Q4 2024 General Motors Co Earnings Call
James.
Speaker Change: Good morning and welcome to the General Motors Company fourth quarter and calendar year 2024 earnings conference call.
During the opening remarks, all participants will be in a listen-only mode.
Speaker Change: After the opening remarks, we will conduct a question and answer session.
Speaker Change: We are asking analysts to limit their questions to one and a brief follow-up.
Speaker Change: To ask a question, press star then 1 on your telephone keypad to join the queue.
Speaker Change: To withdraw your question, press star then 2. As a reminder, this conference call is being recorded Tuesday, January 28, 2025. 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.
Speaker Change: We appreciate you joining us as we review GM's financial results for the fourth quarter and calendar year 2024.
Speaker Change: Our conference call materials were issued this morning and are available on GM's Investor Relations website. We are also broadcasting this call via webcast.
Paul Jacobson: Joining us today are Mary Barra, GM's Chair and CEO, and Paul Jacobson, GM's Executive Vice President and CFO. Dan Burse, President and CEO of GM Financial, will also be joining us for the Q&A portion.
Paul Jacobson: 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 Change: Thanks, Ashish, and good morning. I'd like to begin by thanking our employees, dealers, and suppliers for helping us deliver another outstanding year.
Speaker Change: A year ago on this call, I said that we were optimistic about 2024 given the choice we would offer customers, including industry-leading full-size pickups, new and redesigned SUVs, and an expanding portfolio of EVs.
Speaker Change: and I stress that we will be focused on execution and profitability.
Speaker Change: I'm proud to say that our full-year revenue grew by 9% last year. We were number one in the U.S. in retail, fleet, and total sales. We grew our market share, and we distanced ourselves from the industry's pricing incentives and inventory pressures.
Speaker Change: In our growing EV business, we produced and wholesaled 189,000 vehicles in North America.
Speaker Change: We doubled our market share over the course of a year as we scaled production.
Speaker Change: and our portfolio became variable profit positive in the fourth quarter. This combination of compelling vehicles and high volume and growing segments, strong execution and discipline led to record EBIT adjusted, record adjusted automotive free cash flow and record EPS diluted adjusted.
Speaker Change: At the same time, we continued to allocate capital consistently and in a balanced manner. We invested to drive the business forward, and we improved our balance sheet.
Speaker Change: Our employees and owners are all sharing in our success. I'm pleased to share that our global salary team earned strong performance bonuses and our U.S. hourly employees once again earned the industry's highest profit sharing totaling more than $640 million.
Speaker Change: That's a record payout of up to $14,500 per person, equal to more than two months of extra pay for average UAW-represented team member.
Speaker Change: Investors in GM also earned a 50% total return and we ended the year with fewer than 1 billion shares outstanding, a goal we reached ahead of plan.
Speaker Change: Throughout the year, we also address challenges with resolve. In China, we have been working with our JV partners to drive better performance in the market by right-sizing the businesses, launching new products, reducing dealer inventory, and building to demand.
Speaker Change: We are making good progress and reported positive equity income for the fourth quarter before restructuring costs.
Speaker Change: To improve year-over-year results and make SGM sustainably profitable, they will be implementing a wide range of restructuring initiatives this year that include reducing capacity to operate within utilization levels of about 80% or better.
Speaker Change: As you know, we also stopped funding robo-taxi development at Cruise. We have a proposed restructuring plan that will refocus our autonomous driving strategy on personal vehicles.
Speaker Change: We expect to see a run rate savings of about a billion dollars on an annualized basis by ending robo-taxi development. And we look forward to acquiring the small number of crew shares we don't own and finalizing the restructuring plan later this quarter.
Speaker Change: The momentum we have in both ICE vehicles and EBs will drive our results once again in 2025.
Speaker Change: For example, the redesigned Chevrolet and GMC full-size SUVs that we launched late last year are supporting even stronger ATPs than the outgoing models thanks to their refined exteriors, all-new interiors, and new models like our GMC Yukon AT4 Ultimate.
Speaker Change: We also have a full year of our new compact and midsize ICE SUVs, which include some of our highest volume nameplates like the Chevrolet Equinox, Chevrolet Traverse, and GMC Acadia.
Speaker Change: They are great examples of our strategy to pair bold designs to drive higher ATPs with discipline and capital efficiency to drive better profitability. As Mark shared at Investor Day, we're seeing EBIT improvements in the 10 percentage point range on some of these vehicles.
Speaker Change: Cadillac is also very well positioned. Last year, Cadillac had its best full year sales since 2016, thanks to the ongoing success of the Escalade.
with its refined exterior and stunning new interior.
Speaker Change: EV adoption has been higher in luxury segments. We are being guided by the customer and will continue to be, and these new Cadillacs stand out with their beautiful designs, advanced technology, and customer-focused innovation.
Here are just a few examples.
Speaker Change: The Optik, which is scaling now, and the 7-passenger Vistik, which launches in the spring, will be the first Cadillacs to offer AKG audio systems with Dolby Atmos that reveal more depth, detail, and clarity in the customer's favorite music.
All Cadillac EVs now come equipped with vehicle-to-home capability.
Speaker Change: allowing them to power a home during outages using a GM Energy PowerShift Charger and our Vehicle-to-Home Equipment Package.
Speaker Change: And with the Vistec, Cadillac will be the first GM brand to roll out a new 8S feature that builds on adaptive cruise control and lane centering. The new feature allows an attentive driver to engage the system and travel on millions of miles of roads with a light hand on the wheel.
Speaker Change: Then there's the Cadillac Escalade IQ. With its presence, range, performance, comfort, and technology, it's really in a class of its own.
Speaker Change: One of our New York area Cadillac dealers, who has decades of experience with other luxury franchises, says it's the most impressive vehicle he has ever driven. Customers are noticing. Since production began late last year, we've sold more than 1,500 Escalade IQs.
