GM
#Thanks, <UNK>, and good morning, everybody
Thanks for joining
We delivered a strong second quarter despite a more challenging business environment that included softer industry sales in the U.S
and pricing challenges in China
Results from our continuing operations adjusted for the pending sale of our Opel/Vauxhall brands and GM Financial operations in Europe include net revenue of $37 billion, income of $2.4 billion, EBIT-adjusted of $3.7 billion, and EBIT-adjusted margin of 10%, EPS diluted of $1.60 and EPS diluted-adjusted of $1.89, EPS-adjusted of $3.5 billion in North America and EBIT-adjusted margins of 12.2%, adjusted automotive free cash flow of $2.6 billion, and our return on invested capital adjusted is 30.4% on a trailing four-quarter basis
This reflects the positive impact of our disciplined capital allocation framework
Also, important to note, that during the quarter we returned about $2.1 billion to shareholders, $600 million in dividends and $1.5 billion in share repurchases
We expect to return up to $7 billion to shareholders by the end of 2017 through dividends and share buybacks, subject to market conditions
We made significant moves in the quarter to strengthen our core business performance and capitalize on growth opportunities for the long term
In May, we announced our intent to restructure our international operations, to focus GM India on export manufacturing only, to transition our business in GM South America to ISUZU Motors and to phase out the Chevrolet brand in both markets by the end of the year
Combined with the pending sale of our Opel/ Vauxhall brands and GM Financial's business in Europe, our recent restructuring actions will allow us to deploy resources and capital to higher return opportunities, such as refreshing our profitable global SUV and U.S
full-size truck portfolios and our global emerging-market vehicle program
We will also continue the growth of GM Financial and our very profitable after-sales, will continue leveraging our connectivity leadership through OnStar, and transforming Cadillac to lead in the global high-margin luxury segment
We're also investing in transformative technologies around electrification, autonomous technology, connectivity, and shared mobility services as part of our continuing work to redefine the future of personal mobility
We will continue to build on our significant progress by driving improvements across markets and in product segments to deliver the appropriate returns
Now, let's take a look at a few of the regions that really drove our performance in the quarter
First North America
In the United States, our total sales and retail sales and market share are on pace with last year's first half performance and ahead of the industry
We believe our disciplined go-to-market strategy is paying off
Our retail sales mix of 6% in Q2 was not only the lowest among full-line automakers in the U.S
, it was our lowest for GM in eight years
We are also seeing disciplines on incentives
Our incentives spend, as a percentage of average transaction price, was about 12% in the second quarter, down two full percentage points from the first quarter
We continue to grow in the critical crossover segments that are most popular with consumers
GM's retail crossover share in Q2 was up 24% year-over-year, representing the best quarter in our history for crossover sales
As we prepare to launch four more crossovers in the second half, this is a strong starting point
Overall GM's crossover retail market share increased 1.7% year-over-year, or 1.7 points year-over-year
Cadillac SUV sales were up 16% year-over-year, the best Q2 in history
Buick sales were up 16% year-over-year, its best Q2 since 2005. Our average transaction price in Q2 of $35,000 was essentially flat year-over-year exceeding the overall industry by about $3,800 and we continue to make strides on vehicle quality
Power Initial Quality Study, Fort Wayne assembly received the 2017 Gold Plant Quality Award for the Americas for the highest manufacturing quality
The plant builds light and heavy-duty Chevrolet Silverado full-size pickups, which led their segments, and the GMC Sierra and Sierra heavy-duty
As we moved to China, GM China set a Q2 sales record with deliveries of 852,000 vehicles, up about 1% year-over-year
