General Motors Company

Good morning and welcome to the General Motors Company fourth quarter and calendar year 2023 earnings conference call. During the open remarks, all participants will be in a listen-only mode. After the open remarks, we will conduct a question and answer session. We are asking analysts to limit their questions to one and a brief follow-up. To ask a question, press star then one on your telephone keypad to join the queue. To withdraw your question, press star then two. As a reminder, this conference call is being recorded Tuesday, January 30th, 2024. I would now like to turn the conference over to Ashish Kohli, GM's Vice President of Investor Relations.

Thank you, Amanda, and good morning, everyone. We appreciate you joining us as we review GM's financial results for the fourth quarter and calendar year 2023. Our conference call materials were issued this morning and are available on GM's Investor Relations website We are also broadcasting this call via webcast. Joining us today are Mary Barra, GM's Chair and CEO, and Paul Jacobson, GM's Executive Vice President and CFO. Dan Burse, President and CEO of GM Financial, will also be joining us for the Q&A portion of the call. On today's call, management will make forward-looking statements about our expectations. These statements are subject to risks and uncertainties that could cause actual results to differ materially. These risks and uncertainties include the factors identified in our filings with the SEC. Please review the Safe Harbor Statements on the first page of our presentation, as the content of our call will be governed by this language. And with that, I'm delighted to turn the call over to Mary.

