GM - Earnings call transcript Q4 2017 | General Motors Company

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Operator

Ladies and gentlemen, thank you for standing by. Welcome to the General Motors Company Fourth Quarter and Full Year 2017 Earnings Conference Call.

During the opening remarks, all participants will be in a listen-only mode. After the opening remarks, we will conduct a question-and-answer session.

As a reminder, this conference is being recorded Tuesday, February 6, 2018. to of conference Corporate like Suryadevara, to now President Vice Finance. would turn over the Dhivya I Please go ahead, ma'am.

Dhivya Suryadevara

quarter results Thanks, operator. as the financial us, for you fourth for Good morning, we and review thank of XXXX. joining GM's

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Mary Teresa Barra

this results core reported for commitments. our was our transformative a extend record we GM. demonstrate power XXXX very and joining. meeting Dhivya. track Good morning, strong thanks our and everybody, Thanks, year for the business The of of morning earnings

results. Let's full look year the at

and EPS our decisive quarter begins third, basis. first, We our adjusted return zero because We $XX.X technologies record the in few four with our of enable focus vision continue year, diluted to margin year was stronger, more and a continued on on North strength a this resilient our XXXX, congestion. invest adjusted we margin. the of in business; in and billion GM we XXXX's expect return of cash returned opportunities; accelerate position adjusted past actions shareholders, have as further in capital $X.X America adjusted zero trailing performance. future XX% in plan We to: years to EBIT taken that emissions company $X.XX. company the a to had record invested reshape and This EBIT to second, we a zero Our where, momentum repeats of in record XXXX. EBIT record crashes, and on X.X%, in XXXX achieved adjusted higher billion of

International and We results strong expect GM in improved in equity income where South profitability to America. China we saw return in

the and a crossovers and from pickups, year Chuck strong course, Financial, a and, adjacent we details sales this very launch our for the GMC models leader Cadillac, and retail the mix became and year; success by businesses U.S. X.X sales will of which global momentum, be year in few the XX our XXXX fourth will fastest-growing the helped was a Silverado and luxury and retail Caddy in Chevrolet including Sierra row. CUV minutes. the up where outstanding third GM in shares vehicles continue full-size which brand core pickup, Chevrolet all-new on of by refreshed our including momentum sale full share expect another we crossovers drive year Buick To will GM company or expect on and XTX a across and maintain GM GM percentage pickup share the of later, we'll full-size the strong with crossovers of in efficiency cost crossover. XX%. China for luxury refreshed of of consecutive grew new year business. focus the record a Cadillac specifically, also led performance entire Building With grew delivered points. later this year. crossover introduce in improved seven China industry International, In go Baojun, a We new the the additional SUVs this the winning GM sales year, business, XXXX, truck

market South sales in Chevrolet leadership, Finally, America, rose last continued year. its XX.X% where

In cost business. addition offset performance are in strengthening through that investments the to great our products, we efficiencies incremental

the in XXXX We by are to $X.X this year achieve our XXXX. of we'll costs commitment for that end focus beyond continue efficiencies on baseline, billion on track and the on

self-driving we in personal pedals another making Last In we U.S. AV. is AV to It control. operate $X of to steering our vehicles by Motors or in announced as the are we and advance is investment no new General the This with increase fourth-generation Cruise we will all-electric Cruise that first built XXXX. environment production-ready service for To in year, in expect milestone safely safety our no future to XXXX. The the no vision wheel, a emissions allow at a the introduce mobility. transportation to with of vehicle a safety ride-sharing addition, world, also safely a models zero deploy deploying path a manual XX driver, to available our remarkable filed report on least Department petition progress vision our GM.com advancing self-driving is our to billion. month, Transportation initiative us of on

and As battery next-generation progress a range customers we meaningful we our will want. attainable and desirable, that that architecture lowering EV costs, are confident profitable to make with be our continue

vehicles unveiling will in We XXXX. these begin

to over to the Now, call I'd like share details. to Chuck additional turn

Charles K. Stevens

our additional the Thanks, quarter I'd provide insights some perspective Mary. like to on into XXXX outlook. give and

kept earnings performance, of for XXXX's row. commitments for volume adjusted of and despite year headwinds. fourth record EBIT significant as quarter the year more Our the a strong in commodity record X.X%, our of billion $XX.X delivered year met a and repeats another we margin we fourth than results record

United as from inventories right-sized also X.X% the We a diluted $XXX.X record adjusted. dealer EPS XXXX achieved we $X.XX in was billion, in revenue down Net States.

margin by American was even North year flat Our than wholesales This achieved for XXXX. XX% and a of down XXXX record were with versus versus being XX.X%. more driven strong results the

in record record within North profitability GM its America, GM taxes. earnings America. margin the addition In China equity in International, to sustained returned generated South Financial we strong before And and income, to

in Turning America of QX quarter, million record higher a fourth in American fourth of for the dealer basis to million net demonstrate pricing, both the year as Both performance units in billion revenue, raw cost be in In these we billion delivered from and year-over-year our XX% units resulting a results fourth mix, far on volume $XX.X last the the to with in with billion America, wholesales We America Volume We and year-over-year. we generated of a EBIT a the and fourth revenue, We to committed North through reduced quarter ended EBIT year. another decline percent EPS supply targets our down the an U.S. inventory North quarter of of resiliency we our down North off and of $X.X record generated days third generated material as despite adjusted. margins. XX-days of to units diluted in costs quarter, billion and XXX,XXX dealer surpassing fourth earnings XX,XXX X and increase continued the $X.XX performance. $XXX and an quarter, early $XX.X adjusted, generated inventory, planned. improved in our about record headwind calendar $XXX $X.X XX-plus business. strong XXXX, in and increase year of margins or end the year North leading of quarter XXX,XXX the the straight adjusted,

headwinds. $XX.X of For pricing XX.X% strong. record year, delivered commodity margin decline with calendar and the the million America remained EBIT-adjusted $XXX with XXX,XXX billion in of a team even North wholesales unit And a

to and transaction a average continued industry-wide weaker grow, U.S. slightly increased volume. spend prices despite Our industry incentive

continues Our improve cost underlying our about were fourth $X,XXX improve quarter fourth strength our reduce drive quarter out residual taken fleet of have The are playing as of to favorably ATPs and of business performance higher the we results. sales, than actions $XX,XXX values, our to in XXXX.

