General Motors Company

Ladies and gentlemen, welcome to the General Motors Company fourth 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 call is being recorded Wednesday, February 10, 2021. I would now like to turn the conference over to Rocky Gupta, Treasurer and Vice President of Investor Relations.

Thanks, Tabitha. Good morning, and thank you for joining us as we review GM's financial results for the fourth quarter and calendar year 2020. Our press results were issued this morning, and the conference call materials are available on GM Investor Relations' website. We're also broadcasting this call via webcast. I'm joined today by Mary Barra, GM's Chairman and CEO. Paul Jacobson, GM's Executive Vice President and CFO, and Dan Burse, President and CEO of GM Financial. It's my pleasure to welcome Paul to his first earnings call with us today and give Paul a chance to talk about his enthusiasm for our shared vision and accelerating our path forward. Before we begin, I would 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.

Thanks, Rocky, and hello, everyone. Thanks for joining. This morning, we shared the details of our strong 2020 financial performance, including Q4 records for EBIT adjusted, EBIT adjusted margin, EPS diluted adjusted, and a record year for GM Financial. These results were driven by the quick actions we took to recover from the early effects of the pandemic. Looking at the past year, our employees, suppliers, and dealers rallied with speed and agility to support our customers and our communities, as well as protecting the business. The pandemic has been a catalyst for finding new and better ways to work while strengthening our resolve to win. As some of our plants suspended production in the early days, our teams rapidly turned to producing critical care ventilators and personal protective equipment for patients and frontline healthcare workers. After our first conversation with Ventec Life Systems, we began production in just 30 days, and we built 30,000 ventilators in 154 days. And with that same speed, we developed rigorous safety protocols so we could restart our operations around the globe. This collective spirit was inspiring, and it still drives us, and it's contributing to the greatest era of transformation in the history of our company. In spite of the pandemic, we accelerated mission-critical businesses like our EV and AV initiative. We maximized production of full-size trucks, and we launched our new family of full-size SUVs safely and on time. We'll sustain this culture of innovation and leadership in 2021 and beyond, and that is my focus this morning. We are fully committed to a capital allocation strategy that invests in new and existing businesses to drive growth. We're going to generate that growth through our EV portfolio as well as businesses like BrightDrop, OnStar Insurance Services, subscription services like Super Cruise and OnStar Guardian, and much more to come from our growth and innovation team. The semiconductor shortage won't slow our growth plans, and with our mitigation strategies, we still expect a very good year for General Motors, and Paul will share additional details in his remarks. We have strong underlying performance and very strong momentum with customers. Last year, for example, we posted our largest year-over-year U.S. market share gain since 1990, led by full-size trucks and SUVs. In 2020, GM was the full-size pickup sales leader in the United States, thanks to gains by the Chevrolet Silverado, and record GMC Sierra deliveries, and we plan to expand our capacity in early 2022. The new Cadillac Escalade, GMC Yukon, and Chevrolet Tahoe and Suburban are leading the full-size SUV market. And GM China rode the increasing market preference for large MPVs and luxury vehicles to year-over-year sales increases in these segments, including record deliveries for Cadillac. And as we look to the future, we are well positioned from a policy standpoint. I personally and members of our senior leadership team have had discussions with President Biden, Vice President Harris, and several key cabinet appointees. The Biden administration is increasingly aligned around the importance of domestic manufacturing and the need for widespread adoption of EVs. We look forward to working with the administration on policies that support safer transportation with zero emissions. When you look at the strategy we have shared, it should be clear. We will seize every opportunity to drive growth, expand our markets, and enter new ones. Our Altium platform is core to these initiatives. It is the foundation for our upcoming global family of EVs. With our first-generation Altium platform, we will now see a 40% battery cost reduction compared to today's Chevrolet Bolt EVs. and we're already working on the next generation of Altium battery technology, which will deliver a 60% improvement over Bolt EV with double the energy density. To do this work, we've hired almost half of the 3,000 expected new tech employees across engineering, design, and IT, and we expect to finish hiring by the end of the quarter. What is especially exciting to me is that our vision and our commitments and our aspirations are attracting incredibly talented people to GM. They believe in what we are doing, and when they arrive, they are finding like-minded colleagues already hard at work. Since we first introduced our growth strategy and related announcements in November, we have shared even more of the aggressive steps we are taking to accelerate our plan. We have committed to increasing our EV and AV investments to $27 billion, from 2020 through 2025, including more than $7 billion this year alone. With this investment, we will launch 30 EVs globally and achieve EV market leadership in North America. In addition, by mid-decade, we plan to sell at least 1 million EVs per year in our two largest markets in North America and with our joint venture partners in China. During CES in January, we revealed a new GM brand identity that honors our past but signals our future. We also introduced a new safety brand, Periscope. It describes how we will advance toward a world with zero crashes by integrating vehicle technology, research, and advocacy. And we launched a new brand campaign called Everybody In, which is our call to action to get everyone in an EV. Everybody In is a powerful idea because we must all be all in to achieve our goals. We'll offer EVs across all of our brands and at price points and span the global EV market from the Wuling Hanguang Mini to the Cadillac Celestic. As for the GMC Hummer EV, we have prototypes on the road right now, and they are undergoing cold weather testing in Michigan's Upper Peninsula. Then they will head to Yuma, Arizona, and to the toughest off-road