COMPANY ANALYSIS #2

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Feb 20, 2024

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GENERAL MOTORS CO. AND FORD MOTORS CO. COM PANY ANAL YSIS 2

Janeth Kiongozi, Lathaniel Bastin | ACCOUNTING ANALYSIS 6301.501 FALL 2023 1. Mission Statements 1. Mission statements. General Motor Co.’s Mission Statement: “To earn customers for life by building brands that inspire passion and loyalty through not only breakthrough technologies but also by serving and improving the communities in which we live and work around the world.” This mission statement shows GM’s holistic approach to addressing external factors that influence the business. The main points of General Motors’ corporate mission statement are as follows: 1. Earning customers for life 2. Brands that inspire passion and loyalty 3. Breakthrough technologies 4. Serving and improving communities General Motor Co.’s vision for the future is a world with zero crashes, zero emissions and zero congestion, which guides our growth-focused strategy to invest in electric vehicles (EVs) and autonomous vehicles (AVs), software-enabled services and subscriptions and new business opportunities, while strengthening our market position in profitable internal combustion engine (ICE) vehicles, such as trucks and sport utility vehicles (SUVs). Janeth Kiongozi, Lathaniel Bastin | ACCOUNTING ANALYSIS 6301.501 FALL 2023

Ford Motor Co.’s Mission Statement: “To help build a better world, where every person is free to move and pursue their dreams.” Ford Motor Co. is committed to making this purpose evident in every part of our business, from the way we source our materials, to the vehicles we create, to the services we provide, to the interactions we have with our customers, employees, and communities. Our purpose has set us apart as a company for more than a century and it guides our vision for the future. They aim to shorten the distance between where you are and where you want to go, connect people down the road and over the horizon, discover possibilities, and enjoy the thrill, adventure, and pride of moving freely. Ford+ is our plan for growth and value creation, intended to transform our company to win in this new era of electric and connected vehicles by developing always-on customer relationships, must-have connected products and services, and by leading the electric vehicle revolution. Ford+ serves as our roadmap for the next 10-15 years as we move with speed and ambition to fulfill our purpose. Source: Sec fillings and google. In summary: Both companies emphasize customer-centricity and a commitment to improving the world in their mission statements. Also, both companies aim to contribute positively to society and have clear strategies for the future, with GM's vision placing a strong emphasis on zero crashes, emissions, and congestion, while Ford outlines its Ford+ plan for growth and innovation in the era of electric and connected vehicles. 2. Financial Data Income Statement ( USD in Millions.) GENERAL MOTORS CO. FORD MOTORS CO. Total Revenue 156,735 158,057 Gross Profit 29,843 23,660 Net Income 9,708 (2,152) Cost of goods sold (COGS) 126,892 134,397 Balance Sheet (USD in Millions) GENERAL MOTOR CO. FORD MOTOR CO. Total Assets at the end of the year $ 264,037 $ 255,884 Total Assets at the beginning of the year $ 244,718 $ 257,035

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Total Liabilities $ 192,110 $ 212,717 Stockholders’ Equity $ 71,927 $ 43,167 Total Cash $ 19,153 $ 25,134 Net Property, Plant, Equipment at the end of the year $ 45,248 $ 37,265 Net Property, Plant, Equipment at the beginning of the year $ 41,115 $ 37,139 Statement of Cash Flow ( USD in Millions) GENERAL MOTORS CO. FORD MOTOR CO. Operating Cash Flows 16,043 6,853 Investing Cash Flows (17,882) (4,347) Financing Cash Flows 383 2,511 Total Cash 21,948 25,340 Cash at the beginning of the period 23,542 20,737 Discussion: Does the Total Cash in the Statement of Cash Flow matches the Cash amount in Balance Sheet? If not, why? The total cash in the statement of cash flow differs from total cash in the balance sheet because the statement of cash flow includes both unrestricted and restricted cash, while the balance sheet may only reflect movement in unrestricted cash. Restricted cash refers to funds that are set aside for a specific purpose, such as collateral for a loan or legal requirements. Unrestricted cash refers to cash that’s readily available to be spent for any purpose and has not been pledged as collateral for a debt or other purpose. Restricted cash is not readily available for general use by the company, and therefore, it is not included in the cash flow statement. However, it is included in the cash and cash equivalent line item on the balance sheet because it is still part of the company’s overall cash position. Example in the data given for Ford motors co. in statement of cash bellow after the cash from beginning of the year there is a column for cash, cash equivalents, restricted cash and restricted cash equivalents, period increase(decrease), including exchange rate effect which amount $4,603,000,000.

