Q3 2023 General Motors Co Earnings Call
Speaker 1: Good morning and welcome to the General Motors Company third quarter 2023 earnings conference call. During the open remarks all participants will be in a listen only mode.
Good morning, and welcome to from General Motors Company third quarter 2023 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. We are asking analysts to limit their questions to one and a brief follow up.
Speaker 1: After the opening remarks, we will conduct a question in the answer session. We are asking the ANR to limit their questions to one and a brief follow-up.
Speaker 1: To ask a question, press star then one on your telephone keypad to join the queue. To withdraw your question, press star then two. As a reminder, this conference call is being recorded Tuesday, October 24, 2023. I would now like to turn the conference over to Ashish Kohli, GM's Vice President of Investor Relations. Thanks, Amanda.
You ask a question press Star then one on your telephone keypad to join the queue.
Draw. Your question Press Star then two as a reminder, this conference call is being recorded Tuesday October 24 2023.
I'd now like to turn the conference over to Ashish Kohli, Gm's, Vice President of Investor Relations.
Thanks, Amanda and good morning, everyone.
Speaker 2: We appreciate you joining us as we review GM's financial results for the third quarter of 2020.
We appreciate you joining us as we review Gm's financial results for the third quarter of 2023.
Speaker 2: Our conference call materials were issued this morning and are available on GM's investor relations website. We're also broadcasting this call.
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.
Speaker 2: Joining us today are Mary Barra, GM's Chair and CEO , and Paul Jacobson, GM's Executive Vice President and CFO .
Joining us today are Mary Barra, Gm's chair, and CEO , and Paul Jacobson, Gm's Executive Vice President and CFO .
Speaker 2: Dan Burse, President and CEO of GM Financial, will also be joining us for the Q&A portion of the call.
Dan burst president and CEO of GM financial will also be joining us for the Q&A portion of the call.
Speaker 2: On today's call, management will make forward-looking statements about our expectations.
On today's call management will make forward looking statements about our expectations.
Speaker 2: These statements are subject to risks and uncertainties that could cause our actual results to differ materially.
These statements are subject to risks and uncertainties that could cause our actual results to differ materially.
Speaker 2: These risks and uncertainties include the factors identified in our filings with the SEC.
These risks and uncertainties include the factors identified in our filings with the SEC.
Speaker 2: Please review the Safe Harbor Statement on the first page of our presentation as the content of our call will be governed by this language. And with that, I'm delighted to turn it over to the moderator.
Please review the Safe Harbor statement on the first page of our presentation as the content of our call will be governed by this language and with that I'm delighted to turn the call over to Mary.
Speaker 3: Thanks Ashish and good morning everyone. Thank you for joining us. I'd like to begin by thanking the entire GM team for once again delivering very strong results, including $3.6 billion of EBIT adjusted in the third quarter.
Thanks, Ashish and good morning, everyone and thank you for joining us I'd like to begin by thanking the entire GM team for once again, delivering very strong results, including $3 $6 billion of EBIT adjusted in the third quarter, our supply chain team and logistics partners in North America have done great work in improving the flow of vehicles from our assembly plants to our dealers.
Speaker 3: Our supply chain team and logistics partners in North America have done great work improving the flow of vehicles from our assembly plants to our dealers.
Speaker 3: Our US dealers have helped us outperform the market from a share standpoint with strong APPs and essentially flat incentives. We were profitable in every region.
Our U S dealers have helped us outperform the market from a share standpoint, with strong ATP and essentially flat incentives.
We were profitable in every region, including China.
Speaker 3: And GM International is on track to deliver significantly higher EBIT in 2023 compared to a year ago, thanks to our operating discipline and the lift we're getting from successful vehicles like the Chevrolet Montana and the Trax.
And GM International is on track to deliver significantly higher EBIT in 2023 compared to a year ago. Thanks to our operating discipline and the lift we're getting from successful vehicles like the Chevrolet Montana and the tracks.
Speaker 3: I'd also like to recognize our teams in Canada and Korea. They reached new competitive labor agreements and ratified them with little or no disruption to our operations.
I'd also like to recognize our teams in Canada and Korea, They reached new competitive labor agreements and ratified them with little or no disruption to our operations.
Speaker 3: Because we are in a highly competitive cyclical industry, we have been laser focused on four fundamentals to strengthen our position. They are delivering vehicles that customers love and are willing to pay for, a competitive cost structure, marketing efficiency and incentive discipline, and matching production to demand.
Because we are in a highly competitive cyclical industry, we have been laser focused on four fundamentals to strengthen our position.
They are delivering vehicles that customers love and are willing to pay for.
Competitive cost structure marketing efficiency and incentive discipline and matching production to demand.
Speaker 3: Driving these fundamentals has been and will continue to be the foundation of our consistently strong earnings.
Driving these fundamentals has has been and will continue to be the foundation of our consistently strong earnings.
Speaker 3: For example, GM has now led the industry in full-size pickup sales for three consecutive years and we have led full-size SUVs for nearly 50 years.
For example, Jim has now led the industry in full size pickup sales for three consecutive years and we have led full size Suvs for nearly 50 years.
Speaker 3: Our overall incentives have gone from consistently above the industry average to consistently below.
Our overall incentives have gone from consistently above the industry average to consistently below.
Speaker 3: And we are on track to exit 2024 with fixed costs that are $2 billion lower net of increased depreciation and memorization than 2022.
And we are on track to exit 2024 with fixed costs that are $2 billion lower net of increased depreciation and amortization in 2022.
Speaker 3: And we're launching several new SUVs this year and next year that will be more profitable than the models they've replaced.
And we're watching several new Suvs this year and next year that will be more profitable than the models they replace.
Speaker 3: We're also taking immediate steps to enhance the profitability of our EV portfolio and adjust to slowing near-term growth. These steps include moderating the pace of our EV acceleration in 2024 and 2025 to maintain strong price.
We're also taking immediate steps to enhance the profitability of our portfolio and adjust to slowing near term growth. These steps include moderating the pace of our acceleration in 2024 and 2025 to maintain strong pricing.
Speaker 3: The new launch timing at Orion Assembly also enables us to make engineering and other changes that will make the trucks more efficient and less expensive to produce and therefore more profitable.
The new launch timing at Orient Assembly also enables us to make engineering and other changes that will make the trucks more efficient and less expensive to produce and therefore more profitable.
Speaker 3: Let's dig a little deeper into the steps we're taking with our ice portfolio to keep margins and EBIT strong during a very competitive environment. Over the last several years, we have bolstered our position in high margin segments, including full size pickups, full size SUVs, and large luxury SUVs.
Let's dig a little deeper into the steps, we're taking with her ice portfolio to keep margins in Ebs EBIT strong during a very in a very competitive environment.
Over the last several years, we have bolstered our position in high margin segments, including full size pickups full size Suvs and large luxury Suvs.
Speaker 3: We did this by managing capacity to meet demand, expanding the range of premium trim series that we offer, and with innovations like super cruise and the multi-pro tailgate and factory lifted trucks. And we're not going to let up. As I said, we're launching a wide range of SUVs that will have automotive gross margins up five points higher, up to five points higher than the models they replace.
We did this by managing capacity to meet demand expanding the range of premium trim series that we offer and with innovations like Super cruise and the multi probe tailgate and factory lifted trucks.
And we're not going to let up.
As I said, we're launching a wide range of Suvs that will have the automotive gross margins up five points higher up to five points higher than the models they replace.
Speaker 3: The first two are the Chevrolet Tracks and Buick Investor. These affordable small SUVs are rapidly gaining market share and more than 50% of the Chevrolet Tracks customers are new to GM. Then in the first half of 2024, we begin launching the new Chevrolet Traverse, GMC Acadia, and Buick Enclave, followed by the next generation of the ICE Chevrolet Equinox and GMC terrain, which begin launching mid-year.
The first two are the Chevrolet Trax, and Buick and best jobs. These affordable small suvs are rapidly gaining market share and more than 50% of the Chevrolet Trax customers are new to G. M.
Then in the first half of 'twenty 'twenty four we began launching the new Chevrolet traverse GMC, Acadia and Buick enclave Volte.
Followed by the next generation of the ice Chevrolet Equinox, and GMC terrain, which began launching midyear.
Speaker 3: Here are the profit drivers. First, they're in growth segments. The larger SUVs compete with in a segment that we expect to grow by 25% to 3 million units over the next three years, and the smaller SUVs compete in the industry's largest segment, which we expect to grow 9% to 3.4 million over that same period.
Here are the profit drivers first they're in growth segments. The larger Suvs compete within a segment that we expect to grow by 25% to 3 million units over the next three years and the smaller Suvs compete in the industry's largest segment, which we expect to grow 9% to $3 4 million over that same period.
Speaker 3: Second, they're outstanding products. They offer more comfort and interior roominess, better cargo space, enhanced safety features, and innovative technologies, including supercruise, which will be a segment exclusive in the disfers.
Second they are outstanding products, they offer more comfort in interior roominess better cargo space enhanced safety features and innovative technologies, including Super cruise, which will be a segment exclusive in the first.
Speaker 3: And third, we developed them efficiently. We have simplified the powertrain lineups where we're using 60% of the parts and we reduce build combinations by 80 to 90%.
And third we develop them efficiently we have simplified the powertrain lineups, where we're using 60% of the parts and were reduced build combinations by 80% to 90%.
Now, let's look at <unk>, our commitment to an all EV future is as strong as ever and we continue to plan to have annual EV capacity of 1 million units in North America as we exit 2025.
Speaker 3: Our commitment to an all-EV future is as strong as ever, and we continue to plan to have annual EV capacity of 1 million units in North America as we exit 2025.
Speaker 3: This will allow us to participate in the EV market upside, but we are also scaling away that's consistent with the operating discipline I mentioned. Over the course of 2023, our battery cell manufacturing joint venture in Ohio has made tremendous progress. The plant will be running at full capacity next month as planned, and they are targeting the production of 36 million cells this year. Next year, production in Ohio is expected to rise to 100 million cells.
This will allow us to participate in the EV market upside, but we are also scaling a way that's consistent with the operating discipline I mentioned.
Over the course of 2023, our battery cell manufacturing joint venture in Ohio has made tremendous progress the plant will be running at full capacity next month as planned and they are targeting the production of 36 million cells. This year next year production in Ohio is expected to rise to 100 million cells.
Speaker 3: At the same time, our battery module constraint is getting better, which helps us more, or helped us more than double the ultimate platform production of the third quarter compared to the second quarter. And we are now in the process of installing and testing our high capacity module assembly lines, which will continue into the first part of next year. We are currently challenged getting some of the critical equipment components, but we have a dedicated team working with our suppliers to resolve all issues and get these lines running at rate.
At the same time, our battery module constraint is getting better which helps us more are helped us more than double the altium platform production in the third quarter compared to the second quarter.
And we are now in the process of installing and testing our high capacity module Assembly lines, which will continue into the first part of next year.
We are currently challenge getting some of the critical equipment components, but we have a dedicated team working with our suppliers to resolve all issues and get these lines running at rate.
Speaker 3: By mid-year, we expect that modules will no longer be a constraint and we will be focused on building to customer demand rather than setting new production targets.
By midyear, we expect that modules will no longer be a constraint and we will be focused on building to customer demand rather than setting new production targets.
Speaker 3: Software is another critical piece of the strategy and Mike Abbott and his team are actively engaged in the early assessment in each of these launches. Since he joined our team this summer, Mike has been moving aggressively to build a world class software organization to fully execute our software-defined vehicle strategy while accelerating our vision.
Software is another critical piece of the strategy and Mike Abbott and his team are actively engaged in the.
Early assessment in each of these launches since he joined our team. This summer Mike has been moving aggressively to build a world class software organization to fully execute our software defined vehicle strategy, while et cetera, accelerating our vision.
Speaker 3: We now have executives with experience from Apple, Google, Microsoft, Amazon, Uber, and other leading tech companies heading up our human interface design group, our product software and services group, our software engineering, and our software strategy group.
We now have executives with experience from Apple, Google, Microsoft Amazon Uber and other leading tech companies heading up our human interface design group, our products software and services group, our software engineering and our software strategy group.
Speaker 3: The team is optimizing the software strategy and fine-tuning the plans for our new vehicles to help make sure we execute with the highest possible quality and customer experience while positioning the company to drive significant revenue growth from subscriptions in the future.
The team is optimizing the software strategy and fine tuning the plans for our new vehicles to help make sure we execute with the highest possible quality and customer experience, while positioning the company to drive significant revenue growth from subscriptions in the future.
Speaker 3: To give the team time to do this, we'll move out the launches of three products, the Chevrolet Equin X EV, the Silverado EV RST, and the GMCCR EV Denali, each by only a few months. This will ensure their success. We believe our products will succeed and the costs are coming out quickly. For example, our cost per cell has already decreased 45% over the last 12 months as production volume in Ohio has ramped out.
To give the team time to do this will move out the launches of three products the Chevrolet Equinox EV the silverado.
E V R S T and the GMC Sierra EV Denali each by only a few months this will ensure their success.
We believe our products will succeed and the costs are coming out quickly for example, our cost per sale has already decreased 45% over the last 12 months as production volume in Ohio has ramped up.
Speaker 3: We also expect to achieve significant margin improvement on our battery electric trucks through engineering efficiency and improvements, supplier cost, and reducing order complexity, buildable combinations, and manufacturing complex.
We also expect to achieve significant margin improvement on our battery electric trucks through engineering efficiency and improvements.
Supplier cost and reducing order complexity complexity buildable combinations and manufacturing complexity.
Speaker 3: Another key launch for us is the next generation Chevrolet Bolt EV.
Another key launch for US is the next generation Chevrolet bolt EV.
Speaker 3: I know there has been some speculation in the market as to why we are developing a new bold event.
I know there has been some speculation in the market as to why we are developing a new bolt EV.
Speaker 3: Our strategy to build is to build on the tremendous equity we have in the brand and to do it as efficiently as possible.
Our strategy to build is to build on the tremendous equity we have in the brand and to do it as efficiently as possible.
Speaker 3: Our prior portfolio plans included several newly designed vehicles in the entry-level segments and a capital commitment of $5 billion over the next several years. However, by leveraging the best attributes of today's Bolt EUV, as well as Altium, our latest software, and NACS, we will deliver an even better driving, charging, and ownership experience with a vehicle we know customers love.
Our prior portfolio plans included several newly designed vehicles in the entry level segments, and a capital commitment of $5 billion over the next several years how.
However by leveraging the best attributes of today's bolt EV as well as Altium, our latest software and NACS, we will deliver an even better driving charging and ownership experience with the vehicle we know customers love.
Speaker 3: In the process, we are saving billions in capital and engineering expense, delivering a significantly cost-improved battery pack using purchased LFP cells. We're getting to market at least two years faster, and our unit costs will be substantially lower. This will be our first deployment in North America of LFP technology in the LTM platform.
In the process, we are saving billions in capital and engineering expense delivering a significantly cost improve battery pack using purchased L. S T cells.
We're getting to market at least two years faster and our unit costs will be substantially lower.
This will be our first deployment in North America of L. S T technology and the LTM platform.
Speaker 3: So now let's turn to Cruz. Since the early days of our company, GM has been defining the future of transportation, and today that's more true than ever with Cruz. In February , we celebrated Cruz becoming the first company to eclipse 1 million driverless miles. Fast forward to today, and they have logged more than 5 million miles. And they continue to expand. Just last week, we announced that GM and Cruz are working with Honda to bring driverless rides to Tokyo in early 2026.
So now let's turn to cruise since the early days of our company GM has been defining the future of transportation and today, that's more true than ever with crews and February we celebrated crews, becoming the first company to eclipse 1 million driverless smiles.
Fast forward to today and they have logged more than 5 million miles and they continue to expand just last week, we announced that GM and cruise are working with Honda to bring driverless rides to Tokyo in early 2026, well.
Speaker 3: We'll do that with our origin, the world's first ever vehicle purpose built for autonomous driving on public roads.
We'll do that with our origin. The worlds first ever vehicle purpose built for autonomous driving on public roads.
Speaker 3: As crews continues to push the boundaries of what AV technology can deliver to society, safety is always at the forefront and this is something they are continuously improving.
As cruise continues to push the boundaries of what Avi technology can deliver just society safety is always at the forefront and this is something they are continuously improving.
Speaker 3: In fact, it's our zero-crash vision that keeps us pressing forward, and we know from the data that Cruise AVs are involved in far fewer collisions than human drivers.
In fact, it's our zero crush vision that keeps us pressing forward and we know from the data that cruise avs are involved in far fewer collisions than human drivers.
Speaker 3: This remains the focus of their ongoing discussions with government partners and regulators at the federal and state level.
This remains the focus of their ongoing discussions with government partners and regulators at the federal and state levels.
Speaker 3: And now let's talk about strikes. We know we have ongoing strikes at some of our U.S. facilities. I know many of you are concerned about the impact of higher labor costs on our business in the U.S. Let me address this head on. I'll start with the macro environment, and then I'll cover how we're positioning the business for success.
And now lets talk about strikes we know we have ongoing strikes at some of our U S facilities. I know many of you are concerned about the impact of higher labor costs on our business in the U S. Let me address this head on.
I'll start with the macro environment, and then I'll cover how we're positioned to positioning.
Positioning the business for success.
Speaker 3: It's been clear coming out of COVID that the wages and benefits across the US economy would need to increase because of inflation and other factors.
