Q4 2022 General Motors Co Earnings Call
To ask a question press Star then one on your telephone keypad.
Draw Your question Press Star then two.
As a reminder, this conference call is being recorded Tuesday January 31, 2023 I would now like to turn the conference over to Ashish Kohli Gm's, Vice President of Investor Relations.
Thanks, Michelle and good morning, everyone.
We appreciate you joining us as we review Gm's financial results for the fourth quarter and calendar year 2022.
Our conference call materials were issued this morning and are available on Gm's Investor Relations website.
We're also broadcasting this call via webcast.
Joining us today as Mary Barra, Gm's chair and CEO .
Paul Jacobson, Gm's executive Vice President and CFO .
And how about CEO search.
Dan Berger, President and CEO of GM financial.
Also be joining us for the Q&A portion of it of the call.
Before we begin I'd like to direct your attention to the forward looking statements disclosure on the first page of our presentation.
The contents of our call will be governed by this language.
And with that I'm delighted to turn the call over to Mary.
Thanks, Ashish and good morning, and thank you all for joining US. This morning, I want to begin today's call by recognizing the general Motors team all of our employees and including our dealers and suppliers. It takes experience skill and teamwork to adjust to external factors like higher interest rates commodity price increases and supply chain disruptions and to.
A liver or commitments year in and year out our team rose to meet every challenge thrown at them in 2022, and they delivered record EBIT adjusted and a euro first it really sets us apart from our competition for example, GM led the U S industry in total sales and delivered the largest year over year increase in market share of any.
We alongside record a T. P. This reflects the strength of our product portfolio, including our clear leadership in full size pickups, and full size Suvs, great quality and improved availability.
Separately and G. M C delivered more than 1.1 billion full size pickups full size Suvs and midsize pickups in the U S, which is about 350000 units more than our closest competitor.
Our commercial fleet business is another area, where we gained considerable profitable market share.
The team has earned the business of more than 300 major commercial accounts over the last several years, which led to our best year for commercial deliveries since 2006.
The inflection point was driven by our investment in midsize and full size pickups, including including our capacity expansions to build more crew cabs and heavy duty pickups.
Our growing portfolio of babies will enhance our strong sales and share performance across the board because we're targeting the most popular segments at multiple price points.
This year, we will have nine E vs. In the market in North America, including dish every Chevrolet bolt EV and EV, which saw record sales in.
In fact, they were the best the only mainstream E vs. In the second half of the year and we plan to build more than 70000 this year for North America and other markets.
Quality is another area, where our team deserves recognition and.
In the latest J D power U S. Initial quality study jam improved while the industry went backwards not only did we get better jam and the Buick brand led the industry Chevrolet had six top rank vehicles and the corvette with the highest rate nameplate in the industry.
This commitment to satisfying customers and delivering industry, leading quality helped our eligible U S. Hourly employees earn record profit sharing totaling 500 million, which brings the three year total to $1 2 billion.
Looking ahead, we expect that 2023, it will be another strong year for G M.
We expect to deliver EBIT adjusted in the range of $10 5 billion to $12 5 billion, which reflects the operating performance similar to 2022. When you include the normalization of JM financials results and pension accounting.
Our guidance includes a total of 2 billion in cost savings in the automotive business over the next two years. The areas. We're focusing on include continuing to reduce complexity in all of our products and reducing corporate overhead expenses are across the board I do wanted to be clear that we're not planning layoffs, we are limiting our hiring to only the <unk>.
Strategically important roles and will use attrition to help manage overall head count.
On the revenue side of the equation, we expect the new products in key segments will continue to support profitable growth. This includes the Chevrolet Corvette E rate, our first electric Super car in the and the quickest production corvette in history.
Our new mid midsize Chevrolet, Colorado and G. M C pick up our new Chevrolet Silverado and GMC, Sierra heavy duty pickups, and the all new Chevrolet Trax, which is the best entry level Chevrolet Chevrolet we ever built we're especially excited about the tracks and so all of our dealers in North America Korea, and other international markets.
<unk> really stands out in a segment where customers are often forced to sacrifice for a low price, but the tracks as stylish roomy packed with safety technology and it's very affordable.
Combined city highway fuel economy is 30 miles per gallon and it's also more profitable than the model it replaces.
The third generation Chevrolet Montana pick up that we're launching in South America and Mexico. Starting next month follows the same formula.
On tennis designers inspired by products like the blazer and trailblazer and it will be offer customers more room, the best combination of fuel economy and performance in its segment and a comprehensive suite of safety features and an innovative reconfigurable bet.
So, let's talk about our growing EV portfolio.
At our November Investor Day, we took a deep into the products and supporting strategies that will help us achieve solid EBIT profitability in 2025.
And this is a breakout year for the Altium platform.
Production at our Altium cell joint venture in Ohio is on track and the plant in Spring Hill will open later this year.
He himself started hiring and training launch team members in October and they began equipment installation in November .
These plants will help us meet pent up demand for the Cadillac lyric GMC Hummer EV pick up and the brake dropped zero 600, and it keeps our other EV launches on track for example break drop continues to add new customers, including DHL, Canada and they are on track to achieve the goal of $1 billion in revenue for the year.
[laughter] excuse me and.
In April we launched the Silverado E. B work truck at factory zero for fleets. So we have opened up the order banks to begin converting.
Initial demand for more than 200 customers into firm orders for 2023 production with the first deliveries in the spring.
Interest is so strong that we believe demand will exceed supply in 2023 and into 'twenty four.
