General Motors Aktie

Good morning, and welcome to the General Motors Company First Quarter 2026 Earnings Conference Call. [Operator Instructions] As a reminder, this call is being recorded on Tuesday, April 28, 2026.

I would now turn the call over to Ashish Kohli, GM's Vice President of Investor Relations.

Thanks, Denise, and good morning, everyone. We appreciate you joining us as we review GM's financial results for the first quarter of 2026. 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; along with 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.

On today's call, management will make forward-looking statements about our expectations. These statements are subject to risks and uncertainties that could cause our 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.

Thanks, Ashish, and good morning, everyone. Once again, thanks to our strategic product portfolio and great execution by the GM team, including our dealers and suppliers we delivered an outstanding quarter. I couldn't be more proud of the team's efforts and our results.

We are continuing to execute our plan to return to 8% to 10% EBIT-adjusted margins in North America for the full year. In fact, in the first quarter, we achieved an EBIT adjusted margin of 10.1%, including 1.5 points of benefit from the accounting adjustment resulting from the recent Supreme Court tariff decision. This nets to an 8.6% margin. Complementing our performance in GM North America was our sixth consecutive profitable quarter in China and higher year-over-year results in GMI excluding China.

We're also building tremendous momentum in digital services. They are playing an increasingly important role in our success, and they will drive even stronger results in the future. If you look deeper at our results, especially in North America, you can see how the depth and breadth of our vehicle portfolio is driving the business.

Following a very strong close to the fourth quarter, we began this year with lean inventory in the U.S., and we had planned downtime in North America during the quarter to install tooling for our next-generation full-size pickups. Even with tight inventory, we continue to lead the industry in the U.S. and Canada, and we're #2 in Mexico. We also continue to lead in full-size pickup sales and share with 42% of the U.S. market. In addition, we were #1 in fleet, including commercial deliveries, and we were #2 in EVs. As we exited the quarter, our EV market share in the U.S. was 13% up from about 10% in December 2025, which underscores the appeal of our portfolio as the segment stabilizes.

I would also like to highlight the growth of our crossover business, which is an important differentiator for GM. Since we began refreshing our lineup in 2023, crossovers have grown from just over 40% of our sales to more than 46%. We've also gained 2 full points of share in vehicles like the Chevrolet Trax and Equinox, the [indiscernible] and the GMC Terrain and the Chevrolet Traverse and GMC Acadia. have become significant contributors to our profitability. Additionally, we delivered these results with incentives that continue to be [indiscernible] the industry for both ICE and EV. As we look ahead, the SAAR is holding steady, showroom traffic is stable, and we continue to operate with lean inventory. We began the second quarter with about 47 days of supply on dealer lots.

All of these winning vehicles are laying the groundwork for higher company level profitability around the world through durable reoccurring digital revenue streams. We are on pace to add more than 1 million OnStar subscribers in 2026 with about 30% of our existing customers choosing a premium plan. Outside of the U.S. and Canada, we have more than 20 revenue-generating markets and regions, including Mexico, Brazil, China, South Korea and the Middle East. Within the OnStar platform, Super Cruise is also scaling quickly. Our customers have now driven 1 billion hands-free miles and our subscription performance is on pace to exceed 850,000 subscribers by the end of the year with strong renewal trends in the 30% to 40% range. You will find that our attach rates, subscription renewals and revenue generation compare favorably to others in the industry.

The continued growth of this ecosystem, including the customer base, miles traveled and the insights we're gaining to train our AI models will help pave the way for our eyes off, hands off technology launching in 2028 on the Cadillac Escalade IQ. The escalate IQ is just the start. We are doing something unique in the autonomous space, which is developing a system for personal vehicles that we can deploy on both ICE vehicles and EVs and scale across multiple brands and price points. We're stress testing it in the digital environment capable of simulating roughly 100 years of human driving every single day. We recently took the next step and began supervised on-road testing in California and Michigan. The way we're building this technology is a reflection of how seriously we're embracing AI across the enterprise. Today, nearly 90% of the code written by our autonomy team is generated by AI.

Next, let me comment on our updated EBIT adjusted guidance, which we are raising by $500 million to a range of $13.5 billion to $15.5 billion to reflect the flow-through of the tariff adjustment. While our operating performance remained strong as reflected in our excellent first quarter results, the war in Iran has raised our cost and its duration remains uncertain. We are working to offset these cost pressures by reducing spending in other areas and by continuing to find efficiencies across the business, but we believe it's prudent to wait and see how events unfold before we make any further changes to guidance. As we move forward, I'm confident that our portfolio, production, inventory and incentive discipline, balance sheet strength and free cash flow generation will continue to differentiate GM.

With that, I'll ask Paul to take you deeper into the quarter, and then we'll move to Q&A.

Thank you, Mary, and we appreciate everyone joining us this morning. The GM team delivered another outstanding quarter. Thanks to their hard work and strong execution. Q1 EBIT adjusted was $4.3 billion, surpassing expectations even after excluding the $0.5 billion tariff adjustment. Once again, we demonstrated discipline in our approach to both pricing and inventory.

In the first quarter, our U.S. incentive spend per vehicle as a percentage of MSRP remained more than 2 points below the industry average. U.S. dealer inventory ended the quarter at 516,000 units, down 6% year-over-year overall and down 9% for full-size pickups, even against the difficult comparison created by outsized pre-tariff March deliveries last year. While we further strengthened our leadership in U.S. full-size pickups this quarter, leaner inventory constrained retail sales. Looking ahead, we are working to increase inventory levels of key products and believe that we can take this higher over the next several quarters while being mindful of the broader demand environment.

Let me now provide more details on our strong first quarter results. For the total company, revenue was down year-over-year by approximately $400 million in the first quarter, as expected, driven primarily by lower EV wholesale volumes. ICE wholesales were flat year-over-year, with higher GMI volumes being offset by lower North American volumes, which were constrained by the end of production of certain Cadillac crossovers, lower imported volumes from Korea and full-size pickup downtime. As I mentioned earlier, our Q1 EBIT adjusted came in better than our expectations, driven by solid execution across all of the businesses and good expense management. Year-over-year, Q1 EBIT adjusted was up approximately $750 million, driven by the [ IIFA ] tariff adjustment, lower EV losses and FX benefit, lower warranty expense and emissions-related regulatory savings. These tailwinds were partially offset by a full quarter of tariffs.

Let's expand on a couple of these items. In the first quarter, we incurred $200 million of incremental gross tariff costs, including the tariff adjustment compared to minimal tariff costs last year. EV losses were down several hundred million dollars year-over-year in the first quarter, driven by lower volumes, manufacturing efficiencies and lower fixed costs. On warranty, we continue to expect a year-over-year tailwind of $1 billion with first quarter results improving roughly $200 million versus the prior year. Q1 results included $400 million of lower warranty liability reserve adjustments, partially offset by higher warranty rate accruals on new vehicle sales. We continue to pursue a comprehensive multipronged approach to reduce our warranty expenses from product development and current production all the way to repairs at our dealers.

Let's turn next to an update on our EV charges. Last year, as you know, we reassessed our EV capacity and manufacturing footprint to better align with softer demand and elimination of U.S. tax incentives. As previously indicated, we are transitioning Orion assembly from EV to ICE production and resolving associated supplier contracts. With the exception of the BrightDrop EV van, we have not recorded impairments to our current EV portfolio. Our focus remains on improving EV profitability and scaling our business as market adoption grows, albeit at a slower expected pace than we had previously seen. In the second half of 2025, GM recorded a total of $7.6 billion in EV related charges. This breaks down into $4.6 billion of estimated cash charges and $3 billion in noncash impairments.

In the first quarter, we took an additional $1.1 billion in EV charges, driven mainly by contract cancellations and supplier commercial claims. We expect about $1 billion of this will have a future cash impact. We're moving quickly to finalize claims. To date, we've already recorded around 90% of the expected total supplier commercial claim costs, and we anticipate reaching agreements in principle on most of the remainder during the second quarter. Separately, we continue to work expeditiously through rightsizing our battery supply chain with our joint venture partners. Of the total, $5.6 billion in EV-related cash charges recorded since the second half of 2025, $2.6 billion has been paid as of March 31. In April, we've already paid an additional $600 million, and we continue to expect most of the remaining cash flows to occur in 2026. We remain steadfast in our desire to get these claims resolved quickly and fairly for our business partners and our shareholders.

Now let's turn to a regional perspective. In North America, Q1 EBIT adjusted was $3.7 billion with a 10.1% margin, including an approximately 1.5 point benefit from the tariff adjustment, which nets to 8.6%. We're off to a terrific start to deliver a North American margin in the 8% to 10% range for the full year. Excluding the plant sale gain, China equity income was $100 million. This shows ongoing resiliency from our prior restructuring as well as disciplined production and inventory management in the face of softer macroeconomic conditions. GM International, excluding China equity income delivered approximately $40 million in EBIT adjusted despite the Iran conflict disruptions in the latter part of the quarter. We have been and will continue to divert some full-size SUVs and pickups from the Middle East back to North America, helping to alleviate low domestic inventory levels. GM Financial continued its stable performance, delivering EBT adjusted of $700 million for the quarter.

Now let's look ahead to 2026 guidance. While the U.S. economy has been resilient, we haven't seen any material changes to demand or mix thus far. There remains considerable uncertainty, and therefore, we want to be prudent as we think about the future. Based on what we know today and assuming the SAAR remains in the low 16 million unit range, we are raising our overall EBIT adjusted guidance to $13.5 billion to $15.5 billion up from $13 billion to $15 billion. Likewise, we are raising our EPS diluted adjusted guidance to $11.50 to $13.50 per share, up from $11 to $13. While our execution and discipline helped drive first quarter outperformance, we now expect incremental commodity and freight costs versus our original guidance. At the same time, our FX outlook has improved from a small headwind to neutral for the full year.

As a result of these changes, we are increasing our full year guidance for year-over-year commodity inflation, including logistics and higher DRAM costs to $1.5 billion to $2 billion. The incremental $500 million is expected to be more or less equally weighted across the remaining 3 quarters. In light of that, we're continuing to take proactive steps to ensure that we are efficiently allocating our resources and are ready to quickly adjust as needed. Meanwhile, our gross tariff costs are now expected to be $2.5 billion to $3.5 billion for the year, down from our original guidance of $3 billion to $4 billion because of the tariff adjustment we took in Q1. We expect 2025 self-help offsets to continue in 2026 and are pursuing additional opportunities to further mitigate these costs.

Relative to our international regions, we expect China to remain profitable and to deliver results consistent with 2025. However, we anticipate some softness in our international operations outside of China due to the impact of the conflict and around on Middle East wholesales in particular. There is no change to our other 2026 key guidance assumptions. On price, we continue to expect to be flat, up 0.5%, benefiting from model year 2026 price increases. ICE volumes are expected to be flat to modestly up though production is constrained due to the major refresh on full-size pickups as well as the end of production of the Cadillac XT6. For EVs, we expect volumes to be lower as the market shows early signs of stabilizing around 6% of U.S. industry sales. We continue to expect a benefit of $1 billion to $1.5 billion for the calendar year as we rightsize our EV capacity and run at substantially lower EV wholesale volumes.

The production pause at Ultium Cells means lower benefits from production tax credits flowing through material costs, but this is largely offset by positive inventory adjustments from lower cell inventory levels. On regulatory costs, we continue to expect $500 million to $750 million tailwind year-over-year. The endangerment finding repeal in February was already assumed in our plan. GM Financial continues to expect EBT adjusted in the $2.5 billion to $3 billion range, including accelerated depreciation on its EV lease portfolio. As part of our disciplined risk management, GM Financial regularly evaluates the estimated residual values and proactively adjust depreciation accordingly. We are maintaining our adjusted auto free cash flow guide of $9 billion to $11 billion with a heavier weighting to the second half. Note that this guidance excludes the EPA tariff refund given uncertainty around payment timing.

Our capital allocation policy remains unchanged. We are committed to investing in the business, maintaining a robust balance sheet and returning the remainder to shareholders. We believe that repurchasing GM stock at the current valuation remains one of the most effective ways to deploy capital and create long-term value for our shareholders. In Q1, in addition to distributing $164 million in dividends, we made $800 million in open market stock repurchases, retiring approximately 11 million additional shares at an average price of $75.02 per share. We ended Q1 with $19 billion of cash and $5.5 billion remaining on our share repurchase authorization.

Before I open the call for Q&A, I want to highlight our OnStar digital service business. This includes Super Cruise, but also a broader suite of connected services that we highlighted earlier in the quarter. It's an underappreciated asset that is growing and margin accretive. In Q1, we saw recognized revenue of over $750 million, up over 20% year-over-year. For the calendar year, we expect $3.1 billion of recognized revenue, up 15% year-over-year. We are on track to reach 13 million subscribers by the end of 2026, up by $1 million year-over-year with a monthly average revenue per subscriber of around $20. Those subscribers are driving ongoing deferred revenue growth as well. In Q1, the deferred revenue balance ended at $5.8 billion, up $2 billion or over 50% year-over-year.

For the calendar year, we expect deferred revenue to approach $7.5 billion, up more than 35% year-over-year. In conclusion, I have tremendous confidence in the GM team's ability to successfully navigate the evolving geopolitical landscape. Our broad ICE and EV portfolios remain key competitive advantages versus our peers and our disciplined approach to inventory and incentives keep us agile. Just like we've done with other macro headwinds, we are proactively planning for a range of potential outcomes. We are working to identify additional profit improvement opportunities and have begun taking initial no-regret steps to moderate spending. As events continue to unfold, we will remain flexible and execute the right playbook to optimize profitability, maximize free cash flow and continue to deliver strong returns for our shareholders.

Thank you for your continued support. And with that, we now begin our Q&A portion of the call.

[Operator Instructions] Our first question comes from Itay Michaeli with TD Cowen.

Maybe just to start, Paul, just a clarification on the guidance. Can you talk about the offsets from a cost perspective or otherwise to the higher commodity inflation that's leveling to kind of raise the guidance outside of the AEPA, of course.

Thanks for kicking us off today. So I think when you look at the inflation, the pressures that we're seeing, the offset come in a couple of different forms. Number one, we've put a little bit in the bank in Q1 from our outperformance from what we've seen. Some of that was timing, but there was some good core movement on many of the staples that we've talked about, whether it's warranty or EV profitability, regulatory costs, et cetera.

But then there is also the playbook that we referenced in our comments, which similar to what we've done, whether it was tariffs or chip shortage or COVID, et cetera, that's worked really well for us. So we're looking at doing that. What we don't want to do, we don't want to rush and do a lot of things that are going to jeopardize or otherwise put at risk longer-term strategic initiatives by overreacting to what's going around us. So we have sort of degrees of freedom in terms of what we're going to do, starting with relative low hanging fruit, maybe deferring some hiring or things like that. But overall, I think we're going to be measured about it. So while we have this uncertainty, I think holding our numbers consistent net of [ AEPA ], I think is the prudent thing to do with all this uncertainty. And if things abate, then we could potentially see upside in the future.

That's very helpful. And then a bigger picture question, quite to say the progress on software and services. And how level -- how should we think about the ARPU opportunity for the company on the upcoming SDV platform in 2028? As the sort of opportunity continues to grow from here?

Well, I think, Itay, you look at the momentum we have, and I appreciate you pointing it out. We've started to lean more into disclosing a lot of what's going on here. And I think what we're really focused on right now is the attachment rates and delivering value to the customer. As we roll out SDV 2.0, the number of opportunities out there start to magnify pretty significantly in terms of what the digital offerings that we can put out there. You'll hear more information about that over the coming months. as we lean into when SDV 2.0 comes.

But clearly, when you look at -- we might have a lower average revenue per unit than, say, Tesla does, but we already have significantly higher volumes deferred revenue, more realized revenue. And that's where the real scale benefit comes across the portfolio. So we think that this is a growing and soon to be really influential piece of the business going forward.

Our next question comes from Joe Spak with UBS.

Paul, I know you're on TV this morning, and I think you mentioned some industry discounting. I was just wondering if you could expand on that a little bit because it doesn't really sound like you changed your own sort of volume or pricing assumption. So is what you're seeing sort of in line with what you expected, call it, 90 days ago? And then just given some of these cost pressures, if there -- if competitors do start to maybe try to price for some of these cost pressures, does that -- do you feel like gives you a little bit of leeway to do the same to cover some of those higher costs you mentioned?

Yes. Thanks, Joe. I would say it's largely in line with what our expectations have been. There have been some really unique things that I think have played out this year among the competitive set that we haven't seen historically. But we continue to, I think, be very disciplined in our approach. I think a lot of the share data that people saw during the quarter was probably more a result of some of the challenges we had with inventory on lots. We came into the quarter light on our targeted inventory levels primarily because we've had such a really strong December, for example.

And then with the storm and some other challenges that we had, we weren't really able to catch up. Wholesales call up towards the end of the quarter, but that really didn't show up in showroom we're optimistic that as we get more product out to the dealers in Q2 that we can help to reverse some of the share losses that we saw without getting into heavy discounting across the board. So I think nothing has changed in our playbook. We're going to continue to be tactical and we're going to continue to be disciplined.

Makes sense. And maybe just one on the cost side then, obviously, some good management here in the quarter. And I think you sort of mentioned maybe some cost timing or phasing, I guess the one I'm asked -- I'm curious about is, I think you mentioned, call it $1 billion to $1.5 billion in onshoring and software costs. Like how is that tracking? And is that something that really started to come in this quarter? Or is that sort of more weighted to the remainder of the year? And then one clarification on [ AIBA ]. This is just the receivable for your overpayment, right? Like you're not assuming that you're not paying this in -- or I guess the 122 replacements, like those stay in place. It's not that there's like a benefit assuming your guidance that you do not paying that in the back half, correct?

Yes. So let me cover the tariff question first. So all we've done here is taken the [ IEFA ] direct tariff that we paid last year. that was subject to the Supreme Court decision and credited that back as a receivable. And as we said, we haven't changed our free cash flow guidance because we don't know what the -- when the refunds are going to be received, how that window might work. going forward. But that's all we've assumed.

Now keep in mind, most of our tariff burden comes from 232. So EPA versus our size is relatively small. But because of that entry, that's why we took the guidance down. We're not projecting any other change. We're not projecting any other changes to our tariff bill. When I said guidance down, I went to tariff bill guidance. And then on the cost side, I think it's a couple of things. FX was obviously a benefit for us, primarily the Canadian dollar and then also Korea and some of our imports getting better treatment there. We think that will hold. When you look at other cost items, we can -- we make progress on warranty, a couple of hundred million dollars of warranty in line with what we said we're going to do for the year. EV profitability improved largely as a result of better, more efficient use of the capacity as the whole -- as the write-offs that we took hold. And then also on the regulatory side around GHD.

So I think many of those are going to hold on when you look at the cost pressures as we've talked about, pretty much the onshoring costs are going to be really heavily weighted towards the back half of the year, as expected, and we start to hire people to get the plants running in early '27.

The next question comes from Emmanuel Rosner with Wolfe Research.

So quite an uncertain environment as you certainly indicated. I was curious in terms of the factors you're monitoring, you indicated you'd want a little bit more clarity on some of those before making any additional changes to the outlook. In terms of things that could move the needle for this year that you're monitoring? Is it more on the demand side, vehicle mix, input cost, I'm curious which are the ones that could still move up or down the most and impact you?

Emmanuel, I think the #1 thing that we're watching is what happens from -- with the Iranian conflict because obviously, with oil prices affect a lot more we're seeing from not only logistics, but also other commodity costs. So if the conflict ends in a shorter period of time, I think we'll see a return back to normal levels. If it stays on longer tell me how high oil prices go before we'll start talking about what demand is.

But I also want to remind you that we're -- although we have an incredibly strong truck franchise and I'm very excited about the new truck that we have coming out at the end of the year, we also have a very strong midsize crossover portfolio and small crossover portfolio as well as a strong midsize truck. So I think we're well prepared with portfolio I'd stand against anyone when we look at how consumer behavior might shift depending on how long the war lasts, but we just don't know. So I think those are the primary things that we're watching.

And as Paul said, we looked at the years, seen that uncertainty, especially as the conflict began, and that's why we started to really work on cost management. There's other areas that we're working on to continue to do that. But I think the biggest variable that we're looking at is how long does the conflict last and what does it cause from a cost perspective across logistics supply chain. And if it ends up having anything -- any impact on a shift in mix. But to date, we really haven't seen that.

That's very fair and great color. And I guess just -- as a follow-up on this then in terms of the input cost inflation and commodities, can you tell us what you have assumed in this updated guidance, which has been -- the inflation cost has been increased by another $0.5 billion. What are you assuming for commodities in the back half or for how long they stay high as a base case scenario?

Yes. Emmanuel, what we've done is essentially taken the kind of the curve where it sits today, net of our hedges, and remember, we -- it's not all direct and linear because we've got, for example, steel contracts. If you'll recall, we have about 1/3, 1/3, 1/3, of spot, 1/3 expiring within a year and a third kind of over 2 years. So that's helped us quite a bit. During times when prices go down, we pay a little bit more, but we pay a little bit less when prices go up. So we're really looking at the current environment kind of persisting for the year. And to Mary's point, conflict end and commodity prices and oil prices returning back down to pre-conflict levels, then we could potentially see upside in that scenario.

The next question is from Mark Delaney with Goldman Sachs.

You mentioned the downtime that GM had for tooling in the first quarter related to the next-gen full-size pickups. I'm hoping to better understand if investors should expect more downtime for the upcoming full-size pickup launch? And that's a potential incremental headwind? Or is that now behind and higher full-size pickup truck production should be a tailwind for the volume and share plans that you articulated in your prepared remarks.

Yes. Mark, thanks for that. We had some significant downtime in the quarter primarily related to heavy-duty trucks. I think a lot of that is behind us. There may be some selective downtime, but I think a lot of it can be done during shutdown, et cetera. So we're not anticipating any material downtime at this point. But that's what we're going to need to lean into a little bit to try to get our inventory levels back into the targeted range from where they've been because even when we ended the quarter, we were still down below our target levels. So we're hoping that we can get that back. And the team has done a really, really good job of managing through all of the logistical challenges.

My other question was on Super Cruise and the digital services. For the strong growth that GM has been seeing in Super Cruise and the willingness for consumers to subscribe after the prepaid subscriptions last, can you speak a bit more on the breadth of that consumer demand? And is it concentrated in the higher end parts of the portfolio like Cadillac or is GM seen consumer demand for those solutions more broadly?

So what I would say, Mark, we're continuing to trend at about that 40% attachment rate after the subscription period and we do it differently, right? Other competitors that put the hardware on every vehicle, and they're bearing that cost for us, it's consumers who have purchased Super Cruise, they prepaid for a 3-year period, and we see that in terms of the hardware cost. So we have the deferred revenue that comes with the vehicle and then we have the subscription afterwards we're starting to see escalation in terms of the number of vehicles that are coming off of that 3-year prepaid period, and we're still holding attachment rates in that 40% range.

So we're very optimistic about what that means. And I think that's what I was adhering to in the earlier question of when you look at the ARPU, you've got to really take into account the scale advantage we have, especially as we start growing into SDV 2.0 and expanding that across the -- but Super Cruise is a really strong leading indicator, and we're continuing to invest in delivering more value to customers that we think are going to make that even more attractive in the future.

The next question comes from James Picariello with BNP Paribas.

My first question, just about -- just as we think about adjusted auto free cash flow, how should we be thinking about the GMF? The GM Financial dividends? That was a pretty notable step up at $650 million for the first quarter. And then just to clarify, regarding the EV cash restructuring, of $4 billion or so for the full year. The majority, the remainder of that gets achieved in the second quarter. Is that right?

Yes, James, a couple of things. First, on GMF, we saw an opportunity in the first quarter largely as a result of GMF cash position to step up the dividend from our traditional level. We're not changing the full year expectation of the dividend, so pretty consistent there for the full year. But from a timing perspective, we saw that opportunity and we took it.

On the EV cash charges, as we've laid out, we're going hard and aggressively at the sort of commercial relationships where approximately 90% with those. And we expect to have substantially all of that cash paid out before the end of this quarter -- this quarter being the second quarter. We still have a couple of battery raw material negotiations that we're working through. They're obviously more complex. But those will come in over time as well as we continue to work with our partners. But our goal here is to try to put as much of this behind us as quickly as we can so that we can be focused with our supply chain partners on tomorrow and stop having conversations about yesterday, which I think is way ahead of the expectations that many of our competitors have placed. So we're focused on that.

