GM
#Thanks, <UNK>, and good morning everybody
Thanks for joining us
GM delivered a very strong quarter that set several Q1 records, including net revenue, EBIT-adjusted, EBIT-adjusted margin, and EPS diluted-adjusted
Year-over-year results include net revenue of $41.2 billion, up from $37.3 billion; net income of $2.6 billion, up 34% from $2 billion; EBIT-adjusted of $3.4 billion, up from $2.7 billion; EBIT-adjusted margin of 8.2%, up from 7.1%; EPS diluted-adjusted of $1.70, up from $1.26; and EBIT-adjusted of $3.4 billion in North America and an EBIT-adjusted margin of 11.7%, both of those are Q1 records
Automotive-adjusted free cash flow of negative $600 million is an increase of $800 million
And our ROIC-adjusted was 29.7% on a trailing four-quarter basis, reflecting the positive impact of our disciplined capital allocation framework
And we returned about $600 million in dividends to shareholders in the quarter
Our strong core business continues to drive our earnings growth
The strategic investments we have made in brands and in our operations are delivering outstanding new products with higher quality, stronger ATPs and positive third-party recognition, and they were produced with much greater efficiency
In addition, we continue to generate outstanding EPS performance by focusing on key markets with leading franchises, relentlessly pursuing efficiencies across the enterprise and allocating capital to maximize returns and mitigate risk
This means taking action in difficult markets to either restructure or exit the business
As you know, last month, we announced the sale of our Opel and Vauxhall brands and GM Financial's European operations to PSA Group for about $2.2 billion
This transaction is a win for the stakeholders of General Motors, Opel/Vauxhall, and PSA Group because it will enable each company to capitalize on its respective strategic priority
For GM, the sale is another step in our ongoing work to transform the company by strengthening our core business, investing resources in higher return opportunities including the future of personal mobility, and returning significant capital to our shareholders
We expect the transaction to close later this year and immediately improve our EBIT-adjusted and EBIT-adjusted margins, and adjusted automotive free cash flow as well as de-risk our balance sheet
We can lower the capital balance requirement under our capital allocation framework by about $2 billion and use it to accelerate share repurchases, subject to market conditions
The sale will also allow GM to participate in the future success of PSA through warrants to purchase PSA shares and to collaborate with PSA in future technology development and deployment
Through these actions, we are establishing GM as a more focused company and aligning our business for strong, sustained performance and growth
If I turn and look at GMNA and GM China, they really drove our Q1 results
So, let's take a look
, we have been introducing new and refreshed crossovers across our brands and we posted our best Q1 retail sales since 2008. Retail market share was up 0.3 percentage points to an estimated 16.9%
Chevrolet had its best first quarter since 2007 with year-over-year sales up nearly 2%
Buick and GMC retail sales, each were up nearly 4% with their best first quarter in 13 years
GMC sold its millionth top-of-the-line Denali model, which has contributed significantly to the brand's strong ATPs
Buick, once again, made Consumer Reports' list of top recommended brands
Crossover sales rose a combined 21% and truck deliveries were up 0.5%
Average transaction prices were over $34,000 and were in line with last year, and exceeded the industry by about $3,000. Now let's turn to China
I was just there last week for the Shanghai Auto Show and we actually had our GM board meeting there as well
We were there and participated in the launch of new models for the Buick and Baojun brands
In the quarter, GM China maintained strong equity income and margins, despite pricing pressures and a 5% sales decline in the quarter, partially due to an increased purchase tax
Record March retail sales by GM and its joint ventures were up 16% year over year and helped temper the slow start to the year
GM China launched four models in the quarter, the Chevrolet Cruze hatchback, the Chevrolet Camaro, the Baojun 510 SUV, and a new variant of the Buick GL8 MPV
Baojun and Cadillac achieved Q1 records, with deliveries up 25% and 90% year over year respectively
Half of the 18 new and refreshed models that we introduce in China this year will be in the higher margin SUV, MPV, and luxury segments
GM continues to expand its electrification portfolio in China with plans to introduce more than 10 new energy vehicles between 2016 and 2020, including hybrid electric vehicles, plug-in hybrid electric vehicles, and battery electric vehicles
GM in China launched the Cadillac CT6 PHEV late last year and last week launched the Buick Velite 5 extended-range EV
In addition, Buick will introduce, at least, one all-new locally produced battery electric vehicle model before the end of the decade
