General Motors Company (NYSE:GM) Q4 2022 Earnings Call Transcript

General Motors Company (NYSE:GM) Q4 2022 Earnings Call Transcript January 31, 2023

Operator: Good morning, and welcome to the General Motors Company Fourth Quarter 2022 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. As a reminder, this conference call is being recorded, Tuesday, January 31, 2023. I would now like to turn the conference over to Ashish Kohli, GM’s Vice President of Investor Relations.

Ashish Kohli: Thanks Michelle and good morning, everyone. We appreciate you joining us as we review GM’s financial results for the fourth quarter and calendar year 2022. 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 is Mary Barra, GM’s Chair and CEO; Paul Jacobson, GM’s Executive Vice President and CFO; as well as Kyle Vogt, CEO of Cruise. Dan Berce, President and CEO of GM Financial, will also be joining us for the Q&A portion of the call. Before we begin, I’d like to direct your attention to the forward-looking statements disclosure on the first page of our presentation. The content of our call will be governed by this language. And with that, I’m delighted to turn the call over to Mary.

Mary Barra: Thanks, Ashish, and good morning, and thank you all for joining us this morning. I want to begin today’s call by recognizing the General Motors team, all of our employees and including our dealers and suppliers. It takes experience, skill land teamwork to adjust to external factors like higher interest rates, commodity price increases and supply chain disruptions and deliver our commitments year in and year out. Our team rose to meet every challenge thrown at them in 2022 and they delivered record EBIT-adjusted and a year of first that really sets us apart from our competition. For exam, GM led the U.S. industry in total sales and delivered the largest year-over-year increase in market share of any OEM alongside record ATPs. This reflects the strength of our product portfolio including our clear leadership in full-size pickups and full-size SUVs, great quality, and improved availability.

Chevrolet and GMC delivered more than 1.1 million full-size pickups, full-size SUVs and mid-size pickups in the U.S. which is about 350,000 units more than our closest competitor. Our commercial fleet business is another area where we gain considerable, profitable market share. The team has earned a business of more than 300 major commercial accounts over the last several years which led to our best year for commercial deliveries since 2006. The inflexion point was driven by our investment in mid-size and full-size pickups including our capacity expansions to build more crew cabs and heavy-duty pickups. Our growing portfolio of EVs will enhance our strong sales and share performance across the board because we are targeting the most popular segment at multiple price points.

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This year we will have nine EVs in the market in North America including the Chevrolet Bolt EV and EUV which saw record sales. In fact they were the bestselling mainstream EVs in the second half of the year and we plan to build more than 70,000 this year for North America and other markets. Quality is another area where our team deserves recognition. In the latest J.D. Power U.S. Initial Quality Study, GM improved while the industry went backwards. Not only did we get better, GM and the Buick brand led the industry. Chevrolet had six top-ranked vehicles and the Corvette was the highest-ranked nameplate in the industry. This commitment to satisfying customers and delivering industry leading quality, helped our eligible U.S. hourly employees earn record profit sharing totaling $500 million, which brings the three-year total to $1.2 billion.

Looking ahead, we expect that 2023 will be another strong year for GM. We expect to deliver EBIT-adjusted in the range of $10.5 billion to $12.5 billion which reflects operating performance similar to 2022 when you include the normalization of GM Financial’s results and pension accounting. Our guidance includes a total of $2 billion in cost savings in the automotive business over the next two years. The areas we are focusing on include continuing to reduce complexity at all of our products and reducing corporate overhead expenses across the board. I do want to be clear that we’re not planning layoffs. We are limiting our hiring to only the most strategically important roles and we will use attrition to help manage overall headcount.

Colorado and GMC pickup, our new Chevrolet Silverado and GMC Sierra Heavy-Duty pickups, and the all new Chevrolet Trax which is the best entry-level Chevrolet we ever built.:

We are especially excited about the Trax and so are our dealers in North America, Korea and other international markets.: The third generation, Chevrolet Montana pickup that we’re launching in South America and Mexico starting next month, follows the same formula. The Montana’s design is inspired by products like the Blazer and Trailblazer, and it will offer customers more room, the best combination of fuel economy and performance in its segment, and a comprehensive suite of safety features and an innovative reconfigurable bit. So let’s talk about our growing EV portfolio. At our November Investor Day, we took you deep into the products and supporting strategies that will help us achieve solid EV profitability in 2025 and this is a breakout year for the Ultium Platform.

Production at our Ultium Cells joint venture in Ohio is on track and the plant in Spring Hill will open later this year. Ultium Cells started hiring and training launch team members in October and they began equipment installation in November. These plants will help us meet pent up demand for the Cadillac LYRIQ. The GMC HUMMER EV pickup, and the BrightDrop Zevo 600, and it keeps our other EV launches on track. For example, BrightDrop continues to add new customers, including DHL Canada and they are on track to achieve the goal of $1 billion in revenue for the year. Excuse me. In April, we launched the Silverado EV work truck at Factory Zero for fleets. So we have opened up the order banks to begin converting initial demand for more than 200 customers into firm orders for 2023 production with the first deliveries in the spring.