We also don't want it to be an overhang for cash flow. Despite that, a significant cash outflow that we've seen as a result of those restructuring charges, we were still able to repurchase $800 million of shares in the quarter, and we remain committed to our capital allocation going forward. So I think the team has done a really good job of managing through those challenges and through those conflicts.

Very helpful. And then just on the GMI downside within the guide now, just how should we be thinking about -- I mean, is that order of magnitude, like $300 million of incremental downside? And just how to think about volumes for GMI, the remainder of the year relative to the first quarter? And to that thought, just high-level cadence for adjusted EBIT for the year? Typically, the second and third quarters are the strongest for GM?

Yes. I would say that a lot of that is -- the impact is really being driven by the Middle East. In the quarter, we actually reallocated about 7,500 full-size SUVs that were originally slated to deliver to the Middle East operation under GMI. We reallocated them to North America, partly because of the conflict and the logistical challenges of getting them to market, but also partly to help bolster some of our lower inventory levels here in the U.S. So I think from an enterprise perspective, we're largely mitigating that impact, as we've said. But depending on how long the conflict goes and how long we see challenges in the Middle East, that's what's going to really ultimately determine the pressure on GMI.

The next question comes from Michael Ward with Citigroup.

Just a follow-up on the truck changeover. So you planned downtime for the tooling and the actual change takes place in the second half, 4Q, specifically. Is that right? And does -- is there an impact on the volume in 4Q? Or is that all largely behind you?

Well, I would say as we look at that ramp will start in the third quarter and then we'll accelerate. So depending on how successful we accelerate, there's a tremendous amount of work going on. I'm really pleased with what the truck is from a quality perspective right now. But there may be a small impact, especially since we're running so lean from the current year. It's a good thing, though, that there's still such strong demand for our current generation trucks. So we think it's going to be a pretty smooth changeover, but there could be a small amount of impact as we get into the latter part of the year.

And then just going back to the digital services. I think you said that you expect margins to be in line with other software companies. When will we see those types of margins? I don't know if we're there yet now or not or if they're upfront costs you take. How does that cost/revenue curve look out over the next 2 to 3 years?

Yes. So Mike, this gets a little bit technical. I'll try to summarize it as best I can. But when we sell a vehicle with Super Cruise, all the hardware gets expensed right away. And then the revenue associated with that gets deferred over the 3-year trial period. So that's coming on at a very, very sizable margin because we've already recognized the cost in that going forward.

And then when you look at the other digital services and OnStar, there are some hardware costs, et cetera, that are expensed with the vehicle. There are some service costs that go in. So the margins aren't quite as robust as if you expense everything because there are service costs associated with it, but they're still pretty sizable. So as we ramp up that deferred revenue base and it starts to amortize the P&L at increasing rates, that's where you start to see the impact. And what we talked about, if you go back to Investor Day several years ago. We talked about that having an impact and growing to a point where it has an impact on the overall margins of the company, we're starting to see that take hold, and we see -- we've got a lot of about the potential of what SDV 2.0 and the future improvements to Super Cruise and ultimately, autonomy can do for us when you look at it across scale.

The next question comes from Andrew Percoco with Morgan Stanley.

I want to start on the digital services. I appreciate the added disclosure you guys have started to give here. But if I look at the 13 million or so subscribers that you're targeting by year-end. You've also got, I think, 45 million to 50 million vehicles on road. So I'm just curious, like how do you tap into that 35 million to 40 million other vehicles that don't currently have any subscription these digital services? Is there a hardware limitation? I know there might be some limitations around supervision, but outside of supervision, what's the opportunity to get some of those customers into some of these higher-value digital services?

Yes. Thanks, Andrew. I appreciate that. So I think when we talk about the car park that's out there in the universe of GM vehicles that really is meant to signal the opportunity that exists going forward. So as we continue to put SDV 2.0 and other capabilities, many of the vehicles that are out there don't have the hardware capabilities to be able to deliver that. So we're looking at that growth potential and really sizing the box for the future as we continue to expand that.

So we do have, like I said before, in response to the other question, with Super Cruise, it really is a case where the hardware is on there for people that buy it. As we continue to get the cost down, we can look to potentially approach the market differently on that. But we see a ton of potential here because we're already driving approximately $7.5 billion of deferred revenue by the end of this year with what we have. So it really speaks to the opportunity that's ahead of us.

Got it. That makes sense, and that's super helpful. And I guess, as a follow-up question to that, I think super cruise is available on, I think, 750,000 miles of roads in the U.S. What's some of the gating factors in expanding that? Is it regulatory? Is it your own kind of risk appetite? Just help us think through what some of the kind of gating factors are there.

It really is as the company looks, it's both from -- in many cases, we have LIDAR map with the current system. But -- and it's also -- we've really focused on highway and major roads. And so it's a focus that we continue to look at how we expand. And we -- as you've seen from when we first launched Super Cruise and it started on a certain amount of roads, we continue to expand that over time. So we are now on additional roads, not just highways, and we'll continue to look at the opportunities to do that and making sure we do the technology correctly because one of the things we're most proud of from a Super Cruise perspective is it's viewed as extremely safe and the customers, we're building a lot of trust with Super Cruise as we do that, which I think will also play well as we launch our next generation with the Escalate IQ with the ISO hands-up.

The next question comes from Dan Levy with Barclays.

Paul, you mentioned earlier that some of these commodity costs are staggered and they hit on the lag. So presumably, if cost hold, you'll be facing somewhat of an incremental headwind in '27. I know you're probably not prepared to outline what that -- what the magnitude of that headwind might be to be curious to know. But I'm just wondering, how much do you have in your back pocket on cost mitigation that even if the inflation on these commodities continues to rise into '27 that, that can be neutralized?

Yes, Dan, you're right. It is way too early to speculate on 2027. As we talked about that the pressure that we're seeing right now is a function of the forward curve, that forward curve is going to change 200x between now and 2027. So it's way too early.

But if you think about where we are, and we started to outline this in prior presentations that the momentum we have in '26 and what we're starting with warranty improvement, EV profitability improvement regulatory cost improvement should all continue to be tailwinds in 2027 for us as well. And in addition, we've talked about we basically have stopped production at many of our cell plants to work down our inventory levels, which means we're not capturing the production tax credits that we have in prior years. That when we get battery cell inventory to a normal level, that will get us to a point where we can start to collect those going forward as well as the improved profitability of EVs. And then you look at the product portfolio with the new pickups coming in 2027, end of this year and into 2027, you start to see some momentum, but way too early to speculate. We just -- at the end of the day, we're executing on what we see and planning for future contingencies should we need to do that.

Great. I have a follow-up. I wanted to double click on some of the competitive dynamics within large pickups because I think there's been some attention on one of your competitors that's trying to pick up shares. So I'm wondering if you can help just to double-click within the share dynamics. We know that there is a large skew in the profitability within some of the subsegments within large pickups. Maybe you could just tell us, we see the overall data, but within some of the more profitable areas within large pickups, are you still holding your share? And is that some of those share gains from your competitor are coming at the less profitable areas, and that doesn't matter as much to you?

Well, I think we -- because of some of the issues of ending the year so strong that we were low in inventory and then with the planned downtime we expect, we still had very strong demand for our trucks. And we're not seeing -- I mean we are seeing strong demand across the board in the upside. But we want to welcome every truck customer. I think because of our lean inventories and if you look at some of the incentive rates of some of the competitors. You can see how disciplined we are and still selling every truck that we can. And so I think that's the formula and the recipe that we're going to continue to do is work to earn every truck every truck buyer in a disciplined way because of the strength of our products. So it's across the board.

The next question is from Alex Perry with Bank of America.

I just wanted to follow up a bit on the input cost inflation that you guys are seeing. I guess what commodities in particular, can you remind us where you're hedged? And then are you starting to see any shortages in any raw materials? Or are you concerned at all of shortages if the war sort of persist here?

Yes. Thanks for the question. We vary our hedge levels based on commodities. We're kind of seeing pressure a little bit across the board, as you would expect, primarily driven by higher energy prices et cetera. We're not projecting or worried about any shortages right now. And I think the supply chain team has continued to prove their results through yet another challenge as we've seen them do in years past. So no shortages.

On the commodity side, it depends 25% to 50% hedged. That certainly helped us in the aluminum space this year. But overall, I think it's pretty manageable from that standpoint. We're just going to continue to watch it. I think the hedges and the staggered steel contracts buys a little bit of time to adjust the business, which is why we do it that way. But overall, no real concerns right now.

Perfect. And then could you just remind us on the cadence of the wholesale volumes for the year with the refresh company? Any change to seasonality? And I guess as a follow-up to the inventory question, is the expectation that you'll be able to rebuild some of the depleted truck inventory? And then just on pricing, are you sort of holding that flat to up 50 bps pricing guide for the year?

Yes. No change to our pricing guide. I would say no change to the regular cadence on wholesale across the board. We do have the opportunity, I think, to get a little bit of [indiscernible] deficit on the inventory shortfalls that we've had. We saw some of that come in late in the quarter. that are making their way into showrooms or have made their way into showrooms this month. But we're going to continue to work and try to manage it in that 50- to 60-day range. And the team has done a really good job of trying to make that up.

The next question comes from Chris McNally with Evercore.

I guess as hitting the end of the call, I wanted to think a little bit further out. One of the discussions -- for the first time in a decade, GM is going to have the ability to have more capacity in pickups and SUVs, given -- I think you guys saw it much earlier than everyone else about reshoring. So you'll have both Orion plus Mexico that will still have capacity, not numbers, but more strategic, where do you think GM could theoretically sell more of these higher value-add vehicles? Is it the upper end of the market, lower end of the market, if it not, North America, where you can sell in Mexico and Latin America. But just a little bit about the strategy, '27, '28, '29 at the Orion is done, where could you sort of increase the absolute number of pickups in SUVs that you could sell?

Well, I think we look -- and Paul already mentioned that we shifted some production from the Middle East. Usually, that's a very strong market. So after this conflict in, there's -- I think there's upside there. There's upside in many other markets, not only in full-size trucks, but also in full-size SUVs, both in the U.S. as well as globally, and those tend to run on the higher contented vehicles. So I'm extremely excited about the upside opportunity when we have more full-size SUVs and more trucks to really serve the globe as well as demand in the United States. So it's a huge opportunity for us as that plant comes online.

And I guess the follow-on is around USMCA. I mean I imagine the determination of how much capacity you would want to keep in Mexico even after Orion is done is somewhat dependent upon sort of this next level of USMCA, where I think everyone believe at some point, we'll have some logic where we get back from 25% to something closer to the global import average of 15%. Is that fair to say that some of the stuff is going to have to be live to see where USMCA final negotiations dollar, which is most likely second half, if not even maybe early next year. So we're going to have to wait and see on some of those numbers?

We think -- we understand, and it's a part of the USMCA process that it is updated periodically. We're in that review right now to see how it changes. We think having the appropriate levels around USMCA is very important for the U.S. automakers to compete with the rest of the globe that leverages whether it's other countries in Asia or Eastern Europe, et cetera. From a cost perspective, we've moved several peoples and have the opportunity to build them in the U.S. And we think we've looked at the footprint extremely strategically with the moves we've decided to make. So I think we're going to be well positioned to respond to not only U.S. demand but global demand.

So I think our look at USMCA is not so much of a footprint issue. It's more of making sure it's done in such a way that we can compete with those even though -- and have a level playing field not only with the vehicles -- the tariff on the vehicle, but the tariff on the parts and the underlying cost of those parts. And so that's the work that we're doing now to make sure that the administration and those involved in the USMCA negotiations understand. And I have to say that I think the administration has been very good at having a deep understanding and want to understand what unintended consequences could be. So they further strengthen American manufacturing, not the reverse. So we're going to provide -- continue to provide our input, and we look forward to having USMCA revised in a way that is appropriate to achieve the administration's goals as well as strength in the U.S. manufacturing.

And our last question comes from Ryan Brinkman with JPMorgan.

Could you maybe comment on your operations in China? How far along you might be with regard to some of the product portfolio refresh initiatives? You've talked about on some of these earlier calls, including the NAV push. And then also with regard to some of those operational restructuring initiatives you've talked about and taking charges for in the past. Just trying to look at like the equity income that we see for the quarter, $165 million ability to annualize that? Is that sort of the run rate of profitability your operations are at once they're done with these improvement initiatives? Or where could they get to if you complete that part?

Well, I'm very pleased with the restructuring work that we've done in China. And I think we continue to be one of the -- the only, if not one of the only Western OEMs that is profitable in growing share. in the market. I think over the last few years, we've launched some very important products, including our luxury band that's premium segment, a premium product in the market. So I think we're continuing to work on having the right portfolio, but I also say the software and the services aspects the vehicle as we've launched and the new system that we're launching out across the portfolio, is rated higher than many of the Chinese OEMs when you look at it from a -- if this is an external rating from usage perspective. So I think you can see us moving to have the right product portfolio with the right software and services to be able to continue to grow share.

Having said that, the China market is seeing some weakness. And so we're going to continue to monitor that side. I'm not in a position that I'm going to project what our equity income goals are. We want to see those continue to grow, but it's going to be having the right product portfolio and competing effectively, which I'm proud of the team because that's exactly what they're doing.

And as related to additional restructuring costs, Paul, I don't have any comments specifically on that. I don't know if there's any comment you want to make.

No. I think the team has done a really good job from that standpoint. There's still some final ticking and time going on some of the actions that we've taken, but nothing material that we expect.

Okay. That's helpful. And just as a follow-up, given some of the intent that you alluded to Mary and some of the other unhealthy aspects of the China market with the operate capacity, et cetera, I think exports have been attractive release valve. And just curious if you can comment on your export business from China with regard to ruling? Or what progress have you made there? Are those -- is that a more profitable part of your business in China? And how do you see that potential evolving?

Well, in the markets outside of the U.S., we're -- there already a significant Chinese participation. We have both, I'll say, products from -- that were designed and developed in the United States as well as those from China and especially at some of the price points to meet some of the more price-sensitive developing markets. I think we've seen success of what the right recipe is to have a strong product at the right price point to participate in those markets. So we'll continue to look at those opportunities and continue to refresh the portfolio, again, with products sourced from multiple locations. But I think that is a strength for us.

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

Well, thank you, and thanks to everybody for your questions. I hope you see that we're clearly operating in a very dynamic environment, but that's not unusual for the industry, and that's why we have a multiyear focus to ensure we have the right products the right team and a strong balance sheet supported by healthy cash flows to achieve our long-term goals and execute on our capital allocation strategy, regardless of the short-term volatility or longer-term cyclicality.

To sum it up, we're executing well against our plan, and we've shown quarter after quarter that we have durable earnings, we're growing our software revenue. We're disciplined with our capital allocation, and we have multiple paths to profitable growth. We have strong momentum in the core business, thanks to our broad and deep portfolio of vehicles. We remain focused on delivering 8% to 10% North American margins this year. Our OnStar Digital business, which includes Super Cruise is contributing to high-margin revenue growth. And I'll remind everyone that it's not cyclical. And we're advancing automated driving technology in a way that separates GM from other companies. Finally, we're addressing the near-term cost impacts of higher costs, and we're prepared to respond quickly and strategically as the market continues to develop. So once again, thank you for joining us, and I hope everyone has a good day.

That concludes the conference call for today. Thank you for joining.

Well, thank you guys all for joining again. We're really excited to have one of our keynote panels here. Next up, we have General Motors. Today's Summit is about looking ahead and spotlighting some of the biggest ideas companies are bringing to the table. While the macro backdrop is important, GM is focused on some significant long-term opportunity embedded in its OnStar digital platform, not a new initiative, but one where the scope capabilities and monetization potential continue to expand.

So with that, we're very happy to welcome Paul Jacobson, who joined GM in late 2020 as Chief Financial Officer from Delta, who will walk us through some unique opportunities at General Motors. Paul is going to lead off with a presentation, and then we'll join him on stage for some Q&A following.

With that, I'll hand it over to Paul.

Well, thank you, Alex, and I understand congratulations are in order. So congratulations on your recent wedding, and we're glad you've chosen to spend your honeymoon with us. We're appreciative of that. But many thanks to your wife and make sure you pay her back and owe her for that.

But it's great to be here and really appreciate all the attendance here. I know it's a cold week in New York, but we wanted to use this conference, unlike a traditional fireside chat to actually do a little bit of a deeper dive into our digital revenue. You'll notice, if you've been following us, we've been consistently moving forward in our disclosures around our software business as we've grown it. And that's been very intentional. We wanted it to grow to a scalable number that people can actually see and touch and really interact with versus something that we talked about was going to come and so on.

Because as we remember back in 2021, we talked a lot about what connected vehicles will mean. And I think we're finally here to the point you could start to see that tangibly both in our current results, but also give you some insight into how that might grow. We're not going to give any long-term forward guidance here, but we are going to give you what I think is a really good robust methodology on the variables that matter when they're driving both the growth in deferred revenue, but also the growth in realized revenue as well.

So you may think OnStar and you may think, well, that's nothing digital about that. It's not new. But what it really is, is the umbrella brand for us. It's got incredible brand recognition among our customer base. It's been around for a long, long time and can serve as that halo, if you will, for what the next generation of OnStar can be beyond just the blue button that you're used to seeing in the vehicle.

So let's jump into it. I want to also let you know these slides will be available on our Investor Relations page after this presentation. So you don't need to try to photograph the slides or anything. You'll have them there for download. And if you have any questions or anything isn't clear, the Investor Relations team will be here, obviously, to help out and help bridge the gap where we can.

Over the last several years, we've set a very, very clear objective as have others, about using the connected capabilities of the vehicle and what it means for the next generation, not just for the opportunity to create a subscription or autonomous movement, Super Cruise, things like that, but also how do we get into the second and third owner of the vehicle and subsequent owners. Because if you think about the opportunity that GM has before us, and we'll talk a lot about what selling a vehicle today that is connected, what it means, the real opportunity, if you think 5, 10, 15, 20 years down the road is how do we drive revenue and how do we create opportunities to drive revenue across the entirety of the GM car park in the U.S. and even beyond.

So when you start to look at the ability to collect revenue and to continue to collect revenue years after the original wholesale, you can see where the revenue model actually starts to fundamentally transform because all -- as we know, these software-like margins that are coming in, in the connected business can actually drive and potentially over time, dwarf even the wholesale business, which is remarkably strong and remarkably large. So we're seeing really positive early results. And this is even before we get to software-defined vehicle, as we've talked about in 2028, where the number of services, the number of applications and the number of ways to interact with our customers is even greater than what it is today.

But what it really does today, our go-to-market strategy is really about creating awareness and creating those customer touch points with each and every customer. So what I said is it starts with OnStar, which many people remember is just the blue button that connects you to an operator who can help guide you, can help provide instructions all the way to what is now emerging to the next generation, which is going to be connected intelligence using the intelligence capabilities of the vehicle going forward. But today, OnStar already serves 12 million customers globally, whether it's emergency medical dispatch, automatic crash response, et cetera, all the way up to Super Cruise, as we've talked about before.

So this evolution off the base of OnStar is where we see the biggest opportunity. So that's the challenge just to think about it differently. So this talks a little bit about what that journey has been because it has been 30 years, the heritage brand of OnStar, just really telematics peace of mind, et cetera, to today, where we have more connectivity, can give you engage away from the vehicle, things like remote lock, unlock, remote start, things like that. But what the future is, is that connected intelligence and how do we use the software platform of the vehicle to actually make the driver's experience even better, make their lives easier and use that as an opportunity to further deepen the relationship that we have with the end customers across the board. So we're not just a wholesale B2B enterprise like we've been traditionally and the way that many of you have thought about GM for a long time.

So that ultimately drives all the way up to connected intelligence, lets us use AI assistant voice user interfaces, et cetera, looking for directions, gaming and entertainment, using natural language for adjusting the temperature in the cabin and so on and so forth all the way up to security services, the ability to start your vehicle with a pin or freeze your vehicle for anti theft protection through all the mobile app, through everything that we've got across the board, it gives us these extra platforms to be able to connect.

So what's different today? And this is where I want to spend the bulk of our presentation because I think when you look at the revenue modeling, we've had a lot of questions around where does the deferred revenue come from? How does it actually get realized. So let's talk a little bit about what's different.

Since model year '25, all new vehicles sold by GM come with OnStar basic services. And we give that subscription for 8 years. And there's a method to that because, number one, we're building that relationship immediately, that direct relationship with the customer, giving them reasons to interact with us and giving opportunities to sell them into premium packages, et cetera. The other thing it does is it gives us a natural connection point to the second, the third, the fourth owner that might have that vehicle over that 8-year period in order to take advantage of it. They give us their e-mail, set up their account, et cetera, and they take advantage of that and gives us that opportunity.

But it's not just here's the subscription comes with the vehicle, and we leave it at that. In fact, roughly about 50% of customers are actually upgrading to some of our different packages, whether that's the Protect package, the Connect Plus package or ultimately the OnStar 1. That ultimately combines everything. And with you have Super Cruise, you can put that into it. So people are either taking the 8-year included package, which goes immediately in with every sale into an 8-year revenue deferral or they're upgrading and they can upgrade in a 3-year package, they can upgrade in a month-to-month package, et cetera. And as that revenue is earned on a monthly basis, we actually bring it into the P&L.

So what we're seeing is 25% of our customers are upgrading to that Protect, roughly 25% are upgrading to the Connect and more than 50% of our total paying customers are actually doing the OnStar 1 and bringing that together. So ultimately, what we're seeing is customer choice coming in, driving that value and paying us that revenue into it. So what we've got to do is create that model for sustained revenue growth, both the product offerings, but also that connectivity increasing across the number of vehicles that are driving out on the roads, and that number starts to grow every single year when you include those connected services like basics with the purchase of the vehicle. So you're driving significantly more engagement with every vehicle on the road and opportunities for customers to really drive additional purchases in the future.

And that creates much less churn when you get that basics package as well. So much of the deferred revenue that you see on the balance sheet today is really locked in. It's already been sold, and it is going to come. And then there are opportunities even to grow that realized revenue with more interactions from the customer. In fact, we've more than doubled our monthly active users with the app. It's been a long journey to get there, but what we see is that momentum really starting to take hold. And that's what excites us the most about where we are.

But the important thing is -- and this is the question that finance has to ask is, well, if you're going to give the basic package for free, how are you not going to dilute that base of customers that was already paying for a subscription. And as you can see from this chart, the gray bar represents the paid subscription. So it goes back to the legacy OnStar system. And the dark bar is what you see in terms of the revenue deferrals and what's included in the basic services. And you'll see that the gray bar hasn't changed. It's just we've stacked it on top, which means that the opportunity, the throughput of the paid services isn't changing by virtue of the fact that we're giving some of the basic foundational stuff included in the purchase of the vehicle.

So what that means for us is that gives us that exponential opportunity to grow and what we think we can do over time across the board. So this is the long-term opportunity to convert these prepaid customers to subscription services going down the road. And what you see in Super Cruise, we've talked about this number before, but we had about 35,000 vehicles come off the 3-year subscription of Super Cruise last year, and we converted them to a subscription at a rate of about 30% to 40%. What's exciting about that is there are about 250,000 vehicles that are coming up over the next couple of years. Because remember, the vehicles that are coming up now were just coming out of the chip crisis where Super Cruise was one of our most affected chips that we saw in '21, '22 before we started to normalize in '23 and beyond. So you're starting to see that growth in renewal opportunity come up even more across the board.

So let's look at what the deferral piece looks like. As we mentioned, so when you sign up for OnStar base or when you purchase a vehicle, you're signed up for OnStar Basics, that revenue defers over 8 years. We've already expensed all the hardware of the vehicle. Same is true for Super Cruise that all that hardware gets expensed with the wholesale. So if you think about where the P&L sits against the traditional viewpoint of selling vehicles, we're recognizing all the expense, but we're deferring the revenue that's associated with that subscription. So naturally, that amortized revenue comes on at a significantly higher margin than the vehicle itself. And in a way, that overexpensed hardware actually sort of says you're almost under earning in the current period because you're not getting any revenue associated with what you're selling in terms of the hardware.