In South America, we expect significant year-over-year improvement in 2017, despite initial industry weakness
Chevrolet continued its 16 years of leadership in the region with sales growth of nearly 11%, outpacing the industry and market share of 15.7%
Losses were unchanged year over year and we remain confident that we are well positioned for growth when the market fully recovers
In Brazil, Chevrolet has maintained its market share lead for 18 consecutive months
In our ongoing work to lead in the future of personal mobility, we are making progress in autonomous vehicles, electrification, and connectivity
We just announced we will invest $14 million in a new research and development facility in San Francisco, where Cruise Automation will expand development of self-driving vehicle technologies
Cruise will hire more than 1,100 employees during the next five years and link them with our global engineering talent across the globe
We are running our autonomous vehicle program like a startup to give us the speed that we need to stay focused at the forefront of these technologies and the market applications
As autonomous car technology matures, our talent needs will increase, and Cruise's presence in the Bay Area gives us access to a world-class talent pool
These are men and women who want to be part of a fast-moving technology company that can also manufacture autonomous vehicles in scale
This month we announced Super Cruise
This is the industry's first true hands-free highway driving technology
It will be available later this year on the 2018 Cadillac CT6 sedan
Super Cruise is the first assisted driving technology that will use precision LiDAR map data in addition to real-time cameras, sensors, and GPS
When engaged, Super Cruise accelerates, brakes, steers, and keeps the car centered in the lane, even in stop-and-go traffic
And a camera-based driver attention system exclusive to Cadillac ensures drivers keep their eyes on the road
Super Cruise is a very promising technology that lays the groundwork for a safer future
On electrification, we are maintaining our industry lead in reducing battery cell costs, key to bringing affordable electric vehicles like the Chevrolet Bolt EV to market
We are ahead of the impressive battery cell projection cost we established two years ago, and our internal focus is to make GM the first maker of profitable, highly desirable, range-leading, and obtainable electric transportation
Advancing our lead in vehicle connectivity, in March we became the first mass-market automaker to offer an unlimited data plan
Since then, we have sold more than 100,000 unlimited data plans across our four U.S
GM has more than 5 million OnStar 4G LTE-connected vehicles on the road today, more than any other automaker
Now if we look at the calendar year 2017, given the used car pricing, a softer than expected industry in South America, a more challenging pricing environment in the U.S
and China, and more pressure on commodity costs, there is absolutely no question the global environment is feeling tougher
Having said that, this management team is focused on taking the actions necessary to deliver the commitments we made in January, including EPS diluted adjusted of $6.00 to $6.50, and EBIT-adjusted margins greater than or equal to 2016. Our pipeline and mix of new products are strong
, 10 all-new or recently redesigned crossovers are expected to drive sales and market share higher this year
At the same time, we continue to adjust passenger car output to meet consumer demand
We'll realize full-year sales of popular crossovers like the Cadillac XT5, the GMC Acadia, the Chevrolet Bolt EV, the Buick Envision, and a refreshed Buick Encore launched in 2016. They'll be joined this year by the next-gen Chevrolet Equinox and Traverse and the GMC Terrain, Buick Enclave, and the all-new Regal Tour X crossover wagon
Our intense focus on cost efficiency continued
In January, we increased our savings target to, at least $6.5 billion through 2018, which we expect will more than offset incremental investments in engineering, brand building, and technology
And we are always seeking additional opportunities to streamline the business and identify further savings
Our solid quarter follows three years of record-setting performance and a track record of taking bold and decisive actions to execute our strategic plan, put the customers at the center of everything we do, and deliver shareholder value
And, with that, I'll turn it over to Chuck
When you say that business, <UNK>, are you referring to passenger cars? I wasn't sure of your question
First, I would say, if you look at the cars, the Cruze, the Malibu, specifically that we just launched last year, they are on very efficient architectures; architectures that we'll use for multiple generations, not only from a light-weighting efficiency from a performance perspective, but also efficiency from a cost perspective
So, that's one opportunity that we're already putting in place – or we've already put in place