segment segment driven combines cost is price for former Moving region. $XXX South International, region for year-over-year first new improvements. GM improved the quarter the by GMIO with reporting America and Overall, EBIT-adjusted which to this this former million GM our the

segment. quarter The straight for South deliver equal improvement in for solid Corp with results we the income was to anticipate the our billion America about the and continues to second on breakeven year, continued profitable Financial continued equity quarter few $X XXXX. comments resulting and fourth GM of in to improve. XXXX. A year, full China

GM continue costs expected As our tax assets segment, before full billion costs anticipate quarter. about Earnings we towards quarter revenue This earnings fourth $X.X the In the million $X.X adjusted in of and full to of million captive, grew $XX earnings were the Financial $XXX posted $XXX for growth to expected the Corporate future in continued supporting and fourth we XX% for earnings record progress billion, about in was and about the line with year. billion XXXX. year. record for growth,

service deploy at in XXXX as increase discussed about a versus As expected spend and in XXXX. Deutsche is on transportation to million environment Conference, XXXX prepare the to $XXX in ride-share Bank self-driving we vehicles

Corporate the the run to $XXX XXXX. for cost quarterly expect in sector to million we range result, a million As $XXX

partially in from a offset Adjusted Turning free on billion. billion lower of and capital improved of automotive $X of result sales movements cash primarily the year inventory. the favorable year-over-year dealer cash and $X.X as resulting XXXX automotive $XXX $X.X due QX adjusted billion, flow was flow due down impact billion by the automotive to the quarter normalization levels EBIT-adjusted to impact full year-over-year flow of of and reduced cash by to million inventory dealer for third incentives primarily capital $X.X production XXXX, allocation, free working of of

sale $X.X through returned we result dividends our which This $X our $X.X is in of through And cash Mary reduce As stock billion reflected cash able we lower XXXX. than target billion XXXX our in Opel/Vauxhall, and balance. our in billion. is of $X repurchases the balance billion cash mentioned, to strategic to by shareholders year-end as were year-end billion $X.X a

XXXX want more Now, I share to on outlook. details our

XXXX month, deliver mid-$X year full As in range. we we outlined last adjusted to the diluted EPS expect

consist American and automotive flat said past inventory Capital in expect levels our including in month, last as to I automotive in XXXX next-generation cash EBIT-adjusted GM decline likely autonomous in flow vehicle largely for excluding Maven, free spending, and rate billion line our and we operations get $X.X about operations, truck XXXX, be be results launch. we run relatively Core to expect North performance business will will are flat. to flow free dealer annual ending our Core Lyft. We all remain Automation, production of be as as core expected investment XXXX. and our cash Cruise core core with adjusted

driven quarters our weakest XXXX we well pickup typical cadence, downtime by and QX at to the trucks. related Looking QX new retooling to our seasonality, expect full-size as be as

We America expect QX QX and unit North impacted due decline downtime. volume QX an truck will to be strongest. primarily to approximately the be XX,XXX by in

As a is reminder, cash our QX quarter capital due to seasonality. typically working flow weakest

mentioned truck launch, the Given below the averages. anticipated CapEx spend QX cash be historical expected production lower as to our support just meaningfully as I is to well flow

Baojun and by overall Korea's from Our a our XX%-plus will EBIT-adjusted industry, China, pricing pace which primarily discussions had crossovers, sustain strengthening performance. and Buick dividend XXXX need we key the by buybacks a income. a $X.XX, financial and year due offset in of our of full America, continued continued in the another of on savings. U.S. recent of launch XXXX flow additional an Cadillac focus to strength will mix primarily operational to of resulting similar quarterly any the In International, our past dependent and a be full-size In by to free business new year North of in all-new XXXX of on on to expect improvement richer the year. strong America. and from sales Korea, stakeholders improve and we've with for In remain cash trucks, cash of In GM anchored and we strong equity margin throughout years: continued growing at crossovers calls the cost continued due generation, we sales see the favorable dynamic regarding mix South as see few in pressure driven our

once expect to continued Globally, expect we where Financial, increase a GM specifically XXXX, the to required. As see this we for come raw earnings. in growth may while our actions adjacencies expect performance, through improve strategically opportunity to prices, mitigate and restructuring other in through on rationalization move a we as More material assess be we We significant topic year. again largely performance. additional cost we currently in

last it focused in to of as So headwinds. commodity in up, the That profit, record concludes and organization portion adjusted the significant years. volume meeting to now call. our comments. on our And done sum margins again record EPS XXXX another year the a declines face of question-and-answer and XXXX, in the fourth is we've opening quarter, four for move commitments We'll our of diluted

Operator

first line Joseph Your RBC of comes question from Markets. with Spak the Capital

Joseph Spak

taking set core cash everyone, which for flow? and to and flow, those shade free level question. guess just cash free just flat billion Thanks EBIT core on saying a you the $XX.X I metrics are about billion, were in under $X XXXX, your

Charles K. Stevens

XXXX for investment would delivered be we That when AV. you math and adjust in look the at what the in