It's been clear coming out of Covid that the wages and benefits across the U S economy would need to increase because of inflation and other factors.
Speaker 3: This has been playing out in many sectors for some time now. And I believe that the offer we have on the table with the UAW is better than the contracts that employees at companies like Caterpillar, UPS and Kaiser Permanente have ratified.
This has been playing out in many sectors for some time now and I believe that the offer we have on the table with the UAW is better than the contracts that employees at companies like Caterpillar UBS and Kaiser Permanente have ratified.
Speaker 3: The current offer is the most significant that GM has ever proposed to the UHFU. The majority of our workforce will make $40.39 per hour, or roughly $84,000 a year in salary by the end of this agreement's term.
The current offers the most significant that GM has ever proposed to the UAW. The majority of our workforce will make $40 39 per hour or roughly $84000 a year in salary by the end of this agreements term.
Unknown Attendee: Good morning and welcome to the General Motors Company, 3rd quarter, 2023 earnings conference call. During the open remarks, all participants will be in a listen only mode. After the opening remarks, we will conduct a question and answer session.
Speaker 3: It also includes a cost of living reinstatement, a 25% increase to the company's 401k contributions, world class healthcare with no out-of-pocket premiums or deductibles for our senior members, and it has paid time-offs and several other benefits.
That also includes the cost of living reinstatement of 25% increase to the company's 401k contributions World class health care with no out of pocket premiums or deductibles for our senior members and enhanced paid time off and several other benefits.
Unknown Attendee: We are asking inwards to limit their questions to one and a brief follow up. To ask a question, press star than one on your telephone keypad to join the queue. To withdraw your question, press star than two. As a reminder, this conference call is being recorded.
Speaker 3: Since negotiations started this summer, we've been available to Barion 24-7 on behalf of our represented team members and our company. They've demanded a record contract and that's exactly what we've offered for weeks now. A historic contract with record wages that have increases that are substantial, record job security and world class healthcare.
As negotiations started this summer we've been available to bargain 24, seven on behalf of our represented team members at our company. They have demanded a record contract and that's exactly what we've offered for weeks now our historic contract with record wages that have increases that are substantial record job security and world class Health care.
Unknown Attendee: Tuesday, October 24, 2023.
Ashish Kohli: I would now like to turn the conference over to Ashish Kohli, GM's Vice President of Investor Relations. Thanks Amanda and good morning everyone. We appreciate you joining us as we review GM's financial results for the third quarter of 2023. 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.
Speaker 3: It's an offer that rewards our team members, but does not put the company and their jobs at risk.
It's an offer that rewards our team members, but does not put the company and their jobs at risk okay.
<unk> unsustainably high costs that would put our future and the GM team members job. It rich is simply something that I will not do.
Speaker 3: Clearly, given the industry's changing pricing and demand outlook and higher labor costs, we have work to do to ensure we achieve low- to mid-single-digit EBIT, EB margins targets that we've laid out for 2025. The work has already begun, and I'm confident we will achieve our target and grow from there.
Clearly given the industry's changing pricing and demand outlook and higher labor Cros, we have work to do to ensure we achieve low to mid single digit EBIT EBIT margin targets that we've laid out for 2025. The work has already begun and I'm confident we will achieve our target and grow from there.
Ashish Kohli: Joining us today are Mary Barra, GM's Chair and CEO and Paul Jacobson, GM's Executive Vice President and CFO. Dan Berce, President and CEO of GM Financial, will also be joining us for the Q&A portion of the call. On today's call, management will make forward-looking statements about our expectations. These statements are subject to risks and uncertainties that could cause our actual results to differ materially. These risks and uncertainties include the factors identified in our filings with the SEC.
Speaker 3: So when you add up all the things we've talked about so far, it should be more clear than ever that we have taken and will continue to take decisive steps to grow our revenue while sustaining strong 8 to 10 percent EBIT margins in North America through 2025.
So when you add up all the things we've talked about so far it should be more clear than ever that we have taken and will continue to take decisive steps to grow our revenue, while sustaining strong 8% to 10% EBIT margins in North America through 2025.
Speaker 3: We are optimizing both our ice portfolio and our cost structure to continue to deliver strong profits. We are strengthening our EV business and then we will accelerate further. And we have assembled a world-class team to deliver new, high-margin, reoccurring revenue streams from software-defined vehicles. It does remain a truly exciting time for us.
We are optimizing both or ice portfolio and our cost structure to continue to deliver strong profits. We are strengthening our EV business and then we will accelerate further and we have assembled a world class team to deliver new high margin reoccurring revenue streams from software defined vehicles. It does remain a truly exciting time for us So now al.
Ashish Kohli: Please review the safe harbor statement on the first page of our presentation as the contents of our call will be governed by this language.
Mary Barra: And with that, I'm delighted to turn the call over to Mary. Thanks Ashish and good morning everyone. Thank you for joining us.
Mary Barra: I'd like to begin by thanking the entire GM team for once again delivering very strong results, including $3.6 billion of EBITJusted in the third quarter. Our supply chain team and logistics partners in North America have done great work improving the flow of vehicles from our assembly plants to our dealers. Our US dealers have helped us outperform the market from a sheer standpoint with strong ATPs and essentially flat incentives. We will profitable in every region, including China.
Speaker 3: Now I'll ask Paul to take you through the third quarter financials in greater detail and then we'll move to Q&A.
As Paul to take you through the third quarter financials in greater detail and then we'll move to Q&A.
Speaker 2: Thank you, Mary, and good morning, everyone. I'd like to start by thanking our team members for once again delivering strong results in the face of several challenges.
Thank you Mary and good morning, everyone I'd like to start by thanking our team members for once again delivering strong results in the face of several challenges.
Speaker 4: To those employees that continue to build vehicles through the uncertainties of the UAW strike, thank you for your focus, your commitment to quality, and passion to deliver great products to our customers.
So those employees that continue to build vehicles through the uncertainties of the UAW strike. Thank you for your focus your commitment to quality and passion to deliver great products to our customers.
Mary Barra: And GM International is on track to deliver significantly higher EBITJ in 2023 compared to a year ago. Thanks to our operating discipline and the lift we're getting from successful vehicles like the Chevrolet Montana and the tracks. I'd also like to recognize our teams in Canada and Korea. They reach new competitive labor agreements and ratified them with little or no disruption to our operations.
Speaker 4: In Q3, the UAW strike had a roughly $200 million EBIT impact. And so far in Q4, we estimate the loss production has had an incremental $600 million EBIT impact. Moving forward, we estimate that the impact of the UAW strike to be approximately $200 million per week based on the facilities impacted as of yesterday.
In Q3, the UAW strike had a roughly $200 million EBIT impact and so far in Q4, we estimate the loss production is that an incremental $600 million EBIT impact.
Moving forward, we estimate that the impact of the UAW strike to be approximately $200 million per week based on the facilities impacted as of yesterday.
Speaker 4: We're not going to speculate on the duration and the extent of the UAW strike. And because of this uncertainty, we've chosen to withdraw our 2023 full-year guidance metrics. Even though our strong underlying business fundamentals were pushing us towards the upper half of the range prior to any strike impact.
Mary Barra: Because we are in a highly competitive, cyclical industry, we have been laser focused on four fundamentals to strengthen our position. They are delivering vehicles that customers love and are willing to pay for a competitive cost structure, marketing efficiency and incentive discipline and matching production to demand. Driving these fundamentals has been and will continue to be the foundation of our consistently strong earnings. For example, GM has now led the industry in full size pickup sales for three consecutive years and we have led full size SUVs for nearly 50 years.
We're not going to speculate on the duration and the extent of the UAW strike and because of this uncertainty we have chosen to withdraw our 2023 full year guidance metrics, even though our strong underlying business fundamentals were pushing us towards the upper half of the range prior to any striking box <unk>.
Speaker 4: After we have a ratified contract, we will provide an investor update to quantify the final impact of the strike, as well as labor costs moving forward.
After we have a ratified contract we will provide an investor update to quantify the final impact of the strike as well as labor costs moving forward.
Speaker 4: Despite these challenges, we are already working to offset the incremental costs. Mary mentioned the great work the team is doing with the net $2 billion fixed cost program announced earlier in the year, and the Winning with Simplicity initiative to drive further efficiencies and cost savings.
Despite these challenges we are already working to offset the incremental costs Mary mentioned the great work. The team is doing with the net $2 billion fixed cost program announced earlier in the year and the winning with simplicity initiative to drive further efficiencies and cost savings.
Mary Barra: Our overall incentives have gone from consistently above the industry average to consistently below, and we are on track to exit 2024 with fixed costs that are $2 billion lower net of increased appreciation and merization than 2022. And we're launching several new SUVs this year and next year that will be more profitable than the models they replace. We're also taking immediate steps to enhance the profitability of our EV portfolio and adjust to slowing near-term growth.
Speaker 4: Higher labor costs will make it even more imperative that we continue to focus on the most significant and margin-accretive parts of the business.
Higher labor costs will make it even more imperative that we continue to focus on the most significant and margin accretive parts of the business.
Speaker 4: Let's move now to the Q3 results. Total company revenue was up 5% to more than $44 billion driven primarily by our consistent pricing and higher wholesale volumes, which were up 2% year over year.
Let's move now to the Q3 results total company revenue was up 5% to more than $44 billion, driven primarily by our consistent pricing and higher wholesale volumes, which were up 2% year over year.
Mary Barra: These steps include moderating the pace of our EV acceleration in 2024 and 2025 to maintain strong pricing. The new launch timing at Orient Assembly also enables us to make engineering and other changes that will make the trucks more efficient and less expensive to produce and therefore more profitable.
Speaker 4: We achieved $3.6 billion in EBIT adjusted, 8.1% EBIT adjusted margins, and $2.28 in EPS diluted adjusted, inclusive of the $200 million UAW strike impact during the quarter.
We achieved $3 $6 billion in EBIT, adjusted eight 1% EBIT adjusted margins and $2 28 in EPS diluted adjusted inclusive of the $200 million UAW strike impact during the quarter.
Speaker 4: Production volumes and pricing were up year over year. However, these benefits were more than offset from other parts of the business normalizing, including mix and GM financial, along with our continued investments in EVs and crews, resulting in a $700 million decrease year over year. Adjusted auto-free cash flow was $4.9 billion, up 0.3 billion year over year, driven by the continued strength of our core auto operating performance.
Production volumes and pricing were up year over year. However, these benefits were more than offset from other parts of the business normalizing, including mix and GM financial along with our continued investments in Evs and crews, resulting in a $700 million decrease year over year.
Mary Barra: Let's dig a little deeper into the steps we're taking with our ice portfolio to keep margins and EBIT strong during a very competitive environment. Over the last several years we have bolstered our position in high margin segments including full-size pickups, full-size SUVs and large luxury SUVs. We did this by managing capacity to meet demand, expanding the range of premium trim series that we offer and with innovations like supercruise and the multi-pro tailgate and factory lifted trucks.
Adjusted Auto free cash flow was $4 $9 billion up <unk> 3 billion year over year, driven by the continued strength of our core auto operating performance.
Speaker 4: North America continued to deliver strong results with $3.5 billion in EBIT adjusted. Pricing continued to be robust, and we are starting to see the benefits of our fixed cost reduction program. Realizing about $500 million year-over-year savings in Q3 from lower people cost and marketing savings.
North America continued to deliver strong results with $3 $5 billion in EBIT adjusted pricing continued to be robust and we are starting to see the benefits of our fixed cost reduction program, realizing about $500 million year over year savings in Q3 from lowered people cost and marketing savings.
Mary Barra: And we're not going to let up. As I said, we're launching a wide range of SUVs that will have automotive gross margins up five points higher, up to five points higher than the models they replace. The first two are the Chevrolet Tracks and Buick Investor. These affordable small SUVs are rapidly gaining market share and more than 50 percent of the Chevrolet Tracks customers are new to GM. Then in the first half of 2024, we begin launching the new Chevrolet Reverse GMC Acadia and Buick Enclave followed by the next generation of the ice Chevrolet Equinox and GMC which begin launching mid-year.
Speaker 4: Expected headwinds from pension income, warranty costs, and mix, along with the impact of the UAW strike, more than offset these tailwinds, resulting in a $400 million decrease year over year.
Expected headwinds from pension income warranty costs and mix along with the impact of the UAW strike more than offset these tail winds, resulting in a $400 million decrease year over year.
Speaker 4: As we shared in our prior quarter's update on warranty costs, the quality of our vehicles continues to be strong, as demonstrated by the decrease in claim rates year over year. However, we have experienced an increase in the cost of repairing vehicles due to inflationary factors.
As we shared in our prior quarters update on warranty cost the quality of our vehicles continues to be strong as demonstrated by the decrease in claim rates year over year. However, we have experienced an increase in the cost of repairing vehicles due to inflation inflationary factors.
Mary Barra: Here are the profit drivers. First, they're in gross segments. The larger SUVs compete within a segment that we expect to grow by 25 percent to 3 million units over the next three years and the smaller SUVs compete in the industry's largest segment which we expect to grow 9 percent to 3.4 million over that same period. Second, they're outstanding products. They offer more comfort and interior roominess, better cargo space, enhanced safety features and innovative technologies including supercruise, which will be a segment exclusive in the disfers. And third, we develop them efficiently. We have simplified the powertrain line-ups where we're using 60 percent of the parts and we reduce build combinations by 80 to 90 percent.
Speaker 4: We are committed to reducing the number of claims and finding efficiencies to minimize costs and are optimistic that year-over-year warranty headwinds will begin moderating in Q4.
We are committed to reducing the number of claims and finding efficiencies to minimize costs and are optimistic that year over year warranty headwinds will begin moderating in Q4.
Speaker 4: EBIT adjusted margin was 9.8% and at the top of our 8 to 10% target range. In the U.S., we continued to drive profitable market share growth with 0.7 percentage points year over year in Q3, growing both retail and fleet share. At the same time, we continued to hold incentive spend consistently low and reduce marketing spend by $200 million year over year.
EBIT adjusted margin was nine 8% and at the top of our 8% to 10% target range in the U S. We continue to drive profitable market share growth was 0.7 percentage points year over year in Q3 growing both retail and fleet share at the same time, we continued to hold incentives.
Been consistently low and reduced marketing spend by $200 million year over year.
Speaker 4: We've completely modified our approach to incentives over the last few years. J.D. PowerPin data shows our 2021 U.S. incentive spend as a percentage of ATP was one percentage point above the industry average of 6 percent. In 2023, we are trending about a half a percentage point below the industry average of 3.7 percent.
We have completely modified our approach to incentives over the last few years J D power pin data shows our 2021 U S incentive spend as a percentage of ATP was one percentage point above the industry average of 6% in 2023 were trending about a half a percentage point below the industry average.
Mary Barra: Now let's look at EVs. Our commitment to an all EV future is as strong as ever and we continue to plan to have annual EV capacity of 1 million units in North America as we exit 2025. This will allow us to participate in the EV markets upside but we are also scaling a way that's consistent with the operating discipline I mentioned. Over the course of 2023, our battery cell manufacturing joint venture in Ohio has made tremendous progress.
A three 7%.
Speaker 4: This $1,500 per vehicle relative performance improvement from 2021 to 2023 equates to more than $3.5 billion in annualized EBIT improvement. And is attributable to our strong product portfolio and disciplined inventory strategy. And as Mary mentioned, new and updated products coming in 2024 will have improved profitability, bold designs, and new technology to help continue our sales and pricing moment.
1500 dollar per vehicle relative performance improvement from 2021 to 2023 equates to more than $3 $5 billion in annualized EBIT improvements and is attributable to our strong product portfolio and disciplined inventory strategy and as Mary mentioned, new and updated products coming in <unk>.
Mary Barra: The plan will be running at full capacity next month as planned and they are targeting the production of 36 million cells this year. Next year, production in Ohio is expected to rise to 100 million cells. At the same time, our battery module constraint is getting better, which helps us more than double the ultimate platform production of the third quarter compared to the second quarter. And we are now in the process of installing and testing our high capacity module assembly lines which will continue into the first part of next year.
24, we will have improved profitability bowl designs and new technology to help continue our sales and pricing momentum.
Speaker 4: Total U.S. inventory has remained within our 50 to 60-day range, with a slight sequential increase to 443,000 units at the end of Q3. This is a testament to the hard work of our team who have navigated through the continued logistics challenges and uncertainties related to the UAW strike.
Total U S inventory has remained within our $50 to 60 day range with a slight sequential increase of 443000 units at the end of Q3.
This is a testament to the hard work of our team who have navigated through the continued logistics challenges and uncertainties related to the UAW strike.
Mary Barra: We are currently challenged getting some of the critical equipment components but we have a dedicated team working with our suppliers to resolve all issues and get these lines running at rate. By mid-year, we expect that modules will no longer be a constraint and we will be focused on building to customer demand rather than setting new production targets.
Speaker 4: GM International had a solid Q3 performance with Q3 EBIT adjusted of $350 million, which was consistent year over year. Despite a decrease of $150 million in China equity income, which amounted to $200 million for the quarter, GM International X China EBIT adjusted was $150 million, a significant improvement from break even in 2022.
GM International had a solid Q3 performance with Q3, EBIT adjusted of $350 million, which was consistent year over year.
Despite a decrease of $150 million in China equity income, which amounted to 200 million for the quarter GM International ex China EBIT adjusted was $150 million a significant improvement from breakeven in 2022.
