Okay. Great. Thank you. As we continue the Barclays Global Autos Conference, very pleased to have with us General Motors and Paul Jacobson, the company's CFO, as well as Ashish Kohli, who leads IR efforts. GM coming on the heels of a really successful Capital Markets Day. I think you articulated a very clear vision about the plan going forward. The stock has responded, so you must be happy about that.
It's been a good year.
It's been a good year. So I don't know if you have some opening remarks you wanted to make?
Yeah. First of all, thanks, Dan, and thanks, everybody, for being here and whoever's tuned in on the webcast. Pleased to be here today. Just make a couple of comments on kind of quarter to date. I would say everything is very much in line with our guidance that we gave. We closed out, I think, a really good October. We've seen some pretty good stability in incentive levels across the market for October and so far as we've progressed through the month of November. So very much in line with what we talked about the year. And I think that'll culminate a year that I'm pretty proud of on behalf of the team's ability to execute. We've successfully scaled up EVs after some challenges that we had with the initial ramp-up. And I feel like for the last few years, we've been playing catch-up in the EV space.
We're now at a point where we are very much geared to being able to produce in line with demand. We've seen demand for our EVs continue to grow ahead of the industry. And that's true so far in the first half of November as well. We're pacing pretty well. But we're going to continue to be guided by the consumer here and bring them products that hopefully they like, they adopt. And that's served us well. It's served us well in the ICE portfolio and so far in the EV portfolio as well, where we have considerably less incentive load than most of our competitors out there, almost half in the case of EVs, and still maintaining an advantage on the ICE side. So that's a strategy as we look into 2025. I don't have any additional commentary on 2025.
As we said at Investor Day, we'll give that guidance as we get into our fourth quarter earnings call. We're making good progress on the 2025 budget, but we'll pitch that to the Board in December, and then we'll have a little bit more detail that we can give on 2025.
Great. I want to double-click on two items you just talked about for the fourth quarter. First, EVs. You gave a 200,000-unit target. We're at, call it, 120,000 units year-to-date. How's that tracking? And then EV variable margin positive. Is that still on track?
Yeah. So both of those objectives are very much on track. Production, I think, is going well, and we are very, very close and getting ready to ship the ESCALADE IQ, which we're excited about, a vehicle that has more range, more capabilities, more functionality than anything else that's out there with the halo of the Escalade brand. So we're excited about that. I think as we continue to roll out these new models and get them at dealer levels, we'll have to shift as we get into 2025 and think about the inventory levels and where we want to target. As we said, it's higher than ICE just because we've got to get those experience opportunities out there for customers. But as we start to populate that, then we would expect to see a little bit more stability in EV inventory levels going forward.
Yeah, pretty excited about where we are. Pretty excited about the early returns on some of the models, particularly the Equinox, as we've seen. We're going to continue to push forward, continue to drive cost savings, and scale into some of the benefits that we talked about at Investor Day.
Okay. Great. Another item, inventory, that's been on everyone's minds. The third-party data said that your inventory was at 74 days at the end of October. How are you feeling about inventory? Do you still feel good about getting to 50- 60 days in ICE inventory by the end of the year? And how do some of the underlying sort of competitive dynamics impact that inventory target?
Yeah, sure. So we said at Investor Day that we were going to come into the quarter a little bit higher than our 50-60 day target, which, remember, the way we've talked about that is 50-60 days at year-end. It's going to ebb and flow throughout the year. Excuse me. But we talked about eight fewer production days in Q4. All of those are in November and December. So we had Election Day, Veterans Day, we have Thanksgiving, and then obviously the Christmas holidays we come up. So we still believe that we'll be in that 50-60 day range at year-end as we've planned.
Great. I want to jump to the topic that's on everyone's minds. We just had an election.
Yeah, that's right.
I hear Michigan was a swing state, as was Georgia.
I lived in two of them, so I'm glad that I'm not getting text messages anymore.
Hopefully, no matter which phone. Hopefully, you only voted in one state.
I did. I did. Yeah. No, hopefully about that. Absolutely. I'll confirm that.