3. Selected Ratios The ratios that we selected are as follows: GROSS PROFIT MARGIN (value in USD Million)  General Motor Co. gross profit margin Gross profit Margin= revenue − cost of goods sold revenue *100 Gross Profit Margin= $ 156,735 − $ 126,892 $ 156,735 *100 The gross profit margin for General Motors Co. is 0.190404185  19.04%  Ford Motors Co. gross profit margin Gross profit Margin= revenue − cost of goods sold revenue *100 Gross Profit Margin= $ 158,057 − $ 134,397 $ 158,057 *100 The gross profit margin for Ford Motors Co. is 0.149692832  14.97% RETURN ON ASSETS (value in USD Million)  General Motor Co. ROA Return on Asset (ROA)= Net income Average asset Return on Asset (ROA)= Profit margin* Asset turnover Return on Asset (ROA)= net income sales * sales average asset Return on Asset (ROA)= $ 9,708 $ 156,735 * $ 156,735 $ 264,037 + $ 244,718 2

Return on Asset (ROA)= 0.061938941* $ 156,735 $ 254,377.5 Return on Asset (ROA)=0.061938941*0.616151192 General Motors Co. ROA Return on Asset (ROA)= 0.038163752 ≅ 3.82% Ans. General Motor Co. ROA Return on Asset (ROA) is 3.82%  Ford Motors Co. ROA Return on Asset (ROA)= Net income Average asset Return on Asset (ROA)= Profit margin* Asset turnover Return on Asset (ROA)= net income sales * sales average asset Return on Asset (ROA)= − $ 2,152 $ 158,057 * $ 158,057 $ 255,884 + $ 257 ,, 035 2 Return on Asset (ROA)= -0.013615341* $ 158,057 $ 256,459.5 Return on Asset (ROA)=-0.013615341*0.616303938 Ford Motor Co. Return on Asset (ROA)= 0.008391188 . ≅ -0.84% Ans. Ford Motor Co. Return on Asset (ROA) is -0.84% RETURN ON EQUITY (value in USD Million)  General Motors Co. ROE ROE= net income average shareholder equity ROE= $ 9,708 $ 71,927 + $ 65,815 2 ¿ ¿

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ROE= $ 9,708 $ 68,871 Ans. General Motors Co. ROE= 0.140959184. ≅ 14.1%  Ford Motor Co. ROE ROE= net income average shareholder equity ROE= − $ 2152 43,167 + 48,622 2 ¿ ¿ ROE= − $ 2152 $ 45,894.5 Ans. Ford Motor Co. ROE= -0.04689015. ≅ -4.69% DEBT-TO-EQUITY RATIO ( value in USD Million)  General Motor Co. Debt-to-Equity ratio Debt to Equity ratio(D/E) = total debt ( liability ) total shareholder equity or shorttermloan + longtermdebt + other ¿ payment ¿ totalshareholder equity Debt to Equity ratio(D/E) = $ 114,699 $ 71,927 Ans. General Motors Co. Debt to Equity ratio(D/E) =1.594658473 ≅ 1.59  Ford Motor Co. Debt-to-Equity ratio Debt to Equity ratio(D/E) = total debt ( liability ) total shareholder equity

Debt to Equity ratio(D/E) = $ 140,474 $ 43,167 Ans. Ford Motor Co. Debt to Equity ratio(D/E) = 3.254198809 ≅ 3.25 PRPOERTY PLANT AND EQUIPMENT TURNOVER ( value in USD Million)  General Motor Co. PPE net turnover PPE turnover= sales average PPenet PPE turnover= 156,735 ( 45,248 + 41,115 )/ 2 PPE turnover= 156,735 43,181.5 General Motor Co.’s PPE turnover= 3.629679377  3.63 Ans. General Motor Co.’s PPE turnover is 3.63.  Ford Motor Co. PPE net turnover PPE turnover= sales average PPenet PPE turnover= 158,057 ( 37,265 + 37,139 )/ 2 PPE turnover= 158,058 37,202 Ford Motor Co.’s PPE turnover= 4.248615666  4.25. Ans. Ford Motor Co.’s PPE turnover is 4.25. Summary Table General Motor Co. Ford Motor Co. Gross Profit Margin 19.04% 14.97% ROA 3.82% -0.84% ROE 14.1% -4.69%

