General Motors Company

Good morning and welcome to the General Motors Company second quarter 2025 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 limit their questions to one in 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, July 22, 2025. I would now like to turn the call over to Ashish Kohli, GM's Vice President of Investor Relations.

Thanks, Amanda, and good morning, everyone. We appreciate you joining us as we review GM's financial results for the second quarter of 2025. 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. Susan Sheffield, 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 statement 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.

Thank you, Ashish, and good morning, everyone. Today we reported another quarter of earnings that highlights the core strengths of General Motors. They include the appeal of our vehicles, customer loyalty to our brands, the growing value of technologies like OnStar and Super Cruise, as well as the creativity and resiliency of our global team. I am grateful for everyone's contributions, our employees, our dealers, and our suppliers. In the U.S. and around the world, we have demonstrated consistent execution of our production and go-to-market strategies. We do have opportunities from a quality perspective at both the supplier and the GM level, which Paul will talk more about in his remarks. but we are fundamentally very strong and resilient. As we discussed today, we have delivered strong underlying operating performance and we are positioning the business for a profitable long-term future as we adapt to new trade and tax policies and a rapidly evolving tech landscape. Our clear priorities are to grow our already expansive U.S. manufacturing footprint and domestic supply chain, further strengthen our international business, and continue to innovate in batteries, software, and autonomous technology. In China, we have been working closely with our JV partner to improve sales, inventory management, cost, and profitability. The performance of our new energy vehicles has been especially strong, and in Q2, we reported our second consecutive quarter of year-over-year sales growth. We were the only foreign OEM to gain share, and we reported positive equity income. In the U.S., the industry saw a spike in demand during the quarter due to tariff-related sales pull ahead, especially in April and May. Then in June and July, demand returned to levels that are in line with our full-year outlook of 16 million units. Throughout the first and second quarters, GM outperformed the market in total, fleet, and retail market share year over year. We also gained total, fleet, and retail market share sequentially from Q1 to Q2 despite increased incentives from our competitors. We delivered all of this with inventories at the end of June that were down year over year by almost 10%. Our incentives remained well below industry average for both ICE and EVs, and our pricing has been relatively consistent. I'm particularly pleased that the crossover portfolio we highlighted at our last Investor Day has been delivering record results. These 10 all-new or redesigned crossovers took huge leaps forward in design and technology, resulting in strong demand and revenue growth while reducing complexity contributed to stronger profitability. The Chevrolet Equinox alone gained nearly six points of retail market share year over year in the industry's largest segment. thanks to the popularity of both the ICE and EV models. We are growing in EVs because we have a strategic portfolio of vehicles that people love for their design, performance, range, and value. Five years ago, the EV market essentially had one player. Today, there are 30, and Chevrolet is now the number two EV brand thanks to the success of the Blazer EV and the Equinox EV. And in Q2, Cadillac became the number five EV brand overall. Cadillac has also become the luxury EV leader, fueled by the launch of the Escalade IQ and conquest rates that are above 75% for the Lyric and approaching 80% for the Optic. At the same time, all-electric road trips are getting easier by the day thanks to our fast-charging collaborations, which have been focused on regional interstate corridors outside of the coast. For example, GM Energy 350 kilowatt chargers are now available at nearly 200 pilot travel centers along I-75 between Michigan and Florida, on the routes between Minneapolis and Milwaukee, Detroit and Cleveland, San Antonio and Houston, and Dallas and Nashville. Stations are typically no more than 150 miles apart, so it's easy to take long-distance trips knowing you'll have access to reliable fast chargers and convenient services when you need them. In addition, the first of Iona's charging stations, which can deliver up to 400 kilowatts, are now in service in North Carolina, Texas, Pennsylvania, Ohio, Kansas, Arizona, and Missouri. By the end of the year, our customers will have access to more than 65,000 public fast charging bays across the country. That will grow to more than 80,000 by the end of next year and 100,000 by the end of 2027, a more than 50% improvement in just three years. The growth of our ICE and EV business is also fueling the expansion of our highly acclaimed Super Cruise technology, which in turn is helping guide the development of our personal autonomous vehicles. We're making steady progress growing Super Cruise. The technology is now offered on 23 models, and we continue to add new capabilities. We're on track to have more than 600,000 customers by year-end, each of whom has paid up front for three years of service, with 70% of new Cadillacs delivered equipped with Super Cruise. Additionally, we have changed the way we approach the market for our OnStar products, and we now price our vehicles to include a period of basic OnStar services. As a result, our OnStar subscriber totals are increasing at record rates, and we now have even more ways to engage directly with our customers throughout the life of the vehicle to drive our industry-leading loyalty even higher. As of today, we have booked $4 billion of deferred revenue from Super Cruise, OnStar, and other software services that we will recognize over time. Our projected Super Cruise revenue will be more than $200 million in 2025 and is expected to more than double in 2026. As we continue to scale, we anticipate growing at a robust double-digit CAGR through the end of the decade. We have also introduced a new and improved My GM Rewards customer loyalty program and credit card portfolio that gives our members access to more savings opportunities on GM products and services and exclusive access to member-only experiences like trackside access at racing events and off-the-grid EV excursions. We invested in these programs because our loyalty program members are very valuable. They buy vehicles with higher MSRPs and visit dealers for service at nearly twice the rate of non-members. To build on our leadership positions in ICE and increasingly in EV and develop new sources of competitive advantage in AV software and services, we continue to strengthen our team with experienced executives and tech innovators like Sterling Anderson. Sterling, who was the co-founder and chief product officer for autonomous trucking company Aurora, is now GM's chief product officer. We are also embracing AI across the enterprise, which is why we recruited Google and Cisco veteran Barack Tarosky to lead our efforts under Apple veteran Dave Richardson, who leads software and services engineering. Barack is building a world-class team of applied AI experts and researchers as we redefine how intelligence powers vehicle performance, customer experience, and operational excellence at GM. I believe everything we're doing strategically and proactively, along with closer alignment of emissions rules with consumer demand, will further differentiate us from our competitors, increase our resiliency, and drive overall profitability. For example, The $4 billion of new investment in our U.S. assembly plants will add 300,000 units of U.S. capacity for high-margin, light-duty pickups, full-size SUVs, and crossovers to help us greatly reduce our tariff exposure, satisfy unmet customer demand, and capture upside opportunities as we launch new models. The capacity begins coming online in just 18 months, after which we project building more than 2 million vehicles in the U.S. each year as we scale. At Orion Assembly in Michigan, this includes production of the Cadillac Escalade, followed by the launch of our next-generation full-size light-duty pickups. Adding Chevrolet Equinox ice production at Fairfax Assembly in Kansas and moving Blazer ice production to Spring Hill in Tennessee will further reduce our tariff exposure and increase utilization of our existing U.S. capacity. In addition, we will have even more flexibility to adjust our mix of ICE and EV production than we do today, which will help us operate both Spring Hill and Fairfax more efficiently and a slower growth EV market. Despite slower EV industry growth, we believe the long-term future is profitable electric vehicle production, and this continues to be our North Star. As we adjust to changing demand, we will prioritize our customers, brands, and a flexible manufacturing footprint, as well as leveraging battery investments and other profit improvement plans. The battery strategy we are executing is central to our efforts to make EVs profitable and an even better choice for our customers. Domestically developed and produced cells are also necessary for a resilient and secure American-oriented supply chain. Our joint venture cell plant in Indiana, for example, will produce prismatic cells to help lower pack and total vehicle costs. Foundation work is almost done, and more than 50% of the steel structure has been erected. We have also confirmed that Altium Cells Spring Hill and Tennessee will begin producing LFP cells developed by our Korean partner LGES in addition to high nickel pouch cells starting in late 2027. The new lithium manganese rich or LMR chemistry that we are developing with LGES will be another game changer because of its unique balance of energy density, charging capability, and cost efficiency driven by its reduced nickel and cobalt contents. In large truck packs, we believe the potential savings from LMR may be even greater than using LFP at today's metal prices. Our expertise in leading cell chemistries and formats is also creating new business opportunities. Today, GM Second Life EV batteries are being repurposed by Redwood Materials. In addition, we're finalizing an agreement with Redwood to supply battery modules to Redwood Energy, their new energy storage business, which has been formed to meet surging power demand for AI data centers and other applications. Importantly, all of the cells our JVs build have and will continue to qualify for the Advanced Technology Manufacturing Tax Credits, and we're grateful for the continued support of the administration and Congress as we invest in American battery innovation and job creation. As you can see, we are well positioned to succeed in an ICE market that has now a longer runway. We will continue to drive improved profitability for ICE and focus on EV profitability improvement to generate ongoing strong free cash flow. In addition, we'll continue to drive American innovation in batteries, AV, and software to further differentiate GM. Thank you, and I'd now like to turn the call over to Paul, who will share more details about the quarter.