Interest is so strong that we believe demand will exceed supply in 2023 and into 2024. In the fall we will begin building the sold out Silverado RST First Edition, Chevrolet’s flagship electric pickup, which will feature trailing capable super crews, four-wheel steering and a multi-flex midgate and up to 400 miles of range. We’ll follow with other retail focused models in 2024, including the Silverado EV Trail Boss. This summer will also see the launches of the Chevrolet Blazer EV and Equinox EV. More than 40% of Blazer’s reservation holders are new to EVs. Among the 60% who have owned an EV or hybrid, most are either Tesla customers or are our loyal Bolt EV and Bolt customers. What’s common to everyone is they want an all-electric SUV that’s stylish and roomy with enough range and fast charging capability to make it their daily driver, and they want it from a brand like Chevrolet with a proven record and reputation for quality.

The Equinox EV has many of the same attributes and an even more affordable package, which makes it unique and another growth opportunity for GM. More than one third of the customers interested in the Equinox EV say affordability is their key consideration, and the latest data says nearly half live on the east or west coast or in Texas, which are all growth markets for us. This cadence of self-production and product launches combined with strong demand for the Bolt EV and EUV keeps us on track to produce 400,000 EVs in North America from 2022 to mid-2024 with the Ultium platform, volumes increasing significantly in the second half of this year.

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Q&A Session

Electra: All of these launches and initiatives will help us deliver near-term commitments we made at Investor Day, and we continue to make bold moves to drive profitable long-term growth. One example is our planned investment of more than $850 million in four U.S. plants to build the sixth generation of our Small Block V8, which will deliver even better fuel economy, about a 5% improvement and double digit reduction in emissions and more performance for our truck and SUV customers. We’re also building an EV supply chain that is long-term competitive advantage for GM and a major source of new jobs, especially in North America. For example, our first three joint venture cell plants are expected to create 11,000 jobs in the U.S. with about 6,000 in construction and 5,100 in operations.

In Quebec construction of our joint venture Cathode Active Material plant is moving quickly and the structure should be complete mid-year. In Texas, MP Materials has started construction of its first rare earth metal alloy and magnet manufacturing facility, and they expect to begin delivering product to us late this year. After several months of optimizing engineering and process parameters, Controlled Thermal Resources is now recovering lithium from its geothermal brine resource in California’s Imperial County. This is an important step in completing the engineering design to recover lithium from geothermal brine at scale. In Australia, Queensland Pacific Metals has secured all major approvals to begin construction of a new facility that will be an environmentally sustainable center for processing nickel and cobalt.

In December, Ultium Cells signed a supply agreement with POSCO Chemical to source artificial graphite from Korea. And today we announced the largest ever investment by an automaker and battery raw materials. Specifically, we are making an equity investment of up to $650 million in Lithium Americas to help them develop the largest known lithium resource in the U.S. and the third largest globally. Lithium Americas estimates that the potential output from this project could support annual production of up to a million EVs and create a thousand new jobs in construction and another 500 in operations. Production is scheduled to start in the second half of 2026, and after our initial investment, GM will have exclusive access to the lithium off-take in the first phase of the project.

It’s a landmark transaction and it certainly won’t be the last major supply chain announcement for GM. We continue to pursue strategic supply agreements and partnerships to further secure our long-term needs and drive investment in the United States and across North America. As I said, all of these launches and initiatives tie back to the roadmap we shared at Investor Day. We’re executing a product strategy in ICE and EV that is designed to support strong pricing and grow our share, especially in EVs by competing in multiple segments and price points. We’re expanding domestic cell production to drive EV growth, and we are turning our EV supply chain into a powerful competitive advantage, and we’re maintaining strong financial results during a period of high investments, which includes taking a very strategic approach to managing our costs.

Next, I would like to dedicate a few minutes to Cruise because 2022 was a very significant year for them as well. So Kyle, I’m turning it over to you.

Kyle Vogt:

Robotaxi: We started the year with just a handful of cars on the road and a service that was restricted to employees. In January, though, we welcomed our first public riders and a few months later launched our commercial service, the first ever in a major U.S. city. And since then, we’re approaching 1 million driverless miles, have completed tens of thousands of driverless rides and run the largest driverless AV operation in the world, currently peaking at 130 driverless AVs at the same time in our RedHill fleet. We’ve scaled responsibly, safely and transparently, including the release of the most comprehensive safety report in the industry. It outlines the key tenets and processes we put in practice each day that make our products an obvious choice against a backdrop of tragedies on the road caused by human error.