Cadillac and Baojun also set Q2 sales records on strong sales of the Cadillac XT5 and Baojun 510. Cadillac sales were up 62% and Baojun sales were up 66% year-over-year in the quarter
Year-to-date Cadillac is up 70%
Deliveries of the Chevrolet Equinox SUV in China surpassed 10,000 units since its launch in late April
And the Velite 5, Buick's first extended range electric vehicle made its global debut in April
We expect it to go on sale later this year
I also want to make a few points about South America
Despite challenging macroeconomic conditions, we posted a year-over-year improvement to essentially breakeven
Our sales and market share gains outpaced the industry and Chevrolet continues its 17-year market leadership
In the quarter, South America delivered 160,000 vehicles, up 18% year-over-year and market share rose 0.7 points
Throughout the first half of 2017, sales were up more than 14% compared to a year ago
As we look at the technologies that are transforming our industry, our commitment to leading in this transformation and the future of personal mobility includes making game-changing technologies available to as many customers as possible
We are excited that the Chevrolet Bolt EV, the first affordable long-range electric vehicle, goes on sale nationwide August 1 at certified Chevrolet dealerships
More than 80% of Bolt EV customers have not previously owned a Chevrolet
Chevrolet has sold nearly 8,200 Bolt EVs since they went on sale in December of 2016. Our Cruise Automation team in San Francisco and our technical experts in Warren are making significant progress in our drive to safely deploy our self-driving electric vehicles in commercial ridesharing networks
Last month GM became the first company to use mass production methods to build 130 autonomous vehicles, growing our test fleet to 180. We plan to deploy these vehicles in the challenging driving environment of San Francisco, as well as Scottsdale, Arizona, and Metro Detroit where we are already testing our vehicles today
In addition, technologies like Super Cruise are helping us create a safer future
As we prepare for the fall introduction of Super Cruise on the 2018 Cadillac CT6, GM engineers have logged roughly 160,000 miles of driving on U.S
and Canadian highways as part of the final validation of the system
And when it comes to shared mobility, we keep refining Maven to meet customers' needs as we learn more about the growing sharing economy and freelance economy
In addition to expanding Maven City in New York, we announced that Maven Gig will be in California in three cities
Freelancers can rent Chevrolet Bolt EVs for delivery and ridesharing services
So as we look at H2, we clearly see a tougher business environment and the entire GM team has a disciplined and relentless focus on doing what is necessary to address challenges
For example, in addition to the actions in Europe and our international operations, we are managing passenger car output to ensure our inventories are appropriate and to protect our brands
In North America, our crossover launches continue with the Chevrolet Equinox and the Chevrolet Traverse, the GMC Terrain, and the Buick Enclave
We will also launch the Equinox in Q4 in South America and launch 10 newer refreshed models in China
As Chuck shared with many of you last month, we expect another strong year in North America with EBIT-adjusted margins of 10%-plus
In addition, on a continuing operations basis, we still expect our EPS diluted-adjusted to be in the $6.00 to $6.50 range for the full year
Now, I'd like to turn the call over to Chuck
Good morning, <UNK>
So, first, I think with the Opel/Vauxhall transaction, we've said that – and with the announcements that we made in India and South Africa, that we believe we're in the right market
We have a very strong franchise in South America and as I said in my opening remarks, we're going to continue to work to improve performance and efficiency in each country and by segment
So from a where we intend to play, I think that outlines that
When you look specifically at passenger cars, recall we just launched the compact and midsize architectures, the Chevrolet-branded Malibu and Cruise, a very, very efficient architecture that we believe will get two-plus lifecycles out of because of the design of that architecture
So we think we're well positioned