Thanks Mary, and good morning everyone. Appreciate you taking the time to join us. The team continues to execute well on our discipline strategy, which leverages our leading product portfolio and emphasizes prudent inventory management to support stable pricing while delivering consistent performance. Our agility and responsiveness to evolving consumer preferences and regulatory demands remain key strengths that set us apart. For the first half, total company revenue was a record $91 billion, driven by strong demand, stable vehicle pricing, and continued growth at GM Financial. North America revenue was also a first-half record at nearly $77 billion, up slightly year over year. We maintain production levels in line with our full-year plan as early quarter sales acceleration normalized. This measured approach, combined with strong sales that outpaced the industry, reduced U.S. dealer inventory to 526,000 units, down nearly 10% year-over-year and almost 12% compared to the end of 2024. EBIT adjusted was $3 billion for the quarter, inclusive of a net tariff impact of approximately $1.1 billion with minimal mitigation offsets. As we previously mentioned, mitigation efforts will take time to yield results, limiting their effect on the second quarter. However, we're still tracking to offset at least 30% of the $4 to $5 billion full-year 2025 tariff impact through strategic actions such as manufacturing adjustments, targeted cost initiatives, and consistent pricing. Looking at our sales performance, GM's U.S. market share reached 17.3% in the first half of the year, marking a consistent upward trend and a 1.2 percentage point increase year-over-year, more than double the gain of our closest competitor. As Mary mentioned, continued growth across a number of SUV segments was a key driver, with the Chevrolet Equinox standing out, as its total sales rose more than 20% compared to the same period last year. Our share gains came on the back of strong product, not aggressive pricing. Indeed, in the first half of the year, our U.S. incentives as a percentage of average transaction price were more than two percentage points below the industry average, highlighting the strength of our product portfolio, our disciplined production strategy, and our sustained pricing power. Turning to capital allocation, we remain focused on striking the right balance between investing in the business, maintaining a strong balance sheet, and returning capital to shareholders. During the second quarter, we announced nearly $900 million for the Tonawanda propulsion plant to support our next-generation V8 engine, along with a $4 billion investment in our U.S. manufacturing footprint. These strategic investments will expand capacity, support next-generation full-size SUV and pickup production, and enhance flexibility to shift between ICE and EVs based on market demand. Importantly, not all of this nearly $5 billion investment is incremental to our prior capital plans. A portion is being offset through cost efficiencies, internal reallocations, and by aligning the timing of investments with product updates. Our annual capital spending outlook remains unchanged at $10 to $11 billion for 2025, with a modest increase to $10 to $12 billion projected for 2026 and 2027. This includes key investments in our battery joint ventures, such as Ultium Cells production of LMR and LFP chemistries, as well as our partnership with Samsung SDI. With regard to our balance sheet, we issued $2 billion of debt during the quarter, The proceeds will be used for general corporate purposes, including a $1.8 billion term loan to Ultium Cells LLC to support the voluntary early repayment of their U.S. Department of Energy loan, as well as refinancing a portion of the $1.25 billion note maturing in October. Our balance sheet remains strong, which gives us ample flexibility to navigate the current environment while continuing to invest in key future projects and return capital to our shareholders. Speaking of shareholder returns, we completed the $2 billion ASR during the quarter, retiring an additional 10 million shares, which brought the total shares retired under this program to 43 million. On a diluted basis, this resulted in 971 million shares at the end of the second quarter, representing a 4% reduction since the end of 2024 and a 15% decrease compared to the end of Q2 last year. Supported by our strong cash flows with increased visibility around tariffs and the broader business environment, we resumed open market repurchases in early July. Let me now walk through the second quarter financial results in more detail. Total company EPS diluted adjusted was $2.53, and EBIT adjusted was $3 billion, down $1.4 billion year over year. This decline was primarily driven by a net tariff impact of $1.1 billion in the quarter. We benefited from lower fixed costs, improved mix, and foreign currency impacts, which largely offset the effect of lower volume, EV inventory adjustments, and higher warranty-related charges. Adjusted automotive free cash flow was $2.8 billion, down $2.5 billion year over year. The decline was primarily driven by tariff payments, as well as headwinds from working capital and lower dealer inventory levels. In North America, we delivered EBIT adjusted of $2.4 billion and EBIT adjusted margins of 6.1%. Excluding the impact of tariffs, our margin would have been approximately 9%, which underscores the fundamental strength of our business. On a comparative basis, this keeps us well within our pre-tariff margin target of 8% to 10%. In addition to the impact of tariffs, warranty expenses have also been obscuring our strong performance, including a $300 million increase in the second quarter compared to last year. The main factors behind the higher warranty expenses relate to L87 issues and higher warranty claims from software issues on some of our early EV launches. Let me be clear. We are not happy with our warranty trend and are facing these challenges head on, with the top priority always being our customers. We've provided extended warranties in some instances and taken other proactive steps to support those affected, including shifting some supply of our components to our after sales group to decrease repair times. To address the root causes, we are pursuing multiple paths. We are working to improve supplier quality across the board and are engaging more on critical component operations than ever before to ensure they consistently meet our high standards. Spending on a per vehicle basis for software-related issues is down roughly 25% year-over-year when comparing most recently built vehicles to last year's models. Our expanded use of over-the-air updates, lower number of incidents per vehicle, and increased robustness in our