In the fall we will begin building the sold out Silverado RST first edition Chevrolet's flagship electric pickup, which will feature trailing capable super cruise or will staring at a multiple multi flex mitigate and up to 400 miles of range will follow with other retail focused models in 24, including the Silverado E B Trail boss.
This summer, we'll also see the launches of the Chevrolet Blazer E V and Equinox E D.
More than 40% of Blazers reservation holders are new to Evs.
The 60% who have owned an EV or hybrid most are either tesla customers or our loyal bolt EV and bolt customers. What's common to everyone is they want an all electric SUV that stylish and roomy with enough range and fast charging capability to make it their daily driver and they want it from a brand like Chevrolet with a proven record Oh.
Reputation for quality.
Actually he has many of the same attributes and then even more affordable package, which makes it unique and another growth opportunity for G. M.
More than one third of the customers interested in the Equinox C. B say affordability is their key consideration and the latest data says nearly half live on the east or west coast or in Texas, which are all growth markets for us.
This cadence of cell production and product launches combined with strong demand for the bolt EV and EV keeps us on track to produce 400000 Evs in North America from 'twenty to 'twenty two to mid 'twenty 'twenty four with the Altium platform volumes, increasing significantly in the second half of this year.
Our team in China is also scaling altium.
The Cadillac lyric, which was the first to launch in September and our dealers are very excited about it they delivered around 2400 units through December with about 80% of customers coming from other manufacturers.
Excitement is also building at Beulah, which is now building preproduction units of the Buick electrified and SUV inspired by the electric ex concept. It will be the first in an all new portfolio of Buick Evs.
All of these launches and initiatives will help us deliver our near term commitments, we made at Investor day, and we continue to make bold moves to drive profitable long term growth.
One example is our planned investment of more than $850 million in four U S plants to build the sixth generation of our small block V eight which will deliver even better fuel economy about a 5% improvement and double digit reduction in emissions and more performance for our truck and SUV customers.
We're also building an EV supply chain that is long term.
<unk> advantage for G M and a major source of new jobs, especially in North America.
For example, our first three joint venture sell plants are expected to create 11000 jobs in the U S with about 6000 in construction and 5100 and operations in Quebec, Quebec, our construction of our joint venture cathode active material plant is moving quickly and the structure should be complete mid year.
Texas MP materials has started construction of its first rare earth metal alloy and magnet manufacturing facility and they expect to begin delivering product to us late this year.
After several months of optimizing engineering and process parameters controlled thermal resources is now recovering lithium from its geothermal brine resource in California's Imperial County. This is an important step in completing the engineering design to recover lithium from geothermal brine at scale.
And Australia, Queensland Pacific Metals had secured all major approvals to begin construction of a new facility that will be an environmentally sustainable center for processing nickel and cobalt.
In December Altium cell signed a supply agreement with Posco chemical to support the source artificial graphite from Korea.
And today, we announced the largest ever investment by an automaker in battery raw materials.
Specifically, we are making an equity investment of up to $650 million in lithium Americas to help them develop the largest known lithium resource in the U S and the third largest globally.
Lithium Americas estimates that the potential output from this project could support annual production of up to a million Evs and create a thousand new jobs in construction and another 500 in operations.
Production is scheduled to start in the second half of 2026 and after our initial investment GM will have exclusive access to the lithium uptake in the first phase of the project. It's a landmark transaction and it certainly won't be the last major supply chain announcement for G. M. We continue to pursue strategic supply agreements and partnerships to further secure.
Our long term needs and drive investment in the United States and across North America.
As I said all of these launches and initiatives tie back to the roadmap we shared at Investor Day, we're executing our product strategy and ice and E. D that is designed to support strong pricing and grow our share, especially in evs by competing in multiple segments and price points.
We're expanding domestic cell production to drive EBIT growth.
And we are turning our <unk> supply chain into a powerful competitive advantage.
And we're maintaining strong financial results during a period of high investment, which includes taking a very strategic approach to managing our costs.
Next I would like to dedicate a few minutes to cruise because 2022 was a very significant year for them as well so Kyle I'm turning it over to you.
Thanks, Mary before I share more about our rapid scaling ahead of us for 2023, I'd like to take a minute to highlight what we accomplished in 2022.
You said last year was the year that fully driverless aves stringent transitioned from being a moon shot to reality with the cruise Robo taxi fleet, serving thousands of rides to real customers and a major U S markets and making its first fully driverless deliveries.
Started the year with just a handful of cars on the road and a service that was restricted to employees in January though we welcomed our first public riders in a few months later launched our commercial service the first ever in a major U S City.
And since then we're approaching 1 million driverless smiles is completed tens of thousands of driverless rods and run the largest driverless Avi operation in the World currently, peaking at 130 driverless Aves at the same time in our rental fleet.
We scaled responsibly safely and transparently, including the release of the most comprehensive safety reports in the industry. It outlines the key tenants and processes, we put in practice each day and make our products an obvious choice against a backdrop of tragedies on the road caused by human error.
We finished the year delivering on our promise of old one to complete our first commercial driverless rides in Austin and Phoenix.
And often we went from zero footprint to revenue generating rides in just a few months and this proves that our technology skills quickly to new regions with minimal modification for investment.
And I think at this point, it's fair to say that our focus on complex cities like San Francisco doing that first has paid off and we've opened the door to rapid scaling this year and beyond.
Looking ahead. This is a year when we really hone in on our key enablers for growth and profitability as they're amazing.
Low cost available everywhere.
We're going to expand our service in both existing and new markets and we'll have more to come on this soon and we're working to ensure that our writers have an experience that is not only better than traditional REIT hill, but the best transportation experience possible the.
