The operator welcomes participants to the General Motors Company Fourth Quarter and Calendar Year 2023 Earnings Conference Call. The call will begin with open remarks, followed by a question-and-answer session. Mary Barra, GM's Chair and CEO, and Paul Jacobson, GM's Executive Vice President and CFO, will be joined by Dan Berce, President and CEO of GM Financial, for the Q&A portion. The management will make forward-looking statements about their expectations, and the risks and uncertainties involved. Mary Barra believes that GM is well positioned for a strong financial performance in 2024, with consensus growing about the resilience of the US economy, job market, and auto sales. GM expects healthy industry sales of about 16 million units.

In 2023, GM had record sales in the US, led the industry in initial quality, and maintained its position as the leader in the highest ATP quadrant. They also passed Honda and Toyota in the most affordable quadrant, thanks to popular and profitable vehicles like the Chevrolet Trax and Buick Envista. This success has led to strong financial results, with $12.4 billion in EBIT-adjusted and $11.7 billion in adjusted auto-free cash flow. Almost two-thirds of this cash is being returned to shareholders through dividends and share repurchases, including the immediate retirement of 215 million common shares through a $10 billion accelerated share repurchase program.

The company is focused on reducing their share count and maximizing opportunities with their ICE portfolio. They are launching new models and improving existing ones, with a focus on safety and technology. Their EV business is expected to be profitable in the second half of the year, with plans to produce 200,000 to 300,000 Altium-based vehicles. They will build to demand and are encouraged by third party forecasts for increased EV sales in the coming years.

The company expects to see an improvement in their competitive position as they increase production of several new electric vehicles, including the Cadillac LYRIQ and GMC Hummer EV. They are confident in the design and performance of these vehicles and have a significant number of reservations and orders for upcoming EV pickups. However, they will remain flexible in their production and can adjust to changes in demand. Their supply chain and manufacturing processes have been optimized to support growth, and their battery production is on schedule. They have also made changes to qualify for a full consumer credit and are working with dealers to maintain consistent pricing for customers.

General Motors is addressing stability issues with the Chevrolet Blazer EV and is working to improve the software and overall customer experience. They have established a software quality division and made organizational and process improvements to ensure better software development and testing. They are also focused on reducing costs and increasing efficiency, including simplifying their product designs and making more equipment standard in trim series. This will result in a $2 billion reduction in fixed costs by 2024.

GM has made significant efforts to streamline their product programs, resulting in over $200 million in savings by 2024. They plan to continue balancing their capital priorities and generating free cash flow. In addition, they will be introducing plug-in hybrid technology to select vehicles in North America to comply with stricter emission standards. They are also making changes to improve Cruise and earn back trust with regulators and the public. Their 2024 investment in Cruise will reflect a more deliberate and strategic approach.

GM's spending will be down this year, but they will continue to invest in their employees and technology to achieve their vision of delivering self-driving technology and a profitable business. They have learned a lot in 2023 and are committed to building on their momentum. Their executive compensation is tied to delivering their comprehensive plans and meeting financial targets. They will wait until later in the year to host an Investor Day to provide tangible proof points on their ICE, EV, AV, and software strategies. They have already provided a roadmap for EV profitability in 2025 and will share updates on Cruise as they finalize technology and relaunch plans. Paul will go through the 2023 financials and provide more details on the 2024 outlook before taking questions.

The company has shown impressive growth in revenue, EPS, and cash generation over the past few years. They have focused on profitable growth and have reduced fixed costs through actions such as portfolio simplification and virtual engineering. This has resulted in a reduction of $1.4 billion in fixed costs, partially offset by higher depreciation and amortization. The company has also generated strong free cash flow and returned a significant amount to shareholders through dividends and share repurchases.

In 2024, the company has $20 billion in auto cash and marketable securities and plans to balance capital allocation priorities by returning capital to shareholders. Despite the impact of the strike, total company revenue remained consistent at $43 billion. The company achieved $1.8 billion in EBIT adjusted and 4.1% EBIT adjusted margins in Q4, but this was impacted by the strike and inventory adjustments. North America delivered Q4 EBIT adjusted of $2 billion, down from the previous year due to the strike and inventory adjustments, but within the targeted range. The company proactively managed inventory levels to minimize incentives.