Debt-to-Equity Ratio 1.59 3.25 PPE Net turnover 3.65 4.25 1. Gross Profit Margin: General Motors (GM) has a higher gross profit margin of 19.04% compared to Ford's 14.97%. This indicates that GM is more efficient at generating profits from its core operations and sales. Meaning for every dollar in revenue GM generates, it retains $0.1904 as gross profit after deducting the cost of goods sold. The General Motor Co. is efficiently producing and selling its vehicles. The results show that both companies General Motor and Ford Motor have a positive gross profit margin showing they are making profit from their core automotive operations. With General Motor having a higher gross profit of 19.04% it suggests that it may be more efficient in managing production and maintaining a healthier markup on its vehicle compared to Ford Motor. 2. Return on Assets (ROA): GM has a positive ROA of 3.82%, which means it is generating a positive return on its total assets, for every 1 dollar the assets generate profit of 3.82 cents. In contrast, Ford has a negative ROA of -0.84%, indicating that Ford's assets are not generating a positive profit/ no proper utilization of its resources to generate profit. 3. Return on Equity (ROE): GM has a positive ROE of 14.1%, suggesting that it is providing a positive return to its equity shareholders, meaning that GM generates a return approximately 14.1 cents in profit for every dollar of shareholder equity. While Ford has a negative ROE of -4.69%, indicating that its equity shareholders are experiencing a negative return on their investments. Ford Motor is generating loss for its shareholders meaning there is no dividend that was given. It means ford is not effectively using the shareholder equity to create value for its investors. 4. Debt-to-Equity Ratio: General Motor debt to equity ratio of 1.59 means for every dollar of equity, GM has $1.59 in debt. Ford Motor D/E ratio of 3.5 means that for every dollar of equity, Ford has $3.25 in debt. GM's debt-to-equity ratio is 1.59, which is relatively lower than Ford's ratio of 3.25. A lower ratio is generally considered favorable as it indicates lower financial leverage and less reliance on debt financing. Ford relies more on debt financing. 5. PPE (Property, Plant, and Equipment) Net Turnover:

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GM has a PPE net turnover of 3.65, while Ford's turnover is higher at 4.25. A higher PPE net turnover suggests that Ford is more effective in utilizing its property, plant, and equipment to generate revenue. Ford is efficiently utilizing its fixed assets to generate sales. 4. Qualitative Data General Motor Co. Analyst statement. According to Ward, 2022 U.S. light vehicle sales per Wards were 13.7 million, an 8.1% decline from 2021 and their worst year since 2011’s 12.8 million. December sales, however, grew 4.9% year over year with the seasonally adjusted annualized selling rate at 13.31 million, up from December 2021’s 12.72 million. The chip shortage rather than poor demand is to blame, and we expect one more year of constrained production for the industry. Regardless of high interest rates and average transaction prices over $45,000, we feel U.S. autos have been at recessionary levels for a lot of the time since spring 2020, so we expect 2023 sales to rise by midsingle digits. Gradual improvement in new vehicle inventory should help used vehicle pricing eventually be more affordable for consumers, which is also good for dealers’ used vehicle margins that are currently squeezed by high procurement costs. GM’s fourth-quarter sales had a soft year-over-year comparable due to the worst of the chip shortage happening late in 2021. Fourth-quarter 2022 deliveries grew 41.4%, and for the full year, the company regained the top spot from Toyota by growing 2.5% to 2.27 million. For the quarter, all of GM’s brands rose except Buick, with Cadillac leading the way at 75% growth on good volume from the XT5 and XT6 crossovers; and the CT5 sedan had its best year ever partly from the popular CT5-V Blacking. GM’s full-size pickups grew 23.8% with Silverado HD and Sierra HD up 69% and 72%, respectively, to bring GM’s HD mix up 970 basis points to 35.5% by our calculation. In its release, GM said it’s the top selling pickup maker for the ninth straight year excluding medium duty. The company finished 2022 with its highest inventory level of the year of 410,682 vehicles, a 14.3% rise from Sept. 30 and slightly more than double year-end 2021’s level. For 2023, GM expects industry sales of 15 million, which we believe includes heavy trucks and means a light vehicle number slightly above our expectations. Reference: Yahoo Finance GM Releases 2022 Fourth-Quarter and Full-Year Results, and 2023 Guidance Tue, January 31, 2023 DETROIT, Jan. 31, 2023 /PRNewswire/ -- General Motors Co. (NYSE: GM) today reported fourth-quarter 2022 revenue of $43.1 billion, net income attributable to stockholders of $2.0 billion and EBIT-adjusted of $3.8 billion.

