Ladies and gentlemen, welcome to the General Motors Company Conference Call. As a reminder, this conference is being recorded, Monday, May 13, 2019. I would now like to turn the conference over to Michael Heifler, Director of Investor Relations. Please go ahead, sir.
Thanks, Amanda. Good morning, everyone, and thank you for joining us for our office hours event. We are here in New York with Divya Suryadevara, GM's CFO, and are also joined by a special guest, Duncan Aldred, Vice President, Global Buick and GMC. We have our sell side research analysts in the room and we'll open it up for their questions after Dhivya and Duncan go through materials. The presentation slides for this call were issued this morning and are available on the GM Investor Relations website.
We are also broadcasting this event via webcast. I would like to direct your attention to the forward looking statements on the first page of the chart set. The content of our meeting will be governed by this language. I will now turn it over to Divya.
Thanks, Mike. Good morning, everyone, and thank you for joining. There's 3 items that I wanted to cover today. And normally in earnings and other forums, we don't get a chance to get into these special topics, so we wanted to review them in-depth. Firstly, I wanted to provide some additional color on our earnings cadence for 2019, and this is consistent with what we shared a couple of weeks ago during our earnings call.
Secondly, I wanted to provide an update on our truck launch. There's a lot of discussion around trucks and we do have a special guest here today Duncan Aldred who will share some interesting and exciting stats about our GMC Sierra launch. And finally, provide some analysis around the impact of a potential downturn, which you will see is consistent with what we have previously shared, but wanted provide an update on that as well. With that, let's get into it. 2019 cadencing, what we shared a couple of weeks ago was that Q1 is going to be our weakest quarter driven by specific factors including downtime.
And we have said at that time that Q2 will be better than Q1 and second half is really when you see the earnings start to accelerate. So what you see on this page, Page 6 for those of you following along, our specific drivers around Q1, Q2 and second half of the year, earnings acceleration. Q1, as we talked about, we did have our full size SUV downtime. We had lower China equity income driven by the industry levels as well as the pricing pressures that we're seeing there. And it was partially offset by the early effects of the transformation cost savings that are starting to come through.
And when you fast forward and you look at Q2 in the second half of the year, you see some of these tailwinds start to pick up. Let's talk about Q2. We will have downtime in our Flint plant at a level that's similar to our SUV downtime that we saw in Q1. So we will take about 25,000 units or so of heavy duty down volume in Q2 of 2019. We will also continue to address some of the inventory buildup that we've seen in China as a result of the decline in industry.
We took some actions in Q1 to the tune of 20%, but we still anticipate that we have work to do in Q2 of 2019. From a tailwind perspective, we will have absence of downtime that we saw in Q1, both from an LD as well as full size SUV perspective as both of the plans where we took downtime in Q1 will be running at full steam in Q2 of 2019. From a transformational cost savings, we remain on track to achieve our $2,000,000,000 to $2,500,000,000 And in the Q2 of 2019 is really when you see start to see the acceleration happen. The actions that we took in Q1 of 2019, in terms of headcount reductions and so on, the impact of that starts to build up in 2019 and into the second half of the year. From a second half standpoint, there will be no expected launch downtime that we're going to see in light duty, heavy duty or in full size SUVs.
So you see the volume pickup happening there as we roll into our T1 launch. We will have our launches in China as well. There are about 20 new launches happening in China in the year 2019. It's weighted towards the second half of the year. In the U.
S, we will have our new Chevrolet Blazer as well as our Cadillac XT6 launch in the second half of the year as well as our global family of vehicles that will start to launch in Brazil and then fast forward, it will get to Mexico and it will be a significant portion of our China volume as well. So taking a look at this, the takeaway is that we're on track for a full year guidance of $6.50 to $7 of EPS. And the cadence as you can see is based on specific factors and sufficiency plans that we have in place in order to achieve our outlook for the year. Switching to free cash flow. Seasonally, as you all know, we do burn cash in the Q1 of every year.
And this year, it was exacerbated by our downtime that we took in our full size SUV plans. And here's the cadence of how we see it building up towards our $4,500,000,000 to $6,000,000,000 guidance for the year. Firstly, you're going to see a rewind of the working capital unwind that we experienced in Q1 past the Q1 low point. The earnings that I talked about in the prior page, the cadence will help from a free cash flow standpoint as well. And from a China perspective as well as GMF, typically we receive dividends later in the year and that will act as a tailwind from a cash flow perspective as well.
And overall, we believe that these are the factors that give us confidence towards achieving our $4,500,000,000 to $6,000,000,000 of cash flow guidance. Cash does remain a priority from company standpoint. I shared with you in January of this year that free cash flow and cash flow conversion are important topics as we think about our financial objectives for 2019 and beyond. And a reminder on what's causing the current gap between net income and free cash flow. We have 3 main structural factors that impacted the gap between our CapEx and our depreciation the gap between pension from an income statement perspective and a cash flow perspective as well as the GMF earnings versus dividends.
And these are factors that have built up over the last several years and we're now sitting at a point where we're at an inflection point in each of these factors. CapEx, we do see the 2020 beyond, we expect a tailwind as we get past some of these important launches. Pensions, as we get past our de risking and positioning our pension funds for a sort of close to fully funded position, we will compress the delta between our income statement and our cash flow. And from a GMS standpoint, we're getting closer to full captive penetration. So the next few years, we will achieve that.
And we initiated the dividend last year and we expect to build that up as we get closer to full captive. So getting this straightened out in 2019 and past 2020 is going to be an important factor as we think about our cash conversion and our cash flow generation capability. So that's from a cadence standpoint and I will take questions on all of these towards the end of the presentation. I wanted to pivot a little bit now and talk about trucks. Given the importance of truck franchise to the overall business, we've shared a number of details on our launches and how that's going.
We wanted to provide an update on the launch cadence as well as how our trucks and especially Sierra is doing in our with our T1 franchise here. Let's talk about industry first and we've shared this before that we believe that the industry is starting to look different from the overall light vehicles market. And what you see on this page is just 5 data points in the last few years on how the industry is behaving. The yellow is the overall industry and the blue is the full size pickup industry. And you do see that from a total industry standpoint, it's either a plateau or slightly down, but still overall very healthy levels.
From a truck standpoint, the penetration levels continue to increase and it still remains lower than the highs that we've experienced in early 2000s. But again, very healthy levels and we think it's primarily driven by some structural factors. The demand in trucks are, I'd say driven a bit more by some of the underpinnings that you see in trucks and not really in other parts of the light vehicle market. We see that the truck park continues to grow. It's also aging and it's grown at roughly about 3 times more than the overall light vehicle market.