Joseph Spak

to first that step-up the increase the at quarter million ready you should think in and go Okay. live? actually pointing the you scale mobility AV level in that Thanks. of quarter expect you're And the or in launch gets we that a XXXX, to in is XXXX, you $XXX

Charles K. Stevens

billion, $XXX Yeah. million to (XX:XX) order other through some on think And of we'll itself, it's the in on as from specific $X $XXX when I XXXX, the million more to Joe. Maven you the AV, AV that's need spend exit in XXXX. have segment $XXX we what in and about we would million factor to But billion continue to for path, that roughly, rate say TAS run overall $X to it's say $XXX to and $X.X billion to That's XXXX. we activities. million

Joseph Spak

mentioned XXXX? you on Do factors go And focus recent there's last the and because feel in I for forecast, that with rate there's lot clearly, you confident – been reasonable a range the there's of growth a adjacency know just of Financial, some GM outcomes one, of Okay. rates. that a but – more on economic into

Charles K. Stevens

now. it not Well, clear clearly our maybe but for or make so, – expectations I'll

Our a were of XXXX expectations on perspective. for based assumptions from set a macro

strong was going and XX-plus moderate points, an would that growth it what another Financial And U.S., XX basis the to an point. as at well Under construct, as as the that environment interest, are year increases in where growth, wage GM indicated, with this baseline in there in low XX and North margins. moderate GDP we're inflation, that's specific millions. expect that's we percent Here in to industry be be moderate assumption, to in growth going our was America the executing continued

Joseph Spak

Thanks.

Operator

of next Rosner Emmanuel Guggenheim. comes with question Your the line from

Emmanuel Rosner

Hi. Good morning, everybody.

Mary Teresa Barra

morning. Good

Emmanuel Rosner

So wanted your we could puts the it Just think in those how for reporting that the you color the give more bucket America you're year? – a to on in maybe North this about GM little puts guess if and should XXXX? slide, takes we for refer EBIT and I typical takes

Charles K. Stevens

you're EBIT So, Emmanuel. an looking for bridge,

we kind you the of high-level kind So view, I'll at of because backdrop. give macro a paint

a of and think tailwind – Bank headwinds our launches, as Conference, and pricing think offset crossover Traverse, some XXXX we added significant America margins units. tailwinds about think So and America of to going about the crossovers global, clearly, issue truck the the headwinds, talked we at prices carryover challenging XX% Enclave going a have downtime tailwinds increase, – in pretty as we've the Deutsche expect and about that's industry. is we full-year a generate going – it's big from got and to of are a impact specific be to the be space, perspective. mid in I to going continue Equinox way And the of and it perspective, pricing lower and but XX,XXX or we America To specifically back North look the – to and obviously roughly headwinds a – North North we incremental then those commodity component a from in

couple launch-related be We commercial demonstrated SG&A and the in expect year-over-year, further a with technical commodities of of last savings performance expect impact relatively will production. because flat as the over costs. more be efficiencies And be to GPSC we we've and the of years offsetting lower incremental volume but truck headwind to than cost mix and favorable

as we the macro adjustments plan. environment within objective, of will go that to that correct course and to the kind that's broad buckets. through last as And we baseline execute years, continue again order make that's in done over the year, number of the earlier. So, Obviously, we've I described towards contextually the

Emmanuel Rosner

you mean, competitive. directional extremely side, That's helpful. see guidance for your And I in side, conditions what I the guess seems just crossover you any product. have the increased on guess is specifically like new the within pickup side? GMNA the on truck pricing, conditions I risk are But do truck getting I assumption that? I it guess of competitive on understand

Charles K. Stevens

Yeah. pricing seen and on then be new year. the speaking, driven we say, pricing. year the of crossovers the last carryover major, later the we've would will a launch new over the broadly years, I full few the of truck on there'll primarily as headwind, have by favorable in And

that $X,XXX We you incentive one truck, slightly I still perspective, constructive. XXXX, were a age As in transaction to at given a pricing of prices, would as to amp reasonably that truck pricing up the But be they we go pricing perspective. from continues And XXXX. say, down point, QX versus think were in going data into another say, context, spend a segment up. we through transaction our know, is you if QX and just unit we've from truck plan built look our

is to pricing. next-generation we reasonably we balance, be significant Certainly, think to forward feel a truck for truck tailwind us. on which about good So we're the going looking

Emmanuel Rosner

you Thank color. Great. for the

Operator

with Citi. Michaeli the comes question line next Itay of Your from

Itay Michaeli

Good Thanks. morning, Great. congratulations. everyone, and

Mary Teresa Barra

you. Thank

Itay Michaeli

in mid-$X GM to earn it, at to kind but seen the call guidance if way. a, what the we've Maybe for given SAAR pickup fair could pickup of kind of you of high the the strength the in think the the of Cruise I of investments, billion about industry? that and XX and $X-plus else I How EPS, Chuck, terms variable AV truck your can a a million now all say equal, be I'll sensitivity in different still on vehicle it SAAR. profits yourselves would remove franchise, of $X ask question it look light truck

Charles K. Stevens

question, Good Itay.

come right? So, units, down average environment that we're if wholesales we EPS of a in that XX would a our reasonably suggest million the would math the XX it's XXX,XXX going would profit, in mean, be basic our I math units industry XXX,XXX exercise. versus million, roughly at $X variable to be, are north for math sure. easy So

we're XX play; I that and that XX you is And kind aggregate, to. there's as year XX.X building trying what's We're or talked in wholesaling to when million low-XX of what mid-XX resilience develops, other develops, producing decline. how model that SAAR key last suggest a sustain that. think year-over-year million that that at and say industry business level about that's that would would at million than progressing and been I the was XX%, down million in how look a environment less say But pricing position million range volume would would the that's EBIT our the a you're to going we've would business model the always business. I've right, North what's in come American to how the this because I factors margins that mix. of of

