The operator introduces the General Motors Company Second Quarter 2024 Earnings Conference Call and explains the format of the call. Ashish Kohli, GM's Vice President of Investor Relations, then thanks the participants and introduces Mary Barra, GM's Chair and CEO, and Paul Jacobson, GM's Executive Vice President and CFO. Dan Berce, President and CEO of GM Financial, will also join for the Q&A portion. Management will make forward-looking statements and the risks associated with them are outlined in the SEC filings. Mary Barra thanks the GM team and other business partners for their contributions to the company's strong second quarter and first-half results. She highlights four key drivers of their performance and new hire guidance.

General Motors has a strong portfolio of ICE trucks and SUVs, and their EV portfolio is growing rapidly and gaining market share. They have been able to maintain stable pricing and low incentives, and are focused on improving margins and capital efficiency. Their recent investments have resulted in successful launches of new vehicles, including popular models like the Chevrolet Silverado and GMC Sierra. They also have a strong lineup of redesigned SUVs, including models with advanced features like Super Cruise. This hands-free driving system has been highly praised for its smooth and reliable performance.

The Chevrolet Equinox will be all new and more profitable due to strategic decisions such as bolder styling, elevated comfort and technology features, and leveraging proven platforms and component sets. GM is also simplifying their engineering and equipment processes to reduce costs and improve margins. This includes eliminating unnecessary parts and reducing the number of buildable electrical combinations. As their EV portfolio grows, GM is seeing mostly incremental sales and is working to increase their conquest rate.

General Motors has seen success with their EV models, particularly the Cadillac LYRIQ which is the top-selling luxury EV in 22 states. They are also expanding their EV lineup with the GMC Hummer EV, Chevrolet Blazer EV, and Chevrolet Equinox EV. They have received positive reviews for their EVs and are excited to launch more models, including the OPTIQ and CELESTIQ. They are focusing on winning new customers and have deferred the launch of Buick's first EV. GM is also working on improving public charging access through partnerships with Tesla and the IONNA fast charging venture. Customers have given positive feedback on the drive-through plazas they have implemented with Pilot company for public charging.

The company is committed to responsible and profitable growth in any demand environment. They are adjusting their spending plans to be more efficient and in line with customer demand. They are ramping up domestic battery cell supply and will continue to bring on additional capacity in a measured way. The Orion assembly will be reopened as a battery electric truck plant in mid-2026, six months later than originally planned. The company is also taking steps to address challenges in the Chinese market, including reducing inventory, aligning production to demand, and restructuring the business with their JV partner. However, they expect the rest of the year to remain challenging.

The speaker recognizes the progress Cruise has made and highlights their recent return to the road and leadership appointments. They reiterate their vision to transform mobility using autonomous technology and highlight their AI platform. The Cruise team will focus on the next generation Chevrolet Bolt EV instead of the Origin, which will help them optimize resources and attract investors. The speaker then hands the call over to Paul to discuss the company's financial results, which were driven by strong performance from their ICE business and stable pricing.

The company has experienced stable pricing and strong sales in July, particularly with the launch of new mid-sized SUVs. They have also seen growth in their EV portfolio, with a 34% increase in U.S. deliveries in the second quarter. The company has also been focused on profitable growth, with a lower incentive GAAP compared to the industry average and an increase in U.S. retail market share. In terms of capital allocation, they have repurchased $1 billion of stock in the quarter and completed a $5 billion stock authorization in early July. They plan to continue reducing their share count through an ongoing $10 billion ASR program.

In the fourth quarter, the company plans to retire 20-30 million more shares, bringing the total to around 250 million. They have also authorized an additional $6 billion for share repurchases and will remain active in future repurchases. In the second quarter, revenue increased by 7% to $48 billion, with $4.4 billion in EBIT adjusted and $3.06 in EPS diluted adjusted. The company expects a lower inventory valuation allowance in 2024 due to improved EV profitability and reduced inventory levels. They have already reduced $300 million of the allowance and expect a similar benefit in the third and fourth quarters, totaling around $1 billion for the full year. The company achieved adjusted automotive free cash flow of $5.3 billion in the second quarter, driven by strong core operating performance and capital discipline. North America's EBIT adjusted margins were 10.9%, resulting in $4.4 billion of EBIT adjusted, up $1.2 billion from last year. This was due to higher wholesale volumes, stable pricing, cost containment, EV valuation allowance benefit, and a non-recurrence of a $700 million expense from last year.

