Investing.com — S&P Global Ratings has revised its credit outlook on General Motors Company (NYSE:GM) and subsidiary General Motors Financial Co. Inc. to positive from stable, citing significant margin recovery and expanding cash generation. S&P affirmed its ‘BBB’ issuer credit ratings on both entities, pointing to a potential upgrade over the next 12 to 24 months.
The rating agency noted that GM’s adjusted EBITDA margins are on track to approach 10% this year, up from 7.5% in 2025, before crossing 10% in 2027. According to S&P, this performance is underpinned by GM’s steady 42% market share in full-size pickups, disciplined pricing, lower warranty expenses, and tight control over vehicle inventories and incentives.
S&P expects GM’s free operating cash flow (FOCF) to sales to rise from an estimated 2.2% this year, dampened by cash outlays for electric vehicle restructuring, to roughly 4.0% in 2027 and 4.4% in 2028. In S&P’s view, this expanding cash conversion provides a high degree of financial flexibility that offsets GM’s geographic concentration in North America relative to higher-rated, more internationally diversified peers.
The agency highlighted that GM’s calibrated EV rollout has helped curb losses, projecting an improvement of $1 billion to $1.5 billion this year as battery cell costs decline. Concurrently, S&P emphasized GM’s expansion into higher-margin segments, noting digital services revenue is tracking toward $3 billion with software margins of at least 40%, while defense revenue is projected at $700 million.
S&P pointed to GM’s $23.1 billion in automotive liquidity as of Sept. 30 as a vital buffer against persistent commodity inflation and ongoing tariff headwinds. The agency anticipates this liquidity cushion will support annual capital expenditures of $10 billion to $12 billion alongside shareholder returns, which include at least $6 billion to $7 billion in projected annual buybacks under a newly authorized $20 billion program.
Looking ahead, S&P indicated it could raise GM’s rating if the automaker sustains adjusted EBITDA margins above 10%, keeps FOCF to sales well over 3%, and maintains debt to EBITDA below 1.5x with more than $18 billion in automotive liquidity. Conversely, S&P warned the outlook could return to stable if inflationary pressures, tariff hikes, or market share losses keep EBITDA margins below 10%.
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