GM's full-year 2022 revenue was $156.7 billion, net income attributable to stockholders was $9.9 billion and EBIT-adjusted was a record $14.5 billion. Results were at the high-end of the company's revised EBIT-adjusted guidance range. The company expects its core auto operations to perform at a consistently strong level in 2023, with full-year net income attributable to stockholders of $8.7 billion-$10.1 billion, EBIT- adjusted of $10.5 billion-$12.5 billion, and EPS-diluted and EPS-diluted-adjusted of $6.00- $7.00. GM also expects strong cash flows from automotive operations for the calendar year, including:  Net automotive cash provided by operating activities of $16.0 billion-$20.0 billion.  Adjusted automotive free cash flow of $5.0 billion-$7.0 billion. Reference: General Motor news release. Ford Motor Co analyst statement. Ford’s December sales rose 3.2% year over year with F-Series pickups, the Bronco line, and Lincoln driving growth. Crossovers such as Escape, Edge, and Explorer fell by between about 8% and 40% and caused an overall Ford brand SUV/crossover to decline of 6.6%. Bronco Sport grew 14.1%, while the more off-road focused Bronco rose 13.6%. Ford said Bronco’s share of its segment was 36.4% in December and 27.9% for the year. Total 2022 Bronco volume combined across its models was 216,604, up 51.3% from 2021. This growth is from the Bronco variant, which had a full year of production in 2022 and its sales more than tripled, whereas Bronco Sport started production in fall 2020 and in 2022 declined by 8%. F-Series rose by 20%—1% in December and was down 9.9% for the full year. The all-electric Lightning variant saw 15,617 deliveries, or 2.4% of total 2022 F-Series volume. Lincoln’s 17.3% December growth was almost entirely from the Corsair crossover (up 38.9%) and Navigator full size SUV (up 30.7%). We await product update news on Lincoln’s portfolio, which is currently only a light truck brand. Reference: Yahoo finance. In summary, both General Motors (GM) and Ford Motor Co. have faced challenges due to the global chip shortage that affected the entire auto industry. Despite this, they showed resilience and growth in specific segments, with GM becoming the top-selling pickup maker and Ford seeing notable success with its F-Series pickups and the Bronco models. Both companies are optimistic about the future, expecting an improvement in industry sales for 2023. 5. Recommendations

Based on our analysis of key financial ratios among the companies we selected, we recommend investing in General Motor Co. for the following reasons.  The debt-to-equity ratio for General Motor Co. is 1.59 which is significantly lower than Ford Motor Co. with a debt-to-equity ratio of 3.65 which is very high. A lower ratio is generally considered favorable as it indicates lower financial leverage and less reliance on debt financing. Ford relies more on debt financing. This indicates that General Mo tor has a more conservative approach to debt financing, reducing financial risk and potential liabilities to stakeholders which is a positive sign for the investors.  The return on assets of 3.82% is higher compared to Ford Motor Co. of -0.62% demonstrating its ability to convert assets into profits. The General Motor Co.’s ROA signifies efficient utilization of its assets to generate returns which reflects operational efficiency and a strong business model. The ROA for Ford is negative which indicates the company is not making proper utilization of its assets to generate profit.  The Gross profit margin for General Motor Co. of 19.04% is higher than the profit margin for Ford Motor. This indicates that GM is more efficient at generating profits from its core operations and sales. Both companies have a positive gross profit showing they are making profit from their core automotives operations. In conclusion, General Motor Co. appears to have a healthy financial position with a relatively low debt-to-equity ratio of 1.59 and a positive profitability ratio of ROE of 14.1%% and ROA of 3.83% which indicates the company to be stable and well established suitable for conservative investors for steady return. Ford Motor Co. has negative ROE of (0.84%) showing that its equity shareholders are experiencing a negative return on their investments. Ford Motor is generating loss for its shareholders meaning there is no dividend that was given. It means ford is not effectively using the shareholder equity to create value for its investors.

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