So we've seen a lot of reports about potential changes in EV policy. We've already heard about potential repeal of IRA. We've heard about Trump's so-called removing the EV mandate already, some headlines about pulling back on CAFE and EPA. So just want to start very broadly. With all of these potential changes in mind, and I recognize it's only a couple of weeks since the election, how does this change your strategy going forward on EVs?
Well, I would say that, first of all, it's too soon to speculate. There's lots being reported. I think overall, we've been pretty consistent that we're not looking to next quarter, next year, etc. We're thinking about this in a much longer time horizon. That allows us to be a little bit more stable. So I think many of the things that we're doing today are going to continue irrespective of what happens with the regulations. We're going to continue to emphasize cost reductions. We're going to continue to emphasize simplification. We're going to continue to scale up with demand on the platform that we've established. And we're going to continue to lean into that because we do believe that EV penetration is a long-term objective. We also have said repeatedly that it's not going to be a linear adoption rate from here to there.
It's going to be ebbs and flows. We see a little bit of a plateau after a few years of growth. But like I said, our EVs are growing faster than the industry is and we're being able to pick up share in that space and continue to offer good products to customers. I think as we look forward, the incentive environment and the regulatory environment have kind of been linked since IRA. And I think you're seeing globally, look at what's going on in Europe, where the mandates have outpaced where natural demand sits, etc. And I think we've got to make sure that we have reasonable regulation alongside where consumers are and where demand is. I think the technology is going to continue to win people over, but we've got to be able to produce vehicles that our customers want.
And we have the unique position, that's why we showcased Spring Hill at Investor Day, of having a lot of flexibility embedded into our operation to be able to respond to where consumer demand is. So we're going to continue to work with the incoming administration and figure out the best path forward.
Okay. I want to double-click on one of those points, the IRA credits. How critical are those credits to pricing strategy that you have for your vehicles?
I think if you look at our relative pricing strategy, we are being very, what's the word I would use, very responsible, very prudent in what we bring to the market. Our incentive loads are higher than what they are in ICE, but they are considerably lower than the industry relative to where we are in ICE relative to the industry. So less than about half of the incentive load is on our EVs versus what we're seeing out in the marketplace. And that's because we're bringing products with good range, good charging access, capabilities, etc. And we think that can continue. So still a lot of work to do in that space, but I think the products that we're bringing are being received well.
How do you think about resource allocation in this environment? Obviously, let's see how everything plays out. And I think you just said earlier, your strategy is still very much intact. You have products. You have to support those products. So it sounds like a lot of this is going to still be intact. But how do you think about whether it's R&D, whether it's CapEx in this environment? How widely can this potentially change this environment?
I think what we've established over the last couple of years, I think, is a pretty disciplined track record of capital expenditure. So we certainly have ideas that would eclipse the $11 billion target that we've put out there. And that's a good thing. You want to be in an organization that has more ideas than it can fund. Our job is to allocate that and prioritize it. So while there might be some shifts from time to time, I think broadly, when you look at we're about two-thirds EV, about a third of our program capital is ICE. The refreshes that we're doing in ICE are doing really well. We highlighted the small and mid-size SUV improvement that we've seen in margins. A lot of that is driven by the additional demand, as well as the pricing opportunities that we've seen.
Those vehicles have been really well received, and that's a good success rate. As we get into 2025, we'll start the refresh cycle on the full-size SUVs, and we expect that that's going to be good as well, so the overall ICE portfolio is continuing to drive better returns for us, and we expect that's going to continue for a long time. On the EV side, we've got to keep leaning into how do we reduce costs, how do we reduce costs across the battery complex, and get more consistent software execution, etc., and the team is focused on all the right things, so I think the investment portfolio looks good. We may be able to temper some sort of future transformation, depending on what adoption curves look like, depending on what regulatory targets get reset to, if they get reset, but that's going to come over time.
So again, too soon to tell at this point, but we've got a lot of embedded flexibility in that capital budget.