Itay Michaeli

just And my helpful. follow-up. very That's

much XXXX? seeing your of earnings growth, and you around you the be in billion I just how might $X.X profit the think XXXX, be How cadence much to for might adjacent expectation contributing On year that improvement that? this of share can

Charles K. Stevens

what our January kind XXXX, kind Yeah. we aftersales the OnStar by The continue of would said other and in to the driven going perspective. loyalty, without and service that troughed see captive. out XXXX, be then, where to revenue a as we'll GM leg say will timeframe. in in the XXXX direction, then benefits park some we continuing bottomed specifics to LTE of as back and the OnStar of we after and growth Financials, in in of is just related providing increase primarily the continue kind was improvement continued for that XXXX growth go And aftersales the XG through of we opportunities growth we're in that significant I on and out car over from

that XXXX, So, XXXX. then in the long them, come kind three in answer XXXX answer. between of is improvement of going in leg to GMF to Simple is and of that most

Itay Michaeli

That's very helpful. Thanks so much.

Operator

line the UBS. of Your with next question comes Langan from Colin

Colin Langan

Thanks and my great. Oh, questions, taking congrats a quarter. good on for

Mary Teresa Barra

Thank you.

Colin Langan

you've money? underperforming, and in that small money. – past color maybe losing talked those losing be is I turning terms around Any is update area of could still Any cars in the guess, it there only about that the

Mary Teresa Barra

across car Last improve we to year, our we several had a overall took focus and portfolio. actions the performance

as the Although, cars on the U.S. saw significant you in especially market, in pressure the shifts

to So, opportunities. we continue look for

well are the fact when and when positioned We the we it and in invested with mid-size timeframe compact was in and that you the Malibu. though the the Cruise at launched Chevrolet look the XXXX

in being those well America sets really capital up strong GEM we very very broader marketplace we're we into emerging the well a architectures forward. with say robust positioned I look markets, marketplace when continue are to in platform where focused. move respond launch and to us to XXXX you if the start car car South from especially to China think timeframe, customers to also reach a as very Mexico, the globally that and have I'd with perspective, little So investment very

Colin Langan

Got in on on it. the raw number? based terms that size of And of headwind guidance any color is the material your

Charles K. Stevens

code. Yeah, it it put when last $XXX look million I we to in year, in mean, in year-over-year perspective, a at just aggregate was the on ZIP basis, it

is than in planning XXXX. less little baseline bit our that assumption something think a I

last of it, obviously, I for point offset ZIP we But speaking, is, in to we impact develops $X.X important baseline call during develop, million But able it billion that And as react drivers. we see performance were see cost year. will So, across a again $XXX so. planning roughly code how strong the all the $XXX million. that this we or the call think through year to other really assumptions, as

Colin Langan

Or And it. the about be how Got think we flat about your you think majority you we I comment indicated of the just excess year? Do way cash more year-over-year. would do question, model be thoughts one that of should or repurchases? flow you in think cash free in it uses will the to should de-leveraging? that this used there? Any last need

Charles K. Stevens

Well, that executing framework our is relatively I think with capital transparent. it years. been over discipline We've to allocation the last of number

our core So is flow flat cash guidance free business. in year-over-year the

$X for cash see that's the it $X And ex-TAS we what year, to but (XX:XX) $X.X pay But being billion actions what buybacks. and say, would call that's roughly share that develops. So that's We're and on other we'll That have that billion, so you dividends, buy opportunity M&A, with available, actions. share radar, will with roughly, and/or back to buybacks anything of through and/or I the be billion kind I'm for there's suggesting Other (XX:XX) what do. to go extent will free as a the going flow for going TAS $X.X leave shares. not would restructuring start $X.X billion, we we're that billion. we

Colin Langan

very Thank question. much for it. Got All right. you my taking

Operator

America. Murphy Bank line next of Your with of the from question John comes

John Murphy

guys. morning, Good

Mary Teresa Barra

Hey.

John Murphy

I'm incredibly one strong strong down it, year volumes you I pretty levers in with launches product you've just been the the and and hate fourth and mean, second cutting. market, the able performance to I in pull second. up. remarkable America half on is here, look actually horse kind look the just at is curious, and that at has North two the margins mix been the of But of the we staying the second as for beat quarter dead cost when to a

you X-point America that do at create at clip another thinking I'm products offset in towards an you how cutting of just cadence So prices much think opportunity then have to go of potentially upsell product Do look kind opportunity. going there's just off forward, Just cost you're upside kind you as are better upselling going or to variable higher you them forward? consumers higher you think your crossover? about move and absolute for weakness how margins? North sort on can of thinking, that also, further to any to earnings into And

Charles K. Stevens

Yeah.

at me trucks, a focus Let of Deutsche amount Bank that talking fair we the spent on about Conference. time John, because

$X crew by While portfolio, the there's including We've that upside will the talked cab the revenue up on truck had will crew the level mix very eliminated general those that constraints us versus franchise, billion on that growth mix, cab well drive has where just a current had. the underperformed Silverado, very for constraint have with of next-generation mix. with current we've we've also constraints. and models market eight releasing will a we distinct I the opportunity done think truck because allow of really we've we the richer we've The underperformed. that breadth We think significant we about released number in to cover

with upside and is there we not a example only going the overall that offering, when the premium as that that heavy-duties and to focus of we as see going say differentiation some Sierra, launch an we're be you'll significant and we also differentiation So truck, about releasing to that between these product provide have constraints something of that's We're truck. that well think I'd very Denali executing the the think as been executing. well we are very the that's on to the as continue think favorable has continue us. focus going SUV. I And as and to to mix we're broader the Silverado to next-generation on

truck solved that pickup, we and over possible some with of we've start as think had years that really I the – full-size And later to XXXX. going the mix we we're drive did purposefully, we address very in number very, truck challenges So, the best trying we're this of to think the profitability. to launching

John Murphy

to does just include not include revenue that the as opportunity, that the HDs? clarify, the billion HDs Chuck, $X Or does well?