Speaker Change: 2025 will also be a year of rapid growth for supercruise across all of our brands.
Speaker Change: Our customer-focused strategy with Super Cruise is to continuously refine and expand its capabilities to make it indispensable. This is how we are setting the stage for recurring high-margin revenue streams from subscriptions.
Speaker Change: Since we launched SuperCruise, we have added hundreds of thousands of miles of new roads to its network and introduced features like automatic lane change and hands-free towing. This has helped make about 60% of our roughly 360,000 SuperCruise customers regular users. This year, we expect our SuperCruise equipped fleet to roughly double in size.
Speaker Change: Subscription revenue is becoming an increasingly important part of the supercruise opportunity now that our first customers have completed their three-year trial. Last year we saw subscription attach rates of about 20% off of a base of roughly 18,000 vehicles.
Speaker Change: This year, an additional 33,000 vehicles will end their trial periods, and we target to more than double subscription revenue. Within five years, we expect to approach about two billion dollars in total annual revenue from Super Cruise.
Speaker Change: These are just a few of the many exciting opportunities ahead of us and we look forward to sharing more details with you as we go forward.
Speaker Change: Before I turn the call over to Paul, I'd like to mention the projects we're pursuing with Hyundai. As Hyundai has shared, our teams are moving quickly to finalize the first of several product and purchasing agreements that are designed to help us move faster, lower costs, and become more capital efficient.
Speaker Change: The collaborations will be global in nature, targeting specific segments and areas of the business, and we'll be sharing more details very soon.
Speaker Change: I would also like to address the uncertainty around public policy, trade, and regulation.
Speaker Change: We have been both proactive with Congress and the administration, and in our conversations, we have stressed the importance of a strong manufacturing sector and American leadership in advanced technologies. It's clear that we share a lot of common ground, and we have appreciated the dialogue.
Speaker Change: We believe the President wants to use policy and regulations in ways that will strengthen, not harm, domestic manufacturers like GM. We look forward to continuing to work with the President and his team as they consider how to strike the right balance on these important issues.
Speaker Change: With respect to possible tariffs, we are working across our supply chain, logistics network, and assembly plans so that we are prepared to mitigate near-term impacts. Many of these actions are no-cost or low-cost. What we won't do is spend large amounts of capital without clarity.
Speaker Change: Whatever happens on these fronts, we have a very broad and deep portfolio of ICE vehicles and EVs that are both growing market share and will be agile and execute as efficiently as possible.
Speaker Change: With that, I'd like to invite Paul to walk you through our results and 2025 financial guidance and then we'll move to Q&A. Thank you.
Paul Jacobson: Thank you, Mary, and I appreciate you all joining us this morning as we summarize another year of strong financial results for GM.
Paul Jacobson: Our full year EBIT adjusted of $14.9 billion was at the high end of the range we guided to in October, driven by a particularly strong November and December.
Paul Jacobson: This resulted in $10.60 of EPS diluted-adjusted, up 38% year-over-year, and partially aided by a significantly lower share count as we continue to return excess capital to shareholders.
Paul Jacobson: We increased our full-year revenue by 9% to $187 billion with a 6% rise in wholesale volumes and ATPs above $50,000.
Paul Jacobson: Our strategy of discipline, pricing, and incentives continues to separate us from most of our peers.
Paul Jacobson: And at the same time, we were growing market share. Our U.S. market share for the full year was up 30 basis points to 16.5%, and we ended the year on a positive note at 17.5% in the fourth quarter.
Paul Jacobson: the highest since the fourth quarter of 2018, excluding the impacts of the pandemic in 2020. Our performance was fueled by strong EV growth and a refreshed ICE portfolio.
Paul Jacobson: Ice dealer inventory ended at 53 days at the low end of our 50 to 60 day year-end target, driven by strong sales and appropriately balancing our production to demand.
Paul Jacobson: And we are also making significant progress on EVs. In 2024, we wholesaled 189,000 EVs and delivered more than 146,000 units.
Paul Jacobson: Recall at the end of the third quarter we had around a hundred days of EV dealer inventory so that customers would have the opportunity to see and experience our products. This strategy paid off and we successfully reduced this to 70 days by year-end as our EV deliveries rose.
Paul Jacobson: As Mary highlighted, a big focus for the company has been improving EV profitability.
Paul Jacobson: We achieved variable profit positive on our EVs in the fourth quarter through continued manufacturing scale and efficiencies from higher production, improved material costs, including lower cell costs from scale and performance,
Paul Jacobson: and expansion of our EV portfolio with the launch of the Cadillac Escalade IQ and Sierra EV.
Paul Jacobson: There's more work to achieve our goal of a positive EBIT margin, but we believe we're making good progress. For instance, the Equinox EV has seen a $1,000 improvement in variable profits since its launch in just the second quarter of last year.
Paul Jacobson: Next, I'd like to discuss capital allocation. We continue to balance three key elements, investing in our business, maintaining a strong balance sheet, and returning excess capital to our shareholders.
Paul Jacobson: First, we believe that the amount of capital we are investing back into the business is appropriate to efficiently support long-term profitable growth. Our forecasted capital spend in 2025, including battery JV investments, remains similar year over year at $10 to $11 billion.
Paul Jacobson: Second, we paid off $750 million of senior notes in the fourth quarter ahead of their maturity in 2025. We have another $1.75 billion maturing later this year. We will assess refinancing opportunities or debt extinguishment as we progress throughout the year.
Paul Jacobson: Third, we returned a substantial amount of capital to our shareholders during 2024. We generated full-year adjusted auto-free cash flow of $14 billion and returned nearly 55% of this free cash flow, or approximately $7.6 billion.
Paul Jacobson: In the fourth quarter, we completed the ASR retiring an additional 25 million shares.
Paul Jacobson: We also repurchased 87 million shares in the open market during the quarter at an average price of $53.84 a share.
Paul Jacobson: On a diluted basis, this represents 1.02 billion shares, a decrease of 28% since the end of 2022, and a decrease of 12% compared to the end of 2023.