The origin will go into volume production later this year with closed course testing underway right now and I can say after writing an autonomous origin myself I can say is that it's going to be hard to go back.
So a conventional vehicle format for an a b.
And as part of driving down costs, and increasing availability, you'll also see us to continue to improve our operational efficiency and scale and as an example, most recent 100000 driverless miles that we did clocked in eight times faster than the first 100000 miles that we did and we expect our rapid expansion to continue at similar rates this year and next.
Our operational efficiency also extends to how we spend our cash we continually look for creative ways to reduce expenses, including more recently, increasing our use of automation, increasing our cloud compute efficiency and reducing our R&D real estate footprint are.
Our major investments in lower cost vehicles, and hardware such as the cruise origin, better routing and pricing algorithms and operational efficiencies are going to drop costs and improve our unit economics as we scale to more cities drive up revenue and continue our march toward profitability.
We will be thoughtful and focused with our spending but we do intend to pursue the massive market opportunity in front of us by significantly increasing our commercial footprint and operating scale.
It's abundantly clear that we have a massive opportunity ahead of us and it's fully within our reach we will continue to go up after it with integrity and with urgency.
Thanks, Matt back to you.
Well, Thanks, Kau and now let me turn the call over to Paul Who's going to go into a detailed discussion of our results and our outlook.
Thank you Mary and good morning, everyone. Thank you for joining us.
I also want to start my remarks by thanking the entire G. M team. They remain focused on execution and consistently meeting our commitments no matter the obstacles and this is exactly what they achieved in 2022.
We generated full year revenue of $156 $7 billion, representing strong year over year growth of 23%. This.
This improvement was driven by the team overcoming numerous logistics challenges and collaborating with our supply chain to increased parts availability.
As a result, we grew wholesale volumes, 25% within our objective of 25% to 30% for the year.
We continue to face some supply chain and logistics issues, but overall things remain trending in the right direction.
For the full year, we achieved $14 $5 billion in EBIT adjusted nine 2% EBIT adjusted margins and $7 59 in EPS diluted adjusted.
These results were above the record profits, we achieved in 2021 and at the high end of our revised EBIT adjusted guidance range of 13, and a half to 14 $5 billion as December revenue and FX came in better than expected.
They also speak to the robust health of our underlying business, which allowed us to offset $5 $5 billion of commodity and logistics headwinds $2 billion of incremental E. D in gross spend and $1 billion lower GM financial results.
We generated adjusted free cash flow of 10, and a half a billion dollars, which allowed us to both reinvest in growth opportunities and return excess cash to shareholders in the fourth quarter, we repurchased an additional $1 billion of stock, bringing the 2022 total to $2 $5 billion and retiring 65 million shares.
We also Opportunistically early retired $1 billion of senior unsecured notes and the U S and half a billion dollars of unsecured term loans and GM international both maturing in 2023, our goal remains to be responsible stewards of your capital.
Getting into the fourth quarter results revenue was $43 $1 billion up 28% year over year, we achieved $3.8 billion in EBIT adjusted eight 8% EBIT adjusted margins and $2.12 of EPS diluted adjusted these results were driven by solid unit volume growth of 30% year over year.
The quarter and robust pricing.
North America delivered Q4, EBIT adjusted of $3 $7 billion up $1.5 billion year over year and EBIT adjusted margins of 10, 3%, primarily driven by higher volume and pricing, partially offset by mix and higher commodity and logistics costs.
Production in the second half of 2022 increase was strengthening supply chain and logistics, allowing us to improve dealer inventory for certain vehicles.
We ended the year with total dealer inventory, including in transit vehicles running around 50 days with a number of vehicles physically on dealer lots improving gradually but still approximately one third the level. We were at in mid 2019, supporting a favorable supply and demand environment.
I'd also like to share our perspective on inventory levels going forward, we're committed to actively managing production levels to balance supply with demand and are targeting to end 2023 with 50 to 60 days of total dealer inventory on a portfolio basis. This is down 20 to 30 days for mid 2019.
And as reliant on a continued improvement and logistical challenges the industry has faced.
Within this portfolio target park trucks are expected to run at higher levels, reflecting greater customer driven variation requirements and sedans and Suvs are expected to run at this range or lower.
Throughout the year sales seasonality production schedules and timing of fleet deliveries may take us out of this range from time to time, but that is the targeted range at which will manage.
We continue to see strong demand for our evs with inventory turning on the bolt EV and <unk> and less than 10 days, the GMC Hummer EV and Silverado shut.
Chevrolet Silverado E V a generated incredible demand and excitement leading to over 250000 combined reservations. We've also seen strong demand for the Cadillac lyric GMC, Sierra Evs as well order books for the model year 'twenty three lyric and Denali addition, one theory E V. We're quickly filled with a waitlist.
It is growing daily.
And when you add in the interest we've seen for the Equinox E V and the blazer EV over a quarter million hand raisers R. E V momentum will only build as we enter the largest segments in the world.
Jim International delivered Q4, EBIT adjusted of $300 million flat year over year as the team did an impressive job executing in a volatile environment.
This included $200 million of equity income in China down slightly year over year due to lower volume and pricing pressure, partially offset by cost actions.
EBIT adjusted in GM International excluding China equity income was $100 million up slightly year over year and profitable in all four quarters.
These consistent results consistent results were driven by favorable pricing and volume, partially offset by mix and commodity costs.
I want to take a moment and recognize the transformation. This team has executed over the last few years, achieving over $2 billion of EBIT adjusted improvements since 2018.