The company's pricing for the quarter was higher than expected, driven by new products and reduced marketing spend. Dealer inventory levels were temporarily higher due to delayed sales, but the company is on track to achieve cost savings and maintain targeted inventory levels. GM International's earnings were down, with a loss in China, but improved sequentially. GM Financial had a strong quarter and Cruise expenses decreased due to a focus on technology improvements.

The company is focused on efficient expansion and cost management in their operations across multiple cities. They have paused production of a product, resulting in a charge of $600 million. They have raised their guidance for the year, with increased cash flow expectations. The second half of the year is expected to have lower EBIT due to pricing headwinds, higher costs, and an increase in EV volumes.

In the first half of the year, we produced and sold 75,000 GM Ultium EVs and expect this number to increase. However, the mix of EVs will be a bigger challenge in the second half of the year due to their lower profit margins. We are closely monitoring demand and inventory levels and will take action if necessary. We are making progress towards achieving vehicle variable profit in the fourth quarter through improved manufacturing scale and efficiencies, reduced cell costs, and improved vehicle mix. Our strong financial performance and commitment to our capital allocation framework sets us apart from our competitors.

The company has seen growth in market share for affordable and mid-size SUVs, as well as profitability in their EV portfolio and software development. Customer safety remains a priority. The following Q&A session includes a question about pricing, to which the speaker responds by stating that despite an increase in incentives, the company has maintained flat pricing due to a disciplined commercial strategy and strong demand for their vehicles. Truck sales have also increased, leading to a gain in market share.

GM's consumer demand has remained strong and resilient, thanks to their disciplined inventory strategy and production of in-demand vehicles. Their EV strategy is focused on offering customers choice and they believe the market for EVs will continue to grow, regardless of potential changes in regulations. They have a strong portfolio of EVs and ICE vehicles, with the Equinox and Bolt providing affordability and range for customers.

The speaker discusses the positive aspects of EVs, such as their fun driving experience and attractive design. They also mention the flexibility between ICE and EV and how it puts them in a strong position regardless of regulatory changes. The investments in EVs have also created many jobs in various states. The speaker then answers a question about pricing assumptions and EV volume targets for the second half of the year. The second speaker discusses the strategy for taking Cruise to market and mentions the possibility of finding partners for deployment.

The company is projecting conservative cash flow targets and has managed to maintain flat performance in the first half of the year through incentive strategies and inventory pushes. They are focused on meeting customer demand and are working to improve their technology for their Cruise division to be better than a role model driver. They are open to partnerships and investors for expansion.

The speaker, Paul Jacobson, provides additional information on cost and the company's plans for the back half of the year. He mentions that while there will be some higher costs, they are also on track for their fixed cost savings program of $2 billion. He estimates that they have achieved $1 billion in savings last year and $400 million in the first half of this year, with another $600 million expected in the second half.

The speaker addresses a question about the acceleration of cost savings and explains that the biggest cost increase is due to a $400 million increase in marketing spend for the second half of the year. They also mention that they are still on track to reach their $2 billion cost reduction target and are continuing to work on it. The speaker then addresses a decision regarding the Origin vehicle and explains that while there will be cost savings, it does not necessarily indicate a change in go-to-market strategy, but rather they are still undergoing a strategic review for Cruise.

Mary Barra explains that the main reason for switching from the Origin to the Bolt is to eliminate regulatory risk, as the Origin does not meet motor vehicle safety standards and requires a legislative change. The Bolt has been successful in terms of AV technology and allows for better capital efficiency. When asked about emissions compliance, Barra says that it is difficult to predict the required level of drivetrain mix credit for the 2027 target, and that any potential changes to the EPA targets would require a timeline and process to be determined by the administration and the EPA.

General Motors has various ways to comply with existing regulations, such as adjusting their portfolio and utilizing credits. They regularly review their portfolio and make decisions based on EV adoption and regulatory changes. The company values regulatory certainty and will continue to monitor any potential changes after the election. In the 2027 timeframe, they plan to have hybrids in key segments to meet the current regulatory environment.