Paul Jacobson: Moving forward we expect to continue returning excess capital to our shareholders and further reducing the share count.
Paul Jacobson: Getting into the fourth quarter results, total company revenue was $48 billion, up 11% year-over-year, driven by higher wholesales and consistent pricing.
Paul Jacobson: We achieved $2.5 billion in EBIT adjusted, 5.3% EBIT adjusted margins, and $1.92 in EPS diluted adjusted.
Paul Jacobson: We completed the net $2 billion fixed cost reduction program. Compared to the end of 2022, we realized $900 million in lower marketing spend and $700 million in lower automotive engineering costs.
Paul Jacobson: The remainder was realized through rationalization across some of our earlier stage initiatives which was partially offset by higher depreciation and amortization.
Paul Jacobson: A quick update on our EV inventory valuation allowances. We ended the year with a balance of $1.4 billion, which includes a small reduction in the fourth quarter. We expect further reductions as we move through 2025, but the pace and magnitude will be dependent on EV demand.
Paul Jacobson: We achieved adjusted automotive free cash flow of $1.8 billion during the fourth quarter, up $500 million year-over-year, primarily driven by EBIT performance.
Paul Jacobson: North America delivered fourth quarter EBIT adjusted of $2.3 billion, up $300 million year-over-year.
Paul Jacobson: We benefitted from the absence of 2023's fourth quarter strike and inventory adjustments. Additionally, the fixed cost program contributed to offsetting higher labor and warranty costs. While we remained disciplined on pricing, we faced a slight headwind from full-size truck incentives.
Paul Jacobson: I want to take a moment to emphasize the strong, full-year North American margin of 9.2%, well within our targeted 8-10% range. We are executing well on our product launches, along with being disciplined on cost, pricing, and inventory levels. Our broad and refreshed product portfolio is a key factor driving these strong results.
Paul Jacobson: In the fourth quarter, we achieved a margin of 5.8 percent. This included certain discrete items, including breach of warranty and legal reserves, which roughly impacted margin by 1.3 percentage points.
Speaker Change: I'd now like to discuss the continued higher warranty costs, which include the initial product warranty accrual, recall campaigns, and breach of warranty exposure.
Speaker Change: Despite our success, we know we have an opportunity to improve our results by aggressively targeting our warranty expense. The first priority is always our customers, focusing on parts availability. At the same time, the team is actively working to tackle the root cause of issues as they arise.
Speaker Change: Our commitment starts with the initial quality of our products, an area where we are a leader in the industry. We've achieved a significant reduction in claims with a decrease in the U.S. of over 30% since 2018.
Speaker Change: However, this benefit has been more than offset by a 100% increase in the cost of repair driven by both parts and labor inflation over the same period.
Speaker Change: Rest assured, we remain committed to finding ways to mitigate inflationary pressures and navigate the strict regulatory and legal landscape. We are optimistic that our intense focus on driving down repair costs and improving quality will reduce our warranty costs over time.
Speaker Change: GM International delivered fourth quarter EBIT adjusted of $200 million driven by strong execution and tight cost controls in South America and the Middle East along with positive China equity income of $17 million excluding the restructuring charge.
Speaker Change: The team in China has done a great job of reducing inventory, with SGM's inventories down over 60% from the end of 2023.
Speaker Change: We recorded a 4.1 billion dollar special item in our Auto China Equity Income. Approximately half of this related to an impairment, while the rest is connected to various restructuring actions we have taken so far in China.
Speaker Change: It's important to note that these charges are not expected to require any capital from GM as the joint venture has sufficient cash to cover these costs.
Speaker Change: We believe these actions, along with a comprehensive product launch plan in 2025 that ensures at least one NEV option per product program, will help us achieve our target of the China business returning to profitability in 2025.
Speaker Change: GM Financial also had a strong year of profitability and capital return to GM.
Speaker Change: Fourth quarter EBT adjusted with consistent year-over-year at $700 million. Higher net financing revenue offset lower lease termination gains and higher provision expense driven by increased loan origination volume.
Speaker Change: GM Financial's full year EBT adjusted was 3.0 billion dollars at the top of their guidance range and they paid dividends of 1.8 billion dollars to GM.
Speaker Change: Cruise expenses, excluding the special items for the restructuring charge, were $400 million in the quarter, down from $800 million in 2023.
Speaker Change: As Mary said, we believe our refocused autonomous driving strategy will lead to efficiencies and a $1 billion annual run rate savings in our investment relative to the $1.7 billion we spent on crews in 2024.
Speaker Change: These decisions led to a $500 million restructuring charge in the fourth quarter, which was classified as a special item, with approximately two-thirds being cash-based.
Speaker Change: Additionally, later this year, we plan to include the expenditures for the cruise employees in our North America segment. This will impact our North America margin by around 50 basis points this year. However, we still expect to remain within our 8 to 10 percent range.
Speaker Change: It will also increase our auto fix costs and reduce our adjusted automotive cash flow as the cash used by crews was excluded previously.
Speaker Change: Moving to our 2025 guidance, we expect EBIT adjusted in the $13.7 to $15.7 billion dollar range, EPS diluted adjusted to be in the $11 to $12 per share range, and adjusted automotive free cash flow in the $11 to $13 billion dollar range.
Speaker Change: It's important to note that our guidance does not account for the impact of future policy changes by the new administration, including tariffs, tax reform, or other regulation changes.
Speaker Change: We do anticipate some headwinds in both volume and mix, stemming from a modest decline in ice wholesale volume in North America as we appropriately balance dealer inventory levels.
Speaker Change: However, this will be partially offset by higher EV volume. We're optimistic in our robust product portfolio and our ability to drive market share expansion through strong ICE sales, complemented by a strategically diverse lineup of EVs.
Speaker Change: Additionally, we are planning for a similar U.S. industry year-over-year to 2024.