trails in Moab, Utah. In the meantime, VIN 001 is already spoken for. As part of GMC's partnership with the Tunnel to Towers Foundation, the first GMC Hummer EV will be auctioned on March 27th. All proceeds will go to assisting the families of fallen and disabled soldiers and first responders. We envision a future where there is an EV offering for everyone. Our future will be inclusive and comprehensive, and it will create new businesses and, in some cases, new brands. BrightDrop is a powerful example. It is a new commercial EV business that targets delivery and logistics providers, particularly those in the parcel and food delivery industries, with innovative zero-emission solutions. From a revenue standpoint, we'll provide vehicles like an EV600 van, which is a substantial opportunity in and of itself because the global market for light commercial vehicles is almost 9 million units today, according to IHS Markit. And we believe demand for electric light commercial vehicles will grow quickly. The market seems to agree. In fact, third-party research estimates that the addressable market for ELCVs could be $30 billion by 2025 and double that in 2030. BrightDrop also allows us to create new sources of value for our customers beyond the vehicle. driving diverse income streams from a full ecosystem of product and services. FedEx Express is slated to receive the first EV600s later this year. The EV600s will help them meet their stated fuel efficiency goals as part of their broader sustainability strategy and electrification efforts. FedEx Express has also conducted a pilot with the BrightDrop EP1 electric pallet product and has another one planned. In this first pilot, the EP1 demonstrated significant productivity increases in the delivery process. Similarly, Merchant's Fleet, which has more than 150,000 vehicles under management, is targeting to have 50% of its mobile fleet electric by 2025 and 50% of its managed client's fleet by 2030. It is moving forward with plans to put 12,600 BrightDrop EV600s into service. Another exciting and potentially lucrative source of growth is our Hydrotech fuel cell technology. Like Brakedrop, Hydrotech is proof that General Motors' vision of a world with zero emissions isn't limited to passenger vehicles. Less than two weeks ago, Navistar, GM, and 1H2 announced a zero-emissions long-haul transportation ecosystem that will launch in 2024. Navistar will begin building Class 8 trucks for its launch customers, GM will supply HydroTech fuel cells, and 1H2 will supply the hydrogen fueling infrastructure. It's an exciting way for us to partner in the Class 8 segment, a nearly $30 billion market in the U.S. alone, and one that we haven't seen before. And we believe this is just the beginning for HydroTech. This is a nascent, multibillion-dollar hydrogen power industry for trucking, for military, aerospace, and stationary power applications that we are targeting directly, as well as through GM Defense. Customers and shareholders will continue to see even more evidence throughout 2021 that we're executing our vision and plans for growth. One great example is right around the corner. On Sunday, GM will unveil the 2022 Bolt EUV, which arrives this summer and will be built in Orient, Michigan. The all-new Bolt EUV and refreshed Bolt EV feature unique exterior designs and new interiors. The Bolt EUV will provide nearly three inches more legroom than the Bolt EV and will have available wireless phone charging and wireless Apple CarPlay and Android Auto, allowing customers to easily access their music and podcasts. Like the original Bolt EV, the new Bolt EUV and refreshed Bolt EV will build on Chevy's commitment to attainable EVs. The Chevrolet Bolt EUV is the first Chevrolet and the first GM EV to offer Super Cruise technology, one of the 22 GM vehicles that will offer Super Cruise by 2023. Based on feedback from Cadillac customers, we're confident that we will build a steady stream of subscription revenue because our customers don't want to drive without it. In addition, GM, Cruise, and Microsoft will increasingly leverage Azure, Microsoft's cloud and edge computing platform to help commercialize self-driving vehicles at scale. And with new investment by GM, Microsoft, Honda, and other institutional investors, the estimated valuation of Cruise now stands at $30 billion. And just yesterday, the California DMV released the 2020 disengagement data for autonomous vehicles, and we are very pleased. with the excellent continuing improvement and leadership shown by crews. This fall, we'll begin building the GMC Hummer EV at our Factory Zero in Detroit and Hamtramck. Work on our flagship EV plant is on track, and we cannot wait to start shipping vehicles to customers. Among its many advanced manufacturing capabilities, Factory Zero will be the first U.S. auto plant equipped with 5G fixed mobile network technology. As we said in November, our $27 billion in EV and AV investments will include additional EV assembly and battery capability beyond what we've announced for Factory Zero, Spring Hill in Tennessee, and our Altium Cells JV plant in Ohio, where hiring is already underway. In fact, employees will build prototypes later this year. Along the way, OnStar Insurance Services is on target to expand to all 50 states by the end of the year. What's happening inside our company and behind the scenes is also important to our success. Delivering this exciting new chapter for GM requires a special team that values diversity and inclusion, a safe workplace, and the commitment to create a better, safer, and more sustainable world. We aspire to be the most inclusive company in the world because it's the right thing to do and because diversity and inclusion are the foundation of a winning culture. I am deeply and personally engaged in this part of our strategy. Our strong values are a compelling tailwind for GM. They will drive creativity, agility, and so much more for our future. This future also inspires us to do even more to help mitigate the efforts of climate change, and we will. Less than two weeks ago, we announced plans to become carbon neutral in our global products and operations by 2040. We will set science-based targets to achieve carbon neutrality, and we aspire to eliminate tailpipe emissions from new light-duty vehicles globally by 2035. We will source 100% renewable energy to power our global sites by 2035, five years earlier than we announced just a year ago. And we have signed the Business Ambition Pledge for a 1.5 degree Celsius, a call to action for from a global coalition of UN agencies, business, and industry leaders. Like everything else we do, we will provide updates on our progress, and we will hold ourselves accountable. And now I'd like to turn the call over to Paul.