So the OnStar basics is 8 years. OnStar 1, if you buy a package subscription is over 3 years. And then Super Cruise comes with that 3-year period originally. So what this stacked bar chart shows you is of the deferred revenue that was on the balance sheet at the 2025, how that amortization schedule looks. And the reason we do that is you can model that going forward as you see the revenue -- deferred revenue growing and ultimately create your own models as to what that can mean for us going forward. Because we've already said that 2026, the deferred revenue balance will approach $7.5 billion. So we have significant opportunity to just grow that deferred revenue, but also importantly, grow the realized revenue over time, which you can see here in that blue line.

The black line represents the deferred revenue growth. The blue line represents what's actually being recognized in it. So as you can see, as that deferred revenue continues to grow, the annual realized revenue is going to grow on a lagged basis over time until we reach a level of equilibrium, and then you'll see that sustained in the results going forward. As we said, the deferred revenue here is also going to be recognized at a much higher margin because, like I said, the costs have already been in.

And the good news is we're doing this sort of on the baseline load of R&D. In fact, our research and development budget is actually down a little bit year-over-year, even though we're diving more into software. So the cost, if you will, to be able to grab this additional revenue or be able to drive this additional revenue is actually really already in the baseline in the foundational system. So this represents what I think is a pretty significant opportunity that still is not fully realized in the value. And one of the reasons why we have said publicly and the Board has taken the positions, we -- despite retiring all the shares that we have, we still see considerable undervaluation in the model as well. And that's why we're continuing to drive our share repurchase program.

So this breaks down the deferred revenue balance by product where you see between Super Cruise and Protect, Connect and fleet services. Fleet is another great area for us. We don't emphasize it the way some of our competitors do. But that is a big piece of this, whether it's telematics, vehicle location, optimization services, et cetera. We have a pretty sizable fleet component within this as well. But when you look at all these services, and you can see the growth in Super Cruise of where we are, both in the realized and the deferred revenue. And that installed base is going to continue to grow.

One of the things I think that's been a challenge is in order to get Super Cruise today, you've got to buy bundled higher-level package starting with the model year '27 full-size trucks and then expanding from there. We're actually going to offer Super Cruise as an option. So you don't have to necessarily buy a more expensive package to get it. And the point there is to try to drive adoption to drive purchase to get more of those Super Cruise connected vehicles on the road. We're also expanding globally, South Korea, Middle East, Europe and opportunities for that globally as well. So I think we're up over 700,000 miles of Super Cruise-enabled roads in the U.S. That's going to continue to move forward. And as we've talked about with the autonomous capabilities of having eyes off in 2028 on the highway and then continuing to grow that in the future to more door-to-door type services. That's the expansion path that we see and not even modeled in what you see today of the deferred revenue, obviously.

So there's a lot of opportunity here. We see this as a really strong growing asset, 13 million subscribers by the end of this year, approaching $7.5 billion of deferred revenue and $3 billion of recognized revenue this year. So we think that this is a significant value driver. You're going to hear us talk more and more about that and as well as roll out more of the product team with the ability to demonstrate where the future of this goes. So we're pretty excited about that because if you only have 13 million subscribers today, and I think there are over 45 million GM vehicles on the road in the U.S. you can start to see where the exponential growth can take hold over the years as we continue to increase connectivity into the vehicles, and we continue to increase those features for our customers.

So I hope that this was helpful. I know it was quick. We want to leave time for questions in the fireside chat as well, but I thought it would be a good opportunity for us to lay that out at this conference and grateful for the opportunity to do so. Alex?

Perfect. Thanks for that, Paul. That was a great presentation. Just wanted to follow up on the digital offering, and then we'll sort of get into the demand environment a bit later. But you walked us through the evolution of your digital offering and sort of pathway towards connected intelligence. What specific enhanced features and functionality improvements are planned for 2026 and 2027 to maintain a competitive differentiation in the market?

Well, I mentioned some of those in the presentation in terms of the security services and the additional sort of enhancement that we're doing to the digital side. So what really, at the end of the day, we've got to have a constant expansion going forward. And that's what the capabilities of the vehicle today are not the capabilities of the vehicle that we're going to see in '28 and beyond. So I think the team has done a good job of continuing to drive that focus. We mentioned some about the safe lock and the ability to be able to use the connectivity of the vehicle to put a pin in to make sure the vehicle can't be stolen or you can shut it down and so on. So that and among a number of other features are on the way. And I think a bunch that we haven't even thought of yet today, and that's where the excitement really comes in.

I wanted to just ask a question on -- I think you said roughly 40% renewed their subscription. Did you do any like studies on why the choice made to renew or what new consumers you thought about not renewing, and that's a pretty high figure to have 40% conversion.

Yes. So 30% to 40% on Super Cruise at the end of the 3 years. We think it's a function of a couple of things. Number one, the 3-year period, the 3-year initial period, I think, is important. It gets people used to it. It gets them lots of opportunity to try it, sample it, maybe get comfortable with it if they're not initially comfortable with what a hands-off driver assist program might look like. And that's a longer period than many of our competitors who in the shorter period, see lower adoption rates. And we think that some of that is actually driven by the fact that people just don't have enough time to get used to it. If it's a 90-day subscription, well, I can't make a decision on whether I -- $30 a month. So 3 years, I get comfortable using it.

When we look at those customers that don't renew, there's a few things that stand out. Number one, they tend to be very local drivers. So they're not doing a lot of highway miles, et cetera. So if you're just driving in your local community, running errands with your vehicle, going to from work, staying off the highways. There's not much of an opportunity to really interact with it. And those customers wouldn't see a lot of value in paying a subscription for it. Rural, some rural owners, et cetera, that may not live in an area where Super Cruise is really prevalent on the roads, which is why it's so important for us to continue to expand that with over 700,000 miles of highways and roads, we're going to continue to improve that capability. And I think there's an opportunity to capture some of those.

So for whatever reason, they just don't use Super Cruise a lot, even though they purchased it upfront. So that's what we traditionally see. What I think is really important about that 30% to 40%, it's held up as the number of vehicles up for renewal have come up. So we're optimistic. The team is working hard to make sure that we can maintain that level of attachment even as we start to double like we will this year, the number of vehicles that come off of their free trial period or prepaid trial period.

Yes. I wanted to talk a little bit about the autonomy strategy and how the autonomy strategy sort of weeds into this. I guess as you transition from the current Super Cruise offering to, I think, eyes off hands-off level 3 autonomy launching, I think, with the Cadillac, Escalade IQ in 2028. How will the company's pricing strategy and go-to-market approach for these more advanced features differ versus the current Super Cruise model? And what incremental revenue opportunity do you see from this upgrade?

I mean I think we see it as a pretty sizable opportunity because the step function improvement in what the capability is going to do with that autonomous solution really changes it, right? Because if you can go full eyes off, you're talking about being able to get things done and so on. So we think the value is there. It's too soon to be talking about how we might price it. We've got to get closer to when we go to market, and we'll talk about that. But I think those features and the additional capabilities of the system really present a pretty remarkable opportunity for us going forward when you -- especially when you start to scale it. So much like this did, it will start a little bit slow because it's only going to be on one model, but we want to make sure we get the integration work done and fully integrated into the vehicles, and you'll see it expand pretty rapidly after that.

And then I guess just a follow-up on that. What specific autonomous driving milestones should investors expect before you get to more of a full eyes off, hands off level 4 type of deployment? Can you just walk us through your autonomy road map?

So we're going to continue to sort of increase our disclosures on that, and you'll hear more from Sterling and the team this year as they continue to make progress and give some pretty clearly defined milestones as to how we're going to ultimately get from here to there. But suffice it to say, the team is working really well. I think -- we talked about some cost inflation, additional costs that we're building into the system this year for additional talent to bring in. So I think Sterling has done a really good job of assessing the team, assessing where the capabilities are and what we need to do to upgrade. So we're making the investments and feel pretty good about the progress that they're going to make.

Paul, maybe we'll kind of talk on growth opportunities. Perhaps internationally, how has this been adopted in some of your other markets? And then maybe if we can kind of talk about the power of AI and could that help your cost structure or advance some of the technology maybe more quickly than your team even anticipated?

Well, I mean, I think for sure, there's -- we're just kind of rolling out more of the global expansion of some of these products and the early returns are good. It's just too small to really scale at this point. AI, I think when you look at it first and foremost, you got to think about how can it benefit the customer and where can you do that? Because we know customers today are increasingly expecting more digital, more software, more capabilities, more of what the car can do for them. And we've got to build that in. And you start to see some of that groundwork being laid in what we're doing here with the connected OnStar system and connected intelligence.

As far as what AI can do in the business, I think just like every other business out there, the opportunities to do things more efficiently, cut down development cycles, drive whether it's overhead reduction or more efficiency, more productivity among the administrative levels. I think there's a tremendous opportunity ahead of us. And I think we're in the process of enhancing a lot of our legacy systems and getting it ready and also deploying AI throughout the organization. Every single one of us as a business leader is challenged to find applications in our day-to-day lives. That's true, whether it's finance or marketing or manufacturing, engineering, et cetera. And I think you're going to only continue to see that grow.

Perfect. I wanted to shift and talk about the current demand environment, if that's okay. So I guess on the surface...

But everybody came to here.

So I guess on the surface, the regulatory backdrop in the U.S. seems quite compelling for you. You have the rollback of many of the emission standards, federal tax incentives, allowing OEMs like yourself to prioritize higher-margin accretive ICE vehicles. I guess can you just talk about how you're positioned to capture these near-term tailwinds and monetize sort of the recent policy change? And then what are the current headwinds in the current demand environment? I guess, potential higher gas prices for longer has been a theme here. Can you just talk about how you're monetizing the favorable regulatory backdrop and then your sort of outlook on the current demand environment?

Yes. I think I don't think you can talk about '26 without spending just a minute on 2025, which really, as you look back on it now, is almost a setup year, if you will. It was a year where we -- just over 12 months ago, we were thinking that tariffs were going to be the end of the business model and the success that we've seen. We didn't actually ever feel that, but that was a lot of the anxiety that I think the market was feeling as well. And what we found is that the auto industry is really, really important to the administration. So even implementing tariffs, they wanted to make sure they can maintain competitiveness. And I think they've found a nice sort of narrow path to do that. Would we rather not pay $3 billion in tariffs? Probably.

But at the end of the day, I think what we've seen is we can adapt to that. we can overcome it and use it as a little bit of a speed bump before getting back on track. And that's what we did. So whether it was the go-to-market strategies, the fixed cost reductions that we did or the manufacturing footprint changes that we made, we were able to offset more than 40% of that tariff, which was ahead of our goal, largely because tariffs were a little bit lower than what we originally forecasted for the year.

And then on the regulatory side, we took some pretty sizable charges at the end of the year to write off all of the capacity that we essentially had to build as a result of where the regulatory environment was going, get us the capabilities to produce 1 million EVs a year. We don't need that. And it's clear for the next several years that EV adoption is going to be lower, the trend line, the growth rate in EVs is going to be lower. And that's okay because I think what it does is it gives us the opportunity to go in and get more cost out of the system. We've got LMR technology. We've got prismatic cans coming in over the next couple of years. So just sort of keeping a relevant volume to make sure that the brands remain relevant and the vehicle models remain relevant in the customers' eyes, positions us to be able to grow that as we get more financial sustainability in those vehicles as well.

So that was a lot of hard work. It's not behind us. As we know, we have a significant sort of special cash headwind in 2026. We are working very aggressively to get that behind us. My goal would be to have all of this behind us by the end of the second quarter. And the team working with hundreds and hundreds of suppliers going in and trying to negotiate these claims and making really, really good progress with it. So I feel good about getting that behind us.

Now when you look at '26, I think I may have jinxed it because I said a few weeks ago at a conference that this was probably the most stable start to a year that we've seen in my 5 here. And -- but I will take credit for saying I don't know what's going to happen, but something will. It turns out we got our something. And so far, I think we haven't seen on the ground in -- at the retail level. We haven't seen any meaningful shift. January was really, really light as we know, but that was as much to do with the weather as anything else because I think nobody was going into a car dealership in the eastern half of the United States for probably 2 weeks because of the mass of weather. We lost a little bit of production at Arlington, Bowling Green, et cetera. But that seems to have normalized. February was right on track. March so far, I think, is looking good. So overall, I think we are pretty much on track with where we thought.

Now if you look at the historical models, usually, it takes 4 to 6 months of sustained high oil prices before people start to think, well, maybe I should go for less mileage or maybe I should buy down, et cetera. I don't think we see that, and we certainly don't see it today where we are. If anything, we're challenged a little bit with low inventory in some key products, particularly like the Cadillac, Escalade and some of the full-size trucks as we retool for the next generation of trucks beginning later this year. So we knew we were going to lose that production.

But all in all, like I said, generally on track with where our guidance is and nothing that we've seen in the sales data to indicate there's any concerns. We hear this drumbeat of affordability. I think it's pretty consistent with what we've been hearing for the last few years, but certainly isn't affecting people's purchase decisions.

And then I'll just close by saying I think GM has the broadest portfolio when you look at price points of any of the big D3 manufacturers and arguably more than most manufacturers. We sold over 700,000 vehicles last year with an MSR or with a base price below $30,000. That positions us really well, I think, in all of the ends of the market. So the fact that we're able to make money at that low end, I think, is a really strong testament to what GM has been able to do and why we are so bullish on our portfolio because we think it has a sustainability to it through various iterations of the cycle.

That leads me into -- GM has generated extremely healthy cash flow over the last several years despite tariffs and COVID and the like. How is the firm prioritizing capital deployment across CapEx, new tech initiatives, new dividends, share buybacks? And we've got a lot of credit investors that came to the event and GM is a very important kind of part of their portfolio and balancing all that with your solid investment-grade ratings.

Yes. Well, for the fixed income investors, I know GMF is a serial issuer. Sorry, but not sorry that we're not issuing as many GM bonds because the company is doing incredibly well. We will have a couple of refinancings in all likelihood over the next couple of years. But being a legacy treasurer guy myself, I actually enjoy not issuing a lot of debt. That's a good thing. So especially against some of our history.

But I think if you look at all of the metrics where we are, the one I'm probably the most proud of for the organization is that free cash flow because what that represents is really the lifeblood of performance because free cash flow and ultimately, operating cash flow actually allows you to build the foundation for the future to continue it. It's one thing to have a great portfolio that doesn't generate a lot of free cash flow. You can't sustain that in the future. You can't invest in the next generation and the next generation. So what you end up doing, as we've seen some of our competitors do is cut a lot of content out of the vehicle and make the vehicle overall less desirable for consumers because you're trying to cut costs to maintain that level of cash.

And I think we've been able to do it with a very different nontraditional go-to-market approach. We talk about a lot about inventory discipline and incentive discipline. That translates to over $3 billion a year of additional like-for-like revenue performance versus our competitors, which goes straight to the bottom line and a big reason why we've gone from a legacy of generating about $3 billion of free cash flow to generating $10 billion or more for the last 4 years.

How we prioritize that is, first and foremost, like I said, we've got to invest in the business. We've got to maintain a portfolio advantage. We've got to maintain our ability to deliver value to the customers because that's ultimately what's driving our retail sales and where we see continued room for improvement and evolution as you've seen through the connected services and what the vehicle can do.

So it starts with that. We're taking that up a little bit from where we've been for the last few years from $10 billion to $11 billion up to $10 billion to $12 billion for '26 and '27. And that really is continuing the base level of product investment, but also adding some of the manufacturing footprint changes. So we're really good, I think, as an organization at prioritizing and making the right trade-offs for the organization. I will tell you that there are a whole lot more than $10 billion to $12 billion of ideas, but it's that discipline. And what we talk about internally is capital budgeting is a function of 2 variables, not one. Most people think about it as, well, can I afford it? Well, we can afford to invest more. I mean we're generating over $20 billion of operating cash flow. If the right answer was, let's invest $15 billion to $16 billion of CapEx, we could do that.

The second question, though, is what the gating item is, is every time you take your CapEx budget, you've got to hire more engineers, more supply chain, more logistics, acquire more real estate, get more tooling, et cetera, to make that capital deployed effectively. And when you think about the fixed cost that you have to add to the system, that's what starts to impact the margins. So we've struck this balance of saying with the assets and the resources that we have, what is the amount of capital that we can invest reasonably and make sure that it works and then we can deploy it successfully. And that's where we get the $10 billion to $12 billion. So it's a matter of prioritizing those ideas.

The second priority is the balance sheet. And the balance sheet is arguably probably never been stronger or it's been a long, long time since it's been as strong as it is. The pension is nearly fully funded. We have a little bit of a deficit in the salaried plan. There's no real priority to go in and fund that other than to keep it kind of at 80% or higher. I think it's sitting around 86% right now. But the hourly plan is nearly completely fully funded even after the negotiations of '23. And we have a really good asset management team that is ensuring that we derisk that for the future.

So the balance sheet is strong. We just met with all the rating agencies. We do that twice a year regularly to go through the business, but then also have a very good relationship with them to talk about initiatives and how the year is going. I think they're generally fairly optimistic with how we've navigated tariffs and where we sit today. Iran obviously, will affect their view, but it's hard to argue with the type of consistency and the performance that we've had.

And then lastly, it comes back to distributing and returning capital back to shareholders. We've chosen buyback as the vehicle of choice because we think we're still undervalued. We're undervalued against our historical context. We're undervalued against industry peers even if you change the industry peers that you should be compared to as we think we should. But despite the fact that the stock has gone up 50%, we -- or has doubled, sorry, we still see opportunity there to continue to drive that. In the meantime, we're continuing to use some of the savings of the dividend from the fewer shares to raise the dividend and make the currency even more valuable for our investors and reward them for the long term, while at the end of the day, we have these initiatives in place like connected services where we see can fundamentally transform the P&L.

Right. That's great.

Perfect. I think we will have to leave it there. We're right at the 40-minute mark. So we want to thank Paul for an excellent presentation, and thank you all for joining. So thanks again.

Thanks for your time.

And I'm thrilled to have the folks from General Motors here today. Paul Jacobson, CFO; and Ashish, I can't see you with these lights. He's here someplace. Paul, thank you. I don't know if you want to make any opening comments or...

Well, first of all, I'll just start by saying thanks for having us. It's great to be down here and great to see a full room. I appreciate everybody coming in. We're obviously really excited about the GM story as we've been for the last few years. And I think heading into 2026, I've shared with several people that this feels like the most stable year of the last several.

The famous last words.

But something will happen. I don't know what it is, but something will happen. And I think as a team, what we've really done over the last several years, and I think has been a great story of our resilience is just focused on overcoming obstacles. It's a team that is focused on achieving our objectives, and we're doing it with more discipline and really looking forward to more of that in 2026.6 weeks into the year, it's pretty consistent with what our expectations were that we laid out. January, which is a tough month anyway, was made really tough by 1.5 weeks of weather where basically nobody in the country was going out at all. But overall, I think we're encouraged about the share numbers and kind of how we've ended up generally in line.

It seems like the tariff environment is getting more stable, and we're getting more realization. And as we talked about $3 billion to $4 billion of tariffs this year. That's manageable for us. I mean we overcame that last year. And I think as we start to get towards the end of this year and start to bring online some of that manufacturing capacity -- domestic manufacturing capacity that we've added, we'll start to hopefully see that number come down and work through that. So lots of things that are moving forward. We've got the launch of the new trucks this year, which will obviously be a big piece as we get to the back part of the year. But it feels good.

We've got to work through the cash component of the special items. I know that was a big concern among investors on the call. And I think we'll do that. But overall, our capital allocation priorities remain the same. We're going to invest heavily into the business. We're going to maintain that strong balance sheet. We're going to return cash back to our shareholders and really distribute that in a good, balanced, consistent way. So feel good about where the year is going.

Well, that formula has certainly worked over the last 2 years. As you know, Paul, I've been following General Motors for over 40 years. And there has been a huge change in the culture of General Motors. And I always like to quote one of your predecessors, and he would say, "yes, yes, we're working on that." And they never worked on it. There is a -- I call it the culture of execution. And I think GM is a very different company today than it was even 5 years ago. And I attribute a lot of that to Mary and to yourself because you've changed a lot the way you look at things.

I wonder if you could talk a little bit about some of the changes that have been made in the decision-making process. Just last year and everything that took place, I don't think the old GM could have done it. And I think it really gets down to that one simple point, the culture of execution, making decisions, being proactive. I wonder, am I just dreaming that? Or is that something that's actually taking place within General Motors?

Well, I think when I arrived in December of 2020, I think it was a different company than many people kind of told me about it. I'd had advice, you don't want to go into the auto business, it's slow and so on. But when I got there, I saw a team that was moving really, really fast. And I think COVID taught a lot of companies a lot of things. I think it taught GM a lot about itself and the ability to be able to move quickly, to be able to react and to be able to survive that level of adversity is a pretty strong statement.

And what Mary has done is built an incredible leadership team from people inside the company and people outside the company, bringing the best of that GM culture, tradition, brand, cache, all of it designed with different ways of thinking, different ways of thinking about finance, different ways of thinking about technology and software and so on. And I think it's that group that has really gelled together across the company.

I think COVID and the chip crisis and everything that's happened since then has given us a lot of confidence in ourselves to be able to think, to be able to be nimble, et cetera. And what we've tried to do is take all that and set the organization up to be dynamic. So we're carrying 30%, 40% less inventory than we used to carry. That allows us to move faster, be able to respond to consumer needs faster, be able to respond to the market faster.

We're focused on cash flow and margin, not just market share and volume. And that's a huge driver in terms of what you've seen in terms of our ability to drive free cash flow from where we've been 10 years ago to where we are today and to be able to do that consistently through this adversity, I think, is a huge badge of honor. And all that credit really goes to Mary, her leadership and everybody working together.

Yes. She's got an incredible ability to have the executives put their egos aside and work for the better of the corporation from what I've seen.

Well, it's 100% about the enterprise, and it's about making sure everybody thinks about and what we talk a lot about is share buybacks and so on and even people in the company. But what it's really about is cash generation to be able to fund the future. And that's what we've got. You've got the probably arguably, I haven't been there long enough to say this, but arguably the best portfolio we've ever had. We're adjusting through the massive regulatory swings that we've seen over the last 3 to 4 years, but trying to find that way through the middle to be able to meet customers where they are. That includes ICE. It includes some EVs as well. And we've got to focus our efforts on continuing to drive EVs towards profitability while harnessing that ICE portfolio.

You touched on inventory. And in your presentation, I guess it was last September, over in the U.K. you had a couple of really interesting charts, and you were talking about how lower inventory affects the entire organization, but most importantly, cash flow. How does it affect cash flow? And what types of capital have you been able to free up?

Well, I mean, I think you -- first of all, you got to look at getting full value for the products. And I think a lot of the history of the auto industry has been focused, not unlike my prior industry, which was focused on marginal cost economics, right? The next vehicle you can produce has a really low marginal cost if you can just run it through the factory, therefore, produce it and discount it, sell it. The challenge is that starts to erode all the brands.

When you've got premium brands that you're heavily discounting to drive that extra unit of sales, then you lose that brand value. So when you look at what we've been able to do with taking a more disciplined approach to inventory. So we're not just trying to push volume and focus on the brands, you see an industry dynamic where we're discounting roughly 200 basis points less than the industry average. And that's been true while others have gone in and announced sales to try to drive share or they've been on the wrong side of an inventory curve. That's a very different way of thinking. But it's one that if you look at all the really powerful brands, not just in autos, but across the world, they recognize where that brand value is.

And I think what that's done is probably driven about $3 billion to $4 billion of just straight better cash performance to the bottom line of the company. by recognizing that value and not just trying to push more vehicles out the door. So that discipline really does go through it. And I think we've got really good stewards of the brands where we are and great dealers that are helping to accomplish that as well.

And the dealers have bought into it?

Yes, yes.

Has it changed from order to delivery time? Has that come down? And is there more to go? Can you free up more capital by getting increased efficiencies?

Well, I think interestingly, we saw this during COVID and especially during the chip crisis that customer satisfaction went up despite the fact that they might have had to wait a couple more days or a week to get their vehicle. And the reason is, historically, you'd walk into a dealership and you'd look at the vehicles that are on the lot, they might have 85%, 90% of what you want. But at the end of the day, that's the inventory you built from. And if you wanted to drive away, you took those. Now what people have realized and the chip crisis did this is if I just wait a really short period of time, I can get exactly what I want. So we've seen customer satisfaction go up over that time period as well.

