General Motors Co. (NYSE:GM)

The period under review demonstrates a fluctuating pattern in financial performance as measured by Return on Invested Capital (ROIC). Net operating profit after taxes (NOPAT) and invested capital both experienced changes over the five-year span, ultimately influencing the ROIC trajectory.

Net Operating Profit After Taxes (NOPAT)

NOPAT began at US$13,885 million in 2021, decreased to US$10,217 million in 2022, and then showed a recovery to US$11,524 million in 2023. A subsequent decline to US$10,525 million occurred in 2024, followed by a further decrease to US$8,914 million in 2025. This indicates a general downward trend in profitability over the period, with some intermediate improvement.

Invested Capital

Invested capital consistently increased throughout the period. Starting at US$167,086 million in 2021, it rose to US$172,128 million in 2022, US$182,260 million in 2023, US$194,168 million in 2024, and reached US$195,877 million in 2025. The rate of increase slowed between 2024 and 2025.

Return on Invested Capital (ROIC)

ROIC began at 8.31% in 2021, representing the highest value observed during the period. It then decreased significantly to 5.94% in 2022. A modest recovery to 6.32% occurred in 2023, but this was followed by a further decline to 5.42% in 2024 and 4.55% in 2025. The decreasing ROIC suggests a diminishing efficiency in generating profits from the capital employed, despite the increasing invested capital base. The decline in ROIC is more pronounced than the decline in NOPAT, indicating that the increase in invested capital is not translating into proportional gains in profitability.

In summary, while invested capital has been growing, the ability to generate returns from that capital has been weakening. The observed trend in ROIC warrants further investigation to understand the underlying drivers of profitability and capital allocation efficiency.

The period under review demonstrates a generally declining trend in profitability as measured by Return on Invested Capital (ROIC). This decline appears to be driven by a combination of decreasing operating profit margins and, to a lesser extent, fluctuations in capital turnover. The impact of the effective cash tax rate, while variable, generally mitigates some of the negative effects on ROIC.

Operating Profit Margin (OPM)

The Operating Profit Margin experienced a substantial decrease from 12.91% in 2021 to 6.18% in 2025. The most significant drop occurred between 2021 and 2022, falling to 8.16%. While there was a slight recovery in 2023, the margin continued to decline in subsequent years, indicating increasing cost pressures or decreasing pricing power. This decreasing trend is a primary contributor to the overall decline in ROIC.

Turnover of Capital (TO)

Turnover of Capital shows a modest increase from 0.68 in 2021 to 0.89 in 2024, suggesting improved efficiency in utilizing capital to generate revenue. However, this improvement plateaued in 2025, with the ratio decreasing slightly to 0.87. While generally positive, the impact of this metric on ROIC is less pronounced than that of the Operating Profit Margin.

Effective Cash Tax Rate Adjustment (1 – CTR)

The factor representing one minus the Effective Cash Tax Rate fluctuated throughout the period, ranging from a high of 94.97% in 2021 to a low of 84.99% in 2025. A higher value indicates a lower effective tax rate, which positively impacts ROIC. The decrease in this factor in later years partially offsets the negative impact of declining operating margins, but does not fully counteract it. The relative stability of this factor between 2022 and 2024 suggests a period of consistent tax management.

Return on Invested Capital (ROIC)

ROIC decreased consistently from 8.31% in 2021 to 4.55% in 2025. This decline mirrors the trend in Operating Profit Margin, confirming its significant influence on overall returns. The combined effect of the decreasing margin and the fluctuating tax rate adjustment resulted in a substantial reduction in the company’s ability to generate returns from invested capital.

In summary, the observed decline in ROIC is primarily attributable to a significant reduction in the Operating Profit Margin. While improvements in capital turnover and favorable tax adjustments provided some offset, they were insufficient to maintain the initial level of profitability.

The operating profit margin exhibited a declining trend over the five-year period. While net operating profit before taxes fluctuated, the adjusted automotive net sales and revenue generally increased until 2024, before experiencing a slight decrease in 2025. This interplay between revenue and profitability resulted in a consistent reduction in the operating profit margin.

Operating Profit Margin (OPM)

The operating profit margin decreased from 12.91% in 2021 to 6.18% in 2025. A significant drop occurred between 2021 and 2022, falling to 8.16%. Subsequent years saw more moderate declines, with the margin reaching 8.21% in 2023, 6.76% in 2024, and finally 6.18% in 2025. This suggests increasing cost pressures or pricing challenges relative to revenue growth.