And the aging of the fleet is more than 2 times the rest of the industry from a growth standpoint. And what this creates is the latent demand. There's a built in installed capacity that needs to be replaced. Use cases, we see increasingly that over half of the use cases from a truck standpoint are for both personal as well as commercial purposes and 20% for fleet and government use. And as we all know, it's this part of the market is less prone to the future of mobility and disruption.
So we do see that overall this industry is structurally different. And from a competitive standpoint, when you look at Page 12, it is a market with fewer players. And again, that's the theme of how overall this is different from a light vehicle standpoint, which tends to be more fragmented. And you can see our market share here within the industry at a very healthy level across a number of offerings. We recently also reentered the medium duty truck business, which offers us an ability to enhance the adjacencies, particularly with our commercial and our fleet customers.
And as you look at the large SUV and the lux SUV markets as well, it continues to be a very healthy market. Again, takeaway from this chart, very strong market share as well as a industry setup that's different from the overall light vehicle market. So switching from the industry to our truck launch, we made a number of enhancements as we move from K2 to the T1 platform. Importantly, we increased the light duty capacity by 20,000 units. Again, we were capacity constrained coming out of the last financial crisis and we used the opportunity from a T1 transition standpoint to increase the capacity.
Heavy duties, again, we were constrained and we added capacity to the tune of 40,000 units. And as we've said before, crew cabs were a constraint for us and we relaxed that constraint to the tune of 10 percentage points, which will allow us to participate in a at a level that is comparable to the rest of the industry. And Duncan will talk about this. We did expand our offerings with Nutrims, both in the Silverado and in the Sierra lineup, which is being received very well as well. So when you take a look at all of this, we talked about a revenue believe are driving the better revenue and profitability estimates as well.
But again, we are important to note, we're in the midst of this transition. It's still early days from a launch standpoint and you can see the rollout here on Page 14. Night duty, we did start our crew cab rollout in the Q3 of 2018 and we're continuing with that in the first half of this year. Early in 2019, we have our double cabs coming out and we're in the midst of the launch. In mid-twenty 19, we're going to have our regular cab as well as the diesel variance.
From a heavy duty standpoint, as I said, we're taking downtime in the Q2 to get ready for these launches. And similar to light duty, we're going to start with the crew cabs and then progress in late 2019 to the double and regular cabs as well. And the final portion of our launch will be in 2020 with our full size SUVs. So again, few points that Mary mentioned during our earnings call that I want to reiterate. The rollout of T1 was designed specifically to maximize profit and we started with a high content vehicles and will now shift more towards the double and regular cabs.
And we will continue to we expect to continue to see the strong ATPs that we've experienced for Q1 as well as an incentive discipline that we expect to maintain. When we look at the variance, this is a concept we've talked about in the last couple of years. If you look at historically where GM has participated in the transaction price spectrum, we were under indexed in the left side of the chart as well as the right side of the chart. We played more in the center. And as we have expanded and I've talked about the TRUM offerings and the additional capacity that we've put in place, we expect to participate and get our more fair share in the left and right side of the page.
And with a high feature comes higher ATP as well as higher profitability. And the crew cab that we're rolling out now, we're already seeing additional share that we have picked up to the tune of 5 percentage points in our 50,000 and above vehicles. And you will see this normalize more as we roll out the additional variance as well. From a brand standpoint, we are the only OEM with a 2 brand truck strategy. And again, Duncan is going to get into this shortly.
Silverado participates more in the core of the market as well as the affordable point of the market. We have the variance there to capture additional market share from a Silverado standpoint as well. Sierra is really the only premium truck brand that's out there and it has product attributes and features that really set it apart from Silverado and from rest of the competition. So we're going to talk more about the AT4 and the Denali terms as well. These tend to be in the higher end of the premium brand as well.
And the penetration, we see that exceeding about historical levels by about 10 percentage points. Again, 2 brand strategies allowing us to capture more of the transaction price spectrum that I talked about in the prior page. So I'm going to pause now and turn this over to Duncan. He is VP of Veric and GMC. He's been heavily involved in our truck launch and he's very excited about the product offerings we have.
So Duncan, over to you.
Thank you very much. Good morning, everybody. Great to be here. It's always a pleasure to talk about the GMC story and in particular the Sierra story. So let's start just by saying a quick word about GMC.
Built on over 20 years of professional grade positioning, it's a very, very strong brand. And it allows us to really say we are the only premium truck and SUV brand in the market. That's our positioning, that's our place and we think we've earned the right to say that. Obviously, the flagship of the brand is the Sierra, the all new Sierra next generation 2019 Sierra. And because it's the flagship, because it really points the way for the whole brand, it's the biggest launch in GMC's over 100 year history.
Now when we look about how do we launch this truck, how do we cement those premium truck credentials, there are a whole myriad of things that are best in class or first in class, whether it be best in class front leg or headroom, best in class cargo box volume, things that really matter to truck buyers, truck drivers, best in class V eight power and best in class diesel power as well. There's a whole myriad of things to talk about. But when we really drill it down and say, well, what represents premium? What is it that GMC should be focusing on? And what should Sierra focus on?
We really say premium and premium trucks is about design, capability, innovation and technology. So let's really focus our messaging around those and ensure that we've got the best story in the industry and the best truck in the segment. And that's really what led us to drill it down and talk about what we call the big five. And this is really the messaging that we focused upon when we reveal this to the media about a year, a year and a bit ago. And these are things that are truly game changing for the segment and indeed in some cases for the industry.
So world's first 6 function multi pro tailgate often referred to as the Swiss Army knife of tailgates. You really change the game when it comes to innovation and technology of a pickup truck. First time we've ever seen a head up display in a pickup truck. And it's not just any head up display, it's the latest generation. It's actually 15 inches diagonal.
So this is a huge head of display. I don't know if anyone's had the chance to see it. It's multi configurable. It's got things like an inclinometers, so it can show just where the inclines or declines you're going down. It's not really that good in Michigan to be honest.
It's about the flattest place in the world I think. But it's an outstanding feature and it really is a while when you're behind the wheel because this gives you so much information without having to really take your eyes off the road. First time any pickup truck in the segment has got a head up display. First time also that we've ever seen a rearview camera mirror in this segment. Obviously, we've seen it on some of the luxury vehicles out there, first time this has ever gone into a pickup truck.