Mary Barra: Software is another critical piece of the strategy and Mike Abbott and his team are actively engaged in the early assessment in each of these launches. Since he joined our team this summer Mike has been moving aggressively to build a world-class software organization to fully execute our software-defined vehicle strategy while accelerating our vision. We now have executives with experience from Apple, Google, Microsoft, Amazon, Uber and other leading tech companies heading up our human interface design group, our product software and services group, our software engineering and our software strategy group.
Speaker 4: I want to take a moment to thank the entire international team for the work they're doing to deliver profitable results, including the actions in China to help mitigate some of the industry challenges.
I wanted to take a moment to thank the entire international team for the work, they're doing to deliver profitable results, including the actions in China to help mitigate some of the industry challenges.
Speaker 4: GM Financial had a strong quarter with an EBT adjusted of $750 million, their fourth highest Q3 ever, in spite of higher interest rates and lower used car values.
GM financial had a strong quarter with an EBT adjusted of $750 million Theyre fourth highest Q3 ever in spite of higher interest rates and lower used car values.
Speaker 4: This performance was in line with expectations and primarily due to lower net leased vehicle income.
This performance was in line with expectations and primarily due to lower net leased vehicle income.
Mary Barra: The team is optimizing the software strategy and fine-tuning the plans for our new vehicles to help make sure we execute with the highest possible quality and customer experience while positioning the company to drive significant revenue growth from subscriptions in the future. To give the team time to do this, we'll move out the launches of three products, the Chevrolet Equin X EV, the Silverado EV RST and the GMCCR EV Denali, each by only a few months.
Speaker 4: We also saw increased finance charge income associated with portfolio growth and a higher effective yield offset by that increased interest expense.
We also saw increased finance charge income associated with portfolio growth and a higher effective yield offset by that increased interest expense.
Speaker 4: Corporate expenses were $300 million in the quarter and consistent with the prior year.
Corporate expenses were $300 million in the quarter and consistent with the prior year.
Speaker 4: Cruise expenses were $700 million in the quarter, and we expect a similar quarterly run rate moving forward as they balance expanding operations with further efficient.
<unk> expenses were $700 million in the quarter and we expect a similar quarterly run rate moving forward as they balance expanding operations with further efficiencies a larger fleet of avs and additional resources drove the incremental $200 million of expenses year over year.
Speaker 4: a larger fleet of AVs and additional resources drove the incremental $200 million of expenses year over year.
Mary Barra: This will ensure their success. We believe our products will succeed and the costs are coming out quickly. For example, our cost per cell has already decreased 45% over the last 12 months as production volume in Ohio has ramped out. We also expect to achieve significant margin improvement on our battery electric trucks through engineering efficiency and improvements, supplier cost and reducing order complexity, buildable combinations and manufacturing complexity.
Speaker 4: I also want to highlight a few items Mary shared on our retined EV volume and product production decisions.
I also want to highlight a few items Mary shared on our REIT times, EV volume and product production decisions. These actions will impact our previous EV production targets, including the 100000 EV target we had for the second half of 2023 and cumulative 400000 Evs from 2022 to the first half of 'twenty.
Speaker 4: These actions will impact our previous EV production targets, including the 100,000 EV target we had for the second half of 2023, and cumulative 400,000 EVs from 2022 to the first half of 2024. We are not providing new targets, but are moving to a more agile approach to continually evaluate EV demand and adjust production schedules to maximize profitability.
24.
We are not providing new targets, but are moving to a more agile approach to continually evaluate EV demand and adjust production schedules to maximize profitability, we purposely built flexibility into our manufacturing facilities and are uniquely positioned among our competitors to be able to flex our production between ice and evs.
Mary Barra: Another key launch for us is the next generation Chevrolet Bold EV. I know there has been some speculation in the market as to why we are developing a new Bold EV. Our strategy to build is to build on the tremendous equity we have in the brand and to do it as efficiently as possible. Our prior portfolio plans included several newly designed vehicles and the entry level segments and a capital commitment of $5 billion over the next several years.
Speaker 4: We purposely built flexibility into our manufacturing facilities and are uniquely positioned among our competitors to be able to flex our production between ICE and EVs.
Speaker 4: For example, our Ramos facility builds both ice and EV variants of the blazer and the equinox. Along with spring here, which builds the Cadillac Lyric, along with the existing ice vehicle.
For example, our Ramos facility builds both ice and EV variance of the blazer and the equinox, along with spring Hill, which builds the Cadillac lyric along with existing ice vehicles.
Mary Barra: However, by leveraging the best attributes of today's Bold EV, as well as Altium, our latest software and NACS, we will deliver an even better driving, charging and ownership experience with the vehicle we know customers love. In the process, we are saving billions in capital and engineering expense, delivering a significantly cost-improved battery pack using purchased LFP cells. We are getting to market at least two years faster and our unit costs will be substantially lower. This will be our first deployment in North America of LFP technology in the Altium platform.
Speaker 4: These actions prioritize ultimum profitability versus volume, which helps solidify our North America EBIT Adjusted Margin Target of 8 to 10 percent through 2025. And the cash flow is funding our future in EVs, AVs, software-defined vehicles, and other new businesses.
These actions prioritize altium profitability versus volume, which helps solidify our North America EBIT adjusted margin target of 8% to 10% through 2025.
And the cash flow is funding our future in Evs Avs software defined vehicles and other new businesses.
Speaker 4: Given a more agile approach to our EV transition, we now expect to retime at least $1.5 billion of capital spending at our Orion plant, implement engineering improvements, and improve EV profitability prior to accelerating production of battery electric trucks. We'll provide more detail around EV profitability once we have clarity on labor costs.
Given a more agile approach to our EV transition, we now expect to retirement at least $1 $5 billion of capital spending at our Oregon plant implement engineering improvements and improve <unk> profitability prior to accelerating production of battery electric trucks, we will provide more detail around EV profitability.
Mary Barra: So now let's turn to Cruz. Since the early days of our company, GM has been defining the future of transportation and today that's more true than ever with Cruz. In February we celebrated Cruz becoming the first company to eclipse 1 million driverless miles. That's forward to today and they have logged more than 5 million miles. And they continue to expand.
Once we have clarity on labor costs and.
Speaker 4: In closing, I want to emphasize that our EV momentum is building. We see it in everything from self-reduction to manufacturing to software. We continue to install significant EV capacity and have the agility and decisiveness to make further adjustments to both accelerate or moderate our transition to adapt to customer preference.
In closing I want to emphasize that our EV momentum is building, we see it in everything from cell production to manufacturing to software.
We continue to install significant EV capacity and have the agility and decisiveness to make further adjustments to both accelerate or moderate our transition to adapt to customer preferences.
Mary Barra: Just last week we announced that GM and Cruz are working with Honda to bring driverless rides to Tokyo in early 2026. We'll do that with our origin, the world's first ever vehicle purpose built for autonomous driving on public roads. As Cruz continues to push the boundaries of what AB technology can deliver society, safety is always at the forefront and this is something they are continuously improving. In fact, it's our zero crash vision that keeps us pressing forward and we know from the data that Cruz ABs are involved in far fewer collisions than human drivers. This remains the focus of their ongoing discussions with government partners and regulators at the federal and state levels.
Speaker 4: Higher labor costs are at the top of everyone's mind, but will likely be another example of the numerous challenges this team has tackled over the last few years. And I remain confident we'll continue to execute and find solutions to grow EPS moving forward.
Higher labor costs are at the top of everyone's mind, but will likely be another example of the numerous challenges. This team has tackled over the last few years and I remain confident we will continue to execute and find solutions to grow EPS moving forward.
Speaker 4: The cost initiatives we're implementing are not one and done, but rather a change in mindset that we expect will drive efficiencies for years to come, fundamentally strengthening the company.
The cost initiatives, we're implementing are not one and done but rather a change in mindset that we expect will drive efficiencies for years to come fundamentally strengthening the company. This concludes our opening statements and we'll now move to the Q&A portion of the call.
Speaker 4: This concludes our opening statements and will now move to the Q&A portion of the call.
Speaker 1: Thank you, as a reminder to your members, for your asking that you will make your question to one and a brief follow-up so that we may get to everyone on the call. To ask a question, press star than one on your telephone keypad to join the queue. To wish draw your question, press star than two. One moment.
Mary Barra: And now let's talk about strikes. We know we have ongoing strikes at some of our U.S, facilities. I know many of you are concerned about the impact of higher labor costs on our business in the U.S. Let me address this head-on. I'll start with the macro environment and then I'll cover how we're positioning the business for success. It's been clear coming out of COVID that the wages and benefits across the U.S, economy would need to increase because of inflation and other factors.
Thank you as a reminder, we.
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 to ask a question private Star then one on your telephone keypad to join the queue to withdraw your question Press Star then two.
One moment.
Speaker 5: Our first question comes from Rod Blash with Wolf Research. Your line is open. Morning everybody. Morning Rod. I was hoping you could provide a little bit more color on the slower demand growth for EVs. Obviously GM is just getting started now with mass market, both the products. Still the fastest growing segment within the market.
Our first question comes from Rod Lache with Wolfe Research Your line is open.
Mary Barra: This has been playing out in many sectors for some time now. And I think that the offer we have on the table with the U.A.W, is better than the contracts and employees that companies like Caterpillar, UPS and Kaiser Permanente have ratified. The current offer is the most significant that GM has ever proposed to the U.A.W. The majority of our workforce will make $40.39 per hour or roughly $84,000 a year in salary by the end of this agreement's term.
Good morning, everybody good.
Morning Rod.
I was hoping you.
You could provide a little bit more color on the slower demand growth for these.
Obviously.
GM is just getting started now with mass market opium products still.
The fastest growing segment within the market.
Speaker 5: And just at a high level is this kind of an assessment of the premium that you think EV buyers are willing to pay, are you less optimistic on the IRA becoming a point of sale benefit next year? And just given the investments that you're making, why wouldn't lower volume or pricing assumptions affect the 2025 EV earnings expense? And just given the investments that you're making, why wouldn't lower volume or pricing change?
And just at a high level is this kind of an assessment of the.
The premium that you think EV buyers, who are willing to pay or are you less optimistic on the I R. A becoming a point of sale benefit next year and just given the investments that youre, making why wouldn't lower.
Mary Barra: It also includes the cost of living reinstatement, a 25% increase to the companies 401K contributions, world-class healthcare with no out-of-pocket premiums or deductibles for our senior members and enhance paid time-offs and several other benefits. Since negotiations started this summer, we've been available to Varian 24-7 on behalf of our represented team members and our company. They've demanded a record contract and that's exactly what we've offered for weeks now, a historic contract with record wages that have increases that are substantial, record job security, and world-class healthcare.
Or pricing assumptions of sexy 2020, fives EDI earnings expectations.
Speaker 4: You know, what I would say is, you know, the observation about slowing EV demand growth is something that everybody's been talking about. We've seen it in competitor earnings profiles, et cetera. But you know, I want to be clear.
What I would say is the.
The observation about slowing EV demand growth is something that everybody has been talking about we've seen it in competitor earnings profiles et cetera, but you know I want to be clear, where we're not seeing that in our portfolio right now now admittedly that's in considerably lower volumes and some others that are out there, but we continue.
Speaker 4: We're not seeing that in our portfolio right now. Now admittedly that's in considerably lower volumes than some others that are out there.
Mary Barra: It's an offer that rewards our team members but does not put the company and their jobs at risk, accepting unsustainably high costs that would put our future and the GM team members job at risk is simply something that I will not do. Clearly given the industry's changing pricing and demand outlook and higher labor cross, we have worked to do to ensure we achieve low-to-mid-single digit EV margins targets that we've laid out for 2025.
Speaker 4: But we continue to see strong demand for our portfolio and we're making progress on increasing ultium EV production with ultium products up 2X, 3Q versus 2Q.
To see strong demand for our portfolio and we're making progress on increasing LTM EV production with our LTM products up <unk> <unk> versus <unk>. So so we are scaling but what we've seen here is an opportunity to.
Speaker 4: So we are scaling, but what we've seen here is an opportunity to slow some of that scaling down and take advantage of some of the learnings that we've seen through the engineering and manufacturing process.
Mary Barra: The work has already begun and I'm confident we will achieve our target and grow from there. So when you add up all the things we've talked about so far, it should be more clear than ever that we have taken and will continue to take decisive steps to grow our revenue while sustaining strong 8-10% EBIT margins in North America through 2025. We are optimizing both our ice portfolio and our cost structure to continue to deliver strong profits.
Slow some of that scaling down and take advantage of some of the learnings that we've seen through the engineering and manufacturing process in the early stages and what it allows us to do is to build a stronger foundation before we scale aggressively upwards. So that's really what we're saying I wouldn't chalk it up necessarily to price and you know what.
Speaker 4: in the early stages and what it allows us to do is to build a stronger foundation before we scale aggressively upwards.
Speaker 4: So that's really what we're saying. I wouldn't chalk it up necessarily to price. And you know what what we're seeing in our portfolio is our customers have been remarkably resilient.
What we're seeing in our portfolio as our customers have been remarkably resilient.
Speaker 4: uh... in the order book uh... continuing to uh... keep their orders on the book
In the order book I'm, continuing to keep their orders on the books.
Mary Barra: We are strengthening our EV business and then we will accelerate further. And we have assembled a world-class team to deliver new, high-margin, reoccurring revenue streams from software-defined vehicles. It does remain a truly exciting time for us.
Speaker 5: Thanks Paul. And secondly, obviously there's consequences to almost any change that affects the business.
Thanks, Paul and just secondly.
Obviously, there's consequences to almost any change that affects the business.
Speaker 5: At a high level, do you think that GM will need to make adjustments to the company's product strategy, to adjust for higher labor costs than some of your competitors? And can you clarify whether this $2 billion net fixed cost reduction kind of contemplates a scenario for UHW costs?
At a high level do you think that.
Paul Jacobson: So now I'll ask Paul to take you through the third quarter financials in greater detail and then we'll move to Q&A. Thank you, Marion. Good morning, everyone.
G M will need to make adjustments to the company's product strategy to adjust for higher labor costs in some of your competitors.
Paul Jacobson: I'd like to start by thanking our team members for once again delivering strong results in the face of several challenges. To those employees that continue to build vehicles through the uncertainties of the UAW strike, thank you for your focus, your commitment to quality and passion to deliver great products to our customers. In Q3, the UAW strike had a roughly $200 million EBIT impact, and so far in Q4, we estimate the loss production has had an incremental $600 million EBIT impact. Moving forward, we estimate that the impact of the UAW strike to be approximately $200 million per week based on the facilities impacted as of yesterday.
And can you clarify whether this $2 billion net fixed cost reduction kind of contemplates.
Our scenario free for a UAW cost.
Speaker 3: Right, this is very, yes, we're committed to the $2 billion that we've talked about and
Rod This is Mary Anne, Yes, we're committed to the $2 billion that we've talked about and we already have tremendous work underway to continue to take costs out of the business. So I don't really think this changes our product portfolio and as Paul said.
Speaker 3: You know, we already have tremendous work underway to continue to take costs out of the business So I don't really think this changes our product portfolio as Paul said You know as we get further into the transformation to EV It's a bit bumpy Which is not unexpected and so what we're moving to is Something that we can react much more in a much more agile way to make sure that we
You know as we get further into the transformation to E V. A if.
It's a bit bumpy.
Which is not unexpected and so what we're moving to is it is something that we can react much more and a much more agile way to make sure that we are.
Paul Jacobson: We're not going to speculate on the duration and the extent of the UAW strike, and because of this uncertainty, we've chosen to withdraw our 2023 full-year guidance metrics, even though our strong underlying business fundamentals were pushing us towards the upper half of the range prior to any strike impacts. After we have a ratified contract, we will provide an investor update to quantify the final impact of the strike, as well as labor costs moving forward.
Speaker 3: have the right vehicles and I believe are a portfolio that we have that looks at the most important segment.
Or have the right vehicles in and I believe our portfolio that we have that looks at the most important segments and make sure that we have the right entries I mean, we're already seeing strong demand for entities. I mean, we have evs that people actually want to buy so I think there's a lot of our focus in the portfolio that have the right cells, but.
Speaker 3: and make sure that we have the right entries. I mean, we're already seeing strong demand for entries. I mean, we have EVs that people actually want to buy.
Speaker 3: So I think there's a lot of focus in the portfolio to have the right cells, but just to give ourselves more flexibility. And I think the Bolt EV versus the previous.
Paul Jacobson: Despite these challenges, we are already working to offset the incremental costs. Mary mentioned the great work the team is doing with the net $2 billion fixed cost program announced earlier in the year, and the winning with simplicity initiative to drive further efficiencies and cost savings. Higher labor costs will make it even more imperative that we continue to focus on the most significant and margin of creative parts of the business.
To give ourselves more flexibility and I think the bolt EV versus the previous AAV that we had in the portfolio is a great example, we were able to get the bolt EV more quickly.
Speaker 3: AEV that we had in the portfolio is a great example. We were able to get the Bolt EV more quickly. You know, as we've mentioned, it will require a lot less capital deploy and frankly we're leveraging the strong customer enthusiasm that people have for the Bolt EV. So it's decisions like that where we're still going to have the right portfolio but do it more effectively from a cost and timing perspective.
As we've mentioned it will.