So I think it's a strong indication that this is sustainable in a way that historically it wasn't. Maybe we don't have an 18 plus million units SAR, but I'm not sure that, that's a bad thing. If we try to take out the peak and that -- the benefit of that is that the trough is much, much shallower than it used to be, that's a win for us and I think a win for the industry.

Yes. If the autos become less cyclical, that would be really good.

Yes. And what we have to do is we have to focus on -- we'll never take cyclicality out of the business, right? That's fine. But what we can do is we can eliminate self-induced cyclicality. When you go into a down cycle and you're sitting on 100, 120 days of inventory, you are chasing the falling knife, right? Meaning that what you're trying to do is you're trying to stimulate more demand while you slow down production against this wall of months of inventory that you've got to work through and you're cranking even more vehicles into that slowing demand, it becomes self-fulfilling, and that's what causes the trough to deepen.

No question while we're on because the trucks are so important to General Motors. In years past, what GM would do is they build up inventory heading into a truck change. And then they shut all the plants down at the same time. And of course, they'd have to discount the trucks because everybody is waiting for the new ones.

It looks like some of that is coming into this truck change coming up because it's crucial for General Motors. It's a big number. And it looks like you've already started doing some of the work at the plants, inventories down. Does that put you in a better position to kind of weather this next 6 to 9 months, keeping it a little more stable with the trucks? And is that a conscious effort?

Yes. I think everything is going to be more stable when you're operating from a base of less inventory from that standpoint. So we are retooling and focusing on bringing those next-generation trucks to the market. I think one of the things that we've talked about that many investors are looking towards and asking about is, are we going to see a big spike in price. And I think if you look at the historical models and the heuristics, that usually was driven by the fact that pricing by the end of a cycle had dropped off and tailed off pretty significantly.

We've seen pricing on all of the vehicles hold up much, much longer. So I don't think it's a big spike. I don't think that there's like massive price increases coming. I think it's just a matter of kind of working through that and transitioning to the new vehicle. But we've got really strong demand for our trucks, and we're looking forward to that new one coming out, too.

One of the topics, onshoring. What are some of the puts and takes? When I think about it, one of the risks is as you put investment into the U.S., a new administration comes in and they say, let's go back to the old way. Let's open up whatever it is. What are your thoughts on onshoring and some of the puts and takes? And where does GM stand on that now?

Well, I mean, I think the obvious ones are you're trading off tariff expense for higher labor costs for sure. That's not a terrible thing if at the end of the day, you've got a policy that is rewarding that level of investment.

Labor cost differential, like Mexico, U.S. is $1,000 a vehicle. Is that about ballpark?

We -- it's in that general area, right? When you think about that. maybe a little bit more. But at the end of the day, when you're putting a tariff on top of it, it's not. So we've got to create balance. And I think when you look at USMCA, you look at Canada and Mexico, hopefully, everybody can find alignment on the right thing to do because as a trading block, I think that's really important from that standpoint.

But at the same time, bringing production into the U.S. is also addressing one of those things that we've really seen over the last 5 years, which is geopolitical and global risk, right, whether it was the pandemic affecting different parts of the world at different times, we need to have a little bit more diversity and a little bit more bringing things closer to home to help have some more control of that. So I think overall, it's going to be more stable for production.

We also will get a little bit of incremental production out of it, that will give us levers to be able to respond if we need to. So for example, we know at Arlington, the full-size SUVs and the Escalades, we run all out, right? We've got a little bit of additional supply that we can...

Make some money on those.

And we're doing okay in that space. So might make sure that we strike that balance, but we can sell every SUV we make out of Arlington. So that capacity will be a nice relief for us.

One of the other big cultural changes I've seen, not just GM, in the industry in total is 20 years ago, if you were to survey suppliers, they hated GM, they hated Ford. You have a much tighter relationship with the supply base. And I think the latest example is the BEVs, and you touched on some of the reimbursements, cash reimbursements. In the past, that wouldn't have taken place. What kind of positive feedback were I doubt negative from the supply base? What are you hearing from them as it relates to this?

Well, I think our team led by Shilpan Amin, Jeff Morrison team do really an outstanding job with our suppliers. And if you look at the volatility that we've seen, whether it was chips or Nexperia or all that, we've tended to work through that in a much more consistent way. And I think that's in part driven by focusing on that partnership and trying to find solutions that are mutually beneficial. I mean we want the value chain to be the most valuable value chain. And those relationships are very, very important.

So making sure that we try to find that balance between the uncertainty and the planning that's required to be able to do what we do. So there are many areas where suppliers have done things based on our projections that just haven't come true. We need to figure out what's the right balance in order to cover that. And we -- that was a big reason why we did the charge the way we did was to try to get it done quickly because we want a supply chain that's focused on tomorrow isn't focused on you need to make me whole for last year.

So it's -- I think it's a little bit of a different approach. And we've still got a lot of work to do to kind of work our way through that. But the team has made really, really good progress since the end of the year. And our objective is to get this behind us as quickly as possible because we understand the uncertainty that -- and the overhang that, that creates. We just want to work our way through it, focus on execution, as you led off the conversation and move on and start worrying about tomorrow.

Some in the media think you're getting out of EVs. That's not the case at all.

No.

And it's -- you still have a lot of product coming on that front. So where do you think EVs go from here? I kind of look at California and say California is at 20%. That's probably a good guidepost of where we're heading as an industry. Whether it takes 3 years, 5 years or 10, it doesn't matter. Is that the way you think of it?

Well, I mean, I think a couple of things. Obviously, the $7,500 consumer tax credit was like a reset button on demand. But I think getting to a more natural demand state is actually healthier for the products and for the consumers as well. We saw a lot of really irrational behavior last year, 60%, 70%, 80% incentives on vehicles. That's not a business model that is built for sustainment. That is a business model that's built to acquire regulatory credits. So you had this mismatch between the carrot and the stick, the stick being the regulatory penalties and the carrot being, let's give some consumer benefits.

I think what you've got now is a more consistent policy, and there will be people that will agree with it and won't agree with it. But what it does do is it actually creates that natural demand. So EV demand wasn't 0 before the IRA, right? And it won't be 0 after. We're trending around that 5% to 7%, which is kind of what we saw going into IRA. We do believe that EVs are going to continue to grow and they're going to win just because of the technology, the capabilities of the vehicle as well as EV charging infrastructure expanding and so on and just what we see from customers who buy an EV. About 80% of them say they want to buy an EV again for their next vehicle.

So our job is to continue to say in a more rational, disciplined environment, can we put products out there that are competitive and profitable. And that's what we're working on. So we're still investing, but we're not investing in product proliferation. We're investing in making the vehicles better performing at a lower...

And you're more flexible on the manufacturing side the more they're produced.

Exactly. Exactly.

Are all the regulatory issues resolved on all the different -- the reason why people are chasing the credits, has all that been resolved through Congress yet? Are we still waiting on any piece?

So we saw CAFE get zeroed out last year, which we took a charge for that. The EPA just ruled overturned the endangerment finding. We know that. We expect that there's going to be more work to do beyond that, whether it's going through potential litigation or going through the regulatory framework of saying, okay, now what does that mean? But I think the administration has been pretty clear about trying to deregulate the industry.

Now we still have the federal versus the state. So we're doing our best to try to navigate that. And that's another reason not to really abandon EVs because we might see that change again. So let's spend some time, let's spend some capital investing and making that sustainable for the long run rather than completely swinging the pendulum too far in either direction. And that's where that balance is.

And that's important. For this year, at least, it's a positive when you look at incremental year-over-year.

Yes. It's a positive in that we're bringing down our losses. But last year, as we said, was a really challenging year because it was constant resetting of the demand curve. And that constant resetting is what creates a whole bunch of frictional costs that accrue to us last year. So we know we can do better this year.

The -- it's kind of gone under the radar, but the numbers are starting to get meaningful on the software and services side. And what is GM doing with that? And how big can it get? I know you have aspirational goals. How big can it get? And what does that mean as you look at the organization from an earnings/cash flow standpoint?

Yes. So I mean, we talked about this, and I still hear about this a lot, but we talked about this at the 2021 Investor Day, and nobody really believed it. So there was a lot of commentary about where Cruise could go. Cruise, we folded it back in. We're focusing on the retail and the consumer applications rather than robotaxi. But we had embedded in there a lot of different software revenues coming in. And we're probably a little bit behind on that, but we are certainly making the progress that we said we could.

And you look at the level of deferred revenue that we've got on the books, you look at the deepening of the customer relationships, whether it's through OnStar or it's through GM Rewards and the new card platform, we're getting those attachment points to the retail customer, and that's the basis for growth. I mean, ultimately, we need to get to a point in the business where we can drive just as much profitability, if not more, over the long run from the car park versus just producing and wholesaling vehicles. And I think that's the seismic shift in what digital can do, whether it's in an EV or an ICE vehicle going forward.

So we still believe in that. We still believe that that's the future. We'll start to see that rolling out when we get software-defined vehicle 2.0 in place, which we talked about at the GM Tech Forward event last year. And the team is doing a great job of hitting those objectives. Now what do we do with it, right? We've got to go figure out the commercial applications and the ways to drive value to the consumer. But there is a huge untapped potential that when you look at a 7x multiple that's not built into the valuation. So that all feeds in.

I know this is a long answer, sorry, but it all feeds into what we've been doing with the stock in terms of buying it back. I mean, despite the run-up that we've seen, we still see tremendous value in the stock based on how much cash we're generating and what we think our forward growth trajectory.

In the cable industry, they used to say that the cable has the pipeline to the house. And look what it's done between the TV, the content, the telephone, the Internet and everything else. The autos are a platform of communication. And is OnStar the pipeline? Is that the key to getting inside the vehicle, software-defined vehicle? GM has got a huge leadership globally in that.

Yes. Well, I mean, when you think about the legacy and the history of OnStar, combining it with the new technology and where AI can take it and then you talk about the relationships that we have through GM Financial, there's really deep ties to the consumer base there that I think gives us that avenue. The technology will look really different in the future. We know that. It's already starting to take shape. But yes, it's that foundational relationship that we need to continue to invest in.

Is there a place that we can find the deferred revenue or just wait for your -- or is it published in Qs or Ks or any?

Yes. You can see it in our financials, but also we're now talking about more mainly because it's reached a scale where I think it's meaningful. Honestly, if we had talked about this 3 or 4 years ago, I'm not sure anybody would have paid attention to it. So what we really wanted to do is just kind of go in and focus on fixing it and driving that type of revenue and then kind of reveal it out. Now you see the type of growth that we're seeing in that deferred revenue and what the margins are doing when you bring that level of revenue recognition that you're building at software company like margins. It's not going to take long for that to add up and to have a real meaningful impact on the overall margins of the enterprise.

That's certainly what it sound like. You mentioned AI. And I know that's a widely used phrase, but I kind of look at the auto as an incredibly capital-intensive industry. And inventory alone, if you look in the U.S., you got about $150 billion of capital tied up in inventory. How low can it go? I mean your proof that it can go lower. Toyota for years has been way low. And is that where your target is to get inventory down? You have the trucks, so that kind of distorts it a little bit. But you have more room to go. Can AI help you make that process more efficient? Can more computer technology in that regard shorten that lifeline from the order to delivery to paying suppliers?

Well, I mean, I think the short answer is AI can help everywhere in the company. I mean, all the way from consumer-facing to how do we use AI to improve the experience for the customer in the vehicle with what it can do, all the way back to the finance function, HR, manufacturing, assembly, everything. And that's where we see great potential. So we're doing a bunch of investing right now in our finance architecture to get to much more real-time data and being able to really focus on what we see. I think we do a good job of that today, but we do it with brute force, right? And we've got to go find and drive that efficiency to be able to do it faster and glean insights.

On the manufacturing side, absolutely, whether it's process, this is really complex and having the ability of copilots, if you will, really helping you along and helping you to troubleshoot, find opportunities, that's going to make it more efficient, whether that's inventory, whether it's manufacturing process, whether it's time, speed, quality, we think there's huge untapped potential here.

Less cyclical and less capital intensive would be a big deal for autos, and I think ultimately helps.

And throw higher margins in and you've actually got a really good consistency.

Might actually sell at 7x earnings.

Maybe 17x, 20x, 70x, we'll see.

GM has done a great job. I think you gained share in the U.S. 4 straight years. And when I look back over the last 20 or 30 years, GM spent a lot of time making products that no one really wanted, midsized cars that they were turning to the Japanese brands. When I look out over the next 10 years, I think one of the things is the entire investment world is ignoring is the impact of the millennials and Gen Z on our overall economy. And in the auto industry, in particular, the impact will be greater than the baby boomers in the '80s. And one thing I know about the millennials and Gen Z is they're early adopters of technology. How does GM position itself to capture them? I mean they love your trucks. Will they adapt to this technology? Are they going to buy into it 100%?

Well, I mean, I think it's more than just the trucks. I think you have to look at that whole portfolio, and it starts with the vehicle portfolio. We have, I think, the broadest array all the way up from the Cadillac, Escalade down to the Chevy Trax, right, at just around $20,000 price tag. We sold 700,000 vehicles last year under $30,000. And historically, that would have been big money losers, big loss leaders in the company. We're making money on all those vehicles. And that's a huge testament to what the engineering design and manufacturing teams have been able to do. And I think one of the most unheralded aspects of what we've been doing in that success.

The reason that's important is you need to build that loyalty up from the ground up. So there aren't a lot of Gen Zs or millennials that are buying Cadillac, Escalades or GMC Denali Yukons, but they're going to work their way up there, right? So if you can surprise and delight them with technology as they're working their way up the pricing curves and value curves as their income goes up and so on, their families get bigger. That's a huge, huge leg up because many of our competitors kind of abandoned that sector thinking they could never make money doing it. And we've seen great growth there.

Is -- are your foreign partners key to that, Japan, Korea? Or is that where you have the most effective...

Yes. So we manufacture some of those vehicles in Korea, and there's a real cost advantage and one that we've been balanced even with the tariff to pay there to make sure that we can still do that, and we still feel it's the right thing to do. At the same time, we're onshoring more of this capacity as we've announced with the $5 billion of investments, both in the next-gen V8 technology, but also in vehicle assembly. So overall, it's part of that balanced approach to be able to deliver the product set to all customers at all points.

Do you want to take some questions?

Sure. Anybody have any questions?

Just curious on the EV penetration and growth. How far is GM in terms of cost parity with ICE vehicles today? We thought a few years ago, we were going to be there already by now. And clearly, the cost equation will impact the demand side. So whether it's a percentage or in years?

And then secondly, kind of which of the components is it batteries really that's kind of preventing you from getting there relative to Tesla and other kind of pure-play EV providers? I'm really intrigued by the demand side of the equation. But if cost comes down, presumably, you'll be incentivized to promote EVs even more if it's more profitable.

Yes. So I think it's a combination of a lot of things. Certainly, the cost of the battery and the cost of the vehicles is higher, right? And we're working on technology to do that. When you look at the work that Kurt Kelty and the team have done with LMR and getting to the -- switching to the prismatic, it's going to save us a lot of money at the pack level, thousands of dollars per vehicle that will help us for that next generation of electric vehicles.

I think it's been commercial, too. It's been really difficult to go in and establish some level of consistency in pricing. We've done that. I think our pricing has been more consistent. Our incentives, as we talked about being 200 basis points below the average, it's far greater than that on the EV side because we haven't wanted to get into that, let's crater the brands for regulatory purposes. But that backdrop, when people are offering $99 leases and so on, it's really difficult to try to grab that foothold. And I think that's where more rationality is going to help.

And then the last piece of it is scale, right? We were scale to produce 1 million vehicles a year because that's what the regulatory environment was setting up to require us to do. That's the -- that was the bulk of the write-off was going in and saying, okay, we know that the demand curve is going to be much flatter. It's still going to grow, but it's not going to be growing to 50% by 2030, which is what the regulatory environment required. So we were never going to make a lot of progress against that backdrop of carrying twice as much, 3x as much, 4x as much overhead as we needed. And so while I don't love to write off capital, it was the right decision to be able to do that because the game has changed, right?

And so what we've got is now there's still a big gap between ICE and EV, but we've got the pathway to start to take costs out in the thousands of dollars. We need scale, right? We're going to have to have that in every vehicle that we do and do consistently. That's going to take a little bit of time. But what we -- I think what we've done is really aggressively gone in and stop the bleeding because like I said, last year got worse, not better in terms of profitability because of that choppiness of the demand forecasting.

So that was -- let's hit the reset button, let's focus on where we are going forward. And I think that consistent framework is going to give us a path to be able to do it. It's going to take some time, though, especially if we see it kind of hovering around 5%, 7%, 10% type penetration. It's going to take some time to get there.

Any questions? Harold?

I'm the European auto analyst at Citi. Just the resilience conversation, I thought was really interesting, right? Because the auto industry, both the geopolitics, tariffs, supply chains, DRAM, the amount of change we've seen over the last 3, 4, 5 years has been unlike any change we've seen previously. How much progress do you think you've made? How much more resilient is your business now? And what other risks do you think there might be out there that you might lie awake at night about where there are still vulnerabilities that maybe we didn't or we didn't sufficiently think about previously, right? That's really where I think a lot of this is coming from.

Yes. Years ago, I remember being in the boardroom in my prior life, and there was a big disruption that happened and a Board member asked me one of the best questions I've ever heard in the boardroom, which is tell me what you're doing to prepare for the next time that happens, understanding that next time is going to look completely different than this time. And it took me a while to understand that, but that's really been what the last few years have been. And I kind of said, tongue in cheek, the year is starting off stable. I don't know what will happen, but something is probably going to happen. Let's be ready for it.

I think you look at the reactions of many of the OEMs after the election. We saw a lot of people running around, not knowing what to do. We talked about chaos and so on. We went to work. We had a playbook because we've really sort of learned from COVID and the chip shortage. Let's just figure out what the situation is giving us, how do we work our way through it. So we had that tariff playbook done before inauguration day. We knew what we were going to do. We didn't know every single decision, but we knew what was going to guide it. We knew there were easy, no-regret decisions like we made to increase the throughput at Fort Wayne to take out some of our manufacturing and fixed costs to start thinking about go-to-market and so on. We were on top of that really even before the tariffs were announced because it was something that the President campaigned on, right?

So you can act surprised or you can just go to work, roll up your sleeves and figure out how to get through there. And I think that's some of the lessons that we've taken through COVID, chip shortage, et cetera, that we apply every day. Like I said, it's easier to do when you have less inventory in the system because you can just respond much more quickly.

So I'm incredibly proud of what the team has done. I've got confidence, and I've said at an internal meeting that we had that we've got we've got the market focused on the most important risk there is, which is execution risk. I want the market betting on the management team and the people of General Motors. And the way you do that is you prove you can execute through that. And we're starting to see that. And it's creating that momentum effect that is really, really important for an organization and for an enterprise to see. And we've got to make sure that we can keep that up.

Questions out there? Execution is the biggest change I've seen at GM over the last 40 years.

Yes. All credit goes to Mary, Mark and the team.

Yes. Mark, too. He's an execution guy.

Yes. He's created a pretty amazing portfolio.

We'd be remiss if we didn't touch on share repo, your strategy and what you're thinking about where it goes from here. You've been very successful at buying your stock at extremely low prices. I'm guessing the average price is somewhere around $40?

A little higher than that. But yes, we bought a lot back when it was in the 30s.

Including personally.

Including...

Yes, you did. Yes, track is insider buying, you get a pretty good tip on GM.

That's too much pressure, and I'm not allowed to make investment recommendations.

Yes, that's true.

No, look, I think at the end of the day, our shareholders have been really patient with us for a long time, and it's good to get this balanced approach. This capital allocation policy isn't something new. I think we're probably focusing more on it these days and creating that discipline and that constraining the level of investment. I think we, interestingly, no longer get asked about when CapEx is going to go back to the $8 billion level. And hopefully, we've sort of successfully slotted that away because, number one, $8 billion then isn't $8 billion today. It's closer to $11 billion today.

We've been remarkably good stewards of that capital. We could invest a lot more. We can afford to invest more, but we're focused also on long-term margin performance. And I don't -- we don't want to have to hire more engineers, more supply chain, acquire more facilities and more space that's going to drive up our fixed cost to be able to deploy more capital efficiently. So that's where the balance comes in. And I think it's done really well.

The Board is still very enthusiastic. While we've seen a little bit of movement in the multiple, I think that's been an industry lift. more than it's been GM. You still see us discounted against peers that don't perform as consistently as we do. And as a result of that, I continue to believe that the rational market is going to puncture through that. And in the meantime, we're just going to keep buying shares back from that standpoint. They're undervalued.

Yes, they are. Any questions?

Recognizing that if you ever had a CFO up here saying their stock was overvalued, it probably might be the end. But I really believe it.

Anything else? All right. If not, Paul, thank you. You're the person. I've always appreciated you.

Thank you. Thank you all.

Well, thank you so much for coming back and staying with us. This you won't want to miss. So it's my pleasure to introduce our next session, managing transformation in a dynamic environment. [Operator Instructions] I'd first like to introduce our moderator, Mike Colias. Mike is the U.S. Auto Editor for Reuters. He's long covered the auto industry and for the Wall Street Journal and Automotive News, and he's the author of a 2025 book, Inevitable: Inside the Messy, Unstoppable Transition to Electric Vehicles. So he's pretty ideally positioned to lead today's fireside chat with GM's CFO, Paul Jacobson.

And speaking of which we are tremendously honored that Paul has decided to join us. He's a well-known around Detroit and in the auto industry since he joined General Motors in 2020 as the Executive Vice President and CFO. He's established himself as an exceptional leader on GM's executive team, demonstrating a remarkable financial stewardship during some very unprecedented business and industry challenges.

From navigating the post-pandemic supply chain disruptions to orchestrating GM's strategic pathway to EV profitability and tariffs and what we can all agree has been a very uncertain policy environment. Under Paul's guidance, GM has delivered impressive results in 2025 with robust earnings and a strong outlook. We are again thankful that Paul has agreed to join us today to share his insights.

I'll bring Paul up for a few remarks, and then Mike will join him on stage for the Q&A.

Well, thank you all. I was having to look around to figure out who she was introducing because none of that sounds like me. But really appreciate everybody coming out today. And I just had a few minutes of remarks to kind of set the stage and hopefully make for a great interactive Q&A session.

I think when you look at this industry, when I came to it, and I remember I did my first equity conference presentation, Mary said, what do you think? And I said, Well, I learned a really valuable lesson. She said, Well, what's that? so well, in the middle of my speech, there was a CNBC headline that had what I said in that. And I said, I learned that the world cares a whole lot more what the CFO of General Motors says than the CFO of Delta.

So it's been quite a 5 years. It's just been an incredible run. And when I look around and I think about what we've accomplished as a team and how much transformation the industry had, it's just been really phenomenal. But I think it's just the beginning of what's to come.

So when we look at coming off of 2025 and what the last 5 years, it really is about the dynamism that we've had and the transformation that we've seen in this industry, and GM is no exception.

We just announced our earnings from 2025. It was a great year, but it's hard not to sit back and think a year ago today, we were in the midst of probably one of the biggest, most uncertain years trying to predict what was going to happen. It was the beginning of the tariffs. We thought we were going to go into an earnings conference call talking about our guidance and so on. And we ended up in a world where we really didn't know at that time, and we reset guidance a little bit later than we otherwise would as we started to get expectations.

Fast forward a year, we've obviously been impacted pretty heavily by tariffs over $3 billion last year. We've signaled $3 billion to $4 billion of tariffs this year. But much like I tell my children, it's never as good and never as bad as you think it's going to be when the world hits you with uncertainty. And certainly, that's been the case. We've managed to be able to adjust. And then we just came out last week and talked about restoring back to our 8% to 10% margins in North America, probably about 12 to 18 months ahead of when most investors would have thought we were going to get back there.

And a lot of that is really just driven by grit and keeping our heads down and just focusing on where we know we can excel, and that is serving the customer and staying focused on where we are. But so if you look at that, and a lot of that -- I know a theme of the conference has probably been because we hear it all the time, we talk about affordability and where consumers are. We've got an incredibly compelling portfolio of products across the spectrum.

We go everywhere from the Cadillac Escalade and full-size SUVs where we've got a 60% market share in those full-size SUVs. And then all to the Corvette and what we've been able to do there in the performance space, legendary products, and we're #1 in retail share in the top quarter of the market.