The company is considering putting certain technologies on their fleet based on the regulatory environment, and plans to have hybrids in key segments in the future. The company's strong performance in North America is driving its overall results. There was a solid rebound in both wholesales and non-consolidated revenue in China, but the equity loss remained consistent. The company is considering actions in connection with their partner in China, but it is unclear what those actions will be. The company is facing challenges in China and may need to consider rightsizing actions or reducing capacity, which they have not done before in that market.

The speaker discusses the challenges of making profits in the current automotive market, with many companies prioritizing production over profitability. They mention launching new vehicles and taking steps to improve inventory and partnerships. The speaker also notes that their international markets outside of China are seeing strong pricing and brand recognition.

The speaker discusses how disciplined execution has paid off for the company in international markets. They emphasize the importance of managing brand strength and product residuals in the long term. The speaker believes that the company's upcoming EV models, with their fresh designs, performance, and affordability, will continue to attract new customers and outperform the industry. They also mention the positive response from dealers regarding the new Equinox EV.

The speaker is discussing the company's updated guidance and the potential impact of rising loan rates and dealer earnings on pricing. They believe that their portfolio has held up well despite higher interest rates and plan to approach pricing with conservatism in order to maintain consistency in cash flow and margin performance.

During a recent earnings call, the company's CFO discussed the assumption they had made earlier in the year and how it has changed in the second half of the year. He emphasized that this assumption is not a forecast and the company is remaining agile and adaptable in their approach. The CFO also mentioned the potential for an increase in unit volume and the impact it would have on costs, stating that it would mostly be variable costs.

The speaker discusses the company's pricing, which has gone from a 2% assumption to 0.75%. This results in a $400 million variance for the second half of the year. The speaker attributes this to China underperformance and lower EV volumes. The company has taken its guidance up by $1 billion, with $1 billion offset by China and EV volumes. The speaker is pleased with the company's performance.

Mark Delaney from Goldman Sachs asks about GM's plans for EV production and potential profitability in the fourth quarter. Paul Jacobson responds that they are closely monitoring inventory levels and will adjust production accordingly, but the focus is on the long-term trajectory of scaling up the business. He also mentions cost improvements and the importance of balancing production with demand. On the topic of GM Financial, the company has slightly raised its EBIT outlook for the year.

The speaker, Dan Berce, discusses the slight increase in GM Financial's projected earnings for the first quarter and attributes it to a strong first half performance. He also mentions factors that may impact the second half, such as fewer lease terminations and lower used car pricing. In terms of credit trends, the prime customer segment is performing well, while there has been some deterioration in the less than prime segment. However, there has been recent stabilization in this segment. The next question is about Level 2 plus subscription take rates.

The paragraph discusses the take rates for Tesla's FSE product and compares it to BMW's Super Cruise, which has been slow due to chip availability. GM expects to have Super Cruise on 22 nameplates by the end of the year and is currently unable to provide specific take rates. The company will have more information in the next 12 to 18 months. The decision to pivot to the Bolt was largely economic, but GM may continue to lobby for a purpose-built vehicle to regulators.

GM is focused on improving the regulatory environment for autonomous technology and reducing costs at Cruise. They are also facing challenges in China and are working on a three-pronged strategy to address them. This includes aligning production, reducing inventory, and cutting costs.

The SGMW perspective is that they have maintained a stable market share and support global markets through exports. They plan to export iconic products through the premium channel with low capital investment. They believe the China market will resume growth in the midterm. In regards to the additional costs in the second half, $400 million will be spent on marketing and there will also be costs for commodities and EV retimes. The team is working to address these costs and feel good about their performance so far.

In the closing comments of the conference call, Mary Barra highlights the company's strong results and higher guidance, emphasizing their focus on leveraging their core strengths and being disciplined. She also mentions the progress of their Cruise project and their commitment to returning capital to shareholders. Barra invites attendees to their upcoming Investor Day in Springhill, Tennessee, where they will showcase their latest products and manufacturing capabilities. The call ends with a thank you and a reminder to disconnect.

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