General Motors Company

Ladies and gentlemen, welcome to the General Motors Company Second Quarter 2020 Earnings Conference Call. During the opening remarks, all participants will be in a listen-only mode. After the opening remarks, we will conduct a question-and-answer session. To ask a question, press star, then 1 on your telephone keypad. To withdraw your question, press the pound key. As a reminder, this conference is being recorded Wednesday, July 29, 2020. I would now like to turn the conference over to Rocky Gupta, Treasurer and Vice President of Investor Relations.

Thanks, Sabita. Good morning, and thank you for joining us as we review GM's financial results for the second quarter of 2020. A press release was issued this morning, and the conference call materials are available on the GM Investor Relations website. We are also broadcasting this call via webcast. I'm joined here today at the GM headquarters by Mary Barra, GM's Chairman and CEO, and Divya Sudheera, GM's Executive Vice President and CFO. Before we begin, I'd like to direct your attention to the forward-looking statements on the first page of the chart set. The content of our call will be governed by this language. I will now turn the call over to Mary.

Mary? Rocky, thanks so much, and good morning, everyone. Thanks for joining. I'll begin with the COVID-19 pandemic, which has made this quarter one of the most challenging in our history. COVID-19 has impacted us everywhere we do business. It's changed the way we work, how we sell our products, how we support our customers, and how we care for each other. Many of these changes will influence how we allocate future spending as we move forward. While our years of business transformation actions made the company more resilient, we also took additional proactive steps to help offset these challenges. Dealers stayed connected with customers with our online and contactless shop click drive tool that we enhanced. Our customer care and after-sale operations remained open to keep our dealers and our customers supplied with the maintenance and repair parts needed, and our employees proudly rallied to build ventilators and personal protective equipment for first responders. We used our early learnings in China and Korea to safely begin restarting our operations in North America and South America. with significant support from our supply chain unions and governments. We continue to collaborate with these stakeholders to ensure the highest levels of confidence in and execution of our extensive safety measures. While we can't predict the trajectory of the virus and its ultimate impact on public health and the economy, we have put all appropriate measures in place to position the company for continued recovery in the third and fourth quarters and beyond. Before I talk about our overall performance, I want to acknowledge another issue, the increasing responsibility of companies like General Motors to take a stand against racial injustice in the U.S. while remaining focused on driving business results. General Motors has a strong track record of diversity by many objective standards, but it's clear we must do more, and we will. During the quarter, we outlined several significant steps we plan to take, These, along with all of our progress across ESG, are detailed in our new sustainability report, which is available on GM.com. Now let's look at the numbers. Net revenue was $16.8 billion. We had an EBIT adjusted loss of $536 million. EBIT adjusted margins of negative 3.2. EPS diluted adjusted loss of 50 cents. Adjusted automotive cash flow of $9 billion negative. and Rolick adjusted of 6.4 on a trailing four-quarter basis. In North America, as part of our ongoing transformation, Steve Carlyle was named president of GM North America. Steve's demonstrated track record and particular experience of strengthening the Cadillac brand will accelerate our progress in our very important North America market. We also created an innovation and growth organization that will be led by Alan Wexler, a newly hired senior vice president who will report directly to me. Alan is the former chairman and CEO of Publicis Sapien, a digital business transformation firm, and brings decades of experience leading innovation and customer-driven technology solutions. In other positive developments, the U.S. full-size truck and full-size SUV plants are currently operating at three shifts. To meet demand, we will add 200 employees in Fort Wayne effective September 1, which will increase our output by 1,000 units per month. We continue to offer customers a choice on how they want to do business with us. This includes using the ShopClick drive tool, where visits are up 50% this year, as well as our Clean program for those who prefer to physically visit our dealerships. Customers are now taking delivery of the first of our all-new full-size SUVs. Our Chevrolet and GMC dealers are selling every new Tahoe and Yukon they can get, and buyers are praising the new design and outstanding ride quality. The vast majority of initial Yukon sales are the highly profitable Denali. We continue launching new models through the summer, including the Chevrolet Suburban and the GMC Yukon XL. We've also begun building the highly anticipated 2021 Escalade. It's going well, and we anticipate starting regular production early. Among its industry exclusive technologies, Escalade's available Super Cruise offers new enhancements, including lane change on-demand functionality. Cadillac