But what a lot of people don't know and really, I don't think have an appreciation for is the amount of improvement that we've been able to do at the lower price points. When you look at the unique products that we have in the Chevy Trax and in the Bolt and so on, what you'll see is that we've actually been picking up some of our biggest market share gains in this space.

Last year, we sold over 700,000 vehicles priced under $30,000. Now historically, what you would have heard from a General Motors presentation is okay, well, you made all your money in trucks and SUVs and you gave a little bit of it back at the low end. We've been able to create a portfolio where we can make money top to bottom. And that's really a testament to the ingenuity, the flexibility and the resiliency that the company has seen going forward.

So when you look across our ICE portfolio, I think one of the most probably underappreciated facts is what we've been able to do with profitability and scale at the lower price points in the portfolio as a whole. And a lot of that is being driven by what I think is probably the most powerful slide we have that depicts our transformation.

And that is how do we make sure that we set up the company to be resilient, to be flexible and to be able to respond to the changing environment around us. And if you go back many years, you'll find an industry that was really full of inventory across the spectrum, lots of pipelines, maximizing production, looking at marginal cost economics.

What we've really focused on doing is trying to bring discipline into the business because the consumer is going to change, right? We're going to see a weak economy at some point. Hope it's not this year, hope it's not the year after that, but it's coming. We can't dodge economic cycles. But what we can do is try to minimize the self-imposed cyclicality that we've seen in the industry. So historically, when demand has waned, we've had 4 to 6 months of inventory sitting out there that we've got to sell down while we slow down production while we're trying to generate demand.

So what you saw historically was an incentive cycle that would go like this, right? So during those weakest times when you need cash flow to be able to rely on to not only help the business stay afloat, but also continuing to invest in that product cycle for the next 3, 4, 5 years down the road, that cyclicality really hampered and hindered the business because we were chasing demand with lower prices at the same time we needed that cash flow to be able to invest in the future and so on.

So what have we done? We've taken probably about 40% to 50% of our inventory out. So we ran -- we ended the year with 48 days of inventory, which ordinarily and historically, if you looked at that, most people would have thought, well, there was some type of plant event, et cetera. That's the discipline that we're talking about. So when you run with a targeted inventory of 50 to 60 days instead of running at 100-plus days that we historically have, when the inevitable downturn or recession or weakness might hit, we're going to be able to respond much, much faster because we're going to be focused on the business forward rather than trying to undo some of the inventory that we had built up over time.

And through all that, we've taken a business that has historically been running about $3 billion of free cash flow to one that's been consistently running at the $10 billion range over the last 4 or 5 years. That's important because that's our cushion. That's our safety blanket.

So we can absorb short-term shocks to demand. We can absorb short-term shocks to the supply chain because we're operating from that free cash flow surplus. So we're able to invest in the business. We're able to make sure that we're creating that product pipeline and investing in it so that we're here not just today, but tomorrow and the year after and the year after that with a really compelling line of products.

But we're able to do that at a time that we can absorb that shock. And that's what that free cash flow is all about. It's also allowed us to continue to invest in a healthy balance sheet. The balance sheet of General Motors has probably never been stronger than where we are today with minimal pension liabilities and really sitting there looking at a strong investment-grade credit rating and one that we think we've got an upward trajectory on our credit ratings going forward.

So being good stewards of that. And then finally, balancing that out with being return to shareholder-friendly and making sure that our company is investable because we need to rely on that capital base, and we need to be good stewards of that capital going forward.

So it's that balanced approach, combined with that discipline that we've injected in the business that we think is a recipe for us to be successful, whether we see a supply chain crisis, we see tariffs or we see other uncertainties, this is what's helping us get through it. And the results that we've seen over the last few years have been remarkably consistent, irrespective of what challenges and crises may come our way.

So let's look ahead. We've seen a lot of change in the last year. But what we see right now is a regulatory environment that is more aligned with where consumer demand sits right now and particularly talking about electric vehicles. We recently announced a charge. We took charges in the back half of the year of about $7 billion in our electric vehicle investments.

That's not -- we're giving up. That is not we're throwing in the towel, we can't make electric vehicles. That was about an infrastructure that was geared to be able to make 1 million EVs a year because that's what the regulatory environment was telling us we needed to do. When you look at stringency, greenhouse gas, CAFE, it was all aligned to driving much, much greater penetration than where the consumer was because even in the peak, we were running at about 8% to 10% to 12% EV adoption going forward.

So we were tooling up. We were setting up for that. And now with the changes in the regulatory environment, we think demand is going to be much more naturally accretive. So it's not going to 0. It wasn't 0 before the IRA. It won't be 0 now that the IRA is subsiding and the consumer credits are going around.

But I think vehicles are going to win. Electric vehicles are going to win in the end. They're technologically incredibly capable, the features that they bring, but it's going to take some time. And making sure that we are there for the customers gives us an opportunity to help bring the cost down at the same time, volume is going to ramp up naturally going forward. We're also investing in America. We've announced $5 billion of onshoring investments, bringing it on by -- in 2027 when that starts, we'll produce almost 2 million vehicles here in the U.S.

That's up quite a bit. We've announced the complete retooling of Orion, which was going to be set up as a mass production EV facility is now going to be converted to ICE, but it's going to allow us to bring onshore more truck and full-size SUV production going forward. And that's going to help us manage what the tariff burden is going to be for the long term.

So you talk about some of the self-help that we've been able to do, change in manufacturing footprint is a big piece of that enterprise and certainly going to take hold in 2027 as we go. Probably the single biggest transformational event that you're going to see over the next several years, and I think it's going to be a really big win for the auto industry as a whole is that growth in software and services.

We've started to increase our disclosures about that, and we talked about being able to get to $7.5 billion of deferred revenue on our balance sheet as well as growing our revenue in Super Cruise, OnStar and other features, paving the way for the software-defined vehicle that is coming our way as we ramp up Super Cruise, we get to eyes off, hands-off autonomy and start to work towards that in 2028.

We're building a great foundation. But when you think about the opportunity to interact with the customer, where the customer is and the transformational nature of the vehicle, that's where I get really excited, and we're making great strides in that space going forward. So as we think about where the investment dollars are going, it's going into technology, it's going into the vehicle portfolio and it's going into lowering the cost of our electric vehicles, driving intellectual property here in the U.S. and continuing to drive value and production and great jobs and great investments into the U.S. So we're really excited about where we're heading.

And Mike, I welcome you up and look forward to taking you all questions. But thanks for having us today, and thanks for the opportunity to be with you.

All right. Great. Thanks for that rundown, Paul. Good stuff. And a lot going on in GM, a lot going on in the industry. I think I'd like to focus a little bit on 2025 just for a minute. I just feel like every automotive executive I talked to last year was just -- they were just stuck. It's in limbo. We can't make a decision. We know what's going to happen next. Do you feel like the dust has settled at this point where you're confident in making big capital decisions and that the policy is not going to shift under your feet this afternoon or tomorrow or next month?

Yes. Well, look, I think from an industry perspective, I don't -- there's still a lot of things that we have to get resolved, right? But what I think is we have the direction, right? I think we understand where it's going. Tariffs are here. Tariffs are going to stay. The industry is important. We know that, that the industry is very important to the administration and competitiveness. And when you look at the jobs that we create, making sure that we can be globally competitive is important.

We've already made a number of investment commitments about bringing on. I mean, spending $5 billion over a couple of years is a pretty big statement. If you thought that tariffs were going to be a temporary or a single administration thing, you probably don't think about spending that kind of money. You try to think about, okay, how do I temper it in the short run.

But I think what we're seeing is a little bit of a shift. And then the revenue that's coming into the U.S., I think, is going to be something that future presidents, future administrations value as well. So what's the best thing that we can do to make sure that we manage over the long term, but at the same time, make sure that we can stay competitive and have the right footprint to be competitive globally.

All this extra cost coming into the system, I imagine it's created some interesting conversations with suppliers. We had a supplier, I think Steve from a Tier 2 earlier talking about just the battles that have been going on. I mean, how have you been working this out with the supply base given all the -- I mean, if it's $3 billion for you guys, multiply that across the industry? I mean how has this all been sorted out in the last year?

Well, I mean, I think I wouldn't choose the word battle. I think there are good sort of healthy conversations that happen within families and within enterprises. But we try to take it from the approach of how do we solve the whole.

I mean in the grand scheme of things, we want our supply base to thrive, to make money and to continue to have stability going forward. We need that across the enterprise, et cetera. Sometimes suppliers get better valuations than we do and better multiples and so on. I mean we just need to figure out how do you strike that balance. Tariffs is a piece of it. But as you know, we have MSRP offsets that are meant to help facilitate that supply chain to not get penalized for producing vehicles here.

And that's worked well. I think everybody is learning that. And it's -- if you look at our tariff expense, it's been a little bit choppy as things take time to work their way through the system. But it's one that I think we're starting to learn and starting to work on.

I think more than just the tariffs, though, I mean, you look at EV supply chains and so on, a big component of the restructuring charges that we announced and what Ford announced and others has really been around that supply base, too, because we commit -- get our suppliers to commit to certain volumes that we can't deliver, and we don't want to produce when we know that the demand isn't there, et cetera.

So working through that and trying to hit that reset button. What we found happening on the EV side in 2025, and this is where we slid back a little bit in our profitability journey was the constant ratcheting back of production forecast as we saw that and ultimately culminating in the $7,500 consumer tax credit going away, kind of signaled, okay, we're going to be in this lower demand period for a long time.

So we felt it was important rather than to try to chase that falling demand perpetually is to try to say, let's reset, let's establish the right foundation with us, with our suppliers and try to figure out what's the baseline that we can grow and grow in a stable way for the benefit of us and the supply base.

Has that pendulum swung back the other way and now they're scrambling to get into internal combustion and other powertrain programs to make up for that lost volume in EVs?

I don't think it's swung much. In fact, one of the questions that we get a lot from the investors is, okay, well, now that the regulatory environment has changed, you're going to ramp up ICE production. Well, it's not like we had a lot of pent-up capacity.

We sunset some models and we're extending some models and so on. But we've been producing because if you go back 4 years ago, when we did our Investor Day back in 2021, one of the things that investors, I don't think really fully believed was that we could grow share in ICE at the same time, we were growing share in EVs. They thought that was a zero-sum game back in the time.

But what we've been able to do is attract a lot of customers that are new to GM through the EV portfolio while bringing even more customers and growing share in the ICE portfolio with our products. And so that's been great.

But it means that there's not this valve to go in and say, let's ratchet up production of ICE vehicles. It's not about that. It's about making sure that there's continuity in the supply and what we can do.

I want to come back to powertrain mix in a minute. Just a few more on trade. I mean it feels like, in general, the trade deals we've seen or at least that have been outlined have settled around at 15% mark. I don't haven't checked my phone in the last 15 minutes, so it may have changed.

But is that like the 2 big ones are still hanging out there, right, Canada and Mexico. What would you guys like to see in USMCA renegotiation? What can you handle? What's the message to the administration right now?

Yes. Well, I think there's a lot of power and value in North America, right, and what we can do and how we work together. And I think it's a case of making sure that the auto industry remains competitive across the landscape.

So one of the things that was core as some of the deals were being struck is let's make sure we have alignment that we're not just one-offing deals that actually give those countries an advantage over us because this might be last or later in line. And I think the administration has been responsive and been really good about making sure that we protect the competitiveness going forward.

Longer term, I think it's -- and I think it's on the docket to get done this year. We would like to see trade deals that allow us to continue to thrive and be competitive as a trading block across that. I think we've demonstrated our commitment to bring more production, more assembly into the U.S. But we need that integrated supply chain base to continue to work to make sure we're competitive.

Yes. You guys have made it clear that you're going to be building more cars here, also going to come at a cost, would you say last week, like $1 billion, $1.5 billion onshoring headwinds for the year. I mean, how do you -- can you just kind of give us some insight on how you make these decisions?

I mean, I'm sure there's a lot of benefit to building domestically, but you've got to weigh that against the cost and what you decide to bring back, what you're asking your suppliers to either onshore or move around. I mean how do you put all these puzzle pieces together?

Yes. It's a great question. And the $1 billion to $1.5 billion that we talked about as a pressure for this year was not just manufacturing, it was investments in software and services as well. But what you get is we're staffing up right now with not really any production out of Orion, but we've got to get people hired and trained and facilitated so that we can start production in 2027.

And we said that was broken out to about half and half between the software and services and the manufacturing side. So that will start to work its way through is then we start production. But what we're really looking at is if you think about the tariff, you think about everything that goes versus paying higher wages here in the U.S., it balances it out.

And ultimately, it's an accretive decision for us. I think as you go down the tiers of the supply chain and you think about onshoring, and this is where U.S. content, MSRP offsets and things like that, have to make it all work together is you can't necessarily just onshore the entire supply chain, not just from a wage perspective, but more from a labor perspective in terms of the local markets trying to absorb all those new jobs, et cetera.

It's very different than I think it was 5 years ago. So making sure that we have the time to be able to make the right adjustments for the long term rather than just overreacting or swinging the pendulum, as you said, too far in one direction. We're trying to be very, very, very thorough about it, but trying to make sure that these moves are permanent and resilient.

The words chip shortage, I think is kind of a trigger term in this room probably that we're hearing it more with these memory chips, the dram chips that are being siphoned off into the data center boom. Any sense right now on how big a deal this is, how concerned people should be, what you guys are doing about that?

Well, I mean, we're certainly seeing inflationary pressure from it. And I think I go back to 2021, that was my, I think, my second month on the job that I got an e-mail and I said, well, that -- we're not a semiconductor company. Well, we kind of are. When you think about all the chips that are in our vehicles.

But it's one that our team did a really good job of working with our chip producers and suppliers to make sure that we had as much continuity as we could. It wasn't without some challenges. But I think we went through that probably better than most every other automaker did over the long run.

There were some that were positioned with a lot of inventory heading into that shortage. But overall, I'm really pleased with how we went through that. Right now, we see this as a cost issue for us. We don't necessarily see it as an availability issue, but we're constantly out there trying to make sure that we have access to the chips.

The good thing for -- I think, for us and for the auto industry is we're kind of that foundational demand for memory chips. So yes, there's a spike for AI, for data centers, et cetera. But in any good business, you've got to have that foundational demand that you can count on that's always going to be there.

And I think the chip makers and the memory chip makers want us and need us for that basis. So I don't know that the scarcity issue is going to present itself as we don't get chips as much as well, we're going to have to pay more for them. But as we've seen, these things tend to go in cycles. So we'll get through it and we'll survive and we'll fight another day, and we'll continue to focus on GM.

One more kind of supply chain related. I mean you guys talk a lot about supply chain resiliency. I gather it's a big focus of the company. I think it has helped you guys get through some of these recent shocks. I'm just -- the rare earth thing really spooked a lot of people last year. I don't know if it led to real shutdowns, but that one just seems really tricky because China is so dominant.

They leverage their dominance in rare earths. GM has done a lot in this area, I think, more than most. You got to set up alternative supply chains even domestically. I mean what's a realistic time line though for kind of controlling your own destiny there?

Well, I think we've been focused on this really kind of since COVID. And when you have COVID and the chip shortage back to back, what you realize is that supply chain concentration globally carries more risk than maybe it has historically done or maybe the perception of that risk is a lot more acute given the nature of the pandemic and what we saw.

So we've been focused on trying to drive resiliency and diversity in the supply chain really since 2021. This isn't easy. I mean this is an incredibly complex business when you look at all the threads, but really focused on -- it's not necessarily geopolitical.

There are geopolitical risks, but it's really more about what can happen in one part of the world that doesn't affect the other part and so on, and that works. So we've been working on trying to differentiate that. We did a lot of work in metals, particularly around EV supply, invested in lithium companies, invested in chemical companies in CAM, et cetera, that we've been on this path to try to focus on some vertical integration to get a little bit more control over the supply chain, similar to what others have done.

So I think we've made really good progress with that. I think it's going to help us in the long run overall. And again, it's not -- it's not about U.S. versus China. It's just about trying to -- how do you concentrate the supply chain where you're actually building the vehicles to drive that diversity across the globe and ultimately make it more resilient.

You referenced the big policy shifts in Trump 2.0 here with EV policy, CAFE, big rollbacks in EVA or at least proposed. I mean this regulatory framework for so long was like dictated a lot of what the OEMs did in terms of product development and go-to-market strategy. I mean how has this changed?

I know in the short term, you guys said this is going to help this year, right, $1 billion or $2 tailwind on that. But like bigger picture, just how does this change? You wake up one day and all this stuff that had been kind of guard railing you for 2 decades is gone. I mean, what's that like inside the company to decide where to go next?

Well, it's never easy as a CFO to write off billions of dollars of capital investments. So I think there has to be the reality check of, okay, here's where we are, here's where we're going. And how do we think about positioning the company for success.

I think the ultimate winner in all this, I think, is the consumer because you're right, historically, what the consumer could buy was really driven by the government and the regulatory side of the business. And now we have an ability to meet the consumer where they are.

It doesn't mean everything goes into more gas-guzzling. In fact, we just rolled out our Gen 6 V8 engines, which are the most efficient V8 engines we've ever produced and continuing to drive on that efficiency curve because I think consumers want that.

They want efficiency. They want more clean vehicles and so on. You see it in some of the hybrid growth. You see it in the electric vehicle adoption that's still happening and the fact that 80% of electric vehicle buyers only want to buy an EV going forward. So we've got a lot of anxiety and range and charging investments that need to make to get that to take hold at a much bigger level.

But that's what I mean when I say I think EVs win in the end. It's just going to take some time to get there. So very consumer-friendly. And when you have a business that you've tried to position to be resilient and dynamic in these environments, you can respond faster. And I think that's what GM has been able to do.

Okay. We'll flip to the audience questions here pretty soon, so make sure to get them in. I mean you guys were getting a lot of traction on your EV business in the last 12 to 18 months. Some really cool stuff coming out, moving up the sales charts. But at this point, how do you sustain -- I think you have roughly a dozen full EVs on the market. I mean how do you sustain that in a depressed sales volume that we're seeing now?

Well, I think it's about consumer choice, right? And the entries that we have there are pretty strategically positioned across both the brands and the various price points. And I think it's something that's there for consumers to choose.

Most of the capital and the cost of that is sunk so as we go forward, we've got to work on getting to variable profitability at every vehicle level going forward. And that's with the LMR chemistry and the prismatic cans that we're switching to that are going to save us thousands of dollars in the cost of an EV are going to help us on that journey going forward.

So I think about it as that uncertainty is a little bit of a blessing in disguise because with lower EV demand, it gives us a period of time where we can focus on that architecture, we can focus on getting the cost down as we start to see a ramp coming out the other side. And I think that that's going to be the trajectory we see as we make more investments into charging and so on. So I like where we are.

And I'd obviously rather see more growth and see more scale because I think it's easier to drive to profitability when you have the scale that we do. But that's going to take a little bit of time. But I don't think it's a terrible thing where we sit in terms of our ability to buy a little bit of time to fix some of the cost challenges.

Just one more for me. It's kind of a longer-term strategic question. But with these carrots and sticks in the U.S. regulatory environment kind of being gone, the incentives to buy EVs, the rules that were pushing companies down this path, where does the motivation come from, I guess, to try hard on this part of the business? I know that Mary has said this is the North Star. I think she called it the end game recently.

But it sure seems like it'd be tough to sort of push in that direction when every step you take is sort of not great for the bottom line, at least not right now.

Well, I mean, I think every company, every industry has some things they do really, really well that drive cash and profitability and some things that are future investments. And whether they're loss leaders in retail or their R&D or growth businesses.

And if you think about EVs as a growth business, a couple of things stand out. Number one, we've got scale, we've got technology. We've got battery expertise. We need to get better at making them if you believe that they're going to be there for the long term. Second, you've got the backdrop of what I think is probably going to be a more rational EV industry going forward.

You had players out there that were offering 70%, 80% incentive levels of cost, that's not a profitable business venture. That's not the company that wants to go in and try to get a foothold in a new industry. That's somebody who's buying compliance, right?

It's the only way to think about it. So when you strip that compliance stick out, as you mentioned, you expect that there's going to be some rationality. Either people are going to say, I don't have to discount as much or perhaps I'm going to exit the business as Ford in their announcement announced that they're going to exit a segment of electric vehicles. I think you're going to see that across the industry, which leaves a really interesting market for us to be able to grow into if we're willing to be patient.

And like I said, with the lower scale, and with our financial performance and the buffers that we've created, we have an ability to incur some short-term losses to be able to get to that tail end. So you even have Tesla saying they're going to stop production of the Model S and Model X.

So you're starting to see this position very differently, where I think with our portfolio, we have an opportunity to really go in there, grow our share and do it in a way that happens and it coincides with our improvements in profitability to set us up really, really well over the next 3 to 5 years.

Okay. Well, I left a lot of meat on the bone here. So I'm sure the audience will pick us up. This one is on hybrids. It looks like GM hasn't had a hybrid in its portfolio. We've heard you're adding it. Do you have resident expertise or you partner on that technology?

Yes. So we've done hybrids in China, and we've done hybrids before and some of the first ones. So I think where we look at it today is just making sure that we understand where the market is. And we've got a number of vehicles whose mileage and performance and costs are actually superior to many of the hybrids that are out there.

And we've seen our -- we've seen share gains in that space as well. So I think what we don't want to do is rush into it. We've got really good efficient ICE vehicles. We've got really good efficient battery electric vehicles. And there are some opportunities in there that we're continuing to try to think about. But we want to make sure that we're measured and focused on the portfolio we have.

Okay. This one says, you sounded optimistic about revenue GM can gain from software services. Can you expand on that? How willing will consumers be to pay additional money for services at a time when ATPs are already at record highs?

Yes. So it may seem countercultural, but I am a bit of an optimist as a CFO. It doesn't mean I'm not skeptical, but I'm an optimistic skeptic. And I think this is a great space.

And what we've got to do as a company is make sure that we are finding ways to be able to deliver value to the customers in ways they don't expect. And I think the technology capabilities, as you've already seen, really taking off in vehicles, whether it's in hands-off driving or ultimately going to autonomy and going to connected services within that vehicle are really accelerating pretty rapidly.

So we've got to have the right foundation to be able to deliver value to the customer where we can. OnStar is a great sort of long-term example of that. But you think about the capabilities and what that means for people to take that franchise and digitize it and make sure that there are other opportunities there to interact with the vehicle, whether it's making reservations at your restaurant or full concierge or using AI to help make your life easier in the vehicle.

Those are the things that I think people are going to be willing to pay for because they pay for it today at the same time they make a car payment. So how much of that can you consolidate and bring into the fold and ultimately make it a purchase decision for the customer.

So we're optimistic that I think with that software platform, we're going to be able to deliver a lot of really new great experiences. And as you look out over the next decade and even beyond, I think it's going to be tough to recognize what a vehicle is 10, 15, 20 years from now in terms of its capabilities and what it can do. And I think we can be great players in that space.

Kind of a narrow one on China. I'll try to broaden it a little bit. I mean, can you touch on a long painful decline in market share there? It sounds like some green shoots you guys talked about last week, fourth quarter market share profitability up a little bit.

What can you tell us about the restructuring in China? And what changes can be sustainable given that market's structural problems with overcapacity and never-ending price wars?

Yes. So we obviously have a good, strong business with a long history in China. I think we were one of the first U.S. companies to go over there. And it historically had been a $2 billion equity contribution. It's probably not going to go back there. But what we found and what we were able to do with our partners is restructure that business to be successful in a smaller slice of that market.

And I think that's been -- what that's allowed us to do is to capture the brand equity and the share and the recognition that we have as being a long-time participant in that market with the right infrastructure to be able to be profitable at a smaller level than we were. And that's no small feat.

I mean when you look at the work that our partner did with us some really tough decisions that had to be made. I mean closing plants over there is a really hard thing to do. And it takes a lot of courage and a lot of commitment by both partners to be able to do that. But if you look at since we completed that restructuring, we've been able to be profitable, and it's been much smaller.

So for me as a CFO, it's, okay, I've got a really good business that is producing cash flow and it's driving returns. It's smaller than it's been historically, but the competitive landscape there is going to make it really difficult to ever get back to where it is.

So let's make sure we can use it for what it is, self-sustaining really good, consistent cash flow, not the size that it used to be, but still stable and good. And I think that's where we can be really strong and good players there.