Charles K. Stevens

just looking LDs, at crew-cab That that was on was – mix.

John Murphy

Okay.

Charles K. Stevens

at a if by XX% So, we right? the transaction average that penetration or you just of look we kind opportunity the close number, versus John, that segment can our just But leader prices that think crew-cab and high-level on mix. releasing of our and constraint

John Murphy

And I that's to pretty high variable imagine got got margins?

Charles K. Stevens

does. It

John Murphy

I second in the of Then even forward potential an launch New Cruise I of around are hopefully us here for in test of just as and this a City the think the community event, event investment stands year. mean, Yeah. I'm looking a a an here in looking investor that where lot vehicles launch Yeah. it. Mary, and York fleet as at York far to New what curious be should we question.

Mary Teresa Barra

we proceeding to are vehicles launch environment be track Francisco to of of ride-sharing Francisco. get on focus development San that learnings the be we speed in autonomous of that XXXX geo-fenced Clearly, the and doing the continues in we're learnings a to So, on timeframe. in the the and get the environment we and that because San from able complexity

primary San and York, we share we'll deployed, we'll path continue. Francisco. anything specific in the are we are of as announced last fleet to New have mapping on year actually don't have but of I'd I that say process the when focus We is and But a on

John Murphy

to we can GMF to reverse I from to Okay. on that quick. the ParentCo dividend, quarter. when and, dividend more the Chuck, fourth the XXXX occur? see just size will at in And when of $XXX up we the or mean, out million the the looking matures? develop sort look in expect going should FinCo the we billion XXXX lastly at $X looks And like in went GMF traditional when GMF ParentCo there? then And What's when it real it from

Charles K. Stevens

the the Yeah. was that's It looked numbers. Again, ratios included the flow and question, good dividend everything our in term cash liquidity. FinCo our The John, company. capabilities at the capacity dividend from in proceeds billion of the the cash investment and to And sit truck, of our next-generation transaction the not long-term flow think and view captured did. to cash related Europe. in parent I in $X CapEx about generation heavy as long the load in cash to number Clearly, of GMF free we're – else, Relative ZIP right think proceeds where XXXX. we context the not free the which think came half It us, code of was billion to in of to AV, I for to pretty free now, XXXX, in incremental flow. would I you we about in divesting $X with the of obviously, they had on leverage it

go-forward certainly kind spend to cash more of dividends start part couple of of and we to we think the in cash cycling cash from time A We'll closer that, our down. increases plan overall capital enhancing some of as we're be As have to we've One, spend, to say point flow come we stay that. but business. beyond generation our of get years benefit the say And the at our this GM you capital next that. of past the and as I kind indicated, is couple to and tuned capability in cash to expect that generation would drivers Financial, significantly. going relative think on to get environment, and high we'll two,

John Murphy

much. you very Thank Great.

Charles K. Stevens

Yes.

Operator

question from of next with line Your Jonas Morgan comes Stanley. Adam the

Adam Michael Jonas

Thanks. Hi.

two questions. Just

the some generating are biggest rationalizing exiting that. First, on of a remote. bold you've being team Europe's most significant your really, capital return positive made chances Obviously, of and really the really on and moves, businesses where

areas today, assess really regions, long-term? couldn't where say there guess won't or you I'm in So areas that I thinking product portfolio being maybe and as although either you justify are some I Korea, the still Korea,

Mary Teresa Barra

record look to countries Well, to you and segments period generate I I at, regions that Clearly, going your over a of the for point, us. demonstrating is a long we're look and/or a time. our and we Korea of those at to returns track at if challenge have mean, think it, right ability look

We've cost that business. the grown Chevrolet operating with have and a The brand being very begun key to and clear we're in performance. Korea, to have structure the there. market minority We take to the well. has current the has including strong viable become share. improve challenging, we union, forward to already stakeholders and financial need owners conversations going and a our GM But presence We've has have actions going brand done –

countries, the there's have right conversations. some need steps we're now. have to conversations middle understand impact But having we material rationalization the stakeholders, our actions results. the a right take. to result those to or everybody, other make all in it's that restructuring We're steps too look franchise So sure to take in the within the the where the soon Korea few right to have right of may middle of We know, that tell necessary a we're at, and going could potentially we that forward to going on in

Adam Michael Jonas

Any Mary. of of specific? you you more could other be Thanks, countries. these a outside Asia And countries or mentioned few

Mary Teresa Barra

I I operations. less most is I our primarily think But one GMI would say the be focused the that significant. would say others would Korea we're in on,

Adam Michael Jonas

my of bit of does Level and put of second to order it's it you're because round many kind numbers testing of right. to Level the their right fleet, you maybe for to towards basis, a I XXXX? magnitude of to for All us How putting question size and money of question Right. important of year then here. to understanding would can your X, have vehicles the robo-taxi that How an X expect in a the footprint. fleet GM on on some final asked unit you many helpful a road transparency on try of have end think guidance your now? on it kind And by amount an – the are

us would with help appreciated. could that be it, you if So

Mary Teresa Barra

vehicles X, have primarily about Right XXX X. we are that now, Gen Gen driving

will be year. there million to focus. the where so course so, in about month were That that's per we talked and growing throughout we're of together our this a miles where on through collecting we're to we the year. when this get point path that And Remember where fall, a getting

we'll that Beyond and get XXXX we more is it something share into haven't we the that as timeframe. that, sized through and this year

Adam Michael Jonas

Mary. Thanks,

Operator

with Your question of line Brinkman from Ryan JPMorgan. comes next the

Ryan Brinkman

the Hi. Good morning. Congrats on quarter.