This was done by exiting unprofitable markets strengthening the portfolio leveraging our strong brands to significantly improve pricing and mix all while simultaneously driving down costs, they've done amazing work as a team and they should be.
Lauded for that.
GM financial delivered strong results with Q4, EBT adjusted of $800 million down $400 million year over year, primarily due to lower net leased vehicle income and higher cost of funds, partially offset by growth in the retail and commercial loan portfolios.
Used vehicle prices have declined but continue to run above the contract residual value with a Q4 off lease return rate below 10%.
Overall portfolio credit metrics continue to be strong in part due to a predominantly prime credit mix with net charge offs up slightly due to a moderation in credit performance, but still running below pre pandemic levels.
GM financial paid dividends of $1 $7 billion in 2022, and we expect similar dividends in 2023.
Corporate expenses were $400 million in the quarter flat year over year, as we continued to invest in growth initiatives and drive productivity.
Cruise expenses were $500 million in the quarter up $200 million year over year, driven mainly by modifications to equity awards, resulting in an accounting change in compensation expense.
Our optimism continues to grow based on the great progress crews made in 2022 and their plans for rapid scaling and operationalize a thing of the business will result in a modest increase in cost during 2023.
Let's now look towards 2023 for G. M overall, which I know is a key focal point for everyone.
While the environment remains uncertain at a high level I'm pleased to report that when you exclude the impacts of lower pension income and GM financial contribution we expect to drive consistently strong core auto operating performance. In 2023. This continues the trend we saw in 2022 and highlights the strong execution throughout.
The organizations.
Our plan is to continue to prioritize growth initiatives, such as crews and bright drop while investing to accelerate our transition to evs to take advantage of our vertical integration and local sourcing strategies.
Assuming a 15 million total industry volume and under current conditions, we expect EBIT adjusted in the 10 and a half to 12 and a half billion dollar range EPS diluted adjusted in the six to $7 per share range and adjusted automotive free cash flow in the $5 billion to $7 billion rage.
At G M financial the strong credit performance and historically high used vehicle prices resulted in extraordinary results over the last two years for 'twenty to 'twenty three we expect earnings to normalize in the mid 2 billion dollar range.
We expect volume and mix combined to be a slight tailwind with volumes up 5% to 10% year over year and mix, partially offsetting as we continue to increase production in the sedan small SUV and crossover segments, along with G M International volume growth.
Regarding North America pricing, while we anticipate incentives will increase from the record low levels. We saw in 2022, we expect this headwind to be partially offset by realizing the full year benefit of MSRP increases on many model year 'twenty three vehicles, particularly full size Suvs and trucks as well as pricing we.
To achieve on our new launches in 'twenty three.
We're also anticipating pricing actions outside North America, primarily to help offset FX headwinds.
Overall, we see commodities and logistics costs, as a slight tailwind or longer term steel and logistics contracts, which help protect us from higher market costs over the last two years renewed at higher rates in the second half of last year. This combined with the strategic initiatives to locally source battery raw materials is expected to largely offset that.
Tailwind, we're seeing from lower raw material prices on our spot and indexed exposures.
The $1 billion lower pension income impacts our fixed costs. This noncash item does not impact our core auto operating results, but will be a headwind when comparing year over year in 2023.
As Mary mentioned, we're very focused on keeping automotive controllable fixed costs in check despite our growth initiatives, which is why we were announcing a cost reduction program to take out $2 billion of costs over the next two years.
<unk> in our guidance is the expectation to achieve 30% to 50% of that in 2023 and the remainder in 2024.
This initiative is the result of several factors and demonstrates our continued commitment to closely manage our operations through this transformation and achieve north American margins in the 8% to 10% range through 2025.
We expect capital spend to be in the $11 billion to $13 billion range inclusive of $1 billion invested in our old T themselves JV, we continue to shift resources to evs with around 75% of our product specific capital dedicated to Evs and avs.
Even with the increase in capital spending we expect our adjusted free cash flow to remain strong in 2023.
As we said back in November we expect our clean energy tax credits will be a material tailwind for G. M overtime because of the work we've been doing on vertically integrating the supply chain.
For 'twenty to 'twenty, three we anticipate at least $300 million in EBIT adjusted benefit and expect this tailwind to increase significantly over the next few years as our cell production ramps in our North America focused supply chain comes fully into place.
We're closely monitoring the dynamic macro environment as well as customer demand to make sure. We're appropriately matching supply with demand we will take quick and decisive actions on both the supply and the cost side to actively manage the business.
What gives us confidence in our 2023 and long term objectives is the work we've already done to position ourselves for success repeatedly executing on our commitments and our ability to manage through a very challenging and dynamic environment with.
With a compelling E V and ice product portfolio long term supply chain commitments extraordinary manufacturing capabilities, our strong balance sheet and our amazing team I'm confident we'll continue to enhance the customer experience and deliver compelling growth on both the top and the bottom line.
Mary.
Okay. So with that I think we're ready to our operator to start taking your questions.
Thank you as a reminder to analysts we are asking that you limit your questions to one and a brief follow up so that we may get to everyone on the call. Our first question comes from the line of Dan Ives with Wedbush You May go ahead Sir.
Yes, thanks, and great quarter.
Can you just talk about supply in terms of that more batteries lithium perspective. It just seems like you guys are being much more aggressive making sure you have that supplies through 2020, but just talk about some of those absolutes and just giving you more and more confidence on the notion of the EV target you over the coming years.
Thanks.
Yeah. Good morning, Dan I'm I'm really proud of what the team has done you know our collaborative effort across supply chain finance business development.