Obviously, that oversupply the symptom of that is a wave of exports out of China to all over the world, places like Europe and Latin America. I imagine with your footprint, you're seeing that most in South America where you're coming across Chinese brands. I mean, is that a pressure point in that market? What have you guys had to do to try to counter that?

Yes. Well, I think the biggest impact so far has been in Europe, and you've seen that. We don't have any...

Question that way...

But I think it's important because I think it foreshadows and it shows the competitive pressures that South America, Middle East and others may be behind that, but you can see the type of intensity and competitiveness that those vehicles bring to the marketplace. So therefore, we've got to be ready.

We want to be a global competitor, and that means focusing on products that customers want, being able to do it as efficiently as possible. So I know a number of folks went on a tour of some of the AI and robotics and things that we're doing in the plants to help drive efficiency and safety and consistency through the plants.

We've got to always be focused on making sure that we can compete globally on a level playing field anywhere in the world. So South America is going to be a big area, too, from that. We've got a good long history there, some good -- really good products in that space. And the team has done a good job of making sure that we're responding to that competition where it is.

So it's going to require focus, but it's also going to require to make sure that we're making investments where it makes sense to do that to continue to try to preserve or even grow in some of those ultra-competitive markets.

What about the prospect of having to compete against Chinese brands in Canada, in here? It seems to be on a lot of people's minds lately.

Yes. I mean at the end of the day, I think we've got to be focused on driving what we can for GM. Obviously, the health and the well-being of the U.S. auto industry, I think, is important for the economy as a whole.

So I think it's making sure that wherever competition is, it's a level competitive playing field and that the tariff environment is one that balances those competitive forces to make sure nobody has an advantage if they're going to come into the market. And I think we can hold our own. You look at the vehicles that we produce and where we have really good footholds, I think that's a sustainable advantage for us.

There's one on AI here. How is the usage of AI in vehicle physical development, software development and simulation changed in GM over the past year?

It's growing exponentially, and we've got a lot of expertise and a lot of people that are a lot smarter than I am that are finding ways to drive the efficiency, shortening cycle times and making sure that we're employing AI to almost be that agent for the design, for the engineering tech, et cetera, to help them process information faster, help us process changes faster to make sure that we can continue to drive that efficiency, everything that we do.

So there's a consumer bent that we talked about, but there's also the production bent. And then ultimately, there's the administrative side. So even in our own corporate finance, the ability to use that to go in and answer the questions about organization, about variances, about history, about trend lines, et cetera, really helping us drive insights.

So we have a finance department that isn't focused on reporting what we just did. They're focused on improving what we can do for the next quarter and the next year and the next decade after that, allowing us to be better strategic partners to the business as well.

I don't see one here on affordability, but I think it's important enough to throw one in here. I mean you talked about how you guys -- I think you have a fair argument to make that you're selling several volume models, right, under 30,000.

That's a lot more than a lot of other OEMs are doing. At the same time, I think your average transaction price is around $52,000 above industry average. I get that's loaded Escalades and Silverados and that stuff is expensive. I mean how big a concern is this for GM? Is there more to do on this?

And do your shareholders think that this is a problem that you guys need to solve? I mean, why not sell another Yukon Denali instead of 5 Malibus if you can get more profit doing it?

Well, I mean, I think at the end of the day, we have enough production capacity and scale to be able to produce at all these different price points. And I think the under $30,000 price point is a market that has seen a lot less product than it did 10, 15 years ago. Many people ran away from it. Our team, hats off to them, created a few products that ultimately we can make we can grow, we can scale and we can do it profitably. That's something that's historically been elusive to some of the bigger U.S. players.

So I think there's a real opportunity for us there to continue to penetrate and be there for those consumers at that price point. But at the same time, there are still consumers that are buying full-size SUVs and loading up on trim packages and continuing to buy where they see value.

So at the center of all of that is where do you create value at all these price points, so customers are attracted to it. And in that respect, I don't think it's as much about trading one customer for another as it is finding a way to efficiently supply across all of those product segments and ultimately try to surprise and delight consumers with what they can get for their dollars, wherever they choose to spend.

That's getting a customer in the door at an entry level that can potentially grow with the brand is a part of the thinking here?

Absolutely. We've got that at all levels of the spectrum and meeting customers where they are is a recipe for long, long-term success.

Well, I suppose I can close by asking maybe -- this is a fairness question because for years, we all in the media have asked you guys about the low stock price. And now it's at a record high. So I'm just wondering what you think is resonating with investors now, what they're seeing in GM maybe that they didn't a few years ago.

Well, some people, me included, would say it's still low. We're still -- despite the improvement, we're still trading at a double-digit free cash flow yield. And I think I -- one of the things that I say internally is we didn't earn a discount to the market overnight. That was a lot of years of really challenged over cyclicality, et cetera.

We're not going to earn our way out of that overnight. But what you've seen is a heightened level of confidence in our ability to maybe brush aside some of the uncertainties that historically would have had a material impact on the business and the industry.

And what we're trying to do is differentiate ourselves by saying, look, we are a balanced investment through the cycle. So I think if you look at one data point, you'd have to look at the free cash flow because it's really the product of all of the discipline we've injected into the company, whether it's inventory discipline, capital discipline, incentive discipline, et cetera.

Making sure that, that comes together into a business that investors can start looking beyond this quarter's consensus and earnings results and into how do -- how are we going to grow our profitability from '26 to '27 to '28. So the latest catalyst has been getting back to that 8% to 10% North America margin irrespective of $3 billion to $4 billion of tariff pressure.

Nobody was expecting us to do it as quickly as we can. But we also laid out there's a growth trajectory into 2027 as you look at some of the tailwinds that we've got. So I think driving that consistency is going to continue to drive rewards to our shareholders and make us even more investable than where we are today.

Great. Thanks, Paul. Appreciate you walking us through the GM story. That was good stuff.

Thanks for the conversation.

Thank you, Mike. Great. So thank you, Paul and Mike. That was an excellent discussion. I hope you guys enjoyed that and got your questions answered. Another warm round of applause for Paul and Mike, if you don't mind.

And now we're going to take a 10-minute break. There are snacks in the hallway because we're the Fed, and we feed you. But we don't want you to go hungry. Again, bathrooms behind the conference wall. Please be back here by 2:00 because we have an excellent afternoon session planned for you. And I've got the first one. So don't stand me up.

Good morning, and welcome to the General Motors Company Fourth Quarter and Full Year 2025 Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded Tuesday, January 27, 2026.

I would now like to turn the conference 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 fourth quarter and full year 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; along with 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.

On today's call, management will make forward-looking statements about our expectations. These statements are subject to risks and uncertainties that could cause our 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 this 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. I'm incredibly proud of our global team, including our dealers and suppliers for delivering an exceptional 2025. Together, we grew the business and adapted to significant changes in tax and trade policy, to deliver full year EBIT adjusted at the high end of our guidance range. We are pleased that we delivered a total return of 54% for our investors, and I'd like to share some of the operating highlights that underscore our momentum.

In the United States, we achieved our highest full year market share in a decade. In fact, 2025 was our fourth consecutive year of market share growth and we continue to deliver with low inventory, low incentives and strong pricing. Once again, GM led the industry in full-size pickups and full-size SUVs, and we had our best year ever in crossovers, driven by vehicles like the redesigned Chevrolet Equinox and Traverse. We have also been very successful with smaller profitable crossovers like the Chevrolet Trax, and Buick and [ Vista ], because we provide tremendous value with great styling, technology and a suite of safety features at some of the lowest prices in the market.

We're very proud that [indiscernible] named Chevrolet Trax to its 10 best list for the third year in a row joining the Chevrolet Corvette, Cadillac [ CT5V ] Blackwing, and our full-size SUVs. Not only that, but the Cadillac Escalade IQ won Motor Trend's prestigious SUV and Technology of the Year awards. Lastly, the vehicle and technology solutions that GM involve delivers to our commercial, government and [indiscernible] customers helped us lead the U.S. fleet segment for the second consecutive year.

We demonstrated another true core competency throughout the year, our agility and speed and adapting to change. We proactively managed our net tariff exposure, reducing it well below our initial expectations. Thanks to self-help initiatives and policy actions that support companies like GM that have substantial and growing commitments to American manufacturing. We were also quick to respond to slowing EV demand by selling our share in the Ultium Cells [ Lansing ] plant and pivoting [indiscernible] assembly from EV to ICE production. Our compelling vehicle and technology portfolio, a resilient U.S. market and the steps we have taken to strengthen our position should help make 2026 an even better year for GM.

The charges we took in the second half of the year to reduce EV capacity will reduce our fixed cost and resolve the majority of our commercial claims tied to lower volume. In addition, our warranty expense is moving in the right direction and our EV losses will be lower. As a result, we expect full year EBIT-adjusted margins in North America will be back in the 8% to 10% margin range. We are also operating in a U.S. regulatory and policy environment that is increasingly aligned with customer demand. This allows us to onshore more production to help meet strong demand for our ICE vehicles. We continue to believe in EVs and our portfolio brought almost 100,000 new customers to GM last year. We know EV drivers don't often go back to ICE. So we'll continue executing our plan to dramatically reduce cost and to be well positioned for the future. This will require continued investment, but at much lower levels, and I'm confident in our path to profitability.

Our strong foundation and operating discipline are why our average annual free cash flow generation has structurally improved from $3 billion to $10 billion over the last 5 years. Consistently strong cash generation have allowed us to execute all phases of our capital allocation program, from investing in the business and our people, to maintaining a strong balance sheet and returning capital to shareholders. We believe that formula is sustainable, which is why we are increasing our quarterly dividend rate by 20% and planning future share repurchases.

The growth of OnStar services and Super Cruise further underscores our confidence. In 2025, OnStar had a record 12 million subscribers, including more than 620,000 Super Cruise subscribers, achieving nearly 80% year-over-year growth. OnStar fleet subscriptions hit [ 2 million ], which is 2x any other competitor. This year, we will continue to grow our Super Cruise business in North America and expand into South Korea, the Middle East and Europe. We expect our deferred revenue from software and services to be approximately $7.5 billion by the end of this year, up nearly 40% from 2025. We are also confident in the turnaround of our China business and our growing new energy vehicle portfolio. They are now about 50% of sales in China and profitable across all price points.

As we look further ahead, our annual production in the U.S. is expected to rise to an industry-leading 2 million units after we begin production of the Chevrolet Equinox in Kansas, bring the Chevrolet Blazer to Tennessee, and at incremental capacity for the Cadillac Escalade, and launch our next-generation full-size pickups at Orion Assembly in Michigan. We are also launching our sixth generation small block V8, and the engineering teams are leveraging world-class virtual tools to deliver better fuel efficiency and power for our customers and faster development times. We reached our performance and emission goals in 1/3 of the time versus the prior program by conducting thousands of combustion chamber simulations while we reduced prototyping for a 20% savings in material and tooling costs.

AI, machine learning and robotics are also driving safety, quality and speed in our manufacturing plants so we can get great products and technologies into the hands of customers faster. For example, a cross-functional team developed a predictive weld quality model that has enabled us to deliver even more consistent wells and tighter control directly improving cost and quality. We are also deploying robotic systems alongside humans to make their jobs safer and easier to perform.

For example, a robot can pick up an exhaust system and position it so a single operator can complete the installation without strain. Our robotics and AI work will converge at Orion assembly where plant upgrades include advanced vision systems and the installation of 2,500 robots and [ cobots ] controlled by GM design software. Then in 2028, we expect to launch our breakthrough LMR battery chemistry. LMR will help us reduce cell and pack costs by several thousand dollars.

Also in 2028, we expect to launch our second-generation software-defined vehicle architecture for ICE vehicles and EVs. It will unite every major system from propulsion to infotainment and safety on a single high-speed compute core. The performance upgrade includes 10x more OTA capacity and 1,000x more bandwidth, allowing our vehicles to get better, smarter and deliver more value to our customers over time. It's also an enabler for our eyes off hands-off driving technology. This technology and our new software architecture will both launch on the Cadillac Escalate IQ in 2028. With our Supers experience, the expertise we brought in-house from Cruise, and our learnings from millions of miles of fully autonomous driving, we believe we have everything we need to deliver a safe, reliable and highly capable system that customers will embrace.

Safety is key to building trust and new technologies as we've demonstrated with Super Cruise. For our [ eyes off ] solution, we are building in redundancy with [ LiDAR, radar ] and cameras, and we will begin on highways. Finally, I want to mention that we are hosting our call today from our new global headquarters in Hudson's Detroit. This beautiful space is designed for the collaborative and tech-enabled way people work today, while also saving us tens of millions of dollars annually. It's the latest example of our commitment to operate as efficiently and as profitably as we can.

Thank you, and now I'll turn the call over to Paul.

Thank you, Mary, and welcome, everyone. Over the past several years, we've been on an incredible journey. In the face of a rapidly evolving industry and significant macro challenges, the resilience and adaptability of the GM team have been truly exceptional. These strengths have translated into consistently strong financial performance, including $12.7 billion of EBIT adjusted, and $10.6 billion of adjusted automotive free cash flow in 2025, resulting in a year-end cash balance of $21.7 billion.

As Mary noted, our product portfolio keeps getting better, driving market share gains of 60 basis points in 2025, while we maintain some of the lowest incentives in the entire industry. This disciplined approach has been a key contributor to nearly $25 billion of free cash flow generation over the past 2 years. This robust cash generation enables us to execute confidently across all pillars of our capital allocation framework. Over the last 2 years, we've invested more than $20 billion in capital projects to support growth in our core business and advance our strategic priorities.

Looking ahead to 2026 and 2027, we expect to invest $10 billion to $12 billion annually, including approximately $5 billion to expand U.S. manufacturing capacity for some of the highest demand vehicles and further reduce our tariff exposure. We're also proactively strengthening our balance sheet by thoughtfully managing debt maturities. In 2025, we retired $1.8 billion of debt, further enhancing our financial flexibility and reinforcing our long-term resilience.

Returning capital to shareholders remains a cornerstone of our capital strategy. In the fourth quarter, we executed $2.5 billion in open market share repurchases, retiring another 33 million shares and bringing total buybacks for the year to $6 billion. In 2025, we also distributed more than $500 million in dividends. Since announcing our accelerated share repurchase program in November 2023, we have returned $23 billion to shareholders through share repurchases. These actions have reduced our outstanding share count by more than 465 million shares, or nearly 35%, leaving approximately 930 million diluted outstanding shares at year-end 2025.

Our strong execution and consistent capital returns have delivered substantial shareholder value, with our stock price appreciating more than 170% since late November 2023. This performance reinforces our conviction that repurchasing GM's stock at current valuation levels, which are back to historical norms, but remain well below our peers, represents one of the most compelling opportunities to continue to generate long-term shareholder value. Yesterday, our Board approved a new share repurchase authorization of $6 billion, and a 20% increase in our dividend to $0.18 per share, reflecting its confidence in our ability to generate strong future cash flows and underscoring our ongoing commitment to returning capital to shareholders.

Now let's turn to our fourth quarter results. Total company revenue was $45 billion, down approximately 5% year-over-year, primarily due to our disciplined approach to production and dealer inventory, including aligning EV production to demand. We also faced production constraints on the Chevrolet Trax and a year-over-year headwind from strategic decisions to end production of the Chevrolet Malibu and Cadillac XT4. The lower volume was partially offset by strong pricing across our 2026 model year lineup.

EBIT adjusted was $2.8 billion, and EPS diluted adjusted was $2.51, both increasing year-over-year despite the impact of tariffs. We incurred incremental costs for alternate chip sourcing related to [ Nexperia ] totaling $100 million in Q4, and we anticipate another $100 million of pressure in Q1 2026. Hats off to our supply chain team as they did a great job finding alternatives to ensure we had no production disruptions. Adjusted automotive free cash flow was $2.8 billion, driven by higher EBIT adjusted performance and favorable cash timing.

I want to take a moment to address tariff costs for the quarter and for the full year, as well as the charges we have taken related to EVs. Through the third quarter, we incurred $2.4 billion in gross tariff costs. In the fourth quarter, we incurred another $700 million, bringing the total for the year to $3.1 billion, which was below our predicted range of $3.5 billion to $4.5 billion. When we provided updated guidance in October, we were tracking towards the low end of this range, but took a conservative approach given the dynamic trade and tariff environment. We were able to do even better based on strong execution and favorable policy developments during the quarter, including the benefit from a lower tariff rate for Korea. For the full year, we were able to offset more than 40% of these gross tariff costs through a combination of go-to-market actions, footprint adjustments and cost reduction initiatives.

Turning now to our EV charges. During the third and fourth quarters, we reassessed our EV capacity and manufacturing footprint to better align with softer-than-expected consumer demand, particularly in light of recent U.S. government policy changes, including the termination of certain consumer tax incentives. As a result, in the third quarter, we recorded charges totaling $1.6 billion, including $1.2 billion of noncash impairment charges, primarily related to transitioning our Orion assembly from EV to ICE production. The remaining $0.4 billion consisted of cash charges associated with contractual cancellations and supplier settlements.

In the fourth quarter, we recorded an additional $6 billion of charges. This included $1.8 billion of noncash impairments, largely driven by our decision to discontinue production of the [ BrightDrop ] electric van and to impair certain EV-related assets. The remaining $4.2 billion was primarily related to contract cancellations and supplier settlements, which will impact future cash flows. The aggregate Q3 and Q4 charges totaled $7.6 billion, of which $4.6 billion is expected to be settled in cash. In 2025, we made approximately $400 million in cash payments and expect to pay the majority of the remaining balance in 2026. Moving forward, we expect material but significantly smaller cash and noncash EV-related charges, as we continue commercial negotiations with our supply base and address proposed regulatory changes to greenhouse gas emission standards. Any greenhouse gas-related charges would be noncash.

It is important to note that besides [ Bright drop ], we have not impaired our existing retail portfolio of EVs. We are working to improve the profitability of these vehicles through new battery technologies, engineering improvements and operational efficiencies, along with a more rational EV market. As consumer adoption of EVs increases, albeit at a slower pace than previously anticipated, we expect to achieve the necessary scale to deliver EVs profitably over time.

Now let's move to the fourth quarter regional results. North America delivered EBIT adjusted of $2.2 billion and margins of 6.1%. We ended the year with 48 days of dealer inventory, which is slightly below our 50- to 60-day year-end target. This positions us well for 2026, allowing us to balance production to various demand levels. We are seeing positive trends in our warranty performance with monthly cash flows continuing to be stable. GM International excluding China equity income, delivered EBIT adjusted of $200 million driven by strong execution in South America and the Middle East, along with China equity income of $100 million, excluding the restructuring charge. We recorded a $600 million special item in our Auto China equity income primarily connected to prior restructuring actions. It's important to note that these charges are not expected to require any capital from GM as the joint venture has sufficient cash to cover these costs.

I want to commend our China team for executing a disciplined multiyear plan to rightsize capacity, accelerate electrification and revitalize our operations. These collective efforts have been instrumental in achieving significant milestones, including new energy vehicle sales reaching nearly 1 million units in 2025, representing more than half of the total sales in China.

GM Financial also had another strong year of profitability and capital returns to GM. Fourth quarter EBIT-adjusted was down slightly year-over-year at $600 million. Lower lease termination gains were partially offset by higher retail yields and lower provision expense. GM Financial's full year EBIT-adjusted was $2.8 billion within their guidance of $2.5 billion to $3 billion, and they paid dividends of $1.5 billion to GM.

Last week, GM Financial received approval for their industrial bank application. Once launched, this bank will enable them to accept deposits, providing another source of stable and diversified funding. Over time, we also expect this to lower the cost of funds and enhance their ability to offer more competitive auto loans to customers. I want to personally thank Susan and the entire GMF team for their persistence throughout this process.

Now let's turn to our 2026 guidance, where we expect EBIT adjusted of $13 billion to $15 billion. EPS diluted adjusted of $11 to $13 per share, and adjusted automotive free cash flow of $9 billion to $11 billion. Starting with tariffs. We anticipate gross tariff costs in the $3 billion to $4 billion range, slightly higher than 2025 due to an additional quarter of tariff exposure, partially offset by the reduced Korea tariff and expanded MSRP offset program. For Q1, we expect the gross tariff impact to be in the $750 million to $1 billion range, which is well below the quarterly impact in Q2 and Q3 at 2025, but more than Q4. The higher quarterly run rate in 2026 versus Q4 '25 is largely driven by the timing of tariff costs, which can be lumpy, particularly as it relates to the supply chain. The team did a great job offsetting over 40% of our gross tariff costs in 2025 through go-to-market strategies, footprint changes and cost efficiencies.

As we look ahead to 2026, we expect these cost savings to be sustained and believe there are additional actions that can help mitigate our tariff impact. For the industry, we expect total U.S. SAAR to be in the low 16 million unit range for the year. We expect North America ICE wholesale volumes to be flat to up modestly. ICE volumes this year are constrained due to portfolio shifts, including the ending of the Cadillac XT6, and some expected downtime ahead of the new Chevrolet Silverado and GMC Sierra launches. We anticipate a benefit of $1 billion to $1.5 billion related to the actions we've taken to rightsize our EV capacity. The benefits from both EV-related charges and substantially lower EV wholesale volumes will positively impact both mix and costs.

We also expect that the temporary downtime at our Ultium Cells joint venture will result in lower production tax credits, but this impact should be largely offset by positive inventory adjustments from lower cell inventory levels. Lower production tax credits in 2026 should then represent a tailwind in 2027 as we resume normalized production. We expect North America pricing to be flat to up 0.5%, as we realize the full year benefit of model year 2026 price increases. While this includes a place holder for potentially higher incentives due to the competitive environment, we are confident in our ability to maintain pricing discipline. While some uncertainties remain in the regulatory environment, we are anticipating a benefit in the range of $500 million to $750 million, primarily related to savings from no longer having to purchase compliance credits.

In addition, we are seeing positive trends in warranty costs, which are expected to deliver a $1 billion benefit versus 2025. We expect an increase of around $400 million of high-margin revenue generated from the expansion of OnStar software and services, including Super Cruise. This growth is expected to help increase deferred revenue from $5.4 billion at the end of 2025, to approximately $7.5 billion by the end of '26, further strengthening our future margin profile and long-term growth trajectory.

We expect headwinds in the range of $1 billion to $1.5 billion associated with the onshoring of vehicle production to the U.S., investments to enhance supply chain resiliency, and investments to support our software initiatives. While these initiatives create near-term pressure, they will increase capacity of our highly profitable full-size pickups and SUVs, as well as to help further mitigate tariff costs beginning in 2027. We also expect incremental headwinds in the range of $1 billion to $1.5 billion, driven primarily by recent trends in aluminum, copper and other key commodities as well as higher DRAM costs and unfavorable foreign exchange movements.

Turning to our regions. We expect both China and our international operations outside of China to be profitable and deliver results largely consistent with 2025. GM Financial is once again expected to deliver EBIT-adjusted in the $2.5 billion to $3 billion range, reflecting a stable credit environment. Importantly, as Mary noted, we believe we have a clear and achievable path back to 8% to 10% North America margins in 2026. The midpoint of our EBIT-adjusted guidance supports this outcome, and we are confident in our ability to deliver this goal ahead of investor expectations.

We are accelerating innovation and investing in advanced mobility, manufacturing technologies and robotics to chart the future. This includes expanding Super Cruise to bring hands-free driving to more vehicles and scaling high-value digital services through OnStar, further strengthening our competitive advantage and enhancing the customer experience.

In summary, we entered this year with strong momentum, a resilient balance sheet and the operational flexibility to deliver on our commitments. We remain focused on investing in long-term profitable growth while retaining the agility needed to navigate a dynamic macro and regulatory landscape, positioning GM for sustained success, not only in 2026, but well beyond.

Thank you. And with that, we'll move to the Q&A portion of the call.

[Operator Instructions] Our first question will come from the line of Dan Levy with Barclays.

Wondering if you could first just address the assumption on pricing. And specifically, I think we know that we are in an environment where arguably it's a demand-constrained environment. There's one of your competitors that is keen on gaining -- I'm sure, you're coming off of a, let's say, tougher comp on the pricing side. I think you did just under $1.5 billion in positive pricing last year. So can you just unpack the assumption for pricing to be flat to up? How much of that is just the benefit of ICE or some other dynamics in there?

