The General Motors Company held an earnings conference call on July 25, 2023, to review their financial results for the second quarter. Joining the call were Mary Barra, GM's Chair and CEO; Paul Jacobson, GM's Executive Vice President and CFO; Kyle Vogt, CEO of Cruise; and Dan Berce, President and CEO of GM Financial. During the call, management discussed the company's strong growth due to customer response to their new trucks and SUVs, and a $3.2 billion EBIT adjusted in the second quarter, including a $800 million charge for new commercial agreements with LGE and LGES.

Chevrolet is taking steps to reduce costs and improve margins, such as providing more details at Investor Day, and has seen four consecutive quarters of higher retail market share in the US. They also have led the US industry in initial quality for two years in a row and are focused on strong cost discipline. As a result, they have raised their full year earnings, free cash flow, and EPS guidance, and expect capital spending in 2023 to be in the $11 billion to $12 billion range. They are launching new vehicles to support strong margins, which are connecting with customers.

GMC Sierra and Denali models account for 70% of heavy duty retail sales and more than 70% of sales for the new GMC Canyon mid-sized pickup. The Chevrolet Colorado's high performance off-road models, the Z71 Trail Boss and ZR2, represent more than half of retail sales. The Chevrolet Trax has delivered more than 20,000 units in the second quarter and has attracted many new customers to GM. The Montana pickup has earned one third of the segment in South America and the Trax has earned 50% market share in Korea. GM is on track to deliver higher EBIT adjusted in GM International this year, and they are looking ahead to launch the 2024 Chevrolet Traverse in North America. They have also achieved their target to produce 50,000 electric vehicles in North America in the first half.

GM is increasing production of EVs, and demand remains strong due to the Ultium Platform. There have been delays in the ramp due to supplier delivery issues, and GM is taking steps to address the situation. They are increasing second half production of Hummer EVs, and have secured more than half of their 2030 direct sourcing target for critical raw and process materials.

Ford has announced a $2 billion fixed cost reduction plan for the 2023-2024 timeframe, including a voluntary separation program, reduced sales and marketing expense, and reduced engineering, travel, and administrative costs. Additionally, Ford is embracing a strategy called 'winning with simplicity' to reduce design and engineering expense, supplier cost, order complexity, buildable combinations, and manufacturing complexity. This will result in fewer part numbers and a 50% reduction in trim levels, while still maintaining market coverage for all major segments and price points.

Mary Barra invited Kyle Vogt to discuss the steps Cruise has taken to scale its business and make it profitable. Kyle outlined the formula for driving growth: increasing the supply of vehicles, increasing the service availability, and making the product awesome. Cruise recently hit 390 concurrent driverless AVs.

Bolt platform is the largest and fastest growing AV fleet in the world and is capable of scaling thousands of AVs. The company is confident in its regulatory and permitting paths, and is rapidly expanding cities, hours, and service area. It is also launching commercial service in two or three more cities in the next 12 weeks. The product is well-received, and demand is likely to greatly exceed supply for several years, providing margin opportunity and potential for revenue growth.

Cruise has experienced a 49% growth in rides per month over the last six months, and has achieved a 28-day user retention rate similar to that of a fully matured human ride-hailing service. Safety has also improved with AVs experiencing 54% fewer collisions than human drivers in similar environments, and costs have been reduced by 15% per month. Cruise is also developing a new sensing and compute architecture that will cost 75% less than the first origins, and will include custom chips that will be on the road by the end of next year.

Kyle shared the progress made by the Cruise team and Mary Barra addressed the negotiations with the UAW and the importance of the manufacturing workforce. She also discussed the company's plans to invest in ICE vehicles, retool existing assembly plans, and upscale the team to grow rapidly in EVs. Paul Jacobson was then introduced to finish the call.

The team has achieved strong results in the past four quarters, with U.S. retail share growth and stable incentive spend. GM is raising guidance for the second time this year, and is focusing on a $3 billion fixed cost reduction to offset higher depreciation and amortization from manufacturing investments. The company is also taking a capital-efficient approach to growth initiatives, such as their collaboration with Tesla.

