Thank you. Thank you very much, everyone, as we continue Day One of the Barclays Industrial Select Conference, the Autos Track. I'm Dan Levy. I lead Autos and Mobility Coverage, and I'm very pleased to have with us GM at the conference, Paul Jacobson, the company's CFO. We're going to go through a series of fireside chat-style questions, and then anyone who has questions at the end, please raise your hands. But with that, Paul, thank you.
Great.
If you have some opening comments.
Sure. Well, thanks, Dan, and thanks, everybody, for coming. I think the key to a successful conference is having it in February, where the entire country is being battled with snow and cold temperatures. So it's a pleasure to be here.
Wouldn't come to it if it was in Detroit, huh?
Maybe not, but Detroit this time of year is nice, too. Really, I know we spoke publicly last week, and I know tariffs are on everybody's mind, but when you think about the underlying performance of the business, it's actually keeping up quite strongly. As you know, we had a really strong December as an industry, and even with GM, hit some new share highs, and all consistent with what we've said the longer-term journey is. January was down a little bit from December, but it's a little bit too soon to tell, mainly because it was so much choppy weather, the fires in L.A., et cetera. I would say that the year's, again, set aside the macro, I would say that the year's gotten off to a good start for us, and we're focused on continuing to execute.
We've got a lot of new vehicles coming out. We just had some really good news in the J.D. Power surveys with, I think, 15 models out there making it in the top of the rankings so the quality, the product offering is still quite strong, and we're seeing that manifest itself in both share and pricing, which has been remarkably consistent for a long time. Part of the thesis is we're controlling what we can control, and I think the company is executing well.
Great. I want to kick it off, actually, with a few of the ARS questions, and we'll start with a few, and then we'll sort of wrap up at the end with the remaining questions, but if we can pull up ARS question number one, do you own the stock? Paul, I hope you own the stock.
Do you need me to answer?
Go ahead as many times as you want. You can start the clock, please. I think relative to people obviously own your stock. Okay. All right. There's some opportunity here. Question number two, general bias to where the stock right now? You can start the clock. Great. Okay. Some positive, some neutral. I want to start, and I think to put this in context of the broader market environment for you, in which the SAR environment has done well. Your share has done well. Pricing has held in. Maybe we can, and I think that's underpinned the strong earnings that you've had. Maybe we can just start with share. Your run rate share in the last three quarters of last year, 17%, some of the best share we've seen in years. Maybe you could just talk about how sustainable you think these share gains are?
Yeah, so the numbers that we posted have been the strongest since 2018. I mean, we did have a quarter there in the midst of COVID and chip shortage, but that was really more about availability, so we're looking over the longer term, and I think, first of all, it starts with the portfolio. As we've said before, we've got probably arguably the best portfolio in GM's history in terms of the quality and the consumer demand for it, but the other side of it, too, that I think is a little bit underappreciated by the market because there's a lot of noise about EV adoption, where it's going, what it might be, et cetera, but remember, when we started out on the EV platform, we talked about how EVs can be a creative to share for us.
I think at the time, the market was really looking at it as it was a zero-sum game. Every EV we sold is one fewer ICE vehicle that we would sell, but we're bringing new customers into GM. We've seen that across all of our electric vehicle offerings, and we've also seen it in terms of the share pickup of some of the newer models that we have around like the Trax or the Trailblazer, et cetera. Those refreshes have taken quite a hold with the market, so we do think that this is sustainable. We're seeing EV growth faster than the rate of the industry as a whole, and I think it's a testament to what we're bringing to the market with not compromising on range and quality, and people are seeing that, so we do think it's sustainable. It's going to be really interesting.
Obviously, there's a lot of noise around the industry, and I think the industry is going to go through some shifts depending on how tariffs ultimately manifest themselves or if they do, but the one thing that I like is the hand that we're holding with the vehicle portfolio and the customer response that we've seen, I think is strong enough to help us get through it in a way that probably yields some outperformance.
Okay. And related to that, the pricing dynamics, which in your earnings bridge did much better last year than anyone would have anticipated, was roughly a $1 billion boost year-over-year. Maybe you can talk to the dynamics in 2025. You're talking about price, industry view of price down 1%-1.5%. How should we look at that in the context of higher incentives, questions on inventory? Maybe you can just address. I think there's some confusion on some of the third-party data out there that we see that has your prices down more, but in the EBITDA bridge, we're seeing price actually much stronger.