And again, when you think about what you can actually see out of the rear of the pickup trucks, not particularly big rear screen there. There's often things in the back. This gives you that pure unblocked view of the risk. So again, a really meaningful feature in this segment. Trailering, obviously people buy trucks in order to trailer in and pro grade trailer in system from GMC is the best and most comprehensive trailering system out there.
It's a pretty stressful experience, trailering and this makes it as easy as it possibly can be, whether that's being able to check the tire pressures from inside the vehicles, even the tire pressures of the trailer, whether it's checking all of the lights without having to get out or get 2 people to do it. As you're saying, is the left one work, the right one work. This really makes the trailer inexperience as stress free and as easy as it possibly can. And then of course, finally, the Carbon Pro Box, the only vehicle in the pickup truck market has got a carbon fiber pickup truck box. Not only is it lighter, but it's more durable, it's more scratch resistant and it's just pretty much the best pickup box in the entire segment.
And it's an industry first. And I think one of the medias who look at it the media writers who looked at it recently described it best when he said supercar technology makes it into the pickup truck segment. And we quite like that headline and it was absolutely true in terms of what it was delivering. So these were the big five that we focused on really to underpin the fact that we are the premium truck brand, meaningful innovations that really make that truck experience better than anybody else's. When we came to communicating this, obviously the media launch is one thing the website can tell you all the information, but really it's how do you distill this down?
What is the thing that from a television perspective is going to drive people to the website where they can learn all about this? And the thing that resonated better than anything else was that Multipro tailgate. So I think you've seen the launch ads, which we called Anthem. This is a follow-up ad, which again just shows the incredulity that people agree, the innovation that is the multi pro tailgate. So let's just run this short ad.
So that's the second of the ads that we've seen. It is driving people to the website. In fact, it's double the people who are visiting the website and searching for Sierra. And when they get there, they will also see that it's not just a 6 function multi pro tailgate, but also you can get a KICKR audio system fully integrated into that tailgate as well. So if you like tailgating and people who buy trucks typically do, this is the ultimate tailgate vehicle in there.
It really is an outstanding feature. And anybody who knows BOLTZ and put KICKR audios in BOLTZ, they know KICKR very well. And again, it's just a premium association that we put in alongside the Sierra. Okay. So big five features really cementing ourselves as the premium truck brand.
But it's not just about those features because we have some very powerful sub brands. 1, that is very much established in Denali over 20 years in the marketplace, progressively rolled out across the entire lineup. And in fact, last year we delivered our millionth Denali since we first introduced it about 20 years ago. So this is a very well established brand. People often refer to their vehicle that they drive as I drive a Denali.
They don't talk about driving GMC or a Sierra or Yukon. They say I drive a Denali. And I think when you achieve that status that really represents that you've created a powerful sub brand. We call it the ultimate expression of professional grade and this is really where you get the best appointments to the vehicle and all of the technology thrown in as well. Typically represented well, if we go back just 5 years or so, it represented about 19% of all GMC retail sales.
We put a plan together with a very clear focus and now we're tracking consistently at about 30% of all retail sales at Denali. That's about 140,000 retail sales per year across all the vehicle lines. Just to put that in perspective, that is more than many luxury brands out there, And whether you're talking about Lincoln, Infinity, Jaguar, Land Rover, it's right up there with Acura. And not only is that impressive, but when you look at the average price paid, the average transaction price, it is consistently outpaced Mercedes Benz, BMW, Audi. So this is a super powerful sub brand that is commanding real price from consumers and in volume as well.
So something we're very proud of and something which really also propels GMC as this premium truck brand. So when we were looking at it and looking at it with the Sierra, we also saw customer trends towards more rugged looking vehicles and indeed a vehicle that not only is refined, but is also capable and more rugged in its appeal. From a GMC point of view, we thought, well, how can we do this in a different way, in a premium way? Often, rugged is associated with very stripped out type vehicles. People want to wash them out even.
But we felt and found through research there was a real desire for premium off road. And that's why AT4, you see here the pioneer of premium off road, Making something that looks capable, it is capable. This comes straight out of the factory with a 2 inches lift, first time we've ever done that. So not only does it has it got a huge road presence, but that gives it the extra capability as well. We thought this would do about 10% of our sales.
Currently, it's selling about 23% of our sales. And again, this is very much a premium offering. So we've got one really well established premium sub brand and now we're establishing another and it's got off to a great start. We'll carry on rolling that out across the entire range and it will be across the entire GMC range within about a year and a bit. So really strong start for AT4.
So currently since we launched the new Sierra, AT4 running about 23% of mix, more than double what we expected. Denali running over 40% of mix, again more than double what we were experiencing on the previous vehicle. So again, really, really establishing ourselves as the premium truck front. This is what our customers are saying about it. And so we get early buyer research.
So it's a fairly small sample, but it's something we do progressively through a vehicle's life cycle. So really we wanted to find out why people buying it, all the features that we're putting in these trucks really resonating with our customers and potential customers. So as you can see here from some of the quotes, the tailgate is a huge draw for people that's really attracted them in. That was obviously the focus of our communication and it certainly seems to be working. The design element as we said design is a crucial part of appearing premium.
There's a lot of design cues about this vehicle which again are unique in segment. The only truck for example has got a chrome surround for those side windows, the daylight opening the DLO as we call it. No other trucks got that full chrome surround. And that's a real premium feature. So there's just these little design cues, which really represent that.
And that's being picked up by customers. And then it comes to that innovation and technology. People love the tailgate, they love the head up display, they love the technical features and the luxury features as well. So certainly from a Denali point of view, it's resonating. And similarly from an AT4 point of view, it's resonating as well.
And what we're seeing here is we're not just moving customers around the GMC range, we're attracting new customers. I'll show you a slide in a moment that shows the difference to Denali, but people are buying it because of that aggressive style, because of that capability and again because of some of those features like head of display and the multi pro tailgate. So not just features for features sake, but features that people really value. And again, I'm not traditionally a truck owner and user, I have to say, but I've been the owner of 1 for the last 6 months or so. And I have to say, every time you use that tailgate, you will drop the gate down and the secondary gate down to get you about a foot closer to the gate.
So when you're pulling things out or loading things in, you basically save your back. So even me, I'm pretty tall, but it's for everybody. Really, every time you use that gate, you will use at least one of those functions, which again is a really great feature. Okay. This is again who we're attracting to AT4.