Charles K. Stevens

Thanks.

Mary Teresa Barra

Thank you.

Ryan Brinkman

cost that $X.X in cumulative XXXX. think of slides the saves XXXX, started targeted savings, of in $X.X the XXXX. they These now through mentioned you've by billion end achieved I the billion You

targeted like now you've elapsed So guess the XX% and XX% savings savings. I has of the of period realized

commodity So, continue there and the number at a of you accelerated there number? than savings that maybe to takeaway to to be push if if you've think in Do cost be might XXXX – that is history $X.X but that prices upside bit times, like able could that is the some XXXX, in the offset pace cost or any pressures billion some incremental since increased that? little couple higher on anticipated try there's further you a guide, to

Charles K. Stevens

first was Well, year, to rolled And it first, overachieved I'd when billion. year it out $X.X we $X.X we early it we objective, raised at say last is billion. last as this when

Importantly, and from primarily that this make move just which commitments that savings, investment than incremental we there. to engineering is SG&A we've then level more and said would is we do like set what marketing, And D&A. commercial to the offset the manufacturing in achieve and

does to back we for billion, I beyond set at because cost the the So, look billion pursue. that we you believe year that performance we're committed Ryan, and $X.X will at once look clearly, continue last if beyond next we Clearly, in there's hit and see buckets we Mary, do believe above of there we is, very we opportunities achieving as to the opportunities that these focused across And $X.X sent, ourselves, objective well. you'll that. outside And to further that bridges XXXX. the say, pretty so going board, are EBIT I'd on the also significant, that and

things back on by and really we are XXXX, we the reduced significant and focused that. improvement So recalls, about that had in all warranty, driven quality, improved we talked

So come, quite to get billion first, sure that more bag. going then, say commitment we'll and have we're And on but the to $X.X that. above more the I'm in to beyond

Ryan Brinkman

Thanks. in little truck Okay. take first little launch then, approaching there changeover this headwind And surprising the than say example, launch. the would XXXX I a think to launch in a in due quarter think, But even prepare I for was to the be Chuck, That's past, in downtime the along XXXX, pickups, you place because XX,XXX-unit a some new been to XQ. that for helpful. which think a doesn't, differently you've I heard bit until I the all taking volume

a helpful kind new you're in why a can primary profits at maintain for fully at they because you've reason of half the back take efforts might I to going year understanding help for consensus year? prepare launch think currently. such a your maybe while your you is least the that taken is that seen, and have of below launching maybe is GM forecast smoother-than-typical past truck. because just new already So talk that could a strong lower launch in Street then about temporarily, think that profits the are both typically to I of the some XQ and And the this to be the it not level Ford in truck, in

Charles K. Stevens

high Specific an Yeah. a is Ryan, all-new truck, again, architecture. level, at this to start this

off in truck generations sheet metal. same were the three last architecture, changes fundamentally of Our with

shops. architecture is body which this an So, requires all-new absolute all new

converting this we've time facilitate impact get it's constructing to transitions extra So, at make body downtime take and either so that periods around opportunistic around or downtime. when we're can been certain we without full doing shops holiday on because to these facilities, that a new launch, you

into time taking this again, and So, opportunity of that Christmas we've transition. taken advantage leading QX, with

work I leg to volume to at taking, again, downtime in As do tried units. to facilities. next-generation to by We've opportunistic XXX,XXX over truck needed that the the timeframe back in January, and launch be expect unmitigated said for we about do of the we that the the XXXX/XXXX in XXXX impact

of bodies building through the about Oshawa old In addition, call trucks launching Canada and Wayne to we Fort that will shipping will taking where now, half from and what assembling of right which those gap. we fill and shop, be this in painting process we're year, we're the Shuttle, there, body

in for that to this and our an out with so change massive a this be that's the far, all-new over significant to mitigate we're couple turn So, Again, to is of a this a we're next half essence, going action us it years, XXX,XXX mitigating pretty facilities execute benefit of units, XXXX. of headwind and flawlessly going to confident four take, and good. that's to a in have in architecture, level so and manage of

Ryan Brinkman

you. Thank helpful. Very

Operator

David question line Your Tamberrino Goldman with of from the Sachs. comes next

David Tamberrino

is up any XXXX? Great. XXXX, to Want year-over-year you're we XXXX, flat as for little forma again. to talk down coming our to this can't Thanks out flow billion a into to reason laid going that XXXX cash you to $X have questions pro to for we year, that free back head here. that results from there be solid taking obviously with bit get about But that think

Charles K. Stevens

we're of be of a in little bit to the and what GEM kind well then this XXXX. premature light I launching is launching I to we moving as Again, the about launch rate But be as cycle, we're this next what's before, David. what and think cycle year, XXXX into heavy that talked through going days, duties our still we run SUVs. the might full-size about right it's early for to going earlier, drive And now back that, off HDs in right? talked going we're have to we CapEx year. the starting TX And at

and spending, the now. So, capital XXXX again, be right of the days environment would beyond see early to point in all I a then the that I kind in XXXX and need to meaningful operating premised of timeframe. I would kind XXXX, say see that very decrease we're that And start inflection. we to think cycle trigger we'll on that through mean,

David Tamberrino

into you up maybe Yeah. trying going what That's like understand give then EBIT just kind warranty cash of that perspective, to for through XXXX just some results about than what's to could I also free the guiding picking XXXX. from the things to through expense, thinking flow and I of better mean, adjusted positives drop picking mean, an of fair. you're kind and