Require a lot less capital deploy and frankly, we're leveraging the strong customer enthusiasm that people have for the bolt EV. So its decisions like that what we're still going to have the right portfolio, but do it more effectively from a cost and timing perspective.
Paul Jacobson: Let's move now to the Q3 results. Total company revenue was up 5% to more than $44 billion driven primarily by our consistent pricing and higher wholesale volumes, which were up 2% year over year. We achieved $3.6 billion in EBIT adjusted, 8.1% EBIT adjusted margins, and $2.28 in EPS diluted adjusted, inclusive of the $200 million UAW strike impact during the quarter. Production volumes and pricing were up year over year. However, these benefits were more than offset from other parts of the business normalizing, including mix and GM financial, along with our continued investments in EVs and crews, resulting in a $700 million decrease year over year.
Great. Thank you.
Speaker 1: Thank you. Our next question comes from Itali Michele with Citi. Your line is open.
Thank you. Our next question comes from E Tailers and Kelly with Citi. Your line is open.
Speaker 6: uh... great thank you good morning everyone uh... just first go back to uh... to to the opium a target in twenty twenty five newsgroup review of the kind of the factors are allowed you to maintain that low-to-mid single-digit easy margin target uh... you know given the lower volume you may be touched upon any changes to the uh... lg relationship uh... you know from you know maybe some changes there and also uh... to quantify a bit some of the engineering changes you alluded to that could enhance profitability
Great. Thank you good morning, everyone.
Just first going back to the old T M. All targets in 2025.
With you.
Doctors are allowing you to maintain that low to mid single digit EV margin target.
Given the lower volume, maybe you can touch upon any changes to the LG relationship.
Maybe recent changes there and also if you could quantify a bit some of the engineering changes you alluded too that can enhance profitability.
Speaker 3: Sure, thanks, E.K. And exactly as Paul said, we're taking steps to better position ourselves as we expand. But we are very much committed to the low-to-mid-single-digit margin target in 2025 for our EVs. And it's not one thing, it's multiple things. So first, as I mentioned just a minute ago, it's having the right products and the right segments that have the right features, the right range, the right functionality, et cetera. That's number one. And I think the Silverado EV is a prime example when you look at the range that vehicle has and bidirectional charging. So also, the feedback that we're getting on the blazer EV is outstanding as well. So those are just two examples. It's also the fact that we'll be well into the scale of the battery cells at that point in time. And I already mentioned how much the cost has come down just from having one module to virtually having by the end of the year on plan will have...
Sure. Thanks C J.
Paul Jacobson: Adjusted auto free cash flow was $4.9 billion, up 0.3 billion year over year driven by the continued strength of our core auto operating performance. North America continued to deliver strong results with $3.5 billion in EBIT adjusted, pricing continued to be robust, and we are starting to see the benefits of our fixed cost reduction program, realizing about $500 million year over year savings in Q3 from lower people cost. Expected headwinds from pension income, warranty costs and mix, along with the impact of the UAW strike, more than offset these tailwinds, resulting in a $400 million decrease year over year.
And exactly as Paul said, where we're taking steps to better position ourselves as we expand but we are very much committed to the low to mid single digit margin target in 2025 for Evs and there's a it's not one thing it's multiple things. So first as I mentioned, just a minute ago. It is having the right products in the right segments that have the right features.
The right range, the right functionality et cetera, that's number one and I think you know that the Silverado I E. V is a Prime example, when you look at the range of that vehicle Hasnt bidirectional charging. So also you know the feedback that we're getting and the blades that blazer E. V is outstanding as well. So those are just two examples.
Also the fact that you know will be well into the scale of the battery cells are at that point in time and I already mentioned how much the cost has come down just from having one module to virtually having by the end of the air on plan will have a.
Paul Jacobson: As we shared in our prior quarters update on warranty costs, the quality of our vehicles continues to be strong, as demonstrated by the decrease in claim rates year over year. However, we have experienced an increase in the cost of repairing vehicles due to inflationary factors. We are committed to reducing the number of claims and finding efficiencies to minimize costs, and are optimistic that year over year warranty headwinds will begin moderating in Q4.
Speaker 3: the Lord's Town Plant fully fully ram
The lordstown plant fully fully ramped and then we're on track for the other plants. So getting the Altium battery cell scaled will be another important piece I talked about last time, what we're doing with winning with simplicity and really honing in and going to market in a simpler and a simpler way that frankly, we.
Speaker 3: and then we're on track for the other plants. So getting the Altium battery self scaled will be another important piece.
Speaker 3: I talked about last time what we're doing with winnings with simplicity and really honing in and going to market in a simpler way that frankly we think is better for the consumer because they're not overwhelmed with the number of choices they need to make. And taking that kind of order complexity and build combination complexity out drops a tremendous amount of cost to the bottom line from
Paul Jacobson: A bit of Justin Margin was 9.8% and at the top of our 8-10% target range. In the US, we continued to drive profitable market share growth with 0.7% over year in Q3, growing both retail and fleet share. At the same time, we continued to hold incentive spend consistently low and reduce marketing spend by $200 million year over year. We would completely modify our approach to incentives over the last few years. JD Power Pin Data shows our 2021 US incentive spend as a percentage of ATP was 1 percentage point above the industry average of 6%.
It's better for the consumer because they they're not making they're not overwhelmed with the number of choices they need to make and taking that kind of order of complexity and build combination complexity out drops a tremendous amount of cost to the bottom line from designing it engineering at sourcing it and play.
Speaker 3: designing it, engineering it, sourcing it, and planning for it to get lost.
For it to get line side, and then we've seen product improvements you know with the Altium. It was our first generation we learned a lot from the bolt that went into how we design. This first round of Altium products, but where are you seeing improvements we can make and Altium and then improvements we can make to you know beyond the EV platform in these vehicles that will.
Speaker 3: And then we've seen product improvements. You know, with the Altium, it was our first generation. We learned a lot from the bolt that went into how we designed this first round of Altium products. But we're already seeing improvements we can make in Altium and then improvements we can make to, you know, beyond the EV platform in these vehicles that will make them more efficient. And it's appropriate application of things like gigacastines, which is already on the C8. We learned a lot on the CT6.
Paul Jacobson: In 2023, we are trending about a half a percentage point below the industry average of 3.7%. This $1,500 per vehicle relative performance improvement from 2021 to 2023 equates to more than $3.5 billion in annualized EBIT improvement and is attributable to our strong product portfolio and disciplined inventory strategy.
Them more efficient and it's appropriate application application of things like Giga castings, which is already on the CA. We learned a lot on the C. T. A C T six it'll be a part of Celestica and there's other vehicles that we haven't announced yet that it'll be an important part of so there's it's just it's frankly looking at fundamentally everything.
Speaker 3: It'll be a part of Celestic and there's other vehicles that we haven't announced yet that it will be an important part of. So there's, it's just...
Speaker 3: Frankly looking at fundamentally everything, but we remain.
But we remain we remain committed to get there and frankly, the where lithium prices are trending is another enabler.
Paul Jacobson: As Mary mentioned, new and updated products coming in 2024 will have improved profitability, bold designs, and new technology to help continue our sales and pricing momentum. Total US inventory has remained within our 50-60-day range with a slight sequential increase to 443,000 units at the end of Q3. This is a testament to the hard work of our team who have navigated through the continued logistics challenges and uncertainties related to the UAW strike.
Speaker 3: We remain committed to get there and frankly where lithium prices are trending is another enabler.
Speaker 6: that that's all very helpful and quick follow up maybe on the touch upon crews uh... with the group is getting out of the multiple city for making a lot of progress uh... and it just thoughts on you know funding uh... going forward as as well as any any of the city to talk to you can share as a kind of you know cruise kind of goes into the next day to grow
That's all very helpful. And then as a quick follow up maybe wanted to touch upon cruise, which quickly scaling down into multiple things, making a lot of progress and any just thoughts on funding.
Funding going forward as well as any strategic thoughts you can share what kind of cruise kind of goes into the next stage of growth.
Speaker 3: Well, we're gonna have a lot more to say about crews. And a lot of part of this year, Paul will be at a Barclays Conference. We also will have fourth quarter earnings and then our investor day. So, we do believe that crews has tremendous opportunity to grow and expand safety. We'll be our gating factor as we do that and continuing to work with the cities that we're deploying in. So we'll have more to say about that at a later date, but rest assured, we do have funding plans that will support crews' expansion.
Well you know, we're gonna have a lot more to say about crews in the latter part of this year Paul we'll be at Barclays Conference. We also will have fourth quarter earnings and then our Investor day. So you know we do believe that cruise has tremendous opportunity to grow and expand safety will be our gating factor as we do that.
Paul Jacobson: GM International had a solid Q3 performance with Q3 EBIT adjusted of $350 million which was consistent year over year. Despite a decrease of $150 million in China equity income which amounted to $200 million for the quarter, GM International X-China EBIT adjusted was $150 million, a significant improvement from break even in 2022. I want to take a moment to thank the entire international team for the work they are doing to deliver profitable results, including the actions in China to help mitigate some of the industry challenges.
And continuing to work with the cities that we're deploying in so we'll have more to say about that at a later date, but.
Rest assured we do have funding plans that will support cruises expansion.
Speaker 6: Terrific. That's very helpful. Thank you.
Perfect. That's very helpful. Thank you.
Speaker 1: Thank you. Our next question comes from Joseph back with UBS. Your line is open.
Thank you. Our next question comes from Joseph Spak with UBS. Your line is open.
Paul Jacobson: GM Financial had a strong quarter with an EBIT adjusted of $750 million, their fourth highest Q3 ever, in spite of higher interest rates and lower used car values. This performance was in line with expectations and primarily due to lower net lease vehicle income. We also saw increased finance charge income associated with portfolio growth and a higher effective yield offset by that increased interest expense. Corporate expenses were $300 million in the quarter and consistent with the prior year.
Speaker 7: Thanks, good morning everyone. Just to follow up again on the on the Altium strategy and some of these changes here.
Thanks, Good morning, everyone.
Just to follow up again on the on.
On the Altium strategy and in some of these changes here.
Speaker 7: How flexible are you finding that program is to be able to sort of make these changes? And are some of these learnings you talked about that you plan to implement on the Silverado also scalable to the other products or should we think that I basically do should we think about there being a need for like an ultim 2.0 platform in a couple of years versus sort of what we're seeing today in the market.
How flexible are you finding that program is to be able to sort of make these changes and are some of these learnings you've talked about that you plan to implement on Silverado also scalable to two the other products are or should we think that oh.
Basically do should we think about there being a need for like an LTM 2.0 platform in a couple of years versus sort of what we're seeing today in the market.
Paul Jacobson: Cruise expenses were $700 million in the quarter and we expect a similar quarterly run rate moving forward as they balance expanding operations with further efficiencies. A larger fleet of AVs and additional resources drove the incremental $200 million of expenses year over year.
As we've already.
Speaker 3: We've already said the Ultim platform is chemistry-acknostic. And so we will continue to make, look to make programs. And as we go forward, we will, a gap, they'll be, I think, Ultim 2.0 as we get into the latter part of this decade, as well as many other parts of the vehicle. Again, I think it's hard to really...
Excuse me.
As already said the Altium platform its chemistry agnostic and so we will continue to make a look to make programs and.
As we go forward, we will adapt there'll be you know I think altium to point out as we get into the latter part of the of this decade as well as many other parts of the vehicle again, I think it's hard to really.
Paul Jacobson: I also want to highlight a few items Mary shared on our retind EV volume and product production decisions. These actions will impact our previous EV production targets, including the $100,000 EV target we had for the second half of 2023 and cumulative $400,000 EVs from 2022 to the first half of 2024. We are not providing new targets but are moving to a more agile approach to continually evaluate EV demand and adjust production schedule to maximize profitability.
Speaker 3: explain without being in person and we'll do this one word together at our at our investor day of the simplification that we can do to the vehicles that makes them easier to build and you know frankly the mindset change we've had from a complexity perspective is pretty significant so Again, it's yes. There's gonna be improvements will continue to drive efficiencies in the Altium platform, but it's also broadly across the entire vehicle
Blaine without being in person and we'll do this when we're together at our at our Investor day of the simplification that we can do to the vehicles that makes them easier to build and you know frankly, the mindset change we've had from a complexity perspective is pretty significant. So again, it's it's yes, there's going to be improvements will continue to drive efficiencies.
Paul Jacobson: We purposely built flexibility into our manufacturing facilities and are uniquely positioned among our competitors to be able to tax our production between ICE and EVs. For example, our Ramos facility builds both ICE and EV variants of the Blazer and the Equinox, along with Spring Hill, which builds the Cadillac Lyric, along with the existing ICE vehicles. These actions prioritize ultim profitability versus volume, which helps solidify our North America EBIT adjusted margin target of 8 to 10% through 2025.
The Altium platform, but it's also a broadly across the entire vehicle.
Speaker 7: Okay, and then Mary on the, there's a comment about the Ohio JV battery being enabled to be at.
Okay and then.
Maryann the there was a comment about the so, Ohio, Jeep battery JV being able to be at.
Speaker 7: the full capacity by the end of this year. I think that's like 35 gigawatt hours very call correctly. So how does that JV, which I know you're only a part owner sort of plan to balance that with GM zone EV demand, or is there gonna be like a continued ramp there and produce and maybe build some stock or look for additional offtake or and also does this revise EV timeline impact any of the other battery JVs coming online.
Full capacity by the end of this year I think that's like 35 gigawatt hours, if I recall it correctly. So how does that JV, which I know you're only a part owner of sort of plan to balance our you.
You know that with with G. M zone, EV demand or is there going to be like a continued ramp there and produce and maybe build some stock or look for additional offtake or and also does this revised timeline to impact any of the other battery jb's coming online.
Paul Jacobson: And the cash flows funding our future in EVs, AVs, software defined vehicles, and other new businesses. Given a more agile approach to our EV transition, we now expect to retime at least $1.5 billion of capital spending at our Orion plant, implement engineering improvements, and improve EV profitability prior to accelerating production of battery electric trucks. We'll provide more detail around EV profitability once we have clarity on labor costs.
Speaker 3: No, we plan on having, you know, the ramp at at Lordstown will continue as it is, and the plant in Spring Hill comes online next year, and then we have plant three in Michigan that follows, and then the work with Samsung. We'll keep all of those on track because we believe strongly that we need those cells. You know, obviously if we have to evaluate and slow something down, but at this time we don't see a need to do that with the plans that we've outlined here.
Now we plan on having the.
The ramp at at Lordstown will continue as it is and the plant in Spring Hill comes online next year and then we have plant three in Mexico, Michigan that follows and then the work with Samsung will keep all of those on track because we believe strongly that we need those cells are.
Paul Jacobson: In closing, I want to emphasize that our EV momentum is building. We see it in everything from self-reduction to manufacturing to software. We continue to install significant EV capacity and have the agility and decisiveness to make further adjustments to both accelerate or moderate our transition to adapt to customer preferences. Higher labor costs are at the top of everyone's mind, but will likely be another example of the numerous challenges this team has tackled over the last few years.
Now, obviously, if we have to evaluate and slow something down but at this time, we don't see a need to do that with the plans that we've outlined here.
Speaker 3: Thank you. Hey Joe, just found that we, you know, again, I want to reiterate, we're going to respond to demand and we're going to make sure we have the right products at the right time, but we're not over building.
Okay. Thank you.
Hey, Joe just found that we you know again it I want to reiterate we're going to respond to demand and we're going to make sure. We have the right products at the right time, but we're not overbuilding.
Perfect. Thank you.
Speaker 1: Thank you. Our next question comes from John Murphy with Bank of America. Your line is open.
Thank you. Our next question comes from John Murphy with Bank of America. Your line is open.
Paul Jacobson: And I remain confident we'll continue to execute and find solutions to grow EPS moving forward. The cost initiatives we're implementing are not one and done, but rather a change in mindset that we expect will drive efficiencies for years to come, fundamentally strengthening the company.
Speaker 8: Good morning everybody. Mary and Paul, when you think about the capital commitment that's going on in the business, obviously it's always very large, but with EVs and things that are shifting on technology and products.
Good morning, everybody.
Yeah.
Paul when you when you think about the capital commitment that's going on in the business, obviously always very large, but with evs and things that are shifting on technology and products.
Speaker 8: You know, product plans, you know, it seems a little bit more uncertain, a little bit more dynamic than it has historically. I mean, you think about returns on capital as we shift into this EV world, you know, can they potentially be higher?
Product plans.
Unknown Attendee: This concludes our opening statements, and we'll now move to the Q&A portion of the call. Thank you. As a reminder to your members, we are asking that you will make your question to one and a brief follow-up so that we may get to everyone on the call. To ask a question, press star than one on your telephone keypad to join the queue. To withdraw your question, press star than two. One moment.
It seemed a little bit more uncertain, a little bit more dynamic than it has historically.
I mean, you think about returns on capital as we shift into the EV World.
Can they potentially be higher.
Speaker 8: and shorter dated, so they give you more flexibility to make changes like you just did with the bulb.
And in shorter dated.
So they give you more flexibility to make changes like you just did with the bolt or are we still thinking about sort of seven to 10 year decisions like we did on the ice side because I mean, there's I think there's a lot of folks are thinking this is a real risk, but it sounds like it also might be an opportunity to be more flexible.
Speaker 8: Or are we still thinking about sort of 7 to 10 year decisions like we did on the ice side? Because, I mean, there's, you know, I think there's a lot of folks that think this is a real risk, but it sounds like it also might be an opportunity to be.