Have led to a what I think is the strongest portfolio of battery raw materials going forward, we've fully secured all of our our battery raw materials through 2025, and as you can see from the announcement today with the investment in lithium Americas and the supply that will be able to get from the soccer paths, we're making rash.
Improvements and increases in our battery raw materials for 2026 and beyond.
That that as you know are core to our strategy. What we've done we've talked about being creative because what we're really trying to do is to create a portfolio of that is in it for the long term so whether it's a combination of spot price movements fixed price contracts.
Across the board, we're looking at at ways to creatively manage that and make sure that we're running it as a partnership we want our partners to be successful to especially in this space as we're developing new sources of these raw materials and this is such a great example of that partnership metallic mentality coming to fruition.
[laughter].
And then just a quick follow up you know obviously price cuts that we've seen absolute Ford, but doesn't assume a G. M. Just going down that path continues to hit on that concept here is that the big talk to investors.
Sure I you know when we look at our strong part of our product portfolio and the interest that we have at the prices that we've already announced we feel that we're well positioned are you know even going into the first months of the year, we've seen a very strong customer interest in our products and so we think right now where we are.
Price, where we need to be of course, we're going to monitor it and we will.
Make sure we remain competitive, but we really think with the strength of our product portfolio and what we have coming whereas we're positioned well.
Thanks Congrats.
Thank you thank you Dan.
Thank you and our next caller is rod Lache with Wolfe Research you May go ahead Sir.
Good morning, everybody I'm, sorry, just one wanted to maybe just first follow up on Dan's question.
Okay, I know based on the prices that you've laid out frequent ox blazer lyric that demand for the near term is much greater than your ability to supply.
But at the same time, you're only assuming double or low single digit EBIT margin for Evs by mid decade, and one of your peers is already at 20% gross and pretty healthy EBIT and their costs are still falling. So my question is whether there are changes that you're contemplating or that you could make to <unk>.
And on that benchmarking and generate similar margins any faster.
Hey, Rob it's Paul Thanks for the question and thanks for thanks for being on.
You know it's important to note that our you know as we look across the competitive landscape you know that competitor you referenced wasn't there in the beginning either right. There's a lot of scaling that we're doing across the board. So as we're running concurrent operations with ice and E V. There's obviously, some frictional costs on utilization et cetera.
We expect to be able to to scale as we go through this transformation I'm. The ice portfolio remains really strong, but we're also building the E V factories for the future and clearly the production levels that we see now and as we're ramping up our aren't there yet so we expect a tremendous level of operational synergies. We're also gonna.
<unk> the business aggressively I think the 2 billion dollar cost reduction program that we're announcing today is a is a strong testament to that and making sure that we're driving efficiencies as we ramp up those production. So it's not a I don't think a direct apples to apples comparison, but one that we're obviously aware of on the pricing.
From the demand is a really really strong for all of our vehicle programs are going forward and we feel good about our about where we're going and the trajectory that we're on.
Thank you and just secondly, you you referenced that $2 billion cost savings, what what does that mean for structural costs ex pension and and maybe related to that this this five 5% to 10% volume assumption that you've suggested would seem to imply that you don't see affordability.
Rates as a major impediment to growth at this point is am I interpreting that correctly or are you in fact, I'm, making more room for pricing with this with this cost saving.
Our assumption.
I would characterize it a little bit differently Rod. So you know success is going to be driven by when we look at our our fixed cost lines, you know being down $2 billion. That's that's what we're looking for across the board and we can get there and I think it comes across all areas of the business what I would say is where we're being prudent about.
What we see out in the macro environment, you know again, we continue to see strength and demand for our vehicles and strength in pricing.
But you know we want to make sure that we're driving efficiency, where we can and and and felt like this was the right time to be able to do that so we're gonna be measured in how we do it we're still focused on on the growth areas of the portfolio, but we recognize that there are ways that we can do things more efficiently and we expect to be able to drive that into a into <unk>.
Margin performance, we're not doing anything to prepare for a price war or we're not doing anything in anticipation of a recession I would say, it's prudent cost management and I'm, just being aware of what's around us.
That number is net Paul the $2 billion cost savings or is that a gross savings objectives.
Net of.
Well in other words is there are your structural cost expected to decline by $2 billion extension I guess, the simple way to ask it or is that are there other things that are increasing to offset that.
For our automotive business, we're expecting our structural cost go down $2 billion such that full stop.
Very very clear alright, thank you.
Thanks, Brad.
Thank you and our next caller is Mcgill from Citi. You May go ahead Sir.
Oh, great. Thanks, good morning, everyone and congratulations.
Just two questions on the outlook first can you maybe share kind of what you're expecting for all the company's revenue growth in 2023 to just kind of want to calibrate that would be a 12% CAGR for 2025, and secondly, I'm, hoping you could also maybe quantify that.
The drag this year from some of the investments like the bolt here, Brad, but it's the other investments you're making as well it sounds like.
While it doesn't show strong globally.
Let's rip off there's still a lot of investments still flowing since I was hoping maybe you could quantify that as well and maybe also just to provide a quick update on that.
Wallboard style graph as well.
So on your Oh, you were a little garbled, so let us let us try I'll take the last one the ramp at Altium and Lordstown, Ohio is on track going well.
On the you know the team is really ramping up really focused on quality and then the two.
Two out between LG energy solutions, and general Motors, working really well together, so I'm very pleased.
As I mentioned Spring Hill is also on track as is Michigan and those three plants are really what enables us to achieve the goals that we set for getting into 2025 and a million units on in in North America. So that's all going really really well from a and I think this the middle question you had was about.
With the investments that we're making L. T M a.