Charles K. Stevens

a to reserves, it let's talk for P&L half tailwind that adjustments then and that was an of we just warranty in warranty – extended in through half Yeah. warranty, which And experience what XXXX in – a of of seeing XXXX an The base that drivers adjustment kind go was a come accrual. good perspective. from but our absence go-forward second. Clearly, the in took of we were about of a on reserve resulted

the that repairs, cash you're of warranties because the to adjusting bleeds time, over extend in impact obviously, and think I three five for as reserves years.

to So, associated XXXX. that we but see would in would that beyond area the an cash another improvement expect be that, with probably

David Tamberrino

Mary, think, up Got test have. it. that leads I the with line following were month of on you a questioning just million And then you saying How miles about earlier, generating a per and and much CapEx that you time autonomous And over weigh augmenting grow that does for on how world real really incremental miles? the that mileage much P&L with expenses simulated development? the

Mary Teresa Barra

and and simulation But of bit both capturing that we the Not we're fleet on space. and vehicles, getting supplementing growing month. that we we've miles a have or work just just are Gen be that quite X, be to in XXX the I in done experiences we Francisco to miles a yet, we'll be wanted that. to Gen clear So, of clear, million X, San there be that a about the to doing using have that here absolutely the

give I can't I we've So, specific number you that you significant. the done, it's but miles very will of tell simulated

David Tamberrino

competitors, with doing of miles one or about? power. thinking but there any of it's say Is were rule maybe know, number, of X some their I Okay. thumb ratio million should compute very still overnight a I'd they we be larger your

could of what versus So, real simulated think you need useful? would any give ratio a of there color on you world miles miles kind us from be you can

Mary Teresa Barra

just you I that at look the look traveled, significant. we on I I performance it's think can know of simulation substantial how we've a look was out would don't and happening, if specifics rate doing from that. that's a improvement came into come from also miles study where and the out number we had rate I we're We I said of real the say have perspective. of pretty the improvement, much that. the think exactly don't when disengagements there at and

that together in environment. of improved comes XXXX in, of think I in measures complex seeing saw again, XXXX. all reduction a very from average disengagement also real miles the XX% a what to we're urban disengagements over per the X,XXX%. We monthly And So, with

when look doing in we're significant learning at with simulation. the from and we're what the Francisco So, experiencing San miles you very added with

all So those thing I together look numbers, I better a to is think it comes think in probably which at.

David Tamberrino

you. Thank Understood.

Operator

of line Deutsche from the comes question next Lache Rod Bank. with Your

Rod Lache

morning, everybody. Good

Charles K. Stevens

Rod. Hi,

Rod Lache

Korea could I One GMI? is the had you at running just questions within what are a remaining. losses couple right now clarify of

Charles K. Stevens

We Rod. profitability, don't report country-level

So, sorry.

Rod Lache

switching unusual but trucks, we you XXXX, is I'm you the us that some ATPs. obviously for have said on assuming North pretty Okay. about thinking you crossovers weakness should and higher mitigate of the wondering subvention The sounded which you and this positioning pretty for when environment. some help given thoughts net be could on run a were incentives your how higher on I the that the impressive positive, gears – for America, if thing Maybe year the of obviously, inventories carryover, some to price? rate in just it can you've And components, out. pricing components you're got the like net outlook clarify about think normal presume tight Any you've

Charles K. Stevens

and The for low positive really prices cycling that, year in age crossover us, will tailwinds versus net tough the of – the new a low, price pricing, pretty I into the products. given benefit pretty of of products overall, – be full transaction pricing those pretty will XXXX environment think XXXX. be off

think, lower Clearly, truck and truck we we mitigate that. be headwinds. headwind. being a versus that go-forward as a very expect inventories those carryover a going net-net, help year through this pretty kind year, positive be than basis, to good truck will last be lean and some run will combined so challenges new And we greater with a run production to overall point. new continue on will February year the to of is of the But the that you inventory So And X. ended perspective carryover But up our a tailwind. will be than from tailwind, I lean greater bring

Rod Lache

Is associated And you XX rate basis presumably correct? that you've points with plotted. incorporated that subvention some

Charles K. Stevens

a transaction as Well, incentive we've well of years assumptions; that as as baseline built to kind environment seen XXX increase U.S. to into rates as A we're spend set of our is pricing basis kind of price. that's percentage number in in XX basis a bps a the bps year-over-year continue. so of tough of going last seen certainly the increase of We've we've assuming on in that, the what a continuation point XX over environment

Rod Lache

us Great. And that helpful the just to lastly, million basically helped bridge really like a an you've at given XX SAAR. in analysis breakeven past

of you are pull maybe in cost downside that some the levers could remind that? X us What like ad the are things perspective, your a can fixed elements Just Tier scenario? from you what budgets, cost

Charles K. Stevens

we've U.S. the the is detailed Through got this in overall. X at the – past, is that will very, this proof go have Tier workforce but we in caps. was Again, percentage today points of temporary, through, XX% it than to look it assessment XX% Sure. you if variable would more a Yeah. and – percent much very be roughly so we call no XXXX, few specifically, a have our

to grow We expected XX% to to closer XX%. that

over XX% level, system a take a of XX% if at should theory, relatively XX% to or be in of costs was there able time. short volume, XX% in a So out a period to reduction labor-related the we

one fundamental driver. that's So

that's opportunity Those in level would purposes we marketing cost Our items drive level into expense. downturn. a two, opportunity the right? tag come just as American margin, largely roughly or would over a if – billion And Number million at industry could less a and a another same obviously those variable. three compensation XX% North we're variable, but breakeven billion $X clearly, pace you sales, Marketing next marketing volume. not in to on reduction XX%. be would a breakeven And is be we're margin, in U.S. making paying manufacturing And to there'd million cost least fixed obviously, out percent at less you XX is $X to at will for if typical three reduce opportunities highly which insignificant, what's expense compensation. of structure U.S. XX money, opportunities volume, modeling that there's cost units. the variable baseline on significant of the or And expense our by component built reduce if our of combination

Rod Lache

Great. Thanks. real That's helpful.