Speaker Change: In terms of pricing, we're assuming a decline in North America of 1 to 1.5% year-over-year to capture potentially higher incentives or a moderation in ATPs. While we are not seeing this at the moment, we believe it's a prudent way to plan our budget as we have in years past.
Speaker Change: Offsetting these headwinds, we anticipate EV profitability improvements at the low end of our $2-4 billion EBIT year-over-year target.
Speaker Change: This improvement is based on wholesales of around 300,000 units and is predicted to come from scale, fixed cost absorption, and a continued focus on cell and vehicle cost reductions.
Speaker Change: Regarding CRUISE, our guidance includes around $500 million of the $1 billion annual savings we previously discussed. This is based on our assumption that CRUISE employees will be fully integrated into GM by mid-year.
Speaker Change: For GM International, we expect a tailwind from restructuring the China business and are targeting profitable equity income for the full year. GM International outside of China should be similar to what was delivered in 2024.
Speaker Change: For GM Financial, we expect EBT adjusted to be in the $2.5 to $3 billion range, reflecting the targeted return for the credit risk profile and asset mix in a largely stable economic environment.
Speaker Change: We expect an increase in earning assets driven by both loan and lease portfolios.
Speaker Change: We are forecasting another year of robust, adjusted, automotive-free cash flow. However, we anticipate year-over-year headwinds in the range of $1 to $3 billion from the non-repeat of working capital benefits realized in 2024, primarily from dealer inventory restocking, the timing of payments for previously accrued liabilities, notably warranty, and the inclusion of cruise spend.
Speaker Change: Capital spending is expected to be similar year over year and in the 10 to 11 billion dollar range including battery JV investments.
Speaker Change: We continue to strategically spend on our ICE portfolio and build flexibility into our manufacturing capabilities to maintain agility to adapt to consumer preferences between ICE and EV powertrains.
Speaker Change: Our full year EPS guidance assumes weighted average diluted share count of approximately 1 billion shares, which excludes the impact of any future open market purchases.
Speaker Change: In closing, I want to express my sincere gratitude to every GM team member. Their hard work and dedication have been pivotal in driving our strong financial performance in 2024.
Speaker Change: A relentless focus on execution, discipline, and adaptability has enabled us to successfully navigate a dynamic and challenging landscape, and we believe these key success factors are going to continue to support our efforts towards another promising year in 2025.
Speaker Change: This concludes our opening comments, and we'll now move to the Q&A portion of the call.
Thank you. As a reminder,
Speaker Change: To analysts, we are asking that you limit your questions to one and a brief follow-up so that we may get to everyone on the call. To ask a question, press star then 1 on your telephone keypad to join the queue. To withdraw your question, press star then 2. Our first question will come from the line of Dan Levy with Barclays. Your line is open.
Hi, good morning. Thank you for taking the questions.
Dan Levy: I wanted to start with a question on the guidance and specifically if we could double click on the volume assumptions. I know you're talking about
Dan Levy: for 2025. I know a lot of that is just a non-repeat of inventory build. Maybe you can just give us a sense of.
Dan Levy: What type of SAR and share assumptions do you have? And then maybe you can just comment specifically on the share. It was really strong in the fourth quarter. Is there any sustainability to that?
So, hey Dan, thanks for the question you are
Dan Levy: Getting a little garbled at the end. I think that's cell connection, but I think you were asking about SAR assumptions for 25 and then the share uplift that we saw at the back half of the year, particularly in the fourth quarter.
How sustainable is that?
Dan Levy: So, you know, we're looking at 2025 on a SAR basis to be fairly similar to 2024.
Dan Levy: I think there's some speculation out there that we saw a big pull ahead in demand in the month of December, whether that was EV-driven or just consumer-driven ahead of inauguration. I think one of the things is we're adopting a little bit of a wait-and-see on that. January has been really noisy, as Mary had mentioned in comments this morning about...
Dan Levy: both the weather, the fires in California, et cetera. So it's tough to glean whether there was a big pull forward. So we've got a projected demand to be pretty similar.
until last year.
Dan Levy: On the share side, you know, I think really proud of the team. They have done a tremendous job, and as we've said for a few years, as we have been able to ramp up EVs, we saw the opportunity to grow share in EVs and ICE, and it was not mutually exclusive, and I think the team's been doing that. You know, we are at a share level that we haven't seen, you know, if you exclude COVID, since 2018.
Dan Levy: I think that's tremendous results. I think the team is not going to stop there, but, you know, we're going to continue to work towards that. You know, going forward, you know, I think we were projecting an opportunity or some pretty big ice impacts from not having as much restocking. I think...
Dan Levy: We're going to kind of wait and see to where demand is. We obviously do have an opportunity to build a little bit of inventory within the 50-60 day window that we've outlined at year end as a result of that demand.
Dan Levy: surge that we saw in 4Q, but we're going to kind of watch that. But other than that, I think a pretty similar environment in 25 than what we experienced in 24.
Speaker Change: Great, thank you. As a follow-up, a bit of a policy question. I know you're waiting to see how everything plays out, but...
Speaker Change: President Trump has said he's reversing the the EV mandate. I think we all expect
Speaker Change: some reversal in the tax credits, perhaps in changing EPA. In this environment, can you give us a sense of how you're thinking about resource allocation toward EVs? You know, how much overhead spend can you pull back on?
Speaker Change: How the strategy shifts amid a potential change in ED policy.
Speaker Change: Well, I think you've seen us over the last few years be very mindful of what consumer demand is for EVs and make decisions like we did with Orion and like the third plant that we're in the process of selling our share to LG. So we're going to continue to make decisions like that to be
Speaker Change: appropriate with our capital. As we look at how EVs are going to grow, we never expect it would be a straight line. We're also going to deploy capital appropriately to our ICE portfolio. I think we have the strongest portfolio General Motors has had in decades. Maybe I'm a little biased there, but I think we're seeing that with the response in the market as well. So, we're going to continue to be very efficient as we deploy capital to both ICE and EV, again, guided by the consumer demand.