So we talked about premium off road as opposed to just off road, which is, as I say, been typically a little bit stripped out. So again, we're attracting customers who've got high household income, a little bit below Denali, but certainly above the other trim levels that we offer and indeed the brand as a whole. People more family orientated, they are more likely to be involved in active outdoor activities and they are younger than that Denali buyer. So we're attracting new buyers, younger buyers, but still attracting very affluent buyers. So we're really pleased with the early results from AT4.
It's doing exactly what we wanted it to do. As I say, we're actually selling way more than we originally expected. And again, the average transaction price for this vehicle at the moment is about $57,000 Denali is about $62,000 So you can see this is right up there at the upper end of the price band, the segment price band and the mix. Great start.
Okay. So let's have a
look now what the media and how it's been received in the marketplace. And again, I go back to that media launch, which seems like a long time ago that we really still just coming to a conclusion of the end of Phase 1 of the launch because we did reveal it back in March of last year. Dhivya obviously showed you the cadence of production. So I'd say we're just coming to the end of Phase 1. But certainly in terms of what the media is saying about the truck, it's really exactly what we wanted it to happen.
We've seen what the customers said. Now we can see what the media said here. Probably my favorite, if Aston Martin made a truck, they would model their truck after that AT4. Being from England, the Aston Martin, who doesn't James Bond. So yes, what a great accolade there.
But like I say, there's just many, many great quotes and a really favorable media reception. But just getting into some of the other results and again, Dhivya mentioned some of them. Really, if I go back to since launch, got to be pleased with what we've achieved. We've built and wholesale more vehicles than we expected to the tune of about 20,000. Our sales are tracking 25% up on light due to year to date at retail.
That's through today. So significant year on year growth. We've gained about 2 points of segment share at retail in the light duty pickup segment. And when we drill it down and look at vehicles over 50,000 dollars we've actually now commanding 25 percent of all sales over $50,000 In quarter 1 of last year that was only 14 percent. So we've seen a big step up in what we've been able to achieve in that upper segment.
And again, I mentioned what Denali has done, what AT4 has done in terms of mix and in terms of price, and that's really what's helped us drive that. In fact, our ATP on the new vehicle is tracking about $13,000 above the segment average right now. So really, really playing exactly where we wanted to and that is the control. So we're just getting started in this. I'd say we're just coming to the end of Phase 1.
We've got much more to come in terms of cab types, in terms of rolling out more trim levels and indeed rolling out some of the features there. The CarbonPro box only really goes into production in the next few weeks, the diesel engine a little bit after that. So we've got a lot more to look forward to, which will continue to grow our share of the segment. But of course, that's just half the story because light duty is good as it is, really is only half the story. And as I've been saying to everyone who will listen, what could be better than launching 1 pickup truck in the U.
S. Auto industry at this time, but launching 2. And that brings us to the 2020 Sierra Heavy Duty. Bigger, smarter and stronger than its predecessor, this really is the daddy of all GMC trucks. It really is an outstanding vehicle in every way.
It's literally proportionally much bigger than the outgoing truck. The scale of it and the presence it's got on the road is outstanding. The credentials in terms of stronger, its towing capability is now best in class and also it's smart to win a lot of innovations I'll talk about in a moment. We revealed this truck just about 8, 10 weeks ago, standing in San Diego. So let's just run a short film of how we did that and let's see if we can get the volume cranked right up.
So that was really a sight to behold. That was a 60 foot Viking yacht with marine lift weighing £225,000 that we actually told there. Now it's fair to say we're not certified to do that, but it really did do it. But in terms of certification, it really did it does produce the results. When we talk about heavy duty and what are the key selling points about this.
So we've seen the big 5 on the light duty. What could be better than that? Well, it's the bigger 5 on the heavy duty. And first of all, I talked about the towing there and we showed that with the reveal. 93% of people who buy heavy duty truck buy it for its towing capability.
People use these every day, but they're very expensive vehicles and they also want the luxury features that you associate with those price points. We increased the towing capability by over 50% versus the outgoing vehicle. And now it represents best in class towing capability of over £35,000 So real outstanding capability. Quite honestly, most people never need to use that, but it's certainly nice to know it's there if you want it. 2nd big thing, 1st ever Allison 10 speed transmission made it to the 6.6 liter Duramax Turbo Diesel.
These are 2 very powerful sub brands in that heavy duty market. Allison Transmission, Duramax Diesel. These are things that people look for, they respect, they've got a long history. And again, to get the 10 speed with the diesel is something that's really appealing to customers. Thirdly, we talked about these on the light duty.
First time ever we've got the head of display and rearview camera mirror, world's 1st multi pro tailgate that will also be on the heavy duty, obviously as well as the light. And then again, 93% of people buy a heavy duty to tow with it. For the first time ever, we'll be offering 15 camera views to help that towing experience. So you can see inside the trailer, you can see around the vehicle and you can see something called transparent trailer. And to try and show you what that means, a picture speaks a 1,000 words.
This is a picture of a vehicle towing a boat. And as you can see there, what those camera views do is stitch that image together and basically give you this transparent view as if the item behind you that you are towing simply wasn't there. That will run at any speed, at any time on the screen inside the cabin. So again, really improved safety, really de stresses the towing experience and again, a real great innovation which Sierra can offer. So really excited about this and more outstanding innovation and technology when heavy duty comes around.
Okay. So just summing up, light duty Sierra is the premium truck. The next generation since its launch has got off to a great start. We've built more than planned, we sold more than planned, we've gained segment share and we sold for a higher mix and a higher average transaction price than planned. So Phase 1 of the launch has gone exceptionally well.
As I say, now we're expanding the cab types, the innovations like the CarbonPro box and the diesel engine. We're really moving into Phase 2 and into, let's call it, steady growth state. And of course, we're just preparing ourselves to start manufacturing and selling the heavy duty. This is going to be game changing for GMC, not only because of the capability increase that we've seen there and the innovation, but also because of the extra capacity that Divya has said has been installed. We really believe we can make big strides in this segment, in this heavy duty segment.
Already about 60% of what we sold on the outgoing Sierra heavy duty is Denali. So on the new one with more availability, with more capability, with more innovation, we think we can take that further. Add the AT4 to it as well, given a real new twist in this segment. And again, really underpin not only with the premium light duty truck brand, with the premium heavy duty truck brand as well. So thanks very much.
And Divya, back to you.
Thanks, Duncan. You can see the excitement from Duncan and that really goes through the rest of the organization as well with this new lineup. So we're all excited about that. I want to switch gears completely here and talk a little bit about downturn and downturn planning. So we've shared some of this analysis in the past.