infotainment system updates are all contributing to this improvement. Additionally, we are leveraging our enhanced diagnostics and developing new prognostic tools to identify issues sooner, develop repair procedures faster, and minimize unnecessary repairs. Complexity reductions enabled by Winning with Simplicity initiatives are also supporting improved launch quality, as seen on our recent Tahoe and Yukon launches. As we look to the second half of the year, we expect overall warranty costs to stabilize. And for the full year, we now expect warranty to be a year-over-year headwind. We remain fully committed to continuously raising our quality standards and delivering stronger results for both our customers and our business. North America pricing was a $200 million headwind in Q2 compared to last year. We continue to benefit from robust retail pricing, particularly with our new vehicle launches. However, we experienced a year-over-year headwind in fleet pricing, primarily due to increased competition resulting in pricing moderation. We expect the headwind from fleet pricing to continue into the second half of the year. GM International delivered second quarter EBIT adjusted of $200 million, an increase of $150 million year over year, driven by improved profitability from our China equity income. We expect this strong performance to continue into the second half of the year. Our China team is executing well and launching competitive NEV products that are fueling our market share gains and delivering positive equity income. Outside of China, our operations in South America and the Middle East continue to deliver consistent results. GM Financial delivered EBT adjusted of $700 million and is on track to deliver within the full year EBT adjusted range of $2.5 to $3 billion. The team continues to grow the portfolio while paying a $350 million dividend to GM during the quarter. Credit performance and used vehicle prices remain healthy, reflecting relatively stable underlying consumer demand and market conditions. Now, turning to the forward outlook. Our guidance and most of our underlying assumptions remain unchanged at EBIT adjusted in the $10 to $12.5 billion range, EPS diluted adjusted in the $8.25 to $10 per share range, and adjusted automotive free cash flow in the $7.5 to $10 billion range. To help with your modeling, let me first provide some thoughts on the first half to second half comparison. EBIT adjusted for the first half of the year totaled $6.5 billion. At the midpoint of our full year guidance, this suggests that second half results will be about $1.75 billion lower. There are three key factors causing this dynamic. The first is an additional quarter of net tariff impact in the second half, which accounts for around $1 billion of this gap. The second is that we expect North America wholesale volumes to be down a low single-digit percentage, reflecting typical seasonality from fewer production days and the July shutdown. The last is increased spending related to preparations for the launch of our next-generation full-size trucks, which are scheduled to begin rolling out as model year 2027 vehicles, including also ramping investments at Orient Assembly to increase capacity in the U.S. Now, let's move to a year-over-year perspective for the full year. We continue to plan for a full-year total U.S. SAR of around 16 million units. This implies a second-half SAR in the low-to-mid 15 million range. Pricing remains stable in the second quarter, as well as so far in July. Our guidance assumes this continues throughout the second half of the year. Our full-year North American pricing assumption is unchanged at a year-over-year increase of 0.5 to 1%. Turning to tariffs, the environment remains dynamic. The second quarter net impact of $1.1 billion was slightly lower than we had expected due to the timing of certain indirect tariff costs. As a result, we will likely see third quarter net tariff costs higher than in the second quarter. For the full year, while there have been some puts and takes since we gave our initial guidance, our gross tariff impact remains unchanged at $4 to $5 billion this year, as we continue to produce and import vehicles from Canada, Mexico, and Korea to avoid interruptions for our customers and dealers. Over time, we remain confident that our total tariff expense will come down as bilateral trade deals emerge and our sourcing and production adjustments are implemented. As mentioned earlier, we are making solid progress on our mitigation efforts and remain on track to offset at least 30% of this impact, with roughly one-third coming from each of our key actions. manufacturing adjustments, targeted cost initiatives, and consistent pricing. Next, I'd like to address the recent EV legislation signed by the administration. While we are still seeking further clarification on certain aspects, we anticipate these changes to have a minimal impact on our 2025 results. Our recent investments in U.S. manufacturing give us the capabilities to flexibly produce an ICE and EV mix based on changing customer demand. We also anticipate that a more rational EV market, along with the need to balance regulatory requirements against reduced EV incentives, positions us well for sustained profitability in the years ahead. I want to be clear that our EV journey is about giving consumers choice, and over the last few years, a steady number of consumers are choosing electric vehicles. We offer a compelling EV portfolio and see significant growth potential, particularly in coastal markets where we remain underpenetrated. Now that we have a robust portfolio of EVs on the road, our investment focus has turned to driving down costs and improving profitability. Mary shared examples of how new battery chemistries and form factors are driving cost efficiencies. However, we are also working to improve efficiency by making our vehicles lighter and more aerodynamic, enabling us to achieve greater range with smaller batteries. We are also standardizing key components, such as electric motors, across models to drive scale and reduce complexity. While we anticipate headwinds to EV profitability from lower volume due to the recent removal of government incentives, we remain focused on controlling what we can. These efforts are essential to improving our EV profitability and are critical to supporting the company's long-term success. In closing, everything we've achieved in the first half of the year reflects the commitment and hard work of the entire GM team. By staying focused on our key priorities and investing in our future, we are well positioned to navigate a dynamic environment and deliver strong returns for our shareholders. Thank you, and we'll now move to the Q&A portion of the call.