One last one, and you talked about the flexibility of Spring Hill, and so we were there. We saw a line with LYRIQ, followed by an XT6, followed by the Acura model. Well, it was actually surprising. Can you just talk about that flexibility that, let's just say, EV demand is weaker? Is this to say that you can very easily flex, okay, less EVs, more ICE, and so the volume issue is not a problem?
I would say I wouldn't say it's not a problem because it's another variable that we have to solve, too. But I think what the team has done a really good job of doing is executing and demonstrating resilience in the face of adversity. So if we see volumes change, if we see demand change, there's an opportunity for us to change the line and shift that. We don't have that flexibility at every plant, but within the system, I think we've got enough flexibility. We've got to partner with our suppliers to make sure we can efficiently manage that. But it's something that we've demonstrated in multiple different pieces of adversity over the last few years. And I think it's a spirit that the team can execute well, whatever that uncertainty might be.
Great. Let's talk about the trade side because we've heard about potential tariffs. We've heard about potential tariffs on Mexico. And let's see how all that plays out. Your guess is as good as anyone else's on what actually materializes. But let's maybe just rewind and let's start. USMCA, when that was enacted back in, I think it was 2019- 2020, what was the impact that you had?
Well, I mean, I think we've got a really balanced manufacturing portfolio. We do have assets in Mexico, but we have quite a sizable U.S. footprint as well. And you look at where we are on battery cells, for example. Definitely wasn't there during USMCA, but we're the largest producer of battery cells in the U.S., together with our partner LG. And those were decisions that were made when we could have gone with cheaper alternatives and bought imported technology. We didn't do that. So I think we've got a good balanced view. We're going to continue to work with the administration because I think our goal is very consistent with what the administration's goal is in terms of U.S. jobs and what that can mean. And we've got to have the balance and flexibility to be competitive because we compete in a global environment.
But I think when you look at our track record, you look at what we've been onshoring in our supply base, I think that's in the spirit of what we're trying to do and what the company really wants to see, or the country really wants to see.
Can you maybe just remind us from a component standpoint, how much what's the mix or the extent to which you're relying on components from outside of North America?
I mean, it varies by product line, etc., but as a general rule, very, very small piece for North American production is coming from China. But there is some. It's just not a lot. It's probably quite a bit lower than what most people would think. But I think it's all manageable within that standpoint and things that we'll have to respond to if we do. But I think it's an impact that would be manageable.
Okay. Great. I want to unpack some of the Capital Markets Day initiatives. And I want to start first with the target that you gave of $2 billion-$4 billion profit improvement in EVs. There are different components of this, right? There's the production credit. You talked about a compliance benefit, etc., variable margins. But underpinning all of this is volume. So maybe you can give us a sense of how critical it is that volumes improve to drive that profit target. And is there a minimum volume growth required to hit that target?
I mean, there certainly is a volume component to that. We went into this year, I mean, it was about a year ago that we talked about the journey to EBIT margin profitability. We talked about this year being a year where there was pretty sizable scale benefits. Now, that was on a 200,000-300,000 unit production target at the time. We're going to come in at the low end of that, which I think was a prudent thing to do in the face of demand slowing, demand growth slowing. So that means that there's still some scaling benefits in 2025. So certainly, as a component of that 2-4, that staggered scaling benefit that we would expect to see in 2025, we'll produce about 80,000 EVs in the fourth quarter. That run rate would actually have some pretty big annualization savings.
But I don't want to sit here and commit to that run rate if we're going to see 200,000 units of demand. So we're going to have to keep that up through the year. Part of the reason we adopted that wide of a range on improvement is just to make sure that we don't overpromise on what we can do if we see demand slow down again. We also don't want to get into the volume target discussion, mainly because ultimately, the consumer is going to determine our volume of production. So I think it's a bit irresponsible for us to come out and say, "We're going to produce a million EVs," probably a poor choice of hypothetical there, "but we're going to produce a million EVs.
Demand slows down," and then people say, "Well, you said you were going to produce a million." Well, that would not be prudent to do if there isn't a million units of demand out there. That same level of discipline that we have on ICE is what we need to grow into and ultimately deliver for EVs as well.