Thank you.
Okay, thank you.
Speaker Change: Thank you. Our next question comes from Emanuel Rosner with Wolf Research. Your line is open.
Thank you very much. Good morning.
Emanuel Rosner: My first question is on this margin exit rate in 2024.
Emanuel Rosner: You know, without sort of any large LC and RV charges like you had last year or the strike and strong ATPs in the quarter, I think, you know, some investors may have expected a bit of a higher exit rate in terms of margin. I know you mentioned about 130 basis point of, you know, one-time type items.
Emanuel Rosner: Can you just come back and comment on the quarter performance and to what extent, I guess, what would the bridge look like towards 8 to 10 percent in 2025?
Speaker Change: Good morning, Emmanuel. Not surprised about this question. We did say in the remarks that there were two
Speaker Change: specific issues really around warranty and policy. One was a legal settlement.
Speaker Change: on the oil consumption case, which we recorded in the fourth quarter. That'll be in our 10-K. And then the second is, you know, we've continued to see some breach of warranty pressure, as we talked about in the regulatory and legal environment. We're trying to get a little bit ahead of that, just based on the trends that we see. Those two items in and of themselves were a little bit more than a point.
Speaker Change: as we talked about. That kind of puts us in line with normal seasonality. I'd also, you know, point out, remember that we had...
Speaker Change: I think we disclosed about $300 million in 3Q that was a pull-forward of vehicles that were expected to deliver in the fourth quarter.
that benefited September in Q3 at the expense of Q4.
Speaker Change: And then lastly, you know, normal seasonality. We've got 11 fewer production days just generally based on the holiday schedule. Remember, we lost a couple of days at Arlington because of the floods in North Carolina and the tragedy that impacted that community and a supplier that we had there. So.
Speaker Change: I'm not overly worked up about it. I think when you look at some of those one-off events, I think we're pretty good. The one thing I do want to say, because I know we've received some inbound questions,
Speaker Change: EVmix wasn't really a meaningful factor in that 4Q. It does have a downward impact, but it was really outweighed significantly by those pressures that I just highlighted. So that hopefully gives a little bit more confidence in the construct going forward for 2025.
Speaker Change: I appreciate this caller. Second question is around capital allocation. So it was good to hear you restate the capital allocation policy.
Speaker Change: to return to shareholders. I think you're probably through most of your existing authorizations for buyback, so what would be the next step here?
Speaker Change: Well, Manny, thanks for the question. You know, we're really proud of the strong free cash flow generation that we had in 2024, and we expect another year of very strong free cash flow, and we're going to continue to follow our capital allocation policy. So we'll be working with the board on the next phase, and we'll provide updates as we move forward, but you can look to us following the capital allocation framework as we've done this year.
or I should say done in 2024.
Yes, thank you very much.
Speaker Change: Thank you. Our next question comes from Joe Speck with UBS. Your line is open.
Joe Speck: Thank you. Good morning. Just one quick one on the corridor and then a bigger picture one.
Speaker Change: You know, GM&A pricing in the quarter, I think when, you know, you showed some of the pricing data and the sales release, it looked like...
Joe Speck: Things are really strong, accelerating through the quarter, incentives are low.
Joe Speck: Overall like including the EV portfolio and do you expect some some pricing on pressure on EVs?
Speaker Change: Yeah, hey Joe, thanks for the question. You know, what I would say is there is a little bit of noise in the sort of year-over-year interplay in the accrual on the inventory for incentives, but you know, commercially I think.
Speaker Change: Everything that you mentioned is right. It was a strong year for pricing across the board and strong demand in the fourth quarter, and we expect that to continue.
going forward in pricing.
Speaker Change: For the 1 to 1.5, you'll notice that that's down a little bit from the way we've haircut in prior years. I think that's a statement that we expect a little bit more stability as our competitors have worked down some of their higher inventory balances.
Speaker Change: So we expect a year of a little bit more stability. The down one to one and a half I would remind you is just kind of the way we look at a planning assumption. It's not necessarily in our expectations, but it's how we run the business and how we how we how we guide the business going forward so that we can adjust.
if we see that.
Speaker Change: but not necessarily an indication of the commercial market. Like I said, January, the pricing has been good. In fact, I think ATPs were up a little bit, incentives were down a little bit, but there's just so much noise in it. We're just, we're being cautious until we get a little bit more.
Speaker Change: smooth data from the marketplace just because January was so noisy.
Okay.
Speaker Change: And just going back to policy, I know you're not going to do anything without prudence here. You're going to take some careful evaluation.
Dan Levy: have profitability and capital efficiency in mind. I just was wondering if you could spend a minute talking about the flexibility you have in your footprint. We know about the ICEV flexibility because you showed us that in Tennessee, but I'm curious a little bit more about just shifting mix of production between
Dan Levy: plants, especially on the full-size vehicles, which are produced across North America, if there are any sort of near-term actions on tariffs, etc.
Speaker Change: Yeah, Joe, it's a it's a good question and we've been studying multiple scenarios but from a from a Mexico perspective
Speaker Change: You know, we do build trucks in Mexico and in Canada and in...
Speaker Change: the United States, and so we have the capacity in the United States to shift some of that. We also sell trucks globally, and so we can look at where the international markets are being sourced from. So there's plays that we can do on that perspective to minimize the impact if there are tariffs.
Speaker Change: either on Canada or Mexico. We're encouraged that President Scheinbaum of Mexico has indicated
Speaker Change: They are working and having conversations to take the steps necessary that the Trump administration is looking for, specifically around immigration and some other things to avoid the tariffs. But we're doing the planning and have several levers that we can pull.
Thank you very much
Speaker Change: Thank you. Our next question comes from John Murphy with Bank of America. Your line is open.