Thank you. As a reminder to analysts, we are asking that you limit your questions to one and a brief follow-up so that we may get to everyone on the call. To ask a question, press star then one on your telephone keypad to join the queue. To withdraw your question, press star then two. Our first question comes from the line of Michael Ward with research. Your line is open.

Thanks. Good morning, everyone. Paul, I wonder if you could walk through the accounting for the $600 million you called out. on the delta with the EVs.

Good morning, Mike. So, I think you're referring to the lower of cost or market adjustment?

Exactly, yeah.

Yeah. So, as a reminder, you know, with the cell inventory that we have, we are required to mark any potential losses on that inventory and take it to the inventory that reflects finished goods, et cetera. And as we work towards EBIT profitability, over time that'll start to come down. But as we are seeing adjustments in the market, as we are looking at expectations on pricing as well as production and demand, we made an adjustment to that reflecting what we think is future pressure on EB sales going forward related to that inventory. That number will, we expect, ultimately get better as inventory comes down and we see more stability in pricing. But think about it as more of timing from that standpoint. And, you know, we expect it will get better over time.

And just as it relates to tariffs, you're taking, as the world sits today, and you're talking about the input $4 to $5 billion, those mitigations, What would be the best-case scenario? We get a settlement with U.S., Canada, Mexico, Korea. What would the impact look like right now, like for this year, if the world changed tomorrow and it went back the other way? And then what do you have strategically that helps you from a performance standpoint as you go forward with the $4 billion investment?

Yeah, Michael – It really, I mean, obviously our tariff impact would be lower if the tariffs with Mexico, Canada, and Korea were lower. So, you know, that would have an immediate impact. You know, you have to look at how much lower it's going to be to know what the total impact there would be. Right, right. But, you know, that would have an immediate, because as Paul said earlier today, you know, we have continued to bring the vehicles in from Korea because their contribution margin positives And they're very much in demand. I mean, customers love those vehicles. You know, we've made some short-term shifts of production into our U.S. footprint. I think what's going to happen, though, as we've always said, we feel we'll be able to offset 30%. A lot of that will come in later this year, as well as we'll continue to make improvements across the board as we get into next year. And 18 months from now, the capacity, the $4 billion that we talked about, that capacity will come online, and then that will have another step function improvement. And in some cases, the capacity we're adding is also for unmet demand. So it's a win-win from that perspective. So, you know, we're on, I think, a positive trajectory as we look into later this year, into next year, and clearly into 27 will be substantially better. And to your original question, when we see what the final agreements are between these key countries for us, then we'll be able to size that as well.

So you're prepared for the worst case scenario, so there's potential for some upside the way we look at it.

I think that's a fair comment. I think that's a fair comment. I don't want to predict what worst case is. But I think with what we know today, I think that's what we've used. So I think there's potential.

Yeah, I don't think anybody can predict what's going to happen. So thank you very much.

Thank you.

Thanks, Mike.

Thank you. Our next question comes from Dan Levy with Barclays. Your line is open.

Hi, good morning. Thanks for taking the questions. I want to start first with a question on pricing. I appreciate the commentary that the reason the price in the North America EBIT bridge was negative on fleet, but We did see pretty solid third party data. So retail was tracking up decently based on a third party data. Retail is the vast majority of your sales. Maybe you could just double click on the dynamics there. And you know, as far as the second half goes, how do we reconcile the assumption of pricing sort of held where it is versus the notion that as others run out of pre-tariff inventory and inventory is now more expensive, others may now need to raise prices.