And although to your point, we are seeing smaller car segments and the impact of consumers choosing crossovers and trucks and SUVs, to a certain extent around the globe, we feel – and I'm not going to go into specifics of outlining the entire product portfolio, but we have taken a very much an over-the-horizon look of where we think that's going
We have very efficient architectures that are installed
And so I think we can leverage that very effectively to be well-positioned as the market continues to transform
As we talk, we also have very strong SUVs and crossovers that we're rolling out first half of this year, continue to do that in the second half
So I think we're going to be well-positioned to capitalize on that growth and then well-positioned from a car perspective
Finally, from an emerging market, those China, South America, Mexico, and some of the other more developing markets recall that we have made the investment in our global emerging markets platform that will have a range of vehicles coming off that – and this is a purposely designed architecture from a safety perspective, from an efficiency perspective, from a fuel economy perspective that we think will also be very well-positioned in those markets
So, again, we've looked at where we think the market is going and the trends are consistent with what we believe and the investments we've made in the plans that we have
We haven't broken that out, specifically, but what I would say is that I believe we are making the right investments from an electrification, and looking to really have platforms that go from eAssist to plug-in hybrids to full electric vehicles
And looking at that holistically across the portfolio
So that's the comment I would make but we're not breaking that out
And from an auto 2.0, as you look at specifically autonomous vehicles, of course, built on which we think is the most efficient platform on the all-electric vehicles
So leveraging the Bolt EV platform, I think we are moving aggressively in the development of that technology
As I noted, that we built the next 130 vehicles that we are in the process of deploying onto roads in San Francisco, Scottsdale, and Metro Detroit, leveraging manufacturing at scale methods to be able to build those vehicles
So when I look at where we're at, we're working aggressively at leveraging the assets General Motors brings to this, also learnings that we have from Maven
You know, we've talked about the true opportunity in this business which we think will first come in ridesharing
And we think that can be significant and then grow even further
We haven't sized that yet, but I would say we're working very aggressively on auto 2.0 to make sure we have substance and technology that we believe will generate significant shareholder value
And as we move forward, we'll be able to size that and put some milestones and timing around that
So I would say stay tuned
Good morning
<UNK>, we definitely are working to improve that
I think first, we want to make sure we achieve the $6.5 billion and I think as Chuck said, we're well on track to do that
But the specific work that we're referencing is, as the Opel/Vauxhall transaction closes, we're looking at, how do we take structure and simplify the way we work and out of the company? And that work is actively going on right now and we'll continue to work that through the end of the year
That I think provides additional opportunity
And as Chuck said, achieving the $6.5 billion, but with the operational excellence toolset and mind-set that we're rolling out to the entire company about constantly improving the business, and we've had a very successful deployment where we have our top 1,600 people engaged in running projects
I think you're going to see a continual cost efficiency improvement mind-set as a company
But I'm not ready to take it up further from the $6.5 billion now, but I think as we move forward you'll see us continue to increase that number or set a new target once $6.5 billion is achieved
So on the updates
We have done over-the-air updates primarily to the OnStar system
We are in the process of deploying a new electrical architecture which is a pretty comprehensive undertaking, and that's well underway and being deployed as well as a whole new generation of infotainment systems
So you'll see us have that capability as we move forward
Right now it's pretty much limited to updates from an OnStar basis
Before 2020.