The brand building that we're doing is very important, also looking at the material cost performance that we continue to drive, and then really looking at configuring the vehicle and making sure we have the right vehicle offering to best satisfy and create the value for the customer
There's also opportunities with OnStar and the performance and what we can drive into the vehicle there
So, there's several things that we're looking at and that we continue to work on as we continue to improve the profitability of cars
So, we're very focused on doing that and are making good progress
Good morning
First to talk about autonomous vehicle, we continue to make very strong progress with Cruise Automation
We've given the Cruise Automation team with the right resources that we've added, responsibility not only developed from a technology perspective and integrate with the core engineering elements of General Motors, but also the commercialization
And so we really are running that as a startup
We haven't put specific timing out there, but I think what we've said several times it will be sooner I think than most people think and we're aggressively working on that and you'll hear more from us as the year evolves on that
So I'm very pleased with the progress we're making
And also, I think one of the key things, there's a lot that is said right now about autonomous vehicle development
But when we are doing our development in downtown San Francisco, also in Scottsdale, also now in Detroit, downtown San Francisco is one of the most complex environments, and the progress that we're making with zero incidents as we take many routes around that city I think gives me confidence that we're on a very good path
As it relates to electrification, when I look at all the assets that we bring to electrification, and this is why Mark has challenged the team, that we are the first OEM that is profitable in electric vehicles again from a technology, from a performance, and from an affordability perspective
And I think we have a steady ramp of products that you're going to see over the next couple years in electrification, but as we continue to evolve our BEV architecture, I think that will be the step
We are ahead of the curve on our cell costs
We started at – just a couple years ago we were at $145. We're now below our curve as we get to our goal of being under $100. And so that is progressing very well
The experience that we're seeing with the Chevrolet Bolt EV and the great response we're getting, because that is a car that is not only an electric vehicle, but it's fun to drive and it's really a technology platform
So when I look at what we've already got into the marketplace with our leadership position in the actual cell technology and the scale that we can leverage across the globe, specifically China, which will be the first and we believe largest electric vehicle market, I think that well positions us
So I'm not going to give you specific timing on either, but autonomous sooner than you think
And on electrification, that will really as we continue to evolve the BEV architecture
From a componentry perspective, to your point, it is a bit simpler to put together
It is in one of our very efficient plants, the Lake Orion plant in Michigan
And so, when we look at the launch, it's on track, we're currently selling in eight states, California, Oregon, Virginia, <UNK>land, Massachusetts, New York, New Jersey and Washington
We'll have some remaining northeastern states that will launch in May and then later in the year available across the United States
So, we're right on plan with where we expect the Bolt EV and also important that it will have some global launches as well
So, again it's in one of our most efficient plants
It's been engineered to be very efficient to build, so we're right on track and we're pleased with the progress on the vehicle
Absolutely
We constantly evaluate that and I think the steps that we took at the beginning of the year with what you see, we're doing in autonomous, are leading in that direction
So, we're looking to create the right business model, demonstrate – we're in a little different position with how we come at this and just to get to the core business and some of the – just a different perspective that people have on this company
But that's why we are being so aggressive in autonomous, so aggressive in electrification
And frankly aggressive with leveraging our 20-year lead with OnStar and having connectively in the car and unlocking the data monetization opportunities as well as just leveraging the data to provide a distinct and better value to the customers, so they buy our vehicles
So we continue to evaluate that
We want to put a few more I'll say proof points on the board and demonstrate that we are, I believe, best positioned, especially in electrification when you look at our track record, our scale, the leverage that we have across the globe
So we're going to continue to push on that
And as we evaluate, we'll look at the right time to make sure that we're doing the right thing for our shareholders, of which is having the right availability of capital