Net Operating Profit Before Taxes (NOPBT)

Net operating profit before taxes peaked at US$14,620 million in 2021. It decreased to US$11,802 million in 2022, then recovered to US$13,097 million in 2023. A subsequent decline to US$11,699 million occurred in 2024, followed by a further decrease to US$10,488 million in 2025. The fluctuations in NOPBT, while present, did not offset the overall downward trend in the operating profit margin.

Adjusted Automotive Net Sales and Revenue

Adjusted automotive net sales and revenue demonstrated an upward trend from 2021 to 2024, increasing from US$113,214 million to US$173,096 million. However, revenue experienced a slight decrease in 2025, falling to US$169,708 million. The revenue growth was not sufficient to maintain the initial operating profit margin levels, indicating that the cost of generating those sales increased at a faster rate.

The combination of fluctuating net operating profit and increasing, then slightly decreasing, revenue resulted in a consistent erosion of the operating profit margin. Further investigation into cost structures and pricing strategies would be necessary to understand the drivers behind this trend.

The period under review demonstrates a generally positive trend in the turnover of capital, followed by a slight stabilization. Adjusted automotive net sales and revenue increased from 2021 to 2024, while invested capital also rose over the same timeframe. This interplay directly influences the turnover of capital ratio.

Turnover of Capital (TO)

The turnover of capital ratio increased from 0.68 in 2021 to 0.89 in 2024, indicating improving efficiency in generating sales from the capital invested in the business. This suggests that the company became more effective at utilizing its invested capital to produce revenue during this period. However, the ratio experienced a minor decrease to 0.87 in 2025, suggesting a potential stabilization or slight reduction in efficiency.

The increase in adjusted automotive net sales and revenue from US$113,214 million in 2021 to US$173,096 million in 2024 is a significant driver of the improved turnover of capital. Invested capital also increased, moving from US$167,086 million to US$194,168 million over the same period. The relatively smaller increase in invested capital compared to the increase in sales contributed to the rising TO ratio. The slight decrease in TO in 2025 coincides with a modest decrease in net sales and a continued increase in invested capital.

Sales and Invested Capital Relationship

The correlation between sales growth and invested capital is apparent. While both metrics increased, the rate of sales growth exceeded that of invested capital for the majority of the period, resulting in a higher turnover of capital. The 2025 figures suggest a potential shift in this dynamic, with sales decreasing slightly while invested capital continued to grow.

Overall, the company demonstrated an improving ability to generate sales from its invested capital between 2021 and 2024. The slight decline in the turnover of capital in 2025 warrants further investigation to determine if this represents a temporary fluctuation or the beginning of a new trend.

The effective cash tax rate exhibited considerable fluctuation over the five-year period. Cash operating taxes generally increased, though with some variation, while net operating profit before taxes demonstrated a more volatile pattern. These movements significantly impacted the calculated effective cash tax rate.

Effective Cash Tax Rate (CTR) - Trend Analysis

The effective cash tax rate began at 5.03% in 2021, representing a relatively low tax burden on pre-tax operating profits. A substantial increase was observed in 2022, reaching 13.43%, indicating a significantly higher proportion of operating profits paid in cash taxes. This rate remained elevated in 2023 at 12.01%, before decreasing to 10.04% in 2024. A further increase to 15.01% occurred in 2025, representing the highest rate within the observed period.

Relationship between Cash Taxes and NOPBT

Cash operating taxes increased from US$735 million in 2021 to US$1,585 million in 2022, contributing to the rise in the effective cash tax rate. While cash taxes remained relatively stable in 2023 and 2024, fluctuating between US$1,174 million and US$1,573 million, net operating profit before taxes decreased from US$14,620 million in 2021 to US$11,802 million in 2022, and then to US$10,488 million in 2025. This decrease in NOPBT, coupled with relatively consistent cash tax payments, contributed to the higher effective cash tax rates observed in later years.

The variations in the effective cash tax rate suggest potential influences from changes in tax legislation, jurisdictional mix of earnings, or the utilization of tax credits and deductions. The increase in the rate in 2025 warrants further investigation to determine the underlying drivers.