The speaker is pleased with the company's performance in 2023, with 50 days of U.S. inventory and incentives below the industry average. GM International and GM Financial had solid quarters, with the latter paying dividends of $1.8 billion to GM. Cruise expenses were $800 million, and the company expects EBIT-adjusted in the $12 billion to $14 billion range for 2024. They also anticipate EPS diluted adjusted to be in the $8.50 to $9.50 range, with adjusted automotive free cash flow of $8 billion to $10 billion. The speaker highlights that the $800 million EBIT-adjusted impact from LG agreements will not be repeated in 2024, and this will save the company $1,000 per vehicle in their path to EV profitability.

In 2023, General Motors expects to see a $1.1 billion impact on their EBIT due to the strike and adjustments in net realizable value. They anticipate a market similar to 2023 with 16 million units, and plan to rebound from the strike with market share gains from higher EV volumes. They also expect mixed headwinds from ICE production and a slight pricing headwind, but remain confident in their ability to balance production and profitability. They are on track to achieve $1 billion in net fixed cost savings and expect higher labor costs and lower cruise expenses. In November, they announced plans to improve EV profitability with higher volumes and fixed cost leverage.

GM is seeing a decrease in cell costs due to lower raw material prices and increased capacity utilization at their battery JV plant. They expect stability in their South America and Middle East operations, but anticipate ongoing pressure in China. GM Financial is expected to have EBIT-adjusted in the $2.5 billion to $3 billion range, with credit performance and used vehicle prices returning to normal. They also forecast robust automotive adjusted free cash flow for the year, but anticipate some headwinds from 2023 working capital benefits and timing of payments. The company's capital spend for 2024 is expected to be similar to 2023, with investments in battery JVs. Their effective tax rate for 2024 is projected to be 18% to 20%, and their full year EPS guidance assumes a weighted-average fully diluted share count of slightly below 1.15 billion shares. This includes the impact of remaining shares to be purchased through the ASR, which is expected to reduce the share count to below 1.1 billion once completed.

The company's actual share count will depend on various factors and excludes any additional share repurchases. The company is prepared to flex between ICE and EV production and is actively working to address challenges in their EV transition. The call then moved to the Q&A portion, where the first question was about the outlook. The company is targeting 50 to 60 days of inventory and expects to maintain a disciplined approach to incentives. The 2% to 2.5% pricing assumption is a planning assumption rather than an expectation.

The speaker is discussing the company's focus on generating cash flow and hitting targets for investment. They are confident in their ability to hit their targets for variable profit per unit in the second half of the year, but may need to revisit if there is pricing softness or demand retreat. There appears to be more scrutiny on capital allocation and a shift towards prioritizing cash flow over growth.

Mary Barra responds to a comment about GM's recent changes and clarifies that they are not necessarily a change in strategy, but rather an effort to optimize capital and prioritize returning cash to shareholders. She also mentions the success of their ICE business and the potential for growth opportunities.

Mary Barra, CEO of General Motors, is committed to the company's Cruise technology and believes it is already safer than a human driver. They are working on a detailed plan for the rollout of the technology and will work closely with regulators and first responders. The company has confidence in the technology and will share more about their plans in the upcoming weeks. Analysts are curious about the profitability of GM's electric vehicles.

Paul Jacobson is addressing a question about the impact of the lower of cost or market adjustment on the EV inventory on the company's metrics. He clarifies that it is not included in the two metrics they are focusing on, which are variable profit and mid-single digit margin target in 2025. The company will continue to update on their progress, but it is uncertain if they will do so quarterly. Adam Jonas from Morgan Stanley is the next person to ask a question.

The majority of GM's capital spending is focused on EV projects, while their ICE portfolio is already established. They will continue to evaluate the level of vertical integration as battery technology evolves, but they are currently well positioned with their joint ventures and partnerships.