Hey, good morning, Dan. Thanks for that. And, you know, not surprised by the question. You know, I think a couple of things. Number one, as we talked about fleet, it's largely a comp issue, too, because remember what we're lapping is fleet deals that were done under significantly tighter inventory than even where we are today at our tight levels. So, you know, we think that's some normalization. I with our pricing assumption of up a half to 1% for the year going forward. We had the strength in the first quarter. We have tougher comps really through the middle of the year, but as we launch our model year 26 vehicles with our sort of regular pricing strategy that we've encountered, we still see that working quite well. So I think there's a little bit of noise in the quarter here that we will work through, but nothing has changed about the full year. You know, there's a lot of talk out there about what people are going to do, what they're not going to do. As we've said before, we're pursuing our own sort of commercial path, one that is really centered around the discipline and the demand for our products. And that's worked really well for us. So despite having lower incentives, significantly lower incentives than the industry average, we're still picking up share. So, you know, I think to the extent that you know, we see pricing change. We're going to continue to look at it, you know, according to where we see the demand for our products, which remains strong, and I expect will into the future.

Okay, great. Thank you. That's helpful. Second question is just about the EV strategy going forward, and appreciate the commentary about, you know, you want to give consumers choice, but now that the tax credit is on its way out and there's changes in the regulatory schemes, I know we've seen a broad lineup across price points, but the profitability has been challenging. I think these changes indicate profitability is probably going to get a little trickier, especially given you're losing some of the scale benefits, which was supposed to drive profit. How do we look at the depth or the breadth of your EV lineup going forward and the price points at which you're offering vehicles when it seems like it's just going to be much tougher to get profitability at the more lower price point? Is it that we just see higher price points and that's the strategy?

Well, I think we're, you know, we have a very strategic EV portfolio when you look at luxury trucks and then the affordable vehicles like the Blazer and the Equinox EVs. And so we think we're covering the market very well. You know, before we even had IRA and the $7,500 tax credit and the and some of the other portions of that, there still was demand for EVs. And we think as charging grows, and that's one of the things we highlighted because we are continuing very capital efficiently through partnerships to make sure we continue to expand the EV charging network. I also think there's an opportunity for EVs for those that have a two-car family that have a garage that they can charge. It makes a lot of sense to have one of those two vehicles be an EV. So I think As we get through this period and we go through the potential pull ahead before this September 1st where the consumer tax credit goes away, then we get to fourth quarter, we'll probably see a little result of that pull ahead. We get into 26, though, and I think we'll start to understand what real EV demand is. What we have been saying is what we're investing going forward is largely focused on improving our EV profitability. the announcements we've made from a battery perspective with LMR and LFP, some of the work that we're doing as we move forward to have lighter architectures, more aerodynamic that allow us to use a smaller battery. So we're very focused in this period of time to drive, not just get to variable profit profitability, but get to profitability and then to continue to improve so we have appropriate and strong margins from our EVs as well And then we're very well positioned in the market for later in this decade into next decade, and we truly offer consumer's choice. So we think we've got the foundation with the EV platform that we have that allows us to go from a very small vehicle all the way up to a super truck like the Hummer. We think that's an advantage for us. We think there is going to be an EV market that will grow over time, albeit it'll start lower and potentially grow more slowly. But we're well positioned to do that. And, you know, right now we're seeing growth in both ICE and EV from a share perspective with, as Paul mentioned, very disciplined incentives.

And there's a clear path to get the profitability on the affordable EVs?

I'm sorry, I didn't hear the beginning of your question, Dan.

There's a clear path to get the profitability on the affordable EVs?

Well, that is what we're working on from all aspects, and definitely the battery technology changes. And as we grow with affordable, which is in the heart of the market, that gets us the scale benefits as well. So we are focused on each and every vehicle getting to profitability, and we're not going to stop until they do.

Great. Thank you.

Thank you. Our next question comes from Ryan Brinkman with J.P. Morgan. Your line is open.

Great. Thanks for taking my question. I wanted to ask on the impact of tariffs on your earnings power as we move beyond this year. Earlier you'd called out $4 to $5 billion of tariff impact over the course of 2Q through 4Q25, so annualizing to maybe $5.3 to $6.7 billion with the goal of mitigating at least 30% of the impact this year. but that was before the various investments in U.S. manufacturing announced during the quarter. How should we think about these footprint actions impacting net tariff costs going forward? You know, what degree of tariff cost mitigation beyond the 30% target for this year do you think you might be able to accomplish after these investments come online in 18 months' time?

Yeah, good morning, Ryan. I'll take that one. Thanks for the question. You know, we have, we highlighted that of the $4 to $5 billion, about $2 billion of it is Korea. And as Mary mentioned in her comments and recent question that, you know, obviously the trade deals with Mexico, Canada, and Korea are going to be important. We're not speculating on what those are going to look like going forward, but, you know, there is a possibility and a likelihood, if you will, that ultimately a tariff rate get set at a lower level, which would ultimately bring that in back down. As far as the other aspects of the tariffs, we talked about the $4 billion, which will bring us, when all that is implemented, to producing over 2 million vehicles here in the U.S. That will take care of a large part of the other remaining tariffs that are out there. We're still working through supply chain and other indirect tariffs, but we're not speculating on what it'll be. But I expect that it is likely lower than the current run rate of what you would see just as things shake out. Remember, we're only 90 days into this. As to the 30%, I mean, these are shifts in sort of the general operation of the business that we don't necessarily think go away if tariffs are reduced. So You know, I think we've got a longer-term plan to be able to mitigate a substantial part of this. You know, we're obviously looking for things to normalize around these trade deals that will get done, and we expect that will happen. But, you know, it's too soon to extrapolate that as a run rate into the future.