Speaker Change: Good morning, everybody, and sorry to stay on the mundane topic of policy, but just trying to understand the baseline of where you're starting, where you're assuming policy doesn't change. I mean, Trump, through the Unleash America Energy executive order, essentially canceled CARB's waiver so they can't execute on the ACC2.
Speaker Change: Was your understanding that you do not have to comply with CARBs ACC 2 and get to 35% of your volume as EVs in California and the other states?
Speaker Change: I mean, just what is your interpretation there and how are you going to operate going forward? Because obviously that ratchets up to 45% next year and then 100% by 2035.
Speaker Change: Yeah, our message to President Trump and the administration is that as Evie
Requirements are
are changed.
Speaker Change: In a penalty situation, which we're watching carefully, but, you know, don't disagree with you that I think there's directional change coming. It's just, it's not completely done yet, but we're watching and providing our input at the state level and the federal level.
Speaker Change: But your understanding, Mary, is right now that the 35% requirement that would have been put in place is actually not in place at the moment, right, because of that executive order. Is that how you guys are operating? I just want to...
Actually, no, because I think there's
Speaker Change: legislative or legal changes or policy by different organizations that have to have to align with that we're very clear on the direction but I don't think we can as a as an auto manufacturer right now can assume that that is that is gone at this precise moment
Speaker Change: Yeah, very uncertain. Just one last one, Mary, quickly on the AV commitment. Obviously, there's a lot of costs that are being poured across from crews.
Speaker Change: Into the company, so you're getting some good savings, but you're still spending a lot of money
Speaker Change: on ADAS and level 3 to ultimately level 4 and 5 autonomy. Are you still have an internal commitment to developing level 4 and 5 on your own and sort of a build or is there the potential that you think you might need to go out and buy just given the way that you're going after this at the moment?
Well
Speaker Change: Janet, it's a great question and I think even with what we saw yesterday, there is so much happening from an artificial intelligence perspective of how we move forward. We do and have built the capability inside General Motors. Obviously, our plan that we're working to execute with crews would strengthen that, much of what we can do. There may be strategic partners that we also work with on aspects of this.
Speaker Change: continue to evaluate the landscape to do that as capital efficiently as possible, but still, you know, maintain a leadership position and also the strong relationship with the customer because we think that this is game changing for our industry.
Great, thank you very much.
Speaker Change: Thank you. Our next question comes from Adam Jonas with Morgan Stanley. Your line is open.
Adam Jonas: I just wanted to follow up on Murph's line of questioning around autonomy. I think you said you had 360,000 enabled vehicles.
Adam Jonas: with super crews on the road and you expect to double that in 2025 and that you're moving moving to a from a foundation
Adam Jonas: We're moving to a foundation and end-to-end approach training your massive data sets.
Speaker Change: Can you tell us how moving to end-to-end might change your spending?
Speaker Change: how you approach compute costs. You alluded to Mary working with
Speaker Change: with strategic partners. I think that resonates too, but maybe elaborate a little further on what that might mean to the bottom line or how you're allocating capital over the next 12 or 24 months. And also, I assume most of those 360,000 units are ICE vehicles, so I'm wondering if in your answer...
Speaker Change: You can include, is there any significance or difference, disadvantage, if you will, of collecting data from non-software-defined ICE vehicles versus, you know, your completely new architecture, you know, kind of EV-architectured vehicles for training. Thanks.
Speaker Change: features like towing that no one else has. We're going to continue to build on those. I mentioned something that's coming as an improvement from a driver assist technology yet this year. And we're going to continue and think we can accelerate that if we are able to execute our plan to incorporate the great talent that we have at Cruise.
Speaker Change: for getting Super Cruise to level 3, level 3+, and beyond.
When we talk about, you know, in our forecast,
Speaker Change: Days of particular infant and premature of this the diversity of the services that offer and, more importantly, the diversity of the experience and the partnerships that are looking at, on a company-by-company play and anyone level of the company and it's, sometimes, something that's very important as well.
Speaker Change: Thanks Mary. This is a follow-up on China. Despite recent challenges that you've addressed very proactively, GM does have decades of experience in the market and you have, you know, many billions of invested capital, lots of people and capacity still in place in IP with your JV partners.
Speaker Change: President Trump has been open to foreign firms participating in the U.S. as long as they make products in America, if I'm paraphrasing accurately. Do you see scope for GM to help your existing or even new Chinese partners?
Speaker Change: kind of gain access to the U.S. using your existing onshore capacity and distribution capability. I want to see how you'd approach that. Maybe it's not so relevant in the next 6 or 12 months, but longer term, just given your decades of experience in that market and the relationships that you've built there. Thanks.
Speaker Change: Yeah, you know, Adam, what I've always said broadly on trade across the board is give us a level playing field and let us compete.
Speaker Change: and win based on the strength of our products, the technology, design.
loyalty, etc.
Speaker Change: I think what's happening right now with the overcapacity in China and what's happening around the globe and the subsidies that are occurring, we're not any close to a level playing field. So I also think we have the opportunity, as we mentioned last year, we grew both ICE and EV share, and so I think we're doing a good job of leveraging our capacity that we have in North America. That's where we're going to stay focused because I think that's what's right for the long term of the industry.
and Christian.
Speaker Change: not only where's the vehicle final assembly, where's the supply chain coming from for all of the parts, including battery raw materials, but also where is the IP developed? Because understanding where that research and development is done, as I mentioned earlier today in some of my media,
Speaker Change: It's very important from an auto technology, not only for manufacturing this country from an economic security perspective, but a lot of the technology as it relates to national security. So I think you have to factor all those issues in, but right now I'm focused on leveraging the capacity that we have with General Motors and our opportunities to grow.
Thanks, Mary.
Speaker Change: Thank you. Our next question comes from Chris McNally with Evercore. Your line is open.
Thanks so much, Steve.
Yes, just the questions around, it seems...