Yeah, sure. So I think one of the challenges of this industry is it's incredibly complex, and we want to try to distill it down to single variables. But the problem is there's a lot of noise in those variables. ATP is one of them because you can see a world where our pricing complex goes up, but we're selling more Trax and Trailblazers and vehicles at the low end, which traditionally we struggle to make money on. But as we talked about at our investor day, our margins are up 9-10 points on the refreshes of those vehicles, and they're doing quite well. So we're actually seeing much more traction in that space, which is taking overall ATP down, but our margins are continuing to perform because we're still selling.
We're at full production on full-size SUVs and doing really well in trucks, but that average transaction price is just going to be brought down by selling more vehicles at a lower price point. But that's where the share comes in. So you've got to really look at all this together. So when you look at we're picking up share. Now, I would say that traditionally that hasn't, on its face, been a good thing in the industry. But as we talk about at GM, we don't prioritize share. We prioritize a balance between share and margin. So if you're picking up share at the expense of margin, not a great thing. But if you're able to maintain your margins while boosting share, that's a tremendous thing, and that's what we've been able to do.
And in fact, as the industry overall incentive environment has trended higher, ours have actually continued to gap to the industry average. And as we said in the month of December, we actually had the lowest incentives out there, and that, to my knowledge, has never happened and certainly hasn't been GM leading the way in that space. But that's what we're doing, and we're continuing to drive that. So I think that combination of a great portfolio and the disciplined approach to market that we've taken by balancing our inventory and making sure that we maintain our target levels has been a great recipe for success.
And in the context of the inventory dynamics of some of your competitors, either the ones that have elevated inventory now, or we look at the Japanese, they have low inventory, but there's always the question of could they put more stock on the lots. How do you think that impacts the pricing that plays out for you?
Well, I mean, I think we have to watch it, but I think historically we would be in a case, a situation where we would match a lot of everything. I think now what we're doing is really pricing for our portfolio, our customers, our demand set, our inventory. And I think that's done really well for us. And you look at it in the relative performance of what we've been able to maintain. And I know there have been a lot of questions about it because it's a relatively new phenomenon. But we faced that a couple of years ago where one competitor had a significant amount of inventory, and they were going to boost a lot of incentives, and our stock sold off in anticipation of that impacting us, and it didn't.
Then there was a different competitor that was having inventory challenges, and they were offering big incentives. We didn't match it, and we outperformed. So I think at some point we start to realize that there's a consistency in the methodology that's being deployed here. It doesn't mean that it'll always work. I mean, you may find situations where the competitive dynamic requires it, but where it doesn't and where we're able to sell our inventory and continue to get it out into our customers' hands, that's a really good recipe for success. So you started out by saying our expectation is that the market's going to decline 1-1.5%. That's our planning assumption. It's not our expectation. And we said the same thing last year. We had a 1-2% decline, about a 2% decline that we had assumed at the beginning of the year.
That didn't manifest itself, and we're going to continue to sort of manage our incentives and manage our inventory month- to- month and go through it, but we're not expecting, and we're not going into the year expecting that we're going to have to significantly raise incentives. We're going in with the underlying performance of the business is strong, the products are strong, and we can maintain through it, but the planning assumption is really meant to help keep costs in check and to make sure that the company doesn't try to grow too fast because if you get into a situation where you're spending budget money early and then you start to see pricing pressure come in, it's harder to unwind it than it is to stop it before it ever gets in there. So that's why we assume what we do, and we clearly articulate that in the guidance, but not necessarily our expectation.
Okay. I want to double-click on one of the comments you made, and that's on your smaller SUVs actually getting margins that are much higher than what they had seen in the past. I think you've talked about simplicity as a driver of this. Maybe you can explain what that is, and are we seeing this more broadly in the GM portfolio, the sustainability of these types of sort of improved margins?
Yeah. I mean, it's really a focus, and I think when you look at the performance over the last several years of the company, both in terms of margins, but also cash flow yields, et cetera, you'll see that there's a relentless focus on continuing to improve the profitability. So when you look at the Trax and the Trailblazer and what we've been able to do there, it starts with simplification, so reducing the number of powertrain and wheelbase combinations that we could have. We have done things like no longer split production. So we used to have the Trailblazer produced in two different plants. We now have it centralized in one plant so we can recognize those efficiencies. But the other side of it is we're also selling a lot more.
Based on the great design and the capabilities of the vehicle and the price point, we're able to smooth that upfront capital across more units, which is helping us quite a bit as well. So I would say it's efficiency from top to bottom in everything that we can do. And the great news is I think there's still opportunity in the portfolio for us to continue to get better at that and continue to drive the cash flow.