Thanks, Ashish, and good morning, everyone. As we begin 2024, I believe GM is well positioned for a year of strong financial performance that builds on everything we accomplished and importantly learned in 2023. Consensus is growing that the U.S. economy, the job market, and auto sales will continue to be resilient. At GM, we expect healthy industry sales of about 16 million units. We have an unmatched ICE portfolio in North America, rising EV production on the LTM platform, and GM Financial continues to perform well. We're building on a foundation of products that our customers love. In 2023, GM sold more vehicles in the U.S. than anyone else. All of our U.S. brands grew their sales year over year, and we gained U.S. market share with healthy margins thanks to stable pricing and incentives that were more than 20% below the industry average. The Chevrolet Bolt EV and EUV had record sales. we led the industry in initial quality for the second year in a row, according to J.D. Power. And we now have led the industry in combined pickup, full-size van, and full-size SUV sales for 10 consecutive years, making us the leader in the highest ATP quadrant of the market and helping us lead the commercial fleet market. And we have passed Honda and Toyota in the most affordable quadrant thanks to attractive and profitable vehicles like the Chevrolet Trax, which is one of Car and Driver's 10 best trucks and SUVs, and the Buick Invista, which is winning with younger buyers. In fact, more than one in four Invista customers are between the ages of 18 and 35. The broad-based momentum we have today is important for our future because our customers are the most loyal in the industry. All of this success contributed to full-year EBIT adjusted of $12.4 billion and adjusted auto-free cash flow of $11.7 billion in 2023 and which brings our total to more than $22 billion for 22 and 23. Almost two-thirds of that cash is being returned to shareholders through dividends and share repurchases, including the impact of the $10 billion accelerated share repurchase program that we announced in November. Through the ASR, we immediately retired 215 million common shares in the fourth quarter. Our current share count is less than 1.2 billion, and we are working to reduce this even further. to less than 1 billion common shares outstanding, which would be about 600 million fewer than at our peak. As we look ahead, our priorities and our commitments are clear. They are to maximize the opportunities we have with our winning ICE portfolio, grow our EB business profitably, deliver strong margins and cash flow, and refocus and relaunch crews. Across the enterprise, we are taking important steps to deliver on each priority. Let's start with our ICE portfolio. Chevrolet's crossover lineup had record sales last year, and this year we're enhancing two of its most important models, which compete in growing segments. For example, Super Cruise will be available on the Traverse for the first time, and we will introduce a new premium Z71 off-road model. The 2025 Chevrolet Equinox that we unveiled last week is another great example. It has more standard safety equipment, new truck-inspired styling, and a strong focus on technology. And importantly, both the Traverse and Equinox will have higher projected margins than the outgoing model. Buick and GMC are also launching new crossovers this year to keep our momentum going. In our EV business, we expect our U.S. portfolio to be variable profit positive in the second half of the year based on our current expectations for EV demand and production growth. Strong interest in our vehicles, lower commodity prices, and other factors will support this. Our plan is to produce and wholesale 200,000 to 300,000 Altium-based Chevrolet, GMC, Cadillac, and Brakedrop EVs in North America this year, but we will be guided by customer demand. It's true, the pace of EV growth has slowed, which has created some uncertainty. We will build to demand, and we are encouraged that many third-party forecasts have U.S. EV deliveries rising from about 7% of the industry in 2023 to at least 10% in 2024. which would mean another year of record EV sales. We believe our competitive position will improve throughout the year based on higher production of the Cadillac Lyric, the GMC Hummer EV, the Chevrolet Blazer EV, and the Silverado EV work truck. We're also excited to have the Chevrolet Equinox EV and the Silverado EV RST, the GMC Sierra EV Denali, and the Cadillac Escalade IQ arriving in showrooms over the course of the year. We are confident in the design and performance of these vehicles. For example, the Lyric is driving growth at Cadillac. Its sales have increased sequentially every month since September, and January deliveries should be in line with December despite winter storms across the country. We also have more than 100,000 reservations and orders for EV pickups that we expect to fulfill in 2024 and 2025. However, if demand conditions change, we'll take advantage of our manufacturing flexibility in Spring Hill and Ramos to build more ICE models and fewer EVs. We can also mix between different EV products at Factory Zero. Ultimately, we will follow the customer. The supply chain, manufacturing, and software changes we have made will support our growth. On the battery front, our Ultium Cells joint venture is at full production in Ohio, and the new plant in Tennessee will begin shipping cells this quarter. In addition, our supply chain team has moved very quickly to resource two minor cell components after the U.S. Treasury published its updated IRA guidelines in December. This change means that new production going forward of the Chevrolet Blazer EV and the Cadillac Lyric will qualify for the full $7,500 consumer credit. We work closely with our dealers to ensure consistent pricing for our customers, which we estimate will impact no more than about 25,000 vehicles. Our battery module production is on schedule. The team has improved the automated equipment at our assembly plants used to build modules, and the installation of new high-capacity assembly lines should be complete by mid-year. Our software and services team is also in the process of resolving the stability issues some customers have experienced with the Chevrolet Blazer EV that impacted their screens and charging experience, and they are working with a huge sense of urgency to lift the stop sale soon. We disappointed these customers, and we know it. We are determined to get the software right, and we will. We have made several organizational and process improvements that will help us deliver the best possible customer experience going forward. Among several important organizational realignments, we established a software quality division within the software and services team that has been performing a retrospective on the Blazor EV and has improved the current software development and test processes across the enterprise. Outcomes of this activity are getting applied to all programs going forward, and they include improved standardization of the software development and release process, increased focus on test automation at the vehicle level, and additional quality gates and metrics for software at the vehicle level. From a margin and cash flow perspective, we are making good progress on cost reduction and capital efficiency. Compared with 2022, our fixed cost net of depreciation and amortization will be down $2 billion, as we exit 2024, which will offset the impact of higher labor costs. We are also beginning to see savings from winning with simplicity, and all of our current and future programs have embraced this very important way of designing products. Each team is responsible for creating trim series that make vehicles easy to order with the content customers want and far fewer standalone options. By making more equipment standard trim series with logical price walks, we can eliminate literally thousands of unique part numbers and dozens of software releases. For example, we have eliminated over 1,000 selectable options across our current and near-term product programs, which is reducing hardware, software, ordering, and manufacturing complexity, and importantly, all the costs associated with them. In 2024, the savings are expected to be about $200 million. To be clear, we're talking about $200 million of savings to execute the same product plan. These savings will grow over time as we apply the discipline to future products like our next-generation full-size pickups. We're also continuing to balance capital priorities and consistent free cash flow generation. We expect that our 2024 capital spending will be in the $10.5 to $11.5 billion range. which is roughly flat year over year and down considerably from the $13 billion top of our end initial 2023 guidance. Our forward plans include bringing our plug-in hybrid technology to select vehicles in North America. Let me be clear, GM remains committed to eliminating tailpipe emissions from our light-duty vehicles by 2035, but in the interim, deploying plug-in technology in strategic segments will deliver some of the environment environmental benefits of EEBs as the nation continues to build its charging infrastructure. We are timing the launches to help us comply with the more stringent fuel economy and tailpipe emission standards that are being proposed, and we plan to deliver the program in a capital and cost-efficient way because the technology is already in production in other markets. We'll have more to share about this down the road. Moving to crews. Last week, we released the results of the third-party reviews and we've already begun to implement significant changes to build a better cruise. We are committed to earning back the trust with our regulators and the public through our actions. Our planned 2024 investment in cruise reflects our more deliberate and cadence go-to-market strategy, and we are developing new financial targets and a new roadmap. Spending will be down considerably this year, but we will continue to invest in the people who are advancing the software, specialized hardware, and AI capabilities. This reflects our commitment to our vision, which is to deliver the safety benefits of self-driving technology and a scalable, profitable business. I look forward to sharing our timetable for returning cruise AVs to the road soon. To summarize, we learned a lot in 2023, and those learnings are helping us build our strengths and addressing our challenges. everyone on the team is committed to building on our momentum and creating shareholder value. You'll see in our proxy statement this spring, executive compensation is tied even more closely to delivering our comprehensive ICE, EV, AV, and software plans while meeting our financial targets, so our goals are truly aligned with yours. Before I turn the call over to Paul, I would like to share some thoughts about our next Investor Day. Because of the significant changes that are underway at GM and Cruise, We think it makes sense to wait until later in the year to host an event. This will give our software team the time to focus on software for our upcoming launches, and we will be able to share more tangible proof points on all four pillars of our strategy, ICE, EV, AV, and software. When we do get together, we will show you what we've done, not just tell you what we're going to do. In the meantime, we've already provided a roadmap for EV profitability in 2025, and we'll share updates on crews as we finalize the technology and relaunch plans. With that, I'll turn it over to Paul to go through our 2023 financials and provide more details on our 2024 outlook, then we'll take your questions.