Speaker Change: You made it clear that the guide for policy, particularly on the EV front, is sort of status quo. That's clear. Could you just go through, then, if production is still 300,000 units or wholesale is 300,000 units, what are the specific drivers to the low end of the range already, I mean, $2 billion versus $4 billion, assuming no change in policy?
Speaker Change: Yeah, thanks, Chris. So, you know, we, when we talked about the.
Speaker Change: journey towards profitability. You know, we first highlighted that back in November of 23.
Speaker Change: We talked about scale being the most important driver in the in the short to medium term and then battery cost improvements and and other vehicle cost improvements starting to kick in after that.
Speaker Change: Since that disclosure and certainly what we saw throughout 2024, where we were talking about 200,000 to 300,000 units and came in just a touch below 200,000 but still achieved our variable profit positive, the volume trajectory and the growth and therefore the realization of the scale benefits is coming in.
Speaker Change: a little bit slower and lagged in there. So with 300,000 units, we think that's a good trajectory based on what we've seen over the last, particularly six months, as we've picked up share in EVs.
Speaker Change: and the vehicle mix is continuing to get a little bit richer with the Escalade IQ.
et cetera, we think we can still deliver.
Speaker Change: the low end of that $2 to $4 billion of savings improvement, even though it's on
Speaker Change: lower volume than where we thought we would be more than a year ago and certainly, you know, throughout last year. So, you know, going forward, we're going to continue to watch that as, you know, many people have asked here on the call.
Speaker Change: what happens to consumer tax credits, what happens to IRA, etc. There's a lot of moving parts out there. What I would say is whether we're talking about IRA or tariffs, we've got multiple playbooks that we have been working on.
Speaker Change: to make sure that we can respond or even anticipate some of those moves.
Speaker Change: are bigger deals and bigger transactions like, as Mary mentioned, the transaction with LGES on Ultium Site 3.
Speaker Change: We've got ways to be able to respond to that. The reason that we guided to the status quo...
Speaker Change: is because there are really infinite permutations on policy and we didn't want to get into advocacy in our guidance.
Speaker Change: So, this is why we've done it, but rest assured, we've got plans in place, and we're continuing to work proactively with...
Speaker Change: the administration and with Congress on what we think are the right things to do which is preserve American jobs and preserve American innovation and you know I think we're we're a good actor in that space.
Speaker Change: super clear. And then just the follow-up is on the composition of 25 wholesale quotes. So it sounds like you're guiding wholesale...
Speaker Change: flight down, obviously, EV hotel up 100,000. You didn't give a specific number, but you mentioned ICE down. Well, one of the things I'm trying to reconcile is.
Speaker Change: The wholesale growth last year was plus 10%. So the production did tickle digital sales with plus four.
Speaker Change: with some of that wholesale growth actually EV or inventory and channel, so that is one of the issues on the mix in Q4. Is there anything you can add around the wholesale growth above production in the second half of the year?
Thank you
Speaker Change: little bit because we didn't have that opportunity to build. What I would say is we do have a little bit of an opportunity to build that's not reflected here. We're being cautious about that just until we see the demand outcome and what some of the market going into
Speaker Change: 2025 is going to be, like I said, I would have probably rather had a cleaner January month.
Speaker Change: to be able to make some of those calls, but there's just been so much noise with the retail environment, with everything going on, weather-wise, inauguration, etc., that it's just a little bit too soon to call that build. But should we see consistent demand, as we would expect, you know, I think there's an opportunity to take some of that ice wholesale volume up.
Thank you for watching.
Speaker Change: Thank you. Our next question comes from Tom Narayan with RBC. Your line is open.
Speaker Change: Thanks for taking the question. On the North American pricing guidance down one to one and a half percent, you said you're guiding for IC volumes.
Speaker Change: down higher EV volumes. I would think EVs would come in at higher than ICE pricing.
Speaker Change: So this presumably means I see pricing comes down below the one to one and a half percent guidance If so, what what level of pricing do you see the I see e portfolio and in your 25 guidance?
Speaker Change: I mean, thanks, Tom. I keep going back to this. When we talk about the pricing assumption, it's really a combination of ATP and the incentive environment. And, you know, what we found that has worked well for us...
Speaker Change: in our internal planning and the setup is to assume that we see a little bit of pricing pressure going forward because it's easier for us to react.
Speaker Change: So what I would say is, yeah, we would expect a consistent ATP environment from what we've seen going forward.
Speaker Change: But we've modeled in the risk or the assumption that there's some incentive increases going forward, whether that's market driven or demand driven, etc. And if we don't see that, I would expect that we'll outperform that assumption as we have in years past.
Got it, thanks. And my follow-up on Super Cruise...
Speaker Change: You know, I appreciate the comments on the adoption rate, etc.
Speaker Change: wondering to what extent do you think the regulatory kind of system is a support mechanism for level 2 plus level 3 is this something that could ultimately be the real catalyst that pushes
Speaker Change: SuperCrews or Level 2, Level 3 down the road? Or do you see this as just being consumer demand-driven? Thanks.
Thanks.
Speaker Change: It is definitely something where when people arrive at their destination after using supercruise, they're more rested, which is why 80% of our customers say they either wouldn't buy a car without it or they strongly
would desire it to be on their next vehicle.
and, you know, we're going to look at...
Speaker Change: SuperCruise being standard on our EVs from a Cadillac perspective, the Escalade IQ, Vistic Optic, Lyric V. So this is all I think opportunity for us for more people to experience SuperCruise and the way we have safely deployed this technology. So I say it's very much consumer driven.
Got it. Thank you.
Speaker Change: Thank you. Our next question comes from Mark Delaney with Goldman Sachs. Your line is open.
Mark Delaney: Yes, good morning. Thanks for taking the questions. The $2 to $4 billion of EV savings year-over-year the company was initially targeting for 2025 was driven about half by volume-related drivers. So as you're thinking about the $2 billion and expecting some EV wholesale growth, can you give us a bit more of a sense of how much of that $2 billion is coming from volume and how much is from other factors like materials and battery savings? And to the extent there are changes in the policy environment, any sense you can share around what that might do to your EV volumes going forward?