Okay. Can't have a conversation without tariffs these days, right?
I was hoping maybe, but.
I won't ask you for your view of how this plays out because I think none of us have any good sense. But maybe you can give us a flavor of A, what are you doing, if anything, right now given the policy uncertainty? And B, if the end outcome of this is actually changing the terms of USMCA and content requirement shifts, how does this change your strategy?
Well, I mean, I think number one, we can't be surprised by where we are today. I think the president started talking about this in November, and we started planning in November for this eventuality. We have a playbook. I won't go into all the details of the playbook. We talked a little bit about it last week that we reduced our inventory held at our international plants by more than 30%, and we're continuing to focus on getting that down because the last thing you want is a bunch of finished inventory that just suddenly became 25% more expensive just with the passage of time. So we're trying to be as lean as we possibly can and working with our logistics partners to move things across, which we've done, and I think the team's done a good job of that.
There's other things that we can do that I would say are relatively low cost. They're not free, but it doesn't require a lot of capital. It doesn't require a lot of construction, but there's shifts and things and balance of production that we can move around and help to ease that burden and optimize around a changing macro environment. If they become permanent, then there's a whole bunch of different things that you have to think about in terms of where do you allocate plants and do you move plants, et cetera. Those are questions that just don't have an answer today because I can tell you as much as the market is pricing in a big impact of tariffs and lost profitability, think about a world where on top of that we're spending billions of dollars in capital, and then it ends, right?
We can't be whipsawing the business back and forth. What I would say is this is just, it's a playbook that really is pivoting and saying what is it that we can do, how can we respond? I think the reality is when you look across the supply chain, when you look across production, when you look across the broader industry, there's going to be a lot of impact and a lot of change. We're not alone in that space. But I think we are one of the more prepared companies in terms of this playbook that we have, and that's why we were able to say last week that we think we can offset 30%-50% of that, and we're just going to have to continue to adapt.
But the one thing that I think the management team should get more credit for is its ability to handle adversity. Really coming in since COVID, and you think about what the team did through the chip shortage, not only did we not adjust, I think we outperformed through the chip crisis in terms of the decisions, the tactical decision-making that was being done to prioritize those vehicles for better financial performance. And I think the team did a great job of that. And then when you see what we've been able to do as we've executed through some of the challenges of ramping up EV production, hitting our variable profit positive target in the Q4, we're making great progress. So in a way, I kind of look at the tariffs as another, it's another obstacle, and we're going to have to figure it out.
But the more we fret about it, the more we panic about what it might look like, the less time we're spending actually planning on how would we adjust the business, what would we do. And I think because of that mentality, I think we're a little bit ahead of it. Doesn't mean that there won't be change. We'll have to adjust to that. But I think for starters, we've got a good playbook.
Okay. Another policy question seems to be the theme of the day. We've heard about the EV mandate getting canceled, and in this one, I think there's maybe more of a consensus view on how things could play out with the EV tax credit getting pulled away, EPA standards, GHG standards getting pulled back. How is the EV investment product development strategy for GM potentially changing with this? How are you thinking, how is resource allocation changing, if at all, given the more likely change we're going to see on this front?
Yeah. I don't think we've made any major changes yet from that standpoint, and we might not. I think we've been very clear that our EV journey is about giving consumers choice, and clearly a growing number of consumers are choosing electric vehicles, and in many cases, the vehicles that we're bringing to market because they have capabilities that are more consistent than some of the other products that are out there on the market, so we still think that this is a growth opportunity for us, particularly in states where we've been under-penetrated like California, for example. We've seen great success with the LYRIQ and the new models that we've brought out.
So we still think that there is an element for us to be successful in EVs, and I still believe that getting EVs to profitability is probably the single most important variable that we can deliver for the company and for the shareholders. And we're continuing to make progress on that. As we said, while it's at the lower end of the original range we gave, we still see ourselves improving profitability by about $2 billion in the EV space. Some of that, a lot of it is scale as we continue to ramp up into it, but we've got a lot of great models that are coming out. The Escalade IQ just launched a great vehicle, I think over 450 miles of range in that vehicle and one that is catering to a whole new demographic of customers. So a lot of products coming to the market.
Now, I think we still do have a really strong ICE portfolio as well, and the way that the existing stringency standards sit, that's going to put increasing pressure on ICE vehicles, so should we see a lapse in that? I think we can have a scenario where ICE profitability, ICE cash flows can continue on for longer than they otherwise might, so we'll have the ability to pivot, and we have those conversations regularly about the portfolio, and one of the coolest parts of the job is being able to see model year vehicles that are four or five years into the future and being designed. We've got a lot of great things ahead of us, and I think when you look at the track record and what we've been able to pivot to the next few years, I think can be pretty strong for us.