Rod Blash: Our first question comes from Rod Blash with Wolf Research. Your line is open. Morning, everybody. Morning, Rod. I was hoping you could provide a little bit more color on the slower demand growth for EVs. Obviously GM is just getting started now with mass market, opium products, still the fastest growing segment within the market. And just at a high level is this kind of an assessment of the premium that you think EV buyers are willing to pay or are you less optimistic on the IRA becoming a point of sale benefit next year.
Speaker 4: Yeah, good morning, John's Paul. You know, I think that's what we're aiming to and I think creating the foundation of...
Yeah. Good morning, Johns Paul you know I think our I think that's what we're what we're aiming to and I think creating the foundation of reducing complexity and buildable combinations and and more simpler engineering design manufacturing I think he's going to give us that agility going forward I'm you know I think the other thing.
Speaker 4: reducing complexity and buildable combinations and more simpler engineering, design, manufacturing, I think is going to give us that agility going forward. I think the other thing that you're going to see us, and I think the Orion announcement is a good example of this, is
That that you're going to see us and you know I think the Orient announcement is a good example of this is we're also engineering improvements on the fly. So I think if you look at the historical record. It would be you would produce a vehicle you'd under identify some improvements in customer feature.
Speaker 4: We're also engineering improvements on the fly. So I think if you look at...
Speaker 4: the historical record it would be you'd produce a vehicle you don't identify some improvements uh... in customer features profitability et cetera and you'd wait for a mid-cycle uh... model uh... improvement actually go in and implement those changes and
Rod Blash: And just given the investments that you're making, why wouldn't lower volume or pricing assumptions affect the 2025 EV earnings expectations? You know, what I would say is, you know, the observation about slowing EV demand growth is something that everybody's been talking about. We've seen it in competitor earnings profiles, et cetera. But, you know, I want to be clear, we're not seeing that in our portfolio right now. Now, admittedly, that's in considerably lower volumes than some others that are out there.
As profitability et cetera, and you'd wait for a mid cycle model improvement to actually go in and implement those changes and you know it's.
Speaker 4: you know it's it's really more of a mindset that i would pay more conducive to software that says here's an opportunity to really improve
It's really more of a mindset, that's I would say more conducive to software that says here's an opportunity to really improve the profitability of the capability of the vehicle. Let's go ahead and put it in line. So the Orient decision represents an early application of that where we've seen a slowing in the demand growth creates the opportunity to.
Speaker 4: uh... the profitability the capability of the vehicle let's go ahead and put it in line so the orion decision represents an early application of that uh... where we've seen a slowing in the demand growth create the opportunity to go in
Speaker 4: and build these from the ground up as we expand and scale up. And I think it's gonna make us more nimble in the future and ultimately lead to more consistent ROIC.
Go in and build these from the ground up as we expand and scale up and I think it's going to make us more nimble in the future and ultimately lead to more consistent ROIC.
Rod Blash: But we continue to see strong demand for our portfolio. And we're making progress on increasing ultium EV production with ultium products up to X3Q versus 2Q. So we are scaling. But what we've seen here is an opportunity to, you know, slow some of that scaling down and take advantage of some of the learnings that we've seen through the engineering and manufacturing process in the early stages. And what it allows us to do is to build a stronger foundation before we scale aggressively upwards.
Speaker 8: And then just one follow-up on the strength in sales year to date, the U.S. market really seems to be buoyed by fleet sales more than retail at the moment, and you guys usually have a better line of sight and visibility into orders from your fleet customers. So one, if you could confirm, you know, that that strength has really been driven by fleet relative to expectations at the beginning of the year.
And then just one follow up on the strength in sales year to date. The U S market really seems to be buoyed by by fleet sales more than retail at the moment and you guys usually have a better line of sight and visibility into orders from your fleet customers. So I wonder if you could confirm that that strength is really been driven by fleet relative to.
<unk> is the beginning of the year.
Speaker 8: And two, is there visibility that this is going to last kind of like it did in 10, 11, and 12?
And to US is there is a visibility that this is going to last kind of like it did in 10, 11, and 12 sort of as a consistent driver of the upside of the cycle early early in the in the cyclical recovery.
Rod Blash: So that's really what we're seeing. I wouldn't chalk it up necessarily to price. And, you know, what we're seeing in our portfolio is our customers have been remarkably resilient in the order book continuing to keep their orders on the book.
Speaker 8: sort of as a consistent driver of the upside of the cycle early in the cyclical recovery.
Speaker 4: Well, I think, John , we've we've been consistently talking about pent up demand from the last couple of years, and that's been really evident in the fleet customers. But I would say that the retail share gains and the performance of the retail customer has been strong as well. In fact, we've seen gains in market share pretty consistently this year, both from fleet and from retail. While we've increased production,
Well I think John we've been consistently talking about pent up demand from the last couple of years and that's been really evident in the fleet customers, but I would say that the retail share gains and the performance of the retail customer has been strong as well in fact, we've seen gains in market share pretty consistently this year, both from fleet and from <unk>.
Mary Barra: Thanks, Paul. And secondly, obviously, there's consequences to almost any change that affects the business. At a high level, do you think that GM will need to make adjustments to the company's product strategy to adjust for higher labor costs and some of your competitors? And can you clarify whether this $2 billion net fixed cost reduction kind of contemplates? Is this a scenario for UHW costs? This is very, yes, we're committed to the $2 billion that we've talked about and we already have tremendous work underway to continue to take costs out of the business.
Retail, while we've increased production, while we have kept incentives down and while we have reduced marketing spend so I think it's a real testament, especially to the North America team for what they've performed through and what they've done in the face of that strength and you know, while we hear reports out there in the macro that.
Speaker 4: while we have kept incentives down and while we have reduced marketing spend. So I think it's a real testament, especially to the North America team for what they've performed through and what they've done in the face of that strength. And while we hear reports out there in the macro that consumer sentiment might be weakening, et cetera, we haven't seen that in demand for our vehicles and we've been pretty consistent about that on the retail side as well. So we're continuing to enjoy that and I think we're operating from a much more disciplined lens around margin improvement as a result of what we've seen in that transformation.
Consumer sentiment might be weakening et cetera, we haven't seen that in demand for our vehicles and we've been pretty consistent about that on the retail side as well so.
Mary Barra: So I don't really think this changes our product portfolio. As Paul said, as we get further into the transformation to EV, it's a bit bumpy, which is not unexpected. And so what we're moving to is something that we can react much more in a much more agile way to make sure that we have the right vehicles. And I believe our portfolio that we have that looks at the most important segments and make sure that we have the right entries.
We're continuing to enjoy that and I think our I think we're operating in a from a much more disciplined lens around margin improvement as a result of what we've seen in that transformation.
Speaker 8: Okay, thank you very much.
Okay. Thank you very much.
Yeah.
Speaker 9: Thank you. Our next question comes from Immanuel Ragnar with Deutsche Bank. Your line is open. Thank you very much. Good morning. First.
Thank you. Our next question comes from Emmanuel Rosner with Deutsche Bank. Your line is open.
Thank you very much good morning.
First a couple of clarifications on the 'twenty to 'twenty five targets to the EV business. So a low to mid single digits margin I think when you initiated that guidance. This was excluding the eye or a cell manufacturing credits, but I think including them you could have gone to me too.
Speaker 9: 2025 targets for the EV business. So.
Mary Barra: I mean, we're already seeing strong demand for entries and we have EVs that people actually want to buy. So I think there's a lot of focus in the portfolio to have the right cells, but just to give ourselves more flexibility. And I think the Bolt EV versus the previous EV that we had in the portfolio is a great example. We were able to get the Bolt EV more quickly. You know, as we've mentioned, it will require a lot less capital deploy.
Speaker 9: low to mid single digits margin. I think when you.
Speaker 9: initiated that guidance. This was excluding the IRA style manufacturing credit, but I think including them, you could have gone to mid to high single digit. Is that still very much the case? Are you saying that now including IRA you would be a low to mid single digit? And then on the volume piece, I guess the capacity piece.
High single digit does that is that still very much the case or you think that's now including I really would be a.
Low to mid single digits, and then on the volume piece, So I guess the capacity piece too.
Speaker 10: to the extent that your capacity is flexible between easy and ice.
Mary Barra: And frankly, we're leveraging the strong customer enthusiasm that people have for the Bolt EV. So it's decisions like that where we're still going to have the right portfolio, but do it more effectively from a cost and timing perspective.
To the extent that your capacity is flexible between Evs and ice would you consider reducing the 'twenty to 'twenty five easy capacity targets in the future if the industry dynamics, where demand was weaker than expected.
Speaker 10: Would you consider reducing the 2025 EV capacity target in the future if the industry dynamics or demand was weaker than expected?
Unknown Attendee: Great.
Speaker 3: Well, first on the first question, we remain committed to low single-digit margins before IRA. Nothing has changed there. And so, as you said, it would be, you know, similar to ice-like margins with what we believe we know the IRA to be. We still are waiting for final clarification from Treasury on a couple aspects of that.
Well first on the first question will remain we remain committed to low single digit margins before I R. A nothing has changed there and so as you said it would be similar to ice like margins with what we believe we know the IR H B and we still are waiting for a final clarification from treasury.
Unknown Attendee: Thank you.
Itay Michaeli: Our next question comes from Italy, Michele. What's the deal? Your line is open. Great. Thank you. Good morning, everyone. We're just going back to the OPM targets in 2025. It's a good review. Kind of the factors are allowing you to maintain that load of mixed single digit EV margin target. You know, given the lower volume, you know, maybe touch upon any changes to the LG relationship from, you know, maybe recent changes there. And also, if you quantify a bit, some of the engineering changes you alluded to, that can enhance profitability.
A couple of aspects of that and then.
Speaker 3: And then again, as Paul outlined, with the flexibility we have in Ramos, with the flexibility that we have in Spring Hill and our plants, I don't think it's that we'll adjust down the amount of capacity that we'll have. It's just that we're going to be able to respond very quickly.
Again as Paul outlined you know with the flexibility we have in Ramos with the flexibility that we have in spring Hill and and our plants I don't think it's that will adjust down the amount of capacity that we'll have it's just that we're going to be able to respond very quickly to easier avi, depending on where the customers and what they demand.
Speaker 3: to EV or AV, depending on where the customers and what they demand. So I think we're going to need the capacity. And again, the flexibility that we have is, I think, going to be one of the ways that GM is going to be better positioned to serve the market for both ICME-V as we move in this transition period.
Mary Barra: Sure. Thanks, E.K. And exactly as Paul said, we're taking steps to better position ourselves as we expand. But we are very much committed to the load amid single digit margin target in 2025 for our EVs. And there's, it's not one thing it's multiple things. So first, as I mentioned just a minute ago, it's having the right products and the right segments that have the right features, the right range, the right functionality, et cetera.
So I think we're going to need the capacity and again the flexibility that we have is I think going to be one of the.
One of the ways that GM is going to be better positioned to serve the market for both ice and E V. As we move them in this transition period.
Speaker 9: Okay, that's helpful. And then I guess more broadly for the overall business.
Okay. That's helpful and then I guess more broadly for the.
The overall business.
Mary Barra: That's number one. And I think, you know, the Silverado EV is a prime example when you look at the range that vehicle has in bidirectional charging. So also, you know, the feedback that we're getting on the blazer EV is outstanding as well. So those are just two examples. It's also the fact that, you know, we'll be well into the scale of the battery cells at that point in time. And I already mentioned how much the cost has come down just from, you know, having one module to virtually having by the end of the year on plan will have the Lord's Town plant fully, fully ramped and then we're on track for the other plant.
Speaker 10: Just clarifying your net cost reduction target of $2 billion, I assume this is before any labor cost inflation expected from the new contract, but can you please clarify this? And assuming that this does not include that inflation in the net reduction, what sort of actions are you contemplating to try and offset that labor cost inflation? What could be done above and beyond the $2 billion to offset any additional cost increase?
Just clarifying your net cost reduction target of $2 billion. This is I assume this is before any labor cost inflation expected from the new contract, but can you. Please clarify this and assuming that this does not include that.
Inflation in the net reduction.
What sort of actions.
Are you contemplating.
And offset the labor cost inflation and what could be done.
Above and beyond the $2 billion two to offset any additional cost increases.
Mary Barra: So getting the Altium battery cells scaled will be another important piece. I talked about last time what we're doing with winning with simplicity and really honing in and going to market in a simpler way that frankly we think is better for the consumer because they're not making, they're not overwhelmed with the number of choices they need to make. And taking that kind of order complexity and build combination complexity out drops a tremendous amount of cost to the bottom line from designing it, engineering it, sourcing it and, you know, planning for it to get line side.
Speaker 4: Good morning, Emmanuel. It's Paul. You know, what I would say is that the two billion dollars is around controllable fixed costs
Good morning, Emmanuel It's Paul you know what.
I would say is that the $2 billion is around our controllable fixed costs.
Speaker 4: uh... and uh... we we remain committed to being able to do that uh... you know the implications of the ua w contract uh... when it is uh... agreed to and ratified uh... will uh... flow uh... significantly and largely through cost of goods sold uh... in our margin performance so when you look
And we remain committed to being able to do that you know the implications of the UAW contract. When it is agreed to and ratified will flow.
Significantly in largely through cost of goods sold and our margin performance. So when you look at the ways that we have to offset that you know those are things that affect the E V profitability et cetera going forward. So what we've got to do is make sure that number one we sign a contract that we know we can compete in the global market.
Speaker 4: at the way that we have to offset that you know those are things that affect
Speaker 4: the EV profitability, et cetera, going forward. So what we've got to do is make sure that, number one, we sign a contract that we know we can compete in the global marketplace because.
Mary Barra: And then we've seen product improvements, you know, with the Altium, it was our first generation. We learned a lot from the bolt that went into how we designed this first round of Altium products, but we're already seeing improvements we can make in Altium and then improvements we can make to, you know, beyond the EV platform in these vehicles that will make them more efficient. And it's appropriate application of things like gigacastines, which is already on the C8.
Good place because we want to make sure that these are good jobs and they're good jobs for the next people as well that are gonna taking over where we're protecting the brand the company and the franchise in the future.
Speaker 4: We want to make sure that these are good jobs and they're good jobs for the next people as well that are going to take over. We're protecting the brand, the company, the franchise in the future.
Speaker 4: So we're going to have to look at potentially reducing fixed costs further. We're going to have to look at efficiencies across the board and engineering and designing the vehicles. And that's a little bit of trying to get ahead of some of those inflationary pressures that we saw with the steps that we've taken earlier this year. So we're going to continue to look at doing that. And we've got some work cut out for us, but we're committed to making it work.
So we're gonna have to look at potentially reducing fixed costs. Further we're going to have to look at efficiencies across the board in engineering and in designing the vehicles and you know that's a little bit of trying to get ahead of some of those inflationary pressures that we saw with the steps that we've taken earlier. This year. So we're going to continue to look at doing that.
Mary Barra: We learned a lot on the CT6. It'll be a part of Celestic and there's other vehicles that we haven't announced yet that it'll be an important part of. So there's, it's just, it's frankly looking at fundamentally everything, but we remain, we remain committed to get there and frankly where lithium prices are trending is another enabler. That's all very helpful.
And you know we've got some work cut out for us, but we're committed to making it work.
Great. Thank you very much.
Speaker 1: Thank you. Our next question comes from Adam Jonas with Morgan Stanley . Your line is open.
Thank you. Our next question comes from Adam Jonas with Morgan Stanley . Your line is open.
Itay Michaeli: And a quick follow up, people wanted to touch upon crews, with crews really scaling down to multiple cities, making a lot of progress. And they just thought on, you know, funding going forward as well as any of those specific thoughts you can share as we kind of, you know, crews kind of goes into the next stage of growth.
Speaker 8: Hi, good morning. Mary, you've acknowledged for some time that the General Motors share prices not really getting any credit for the cruise business. I think many would argue that at $29 a stock might even be implying a negative value for cruise, which I think you reckon would be pretty ridiculous. So my question is, besides continuing on growing and executing on the business, and I know we're going to learn a lot in the next year, is there anything else that your management team or board could possibly do to unlock value for the cruise business?
Hi, Good morning Mary.
You've acknowledged for some time that the general motors share prices, not really getting any credit for the cruise business.
I think many would argue that at 29 Bucks a stock might even be implying a negative value for cruise, which I think you've you reckon, we'll be pretty ridiculous. So Michael My question is besides continuing on growing and executing on the business.
Mary Barra: Well, you know, we're going to have a lot more to say about crews. And a lot of part of this year, Paul will be at Barclays Conference, we also will have fourth quarter earnings and then our investor day. So, you know, we do believe that crews has tremendous opportunity to grow and expand safety will be our gating factor as we do that. And continuing to work with the cities that we're deploying in. So we'll have more to say say about that at a later date, but rest assured, we do have funding plans that will support crews' expansion. That's very helpful. Thank you.
Yeah, no we're going to learn a lot in the next year is there anything else that your management team or board could possibly do to unlock value for the cruise business.
Speaker 3: Adam, first of all, I completely agree with you. I think this doc is undervalued, even if it was just an ICV and software company. I think the cruise piece of it is further. I think as we continue to...
Yeah Adam.
First of all I completely agree with you I think the stock is undervalued if even if it was just an ACB in software company and think the crews piece of it is further I think as we continue to expand.