I promise we won't write a million EVs in our notes.
You can. It's your note.
Maybe we can talk about leasing. We've seen a lot of industry reliance on leasing for EVs. I think EV lease penetration is probably 50%, in large part because that's the easiest way to get that $7,500 IRA credit. Some of the deals we've seen out there are actually quite attractive, including yours. Maybe you could just talk about some of the underlying math or assumption on those leases and how confident you feel that those leases are at the same profit profile as regular cash sales?
Yeah. I would change the question a little bit. I don't think we're reliant or dependent on leases. I think consumers are driving better lease penetration. And if you think about that, you look at the still what I would consider to be relatively early adopters of EVs, because we're still below 10% overall, still high-income earners, most of whom probably don't qualify for the $7,500, irrespective of where content is. So I think many purchasers are opting for a lease. I think there's also the component of, "I'm uncertain as to how it's going to hold its residual value. I'm uncertain about charging. I really want to try it, but I don't want to buy one." So we're seeing lease penetration up a multiple of what we typically see on the ICE side.
But remember, the way the economics work is that $7,500 stays with us on the lease. So we're able to pass that through, and then we can recapture that through either a deal where we can sell the tax credit or we can capitalize on the tax credit in our own portfolio as well. So I think as with broadly purchased EVs, I think the economics are a little bit less advantageous than the ICE portfolio, but I think they're still pretty consistent with what we see on the buy side.
Great. I want to double-click on comments you gave earlier about a refreshed ICE portfolio. And I think actually one of the interesting things we've seen this year is that despite sort of headline ATPs for GM being down whatever it is, several points, your pricing this year is tracking up. And I think a lot of that is on the back of new products. So maybe you could just remind us which products are refreshing this year? And when we think about the benefits that are going to flow through to GM, is that in the way of better pricing, richer mix? Just how do we think about the profit impact on those refreshed ICEs?
Yeah. And look, I understand the industry's reliance on trying to simplify a portfolio that's really complicated, but I'm not sure that when we just talk about sound bites like ATP and people see ATP going down, there's an immediate knee-jerk reaction of pricing is softening. Well, ATP could go down because I'm selling order of magnitude more vehicles at the low end, picking up share in a vehicle category that I didn't really have a lot of penetration in. At the same time, I'm selling full-size trucks and SUVs at the same price I was before. Guess what happens? ATP goes down because it's across a very, very broad, diverse portfolio. And that's what we've seen.
You look at the success of the Trax and the Trailblazer and the Envista at lower price points, but we're selling multiples of what we used to sell of the Chevy Trax in 2022. That's a good thing, right? Because it's helping our share. Those vehicles are more profitable than their predecessors, etc. So overall pricing, I think, has remained remarkably stable and consistent, well beyond what most people would have predicted for the last couple of years. And as we go into 2025, and hopefully we see an easing cycle and we see interest rates coming down, that can help ease some of the affordability concern upticks that we've seen in years past and potentially make it easier to have even more stable pricing. That being said, we'll go into 2025 with a pricing assumption.
And I want to be very careful that we don't say that this is a guidance or an expectation because it's just the way we budget and plan. It's easier for us to go into the year with a down pricing assumption and adjust to invest in more priorities if we have room, etc., than it is to set an ambitious target on pricing, underachieve it, and then have to roll back a number of spending initiatives as well. So I think it's just the right way to approach budgeting. We've tried to sort of drive it down the middle with our guidance when we do that. And that's worked well for us for the last couple of years. And I think that we'll probably evolve in a similar pattern in 2025.
You talked about some of your mid-size SUVs getting something like 10 points of better margin versus the prior generation. When we look into next year, and I think on the slides at the CMD, you talked about this underpinning the target to be roughly flat year over year. What are the net benefits from these refreshes? And maybe you could just give us a sense. We've heard about this idea of simplicity, sort of narrowing the number of product proliferations out there in the industry for quite some time, and it never happens. What have you done differently that's seemingly allowing you to extract these benefits on product, focusing on the product where there's actual volume and extracting those benefits?