To quantify I think we've we've talked about what those investments are but theyre part of our capital program that we announced that you know last year this year and going into next year. So that's part of it and.
The first one was on the revenue growth of Utah, So I'll just.
Jump in and say that you know, we obviously experienced pretty significant revenue growth in 2022, driven by a 25% increase in wholesale we're not expecting that similar jump in production.
In 2023, so I'm, we're not giving any specific revenue guidance, but I would say that we would expect the growth rate to be below <unk> 20, a 2022 levels.
Okay.
Perfect. That's very helpful. Thank you.
Thank you.
And our next caller is John Murphy with Bank of America.
Good morning, everybody just a first question Mary on the eye.
Right and there's a lot going on with the interpretation and the final rules being set here you. Originally it looked like GM was going to be relatively advantage, which is the way that you were set up on production and your supply chain with some of the interpretations on the commercial vehicle side and the fact that lease vehicles may.
Fit the bill are being commercial vehicles. It may open the door to Europeans Chinese Japanese South Korean anybody shipping into the U S and still getting to 7500 dollar credit. So just curious what your thoughts are on that you know how you think the rule should be interpreted.
And could it be the chance if this loophole or change stays enforced that you might ship even from China.
And so our strategy all along for a very long time has been to build where we sell and I think when you look at the work that we've gone with the battery plants in this country and all of this supply investments that we've made yeah that helps us have on I'll say supply chain resiliency and more certain it gives us the opportunity.
But some of the deals we've made to I think have a better cost advantage. I mean also you know also it's good for the country and creates jobs and that's what I was meant to do and so we're waiting to see what the final rules and are going to be from Treasury I think regardless of some of the issues still to be clarified from a lease perspective.
General Motors is still and it you know going to benefit greatly because if you look at the production tax credits from cell and module perspective, and then where will be from a battery component and critical minerals are we think we're well positioned again the deal that we announced today are the partnership equity investment I think continues to ramp.
For us it so yeah, we're waiting to see what is going to be but you know our focus is on having a strong supply chain here, obviously, when we get the final rules will look like because we do have a global footprint, but I think we're focused on supporting our North America production, primarily from North America.
And to a certain extent from Korea.
But again, we're waiting to see but I think you have to go back to what the intent of higher rate wise.
Yeah, I agree with you and just one follow up you mentioned fleet sales as an opportunity fleet sales have been very low for the past couple of years I mean fleets have been very under saturated or not satiated at all on their demand function and now that you know supply is becoming more normal you know how big a part of a recovery.
Do you think they could have in the market just maybe in general where where they've been for T. M. In 'twenty, one 'twenty, two and where do you think they might be in 'twenty, three and you know how big a part of that play.
And sort of the development of Evs profitably.
The fleets in the early stages of the EV ramp.
Well I think it's an important part and I think when you look at bright drop it's a true guess all growth opportunity for US I think when you look at the Silverado E beam work truck I think that's going to be very important as well and so you know we're going to make sure that as we grow our fleet commercial rental business. It has a appropriate profitability.
Profile are not you know from the days 10, 15 years ago, when we really step back from that but I think you know, whether it's what we announced with Hertz and and the number of customers that we have interested you know every company is working to reduce their carbon footprint and so the evs that are we have just to help support that I think are going to be very strong and I think we're gonna have a good portfolio.
I think that allows us to grow, especially in areas, where we weren't involved in the past E. Visa is a is a fresh start there.
I'm sorry, if you were to think about that 5% to 10% increase in wholesale volumes would that be dominated by by fleet I'm just because I mean, everybody is obviously very concerned about the retail customer at the moment, but really neglecting that you know a quarter of this market is.
Traditionally fleet and it's you know 10% to 15% the last couple of years. So I mean, there's a potential doubling in fleet volume they could come in the market at large.
Large and maybe be very supportive of that wholesale increase I mean, I just could you give us some numbers where thoughts on how supportive that could be in that 5% to 10% wholesale increase.
I think you know when we talk about a 5% to 10% increase we're talking across the board you know when you look at the EV launches that we have the fact that we have brand new us Chevrolet Silverado and GMC Sierra heavy duty pickups are the fact that we have the new mid size, which is just an outstanding midsize truck with the Colorado Chevrolet Colorado in the GNC can.
As well as the track so we think from an ice perspective, we have an opportunity we think from clearly the E V ramp up that we're going to have this year that it's a part of it and some of that both of those exciting products will be in the fleet business. So I think it's a it's it's a both answer John not a single one or the other thank.
Thank you very much.
Thank you our next caller is Ryan Brinkman with J P. Morgan.
Hi, Thanks for taking my question with regard to the 300 million tailwind you are assuming from clean energy tax credits in 'twenty three I heard you say this could grow substantially over time, but just wanted to check in and try to dimension that potential are you, assuming a benefit of $35 per kilowatt hour or $45 in our U.
In a position yet to share or have you resolved internally with your JV partner. How these tax benefits are expected to be shared between G. M and L. G. I'm just trying to dimension of the opportunity as you know 1 million vehicles in 2025 times $45, a kilowatt hour 35, and then to understand.
Whether we need to split that about 50 50 or if there's some other map we need to take into account.
Yeah, So Ryan a lot of detail in your question I'll take you back to what we said at Investor Day was we expect EV benefits tax benefits to be 3500 $5500 per vehicle the $300 million in 2020. Three is obviously a function of our ramp rate of our our cell production were not good.
To go into any details on on how that works across the board. It's our our best expectation of where we're going but land is at least $300 million this year and and ramping up rapidly as our as our production increases across our LG implants.
Okay, great. Thank you.