In the context of EVs as a means, compliance standards are less strict. I think you mentioned at one point something like $2,000-$3,000 of compliance benefit per vehicle. Does the strategy change at all if the compliance standards are?
I think it doesn't change our goal at all. I mean, it may raise the bar a little bit for profitability. I think that is an important piece for the next generation, and we've got to work on that. But does that mean that the product offering would be as broad as it otherwise would be? Maybe not. But we've got a lot of great new vehicles in the marketplace now. The good news in that scenario is that ICE becomes that much more profitable because essentially it's right pocket, left pocket. You're gaining profitability in EVs at the expense of ICE. So that's a very complex balancing equation and one that we'll have to look at. But clearly, it would raise the bar on what we have to do in terms of material cost reductions, sell cost reductions, and efficiencies, but we're laser-focused on that anyway.
I don't think we want to be in a world where we say EVs are profitable simply because of compliance or simply because of the regulatory environment. We need to make them profitable for the long run.
One last one, and you're talking about the merits of the ICE portfolio. I think we've seen broadly in the automotive landscape, ICE refresh is getting de-emphasized, a lot of program or product focus on EV. Now, you've refreshed a lot of your ICE. Is there an opportunity for maybe a supercycle where there is a further wave of refreshes, a fresh wave of push toward ICE given an extended ICE tail here?
Well, I mean, I think that's certainly something that we have to consider is to the extent that we see the regulatory environment making ICE a little bit more prolonged than it otherwise would be under the current regime, then yeah, I think you've got to look at that and you've got to make sure that you can pivot. And I think one of the things that we can do as a company is be able to respond faster. How do we cut that product cycle, that product development cycle so that we can respond very, very quickly and get those refreshes? Because I don't think anybody can argue that the success we've had with the refreshes that we've put out into the market and now with the full-size SUVs, we're continuing to see that success. So there might be another opportunity to do that.
And if that's the case, we've got to take advantage of it at the same time that we're focused on continuing to improve the profitability of EVs. So yeah, that's part of what portfolio planning is. You try to make your best estimate of what the market is going to want for the next five to seven years, and you go out and you try to anticipate and exceed your customers' expectations. I think we've done that with our portfolio today, and I think the obligation for us is to try to keep that up in the customer's eyes.
Okay. Let's pivot to AV and software. Obviously, the big news a couple of months ago was that you consolidated ownership of Cruise. You've brought the engineers in-house, and work on a full Level 4 system has been stopped. It's going to be more of an advanced ADAS-type solution. How critical is an L3, let's call it eyes-off, hands-off system to selling vehicles? And you focused a lot more on efficiency in your spend. Is there an opportunity to partner with an external player to help be a bit more efficient on the resources?
Well, I mean, I think Cruise taught us a lot, and you never want to look at something like that and not learn a lot of lessons from it. I think we developed a good bit of technology savvy that I think is going to benefit us in our personal vehicle fleet. What we said that we weren't going to fund anymore was really the robotaxi development side of it. And there's a long list of things that you can look to, but most notably was the capital that was going to be required going forward to be able to do that and compete against technology companies that have a much lower cost capital, much deeper availability of both cloud and compute resources, et cetera.
And as we went and looked around the market, we thought that this was going to be a little bit of a mostly go-it-alone type strategy with the amount of funding that was going to be required from us. So we made the tough decision, and it was a tough decision to bring that in to save money and to really focus on the personal autonomy side of it because I do think that this is going to increasingly become a point of competition. And making sure that you've got your own tech platform is going to be an important way to help drive the revenues for that. And as we've said before, we get asked the question about software and technology, when would we consider collaborating in the industry, when would we want to do it on our own?
And the answer to that is when you can differentiate for the customer in a way that ultimately is going to drive value for you and your shareholders, you want to do that on your own. Where there are things that are blind to the customer or the customer doesn't really value because it's architecture, it's infrastructure, et cetera, those are the types of things that you can collaborate on. But when you think about Level 3 and ultimately Level 4 and where it's going, you want to be in a part where you're controlling that experience the best you can for your customer base going forward because it is going to be a competitive differentiator. But I think that's just one element of what software is going to do for vehicles going forward. I think the team that we've put in place over the last couple of years has got the right momentum, and they've got the right perspective and background to make that successful.