Very helpful. Thank you.

Thank you. Our next question comes from Joe Speck with UBS. Your line is open.

Thanks. Good morning. Paul, just maybe turning back to some of the tariff comments, and I understand a lot has changed, but you did mention that you expected the biggest headwind to be in the second quarter, and now it seems like the third quarter. So maybe you could just sort of help us understand what large buckets, what sort of changed within that. It seems like in the slide you're mentioning indirect tariffs, which is maybe commodities and or maybe there's something with the mitigation efforts, just any color you have there.

Yeah, thanks, Joe. You got it. It's really on a lot of the indirect items that we were, when we came out with the overall tariff guidance, we were estimating the timing on when some of that would hit. So I would expect that we would have more expense potentially in the third quarter, but we're still tracking on that four to five despite all the changes that we've seen going forward. So it might be slightly higher in the third quarter, and that's kind of what we're thinking right now. On the cash side, we actually expect that cash impact potentially to be lower potentially. We still didn't get the full benefit of the MSRP offset just because of the timing. So that will materialize in the second half of the year on the cash side. But from an expense side, just think slightly higher in 3Q, but still on track for the $4 to $5 billion for the year.

Okay. And then just turning back to EVs and regulatory policy, but maybe from – a little bit of a different angle. You know, I know in your K you disclosed that last year you expensed a billion dollars for credits. I was wondering if you'd let us, it doesn't sound like you expect much sort of change to this year, but I was wondering if you could let us know how much you are counting on that expense to be this year. And is it fair to assume you have a, if we're comparing 26 to 24, you have a potential $1 billion tailwind from credits.

Yeah, Joe, it gets really complicated really fast, as you might imagine, with the different regulatory schemes. But what's in there is CAFE, GHG, state regulations, etc., So what we know today is, you know, the CAFE penalties under the one big beautiful bill were zeroed out. So we did have some balance sheet purchased credits that were there this year, but we also have some expenses that we had already booked. That's going to basically be a wash for us. So I don't expect any material adjustments from CAFE. Okay. GHG obviously has not been fully answered. We have comments from the administration, and in the one big beautiful bill, there are changes to future compliance, but we're still working through that across the board. So I think 25 is a little bit of a transition year as we understand what the future landscape is going to be. and how that's going to affect the credits and the liabilities that are on the balance sheet this year. But going forward, we do expect to be a more, I guess, a lower expense rate for compliance in the future.

And just I would add to that, it also gives us the opportunity to sell EV vehicles, or excuse me, ICE vehicles for longer and appreciate the profitability of those vehicles while we're, you know, month by month, quarter by quarter, year by year, improving our EV profitability. So I think it's a huge opportunity.

Thank you. Thanks, Joe.

Thank you. Our next question comes from Etai McKellie with TD Cowan. Your line is open.

Great. Thank you. Good morning, everyone. Just first on the guidance, just given still the wide range, second half of the year, $3.5 to $6 billion, I'm just curious what some of the factors that could materialize that could cause you to be at the low versus high end of that range and whether you have a current bias within the range currently.

So thanks, Itai. As we have continued to practice, as we generally use midpoint conventions as how we're thinking about things, The reason to not change is obviously there's still things working out. We don't want a lot of volatility in our guidance from that standpoint. But as we look at the landscape, some of the things that could help us are getting some of the offsets, as we've talked about, potentially overperforming on that. Some of the challenges are higher tariff rates for longer. But overall, we're aiming for the midpoint, and that's the way we try to shoot straight across the guidance. So as the year progresses, we'll have an opportunity to tighten that range as we know more.

Right, that's helpful. And just as a follow-up, just with wholesale volume declining on seasonality and you've gained some nice market share, your inventory is in good shape going into second half of the year, any thoughts on where U.S. dealer inventory could end the year roughly?

Well, I mean, we remain committed to our 50- to 60-day targets. at the end of the year. You know, that obviously fluctuates with changes in demand, but clearly the vehicle count, as we highlighted in our comments, is down pretty significantly year over year. You know, we have responded, I think, the right way with some component availability into our customer care and after sales groups. to address some of the more specific warranty issues to make sure customers are getting their vehicles back faster. That was a very calculated measure that impacted our wholesales, to be honest, and something that I think ultimately we can improve in the second half of the year that we'll have an ability to potentially improve our wholesales. But nothing has changed from that target of wanting to get to that 50- to 60-day target ranking.

Perfect. That's all very helpful. Thank you.

Thanks, Ita.

Thank you. Our next question comes from Adam Jonas with Morgan Stanley. Your line is open.

Thanks, everybody. Mary, about 15 or 20 years ago, GM was leading the industry in humanoid robot development, working together with NASA on Robonaut 1 and then Robonaut 2, deploying an upper-body humanoid on the International Space Station in 2011. Fast forward to today, and most of your key competitors have a humanoid program, and many, myself included, think that this market's 10 times larger than cars, at least. So when can investors learn more about GM's robotics chops in your in-house robot facilities? Mary, as an engineer, I'm sure you must be super excited about the opportunity to show investors where GM can dominate here. And Mary, I actually think that this is good for the UAW because we need American human muscle to develop, build, and service these robots. So when are we going to learn more?