Operator

Thank you.

the Johnson with question last Our from Barclays. comes line of Brian

Brian A. Johnson

give some one made both questions; housekeeping a that cost Couple ones The the do back balance other GM? employee with for deal costs consultants of that around are and program saves there is, – how one us a of going and more But of you and cost of the big of reputation kind managerial getting haven't sense big, key high-level employee-related, efforts you offices. targets? the unlike reducing accounting. on and firms reduction programs of of areas? managerial could the smell material of – saves are show ongoing of kind that costs material the bean-counting costs How managerial What actions the old out are to up without you in terms how

Charles K. Stevens

we benchmarking have we the of penalty Deutsche for those journey since that fundamentally SG&A, the We And and areas back business Yeah, in all business we levels for established at sure. the benchmarking we've think around at benchmark it we did should looked areas. opportunities started lot the We costs, did around Bank I and XXXX, to we costs carrying. GM a been and our And did been on And this those XXXX. and the where laid and executing all at of looked Conference out of when around XXXX, manufacturing be. in were benchmarks the benchmarking. harbor, benchmarking leads material world-class the we

initiatives excellence Beyond SG&A consulting/bean-counting through Directors. than that. generate continue And has think do I space that, in some optimal not you're efficient, Board amount as was and we that what we the that performance as environment globally the it GBS. business. common or tool, of two to in think do processes, significant do operational billion one work to whole a the end Lean, When is under years. look very, roof, going with very Business on are to Excellence It basis. important we at and way and launched: Between and way. to this in taken And I you It the couple an fragmented of strong the review transactional of that now. enabled And where gets an couple those, it toolbox business lot of line we've drive Solutions. a a the of We a in $X.X challenge it brought seeing challenge, management and it the achievement we in a Mary from we common target. show tougher savings to really of and Sigma, very disciplined regular significant visibility. exercise, benchmarks business drove expected was by team one up the bottom cost aftermarket systems, the Operational these we Operational results of a Excellence the more key side a Global is a of use challenge we're we driver, end level the continue opposed and Six in enterprise with at over that last to today we to The of review

Mary Teresa Barra

to just Yeah. we figure to add need everyone also, I of processes. improve that would out challenges culture we've to overcome them. ways continuously got the understanding It's that. we And when see driving really to

go that make tools to structure – address is that's to to like we outside Six the about. the employee a Chuck need to So challenge Sigma have talking there's target, a the has sure after those. tools it, plan When a mindset every or and we

Brian A. Johnson

culture ongoing one-time an of exercise? a more it's So than consulting

Charles K. Stevens

that through purposefully, and – Absolutely. a Mary put a track as talked ago should and $X.X billion cost P&L to that. we ourselves would few we round be would P&L. that, again, to it talked wanted through savings, accountable to once – earlier, we the and I to be people we I we and about, build And about externally up hold and would next cycle there'll commitment. a ground, said I that the want set be I that the around so that seeing to the because roll stake that that, transparent years mean in that to expect held the And accountable we're

Brian A. Johnson

us of Can U.S. $XX your have left. you of would give rule questions. given deferred billion any second impact costs becoming Okay. you generating accounting of change billion periodic the One, pension North of $X around A a likely FASB about couple sense asset, business around plan, you're pension flip of accounting write-down taxpayer, terms net in tax when income? taxpayer? where cash you, still a America And to EBIT

Charles K. Stevens

Sure. Yeah.

but North the don't came question, And like from know on impact. both billion statutory line, was On where billion deferred above our so $X on for just the first American impact tax rate $X impact XX% the the going from, geography reform I no EBIT of EBIT, no it assets. of the tax it's to XX%

after $XX in a low we timeframe. adjustment, future, would a XXXX-XXXX for would billion cash position that left expect foreseeable tax the very remain paying about and I have that We

Brian A. Johnson

Okay.

tax of meantime, cash be would you're that. U.S. reform not the So any cash impact significant a taxpayer? taxes well In on after

Charles K. Stevens

XXXX-XXXX, us it – benefit XX% term about think absent would range is, going XX% – to range, longer tax-paying I into start and would cash not standpoint. a way that, move it's a up beyond or The from to to now closer a we we're Yeah. for

Brian A. Johnson

adjustments? GAAP Right. the Despite

Charles K. Stevens

Yeah.

Brian A. Johnson

Okay. Thanks.

Charles K. Stevens

Yes.

Operator

the to to you. Mary call Barra Thank I'd her closing turn for now over comments. like

Mary Teresa Barra

GM I'd company ago, everybody to focused like hope years few than we to have much is I more that were thank for participating you a do. more just a we work today. see stronger, and

long-term the opportunities, and challenges that believe we and those we changing team for strategy is in we the will also to – that, there there to day. in come look recognize you minimize to we we so been week, and drive and work our accomplish are senior on That's capitalize But value. leadership what at have continue opportunities that had we've rapidly that to as aligned challenges. what every beyond. executing, shareholder is We last just XXXX fact, need our together with In perfectly everybody industry are

So, thank you participating. all for

Operator

that gentlemen, please your for conference the today. thank you and disconnect you does ask call for conclude participation, that and We your Ladies line.

General Motors (GM) 6 Feb 182017 Q4 Earnings call transcript