GM reported a 25% year-over-year revenue increase in Q2 due to supply chain improvements and stable pricing. They anticipate being towards the high end of their 5 to 10% guidance range for the full year. GM achieved a 7.2% EBIT adjusted margin and $1.91 in EPS diluted adjusted. North America reported an $900 million year-over-year increase in EBIT adjusted and 8.6% EBIT adjusted margins, despite a $700 million LG agreement charge. GM also repurchased $500 million of stock during the quarter.

GM's vehicles remain strong, evidenced by JD Power ratings, but inflation and the ARC airbag recall have increased repair costs. Dealer inventory is around 10 days and GM is aiming for 50-60 days by the end of 2023. There are still supply chain and logistics challenges, but GM International's Q2 EBIT adjusted was $250 million, largely flat year-over-year. China equity income was up $150 million and GM International's EBIT adjusted excluding China equity income was down $150 million, due to a $100 million charge from the LG agreements and $150 million of mark-to-market gains recorded in the prior year.

GM Financial reported EBT adjusted of over $750 million, a decrease from the previous year, primarily due to higher cost of funds and lower net leased vehicle income. Corporate expenses and Cruise expenses were also down and up respectively. GM Financial's key metrics and balance sheet remain strong, allowing them to increase their full year EBT adjusted guidance to the $2.5 billion to $3 billion range. GM is also increasing their full year guidance to EBIT-adjusted in the $12 billion to $14 billion range, EPS diluted adjusted to the $7.15 to $8.15 range, and adjusted automotive free cash flow in the $7 billion to $9 billion range. The 2023 capital spend guidance has been lowered to the $11 billion to $12 billion range.

Mary Barra states that their goal of achieving low to mid-single-digit margins for their EV portfolio by 2025 remains unchanged, despite competitive pricing and manufacturing innovations. They are focusing on profitability and are not sacrificing margin for volume. They are making decisions today to help drive a stronger company beyond 2023 and are expecting revenue growth from software-defined vehicles, AV, and other new businesses.

Rod Lache asked about any changes to mid-decade pricing expectations due to capacity growth and competitive actions. Paul Jacobson responded that the demand for their vehicles remains strong and they are impressed with the purpose-built EVs they have created. They have not changed their expectations for mid-decade pricing. The $800 million LG charge is related to the cost of production and efficiency improvements in the body shop and battery team.

Mary Barra discussed GM's pricing strategy for their electric vehicles, noting that the prices are in line with customer expectations and the feedback has been positive. She also mentioned that GM has invested $800 million to do the right thing for their customers, and that the demand for their Bolts is so high that they can't build enough. Finally, GM will provide more information on their EV margins in November.

Mary Barra, CEO of General Motors, has stated that the company is still targeting to produce 100,000 Ultium-based products in the second half of this year and 400,000 by the middle of next year. Despite a delay caused by the automation equipment supplier not being on track, GM has added additional lines to reduce the risk and has seen an improvement in the last four to six weeks. Barra is confident that the issue will be resolved by the end of the year or a month sooner.

Mary Barra is confident in the pricing of the Silverado EV and is seeing strong demand for the LYRIQ, HUMMER truck and SUV, and Bolt. She notes that there are still plenty of reservations and deposits being made, with very low churn, and that for any customer who decides to wait, there are several more waiting in line. She also acknowledges that there has been criticism of GM's speed in developing EVs, but that they are going as fast as they can while still ensuring that the vehicles don't require any compromises.

Paul Jacobson from GM discussed how the company is trying to maintain discipline on inventory and incentives to drive share with margin performance. He is cautiously optimistic that the demand for their vehicles will remain strong. He also discussed the safety measures implemented on Cruise vehicles, which are 54% safer than those driven by humans. He talked about specific features of the Origin vehicles that could lead to further improvements in safety.