Well, Adam, thanks. I actually didn't work directly on that project, but it was in the area I was responsible for, so I know the NASA partnership you're talking about very well. Also, we have a very long and rich history with GMF, excuse me, GM Robotics, GM FunUp, sorry. And we still have a very, very strong partnership. So we have a core capability in the company for sure. There's also partnerships that we're looking at and strategic relations that we have. But as we look at automation overall, our first look as we want to not only lead from what happens from a robotics perspective, because remember, a lot of things that we leverage robotics for are areas where there's safety challenges to do the work. If there's ergo challenges, we have a very robust ergonomics program in this company to make sure people don't get hurt doing their jobs. And then just difficult or very dirty tasks that, frankly, no one wants to do, and I don't blame them. And so there's a lot to do there. There's also work to do to get rid of a lot of the indirect. But we've also done a lot of work from a winning with simplicity perspective, and we've talked about that for the last few years. But first has been focused on what was, I'll say, some of the low-hanging fruit to simplify how we go to market from a trip-level perspective, free-flow options, et cetera. But now we're really getting into part design, where the parts are just simpler parts or a part that integrates and does more function. So there's tremendous work going on across the company to lead to manufacturing efficiency. And then, like I said, as we go forward, we're going to continue to capitalize on the core knowledge that we have in this company to make sure we're driving efficiency. I'm also very proud of the fact that way back when, when assembly lines and all the equipment in a plant was controlled by wires and relays, We did training programs partnering with the local community colleges to train our workforce to be able to leverage how we run automation today. From a computer perspective, we have an active training program right now where we're training more and more electricians and technicians as we have more complexity in our plants. And so we're going to continue to do that, something I'm very proud of. And I do agree there's huge opportunity for our workforce as we look to what technology has to offer to improve the jobs. But overall, we're focused on what's going to drive manufacturing optimization across all elements.

That's great, Mary. That sounds like stay tuned and bless you for investing in those important areas in our country. Just as a follow-up on EV profitability, I want to return to that. Tesla is still seen as a benchmark in Western EVs. by many. Maybe you're now the new benchmark or the new emerging benchmark, but in Western EVs, they're still the big dog. But if you remove ZEV credits, which is probably appropriate, and downstream retail, they're loss-making. I mean, they're worse than Renault. Their margins are worse than Stellantis. They would really love to have your GMI margins. So add this to Elon's, it seems to be also exiting the auto industry, clearly pulling capital out of the business and doubling down on AI and on autonomous robotaxis. So how does GM expect to be profitable with EVs when players like Tesla apparently cannot? I'm just wondering what you'd highlight as your differentiation in terms of how you configure the vehicles or your scale or something about working with the Koreans in your in-house work. When you benchmark Tesla, why are they loss-making and you feel that you can be profitable? Thanks.

Well, I think one of the things I'm very proud of, I'm not going to comment on Tesla because there's a lot there, and as you know, I don't usually comment on competitors, but I think when I look specifically at General Motors, one of the reasons our EVs are doing so well from a customer perspective is they're true to our brands, whether it's Chevrolet, whether it's Cadillac, whether it's GMC Hummer and GMC. Also, beautifully designed vehicles that have the range and the performance that customers are looking for, whether you're talking about a truck or all the the technology and safety we put into an Equinox. That's what we're known for, and that beautiful design with also efficiency. As Paul said in his opening remarks, we still believe we have tremendous opportunity to, as we did our first EV platform, to make changes to that to drive more efficiency from a weight perspective, from a simplification perspective. The same is true for batteries, and we're investing in future technologies that are going to allow us to take significant cost out. And then we will get scale. And one of the things I'm really excited about with how we have been growing our share quarter after quarter is the support that we have from our dealers who now really understand EVs. They understand what the customer is looking for. Like I said, I think we can improve that scale when we think about two-car families. that have an opportunity to have one of those vehicles in the Garage B EV even before the charging infrastructure is there. So it's going to be beautifully designed products with brands people trust. Remember, we have the highest loyalty. It's going to be having the right technology on the vehicle, getting that scale, and then the engineering solutions. So I'm very, very bullish on where we're going to be on EVs as we continue to move forward in the next couple of years.

And, Adam, I'll just add, too, I think the other asset that we have is, you know, a lot is made about Tesla's simplicity and their scale. And clearly, you know, within a couple of narrow segments, they do have that, and they've realized some good advantages, and hats off to them. It also leaves them overexposed to, you know, a demand set that has been highly volatile. Yeah. When you look at what we've done in Spring Hill and what we've announced that we're going to do in Fairfax, we're increasingly building flexibility into our operation, into our manufacturing plants that as we go through this period of transition, however long it might be, where customers are adopting EVs at a slower or a faster rate, that is going to change year to year for the foreseeable future. That built-in flexibility for us to switch between EV and ICE and make sure that we meet customers where they are is an inherent advantage that we have because we can absorb some of the costs of that manufacturing facility with more ICE production if EV demand goes down. So that flexibility is going to be important for us as we go through the next several years, and I think it's going to be helpful on that journey.

Thanks, Paul. Thanks, Mary.

Thanks, Adam.

Thank you. Our next question comes from Tom Narayan with RBC Capital Markets. Your line is open.

Thanks for taking the question. I wanted to do a little more, maybe drilling down on the Korea operation you guys have. I know it's a substantial part of the tariff amount, obviously. I know we all hope for a resolution there. But, you know, the cost dynamics there are better, I believe, than if you were to produce those vehicles in the U.S. Just curious, in like a worst-case scenario situation where we're at the current status quo and that continues prospectively, how do you think about the Korean business? Is the better economics there sufficient that you could continue working with the same kind of production, same capacity, or would you make changes there and then have a follow-up? Thanks.