There's a few points that I want to make before we get into the analysis portion of it. Firstly, we're not anticipating an imminent downturn here in the United States. The economy continues to be healthy. Fundamentals are strong. But regardless of that, we think it's prudent to have the operating discipline, the financial discipline, the cost discipline for a business like ours.
So we wanted share some of the details on what kind of improvements we've been making in the overall business here. And finally, this audience will particularly know this, this is an inherently assumption driven analysis. I'm sure people in this room and on the phone have your own ideas on whether a downturn is imminent, how deep is it going to be, what will happen to price, what will happen to mix and other assumptions? But and it's obviously inherently difficult to predict that. What we want to provide though is a framework with which to look at it and provide some sensitivity so you're able to model it and think about it in a way that you think is appropriate.
So with that, what I wanted to start with is some of the actions we've taken since the last downturn in terms of how we've positioned the overall business. And I want to split this into the operating elements and the balance sheet elements as well, because I think there's important changes to both. From an operating standpoint, firstly, we have increased capacity utilization and we've taken a number of plant actions in the last financial crisis and since then, which helps us move towards a better capacity utilization. From a cost structure standpoint, we've realized this is an inherently high fixed cost business. And what we've done in the last several years is improve the fixed cost as a percentage of revenue and we've reduced that about 4 percentage points since 2006 or so and improve the contribution margin as well.
So reduce overall breakeven point and make sure that we're able to operate within the 10,000,000 to 11,000,000 units that we've signaled in the past. From a structural standpoint, this tends to go unnoticed, but there is a lot to be said for a more simplified operating and management structure. We've taken a lot of actions as it relates to geographies and areas of the business where we were not making a compelling rate of return. We've also streamlined our management structure and from a percentage of reduction in executives and the pace of decision making has improved as well. From a qualitative standpoint, that goes a long way in setting up the business for a more volatile environment.
The adjacencies that we've talked about historically, whether it's after sales or OnStar, an important aspect of this is these are less cyclical and perhaps even countercyclical areas of our business. And what we've done since the last downturn is really strengthen our contribution to profitability as well as the overall revenue metrics from an adjacency standpoint. And GMS continues to grow and provide that downturn protection, which very important as well. Switching gears, fuel economy, since the last downturn, it is a very different lineup of vehicles that we have from a fuel economy standpoint. Again, difficult to predict how that would impact the changes in mix, but we do think it's an underlying factor that plays into this.
I talked about exiting restructured underperforming businesses as well, whether it's segments or geographies. We are committed from a capital allocation standpoint to continue investing in areas where we will earn an appropriate rate of return. And you've seen us take actions, a number of actions over the past several years. And what's also not said in this page is the cultural aspect of it and Mary has talked about it. From an entire organizational standpoint, the culture to win and the accountability to produce results is something the team this team has signed up for and you'll see us continue to deliver from that standpoint as well.
Switching over to the balance sheet, we are cognizant of the fact that this is a high operating leverage business, which demands that from a financial leverage standpoint, you want to keep that low and you want to keep that at prudent levels as well. We continue to make progress from a credit rating standpoint. We have a very good dialogue with every one of our rating agencies. We recently received an upgrade from DBRS and we continue to be on in good dialogue as to how we're improving the business and communicating with them on how things are different since the last downturn. From a revolver standpoint, we do have an increased revolver availability.
We do not anticipate using the revolver during a normal downturn, but this is protection that it provides from an overall liquidity standpoint. From a net debt perspective, we continue to demonstrate discipline, and I have a couple of slides here on the progress we've made on pension obligations as well. We are operating this business with the discipline that over the next 2 to 3 years or so, we want to look ahead and minimize the non operating calls on cash flow that might come across to our business. And so we're at any given point in time looking at the rolling 2 to 3 year cash flows to minimize any surprises. So the takeaway from this page, very different business from both an operating as well as financial standpoint since the last downturn.
So some of the core principles that we want to operate under from a downturn standpoint. We want to continue investing through the cycle. And what we mean by that is from a CapEx standpoint, we want to avoid the historical start stops that you've seen in the industry, which doesn't which is really not efficient. So our assumptions plan for a steady product cadence and product investment through the cycle. We do expect that in a moderate downturn, we will maintain our dividend spend.
We, as I mentioned before, do not anticipate drawing on the revolver in the event of a moderate downturn. And our $18,000,000,000 average cash target balance continues to remain sufficient as we think about what is the appropriate level of liquidity as we go through the cycle. And finally, as you'll see in the next couple of pages here, an important operating principle is to maintain a positive EBIT adjusted globally as well as in North America. So with that, let's get into the analysis. As I mentioned, assumptions, it's obviously, depends on each person that you talk to what might be an appropriate assumption.
The other thing that's difficult to plan for is there are some items here that are more certain than others. In a 25% volume decline, you can expect that the volumes are going to be down 25%. You can plan with a little bit more certainty what the cost actions might be or CapEx actions might be that you can take in a downturn. Working capital unwind that you see on this page typically tends to be close to formulaic. You will know what the receivables and payables and sales allowance unwind is going to be during a downturn.
The difficult things to predict on this page are price and mix. And so what we have here is we've modeled a 1% to 2% range from a price standpoint. And as a comparison during the 2,008, 2009 crisis, the impact was around 2%. So you can dimension that however you'd like. From a mix standpoint, we have assumed that there will be a shift away from trucks into crossovers and cars.
And again, the degree of that and how quickly that will happen or specific mix within crossovers, again, remains to be seen. But we have stressed these levels again from a 2,008, 2,009 standpoint as well. For CapEx, we have assumed a 3% reduction in the non product program category. So this is your maintenance spend, typically not affiliated with the specific product programs as well. So if you put all this together and look at the EBIT impact as well as the free cash flow impact, From an EBIT adjusted standpoint, our prior messaging on 60% to 70% impact on EBIT continues to be appropriate.
We do think that in a regular downturn, we have we typically take actions from a cost standpoint and capacity standpoint that you saw us announce in like the last November timeframe where we have taken proactive steps to address some of that. And so the starting point, as you can imagine, from a baseline EBIT standpoint and a baseline free cash flow standpoint is higher than we would have been if we had not taken those actions. From a delta perspective, the 60% to 70% remains appropriate. Free cash flow, you will see the impact of EBIT roll through to free cash flow. And in addition to that, you're going to see the working capital unwind.