Okay. I want to finish up the rest of the ARS questions, and then I'll ask you a couple more to wrap up. Okay. Question number three, through cycle EPS growth above peers, in line with peers, below peers. Actually, you've obviously been outperforming your peers on the EPS growth side. You can start the clock, please. And it's not just people, there's a misconception. It's not just the share buybacks that are helping the EPS. Okay. In line. All right. Question number four, if we can go ahead and start the clock, please. Okay. So excess cash. All right. Let's see what the answer here is. And then you probably know where the question's going on excess cash.
You didn't give people enough time, it appears. You gave them the least amount of time with the most choice.
Can we refresh that one? Can we refresh that one, please? All right. So while that question is getting, can we refresh it? Okay. While that question's getting refreshed, just give us a sense of the gating factors on your share buyback plan, when we should see another repurchase authorization, and should we generally just consider is your framework that all or most of your free cash flow is going to go toward cash return to shareholders under the current macro environment or the current environment?
Look, nothing has changed in our capital allocation policy and process. I think a lot has been made about that, mainly because we utilized almost all of our prior authorization as we were in the Q4. So we're continuing to move forward on that. I don't have any announcement today, but what I would say is it's very consistent. We're investing in the business. We've got a really strong balance sheet, and we're returning cash back to shareholders.
Okay. Great. Yeah. You can pull that one back up again. The capital allocation question? Okay. All right. Thank you. If we can go to question, actually number six. Oh, all right.
You never gave anybody a chance to answer number five.
We're going to skip number five. Start the clock on this one, please. And you can start the clock. Okay. Good. All right. We can ask that one if you want. Why don't we skip to number six, please? Yeah. Sorry. Oh, is that number six?
It is.
Then the next one. Okay.
Should I tell you that the underlying performance of the company is good?
Okay. All right. The last question, and I think this sort of will put a bow on it, and we can start the clock. And look, here's my, I guess, where I would ask just on GM as a whole. Your stock trades at its depressed multiples, we saw. But you keep on putting up this really strong earnings. This is a question I've asked you before. I think it's a sign from the market that the market doesn't see your earnings as sustainable, but you keep on doing 14 billion plus EBITDA, which is something we haven't seen from GM in the past. I get it. There's macro uncertainty, and people are looking at pricing. What would you say that would tell people, "Hey, there is an element of sustainability. The market is just getting this wrong on GM, and there's a clear opportunity here"?
Look, I think it's pretty bold of anybody to say that the market is wrong because the market is what the market is. Clearly, there's a perception of GM, and there's a perception of the industry, highly cyclical. I come from a long history of a highly cyclical industry that managed to break out of that shell. It takes time. One of the things that I share internally is that we didn't earn this discount to the market overnight. It took years and years and decades of underperformance and cyclical performance. We're not going to earn our way out of it overnight either, but we've got to focus on executing. The interesting thing is the backdrop, since I started. It seems every year is okay, but it's peak cycle every single year, and all we do is we keep raising the bar on ourselves.
That's cultural change, right? The typical landmine, if you will, for a cyclical company is when you start performing at top of cycle. This is wonderful, right? Now let's start spending. Let's start investing. Let's start doing this because we don't know how long it's going to last, and it becomes a self-fulfilling prophecy. Costs go up, pricing starts to come down, and then it just gets exacerbated. What we're focused on is we look at last year, which was a record EBITDA year, and yeah, we'll pat ourselves on the back and celebrate. We should. At the same time, as soon as we're done doing that, we're going to go in and look at what happened last year that we could have done better, right?
And there are a lot of things that we could have executed better on last year that tells you that the underlying earnings power of the company was better than what we delivered. So let's hold ourselves to that standard, and let's keep focused on growth. So when we came out with our initial guidance at Investor Day, people were skeptical yet again from that standpoint. Now, that's different than the tariff environment, whether people want to put a risk premium on the stock for the tariffs, I get that. But I think it's fairly short-sighted to bet against the execution of the company when it's establishing the type of track record it is. And you look at the $10 billion ASR, that was the strongest sign I think that we could give at the time to say that this stock is incredibly undervalued. And in hindsight, that was an excellent transaction. We were really happy with the way that was executed. And I think we had the story proven. Now, let's get out of some of this macro uncertainty. But I can tell you, we're still running the company every day, and we're focused on what can we do to get better. So I think it takes time.
Great. All right. We'll wrap it there. Paul, thank you so much.
Thanks, Dan. Appreciate you. Thanks, everybody.