Speaker 3: expand cruise in a very thoughtful way, focused on safety, I think people will see and start to unlock. I mean, you know, just last week we announced the opportunity that we have with Honda and Cruise and General Motors in Japan. And so to be able to be involved in driving expansion, not just in the United States but globally, I think is going to be an important part of Cruise's mid- to longer-term future of success.
Expand cruise in a very thoughtful way focused on safety I think people will see and start to unlock I mean, you know just last week, we announced that the opportunity that we have with Honda and crews and general motors in Japan, and so to be able to be involved in driving our expansion not just in the United States, but globally.
Joseph Spak: Our next question comes from Joseph back with UBS. Your line is open. Thanks.
Unknown Attendee: Good morning, everyone. Just to follow up again on the, on the Altium strategy and some of these changes here. How flexible are you finding that program is to be able to sort of make these changes? And are some of these learnings you talked about that you plan to implement on Silverado also scalable to the other products? Or should we think that I basically do, should we think about there being a need for like an Altium 2.0 platform in a couple of years versus sort of what we're seeing today in the market?
It's going to be an important part of cruises mid to longer term future of success. So we do believe in the technology as I said in my remarks.
Speaker 3: So we do believe in the technology. As I said in my remarks.
Speaker 3: It is safer than a human driver and is constantly improving and getting better and that's what we're focused on doing.
It is safer than a human driver and is constantly improving and getting better and that's what we're focused on doing.
Speaker 2: It's really amazing to see the growth in San Francisco. I know people that use it every day. Just a follow-up for Paul. You guys have been very specific, I think, within a range, at least.
It's really amazing to see the growth in San Francisco I know people that use it every day just a follow up for Paul.
Unknown Attendee: God, you know, as we've already, excuse me, as we've already said the Altium platform is chemistry agnostic. And so we will continue to make, look to make programs. And, you know, as we go forward, we will adapt. I think Altium 2.0, as we get into the latter part of the, of this decade, as well as many other parts of the vehicle. Again, I think it's hard to really explain without being in person and we'll do this one more together at our, at our investor day.
You guys have been very specific I think within a range at least.
Speaker 2: of a 2025 EV target of the mid to high single digit without IRA. You're obviously not disclosing where EV margins are today, so I'm not going to press you on that because you would have disclosed it. You're choosing not to, but I think in some of your comments, if I heard you correctly, Paul, you said...
Of the 2025 E V targets of the mid to high single digits without I array.
Yeah, obviously, not disclosing where EV margins are today, so I'm not going to press you on that because you would have disclosed it you're choosing not to but I think in some of your comments if I. If I heard you correctly, Paul you said.
Speaker 8: you will you're not doing it today because the labor situation or you know until you get the clear picture on labor uh... when we get through this standoff with the way w
You will you're not doing it today because of the labor situation or you know until you get a clearer picture on labor.
But when.
Unknown Attendee: The simplification that we can do to the vehicles that makes them easier to build. And, you know, frankly, the mindset change we've had from a complexity perspective is pretty significant. So, again, it's, yes, there's going to be improvements. We'll continue to drive efficiencies in the Altium platform, but it's also broadly across the entire vehicle.
When we get through this standoff with UAW can.
Speaker 2: Can we expect that you will be specific of what the starting point is in the next year so we can understand the delta from how loss-making the EVs are today? Clearly they're loss-making, but put a number on it so that investors can have greater transparency of the delta. Is that something you can commit to, please?
Can we expect that you will be specific on what the starting point is into next year. So we could understand the delta from how loss, making the heavies are today clearly there were lossmaking, but at this but put a number on it so that investors can have greater transparency of the delta is that something you can commit to you. Please.
Speaker 4: Yeah, good morning, Adam. First of all, just to clarify in your comments, the target is low to mid single digits X IRA. I think you said mid to high in your question. I just want to correct that for the record.
Yeah. Good morning, Adam first of all just to clarify in your in your comments. The target is low to mid single digits ex IRA I think you said mid to high in your in your question I just want to correct that for the record.
Mary Barra: Okay. And then, Mary, on the, there's a comment about the Ohio J, battery JV being able to be at full capacity by the end of this year. I think that's like 35 gigawatt hours, very cool, correctly. So, how does that JV, which I know you're only a part owner, sort of plan to balance, you know, that with, with GM zone EV demand, is there going to be like a continued ramp there and produce and maybe build some stock or look for additional offtake?
But yeah, clearly look the as we've said.
Repeatedly this year the the margins in Evs are just relatively nonsensical, mainly because we've got a big scaled infrastructure with limited production across the board. So we are absolutely.
Speaker 1: infrastructure with limited production across the board. So we are absolutely committed to presenting that road map and we'll do that at our investor day. And, you know, the decision to push out investor day was really, we've got a lot of good strategic data points to put out there. We want to make sure that it wasn't something that was dominated by the UAW. So, you know, when the weather gets a little bit warmer in Charlotte in March, we'll have that investor day. We'll provide that road map including kind of where we've come from and where we're going to get to that low to mid single-digit margin target. And we're making good progress internally. Thanks, Paul. Absolutely. Thanks for the question. Thank you. Our next question comes from James Piccarello with BNP Paribas. Your line is open.
Absolutely committed to presenting that roadmap and we'll do that are at our Investor day, and you know the decision to push out Investor Day was really we we we've got a lot of good strategic data points to put out there we want to make sure that it it wasn't something that was dominated by the UAW. So you know when the when the weather gets a little bit warmer and sharp.
Mary Barra: Or, and also does this revise the timeline impact any of the other battery JVs coming online? No, we plan on having, you know, the ramp at, at Lordstown will continue as it is and the plant in Spring Hill comes online next year. And then we have plant three and mix Michigan that follows and then the work with Samsung will keep all of those on track because we believe strongly that we need those cells. No, obviously if we have to evaluate and slow something down, but at this time we don't see a need to do that with the plants that we've outlined here.
In March we will have that Investor day, where we'll provide that roadmap, including kind of where we've come from and where we're going to get to that low to mid single digit margin target and we're making we're making good progress internally.
Speaker 11: Thanks, Paul.
Thanks, Paul.
Absolutely thanks for the question.
Paul Jacobson: Okay, thank you. Hey, Joe, just down that we, you know, again, I want to reiterate, we're going to respond to demand and we're going to make sure we have the right products at the right time, but we're not over building. Perfect.
Speaker 1: Thank you. Our next question comes from James Picarello with BNP Paribas. Your line is open.
Thank you. Our next question comes from James Picariello with BNP Paribas. Your line is open.
Speaker 12: I'm curious to get your thoughts on incentive spending for the fourth quarter and just the overall pricing backdrop in North America. I mean, obviously we have, you know, there are
Hi, good morning, everyone.
I'm curious to get your thoughts on incentive spending for the fourth quarter and just the overall pricing backdrop in North America. I mean, obviously, we have you know there are production.
Speaker 4: production limitations type of strike right now. For just, you know, how are US inventory days supply trending, you know, today relative to quarter end? And you have just any color there would be great. Thanks. Yeah, good morning, James. So, you know, in terms of incentive strategy, like I said in my prepare remarks, you know, I think the team deserves a lot of credit for really transforming the approach and the go-to-market strategies, not just around incentives, but how we market the vehicles and...
Invitations strike right now, which is how our U S inventory day supply trending you know today.
Paul Jacobson: Thank you. It's always very large, but with EVs and things that are shifting on technology and products, you know, product, product plans, you know, it seems a little bit more uncertain, a little bit more dynamic and it hasn't historically. I mean, you think about returns on capital, as we shift into this, this EV world, you know, can they potentially be higher and shorter dated so they give you more flexibility to make changes like you just did with the bulk.
Today relative to quarter end.
Just any color there would be great. Thanks.
Yeah. Good morning, James So on in terms of incentives strategy like I said in my prepared remarks.
I think the team deserves a lot of credit for a really transforming the approach and the go to market strategy is not just around incentives, but how we market the vehicles and.
Speaker 4: really across the board that has been a huge contributor to some of the profitability that we've had on the backs of the strength and the consumers and the products that we're producing across the board.
Paul Jacobson: Or are we still thinking about sort of seven to 10 year decisions like we did on the ice side because I mean, there's, there's, you know, I think there's a lot of folks that think this is a real risk, but it sounds like it also might be an opportunity to be more flexible. Yeah, good morning, John's Paul. You know, I think I think that's what we're aiming to and I think creating the foundation of reducing complexity and buildable combinations and more simple engineering design manufacturing.
You know really across the board that has been a huge contributor to some of the profitability that we've had on the on the backs of the strengthen the consumers and the products that we're producing a across the board so light.
Speaker 4: I expect that strategy to continue. You know, certainly as we looked at at quarter end inventories had trended a little bit higher and of course this varies on a product by product basis.
I expect that strategy.
To continue certainly as we looked at are at quarter end inventories have trended a little bit higher and of course. This varies on a product by product basis, and we're watching that very closely in partnership with our dealers to try to make sure in light of the work stoppage that are we are getting vehicles to market, where we have them. So.
Speaker 4: And we're watching that very closely in partnership with our dealers to try to make sure, you know, in light of the work stoppage that we are getting vehicles to market where we have them. So, you know, we're going to continue to manage that very tactically across the board. But, you know, everything that we're seeing in the demands that right now is pretty strong for our vehicles and we expect that to continue through the rest of the year.
Paul Jacobson: I think it's going to give us that agility going forward. You know, I think the other thing that that you're going to see us and, you know, I think the. Orient announcement is a good example of this is we're also engineering improvements on the fly. So I think if you look at the historical record, it would be. You'd produce a vehicle, you'd identify some improvements in customer features, profitability, et cetera, and you'd wait for a mid cycle model improvement to actually go in and implement those changes.
Well you know we're going to continue to manage that very tactically are across the board, but you know everything that we're seeing in the demand set right. Now is is pretty strong for our vehicles and we expect that to continue through the rest of the year.
Speaker 12: Okay, that's helpful. And then my follow-up, can you just confirm the materials and freight impact in the quarter and just at a high level as we think about next year based on current commodity spot pricing, any visibility you might have in supplier costs, just how we can think about this cost bucket for 2024. I believe the 2023 guide, the prior 2023 for an expectation of neutral, so any color there would be great. Thanks.
Okay. That's that's helpful. And then my follow up can you just confirm the materials and freight impact in the quarter and just at a high level. As we you know as we think about next year based on current commodity spot pricing and any visibility you might have and supplier costs. Just how we should oh, we can think about this cost bucket for.
Paul Jacobson: And you know, it's really more of a mindset that I would say more conducive to software that says here's an opportunity to really improve the profitability, the capability of the vehicle, let's go ahead and put it in line. So the Orient decision represents an early application of that where we've seen a slowing in the demand growth create the opportunity to go in and build these from the ground up as we expand and scale up. And I think it's going to make us more nimble in the future and ultimately lead to more consistent ROIC.
2024.
I believe that 2023 guide the prior 2020.
From an expectation of of neutral.
Color there would be great. Thanks.
Speaker 4: Yeah, it's a little early to get into that. We're in the midst of our budget process right now, but what I would say is we have seen some logistics and delivery pressure that we've talked about before, particularly with vehicles coming into North America from Mexico with rail challenges, et cetera. So I expect there'll be parts where there's some inflationary pressure, but as we've said over the last couple of years.
So it's a it's a little early to get into that where we are in the midst of our budget process right now, but you know what I would say is we have seen some logistics and delivery pressure that we've talked about before particularly with the vehicles coming into North America from Mexico with with with rail challenges et cetera. So you know.
John Murphy: And then just one follow up on the strength and sales year to date the US market really seems to be buoyed by by flea tails more than retail at the moment. And you guys usually have a better line of sight and visibility into orders from your, your fleet customers. So I want if you can confirm, you know, that that strength has really been driven by fleet relative expectations at the beginning of the year.
I expect there'll be parts, where there are some inflationary pressure, but as we've said over the last couple of years the amount that we spend on expedited logistics et cetera, that's been coming down as the chip shortage in some of the supply chain shortages have.
Speaker 4: the amount that we spend on expedited logistics, etc. has been coming down as the chip shortage and some of the supply chain shortages have.
Speaker 4: have been tempered from the peaks in 21 and 22.
<unk> had been tempered from the peaks in 'twenty, one and 'twenty two.
John Murphy: And to is there, you know, is there visibility that this is going to last kind of like it did in 10 11 and 12 sort of as a consistent driver of the upside of the cycle early early in the cyclical recovery? Well, I think John, we've been consistently talking about pent up demand from the last couple of years. And that's been really evident in the fleet customers. But I would say that the retail share gains and the performance of the retail customer has been strong as well.
Speaker 4: You know, I will say that there's a bit of concern on my mind in terms of
You know I will say that there is there's a bit of concern on my mind in terms of the supply chain's ability to ramp up after the work stoppage you know obviously.
Speaker 4: the supply chain's ability to ramp up after the work stoppage.
Really where we're focused on on getting this finalized as quickly as we can but it's important that we don't end up in a situation, where we can't ramp up to full production because the supply chain has to rebuild et cetera, So we're watching that closely and and and and making sure that we're in a position, but more to come on 'twenty.
Speaker 4: But it's important that we don't end up in a situation where we can't ramp up to full production because the supply chain has to rebuild, et cetera. So we're watching that closely and making sure that we're in a position. But more to come on 2024 as we work through that and to work through the budget.
John Murphy: In fact, we've seen gains and market share pretty consistently this year both from fleet and from retail. While we've increased production, while we have kept incentives down and while we have reduced marketing spend. So I think it's a real testament, especially to the North America team for what they've performed through and what they've done in the face of that strength. And, you know, while we hear reports out there in the macro that, you know, consumer sentiment might be weakening et cetera.
24, as we as we work through that and work through the budget.
Thanks.
Speaker 1: Thank you. Our next question comes from Dan Levy with Barclays. Your line is open.
Thank you. Our next question comes from Dan Levy with Barclays. Your line is open.
Speaker 13: Hi. Good morning. Thank you for taking the questions. I wanted to start first with just a question on the volume versus price-mix interplay. You know, pre-COVID, you were at, call it, anywhere from 3.2 to 3.6 million units in annual volume. And, you know, this year on some of the consensus numbers, you know, strike a side, they'll be closer to call it 3 million.
Hi, Good morning, Thank you for taking the questions.
Wanted to start first with just a question on that.
John Murphy: We haven't seen that in demand for our vehicles and we've been pretty consistent about that on the retail side as well. So, you know, we're continuing to enjoy that. And I think I think we're operating in a from a much more disciplined lens around margin improvement as a result of what we've seen in that transformation.
The volume versus price mix interplay.
Unknown Attendee: Thank you very much.
Pre COVID-19 you're at call. It three anywhere from three two to $3 6 million units annual volume.
This year on some of the consensus numbers strike aside any closer to call it 3 million units.
Speaker 13: Um, you know, now you're absorbing more in the way of labor costs.
You know now you're absorbing more in the way of labor costs.
Speaker 13: I think we're waiting to see what happens with EVs, but most would view EVs to be a cost challenge. So, you've already done a really good job showing us the benefits of mix, and pivoting to profitable units. I think that was something you alluded to in your prepared remarks, and really, you know, a business that you've, you know, in a way.
Emmanuel Rosner: Thank you. Our next question comes from Emmanuel Rosner with Deutsche Bank. Your line is open. Thank you very much. Good morning. First, a couple of clarifications on the 2025 targets for the EV business. So, low to mid single digits margin. I think when you initiated that guidance, this was excluding the IRA style manufacturing credit, but I think including them, you could have gone to mid to high single digit. Is that still very much the case?
No I think we're waiting to see what happens with E D. But most would view evs to be a cost challenge so.
Emmanuel Rosner: Are you saying that now, including IRA, you would be low to mid single digits? And then on the volume piece, I guess the capacity to the extent that your capacity is flexible between EVs and Ives. Would you consider reducing the 2025 EV capacity targets in the future in the industry dynamics or demand was weaker than expected?
You've already done a really good job showing us the benefits of mix and pivoting to profitable units I think that was something you alluded to in your.
In your prepared remarks, and really you know business.
In a way.
Speaker 13: shown slight pitted away from volume. How much more do you think that business can focus more on mix and profitable units and relatively reduced focus on volume?
<unk> like pivots away from Boeing how much more do you think that business can focus more on our mix and unprofitable units and relatively reduced focus on on volume.
Speaker 3: Well, I appreciate the question. We really want to focus on both, but it's got to be profitable growth. When you look at the EVs, and even our ice vehicles, I just mentioned that the tracks, 50% of the customers for the new tracks are new to General Motors. So from an EVs...
Well Dan I. Appreciate the question, we really want to focus on both but it's it's gotta be profitable growth. When you look at the Evs are and even our ice vehicles I just mentioned that the tracks are you know 50% of the customers for the new tracks are new to general Motors. So.
Mary Barra: Well, first on the first question, we remain committed to low single digit margins before IRA. Nothing has changed there. And so, as you said, it would be similar to Ives like margins with what we believe we know the IRA to be. We still are waiting for final clarification from Treasury on a couple of aspects of that. And then again, as Paul outlined, with the flexibility we have in Ramos with the flexibility that we have in Spring Hill and on plants, I don't think it's that we'll adjust down the amount of capacity that we'll have.