Mary is responding to questions about the company's strategy and competition, particularly from China. She emphasizes the importance of a level playing field and improving the company's cost structure. The company has made big changes in the past and may continue to do so in response to shifts in the industry.

Mary Barra, CEO of General Motors, explains that the company regularly evaluates its strategy and is open to making tough decisions, such as potentially exiting China or rebranding Cruise, in order to protect profitability and cash flow in the long term. She also mentions the successful decision to sell Opel in Europe as an example of the company's willingness to make unexpected moves for the benefit of the business. Barra emphasizes the company's strong position in markets such as North America and South America.

GM is considering expanding into the Chinese market, which is experiencing significant technological and competitive changes. The company is focused on ensuring a strong future and profitability for investors, and is also planning to bring plug-in hybrid vehicles to the US to meet compliance standards. In 2024, the company's focus will be on electric vehicles, with the potential to adjust hybrid capacity as needed. This outlook is stronger than what investors had anticipated.

The speaker is responding to a question about the company's outlook for 2024. They mention that the higher outlook is partially due to industry-related factors, such as volume and pricing, but also due to company-specific factors like lower Cruise spending and cost reductions. They emphasize the team's ability to overcome challenges and execute well in the upcoming year, with a focus on EV production and customer response.

Mary Barra responds to a question about the $1 billion reduction in spending for Cruise in 2024 and the response from regulators to the recently released comprehensive review. She mentions that the response has been positive and that they have been transparent with regulators. She also clarifies that their initial estimates were made before they fully understood the situation, and that they are still focused on developing the technology and keeping their talented software engineers.

The speaker discusses their strategy to cut costs and focus on one city for their technology. They mention a $1 billion investment and clarify that it does not necessarily mean they will spend that entire amount. They also mention the need for further funding for Cruise and state that they will evaluate their options once they have a detailed plan in place.

Paul Jacobson discusses the company's cash balance and capital allocation strategy, stating that there will be a sizable increase in cash but the company's stance remains the same to invest in the business. He clarifies that the company's targeted range for cash on hand is $18 billion to $20 billion. A question is asked about the scale required to achieve profitability goals, and Jacobson responds that the company is counting on a combination of scale, lower battery costs, and savings to reach their goals.

In response to a question about the mid-single-digit EBIT margin target for next year, Paul Jacobson stated that the target is consistent with the company's projected unit volume of 200,000 to 300,000. He also mentioned that growth will be a smaller component of the walk from 2024 to 2025 compared to 2023 to 2024. He also noted that the lower battery raw material costs will not have a significant impact until the middle of the year and will have annualization benefits in 2025. In regards to Cruise, Mary Barra stated that the $1 billion lower spending for this year is the company's best estimate.

GM CEO Mary Barra responds to a question about the pace of their advanced ADAS and software development, specifically their Super Cruise technology. She admits that in hindsight, they should have implemented it across their portfolio much more quickly and it is now available on multiple models. Customers have shown a strong interest in the technology, with over 80% saying they would not want a car without it.

The company is committed to continuing to develop Super Cruise and adding it to more vehicles. They have already made progress and plan to make it standard on many vehicles. The cost of the technology has been reduced and they are deploying it as quickly as possible. There is some engineering and sensor requirements, but they are working on adding it to new vehicles in a timely manner.

During a conference call, an analyst asked about the company's projected cost savings and potential market share gains, EV margin improvement, and lower mix. The CFO declined to give specific details but mentioned stable pricing and consistent market share gains. He also mentioned that the company has good relationships with suppliers and is willing to help with any challenges in the annual budget process. The analyst also asked about potential supplier concessions if the company were to shift production levels, but the CFO did not provide a direct answer.

Mary Barra, the CEO of the company, thanks everyone for their questions and shares her thoughts on the company's performance. She believes that the company is well positioned for a strong year due to their success in various segments, cost discipline, and improvements in processes. They also prioritize returning cash to shareholders and are focused on executing their plan in all areas of the business. She thanks everyone for their support and ends the call by wishing everyone to stay safe. The call concludes.

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