Yeah. So we've significantly reduced the number of buildable combinations, which manifests itself in a lower manufacturing cost per unit because we don't have as much complexity in the line. It doesn't require as much inventory, etc. So we have a pretty good idea of what customers are ordering, etc., and need to make sure that we harness those savings with that. As we go into 2025, we're probably not going to get as much benefit from the smaller SUVs like the Trax because that's been out for most of the year. As you look to some of the mid-size SUVs, we still have a little bit of annualization next year. So I would expect that we'll get probably about six months of benefit.
And then, as I said, rolling out the new refreshed full-size SUVs, we should get a little bit of a benefit from that as we roll that out into 2025. So a lot of it comes down to building products that are driving significantly more demand. So the units per entry goes up, and that's able to drive a lot of synergy across the system. So when you look at the Trax selling, I think the number is close to like four or five times what we were selling three, four years ago in that. There's a lot of savings in that. So we're going to keep that up. And hopefully, as we continue to focus on the customer and drive the right products, we're going to see those benefits.
Let's pivot a little bit.
I don't think we're going to get to all those questions.
But we actually covered a lot of this. This has been very efficient, and I'll ask maybe a couple more to folks in the room if anyone has questions. I want to ask about cash and balance sheets. So you ended 3 Q with $27 billion. So maybe you can remind us, is the $20 billion target you've talked about floor, or is that a target level? And do you believe the current macro environment, your current cash pile, allows you to predominantly use that excess cash toward return to shareholder?
So we've said as a general rule, $18 billion-$20 billion is our targeted cash level. We ended third quarter fairly high. Seasonally, fourth quarter and early first quarter, there are a lot of cash calls on the business. So we need to make sure that we get ready for that, as I mentioned, lower production days, etc. So I think we're in a decent position on that. We've certainly said from capital allocation perspective, we're going to be consistent. $11 billion, plus or minus, is what we're aiming for on capital. We'll deliver that. And that's enough. The organizations can always find ways to spend more. But as we've talked about before, capital allocation, capital budgeting is really about two questions. One is, can you afford it? The reality is we could afford more, right? There's no doubt about it.
When you're generating more than $20 billion of operating cash flow, we could afford to invest more. The second, though, is in order to invest more, you've got to drive up your fixed costs. You've got to hire more engineers, more planners, more supply chain people. You've got to get more real estate, more facilities, etc., and that just raises the overall level of fixed costs and puts pressure on future cash flows. So we've tried to strike a balance. We're investing at a level that is consistently more than what we've done in our history, but at the same time, allows us to keep that discipline on the fixed cost side because ultimately, it's got to be able to feed that consistent margin story that we've seen. So with that, that $11 billion range is a number that I think suits us well where we are.
We've got to maintain flexibility so that if we see pressure in the system, we can adjust and pivot, and I think we've got a lot of that as well. The second leg of the stool is balance sheet. We've got a really strong balance sheet. The pension is well funded, and we have $2.5 billion of debt maturities next year, which we're thinking about. I could see us refinancing them. I could see us paying it off with cash. I'm not sure that's going to be a needle mover, but we've got to ensure that we keep discipline in the balance sheet. That's really important for us, and then third is returning capital to shareholders. As we've said before, I think we're going to continue to prioritize share repurchases as long as our multiple is as low as it is.
That's going to get fixed with consistent performance and continued delivering on our targets, which we're committed to do. If we got to a more reasonable multiple, I could see us pivoting a little bit more into dividends. We've got a relatively conservative dividend policy based on where we've been historically. But that is important to us. We took the dividend up last year primarily on a lower share count. I think there are opportunities to keep balancing that as our share count goes down. But for now, it really is a prioritization of share repurchases. It really comes down to the math of it.
Within the share repurchases, I think you just completed the ASR from last year. How do you think about incremental share repurchases from here? Is it open market repurchases, or is there consideration of another ASR?