Dan, thanks for the question. What I would say is going into this year, we're not modeling any increases. This is really just the annualization of what we did in '25 coming through primarily for model year '26. So we're obviously going to take it 1 day, 1 week, 1 month at a time as we go through and watch where we are. But we're not putting projections out there if we've got a lot of price increases to go through. We're cognizant of what the environment is out there, but we're also confident with our vehicles and with the new truck launches later this year, feel like we can continue to drive the momentum commercially that we have in the past with no significant change.

Great. As a second question, I wanted to just ask about the dynamics of your product portfolio. And within that, first, maybe you could just address the fixed cost base that you have. You still have all of your EV programs intact. You still have much of the battery capacity intact. This was set for a higher volume outlook. To what extent does this portfolio align with what's going to likely be higher near-term ICE mix?

And then maybe you could just address the potential to add hybrids into the portfolio. Just how much more do we have to see the portfolio and the fixed cost base shift to adjust to this new reality that we have?

Well, I'll start, and then I'll turn it over to Paul for some of the financial piece of it. But we think we have the right portfolio. We have strong internal combustion engine portfolio, as Paul mentioned, with the new trucks coming out. And unlike many others, we invested in having a dedicated EV platform that gives us a foundation for the portfolio we have. As we've said, the investments we're making now in EVs will be very much focused on cost reduction, like [ LMR ]. We also have teams on each of our EVs to continue to take cost out beyond the battery. And then we have announced in the past that we will have hybrids in key segments. So I think we're going to have the right portfolio.

And we also are focused on the end game. We know once somebody drives an EV, they rarely go back to internal combustion engine. And we also -- a big enabler of EV adoption is going to be charging. And last year, the charger -- Level 2 chargers increased by 25%. So EV adoption are going to grow over time. We think we're well positioned there. So we were very, I think, thoughtful about the way that we adjusted capacity in light of a very dramatic change in the regulatory environment as well as the -- eliminating the consumer tax credit.

Yes. Just to add to that, Dan. I think, as we went through the restructuring, we were mindful of where is the excess capacity that we know we're not going to need for a long time because we had built up for a very different regulatory environment, as Mary had said. But we're also cognizant of making sure that we preserve capacity to be able to pivot and rotate where we need to, to get the cost savings. So particularly as it relates to battery capacity, we've got enough to be able to transition to LMR and to LFP as those projects get underway over the next couple of years. So it really was trying to look at what is the right short-term decision, but also how do we balance that against long term and where we know it's going to go, or we believe it's going to go in the future.

And as far as vehicle programs, remember, with the product cycle that the industry has some of these decisions were made years ago. And we have to do our best to be able to pivot to where demand is going to be. And I think if you look at this management team, and what it's accomplished over the last several years in the midst of a lot of uncertainty, I think we've got what it takes to be able to respond and meet the consumer where they are as they continue to evolve.

Our next question comes from Michael Ward with Citigroup.

Two things. First, on the inventory. You see the impact on the on the pricing. Is that inventory discipline, is that going to continue? And what are the implications for cash flow? Is that one of the ingredients that's adding up to the stronger-than-expected cash generation?

Mike, thanks for the question. So on the inventory side, I think the commercial team and the production team have both done a really good job of coordinating the last few years to keep us within that targeted range of 50% to 60%. We had a really strong December month, which is why we ended the year at 48 days of inventory. So I think we're going to continue to balance that where it is. I don't think there's a big buildup contemplated. In fact, with the transition to the new truck, we'll lose some production as well.

But overall, I think it's that discipline that has really helped us to drive much, much more consistency in our cash generation going forward. So we're not banking on any significant inventory build, although it is an opportunity potentially to get back into that 50- to 60-day range.

And then on the -- this announcement by the Industrial Bank and, I think, FDIC approval the other day, that seems like a bigger deal than it just on the outset as it relates to cost of capital for GM Financial. How much can you save from just a cost point of capital for that?

Yes. I'll start, and then I'll let Susan chime in as well. But this is really a great achievement and one that, candidly, probably should have been approved a few years ago as we went through that. But the perseverance of the team to get that through provides yet another opportunity to drive capital in an efficient way for us. It will take some time.

But Susan, I'll let you comment on anything you want to add.

Yes. Thanks, Paul, and thanks for the question. Very excited to have the conditional approval and get the industrial bank up and running. And as Paul said, this is going to be complementary to our funding platform, and it will allow us to offer depository products and another source of funding to help us bring down the cost of funds somewhat. They are high-yield savings account and broker deposits. So as it gets up and running, again, complementary to our footprint. It's not going to replace how we fund the business, but we'll be complementary to it and allow us to bring down the cost of funds, and the basis points over time. And on our debt complex, that's a meaningful move.

Meaningful like 100 basis points? Is that the type of meaningful you talking about?

Probably not that much. It just depends on the rate environment, but it's going to help us be more competitive.

Our next question comes from Joe Spak with UBS.

First, just I guess bigger picture, Mary, I wanted to go back to some of your comments on portfolio and you mentioned hybrids. I mean that's a pretty broad term nowadays with traditional plug-ins and [ ERV ]. So I was wondering if you could maybe shed a little bit more light on how you're seeing that portfolio evolving? And then is that considered in the $10 billion to $12 billion CapEx you've guided through -- guided for, for the next couple of years?

And I guess most importantly, yes, powertrain, I think, is going to be part of the consumer decision, but the features in the car are seemingly becoming more important than you're sort of highlighting that with some of the Super Cruise and other software. So will all these vehicles be able to use that next-gen architecture you showed that, I think, is supposed to launch in '28?

Sure. Joe, a lot packed into that question. But first of all, any products that I've talked about are comprehended in the $10 billion to $12 billion capital. So yes, SDB, our next-generation software-defined platform and Super Cruise will be available both ICE and EV platforms. And from a hybrid perspective, again, we're looking at where are the segments that there's the most demand for hybrids that are important from our total portfolio. So I'm not going to give you any specifics other than we're looking at a segment by segment what we feel that we need to have to make sure we compete.

And I'll just reiterate that we're -- in the last 4 years, even as others have brought on hybrids, we're still growing share. And that, I think, just indicates that we have the right product portfolio. So -- and lastly, I just want to comment, you're absolutely right. The propulsion system of the vehicle is one distinguisher. But people are looking for their vehicle to do more. And that's why I think we also are going to be distinguishing ourselves as a full-line OEM that's been around for a while, able to have a very modern electrical architecture that will then be the foundation for offering more services, AI assistance, as well as continuing to grow Super Cruise and into our eyes off hands off that we've announced for 2028.

So I feel very confident that this is going to be another area where GM distinguishes itself from others with what we have planned and what we'll be rolling out. And the team is excited and it's on track.

And then Paul, I just wondered if we could unpack the $1 billion to $1.5 billion in onshoring and software expense. And is there any way we should think about the split between that? Because -- and please correct me if I'm wrong and think about this, but I imagine the software expense portion of that is ongoing, and may even grow over time in line with what we just talked about. But the cost really in the start-up the [ onshoring ] I would think of it as more as temporary and maybe there's some relief as we think beyond '26. Is that right?

Yes. Thanks, Joe. I would probably split them about 50-50 as we're thinking about it going forward. Obviously, the ramp-up costs of the onshoring will be offset as they go into production into the future. So there's a little bit of an offset there. And then certainly, on the software side, we're continuing to invest in those technologists and those programmers to be able to get where we need to go on SDB 2.0, and on autonomy and ultimately, Super Cruise enhancements going forward. So I'd split them about 50-50. It will vary over time, but that's the way we're thinking about it.

Our next question comes from Andrew Percoco with Morgan Stanley.

I want on the tariff disclosure, the $3 billion to $4 billion gross tariff cost for 2026. It sounds like you're assuming the lower South Korea tariff in that assumption. Can you maybe just talk to -- I know it's obviously overnight some headlines that it might be going back to 25%. What would that mean for you? And then maybe just remind us what you're doing in terms of tariff mitigation for 2026? I think you talked about 35% offset for 2025. Wondering if that's a similar range for 2026 and maybe what some of the moving pieces are to get you there?

Well, I'll start and then turn it over to Paul for some of the specifics, but we're encouraging and hopeful that the countries will get the regulatory approvals, or legal approvals in their country to put into place the deal that was actually negotiated and agreed to in October. As Paul indicated in our guidance, it is -- we assume 15%. And if there are -- if there's a period of time where it's not 15%, that's going to be something a headwind that we'll work to offset.

Paul, if you want to get into some of the specifics?

Yes. So thanks for the question, Andrew. The offset -- the self-help provisions, just as a reminder, we talked about go-to-market. We talked about manufacturing footprint changes, and we talked about fixed cost reductions. Obviously, for Joe's question that we just went through, there's some fixed cost pressure that's new with the manufacturing additions that we'll take on in '26. That will obviously lead to significant offsets in 2027 as we begin to onshore production. But in '26 it's really a lot of the annualization of what we've done. And so with the go-to-market and then the fixed cost reductions, we'll get an annualization benefit in '26. So we should end up at a position where our net tariffs are actually lower in '26 than they were in 2025. So that equates to slightly more than the 40% offset just from that annualization.

Got it. Okay. That's super helpful. And then maybe just coming back to Super Cruise. You mentioned expanding that into some international markets. Can you just remind us what -- maybe what regulatory approvals are needed to do that? And also, from a functionality standpoint, can you maybe just give us a road map for what improvements consumers might back to see going forward, whether that be point to point? Just kind of wondering what the progression of that looks like over the next few years before you get to full [ eyes off, hands off ] L-3 with that next-gen platform?

Andrew, we [ can't ] get you the specific. We have a road map that we're working to where we continue to expand and add more features that we haven't announced yet, so stay tuned on that. And as to the regulatory specifics, I think I don't have them top of mind, but I know the team is working and the rollout is planned, and I don't think there's any barriers for stopping the global expansion that we have of Super Cruise.

Our next question comes from James Picariello with BNP Paribas.

Just have a question, first, on the GM North America margin range of 8% to 10%. I mean, that clearly embeds a pretty sizable step-up and you have the $14 billion midpoint guide for the total company. I just want to address the moving pieces there as to how we get to that range yet. Still only have your total company at the $14 billion. I guess what my model is currently saying is if I get to 8% to 10% for GM North America, even at the low end, it would imply higher overall [ in the EBIT ]. So any clarity there would be great.

Yes. Thanks, James. We're incredibly proud of the work that the North America team is doing to continue to drive back to that 8% to 10% margin. Many of the tailwinds that we mentioned in the prepared remarks about improved EV profitability, improved warranty expense, regulatory costs, all benefit North America. So it's a journey that, I think, is ahead of where investors were, and we've worked hard to try to make sure that we can deliver that in 2026. And I think our guidance reflects the confidence that we'll be able to do that.

Obviously, a lot of things going on in the world internationally and with the work that the China team has done that kind of disrupts a little bit of the balance that we've seen historically. But overall, we think it's a good start to the year in terms of laying out these expectations and we're set to [indiscernible] go get them.

Yes. Understood. And then just my follow-up is on GM's memory chip supply and just an understanding of how much of this year's supply is already locked in, and is pricing also predominantly locked in for the year?

Well, we shared that between commodities, DRAM and FX, we see a headwind of $1 billion to $1.5 billion. We're not breaking that out specifically. I would say the team is actively working from a memory chip perspective. And as of now, we don't see any issues that are going to impact our ability to produce. I think you've seen us over the last couple of years, even going back to the semiconductor shortage to see how the team works and get ahead of these. And so that's obviously ongoing work the team is doing. But as of now, we don't see anything that's going to create an issue for us there.

Our next question comes from Itay Michaeli with TD Cowen.

Just first, a question on the full-size pickup launch this year. I'm curious kind of what's embedded into the guide at a high level? I know, Paul, you mentioned some downtime. I don't know if you're able to clarify that or quantify that? And should we think about some of the volume price mix impact more later this year, or more of a 2027 impact?

Yes. Thanks, Itay. Obviously, we're really excited about the new trucks that are coming online. We'll obviously have to take some downtime as we retool for that. Some of that will be able to build ahead a little to offset, but you will see that impacted in our volumes this year overall.

On the -- on the pricing, I would say it's largely going to be a 2027 tailwind, I think, going forward. And the one thing I've shared this with a number of investors that the historical norm of a giant up in price for a model year really doesn't hold in this environment where pricing has held up the later years of the model run going forward. So obviously, in the low inventory, low incentive world that we've seen, we haven't seen the typical pricing heuristic where we see a lot of pricing erosion at the end of a production run.

So we're not expecting to see a giant pop in prices, but this is an opportunity to deliver more value, and we're confident that when the new trucks come out, we're going to continue to drive the type of share momentum and pricing discipline that we've seen over the past several years.

Perfect. That's very helpful. And a quick follow-up. I was hoping you can share kind of at a high level what you're assuming the declines in EV volume this year, how much of that could translate to incremental ICE demand for GM? And kind of how does that affect your inventory and kind of wholesale volume planning throughout the year?

Well, it's a great question. I don't think anyone really knows what the state EV demand will be in this new environment. I think we're still seeing -- we saw a fairly substantial pull ahead before the consumer credit went away. And so we're -- and looking at other geographies that had EV incentives and then took it away. It literally was 6 months before we really started to understand what steady state would be.

Having said that, we're looking across all aspects of where we can have additional volume color [indiscernible] to the fact that we ended the year with a lower inventory below the 50 to 60 days. So we're going to continue to look at where the opportunities to get more with the full-size truck downtime, we're pretty tight. But the team usually does a great job of pulling out more production when it's needed as an old manufacturing person, those are the challenges that you love to have. So again, we're going to see where the EV market is and then we're going to maximize as much as we can from an internal combustion engine perspective.

Our next question comes from Colin Langan with Wells Fargo.

If I look at the quantified puts and takes in the guidance, they kind of net out. So what is actually driving the expected increase? There's a slight increase in pricing? And then is the rest volume? Because I thought your commentary said, ICE volume flat to slightly up. So what is the gap to kind of drive numbers up year-over-year?

Yes. Colin, thanks for the question. So we tried to do a good job of laying out sort of the key headwinds and tailwinds. But when we lay all of that out together, we actually see some upside coming through on that. Some of it will be in our ability to lower our net tariff exposure. Some of it will be on the regulatory side that we expect coming in as well. And then some of it is going to be continued work on driving EV profitability improvement. So we laid out what we see on some of the fixed cost relief.

But as you know, we struggled this year with sort of step down after step-down after step-down in EV costs that at the end of the day, result in a lot of supplier claims that we've tried to sort of all bring together in the onetime step down. So when you look at it across the board, all of those result in what we believe is going to be a pretty strong year-over-year improvement, as we've highlighted.

So is that a cost improvement that you're implying that outside of what's listed in the slide?

I mean, ultimately, when you look at the listings in the slide as what we've highlighted, it really comes down to a margin improvement on the vehicles going forward because we absorbed so much cost in '25. [ Between ] that, warranty, all the tailwinds that we highlighted.

Got it. Okay. And then why you assumed last year the guidance pricing down 1% to 1.5%. Why that optimism this year? Seemed like a little bit more conservative last year ended up being a lot better.

Well, I think last year, as we were looking through the uncertainty that we saw across the board. We didn't want to make any statements. Then obviously, as we saw the year progress, we took that guide up. And this year, what we've assumed, as per the question from Dan at the beginning of the call, was we haven't assumed any pricing increase at all. This is just we put in the model year '26 late in 2025. This is the annualization of that. So we're assuming that, that holds but we're not counting on any additional pricing coming through. So I wouldn't say that it is an aggressive assumption. It just is more of a function of kind of where we see the landscape today.

Our next question comes from Emmanuel Rosner with Wolfe Research.

Can you talk a little bit about how you're thinking about the mix benefits implied, or assumed in this year's outlook? I know some of it is reflected in these lower EV losses that you quantified, that 1% to 1.5%. Is there another potential mix benefits from optimizing ICE mix in light of the emissions deregulation, or from rebuilding inventories, which were at a very lean level at the end of 2025?

Yes. Emmanuel, the mix -- the mix benefits, as you've highlighted, we certainly are expecting EVs to probably be down for the full year given the cessation of the consumer tax credit going forward. The volumes are somewhat hampered by the transition to the new truck platform. I'm not sure that there's a huge volume push that we're banking on, but obviously, we'll take every opportunity we can.

Now without, perhaps being obvious, the weather that we've seen recently has obviously impacted production likely for everybody given the width and the breadth of the storm going forward. So we've got, I think, some makeup work that we've got to do going forward, but we're confident that the team will be able to do that. I'm glad that everybody has stayed safe through our plants.

And then I was hoping to ask you about the warranty cost benefit of the $1 billion for this year. Can you just remind us the dynamics in drivers of this? Obviously, you have pretty large warranty costs in 2025. But then, I think recently, there was a reopening of the investigation into some of these V8 engines. So how much of it has already been essentially provisioned for? And what drives really the confidence in this year's benefit?

Yes. So all of this starts, Emmanuel, with what we see on the monthly cash and where we see the exposure. It's obviously a very complex set of calculations and analysis going forward across the vehicle universe. But it really begins with cash. And we've seen that flattening, which is the first thing that needs to happen before you can ultimately come back down the curve on accruals because of the lagging effect there.

But when you look at the [indiscernible] and the V8 engines, we've seen really good progress with the fixes that the team has put out there would be oil change and some of the testing that we can do with dealerships. So we believe that will mitigate and hopefully, ultimately, bring that down or certainly not lead to any more increases going forward. So the team is hard at work across looking at every detailed cause of the warranty accrual. It's not just the big ones, but it's the small ones. We're looking at inflationary pressures that we've seen at the dealerships and making sure that the dealers are charging fair prices to us for warranty as they are for retail across the board.

And it's really an all hands on deck, and we're starting to see some really early green shoots on some of that work that's been ongoing. And that's where we think it will compound into warranty savings for us into '26 and hopefully beyond.

Our next question comes from Ryan Brinkman with JPMorgan.

My question, which is on the emissions regulation assumption baked into the '26 guide. The outlook for $500 million to $750 million of savings there from no longer needing to purchase those compliant credits. It seems a bit less than the roughly, I think, $1 billion annually that you've maybe been spending. Is that because some of the purchases sit outside the U.S., or because some U.S. regulatory product purchases maybe at the state level will need to continue in some form? Or what is the right way to think about that?

Yes, Ryan. Obviously, the compliance requirements are pretty complicated. You've got both state, federal, local and international as well. But as we've talked about, the credits were roughly split between CAFE and GHG. So CAFE, we know we don't need to purchase credit as the administration is already zeroed out the CAFE penalties across the board. We took a charge for that in the third quarter and expect that to result in some year-over-year savings in '26 versus '25.

And then GHG is still pending with the administration. We're assuming that, ultimately, that gets resolved over time, but there's going to be a lag effect as the administration works through the regulatory process to accomplish what their objectives are on GHG. So when we purchase credits, we amortize them over the time, the remaining life of those credits. So that's where you're probably seeing a little bit of a disconnect versus the P&L and the cash.

Okay. Very helpful. And then just lastly, on international operations. Obviously, a lot of focus on the improvements in turnaround in China. Maybe just if you could talk about consolidated IO. It looks like a lot of sequential improvement there in revenue and wholesale as well. But just curious about, we're reading a lot about the incremental pressure being placed on some of these regions outside of China by Chinese automakers. Obviously, it doesn't affect you in North America, you're not in Europe, you don't have to work about that. But maybe if you could talk to LatAm or some of the other markets where you operate, and what you might be seeing [indiscernible]?

Well, I think you highlighted, we are seeing improvement from an international perspective, specifically in South America. And when you focus on Brazil, as an example, even with the stiff competition coming from the Chinese OEMs that are heavily subsidized, we've seen improved performance there among other countries in South America. So I think each of the different areas, we've seen improvements, and I think it speaks to the strength of our vehicles and the strength of our brands. So again, it was across the board that we're seeing that improvement.

And -- we are in Europe. We just export into Europe with some vehicles that we have actually the -- the app -- or excuse me, the [indiscernible] and then the [ Vistek ] actually won German car of the years or over the last 2 years from an EV perspective, so luxury perspective. So we're there in a small way as we look to see what's going to -- how the European market is going to sort out, and I think that's a growth opportunity for us. And proud across the international markets for the work they've done to improve their business.

We have time for one last question. Our last question comes from Tom Narayan with RBC. I do apologize he disconnected. Our last question will come from Mark Delaney with Goldman Sachs.

The company is expecting to peruse revenue to be $400 million in '26, up from $234 million at the end of 2025. Can you help us understand what's driving such a step-up this year in Super Cruise revenue?

And then as you think about that broader OnStar Digital Services business momentum that you spoke about. Are there other key areas you're seeing momentum beyond Super Cruise or Super Cruise's the big driver of digital services?

Yes. Well, Mark, thanks for hanging on for the whole call. I appreciate you getting your last question. And the Super Cruise revenue is a couple of things. So remember, when we sell a vehicle with Super Cruise, we include 3 years of prepaid services on that. So that balance then amortizes over a 3-year period. So what you're seeing is growth in those initial rates as we ramp up production and sales of vehicles equipped with Super Cruise.

The second aspect of it, which we're continuing to see really good penetration and attachment rates is on the renewal. So at the end of 3 years, customers are approached with would they like to subscribe. And we've seen attachment rates in the in the low 40% range with people stepping up and renewing that. So that's where you're seeing a lot of the growth in Super Cruise.

In OnStar, we include an OnStar basic package with the sale of vehicles that has -- that amortizes over the life of that period, but it also what it does is gives us an engagement opportunity with the consumer that is really laying the foundation for, number one, enhanced OnStar services currently, but also then second, look at GM Rewards. You look at opportunities when we get software-defined vehicles down the road, it's really a big step function. So that's where you're seeing a lot of the deferred revenue growing and coming in at very attractive software like margins.

My other question was on China. The company has obviously made a lot of improvements there. And I think expecting pretty similar China profits in 2026. There is a view though that the China market, in general, is becoming more difficult after a lot of stimulus in 2025, and maybe demand in the broader China market could be down this year. Maybe talk about what offset there could be for GM specifically, perhaps it's the product portfolio, but I would hope to better understand what would allow GM to be more stable year-on-year if the market does soften?

Well, I think the number of vehicles that we launched this year, the new energy vehicles, I think, are doing very well, over 50% as we indicated with the right software, the right technology and virtually across the board, we have in China for China solutions that I think are resonating really well in the marketplace. And I think that discipline along with the discipline in the way the business is operating of making sure we manage inventory, which allows us to manage incentives. And it also allowed us to have a much better relationship with the dealers because we've had a dramatic improvement in their profitability.

So I think it's if you want to say what's going to drive China's business overall, it's the right product portfolio and then the discipline in which we're managing the business. And I have to give a lot of credit to the team over there for really turning around that business rather quickly [indiscernible] way.

And then lastly, I'll just say both of our strong brands, the Cadillac and the Buick brand, have a long history. The Buick brand, especially, but also the strength of the Cadillac franchise as well is serving us well. So we think we can compete, obviously, not to the extent we were 5, 6 years ago, but we think we could have meaningful -- a meaningful presence there with the right product portfolio at a premium and luxury level.

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

Well, thanks, everybody, for sticking with us through the call. I know we're running a little over, so I'll be brief. But I just want to, again, I want to start by thanking everyone in General Motors, our suppliers, our dealers for all of their hard work to deliver the 2025 performance. But it really goes beyond that because over the last several years, we've really built a foundation of product excellence, innovation, operating discipline and resiliency and agility.

So we know we're going to continue to see opportunities. I think we have the right team to be able to manage through those and continue to deliver results for our shareholders. So I want to tell you [indiscernible] extremely excited about this year and what we can do at an even better '26, and getting North America back to the 8% to 10% margin is something that we're looking forward to executing through the year and delivering for our shareholders. So thanks everybody, and I hope you have a great day. Stay safe.

Thank you. That concludes the conference for today. Thank you for joining. You may disconnect.

Okay. I think we're going to get started here with the next session. Very pleased to have with us Paul Jacobson, CFO of General Motors. GM has been our favorite idea within autos, and we're very pleased to have Paul with us today to discuss the business and the go-forward outlook. So Paul, thanks for joining us as always.

There's a ton we could talk about here, so -- but I want to sort of try to keep it somewhat focused. So let's talk about the -- I want to talk about the here and now, and then let's transition to sort of where we go over the midterm and then where we go maybe a little bit longer term. But we got sales updates yesterday. Things look good. It seems to us like things are tracking in line with sort of what we expected and probably what you expected. But you do have about 3 weeks left in the year. So just curious if you could give us a little bit of an update as sort of how you've seen the quarter play out relative to the guidance you issued at the end of the third quarter.