Thank you. Our next caller is James Picariello with BNP Paribas you May go ahead Sir.
Hi, everyone.
Just on back to G. M D V pricing relative to the market in North America.
How would you assess jams price competitiveness given the latest moves by competitors.
It was as though demand in your order books are quite full but just given the you know the.
Recent competitive responses by others would be curious to get your take you know whether your GM sees the opportunity to reposition or real said the IRA defined a MSRP catch to you as well to consider thanks.
Yeah.
Sure well I think that's the strength of what general Motors is planning to launch this year. Many of the products that we have are going to be below the caps, because where we have a full portfolio of vs. At multiple price points. When you think about the equinox T V. The blazer E V and and then the silverado as as well as the lyric I think we're really well positioned.
And these are brand new products into the marketplace that we have really strong interests. So yeah. That's why both Paul and I feel that right now based on the interest and the fact that you know the pricing that we put out even before the IRA came out with very appropriate where you know, we're going to and because of the strength of the altium platform that's what any.
<unk> us to do that along with the fact that we're you know I had from most of the I'll say that our traditional Oems and getting battery salads produced in this country. So I think if you look the strategy, we've been executing we're well positioned and the strength of our product portfolio. I think is what is giving us the cop.
<unk> to where we sit right now with feeling that we priced appropriately.
Understood and then just within the 400000.
Cumulative production target by the first half of next year can you just dimension what portion of that would be you know your EV truck platform.
I you know, we haven't provided that kind of specific analysis, but the fact that you know shepherd that well the hammer to begin with and that will ramp significantly this year and even more next year.
Where we're completely sold out and then the Silverado that we think we're going to the Silverado Dean I'll work tracking and they are they are T. Cons at the towards the end of the year I mean, I think all of those are very significant products that are going to do very well, but we're not giving specific specific numbers.
Understood. Thanks.
Thank you Mark Delaney with Goldman Sachs. You May go ahead.
Good morning, and thank you very much for taking the question.
Jim considering changes to its longer term battery plans for North America is there have been media reports recently, suggesting both of Gm's, considering adopting cylindrical cells and also the G M and LG may not partner on a fourth battery plant.
So so first you know one of the strong points of the Altium platform is that it's chemistry agnostic and it can take pouch prismatic or cylindrical cells and so we can have a look to what it's going to be the right battery for the specific vehicle from a performance perspective, so we have that complete flexibility.
We have very important work going on with LG energy solutions. They are an incredibly important partner to us.
And we're working well together as we mentioned with the launch of the Orient or excuse me. The Lordstown plant and then spring Hill and then the plant in Michigan. So we're working well together and we are going to need a fourth plan and more plants beyond that and as we have those details to share we will we will share them, but right now.
There's nothing that's really changed in our plan to have battery manufacturing capability here in the U S and and broadly in North America as well.
That's helpful. Thank you and my second question was on cruise and congratulations on the expansion into the new geographies last year Oh did you.
You think about 2023, and how you're planning to expand because your job rate a bit more on your expansion targets are for cruise and any.
Any potential changes in San Fran given the recent feedback from the local government there. Thank you.
Karl do you want to take that one.
So we will be expanding in 2023, several new cities, but our current focuses on expanding our driverless service in San Francisco as well as in Phoenix, and Austin falling our initial driverless launches their initial deployments in Phoenix and Austin were modest and are we want to expand those are very quickly and of course by doing that.
Spanish business.
New cities I'm using this repeatable playbook we've developed.
You know across safety and operations.
Some of the technical features the barriers still launching in new cities and drive growth in existing markets are much smaller because of that upfront work, we've put into solve those really difficult barriers to the scale first.
And I think your second question was on the that's FMT.
M T a comments about our.
California public utilities.
Commission permanent a permit to expand and I just want to say there that our safety record as publicly reported and includes having driven millions of miles and an extremely complex urban environment with zero life, threatening injuries or fatalities and we're really proud.
Of that record and also that the overwhelming majority of public comment on our permit application, including advocates for the disability community small businesses and local community groups support expanding our fleet and San Francisco.
Thank you.
Yeah.
Thank you our next caller is Adam Jonas with Morgan Stanley You May go ahead Sir.
Hi, Thanks, everyone I just wanted to follow up on Mark's question about the about all Tam in the form factor.
I appreciate that there's room for flexibility in your you've mentioned in the past married up the all time system was was kind of form faster factor in chemistry agnostic, but if you did it change to cylindrical or the 46 80 form factor as reported and some of these sources, what what kind of thing would drive such a change I'm not saying that you have made there.
But it seems like it is a potential there is potential to do that what kind of would it be driven by safety or cost and kind of how difficult would it be to make that flip.
So first of all I'm not going to comment on speculation.
And by the way Hello, but we and you know we're looking really at performance I mean, one of the things when you look at with the way that you can figure the packs within Altium. The difference that the south is is a lot having to do with performance and how do we get the Max Max benefit again, our team has been working Ah and looking.
All three cell form factors for a while and in fact today from a prismatic perspective, that's what's in they are deep.
<unk> the Altium based vehicles that we're launching like the lyric and the Buick in China. So we've all along I've been looking at all three form factors.
Thanks, Marion I just have a poll for Paul on the pricing you mentioned.
Higher incentives, but offset by the increase in the step up in the MSR piece I just want to make sure. We're interpreting that correctly that those are kind of a wash that you think one more or less compensates for the other to leave the pricing element more or less stable from from 'twenty two to 'twenty three is.
That is that the correct way to think about it broadly I know I know, it's a volatile environment, but just wanted as a starting point is that the message a wash.