From an east point, specifically, we think that along the coast, where EV adoption is higher that's gonna be a growth opportunity for us and you know over the next several years and we're going to just focus on continuing to have winning ice and winning EV products that people want to buy and so I don't I felt like Youre quite.
Speaker 3: point specifically, we think that along the coast where EV adoption is higher, that's going to be a growth opportunity for us, you know, over the next several years. And we're going to just focus on continuing to have winning ICE and winning EV products that people want to buy.
Speaker 3: And so I don't, I feel like your question is saying, are you just going to shrink? And the answer is no, that's not our intent. Our intent is to be profitable and then grow and expand. And we think we have the opportunity to do that.
Are you just going to shrink and and the answer is no. That's not our intent our intent is to be profitable and then grow and expand and we think we have the opportunity to do that.
Speaker 4: And Dan, I think, you know, I'll add that, you know, I think the challenges of the last few years, I think it taught us a lot about ourselves and about the quality of our products. And it all starts with that when you create products that customers love. You have an opportunity to think about the business. So while...
And then I think you know I'll add that you know I think the challenges over the last few years I think have taught us a lot about ourselves and about the quality of our products and it all starts with that when you create products that customers love you have an opportunity to think about the business. So while.
Mary Barra: It's just that we're going to be able to respond very quickly to EV or AV, depending on where the customers and what they demand. And so, I think we're going to need the capacity and again, the flexibility that we have is, I think, going to be one of the ways that GM is going to be better positioned to serve the market for both IC and EV as we move in this transition period. Okay, that's helpful.
Speaker 4: you know the the the profitability and the margins have gone up we've been really focused on that but you know some examples of that are what we're doing with buildable combinations
The profitability and the margins have gone up we've been really focused on that but you know some examples of that are what we're doing with buildable combinations, what we've been doing with our with marketing spend et cetera, It's really focused on driving at the unit level. The the margin improvement across the board so are focusing on.
Paul Jacobson: And then I guess more broadly for the overall business. Just clarifying your net cost reduction target of $2 billion. This is, I assume this is before any labor cost inflation expected from the new contract, but can you please verify this and assuming that this does not include that inflation in the net reduction. What sort of actions are you contemplating to try and offset that labor cost inflation? What could be done above and beyond the $2 billion to offset any additional cost increase?
Speaker 4: what we've been doing with uh... with marketing spend etcetera it's really focused on driving at the unit level the the the margin improvement across the board so uh... focusing on those premium mixes where we know the demand is focusing on uh... the premium vehicles where there's uh... supply constraint
On those premium mixes, where we know the demand is focusing on the premium vehicles, where there is a supply constraints. Those are lessons that we can take into the future going forward and they're going to help us not just with ice profitability and margins, but also help pave the way for an EV strategy that is really focused on consistent.
Speaker 4: Those are lessons that we can take into the future going forward and are going to help us not just with ICE profitability and margins, but also help pave the way for any of the strategy that is really focused on consistent margin performance going forward. So incredibly proud of what the organization has done. And certainly think there's more to come. Now we've been doing all of this in
Margin performance going forward, so incredibly proud of what the organization has done and certainly think theres more to come now we've been doing all of this in.
Paul Jacobson: Good morning, Emmanuel. It's Paul. You know, what I would say is that the $2 billion is around controllable fixed costs and we remain committed to being able to do that. The implications of the UAW contract when it is agreed to and ratified will flow significantly and largely through cost of goods sold in our margin performance. So when you look at the ways that we have to offset that, those are things that affect the EV profitability, et cetera, going forward.
Speaker 4: in a lower SAR environment and feel really good about our ability to continue that. Should we get back to more historical, normal levels at higher volumes?
And a lower Saar environment and feel.
Really good about our ability to continue that should we get back to more historical normal levels you know.
At higher volumes across the board. So I think it's I think it's been good lessons learned and you know you never let a good crisis go to waste and and I think that's where we've seen.
Speaker 4: across the board so yeah i think it's i think it's been good lesson learned and you know you never let a good crisis go to waste and and i think that's where we've seen uh... some really good long-term permanent learning for the organization
Some really good long term permanent learnings for the organization.
Speaker 13: Great, great. Thank you. And then second question, wanted to just go into the dynamics behind the battery plants. Thank you for the commentary earlier that you're starting to run at capacity on Lordstown. Spring Hill that sounds like that's a slight delay. I think that was supposed to launch this year saying it's 2024.
Great Great. Thank you and then a second question wanted to just go into the dynamics behind the battery plants.
Paul Jacobson: So what we've got to do is make sure that number one, we find a contract that we know we can compete in the global marketplace because we want to make sure that these are good jobs and they're good jobs for the next people as well that are going to taking over. We're protecting the brand, the company, the franchise and the future. So we're going to have to look at potentially reducing fixed cost further.
For the commentary earlier that you're starting to run at capacity on lordstown.
Springhill that sounds like that's a slight delay I think that was supposed to launch this year, you're saying it's 2024.
Speaker 13: Um, you know, Lansing is after that. Maybe you could just give us a sense on where the other two battery plants stand and to what extent.
And thing is after that maybe you could just give us a sense on where the other two battery plant stand and to what extent.
Paul Jacobson: We're going to have to look at efficiencies across the board and engineering and designing the vehicles and that's a little bit of trying to get ahead of some of those inflationary pressures that we saw with the steps that we've taken earlier this year. So we're going to continue to look at doing that and we've got some work cut out for us but we're committed to making it work. Great, thank you very much. Thank you.
Speaker 13: Is the gating factor more on supply versus
Is the gating factor more on supply versus.
Speaker 13: more so listening to the near term demand. And if you need to, you can delay some investment or ramp on the other two batteries.
More so listening to the near term demand and if you need to you can delay some investment to ramp on the other two battery plants.
Speaker 3: So, as I mentioned before, we will have the Lordstown plant, you know, up full capacity at the end of this year, which then allows for it to, you know, have a full year next year. The Spring Hill plant will start early, early next year. There was a couple weeks that pushed it in. It was supposed to originally start at the end of this year. It's a couple weeks due to some construction delays, but it now is on track and it will ramp with all the benefit of the learning.
However, as I mentioned before we will have the the large cam plant up full capacity at the end of this year, which then allows for it that you now have a full year next year.
Adam Jonas: Our next question comes from Adam Jonas with Morgan Stanley. Your line is open. Hi, good morning, Mary. You've acknowledged for some time that the General Motors share prices not really getting any credit for the cruise business. I think many would argue that at $29 a stock might even be implying a negative value for cruise, which I think you reckon would be pretty ridiculous.
The Springhill plant will start early early next year. There was a couple of weeks that push it and it was supposed to originally started at the end of this year is a couple of weeks dataset to some construction delays, but it now is on track and it will ramp with all the benefit of the learnings and we fully believe we're going to need all the cells from both of those plants and then when you get to.
Mary Barra: So my question is, besides continuing on growing and executing on the business, and I know we're going to learn a lot in the next year, is there anything else that your management team are bored to possibly do to unlock value for the cruise business? Adam, first of all, I completely agree with you. I think this stock is undervalued, even if it was just an ICB and software company, I think the cruise piece of it is further.
Speaker 3: and we fully believe we're going to need all the cells from both of those plants. And then when you get to the Michigan plant...
The Michigan plant and again, we think that there's going to be demand there as we continue to though.
Speaker 3: Again, we think that there's going to be demand there. As we continue to though,
Speaker 3: be agile and resilient and build to where our customer demand is, we can obviously make some changes there. But right now, the cadence I talked about is when those plants start and the fourth plant will be likely very early 26.
You know be agile and resilient and build to where customer demand is we can obviously make some changes there but right now the cadence I talked about is when those plants start and the you know the fourth plant will be likely very early 'twenty six having good good progress with Samsung So.
Speaker 3: having good progress with Samsung. So we're not slowing the ramp of the battery plants down it all. I think as you know, battery cells are the constraint of the industry. And so we're going to, we think we're going to need all of those even with this ramp. Change that we've made with, with Orion and, you know, on some of the other programs I mentioned, it's just a couple of months in most cases.
Mary Barra: I think as we continue to expand cruise in a very thoughtful way, focused on safety, I think people will see and start to unlock. I mean, just last week, we announced the opportunity that we have with Honda and cruise and General Motors in Japan, and so to be able to be involved in driving expansion, not just in the United States, but globally, I think it's going to be an important part of cruise's mid to longer term future of success. So we do believe in the technology, as I said in my remarks, it is safer than a human driver and is constantly improving and getting better, and that's what we're focused on doing.
We're not slowing the ramp of the battery plants down at all I think as you know battery cells are the constraint of the industry and so we're going to we think we're going to need all of those even with this ramp change that we've made with with Oran and on some of the other programs. I mentioned is just it's a couple of months in most cases.
Great. Thank you.
Yeah.
Speaker 1: Thank you. Our next question comes from Colin Langen with Wells Fargo. Your line is open.
Thank you. Our next question comes from Colin Langan with Wells Fargo. Your line is open.
Oh, great. Thanks for taking my questions.
Speaker 2: The UAW made a big deal about the concessions at the battery plant. I'm just wondering if you have any color there, because I was a bit surprised, because that's in a joint venture, so I wasn't sure how you actually could give consent.
The UAW made a big.
A big deal about the concessions that battery plant just wondering if you have any color there because I was a bit surprised because that's in a joint venture. So I wasn't sure how you actually could give concessions any color on what the nature of that agreement is and how you're able to kind of come to terms with them there.
Adam Jonas: All right. It's really amazing to see the growth and San Francisco. I know people that use it every day.
Paul Jacobson: Just a follow up for Paul. You guys have been very specific, I think, within a range, at least of a 2025 EV target of the mid to high single digit without IRA. You're obviously not disclosing where EV margins are today, so I'm not going to press you on that because you would have disclosed it, you're choosing not to. But I think in some of your comments, if I heard you correctly, Paul, you said, you will, you're not doing it today because of the labor situation or until you get the clearer picture on labor.
Speaker 3: Right now, the Altium team that is a separate company is negotiating the employees at Georgetown voted to unionize. And so that local leadership team is negotiating with the UHW to have their own agreement.
Right now the Altium team that is a separate company is negotiating the.
The employees at lordstown vote into unionized and so that local leadership team is negotiating with the UAW to have their own agreement.
Speaker 3: We did have some conversations and we did put an offer on the table that would put the ultim cells under the scope of the master agreement. And we believe that the time that it would allow for, which it must have benchmark economics and also operating flexibility because the battery cell plan is very different than, you know, some of the traditional operations we want right now. But at this point that offer remains open, but the focus is on ultim getting their own agreement.
We did have some conversations and we did put an offer on the table that would put the ELT themselves under the scope of the Master agreement.
And we believe that the time that it would allow for it must have benchmark economics and also operating flexibility because the battery cell plant is very different than.
Paul Jacobson: But when we get through this standoff with the UAW, can we expect that you will be specific of what the starting point is in the next year so we can understand the delta from the how lost making the EVs are today, clearly they're lost making, but put a number on it so that investors can have greater transparency of the delta. Is that something you can commit to, please? Yeah, good morning, Adam.
Some of the traditional operations, we have one right now but at this point that offer remains open but the focus is on altium getting their own agreements.
Hum.
Speaker 2: Just, you know, we're still in early days at UVs. They're seeing like demand is eased already. And it's great that you have the flexibility to kind of switch between EV and ICE, but the regulations in the US.
We're still in early days, the Ivy's seems like demand has eased already and it's great that you have the flexibility to kind of switch between E V and ice, but the regulations in the U S kind of push you see at least at some point in the future do you think there's any change in the tone in Washington of potentially pushing out some of those targets.
Paul Jacobson: First of all, just to clarify in your comments, the target is low to mid single digits X IRA. I think you said mid to high in your question, I just want to correct that for the record. But yeah, clearly look, as we said repeatedly this year, the margins in EVs are just relatively nonsensical, mainly because we've got a big scaled infrastructure with limited production across the board. So we are absolutely committed to presenting that roadmap and we'll do that at our investor day.
Speaker 14: kind of push EV, at least at some point in the future, do you think there's any change in the tone of Washington of potentially pushing out some of those targets? Doesn't it become a bit of a challenge if consumers aren't interested in buying EVs?
It doesn't become a bit of a challenge of consumers arent interested in buying evs.
It's the only way to solve it might be.
The margins right.
Speaker 3: Yeah, I mean, obviously we provide regular input into the administration and the regulatory agencies. You know, I've been very clear and on the record that, you know, the regulations can't get in front of EV demand, some of which is, will be enabled by having a robust charging infrastructure. So we regularly have those conversations, and we'll do what it takes to meet the regulatory environment as well.
Yeah, I mean, obviously, we provide regular input into the administration and the regulatory agencies.
Paul Jacobson: And the decision to push out investor day was really, we've got a lot of good strategic data points to put out there. We want to make sure that it wasn't something that was dominated by the UAW. So, you know, when the weather gets a little bit warmer in Charlotte in March, we'll have that investor day. We'll provide that roadmap, including kind of where we've come from and where we're going to get to that low to mid single digit margin target. And we're making good progress internally.
I've been very clear on the record that our you.
You know the regulations can't get in front of EV demand at some of which will be enabled by having a robust charging infrastructure. So we regularly have those conversations and we will do what it takes to meet the regulatory environment as well.
Unknown Attendee: Thanks, Paul. Absolutely, thanks for a question.
Got it alright, thanks for taking my questions.
Sure.
Speaker 1: Thank you. Our next question comes from Mark Delaney with Goldman Sachs. Your line is open.
Thank you. Our next question comes from Mark Delaney with Goldman Sachs. Your line is open.
Speaker 8: Good morning, thanks very much for taking the questions. Very much appreciate the plan to be flexible on the cadence of the EV ramp and the opportunity for GM to implement some incremental cost reductions. But given that scale was one of the key inputs in EV profits, can it be better understand if there is a certain minimum amount of volume that you may need to be at in order to reach your load amid single digit EV margin target in 2020?
Good morning, and thanks very much for taking the questions very much appreciate the plan to be flexible on the cadence of the EV ramp and the opportunity for G. M to implement some incremental cost reductions, but given our scale was one of the key inputs in EV profits it was been or better understand if there is a certain minimum.
James Picariello: Thank you. Our next question comes from James Picariello with B&P Pariva. Your line is open.
Paul Jacobson: Hi, good morning everyone. I'm curious to get your thoughts on incentive spending for the fourth quarter and just be overall pricing backdrop in North America. I mean, obviously we have, you know, there are production limitations type of strike right now. But just, you know, how are US inventory days supply trending, you know, today relative to quarter end and you have just any color there would be great. Thanks. Yeah, good morning, James.
A lot of volume that you may need to be at in order to reach your low to mid single digit EBIT margin target in 2025.
Speaker 4: Yeah, good morning, Mark. So, you know, what I would say is it's a little bit of a step function, right? So as we build a plan or transform a plan, you know, we've got to fill that up to maximize efficiency. So, you know, the decision to defer, Orion is really an example of not rushing to build that full infrastructure before we know that we can fill it up. So, ultimately leads to more of an efficient transition. So, what I would say is, you know, we've got, we've got good capacity at the...
Yeah. Good morning, Mark. So you know what I would say is it's a little bit of a step function right. So as our as we build a plant or transform a plant you know we've got to fill that up to maximize efficiency. So you know the decision to defer oriented is really an example of not not rushing to build that full infra.
Paul Jacobson: So, you know, in terms of incentive strategy, like I said in my prepared remarks, you know, I think the team deserves a lot of credit for really transforming the approach and the go to market strategies, not just around incentives, but how we market the vehicles and, you know, really across the board. That has been a huge contributor to, you know, some of the profitability that we've had on the, on the backs of the strengths and the consumers and the products that we're producing across the board.
Structure before we know that we can fill it up so ultimately it leads to more of an efficient transition. So what I would say as you know we've got we've got good capacity at the facilities that we've already transformed and we're working to scale those to that capacity as quickly as we can so it remains a big part of it.
Speaker 4: facilities that we've already transformed and we're working to scale those to that capacity as quickly as we can So it remains a big part of it But you know, I think you're gonna see a little bit of step changes through the transformation as we bring That incremental capacity online, but that's part of our plans. It's all rolled into the targets that we've outlined on our ability to To hit the load of mid-single digit margins on EVs in 2025 and then grow from there
But you know I think youre going to see a little bit of step changes through the transformation as we bring.
That incremental capacity online, but that's part of our plans. It's all rolled into the targets that we've outlined on our ability to to hit the low to mid single digit margins on Evs in 2025, and then grow from there.
Paul Jacobson: So I expect that strategy to continue, you know, certainly as we looked at at quarter end inventories had trended a little bit higher and of course this varies on a product by product basis. And we're watching that very closely in partnership with our dealers to try to make sure, you know, in light of the work stoppage that we are getting vehicles to market where we have them. So, you know, we're going to continue to manage that very tactically across the board.
Speaker 15: Thanks for that, Paul. And then, you know, on the international business, the company was profitable, including in China, despite what's been a difficult market backdrop. You speak in more detail on how you think the international market will progress from
Thanks for that Paul and then on the international business the company was profitable, including in China, Despite what's been a difficult market backdrop.
More detail on how you think the international market will progress from here. Thanks.
Speaker 3: Well, if we first start with the GMI market, X China, again, we see a really strong improvement across all of the countries that we're in from South America to the Middle East, to Korea, etc. We're going to continue to focus on it. And the one, again, it's...