Go ahead
Well, in our data monetization, I agree with you that the opportunity is there
I would say we are just in the initial steps of not only leveraging the data to provide more value to customers
You know, one of the assets that we have that will – is actually in touch right now so it will be leveraged shortly, is active health management of being able to assess different components in the vehicle and be able to alert customers ahead of time, schedule them for their vehicle to be fixed, unlock the door with OnStar
So really – and then fix the vehicle, lock it back up
That capability that is near-term that we have and will be deploying
So I think there is this segment around the data to how do you use data that we get from the vehicle and because we have the largest connected fleet to improve the customer experience and therefore pull people to our vehicles
And then the second piece, as you indicated, is more of a B2B opportunity
And I don't have any specific examples that I'm going to share right now but I can tell you we're actively working both internally and externally
We just hired a Chief Data Officer into the company, started this month and so there's quite a bit of work going on
You'll hear more as we go forward but I think we're seeing monetization through OnStar with different activities
And like you said, insurance is one but there's additional framework
We recently also launched OnStar Go with IBM and that creates a marketplace that's able to be customized for our specific passengers or consumers
So more to come on this, <UNK>, and I agree with you of the opportunity and we've got to seize it
Well, as I look at potential changes in the rules, we have a very strong partner with SAIC, been very productive and are working together and I think it's been demonstrated in our market performance, we do joint development
A big portion of the global emerging-market platform that work is being done in China
So we've integrated the PATAC Center
So as I look at regulatory changes or rule changes from a China perspective, this isn't one on the top of my list because I think we work together well and I think there's benefits to that
What I am looking for is to make sure that we have a level playing field and that we have rules that are aligned with the timing required to effectively implement from an automotive company perspective
When you look at some of the latest rulemaking around electrification, being implemented now and being rolled out now with implementation next winter, that's a pretty short timeline to effectively and efficiently meet those requirements
So that would be something I'd look for before I'd look for relaxing of the 50%
Thanks, <UNK>
Clearly the – we believe that most efficient way to execute autonomous vehicles is with the pure EV, that's why we are using our Bolt EV platform
And we think it allows for more efficient integration to the vehicle
We do believe in a sensor suite that LIDAR is a part of its solution to have the right sensing to provide the right safety level
So, first on Super Cruise, recall that we actually held that technology till we did appropriate validation, the 160,000 miles that we talk about, I'll say, would be final validation
That was substantially more work done from the Super Cruise development, testing and validation for the company to feel that it met our requirements from a safety perspective to launch into the public
From an autonomous vehicle perspective, miles driven is certainly a factor, but it's not the only factor, because what is the quality of the miles driven? Right now, to our knowledge, we're the only one testing our autonomous vehicles in Downtown San Francisco, which is a pretty dense urban environment with a lot more, I'll say, opportunities to learn from different situations
So it's not just the miles traveled
It's the quality of those miles in the number of incidents that you're exposed to that the vehicle learns
And so although we don't have a very specific mile, there's quite a bit of work we're doing, even with agencies or groups outside of the company to put that together
As we move forward, we'll share, because as we understand it today with the NHTSA requirements for U.S
, a big portion of the guidelines they put out is to demonstrate how you're measuring, and then share that as they look at authorizing, pulling the driver out of the vehicle
So there's quite a bit of work going on there
So I would say it's much more involved than just miles traveled
And that's what we're working on right now, and we'll share more as we go forward
Good morning
I don't think it affects it
The partnership that we have with Lyft was never exclusive for either Lyft or for General Motors
We're quite far along in our autonomous vehicle development based on the fact that shortly we'll have 180 vehicles testing
I don't know if you've had a chance to see the different videos that we posted of the capability of our autonomous vehicles to date that grows frankly on a weekly basis
So we still think the opportunity to deploy in a ridesharing
And the reason for that is as you first have electric vehicles as the capability will go up in those vehicles from the speed at which they can travel, the different circumstances, tunnels, et cetera, that the vehicle is capable of learning
So integrating in a shared fleet – in a ridesharing fleet I think allows to get the best exposure for the vehicle to keep learning as we go forward, but I would say that's in the early stages of sub-deployment
So again, we have a good relationship with Lyft and we think that opportunity presents itself, but that's how we see it playing out right now, and again, understand their work that they're doing on their own as well
I want to thank everybody for joining us today
We believe the strong results we reported today reflect on our ongoing work to transform GM into a more focused and disciplined company
This team has demonstrated quarter after quarter that it has the right mindset to capitalize on opportunities, make the hard decisions, overcome headwinds, and meet our commitments all with integrity
We're going to continue to take bold and decisive actions to execute our strategic plan and that's in the core business or Auto 1.0 where we're working to make sure we have the right product portfolio as we move forward, as well as the very, very efficient business on all aspects
And then from a future of personal ability, or Auto 2.0, we are taking very deliberate steps and working, I'd say, quite aggressively to make sure that we leverage all the assets we bring to this equation
We believe we can translate that into significant shareholder value and that's what we're focused on doing
So again, thanks for participating
