• GM is maintaining its capital-allocation strategy, including business investment and share repurchases, while pursuing structural cost reductions, supply-chain resilience and expanding higher-margin subscription services such as Super Cruise.

General Motors NYSE: GM Chief Financial Officer Paul Jacobson said the automaker remains on track to finish 2026 near the higher end of its full-year guidance after raising its outlook twice this year, citing continued consumer resilience, disciplined inventory management and a broad vehicle portfolio.

Speaking with JPMorgan Head of U.S. Equity Research Rajat Gupta, Jacobson said GM is beginning its planning process for 2027 and expects several operational improvements to support earnings and cash flow beyond the current year. However, he cautioned that commodity costs, inflation and geopolitical developments remain uncertain.

Cash flow and capital allocation

Jacobson highlighted GM’s improvement in free cash flow over the past decade. He said the company averaged approximately $3 billion in free cash flow during the first five years of that period and more than $10 billion during the last five years.

GM has set annual capital spending around $10 billion to $12 billion, according to Jacobson, while maintaining a capital-allocation framework centered on investing in the business, preserving a strong balance sheet and returning capital to shareholders. He said GM’s pension plan is close to fully funded, its credit metrics have a generally positive bias from rating agencies, and its debt levels are healthy.

The company has retired more than 37% of its shares outstanding since 2013, Jacobson said. He added that GM remains committed to repurchases as long as it continues to see a double-digit free-cash-flow yield and what it views as a low valuation multiple.

“We trade at a discount to many of our peers who are underperforming,” Jacobson said, adding that GM believes its more consistent operating performance and efforts to reduce cyclical volatility should support a higher multiple over time.

Consumer demand, trucks and 2027 outlook

Jacobson said consumer sentiment surveys have diverged from actual purchasing behavior in recent years. While sentiment has been weak, he said GM continues to see stable demand for full-size trucks and SUVs, consistent market share and resilient customer finances.

GM Financial, which Jacobson said has a $125 billion balance sheet, provides the company with visibility into delinquency and default trends. He said those indicators have largely normalized around pre-COVID levels and have not materially changed in a way that raises immediate concern.

He said the company is focused on avoiding heavy discounting to chase incremental volume. GM has maintained discounting that is roughly 150 to 250 basis points below the industry average while retaining share, he said.

The company expects its new full-size pickups to reach showrooms toward the end of 2026. GM previously said it would be short roughly 35,000 trucks in the fourth quarter during the production transition. Jacobson said the launch is progressing well, with preproduction vehicles and powertrain testing performing as expected.

GM expects a richer mix of trucks to provide pricing and mix benefits in 2027, though volume is likely to remain relatively flat until production ramps later in the year. He characterized 2028 as a potential year for greater truck-volume upside.

For 2027, Jacobson said improvements in electric-vehicle profitability, warranty costs, new trucks and digital revenue are multiyear tailwinds. He said cash flow should be “substantially better” in 2027 than in 2026 as GM works through most of the EV restructuring cash payments made this year.

Warranty, costs and supply chain resilience

Jacobson said GM is seeking to reduce warranty spending and improve quality. Monthly cash warranty spending has flattened and begun to trend lower, he said, while the related expense recognition lags that improvement.

He said GM’s goal is to return to its historical quality levels and ultimately become a world-class quality leader. Jacobson compared GM’s warranty spending, which he said is closer to 2% of revenue, with approximately 1.2% for Toyota and others. The company is using technology in manufacturing, supply-chain processes and vehicle data to identify problems earlier, he said.

Looking ahead, Jacobson said GM plans to focus more on structural cost reductions, including potential applications of artificial intelligence, rather than relying solely on price increases to offset inflation. He said the company does not want to reduce costs in ways that diminish vehicle quality.

GM also established a $4.5 billion purchasing facility with relationship banks to provide additional supply-chain resilience. Jacobson said the structure can help the company maintain more consistent free cash flow without building a large inventory position, while offering cushion inventory for potential disruptions. He identified chips as a particular area of supply-chain volatility.

Digital services and customer relationships

Jacobson said GM expects to end the year with approximately $7.5 billion in deferred digital revenue and to recognize about $3 billion in digital revenue this year, with double-digit growth expected to continue. He said the recognized revenue carries “software-like” margins.

A portion of that growth is already supported by deferred revenue amortization, while subscriptions are also expanding. Jacobson said about 35,000 vehicles this year are reaching the end of a three-year Super Cruise period, with new subscription attachment rates of 30% to 40%. That vehicle count is expected to double next year.

GM is also making Super Cruise available on more vehicles, including beyond premium trims, and sees future opportunities for subscription services through OnStar Digital and connected-vehicle capabilities. Jacobson said the company intends to continue expanding disclosures about digital operations but does not expect to report them as a separate segment because they remain closely tied to vehicle sales.

Beyond digital services, Jacobson said GM Financial, GM Insurance and GM Rewards can deepen customer relationships. He said GM Insurance may benefit from lower customer-acquisition costs at the point of vehicle purchase and from GM’s ability to repair vehicles with GM parts or replace vehicles more quickly following an accident.

Jacobson also said the company is using artificial intelligence across functions, including finance, product development, manufacturing quality and supplier collaboration. He said AI could help accelerate decision-making, improve productivity and shorten product-development cycles.

About General Motors (NYSE:GM)

General Motors Company NYSE: GM is a global automotive company headquartered in Detroit, Michigan. Founded in 1908, GM designs, manufactures and sells cars, trucks and sport utility vehicles through its Chevrolet, Buick, GMC and Cadillac brands.

GM's product portfolio includes gasoline-powered and electric vehicles, full-size pickup trucks, commercial vehicles and luxury automobiles. The company is developing battery-electric and other advanced vehicle technologies, while also offering connected-vehicle services through its OnStar platform.

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