We've typically planned for about $5,000,000,000 of an unwind. And excluding the impact of a working capital, timing element here, we do anticipate that this would be a breakeven type free cash flow. Again, similar to analysis that we've shared before. Working capital, we do view as a timing item, which is a temporary unwind, which is followed by a rewind much like you're seeing in Q1 and Q2 of this year. And what the actions that we would take from a CapEx perspective will serve to offset as well.
So again, takeaway from this page, baseline EBIT and free cash flow have been helped by 60% to 70% range that we've talked about before and a flat free cash flow excluding the impact of working capital items. And I mentioned we provide sensitivities. Rough rule of thumb here, again, we're trying to simplify here to keep things very high level. 100 basis points of pricing pressures typically translate to about $1,000,000,000 of an impact. And from a mix standpoint, about 100 basis points shift away from trucks translates to a $500,000,000 of an impact on profitability.
Again, you can flex that in a number of different ways to arrive at, as your own analysis. Switching over quickly to the balance sheet aspect, especially on pensions. Pension if you step back and think about pensions and how things were prior to the last downturn and where things are now, we have made significant progress from a balance sheet standpoint. We have settled our number of our salaried obligations to the tune of $28,000,000,000 in 2012. We have made contributions into our U.
S. Pension plan from a voluntary perspective. With the transaction that we had in sale of Europe, we did transfer our European pension obligations, a portion of that to PSA. And most recently, last year, we prefunded about $600,000,000 of our voluntary pension obligations to non U. S.
Plans as well. So again, a snapshot of a few actions that we've recently taken from a pension standpoint. And as you look ahead, we do not plan to make any significant mandatory contributions over the next few years. The obligation, it tends to be a naturally shrinking obligation. We make significant benefit payments every year and that takes care of the natural decline in the obligation by itself.
And from a risk management standpoint, the plan assets are positioned such that both from an interest rate volatility and an equity market volatility perspective, it is significantly less exposed to this market than these markets than it was in the past downturn. Over 70% of our assets are not exposed to interest rates and we have a very low equity exposure as well to the tune of about 10%. Again, takeaway from this, from a non operating surprises perspective, this is a very different business than what you saw in the last downturn of 'twenty. So again, we wanted to provide that flavor from a readiness perspective. And just to summarize and close it out here and I want to open it up to Q and A.
From a cadence standpoint, we do expect stronger second half of the year. That's really the takeaway there and we're on track for our EPS as well as our free cash flow outlook for the year. We're excited about the truck launch and you've heard Duncan talk about it. And we again, we're in the early stages of our launch and we have more to come. And finally, we're not anticipating a downturn, but we're much well positioned for it compared to where we were previously.
With that, we will open it up for Q and A.
Hi,
Emmanuel Rosal from Deutsche Bank. Thank you very much. I have three questions if I may. The first one is on the cost savings for the rest of this year. To the extent that you expect them to really materialize in the Q2 and for the full year the guidance was $2,000,000,000 to $2,500,000,000 is going to start becoming extremely material as we sort of go into the Q2.
Can you maybe remind us what sort of actions have happened in Q1 and how they sort of drive this magnitude of cost savings over the next few quarters?
Sure. So from an overall restructuring standpoint, again as a reminder, we said about $4,500,000,000 in cost savings that was split roughly a third, third, third between manufacturing, engineering and SG and A. And as we think about the actions that were announced in November, we started implementing a number of them in the Q4 of 2018 and going into 2019. We had a number of our salaried voluntary and involuntary actions take place in the Q1 of 2019. We had a lot of the engineering actions that I mentioned as well took place in the Q1 of 2019 as well.
And manufacturing, we continue to make progress as well. So across the board, I would say a lot of progress made in Q1 of 2019 and you'll start to see the results of that in Q2 and beyond.
Okay. And I guess,
so secondly in terms of the rollout of the new pickups. So I think the message is you've really started from the high end in terms of availability of dealerships. It's not all the cabs configuration are not necessarily there. When would be a month this year where you feel like the sales results that we get to see a more representative where some of the normalized sales trends could be.
I think Duncan, you can weigh in as well, but I'd say second half of the year is when you get to see the real impact. So closer to end of Q3 and starting into early Q4.
Yes. I was going to say exactly that September, October time. So I mean, it's interesting really. We only sold more of the new vehicle versus the outgoing vehicle. The 1st month we did that was April from a GMC standpoint.
So you can see that transition has been very meticulously planned. And that's why I was saying really, I think we just come into the end of this Phase I period now before we accelerate on into Phase II. But I think, yes, end of Q3, early 4th is when you'll see steady more of a represent steady state.
Great. And then just finally in your downturn analysis on the free cash flow side, so about breakevens or in year 1, excluding working capital, what is your baseline in there? Is it a free cash flow from last year or this year, Candace? Or is it the one after your $6,000,000,000 free cash flow improvement plan?
This year's starting point could be used as a baseline. So the $4,500,000,000 to $6,000,000,000 of free cash flow.
So if your free cash flow was $6,000,000,000 better as in your plan, your downturn analysis would be $5,000,000,000 $6,000,000,000 better?
Yes. And although this year's free cash flow does contemplate a portion of the savings coming through. So as you see tailwinds in CapEx and the remaining portion of the cost savings flow through, you will see the baseline increase and therefore it raises the water line as well.
Thank you. Itay? Thanks. Itay Michaeli from Citi. Also three questions.
First 2 on pickup trucks. Slide 11 is very powerful and it kind of begs the question as to why not particularly when we talk about downturn analysis and the cycle, not disclose the pickup truck franchise separate from the other segments that we've talked about in the past. And or maybe to that, if you think about the pros and cons of doing that, can you share you said revenue in the past on the K2XX platform, the profitability margin all in. We can all come up with estimates, but I think that would be helpful. And also does beg the question as to in a downturn analysis, why would truck mix go down to cars?
So love and maybe it could be the other way around. So love to get your thoughts on all those.
So from a disclosure standpoint, obviously, we're trying to strike a balance in terms of what's right. We have started talking more about it, I'd say, in the last couple of years, including revenue and overall kind of dimensioning the business for you guys to think about it better. So nothing really to say here from a planning perspective. We'll continue evaluating it as we go along in terms of what's the right amount of disclosure. But agree with your point that as the market looks like it's decoupling between the two, the additional clarity that we can provide around this important area of the business will help people understand that better.
The points well taken.
It. Okay.
And maybe one last one. As we think about the second half of the year, I think in the past you've shared year end inventory targets either from a units or day supply. Any update on that? How should we think about your planning in terms of wholesale in the second half for dealer inventory?
