General Motors Company

Good morning and welcome to the General Motors Company's second quarter 2021 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. We are asking analysts to please limit yourself to one question and a brief follow-up. 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, August 4th, 2021. I would now like to turn the conference over to Rocky Gupta, Treasurer and Vice President of Investor Relations.

Rocky Gupta Thanks, Tabitha. Good morning and thank you for joining us as we review GM's financial results for the second quarter of 2021. Our 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 by Mary Barra, GM's Chairman and CEO, Paul Jacobson, GM CFO, and Dan Burse, President of GM Financial. As usual, 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 a call will be governed by this language. And now I will turn the call over to Mary Barra.

Thanks, Rocky, and good morning, everyone. Thanks for joining us. Today, Paul and I will provide some insights into our record results and then talk about our outlook for the second half. As we announced earlier, we achieved EBIT adjusted at $4.1 billion in the second quarter and $8.5 billion in the first half, including charges for recalls, primarily the Bull TV. I really want to thank our employees and the extended GM team, including our suppliers and our dealers, for helping us deliver such consistently strong results. Everyone continues to demonstrate remarkable resiliency and adaptability in a rapidly changing environment. In addition, our ROIC adjusted of 27.3% in the quarter significantly exceeded our target. This underlines how our strong returns enable us to reinvest in the future of this business. The reinvestment includes accelerated investments in our electric and autonomous strategy to build a future that is better for our customers and better for the environment. And we'll discuss this a bit more in a few minutes. All electric is an important point of distinction. Because of the performance, range, flexibility, and scalability of our Altium and HydroTech platforms, including the work we're doing to continually drive cost reduction, we don't need to depend on partial solutions like hybrids and electrified ICE vehicles. Instead, we're primarily focused on investments that achieve the end solution of zero emissions more quickly. Before we move on, I will share my perspective on our recall of the 2017 to 19 model year BOLT EVs and then the status of the semiconductor situation. So let's start with the BOLT. Across the company, we have made both product and workplace safety everyone's responsibility. Our focus is on prevention, but also moving with a sense of urgency when problems do arise. When we learned of a potential of two new battery fires, that were part of our previous recall population, we acted quickly. We did an investigation, and our engineering analysis identified two rare manufacturing defects in some cells manufactured by our supplier in the 17 to 19 timeframe. So we instituted a second recall with the overriding priority of doing the right thing. Because cells for 2020 and later vehicles were built using improved manufacturing processes, the recall does not impact new or bold EVs or EUVs. And since the recall, we have worked with our supplier and partner to make further process improvements. Just as important, the recall doesn't impact the Altium platform. It is a different battery system and our joint venture plants that manufacture Altium cells will follow rigorous GM quality processes. As for semiconductors, the situation does remain fluid and the supply chain continues to be impacted by events like what is happening right now with the COVID spike in Malaysia. While we informed our employees yesterday that some truck production will be impacted next week, even as we resume production at some crossover plants, we remain confident in our team's ability to continue to find creative solutions that minimize the impact on our highest demand and capacity-constrained vehicles, including full-size trucks and SUVs. We are raising our guidance for full-year EBIT adjusted to $11.5 to $13.5 billion. And we are being cautious because of the uncertainty due to the Delta variant and its potential impact on the supply chain. But we do believe that the combination of our safety protocols and the rising vaccination rates will help minimize disruptions, but we do have to note the situation does remain fluid. We are also putting long-term solutions in place to de-risk our supply chain. This includes collaborating with semiconductor manufacturers and continuing to enhance transparency throughout the entire semiconductor supply chain. So now let's turn to growth. As I mentioned in my letter to shareholders, we are addressing the entire ecosystem to speed EV adoption and commercialization of self-driving technology at scale. We will offer a full range of vehicles and services that make EVs accessible to the largest possible customer base. It will also create job opportunities for thousands of employees in our Ultium CELS joint venture. In addition, we will work to grow our businesses like BrightDrop, OnStar Insurance, and other software and services, including subscriptions. The cruise model for autonomous rideshare is another great example of an inclusive solution because it will make all-electric transportation more accessible and affordable. Delivering on our EV all-electric future requires a value change that is secure, sustainable, scalable, and cost competitive. To do this, we are creating a diversified value chain of environmentally friendly and geographically diverse footprints through investments, strategic partnerships, and supply agreements. For example, we are working with suppliers to develop new sources in the United States for lithium, a key battery cell component, and accelerate the adoption of extraction methods which have less of an impact on the environment. We're taking a similar approach across other critical minerals needed to support our EV future. And we're confident that our strategy will secure our supply in a sustainable way as we accelerate our transition to EV. We'll share more about these key topics and others, including battery cost and business opportunities that we're creating with software at our investor event on October 6th and 7th, which we hope will be in person because we are so looking forward to having you experience technologies like Watts to Freedom in the GMC Hummer EV pickup, as well as Super Cruise, which we are constantly advancing its capabilities. Just last month, for example, we demonstrated the latest version of Super Cruise technology that will be featured on the Sierra 1500 Denali late in the 2022 model year. It will include the ability to trailer while driving hands-free. We will also update you on Cruise, which continues to make excellent progress toward launching its first fully driverless commercial service. GM remains a major accelerator of Cruise's mission with the purpose-built origin giving crews a huge competitive advantage. I also want to take a moment to share some new insights into our plan to launch more than 30 EVs globally by 2025 and become the EV market leader in North America. As we recently announced, because we are increasing our 2020 to 2025 capital and engineering investment from $27 to $35 billion, we will add two new vehicles to our commercial portfolio. The first is a full-size battery electric cargo van for Chevrolet, which will exceed the expectations of small business owners, tradespeople, and anyone else who has been well-served by the Chevrolet Express. The second is a medium-duty truck that will put both Altium and our HydroTek hydrogen fuel cell technology to work, powering service and utility vehicles such as school buses, bucket trucks, wreckers, and more. Both will complement BrightDrop and keep our commercial fleet market share growing, and we'll share more details about these products as we move forward. Now, if you step back for a moment and think about what this means for the future of work and the greenhouse gas reduction from surface transportation, because when you say between these new trucks, BrightDrop, EV pickups coming from Chevrolet and GMC, and our work with WebTech on locomotives and Navistar on semi-trucks, we will have electric solutions for almost any towing or hauling job you can imagine. Hydrotech is a very important part of the equation because it expands our reach into additional growth markets. We're already at work on our first production fuel cells leveraging innovative manufacturing processes that can unlock economies of scale and reduce overall costs. This technology, along with our four U.S. battery plants that we have announced and the full portfolio of EVs we are planning, in addition to the customer experience we're creating, underscore, once again, how determined we are to lead. The determination reaches through the entire company, and when I meet with our employees, they tell me how incredibly excited they are to be part of a once-in-a-generation transformation that will truly change the world. Their tenacity and collective commitment to our vision are why we are delivering such strong business results and advancing our future so quickly. So now for a closer look at our results, and the outlook. I'll turn the call over to Paul.