has generated the most consumer interest ever for the new Escalade with 600-plus orders already on the books. In addition, the 2021 Chevrolet Trailblazer and Buick Encore GX small SUVs are new market opportunities for both brands. Both are gaining share every month, turning fast at dealers, and attracting new and younger buyers. Nearly one-third of Trailblazers buyers are 35 or younger, and Encore GX has quickly become the brand's highest-volume Buick, surpassing the Encore. In other North America highlights, GM was the highest-ranked automaker in the J.D. Power 2020 initial quality study. Our brands led in six segments and eight other models placed within the top three. In addition, GM rose three spots in the J.D. Power U.S. Automotive Performance Execution and Layout Study, or often referred to as appeal. Our brands led in three segments and nine other models placed in the top three. GM Defense won a $214 million production contract to build, field, and sustain the Army's new Infantry Squad vehicle. It is based off of the 2020 Chevrolet Colorado ZR2 midsize truck architecture and leverages mostly commercial off-the-shelf parts. GM Financial, which performed well in the quarter, achieved 53% share of GM's retail business in the U.S. and has $24 billion in liquidity at quarter end. In June, we released our new OnStar Guardian app to select owners of GM vehicles. This allows them to bring the safety of OnStar outside the vehicle for the first time in its 24-year history and share access to the app with loved ones. So far, we've onboarded more than 7,000 customers and will soon roll it out to our entire GM owner population. Turning to our international operations, the business environment in China is improving. Following the deepest impact of COVID-19 in February, sales have been recovering month over month. Luxury, SUV, and MPV segments we are well positioned are showing the greatest recovery. In the recent J.D. Power initial quality study, GM's Yantai Dongyue North plant in China, which builds the Buick Envision, was ranked the highest automotive manufacturing facility in the world. Buick deliveries increased nearly 8% year-over-year, strengthening its leadership in the MPV segment with the all-new GL8 Avenir family. Its SUV portfolio will grow with the all-new Envision. Wuling sales grew nearly 10%, sustaining its leading position in commercial vehicles while strengthening its foothold in passenger entry. In South America, all manufacturing sites are operating in line with market demand, which remains below pre-COVID levels. We anticipate gradual recovery over time. To counter the impacts of the pandemic and macroeconomic conditions on our business, including FX, we continue to seek efficiencies, reduce costs, and capitalize on the market success of the new Chevrolet Onyx and Tracker. Elsewhere in international operations, restructuring efforts continue. The Korea transformation is progressing to plan with the recent launch of the Trailblazer for Export and Domestic Markets. Domestic sales were up more than 16% in the quarter. All of our Thai dealers have accepted the transition package, and we have reached agreement with over 90% of our dealers in Australia and New Zealand. Now I'd like to shift and talk about our EV progress. Following our EV day in the U.S. in March, the team continues to share our EV strategy with media and stakeholders in our global markets about our next-gen platform, Ultium Battery Technology, and EV portfolio. The positive coverage is encouraging, and we will host a Tech Day next month in China to demonstrate our progress in this important market. The team also showcased our EV technology and design this month during a visit by the U.S. Secretary of Energy. We were pleased to accept a Department of Energy award that will help us develop lighter, stronger, and less expensive battery enclosures. We are also making significant progress on our Altium Cells facility in Lordstown, Ohio, with our joint venture partner, LG Chem. Site ground prep began in April, building foundation work started July 1, and crews will begin erecting building steel today. Also on track are the first of our upcoming EVs in North America based on our next-gen EV platform and Altium battery system. The Cadillac Lyric luxury electric SUV will be revealed next week, the GMC Hummer EV, which we'll reveal in Q4, and the Cruise Origin AV that we've already shared. Lyric scored the highest of any vehicle tested in our vehicle confirmation clinic. It was also the highest rated in terms of exterior and interior appeal among vehicles luxury and non-luxury in the clinic data set. Our EV sales and portfolio are growing in China with overall year-over-year deliveries in the first half up for the first half of the year by more than 25%. New entries with our JV partner include the Chevrolet Menu, which is in early phases of launch, the all-new Baozun E300 and E300 Plus, which support DC fast charging and charge in an hour, and Wuling's first all-electric models, the Rongguang electric minivan and the Hongguang mini EV. And last week, we launched the Buick Elite 7, Buick's first all-electric SUV. Turning to AVs, Cruise continues to put its test fleet to work, autonomously delivering more than 50,000 meals to people in need in San Francisco as part of the COVID-19 relief effort. Cruise is making strong technical progress, and we're expecting some exciting updates in the second half of this year. With that, I'll turn the call over to Divya.