Speaker Change: Yeah, good morning Mark. What I would say is it's probably about evenly split between scale benefits and other initiatives on cell cost efficiencies. You know, we're continuing to ramp up cell site 2 as we talked about it in yesterday and that's going to provide us some efficiencies going forward. There are some material cost savings that we're starting to bake in, etc., but it probably split about 50-50 between there. I think, you know, any policy changes
Speaker Change: You know, as I said before, there are literally infinite iterations that you can go through in terms of...
of Demand, Value of Credits.
Speaker Change: where we are on production tax credits, etc. So that's why we've built in the assumption that this is kind of status quo. We'll react to that which we can, but we're going to continue to watch this. But this is our best estimate on where we are, and I think that's a good journey long-term irrespective of
of what happens, as Mary has reiterated many times.
Speaker Change: This is about providing choice to consumers, and many consumers, as we've seen in the share data, are opting for our EVs.
Speaker Change: As a matter of just corporate strategy, we've got to work and we've got to be focused on making sure we get those to profitability. And we're on that journey. And I think the team is making good progress for that. And it's going to require a little bit of time to get there, depending on how quickly this scales up. But I think we've seen tremendous improvement already. And we're anticipating more of that in the future.
Paul Jacobson: I would also just add that if there are factors that cause EV demand to lessen, we have a great ICE portfolio that we'd happily ramp up production beyond what we have in our current plans for this year. So again, that's that flexibility that Paul talked about.
Speaker Change: That's all very helpful. And then, can you just be a bit more specific around the assumptions for EV pricing? You spoke already around how you're expecting it for GM in total, but...
Paul Jacobson: It would be helpful to have a better sense of the baseline assumptions around EV pricing. If the industry pricing does get more competitive to the extent there are policy changes, that could help us to better think through what EV profitability year over year may move to to the extent there is more difficult pricing. Thanks.
Paul Jacobson: Yeah, you know, I think we're assuming fairly consistent pricing on EVs from what we've seen and there is a lot of what I would say irrational incentive behavior out there in the market. You know, depending on what policy changes happen around stringency regulations, etc., we might see some of that incentive behavior tamped down because it's clear that people are out there selling
of Compliance.
Paul Jacobson: So I think there are a lot of changes going forward. We're continuing to just keep our head down, focus on building great products. And as you've seen from the chart that we included in the...
Paul Jacobson: in the earnings deck, I would put our incentive discipline and our go-to-market strategies up against anybody in the industry in terms of the type of performance that our team is driving.
Thank you.
Speaker Change: Thank you. Our last question comes from Ryan Brinkman with J.P. Morgan. Your line is open.
Speaker Change: aftermarket parts and services. Some other automakers have mentioned similarly priced vehicles in China might be unprofitable, but they can then make money when exporting them to higher cost markets. So it looks like some good commercial traction, but just curious your thoughts on the best way to take advantage of this brighter area of the China sales picture.
Speaker Change: joint venture with Wuling. Wuling is known to be an incredibly efficient and low-cost producer and to do that well if you look at their whole portfolio it kind of is in that space so I think there's
Speaker Change: They're one of the leaders, I think, in doing that, you know, well before some of the other growth. And those are vehicles that are very popular with consumers as well. As you mentioned, there's...
Speaker Change: of all opportunities in addition to the profitability on the vehicle.
Speaker Change: source some vehicles from Wuling to other markets, international markets, working with us to make sure the product meets the standards for each of those different countries and we've been successful doing that.
Speaker Change: Okay, thank you. Maybe lastly a quick follow-up on your comments regarding capital allocation. I'm curious how some of the uncertainty surrounding regulation, particularly tariffs
Speaker Change: Could affect your thinking there, you know, might you potentially want to operate with more than the targeted 18 billion of gross cash for a time or are you thinking any differently about the planned cadence of repurchases in 2025 until we gain greater clarity, maybe as soon as April 1st as per one of the executive orders signed last Monday or how are you thinking about this?
Speaker Change: What I would say is that, you know, our stated liquidity goals alongside our revolving credit
Speaker Change: You know, a target that includes a whole host of risks and things that might happen to us. And when you look at the liquidity we had going into COVID, for example, that was enough.
Speaker Change: at the time to get us that time going forward. So we're not anticipating having to build cash in anticipation of a big draw. And I would say it's gonna be continued business as usual. We're gonna have to execute going forward. As others mentioned, we do have.
Speaker Change: Still a little bit of capacity left under the buyback, and we're going to continue to work with the board and allocate capital, but our free cash flow generation is strong, and we expect to continue to allocate that and ultimately share that with our investors.
Very helpful. Thank you.
Speaker Change: Thank you. I'd now like to turn the call over to Mary Barra for her closing comments.
Mary Barra: Thank you. And I want to close by thanking our team once again for their strong execution in 2024, which has set the business up for continued success in 2025.
Mary Barra: If you step back and look, we have a broad, deep, and compelling portfolio of internal combustion engine vehicles and EVs to meet customer demand, and it keeps getting stronger with the strength of our products.
Mary Barra: We continue to innovate and we're growing technologies like Super Cruise for today and L3 for the future, even moving to L4. We're profit focused and we're capital disciplined with strong margins, cash flow, and a healthy balance sheet.
Mary Barra: And I want to remind everybody, we have demonstrated our agility many times over the last several years, and although there's a lot of uncertainty with some of the uncertainty, there's pluses in the column as what not just negatives, and we intend to capitalize on all of that.
Mary Barra: And that's why I believe that 2025 is a year that is full of promise for General Motors and I look forward to sharing our progress with you and demonstrating once again how much the General Motors team is capable of delivering. So thank you again for joining and I hope you all have a great day. Stay safe.
Mary Barra: That concludes the conference call for today. Thank you for joining.