<UNK>, thanks for your comments, and I am 150% committed to General Motors
In my 37-year career, this is an incredibly exciting time because not only do I believe we are putting the best vehicles on the road that we have in my career here, but when I look at the opportunities that we have with autonomous, with electrification, with connectivity, I'm very passionate about it
And so I'm 150% dedicated to this company and continuing to demonstrate that General Motors can be the industry leader in transforming transportation and also being very responsive to the environment, and I think we're well positioned to do that
So that's where my focus is and will be going forward
So you bring up a very good point, one that we're very cognizant of, and so we look at what the landscape is
We do have OnStar deployed quite successfully in China right now
But we also think there are opportunities that we're exploring of how we work in that whole ecosystem because it is a very different ecosystem, not only because of some of the issues that you've raised and the different companies that really are leading in that market, but also because of where the country is and how they're adopting technology and in some cases skipping whole generations of the way developed markets use the technology in going right to an end game solution
So when I was there just last week, we spent quite a bit of time on that topic and developing the plan of how we're going to pursue that, very specific to the Chinese market, that environment, and the potential people we might work with there as we continue to evolve the OnStar platform in that country
Yes, SGM has that
The way we view data, <UNK>, is that the customer owns it
And so if someone signs up for this service, they give us permission to how we're going to use that data
So again, complying with all the laws and regulations in each of the countries, that's the way we use it
But through our joint venture, SGM, we do have access to that data, as we set it up with permission from the customer
Thank you
Right now when we talk about it, we have a cell cost per kilowatt hour that's around $145 and that's for the Bolt EV and we're working that – what we showed a couple of years ago, we're working on a path to get that, like I said, around $100 or below $100 and we're ahead of the curve on that
You have to look at the whole vehicle, how it comes together, the scale, the different offerings, is it in sharing environment
So, when we drive to that profitability, I can't just say we got to get it to act because you've got to really look at, there's many other levers that get us to be profitable in electric vehicle
Now, we're going to keep working aggressively on the cell cost and leveraging our scale
To drive you the profitability which is I think where you're asking the question, getting below $100, we'll get there and then we'll set another target
Thank you
And then, <UNK>, on the technical piece of it, we last year spent a considerable time
There'd already work being done, but had my personal attention and Mark Reuss on it as well as <UNK> Mott from an IT and we put the resources together much more into one integrated organization to drive, how did we quickly
Because now if you think about it, the car used to stop, it's a pain and now the car doesn't stop there because there's so many services or apps that you can use outside of the car to get the speed and the quality and the integrity to make sure we do it right from a safety and a cyber security perspective
We pulled that whole organization together, they operate under one person that we brought into the company
So, that's the way we're leveraging the engineering and then we do have a new electrical architecture coming in our vehicles that has been under development for a couple of years and will be launched shortly
So, we have addressed, I'll say, the core electrical architecture, but I think more importantly, bringing the resources and having the view that the car extends outside of the pain to make sure that we have the systems integrated well and that's the way that we operate today
And so, that's how we're addressing, I'll say, the tech piece of it to support the opportunity that we have to be first and fast in really leveraging this new area
Thank you, operator
I just got a couple of comments
I'm really proud of the team and what they've accomplished in this first quarter
This again, I think, demonstrates our resolve that we are going to continue to strengthen the core business, generate the best possible return for our owners and then continue to execute with a huge sense of urgency on the transformative technologies that are really going to allow us to have a leadership position and make people's lives safer, simpler, and better as we move forward
We are a very disciplined company as we approach this
I think, you've seen actions from us, you'll continue to see actions that represent us because myself, the leadership team and every GM employee, we are here to win
And that's what we focus on doing every day when we are at work or wherever we are
So, thanks again for participating