I think that program worked really, really well for us. And the returns that we've seen this year, I think, are good tangible evidence of that. We retired about 250 million shares under that program. It was important for a couple of reasons. Number one, it was the magnitude of it, which certainly caught people's attention. But more importantly, the real benefit of the ASR was the commitment. I mean, when you announce it, you write the check. It's done. So that's far more impactful than just announcing a $10 billion authorization where the average person is going to handicap execution probability and say, well, maybe they're going to do half of it, maybe they'll do two-thirds of it, but the market can't really get its arms around how committed you are to that, especially when it's a big number.
So doing it the way we did, I think it was the right way to execute that. Going forward, there were some things about that that we had to live with. So when you do an ASR, your counterparties are shorting the stock, and they need time to work through it, etc. It kept us at a lower level in the market for the better part of this year just based on the volume of recovering. So when we said we wrapped it up in October, that was them filling that. And we needed to give them space, which limited our ability to go and do open market repurchases. We were still able to go do it, but not at the volume we otherwise could. So as that's behind us, we can think about a more balanced approach. And there's lots of tools available to us.
We're not committing to think about another ASR because I'm not sure it's necessary. We've established enough credibility and enough of a track record at this time to say if we have an authorization to repurchase shares, we're going to go repurchase the shares. Very consistent with our free cash flow execution.
Folks in the room, questions?
Just a quick follow-up on EVs and inventory levels. Hopefully, you get to the 300,000 plus run rate. But to your point, you probably want to get your inventory levels up to 60 days in EVs upfront, which is, given you're producing 80,000, we should be thinking about as we go into 2025 that we could be looking at two months plus a 300,000-unit run rate as to what, 25,000 a month, 50,000 units of inventory. I mean, if you're really going to sell 300,000, you want to kind of build up to that level. But it could optically look potentially bad if the sell rates weren't to get 75 or 200,000 annualized. So just want to make sure I understand what you want that inventory level to be as we go into 2025. And then two, wait till the spring time, don't panic.
It's going to take time to build up to that run rate. How are you thinking about that dynamic? Because optically, it could look great, or it might look a lot of excess.
Yeah, sure. So I mean, we think about EV inventory levels and ICE inventories very differently, and I think we're meant to right now, so when we talk about 50-60 days, we're really talking about ICE, full stop. The days inventory calculation for EVs is quite a bit higher than that, just based on the fact that demand is low. We're not going to sell the portfolio of EVs that we have if we don't have vehicles out on the lot, so you've heard us talk about the number of vehicles per dealership because that's how we're doing is we're increasing awareness out there. Now, as we level off with that awareness and we generate that, then we can start to pivot back towards looking at days of inventory, but for the foreseeable future, I'm not sure that that's going to be the right metric.
So with the new product launches that we have, with the OPTIQ, with the ESCALADE IQ, we've got to get them out there so people can see them, they can experience them, they can drive them, etc. And that's going to push the days inventory up. But you still look at it across the dealer network; it might be five or six vehicles per dealer type of thing. So that's what we're looking at on the commercial strategy. And I expect that's going to continue for at least the next few quarters as we get that out there. And then we'll be able to look at what is more of a sort of balanced production level look like.
My absolute numbers went up way over 30-40,000 units up there across the dealers.
No, not at all. You're right.
Hi Paul. Yes. So there are a whole host of investors out there who will consider buying GM stock because they see Tesla's new Full Self-Driving. They're like, "Where are you on Cruise?" If Cruise doesn't succeed, GM's a zero long-term. They think Rivian has the best software out there. How is GM going to compete in the long-term? So you're clearly executing extremely well with your current product offerings. Your EVs are doing well in the market. But what would you say to those investors who just won't even consider GM because they look at Rivian and Tesla as the full future?
Yeah. Look, I understand that, and I get it. That's why our number one priority inside the company is to get EVs profitable because I think at the end of the day, things change when you do that. It's not something that Rivian's been able to do, and it's something that took Tesla a long time to do. And I think people look at the comparison between GM's EVs and Tesla's EVs today. Well, Tesla had a 10-year head start. They didn't do that overnight. And I think we can cross that curve faster than that. There's the follower benefit that you get. So for people that are worried about the future, I don't think GM goes to zero. I don't think GM goes to zero if Cruise is successful. I don't think GM goes to zero if Cruise isn't successful.