So we would anticipate that similar to Q4 of 2018 and before that as well around 70 to 75 days supply is what we've targeted across a variety of segments. And you'll obviously, to your point, you'll see seasonality during the year. But I think at the end of the year, you can plan on about that range is where we'll end up.
Joe? Thanks. It's Joe Spak from RBC. You mentioned you picked up 5 points on the high end of pickup truck mix. I think if I remember correctly going a couple of years back there was about an 8 point gap between sort of your overall sort of 35% share.
So is that is there still more to go there? Is that sort of the gap you expect to close as you sort of continue to get that full lineup out there?
Yes. I mean, I'll talk for GMC. So over 50,000, I said retail 25,000 sorry, 25% was what we achieved quarter 1. A year ago, it was only 14%. We still think there's plenty of upside there.
I mentioned the success of AT4, which is squarely above that 50,000 segment. We've already increased the capacity of that trim level now. So without kind of specifically giving goals, we think there's a lot of upside for us above 50,000 and indeed above 45,000, which is still a lucrative segment of that market. And really from a GMC point of view, this is where we should be winning really in the segment. So yes, plenty of upside to go, I think.
And then I guess while we have you maybe in a segment that gets a little bit less attention, but the midsize segment you were when you reentered that segment was a little bit of a different landscape now. There's some more competition come today and potentially even more coming. How do you think about differentiating in that segment? And what do you see the opportunity there?
Well, I quite like it when you get new entrants to segments, especially when there's still only 5 or 6 of you. It's not like there's 25 or 30 of us. So what it does, it drives more interest to the segment. So the rising tide can lift all boats really in that segment. And this year alone, we're seeing that I think the segment at retail has increased 11%, new entrants have helped drive that.
But our volume is also up. We've grown a few percent as well. So it does attract people in. How do we differentiate? Again, I think GMC premium truck brand Denali, in terms of what we sell Denali is over 20% of sales in that midsize segment, again at a high price.
So we've really got a unique space within that. So that's one way we differentiate and the core way. Again, going forward AT4, something we'd like to see on that model as well, which again is probably more the core of that segment. It is seen as more of an off road. So premium off road and Denali, we think we've got a very strong offering from a GMC point
of view in what is your growing segment. Maybe one last one. So, you have the multi pro tailgate. And I guess I want to make this a bigger GM question actually because that's an interesting technology. Super Cruise is another interesting technology.
You've chosen to sort of take those at the very specific models, very high end trims. How do you balance that versus trying to get people into those trim lines versus what's I think a technology that if you actually made a little bit more broadly and as an option on some other packages might actually have you gain some share and sort of mix up on some other vehicles?
It's a great question. And I'll talk about it generally and you can talk about the tailgate. That is especially as it relates to Cadillac and Super Cruise, that's something that we evaluating and initially we started out in C26, it's rolling out to other entries as well. We do anticipate that over time it will be in all the Cadillac entries. We look at it on a case by case basis, where does it make sense to offer this and where does it not.
And you can talk about the Multipro, but it's balancing that exclusivity element with the accessibility and drawing people in case by case basis, Joe.
Yes. From our point of view, it's quite funny. We went to the innovation lab 4 years, 5 years ago looking at a lot of technologies I've just talked about today, really saying which ones do we want, which ones are we going to go after. And for me, as soon as I saw that, I thought that's GMC all over and I was really enthusiastic. So the point where we said we want we need that on as many GMC trucks as possible.
So actually standard equipment on probably 80% of our sales. So a standard feature. And of course, when we came to pricing the vehicles, we made trade offs to keep the price at the level we wanted. But it is standard and then it's optional on the other. So the only ones it's not standard on is really the entry level vehicle, the work truck and the SLE as we call it.
So again, over time, we'll continue to evaluate and it's feasible we may actually make it standard across the range as well. So yes, we were I was very adamant that that feature demonstrates GMC what we are, what we want to be probably more than any other. And as such, it should be enjoyed by the vast majority of buyers of the GMC.
Adam Jonas, Morgan Stanley. Divya, what would you say is your currently worst performing business?
Well, we've made, as you know, a lot of progress across a multitude of geographies. I'd say the international business as we see it ex China, we have been making progress on South America and Asia Pacific markets where we shared some of the actions we've recently taken. Getting that closer to breakeven, I'd say, has been a recent priority. So I'd mention that as the remaining segment that with more work to do.
But I guess within North America, I know the mix has moved so overwhelmingly towards trucks and SUVs, but you still have I don't know if you could tell us what percentage or even numbers of workers that are working in businesses other than trucks and SUVs that we highlighted today that still has some work to do. I mean, would you throw what's left of pass car in North America in that category of underperforming? Or is that the fact that you didn't mention that won't mean that it's being absorbed or resorbed somehow?
I'd say a lot of the actions we've recently taken have been towards that end, And if you think about where the next level of intense competition is coming in, it's really in the smaller and compact crossover segment where there's a number of entries from competition, there's pricing pressure and so on and so forth. But we're taking the early steps that we need to take now in order to position that for we have like OpEx and variable profit improvements efforts that are going on in all of these areas that you're talking about. So I'd say we're proactively looking at it. The recent steps that we've taken certainly helps us position well for that. And we have more work to do, but we're making progress.
And as finally, China didn't talk about it too much. Obviously, there's so much going on with the headlines. I don't want you to comment nor could you comment on the direction of trade. But can you tell us give us a bit of an update on what you're seeing right now on the ground, pricing, competition, volume, production, anything at all you can tell us in real time, notwithstanding the headlines and the tweets?
Certainly, it remains volatile, and we're keeping our eye on it. From an industry standpoint and from a pricing pressure standpoint, you're starting to see impact of all this volatility flow through. We what we're focused on really is getting inventory right and getting costs right. And if we can adjust to in Q2 to the levels that we want to, we think it's going to position us really well for second half, because as we get into the second half of the launches where we think we're in the sweet spot of where we need to be, that's going to be good, but we want to get that to the right spot. Cost is the other aspect, right?
We can't control industry, we can't control tweets, we can't control trade tensions. What we can control is the things that are like cost, which are within our within the organization's ability to control. So what we're focused on the ground is get ready for the launches flawlessly, make sure you right size the inventory and have laser focus on cost, which the team has done a good job of in the past, but now it's even more important that we continue to focus on cost initiatives. So obviously, hard to call given the level of volatility to your point, but we're controlling everything we can control.