Yeah, I would say order of magnitude, yes, you know the pricing increases were not contemplating a big ones. This year, rather the annualized <unk> of what we did last year across the board. We have some new launches that that we're kind of come in we won't get specific on that.
We are assuming that there's going to be you know some said steady increase normalization of incentive that's where we said we're trying to plan conservatively. What I'll tell you is January month has come in really really strong a continuation of what we saw in December and were just watching the environment around us.
But you know we still feel good about where demand sits.
Thanks, Paul Thanks Mary.
Thanks, Adam.
And our next caller is Chris Mcnally with Evercore.
Thanks, So much I just wanted to revisit raw.
Ryan's question on the on the Io, a $300 million and thanks, so much for giving that that that that number.
Just our math is that that would be something like 10 to 12 gigawatts from the two facilities in Ohio, and Tennessee, and without sort of confirming the explicit math can we can we just talk about maybe how long it may take to ramp.
I'll and then obviously, Tennessee is only starting at the end of this year, but I think they were about 40 gigawatts. Each so it seems like there was a material amount to grow is that capacity growth, but just anything you could talk about the timeline on Ohio, and Tennessee Giga.
Yeah. So you know the the plan was we we started in fourth quarter and we said a couple earnings calls ago that Ohio would add 20% more capacity every quarter, so to be fully up and running by the end of the year. That's the plan is still on track I think you'll see us follow a similar but maybe a little faster and springhill because we already have all.
The experience and we actually have people from spring Hill.
The Ohio facility right now to make sure we have a smooth start up there so and and you know we've talked about the plant is roughly you know around 37 40, So I think you're in the right ballpark, but that's how those plans for ramp will ramp up.
Perfect. That's super helpful and just the follow on just from a modeling perspective should we assume that 300 flows through EBIT or is there.
Any benefit that also is going to start to benefit taxes as well. It just does it's more where we're going to see the benefit of of IRA. If it's only an in and EBIT or if there is actually a some tax component as well.
We think that there'll be some that kind of flows through both you know our our deck has a guide on a on a lower tax rate of 16% to 18% for 2023.
That's largely driven by R&D credits and in semi are a we're not getting any specifics into the breakout between them until we see the regs written then we get more definition around it but we do expect that there are likely going to be components in both areas.
Okay. Thanks, so much bolt.
Thank you and our last question comes from the line of Emmanuel Rosner with Deutsche Bank.
Alright. Thank you so much on two fairly quick ones.
First one is back on on pricing and I think you said you were trying to be conservative in your assumptions. So was just hoping you could be a little.
It's more specific or explicit around what sort of incentive environment sure.
You're assuming.
Because I understand the MSRP going up just not super clear from the outside you know what sort of a macro or industry environment, youre, assuming and the impacts on PEO.
On the overall industry incentives.
Yeah, Hey, Emmanuel so nothing specific to guide on in terms of our our forward incentives beyond you know we we we do expect over time for incentives to you know increase from the sort of record low levels that we've seen a we've seen slight upticks, but I would say that's largely more of a fun.
Should have interest rates than it is waning demand.
Or inventories inventories still remain very tight we expect that to be the case, especially grounded inventory at dealers.
Through 2023, so while we see some normalizing of other incentives nothing nothing more specific than that but we'll guide to.
Okay. So then just affirming is on in terms of macro environment. If that's okay.
You're assuming some sort of recession in the second half.
Impact on sort of the consumer demand for vehicles or are you assuming sort of current.
Current conditions continue and then I just have a follow up on free cash flow.
Yeah. So again you know this is a situation we're watching carefully about what we see from a new vehicle consumer is a consumer as Paul said he you know even in the month of January we've seen it to be very strong. So we're going to continue to moderate art to monitor that and take out unnecessary shops that are where we're going to watch and learn as we go through.
The year, we told you at Investor Day, we're gonna be conservative as we plan. This year, but also positioning ourselves to take advantage of whatever the market ends up being and we're still on that plan executing but again from our early read in January it's pretty positive.
Okay. Thanks for that and then just quickly on <unk>.
Free cash flow can you just provide a high level walk between the 2022 strong performance in 2020.
'twenty three because obviously the AR due to sort of the elements you would exclude that to make them comparable.
Pension income.
This is noncash right. So yeah walk between 'twenty to 'twenty two it would be helpful.
Yeah, just really high level $10 5 billion in 2022 at the midpoint. We've got a couple of billion dollars more of Capex going forward and you know probably not as much of a working capital build as we saw in 2022, that's high level, how do you get to the two.
The five to seven.
Great. Thank you so much.
Thank you.
Okay, I'd like to turn the call over to Mary Barra for her closing remarks.
Great well, thank you Michelle and thanks to everyone for your questions. You know we have general Motors are really excited about the opportunities ahead of us and twenty-three, especially with all the new vehicles that we're launching Chevrolet and GMC will build on their leadership in pickup trucks and Chevrolet is giving customers around the world compelling entry level products to and this is the breakout.
Ear for the Altium platform. So when you look at the products will have by the end of this year again, they're all outstanding.
Again, we expect another year of strong financial results and our confidence reflects the determination of the G. M T.
The GM team the strength of our vehicles were delivering and the valuable relationships, we've developed with our dealers our suppliers and our other partners. So I hope you see with what we did in 'twenty, two and what we're indicating we're gonna be able to achieve in 'twenty three that we continue to have your confidence and we look forward to.
Continuing to telling you more about this year as we go forward. So I hope everyone has a great rest of day.
That concludes today's conference call. Thank you for joining.
Yeah.