Kyle Vogt answered a question about the 50-some-percent reduction in collisions seen in Cruise fleet driving, saying that when looking at collisions where the AV was the primary contributor, there were 92% fewer collisions. He also noted that there were 73% fewer collisions with meaningful risk of injuries, and that the product was continuing to improve rapidly with monthly software updates.

Paul Jacobson of GM explains that in order to keep inventory and margins steady they have been balancing supply and demand, and the strategy has been successful. He also states that if they flex up on volume, it would largely be variable costs that come in, rather than fixed costs.

John Murphy asked Paul Jacobson about the durability of fleet sales in the face of potential economic risks. Jacobson responded that there was a lot of pent-up demand from the last few years due to capacity challenges caused by COVID and semiconductor shortages. Fleet sales were performing well with margins similar to retail sales and they expected this to continue in the short and medium term. Murphy then asked if the $792 charge for the LG issue was contemplated in their initial guidance, which would make the raise in the outlook $1.8 billion.

Mary Barra from General Motors explains that the new Bolt model will incorporate Ultium and Ultifi technology, which will reduce costs by 40% compared to the previous generation battery technology. This will allow them to build a capital-efficient vehicle quickly and affordably to meet consumer demand.

Mary Barra of GM has indicated that the company is open to considering SAIC's EV platform to meet the needs of the Chinese EV consumer, but the Ultium platform is more cost-efficient. GM is reviewing its CapEx for 2024 and 2025, and is looking at simplification initiatives to ensure the right portfolio entries. There is no market-driven slowdown in GM's spending.

Mary Barra explains how General Motors is working to reduce capital costs and complexity in its vehicles by leveraging the Ultium platform. She also mentions that Mark Reuss is leading an initiative to reduce costs in manufacturing and capital expenditure. Barra then states that the Bolt has had very good warranty performance over the past several years.

GM is confident that their vehicles will have strong warranty performance due to their quality systems and processes. If there is an issue, they have traceability to identify it. GM is currently struggling with suppliers to start up their modules, but they have quality checks and error proofing in place to ensure quality. In regards to the autonomous vehicle rollout in San Francisco, Kyle was asked how many AVs it would take to blanket the city for a similar service to Uber.

Mary Barra does not have any comments on the strategy for Cruise's capital funding, but she notes that GM is generating enough free cash flow to fund Cruise's expansion. She states that GM will make decisions that are in the best interest of their shareholders. Kyle Vogt provides some information on the San Francisco fleet, noting that they are close to opening up the service to the public. He also states that they do not intend to direct all vehicles into a single city, and that there is capacity to absorb several thousand vehicles in a city like San Francisco.

Mary Barra of General Motors discussed the potential for their Level 2 plus product to generate revenue and profit, and how they are in dialogue with the Department of Transportation and NYCTA to improve road safety. GM's China equity income was $21 billion in both the first and second quarters of 2020, down from $0.2 billion a year prior and $0.5 billion pre-pandemic.

Mary Barra states that GM needs to have the right EVs at the right price with the right technology to restore China profitability. She recently visited China to review the product line and understand the competition. GM and LG ES have been working together to develop a diagnostic that will allow vehicles to go from a reduced battery charge to a full charge. This has taken longer than initially expected.

Mary Barra closed the call by discussing the success of the second quarter and the first half of the year, which was due to the launch of great new vehicles and strong execution of the business plan. She also discussed the outlook for the second half of the year and the next several years, which will be shaped by their ICE and EV portfolio, investments in vehicles and growth opportunities, and cost discipline. At the upcoming Investor Day, attendees will get to drive the new STBs, experience the capabilities of Super Cruise, and drive the new Chevrolet Silverado EV work truck, which is a powerful example of the benefits of the Ultium platform.

Tesla has invested in their electric vehicle platform, offering more driving range, faster charging, and greater towing capability than competitors. They are currently going through growing pains, but are excited to demonstrate their progress in November. They plan to continue to execute with discipline in the third and fourth quarters.

This summary was generated with AI and may contain some inaccuracies.