I think it's a case of, can we do what we've been doing really well, and is there a growth story attached to it that comes with software? So we're really prioritizing software execution and getting the vehicles to the level where they can support a whole host of over-the-air upgrades, etc. That takes a little bit of time, but it's progress that we're making. Two years ago, people said the ICE portfolio was worth nothing. 13 months after that, they said EVs were worth nothing, so that kind of extreme talk, I don't think is helpful. And one of the ways we've tried to change that narrative, and there are some new faces in this room today, is turn it into a math exercise because the one thing you can ignore is free cash flow performance.
You look at, despite the run-up that we've seen, our free cash flow yields are still well north of 15%-20%. That's an incredible story. So you can say, well, it's the peak of a cycle. Okay, well, what does the cycle go down to? Does it go down to 10% free cash flow yield? Because it's risk premium on top of risk premium on top of risk premium. So we've tried to change that narrative by turning it into as simple a math exercise as we can. And the fact of the matter is, despite the run-up, the shares still remain really undervalued, not just against the market, but against the industry.
When you think about the multiple discount we have against some of our competitors who aren't performing nearly as well, the only way to overcome that is to just keep doing it consistently and buying shares until you do.
I'm going to wrap with just to double-click on that last point. And if I just look at what you've done the last four years and what you're projecting into next year, this is going to be now five years of $14 billion plus EBIT per year. If I recall correctly, pre-COVID, the best you ever did in a year was $12 billion. I get it. Part of this is people say it's pricing, this and that. But what would you say to folks about the sustainability of this level of earnings? And I appreciate there are cycle considerations, but what would you say about the sustainability of this level of earnings and you exercising control on the right factors to keep that level elevated?
I will say that you haven't said it today, and I give you credit for it, but the word that has often been used on the speaking circuit over the last really 12-24 months has been normalization. I will tell you, we ban the word normalization inside the company because what is normal, right? Isn't it possible that we've established a new normal? Because I can tell you, we've learned a lot about the value of our products in consumers' eyes, how to price them, how to not react, just knee-jerk reaction to what's going on around us and focus on our inventory, our demand, our execution. And I think it's served us really, really well. Is that going to take the cycles out of the industry? Probably not. But our job is actually to take out the self-inflicted cycle amplification, which we did.
We overproduced in good times. We had to scale that back in bad times. We over-incented in good times from what we had to. We couldn't roll those back in bad times. So at the end of the day, we actually contributed to an amplification of that cyclical behavior. And we've got to get out of that. Not unfamiliar to what we've been able to do in the past at other companies is just to avoid some of that self-inflicted harm, which means that the whole normal resets to a level that's better, more consistent performance than the cycles of the past. Like I said, it doesn't make us immune to a downturn, but I guarantee you, performing with that level of consistency and that focus on the fundamentals will perform better in a downturn than we've ever performed before.
That's just making sure that you're preparing and you're more stable. And sometimes that means leaving some money on the table in good times. Could we make more money by producing more and driving more volume at lower prices? Yeah, on the margin, maybe we could. It's not going to be worth the capital, the fixed costs, etc., to ramp that up, only to have to tear it back if the market comes back down again. So by clipping off maybe the top of those cycles, it means that the troughs of those cycles are much better than they otherwise would be if I'm trying to drive every last penny out of the top phase of a market. And people have said, when I first started, one of the questions we got a lot was, what's break-even SAAR?
We don't talk about that anymore because nobody thought we'd be making what we're making in a 16 million unit industry. So that stands to reason that we'll probably do better in a 14 million unit industry at 12, or maybe it ticks up a little bit higher. So we're going to just keep responding to that. But I think the fundamental things that we've done are actually working really well.
Leave it there. Paul, thank you so much.
Excellent. Thank you.