Well, if we first start with it and Jim I market ex China, and you know again, we see a really strong improvement across all of the countries that we're in from South America to the Middle East to Korea et cetera, we're going to continue to focus on and the the one again, it's it's operating discipline. It's also having the right products for those.
Paul Jacobson: But, you know, everything that we're seeing in the demands that right now is pretty strong for our vehicles and we expect that to continue through the rest of the year. Okay, that's helpful. And then my follow up, can you just confirm the materials and freight impact in the quarter and just at a high level as we, you know, as we think about next year based on current commodity spot pricing and any visibility you might have in supplier costs.
Speaker 3: It's operating discipline. It's also having the right products for those markets and understanding in some cases, especially in markets like South America, where we price for what's happening from a foreign currency exchange perspective. And we're seeing the products because of the strengths of them hold up. So very pleased with where the GMI markets are.
Markets and understanding in some cases, especially in markets like South America, where we price for what's happening from a.
Paul Jacobson: Just, you know, how we should only can think about this cost bucket for 2024. I believe the 2023 guide, the prior 2023 for an expectation of mutual. Any color there would be great. Thanks. Yeah, it's a little early to get into that. We're in the midst of our budget process right now. But, you know, what I would say is we have seen some logistics and delivery pressure that we've talked about before particularly with.
Current foreign currency exchange perspective, and we're seeing the products because of the strength of them hold up so very pleased with where the GMI markets, our and as you focus on China, China is still a.
Speaker 3: And as you focus on China, you know, China is still, you know, we're looking for potentially a modest recovery continuing into Q4, but the real focus for General Motors in China is to make sure we get our Ultium products out there, you know, from a Buick and a Cadillac perspective.
You know, we're looking for potentially a modest recovery continuing into Q4, but the real focus for general Motors in China is to make sure we get our Altium products out there you know from a Buick and a N a cadillac perspective.
Speaker 3: and then also focus on the right products from an SGM ruling perspective. And then remember, we're also expanding for premium import.
And then also focus on the right products from an S. G M. A rolling perspective, and then remember we're also expanding for premium import and we think of those three initiatives are going to position us well in an uncertain market that we're facing in China, but gives us a lot of optionality at.
Paul Jacobson: The vehicles coming into North America from Mexico with with with rail challenges, et cetera. So, you know, I expect there'll be parts where there's some inflationary pressure. But as we said over the last couple of years, the amount that we spend on expedited logistics, et cetera, has been coming down as the chip shortage and some of the supply chain shortages have been tempered from the peaks in 21 and 22. You know, I will say that there's there's a bit of concern on on my mind in terms of the supply chains ability to ramp up after the work stoppage.
Speaker 3: And we think those three initiatives are going to position us well in an uncertain market that we're facing in China, but gives us a lot of optionality at the, you know, I'll say the entry level and value part of the market, the mid part of the market, and then at the top part of the market.
At the at the I'll say the entry level and value part of the market. The mid part of the market and then at the top part of the market.
Thank you.
Speaker 1: Thank you. I'd now like to turn the call over to Baksha Mary Bala for quote unquote.
Thank you I'd now like to turn the call over to Mary Barra for closing comments.
Speaker 3: Well, thank you, Amanda, and thanks to everybody for joining the call today.
Paul Jacobson: You know, obviously we're we're focused on getting this finalized as quickly as we can. But, you know, it's important that we don't end up in a situation where. You know, we can't ramp up to full production because the supply chain has to rebuild, et cetera. So, we're watching that closely and and and making sure that we're in a position, but more to come on 2024 as we as we work through that and to work through the budget. Thanks.
Well, thank you Amanda and thanks to everybody for joining the call today, it's clear that we're dealing with a lot of near term uncertainty.
Speaker 3: It's clear that we're dealing with a lot of near-term uncertainty, and then also, I'll say, the transition to EVs that will have ups and downs.
And then also the I'll say the the transition that to Evs that will have ups and downs, but I hope it's equally clear that we're going to be acting with purpose, we're going to remain agile and we're making sure. We have a system that has the ability to respond to where the market is and our commitment is to deliver a strong and profitable ice.
Speaker 3: But I hope it's equally clear that we're going to be acting with purpose. We're going to remain agile and we're making sure we have a system that has the ability to respond to where the market is.
Speaker 3: And our commitment is to deliver a strong and profitable ice business, as well as a strong and profitable EV business for our future.
Business as well as a strong and profitable EV business for our future. In addition, I think if you look deeper into the organization that my Cabot has built from a software perspective. This is a really foundational for us to be able to capture additional revenue.
Dan Levy: Thank you. Our next question comes from Dan Levy with Barclays. Your line is open. Hi, good morning. Thank you for taking the questions. I wanted to start first with just a question on the volume versus price makes interplay. You know, pre-COVID you were at, call it three anywhere from 3.2 to 3.6 million units and annual volume. This year on some of the consensus numbers, strike aside will be closer to call it 3 million units.
Speaker 3: In addition, I think if you look deeper into the organization that my debit has built from a software perspective, this is really foundational for us to be able to capture additional revenue with a very different margin profile than some of the aspects of the vehicle and the business that we have today. And then finally, we see tremendous opportunity with
Dan Levy: Now you're absorbing more in the way of labor costs. I think we're waiting to see what happens with EVs, but most would view EVs to be a cost challenge. So, you know, you've already done a really good job showing us the benefits of mix and pivoting to profitable units. I think that was something you alluded to in your, in your prepared marks and really, you know, business that you've, you know, in a way, shown slight pivots away from volume. How much more do you think that business can focus more on mix and profitable units and relatively reduce focus on volume?
With a very different margin profile than some of the aspects of the vehicle and the business that we have today and then finally, we see tremendous opportunity with with crews.
Speaker 3: and we'll continue to work across not only this country, working with our regulators to make sure we can deploy, deploy cruises.
And we will continue to work across not only this country working with our regulators to make sure we can delight.
Deploy crew safely.
Speaker 3: I know the UAW contract is one of the biggest sources of uncertainty right now, but I want to remind you with what I said earlier. We will not agree to a contract that isn't responsible for our employees and for our shareholders. We need to make sure we have a contract that is going to allow us to compete and win.
I know the UAW contract is is you know one of the biggest sources of uncertainty right now, but I want to remind you with what I said earlier, we will not agree to a contract that isn't responsible for.
For our employees and for our shareholders, we need to make sure. We have a contract that is going to allow us to compete and win and what is a challenging market for Evs and also allows us to support.
Speaker 3: and what is a challenging market for EVs and also allows us to support the business that we have with strong margins in our ice business.
The business that we have with strong margins in our ice business. When we do reach an agreement we will schedule an event shortly thereafter to discuss the economics and our strategy for managing them and as Paul said, we will host our next Investor day in March to go even deeper into the ice E V. A V and specifically our software plants.
Speaker 3: When we do reach an agreement, we will schedule an event shortly thereafter to discuss the economics and our strategy for managing them. And as Paul said, we will host our next investor day in March to go even deeper into the ICE, EV, AV, and specifically our software plans.
Mary Barra: Well, Dan, appreciate the question. We really want to focus on both, but it's got to be profitable growth. When you look at the EVs, you know, and even our ice vehicles, I just mentioned that the tracks, you know, 50% of the customers for the new tracks are new to General Motors. So, from an EVs point specifically, we think that along the coast where EV adoption is higher, that's going to be a growth opportunity for us, you know, over the next several years.
Mary Barra: And we're going to just focus on continuing to have winning ice and winning EV products that people want to buy. And so, I don't, I feel like your question is saying, are you just going to shrink? And the answer is no, that's not our intent. Our intent is to be profitable and then grow and expand. And we think we have the opportunity to do that. And Dan, I think, you know, I'll add that, you know, I think the challenges of the last few years, I think, have taught us a lot about ourselves and about the quality of our products.
Speaker 3: you know when you look at our growth businesses especially crews and software we're at an inflection point right now and we see tremendous upside opportunity and growth and so we look forward to discussing each of them with you in more detail as we move forward
When you look at our growth businesses, especially cruise and software. We're at an inflection point right now and we see tremendous upside opportunity in growth. Instead, we look forward to discussing each of them with you in more detail as we move forward. So make no mistake I'm, Jim is very committed to all EV future, we're not changing any of our goals. There. We're just trying to.
Speaker 3: So make no mistake, Jim is very committed to an all EV future. We're not changing any of our goals there. We're just trying to make sure the company is more agile and resilient so that we can be successful as we manage this transformation.
And make sure the company is more agile and resilient. So that we can be successful as we manage this transformation. So I want to thank you again for joining us. Thanks for your questions and I hope everyone has a good day.
Speaker 3: So I want to thank you again for joining us. Thanks for your questions, and I hope everyone has a good day.
Speaker 1: Thank you. That concludes the conference call for today. Thank you for joining.
Thank you that concludes the conference call for today. Thank you for joining.
Mary Barra: And it all starts with that when you create products that customers love. You have an opportunity to think about the business. So, while, you know, the profitability and the margins have gone up, we've been really focused on that. But, you know, some examples of that are what we're doing with buildable combinations, what we've been doing with marketing spend, et cetera. It's really focused on driving at the unit level, the margin improvement across the board.
Mary Barra: So, focusing on those premium mixes where we know the demand is focusing on the premium vehicles where there's supply constraints. Those are lessons that we can take into the future going forward and are going to help us not just with ice profitability and margins, but also help pave the way for any EV strategy that is really focused on consistent margin performance going forward. So, incredibly proud of what the organization has done.
Mary Barra: And certainly think there's more to come. Now, we've been doing all of this in a lower SAR environment and feel, you know, really good about our ability to continue that. Should we get back to more historical, normal levels, you know, at higher volumes across the board. So, you know, I think it's been good lessons learned and, you know, you never let a good crisis go to waste. And I think that's where we've seen some really good long-term permanent learnings for the organization.
Mary Barra: Great, thank you. And then, second question, wanted to just go into the dynamics behind the battery plants.
Mary Barra: Thank you for the commentary earlier that you're starting to run at capacity on Lord's Town. Spring Hill, that sounds like that's a slight delay, I think that was just a launch issue you're saying, it's 2024. You know, the land thing is after that. Maybe you could just give us a sense on where the other two battery plants stand and to what extent is the gating factor more on supply versus more so listening to the near term demand. And if you need to, you can delay some investment or ramp on the other two battery plants.
Mary Barra: So, as I mentioned before, we will have the large town plant, you know, up full capacity at the end of this year, which then allows for it to, you know, have a full year next year. The Spring Hill plant will start early, early next year. There was a couple of weeks that pushed it in, it was supposed to originally start at the end of this year. It's a couple of weeks due to some construction delays, but it now is on track and it will ramp with all the benefit of the learnings.
Mary Barra: And we fully believe we're going to need all the cells from both of those plants. And then when you get to the Michigan plant, again, we think that there's going to be demand there. As we continue to, though, you know, be agile and resilient and build to where our customer demand is, we can have, obviously, make some changes there. But right now, the cadence I talked about is when those plants start and the, you know, the fourth plant will be likely very early 26, having good, good progress with Samsung.
Mary Barra: So we're not slowing the ramp of the battery plants down at all. I think, as you know, battery cells are the constraint of the industry. And so we're going to, we think we're going to need all of those even with this ramp change that we've made with with Orion. And, you know, on some of the other programs I mentioned, it's just a couple of months in most cases.
Unknown Attendee: Great.
Colin Langan: Thank you.
Mary Barra: Our next question comes from Colin Langen with Wells Fargo. Your line is open. Oh, great. Thanks for taking my questions. The UAW made a big deal about the concessions at the battery plant. I'm just wondering if you have any color there because I was a bit surprised because that's in a joint venture, so I wasn't sure how you actually could give concessions. Any color on what the nature of that agreement is and how you're able to kind of come to terms with them there.
Mary Barra: Right now, the Altium team that is a separate company is negotiating the employees at Georgetown voted to unionize. And so that local leadership team is negotiating with the UAW to have their own agreement. We did have some conversations and we did put an offer on the table that would put the Altium cells under the scope of the master agreement. And we believe that the time that it would allow for which it must have benchmark economics and also operating flexibility because the battery cell plant is very different than some of the traditional operations we want right now. But at this point, that offer remains open, but the focus is on Altium getting their own agreement.
Colin Langan: I just, we're still on early days at UVs. There seems like demand is eased already. And it's great that you have the flexibility to kind of switch between EV and ICE, but the regulations in the U.S. Ives, kind of push Evie at least at some point in the future. Do you think there's any change in the tone of Washington of potentially pushing out some of those targets? Doesn't it become a bit of a challenge of consumers?
Colin Langan: Aren't interested in buying EVs? And you're just the only way to sell them would be to hit your margins, right? Yeah, I mean, obviously we provide regular input into the administration and the regulatory agencies. You know, I've been very clear on the record that you know, the regulations can't get in front of EV demand, some of which will be enabled by having to robust charging infrastructure. So we regularly have those conversations and we'll do what it takes to meet the regulatory environment as well. Got it. All right. Thanks for taking my question. Sure. Thank you.
Mark Delaney: Our next question comes from Mark Delaney with Goldman Sachs. Your line is open. Good morning. Thanks very much for taking the questions. Very much appreciate the plan to be flexible on the cadence of the EV ramp and the opportunity for GM to implement some incremental cost reductions. But given that scale was one of the key inputs and EV profits.
Paul Jacobson: Can you have a better understand if there is a certain minimum amount of volume that you may need to be at in order to reach your low to mid single digit EV margin target in 2025? Yeah, good morning, Mark. So, you know, what I would say is it's a little bit of a step function, right? So as we build a plan or transform a plan, you know, we've got to fill that up to maximize efficiency.
Paul Jacobson: So, you know, the decision to defer orient is really an example of not not rushing to build that full infrastructure before we know that we can fill it up. So ultimately leads to more of an efficient transition. So what I would say is, you know, we've got. We've got good capacity at the facilities that we've already transformed and we're working to scale those to that capacity as quickly as we can. So it remains a big part of it. But, you know, I think you're going to see a little bit of step changes through the transformation as we bring that incremental capacity online. But that's part of our plans.
Paul Jacobson: It's all rolled into the targets that we've outlined on our ability to hit the low to mid single digit margins on EVs in 2025 and then grow from there. Thanks for that, Paul. And on the international business, it's going to be as profitable, including in China, despite what's been a difficult market backdrop.
Paul Jacobson: You speak more detail on how you think the international market will progression here. Thanks. Well, if we first start with the GMI market X China, you know, again, we see a really strong improvement across all of the countries that we're in from South America to the Middle East to Korea, etc. We're going to continue to focus on the one. Again, it's operating discipline. It's also having the right products for those markets and understanding in some cases, especially in markets like South America, where, you know, we price for what's happening from a current foreign currency exchange perspective.
Paul Jacobson: And we're seeing the products because of the strengths of them hold up. So very pleased with where the GMI markets are. And as you focus on China, you know, China is still, you know, we're looking for potentially a modest recovery continuing into Q4. But the real focus for General Motors in China is to make sure we get our Altium products out there, you know, from a Buick in a Cadillac perspective, and then also focus on the right products from an SGM ruling perspective.
Paul Jacobson: And then remember, we're also expanding for premium import. And we think those three initiatives are going to position us well in an uncertain market that we're facing in China. And it gives us a lot of optionality at the entry level and value part of the market, the mid part of the market, and then at the top part of the market.
Unknown Attendee: Thank you.
Mary Barra: I'd now like to turn the call over to back to Mary Barra for a clear closing comment. Thank you, Amanda. And thanks to everybody for joining the call today.
Mary Barra: It's clear that we're dealing with a lot of near-term uncertainty and then also the, I'll say, the transition to EVs that will have ups and downs. But I hope it's equally clear that we're going to be acting with purpose. We're going to remain agile and we're making sure we have a system that has the ability to respond to where the market is and our commitment is to deliver a strong and profitable ice business as well as a strong and profitable EV business for our future.
Mary Barra: In addition, I think if you look deeper into the organization that my gamut has built from a software perspective, this is really foundational for us to be able to capture additional revenue with a very different market profile than some of the aspects of the vehicle and the business that we have today. And then finally, we see tremendous opportunity with cruise and we'll continue to work across not only this country, working with our regulators to make sure we can deploy cruise safely.
Mary Barra: I know the UAW contract is one of the biggest sources of uncertainty right now, but I want to remind you with what I said earlier. We will not agree to a contract that isn't responsible for our employees and for our shareholders. We need to make sure we have a contract that is going to allow us to compete and win in what is a challenging market for EVs and also allows us to support the business that we have with strong margins in our ice business. When we do reach an agreement, we will schedule an event shortly thereafter to discuss the economics and our strategy for managing them.
Mary Barra: And as Paul said, we will host our next investor day in March to go even deeper into the ice EV, AV, and specifically our software plans. When you look at our growth businesses, especially cruise and software, we're at an inflection point right now and we see tremendous upside opportunity and growth and so we look forward to discussing each of them with you in more detail as we move forward. So make no mistake, Jim is very committed to an all EV future. We're not changing any of our goals there. We're just trying to make sure the company is more agile and resilient so that we can be successful as we manage his transformation.
Unknown Attendee: So I want to thank you again for joining us. Thanks for your questions and I hope everyone has a good day. Thank you.
Unknown Attendee: That concludes the conference. Call for today.
Unknown Attendee: Thank you for joining.