Yeah, Tom, you know, we really have to see where this levels out. I mean, we've had the operation in Korea for a very, very long time. It's a very efficient operation that we're very proud of. But we've got to evaluate when we have some certainty with what the tariff will be. So I'm not going to speculate. Obviously, we've talked about it with the different choices that we have. But I'm not going to speculate right now until we know where the agreement between Korea and the United States lands. But it's an operation we've had for a long time that's very efficient and high quality. Again, as I mentioned, right now the vehicles that we produce there, they're in high demand conditions. and they still are contribution margin positive. So I think we're in the right place where we are right now until we get more certainty, and then we'll have more to say about it. Got it.

And then as you think about, you know, outside the U.S., you know, China looks like it was maybe surprised positively at your performance there, despite all the negativity we hear in the press with the domestics there. But then the flip side, in Europe, you're hearing a lot of, and a negativity from large OEMs this week with all the competition there. How do you think about these two markets for GM? Is it better just to kind of hunker down and stay, you know, more focused in the U.S. where you guys are so dominant? Or do you see opportunities, especially with the EV side, you know, battery costs coming down in the future presents a great opportunity for you guys to kind of expand further in those two markets? Thanks.

Well, I think from a China perspective, now that we announced the restructuring last year and it's on track, very proud of the fact that the team is gaining share. I think we're the only foreign OEM or foreign brands to be able to gain share, positive equity income. And I think there's an opportunity. With what we know today from the geopolitical situation and the relationship between the two companies, countries, I think there's an opportunity for Cadillac and Buick to be strong there. You know, Buick has a rich history there, and the brand means something to the Chinese consumer, and Cadillac is viewed as, you know, luxury and a great choice. I mean, one of the vehicles we have there is the GL8, which has been a very, very successful product, and now that we have it out from a new energy vehicle perspective, it's doing quite well. So I think With what we know today, we can have a smaller but strong business that can grow in China, and I think that's something that we're going to be continuing to focus on. I'm really proud of the team there. And then from a Europe perspective, I think there's a lot of changes that are happening in Europe right now from a regulatory perspective, from what's happening from a competition perspective, especially from the Chinese. I think over time that will settle out. We think we have an opportunity in that market. Very proud of the fact that the Lyric was named German Luxury Car of the Year last year. First American brand to ever receive that honor. So I think we have, especially our EVs, that can do very well in the European market. But I think there's some stabilization that has to happen of what is the policy situation across Europe that will inform the next step we take. And then you didn't mention South America, and I think we have huge opportunity from a South America perspective. We have very strong brands there, a very strong dealer base, and I think there's opportunity there as well, as well as in the Middle East. Got it. Thank you.

Thank you. Our last question will come from the line of Emmanuel Rosner with Wolf Research. Your line is open.

Great. Thanks for taking my questions. I wanted to ask you about the share buyback program. So it's good to see GM back in the market, buying some on the open market. Can you give us any sense of, you know, how much you're hoping or planning to buy in the second half? I believe you still have $4 billion plus maybe on the authorization. So is the goal to complete that this year, or would it be an amount less than that?

So, Emmanuel, good morning. Thanks for the question. First of all, we never left the market. As you know, we were covering with the accelerated share repurchase in the second quarter, so that's been consistent. While we paused open market repurchases, we have said that we're back now, and we began repurchasing in early July. No comment specifically on how much we're going to do. We obviously wouldn't telegraph that, but you're right. We had, as of the end of the quarter, $4.3 billion remaining on that authorization. And as we've said, we're sticking with our free cash flow guide. And you would expect that seasonally there's going to be more cash generation in the second half versus what we did according to that guide when you look at the midpoint. So I'll just leave it at that. But, you know, we're going to maintain that consistent application of our capital allocation policy.

Okay, great. And then the second topic I was hoping to ask you a follow-up about is – a follow-up on your EV strategy as a result of some of these U.S. regulation changes. I appreciate all the effort that you highlighted towards flexible manufacturing and the ability to really respond to consumer demand. Is there also an opportunity or appetite at GM to try and reduce the overall capital intensity of the business? Obviously, your CapEx remains very you know, stable and steady. Just curious if with this, you know, lower EV market predicted as well as essentially easier rules to follow, if there is any appetite there to actually just say, well, maybe down the line at some point, we don't need to spend as much on a go forward basis as an overall company.

Well, Emmanuel, I think, you know, from a capital perspective, you know, feel very comfortable with where we are at the 10 to 11. And then we've announced that, you know, with the, uh, footprint changes that we will go to 10 to 12 over the next couple of years, but still very much in line with affordability and balanced capital allocation. And capital levels on an inflation-adjusted basis are similar to what we did in 2018 with much better cash flow performance. So when you look at EVs, I wouldn't say that we're going to be spending significantly less. What I would say is the composition of the investment is changing, where we have been out expanding the portfolio and making sure that we can meet customers where they are. Our capital is now focused on where can we structurally and architecturally improve the costs and the performance. A lot of announcements that we've made on the battery technology and the teams are hard at work at looking at other things such as aero and materials. So, you know, I think there's a path there and one that we feel very comfortable with.

Great. Thanks for the call, Eric.

Yeah, thanks, Emmanuel.

Thank you. I'd now like to turn the call over to Mary Barra for her closing comments.

Well, thank you, and I want to thank everybody for your attention and for your questions. We really do appreciate the dialogue, but I hope you step back and see that we are well positioned for the future. We have a lot of momentum with customers as we adapt to the changing markets, trade and tax policy, and we are demonstrating leadership in ICE, EV, software, AV, and other important technologies for the future of mobility. This underscores my belief that GM will emerge from this transition period even stronger financially and with clear momentum, and that we will be uniquely differentiated from our competitors with the strength of our ICE business, the strength of our EV business, and the progress that I know we're going to be making from a technology perspective. So thanks, everybody. I hope you have a great day and be safe.

Thank you. That concludes today's conference. Thank you for participating. You may disconnect at this time.