Shreyes Shreyes Patel at Wolfe Research. Just wanted to clarify a couple of things. So the 2019 free cash flow, the working capital headwind that you're facing, it's like $500,000,000 to $1,500,000,000 Is that right? So I think it was $4,500,000,000 to $6,000,000,000 within the with the working capital headwind.
The working capital headwind that I talked about was really a Q1 phenomenon that will unwind through the rest of the year. If you think about the whole calendar year, we're not specifically calling out $1,500,000,000 to $2,000,000,000 The number that you might be remembering is as we talked about why we had a range of $1,500,000,000 to like the $4,500,000,000 to $6,000,000,000 is the $1,500,000,000 range. And the way we attribute that is obviously the earnings range that we have together with working capital unknowns because it's a large commercial flow business. There might be some working capital items at the end of the year that might impact it. So it's more of a range that we have provided as opposed to a specific headwinds that we're pointing to for the calendar year.
Okay. And
then and that $4,500,000,000 to $6,000,000,000 is the starting point of the breakeven analysis that you did? Yes. Yes. Okay. And then just on the trucks, I think you guys have talked about $2,000,000,000 revenue opportunity on the new trucks.
Is that still a reasonable assumption? And then how should we think about some of the incremental content that's going in? I mean, obviously, you talked a lot about the product. For example, I think Fiat Chrysler last week was talking about, I mean, the week before they were talking about $500,000,000 of incremental content on the HD for them. So just trying to think about how we should be looking at that.
Do you want to address
the first?
Yes. I'll take the first one. So from a $2,000,000,000 standpoint, Shreyas, if you looked at the slide that talked about the differences between K2 and T1, we talked about 20,000 extra capacity for LD, 40,000 extra for HDs, increased crew capacity. Those are 3 of factors that go into the $2,000,000,000 that we've historically talked about and I'd say remains on track. From a cost standpoint, and Duncan, you should weigh in as well.
Obviously, trucks do have increased content. We're recovering that. You've seen that in Q4 and in Q1 from a price standpoint. It's safe to look at it as variable profit positive and like for like truck EBIT flat. And obviously, the tailwind is coming from mix.
I'm talking about a like for like truck. And the biggest difference is depreciation because of the new CapEx that's gone into the T1 trucks. So that's roughly a way to think about it.
Yes, typically in pricing.
So we do make some trade offs. We don't just keep layering more and more and more equipment on to the point where it becomes unaffordable for consumers. So certainly when, for example, we say, hey, we're going to make that multi pro tailgate standard, we'll look what less important things we can take out of the truck and then price down for. So there is an element of trying to keep the vehicles affordable. But I think Dewey just said it there.
The other equipment we're putting in, we are pricing up kind of market value for the features as well. So that in some ways what's driving those prices up as well. Okay.
And just
last one. You talked about China, obviously, how you're managing the low volume environment. Is there anything we need to be aware of in terms of, kind of CO2 compliance or NEV compliance that obviously those are kicking in now or this year. But I think a lot of your NEV vehicles are coming in post 2020. So I'm just trying to think about how you're managing CO2 compliance or NAV compliance there as well.
We do have launches as we through 2019 and into 2020 and we expect to be compliant. Obviously, the mix of the legal will shift based on what is overall needed from a compliance perspective, but we expect to be compliant.
Colin? Colin Langan, UBS. Can I just follow-up on I thought you said you gained retail share and pickup, but year to date, I thought your overall share is down over 300 basis points? So is that all fleet or am I comparing the wrong thing?
So I'm talking about retail GMC. So again, I don't know if you're looking at GM trucks overall or total. But yes, so GMC, so we've gained 2 points of retail segment share to date. And as I say, as today, we're up 25% in volume versus a year ago.
And you highlighted the cadence of the pickup, just starting with the high trim crew, the double, the regular and then the heavy duty. I mean, any sense of what how much does it make up of your typical sales and how
Again, I Again, I think the opportunity we have with the new vehicle, the increased capacity and capability and frankly, we've just got what I believe is a segment leading truck. You saw the towing claim there. So I think it could improve increase from that 25% of sales. Crew is the big seller for us. Crew light duty is the biggest seller.
So again, it's hard for me just to guesstimate 8 percentage, but crew light duty is the biggest seller for sure. So the rest will supplement that. But again, I'd be making it up a little bit if I give you a percentage.
And you also highlighted the pricing of the market. Any sense of how much of the market is over $55,000 in terms of
Yes. Over $50,000 is in light duty is about 13%, 12% to 13%. And then 45% to 50% is about another 12%, 13%. And then on heavy duty, it's a lot more. Obviously, like I say, that's why heavy duty is so critical.
60% of what we sell today is Denali's. So 60,000,000, 70,000 plus. So that's going to be a very big launch for us.
And what is the assumption for pickup share in the second half? So if we know that guidance is on track in the second half, is that supposed to be flat? Is it up? How should we think about
it? Haven't provided a specific guidance number for share and you'll see if it goes that's what I'd say. We haven't provided specific aspects, Cowen. I think we'd say that things will normalize in the 3rd to Q4 of the year. We will certainly provide more information as we go along and whether we're on track.
And beyond that, describing a certain percentage number, I think
I don't
know if that's going to be that useful.
From where it is today or from year over year, so I'm not sure.
Okay. We have time for one last question.
Richard? Yes. Rich Carlson from BMO.
So I just
want to squeeze 1 in on GM Cruise because you had the announcement out last week. How did that come about? What did it do to GM's percentage share of GM Cruise? And then I guess how actively are you out pursuing more investments?
So we had been very clear early on that the accrued business is well capitalized through commercialization and that remains to be the case. And the opportunity that we had that we announced last week was a result of reverse inquiries that we had we got. And from the standpoint of being opportunistic and taking money when you don't need it as opposed to when you need it, we felt like it was a prudent thing to do. We continue to believe in the opportunity in that business and we were keen to not to dilute ourselves beyond just a modest level. So we participated in the round, which we'll share more details when we announce the Q2 earnings.
But the extent of our participation was such that our dilution was only modest in this round. So I'd say reverse inquiry, we felt like it was the right thing importantly as it relates to talent and especially as we're competing with other players out there in Silicon Valley, we felt like this was going to be yet another proof point from a talent acquisition perspective for the ticket.
So I assume then Honda and SoftBank were involved in the conversations?
The existing investors participated pro rata in the race.
Okay. With that, this concludes our event. Thank you for joining and your interest in General Motors.
Thank you. Thank you.