Yes. Well, first of all, Joe, thanks for having us. And you have been a fan of GM and probably one of the longer ones, too, in terms of recognizing what we've been capable of. And I think when you look at this year, in particular, really proud of what the team has done this year. I think despite when you -- it's hard to even go back 12 months and understand the type of uncertainty and anxiety that was out there. And we were pretty calm from the start and ascertaining what the impact of tariffs was going to be, et cetera. We got definition around it, but we had already started working on what our plans were.

And as we sit here with 3 weeks to go in the year, feel really good about how stable we've been able to do that. I mean there's a lot of work going on behind the scenes, whether it's public policy or supply chain or even on the commercial side. But I think it's a really good testament to how we've tried to pivot and run the business to be flexible. We're not complaining about what's happening around us. We're controlling what we can control and taking a lot of that, as we've referred to it recently, self-imposed cyclicality out of the business, tighter inventory, more disciplined incentives, et cetera, it makes the business easier to run, and we've seen that in these times.

So when you look at right now, I think the environment -- the demand environment has been pretty for us. Let's set aside EVs for a second because we'll spend some time talking about EVs. It's just a ton of noise in the EV space and probably going to be for a little while. But on the ICE side, really, I thought really respectable numbers in November. I mean demand is holding up. There's a couple of areas we could have done better. We knew we had some supply shortages, particularly on like the Chevy Trax and some of the lower-end vehicles, largely to some of the challenges we had in Korea, where we had some disruptions. Those are all short term in nature.

But when you look at trucks, SUVs, et cetera, I think we're shaping up for a good year into 2026 and as we started to lay out that guidance, believing that '26 can be better than 2025, I think has kind of given a collective side of relief from the markets. You didn't really know how to think about the annualization of tariffs, the consumer and so on and so forth. But from what we can see and when you look at the opportunities that are ahead of us in 2026, we're really focused on the cost control items, where can we go and take costs out of the business. And I think that's going to keep that momentum going into next year.

Yes. So let's dive into some of those things. And maybe sort of a good way to sort of transition from what you just sort of talked about and the impact this year and into next is Korea because I think yesterday or the 2 days ago, London came out and said it's retroactive back to November. So I know last time you spoke, you said sort of it's final, but not officially final. Is it now officially final? So we should expect a little bit of upside, I guess, in the fourth quarter. And then we've estimated that could be roughly $1 billion in '26. Is that ballpark accurate that sort of helps keep that sort of tariff neutral to sort of slight benefit in '26 versus '25?

Yes. So let's talk about the short term. So it is retroactive to November 1. That was our expectation when we built our guidance and went on the call. There was an opportunity potentially for some upside if they had gone retroactive to the date of the original deal. In August or when? Back in August, as they had done with some of the other countries. But as I understand it, there was still some tweaking going on between the parties, which meant that, okay, well, we can't make it retroactive back to then because the real deal was November 1. So it is good news for us, and it will help the quarter, but we've built that into our expectations. There's no additional upside from there.

As we think about 2026, I mean, the benefit in the reduced tariff rate is actually a little bit lower than the $1 billion. And we said $2 billion of tariffs at the beginning of the year at a 25% level. But we were also actively working on self-help initiatives and thinking about different opportunities to bring that down. And we were successful in doing that. But we do think that is going to be a tailwind next year, just not as much as the whole 50% because the ultimate tariff bill that we're going to pay this year for Korea was going to -- is going to be a lot lower than the $2 billion from the stuff that we've been working on.

So as we get into these deals getting finalized, -- and hopefully, we start to see more progress on USMCA, which I think is the next big one that the administration has to take on and certainly has a big effect on us. We're still in the mindset where we think we can be flat to down maybe slightly, certainly lower on an annualized run rate than we were in '25 heading into '26. So as we get into fourth quarter results and into January, we'll give more complete guidance on what we see the '26 landscape looking.

And that flat to down is as USMCA Mexico kind of stands right now. So if something happens there, which you said is probably the next thing administration work on, that would be additional upside.

It could be additional upside. But as we sit here today and as we think about '26 being better than 2025, we kind of narrowed it into those pillars that we talked about, improving EV profitability through the restructuring actions that we took in the third quarter, and we've alluded to for Q4, warranty, better warranty, potentially better ICE performance from compliance, if GHG gets finalized, et cetera, there's some good news there. And then that annualization of tariffs is a part of it. And that's all opportunity available to us before we even talk about what is the consumer going to do hold up.

So either it's a bit of a relief valve if we see some weakening in the consumer next year or more importantly, it's additional upside if we could see a stable or potentially even improving consumer environment next year.

So let's start on the -- for lack of a better term, sort of self-help initiatives on the cost side. And you mentioned some of the regulatory stuff, which I guess is self-help, although it's really sort of above you, if you will. So really, let's focus first on warranty and restructuring, rightsizing of the EV business. So you've talked about how you're seeing some better experience on the vehicles and the lag that, that sort of takes into '26. Can you just remind us sort of what gives you the confidence that warranty can be that year-over-year tailwind into '26? Is it just the experiences? Or are there any -- I mean, I know you had some big onetime items from the recall in this year as well. So like order of magnitude, how much could we be talking about in '26?

So it's probably a little bit early to tell, but we think it could be in the $1 billion if not more. So to understand warranty, there's so many things that are going into it right now. Our incidents per 1,000 vehicles has actually been down and trending down over the last couple of years. We've seen a little bit of a pop with some of these supplier-related issues around the L87 engines and some of the transmission issues, which is unfortunate, but these things happen from time to time. But the actual sort of overall quality of vehicles has been improving.

So we've seen a couple of different things. Number one, the cost per repair is off the charts. I mean when you have to replace an engine or you have to replace a transmission, it doesn't matter if you're 25% better at having incidents. The incidents are costing you 3x, 5x as much. So we've got to get after that. And I think we're in a good position on the L87 where we should be cresting over the top and starting to come down that hill. There's also inflationary pressures, and we've seen this not just from dealer labor rates in the shop, but also the way state legislators have legislative bodies have changed the laws to help markups. And we see some activity where dealers are taking advantage of that, to be honest. And that's an industry issue. We've seen that across the board.

So we're talking to the dealers and making sure that we've got a fair balance about making sure you get the right retail markup and return on your investment for the work that we're causing with the warranty. But let's not make sure that it's over the top. So I think there's some inflationary pressures that we can work on. The bulk of it ultimately is just getting at this cash spend. So what we alluded to is that as the cash spend is going up, your warranty liability is going up at a higher rate because just remember, liability is all about the current spend level projected across the future set of vehicles as well as the vehicles that are out on the road.

So the first thing that you have to do is flatten that curve on warranty spend. We're flat -- we're pretty flat on the cash outflows per month. Now we got to bend it down, and that's where the lag effect comes in. So the year-over-year improvement in warranty is really going to be a function of when do we see that curve come down and how much of that benefit do we get in '26. But coming down the curve, if it doesn't help us in '26 as much as it could, it's still going to be a tailwind into '27. So this is about managing it for the long term, and we're all over sort of every variable in the equation to try to get after it.

On the EV side, and you mentioned there's obviously a little bit of noise in the market now. So there was pull forward, now there's give back. We'll sort of see where things settle out. But I think our expectation, I'd say, market expectations are that EV demand will be lower next year than we've seen this past year. You've talked about restructuring, but then Mary and the team also sort of still talk about EVs being sort of the North Star.

So can you just help us square those comments, how you're sort of really going about rightsizing the capital that you've already invested, how you sort of think about additional sort of future investment? Because I think that's still one of the, I think, the concerns that investors have here, which is that you're going to be forced to or going to invest in product that really doesn't have the same return profile as the rest of your business.

Yes. And I think this -- I'm going to be a little bit more long-winded on this answer because I think you've got to provide the overall context because when we were sitting here a year ago, the apprehension in the investment community was the $7,500 is going to go away. The President has made that a signature that we're going to take away the consumer tax credit. Everybody was worried about that. Nobody saw coming the regulatory framework changes, which was the stick to the $7,500 credit. And when you really sit back and digest the overall economic impact of the regulatory environment on the $7,500, the $7,500 was a drop in the bucket compared to the cost of the stick. And that was what was really driving the industry.

So you saw and you still, to some extent, see the behavior even post September 30, where manufacturers were offering massive irrational incentives on EVs. Some manufacturers out there offering 50% to 70% incentive levels. There's only one reason you do that. It's not to have a successful EV business model. It's to accrue and acquire credits to be able to continue to sell your ICE franchise. So that's the type of irrational environment that I think what this administration has pulled back from is saying, look, we want an industry that makes the vehicles that consumers want. And there are some consumers that want EVs. We've seen it, and that's grown over time. It was there before IRA. It popped after IRA. It's come back now that it's come back down since IRA consumer tax credits are gone, but it's not 0. And it's likely not going to be 0.

So when you think about all that landscape and what does it mean for GM, we were basically creating the infrastructure to comply with the laws and the regulatory environment heading into 2030, which was going to require 50% of all vehicles sold to be EVs. And we have always talked about the penalties for violating GHG stringency. It's far greater than 100% of the net sale value of a vehicle, let alone the margin. So nobody is going to do that. So we set up this infrastructure to be able to do that. And now what we're having to do is to pull that back. So I don't -- I'm not a fan of writing off capital investments. I think we've got to be very disciplined to try to minimize that. But if ever there was an opportunity or a situation that drove that, it's this seismic shift in the regulatory environment.

So what we're doing is going and saying, I'm never going to get EVs to profitability if I'm producing 150,000 to 200,000 EVs on a capacity set that was tooled to build 1 million because everything is costing 5x as much in terms of overhead absorption, et cetera. So ultimately, what we're doing is going through manufacturing segment by manufacturing segment and say, what kind of capacity do we take out because of the regulatory piece of it so that we get a more accurate picture of where our EV trajectory is. And that's why we haven't talked about variable profit or EV profitability this year because it's just noise, right, until you get that rightsized and really understand it. We're making good progress on reducing the cost of the vehicles. That's been totally absorbed and hidden by supplier claims, fixed cost allocations, cost thickening from underutilization of plants, et cetera.

So what we've got to do is we've got to get out from underneath that. That was part of the restructuring charge that we took in Q3. We've alluded to more work. That work is still going on in Q4. We're not prepared to talk about what it is today. But the intent of all that is to rightsize that footprint to make sure that going into 2026 in this new environment, whether EV adoption sits at 5% or 7% or it goes back up to 8% or 9%, we're in a position where we can actually have much more transparency into the profitability of those vehicles going forward for us and for our investors. So that's where a lot of that upside is going to come because, like I said, even though this year, we were reducing the costs, the losses were continuing to grow because you have onetime charges coming in all the time.

You had certain facilities, which were, let's say, EV dedicated. You have others like in Tennessee that were sort of more flexible. You did mention, right, EVs aren't going to 0. There is still some demand. And again, I think most people would agree that with enough time, right, you will see EVs start to sort of move higher again. Is that flexible capacity model something you will look more towards as you -- if and when you sort of begin to reinvest in the business? Or is the dedicated facility something you'll need to reevaluate?

Well, I think it's a combination of both. I mean, at first, it starts with the capabilities of the plant, right? You've got to make sure you've got the right plant setup that can absorb the makeup space, et cetera, to be able to do ICE and EV on the same line. Spring Hill is a great example of that. I think Fairfax, we're going to be able to do that as well. Other plants are just geared towards one or the other. So Factory ZERO now becomes the sort of linchpin for EV production that was going to be Orion, but that was going to be at such volume. We weren't going to be able to fill it for years at a lower EV demand or EV penetration.

So the natural switch, which we announced earlier this year was to pivot and onshore more truck and get some incremental SUV production at Orion on the ICE side, while still sort of optimizing the capacity utilization at Factory ZERO. So that's an example of us pivoting, and it's expensive. There's no doubt about it. But I think when you look at $4 billion of incremental capital that we announced this year for reshoring, but we only took our capital guide up by $1 billion a year for 2 years. That's the type of pivoting and dynamic management that we need to do because the priority has changed, right? The more we can do that and the more nimble we can be there, I think the greater longer-term returns for shareholders we can drive.

So we talked about warranty. We talked about the EV profitability. There are other elements, which you sort of alluded to from a regulatory environment. One is just sort of the absence of credits, right? I don't think you've quantified despite us sort of asking multiple times if you're willing to today, that would be great sort of what it was in '25 and how much of an easy sort of unwind that is in '26. Beyond that, I think the thing other investors are really focused on is mix. And I think your message has been that this is a big -- this is a potential tailwind over time, but maybe not that meaningful in '26.

But correct me if I'm wrong and just sort of how you sort of view mix going forward. And really, I think one of the things we struggle with is like it seems like a very difficult exercise to actually figure out where demand left unconstrained by a regulatory environment can go because we don't really know what the market looks like because you and your competitors have been supplying the market with vehicles to meet some of these onerous regulatory requirements. So how do you think about that as an organization? And is -- you mentioned the $4 billion investment in the U.S., a lot of that was or some of that was for trucks, SUVs. That can be viewed as a little bit of a sort of maybe tariff mitigation. But is the other way to sort of interpret that as a clue to where you think industry mix can go?

Yes. Well, first of all, on the regulatory and compliance front, what we have talked about is in 2024, we spent about $2 billion on credit. Now that's not an annual number because you're buying ahead and you're amortizing them over years. But last year was about $1 billion in compliance expense that we ran through and roughly half between GHG and CAFE. You've seen us write-off in Q3. We wrote off about $120 million of CAFE credits. Those are now 0, but we also had liabilities going forward that net out from that and so on. So CAFE is done. And the administration is continuing to look at the standards in addition to zeroing out the penalties. So I think that's all good in terms of getting consumers what they want to buy.

The other piece on the GHG, which constitutes the other sort of half of that expense load, and it's been trending at a little bit of a higher rate in 2025 just because of the mix that we've been producing, it's not done yet. We expect that to be done in 2026, in which case, there would be a headwind a tailwind because we are expensing the credits right now and the compliance costs that we won't have to next year. So we do think, assuming that they're on the time line that they say they are and what they're working towards, we do think that there will be a tailwind for that in 2026 and part of what's giving us the confidence going forward.

On the bigger question, I think that is the next 5 years, the fundamental strategy piece that we've got to get right because we've been shaping up for the last 2 to 3 years, a portfolio that was going to be compliant with the prior standards. So that meant more EV offerings, fewer ICE offerings. And now we're pivoting that back. So we've said pretty publicly, we're still going to invest in EVs. The investment in EVs is going to be very different than what we saw in the last 3 years, where it was about building a portfolio, getting more entries, which you have to do if you're going to get to the type of penetration levels that the prior administration was looking for. We have that portfolio. There's no reason to not necessarily still offer them because you've got a lot of sunk costs into it. You got to make sure that you're going to be able to build them profitably and before you scale up, but we have that opportunity to do so.

So instead of the capital that we're spending today is not about proliferation of the portfolio, it's about getting the cost down. So LMR technology, prismatic cells, et cetera. These are going to take thousands of dollars out of the cost of the EVs and position us well for when EV demand starts to grow again or if there's a regulatory shift, et cetera. So when we talk about EVs in the long run, we still do think that long term, customer adoption is going to go up. The capabilities, the performance of electric vehicles and what they can do is winning people over. What is causing that to be slow is the anxiety of range of charging speed of charging locations. That's going to get fixed over time, and it's going to improve over time. But what we do know is that roughly 80% of customers who have bought an EV have said their next vehicle purchase will be an EV.

So you're starting to mount with some smaller, albeit slower growth rate of incremental adoption, but you're also starting to bring in the people who might be on their second or third EV that are coming in. So that's what I said before that before the IRA, EV adoption was in the 5% to 7%. So it's reasonable to believe that maybe that goes to 6% to 8% over the future. But right now, it's just noise. I mean you look at our November numbers for EVs, they were down, right? Well, of course, they were down because some people bought their November EVs in September or August. So I don't think we're going to know where natural demand for EV sits for probably 4 to 6 months before we start to see some consistency out of that. And we start to see what is the competitive environment going to be because really we're still seeing increased discounts and incentives on electric vehicles today when everybody has a sense of where the direction is going.

So there's 2 reasons that why a manufacturer would do that. Number one is they're worried about whether the compliance relief actually happens or not, and they still got to get credits. or number two, they might be liquidating their inventory. So in a world where the competitors are liquidating their inventory gets us actually a cleaner sheet and a cleaner landscape to bring our EVs, which people have adopted pretty well based on the mileage and the capabilities and so on to actually come to the market in a much more rational environment, where we think that could be helpful. So what we're really doing now is thinking about producing EVs in lower volumes while we work on cost reductions and we work on market stabilization. And then hopefully, as we get into '28 and '29 and we get the lower-cost battery cells with more capability, then we start to see adoption take up, and that could be a recipe for us to be really, really successful.

But it's only -- so you could get maybe to variable profit on the first leg, but to get true profitability, you do need that scale eventually, right, that volume inflection. Is that fair?

Well, I think what we're trying to do is to bring down that breakeven point with the restructuring work that we're doing right now because if I have to grow into 1 million units of production capacity, yes, there's a lot more scaling than if I cut that capacity down significantly to something that's more manageable for the next 5 to 10 years and where we think that's going to go. It's going to be a lot faster for me to actually fill that up.

So we talked a lot of -- we focused on a bunch of the potential tailwinds into '26, but this is -- as I'm sure you quickly learned since coming to GM, it's a very complicated business. There's lots of -- there's always puts and takes. So one of the things which you've alluded to a little bit, but I was wondering if we could just spend a second on is launch costs next year because you do -- you are planning to, I think, refresh the full-size truck platform. There's usually some costs associated with that. Now you're always launching stuff. So I don't know whether that seems like a larger program than normal. So maybe there's a little bit of an incremental headwind there.

And then you mentioned -- you alluded to earlier, some of the additional capacity of the $4 billion in the U.S. I think that starts maybe late '26 or really more '27, but some of that presumably needs to get spent in advance of that. So how do we think about that level of investment on the cost side next year?

Yes. It's not something that's over the top. We're worrying about it because we're always constantly refreshing something. But we will have some sort of restart-up costs for -- at the end of '26, getting Orion up into '27. So we'll have to start staff up ahead of that, et cetera. But all stuff that we think we can absorb and still be better in '26 than we were in '25. But when you look at that truck platform, I mean, it's a real opportunity to take the gains that we've gotten in share and the performance that we've seen on our incentives and relative incentives to the industry and really amplify that on a really high-quality, highly desirable new platform. So we're excited to see that come in. And I think that's going to be a good opportunity for us as we get into 2026.

And anything to note on material costs or metals, like we've seen a little bit of movement in metals. Is that anything worrisome?

It's -- I became sort of inundated 5 years ago when I started with worrying about every possible variable. And what we've got to do is just make sure that we manage that. There's going to be noise in there. I think the consumer has been really resilient over the past several years on price. I'm not sure that going into '26, we can count on that same backdrop into '26. Nothing in the data indicates that there's any weakness, but you just got to be ready for it. So as we've done in past years, we'll probably come into the year conservative on our commercial and our revenue assumptions. because it's easier to adjust the business if pricing and incentives are stable than it is to hit the brakes on everything else and bring it back.

So we use that as a bit of a disciplinary tool in our own budget setting process so that spend doesn't start to accumulate because in any budgeting exercise, people want to spend to their initiatives first and then deliver their performance later, right? So we can't be in a scenario where we start to raise our costs and then not see that performance come in. So we use that as a real disciplinary lever on the business.

But in terms of that sort of K-shaped recovery we have been seeing, you don't really see any major changes from that from the consumer.

I mean there's nothing in the data right now that would indicate. Again, if you filter out the EV noise, some of the small crossover noise that I mentioned earlier, November looked a lot like October. We have fewer production days in December, and we got to get through the seasonality issues. But I think the year is going to close out well and very much in line with our expectations. And heading into next year, a lot of reasons to be optimistic.

One of the other things you've had to focus on a lot since you've come to GM is supply chain management, diversity of supply, right? And I think -- and I think there's a couple of things going on here, which I'd like to touch on. So one is, right, there was a report that you trying to get the supply base to deemphasize China. I was wondering if you could sort of spend a minute on that and comment on that.

The second is there's -- over the past couple of days, there's been a lot of media and reports and a little bit of worry on memory for automotive and how there could be a shortage maybe at some point next year or maybe in '27 or at the very least some additional prices. So how are you viewing those 2 parts of the supply chain?

Yes. So first of all, on the resiliency project is what we call it, it's not so much deemphasizing China as it is deconcentrating or taking out the concentration that we've had in. And this is work that really kind of began in the immediacy of post COVID, where we saw ourselves really susceptible to geographic shocks to the system, whether it was some of the fires that we saw in Japan, the chip shortage as well as COVID in and out of China and back in again and so on that we realized we just needed to actually distribute our supply chain a little bit more. So that work has been going on.

And I think we're probably farther ahead than most of our competitors in that work. And we're in the sort of final legs of it, and that's why you're starting to hear more and more about it. But it's raised our costs a little bit for sure. You can't do that, but it's important because it's overall stability of the company and the supply chain as a whole. So that work is ongoing, and we should be able to finish it in the next -- within the next couple of years is what we're looking to do.

On the broader piece on chips, I think the nature of chip buying has really changed since 2021 and the chip shortage that we have. And you're still seeing some of that with Nexperia. So for example, some of our chip costs right now are -- we're spending more money on chips right now because we're having to go source them from all over the place to make sure that we maintain production. So we've seen some cost pressures in the current quarter as a result of that going forward. But the team has done a great job of finding them and make sure they're balancing them in our production. And I don't think we've had nearly as many production challenges that some of our global competitors have.

But the way we buy chips is different because the other thing the auto industry buys is typically older generation, lower-margin chips that if you're a chip manufacturer, you look at that and say, I don't -- I would rather not use my capacity to build that. I'd rather build the next generation of higher-margin AI chips, et cetera. So we've had to make investments. We've had to co-source. We've had to go in and whether we do a prebuy commitment or we do some capital injection joint ventures, et cetera. The way we're buying those chips is very different. I think that will help protect us into the future against what those demands are.

Okay. One question, and we'll open up to the audience. And just as a reminder, if you scan the QR code on your table, you can get a question. It'll show up on an iPad, and I'll ask a question on your behalf.

But before we do that, just obviously, one of the question that always comes up and we're saving it for the end, but capital allocation. So you've been aggressive buyers of your stock over the past couple of years. The cash remains really, really high. We did talk about some of the other sources that you need to use for that cash, some restructuring, right, some -- a little bit higher sort of CapEx. But overall, the cash generation still remains pretty strong. How do you think about the pace of returning that cash over the coming years here?

Well, look, I think at the end of the day, we've seen a little bit of an uptick on our multiple. But by any measure against the market, against the industry, against our own historical performance, we're still, I think, pretty significantly undervalued. And I think the Board feels that way as well. So buying back the stock is one of the best investments that we can make. We still have the same capital allocation policy that we've been following very carefully, which is, number one, invest in the business. Our capital budget of $10 billion to $12 billion for the next couple of years is informed by 2 things. One is affordability. We can afford to actually invest a lot more, right, with the type of cash we're generating.

But number two is, do you have the infrastructure to deploy it effectively? And the answer is we're kind of at a limit there because I don't want to have to go hire a lot of logistics people, buy real estate, get more engineers, et cetera, to be able to absorb that additional capital base and actually bring our margins down because of the fixed costs associated with managing that capital. That's not an effective use. So I think we're in a good position where we're investing in the priorities that are important for the next 5 to 10 years or more, and we've got to continue to balance that. So we're in a good range on that $10 billion to $12 billion.

Second is the balance sheet. Balance sheet is in great shape. We used an opportunity to pay off some maturities this year. We don't really have any maturities next year of any size, some capital leases, amortization, et cetera. So there's a little bit of work we can do, but there's no urgency to go out and say the balance sheet needs to be fixed. It's in a really good spot.

So that leads to the third leg of the stool, which is returning capital to -- and we've established a really good track record of not only buying back shares, but also starting to step into a bigger and bigger, more meaningful dividend. I think we're going to continue to do that. The priority is as long as the stock remains as undervalued as it is, the priority is to buy back shares. And I think you'll continue to see that from us going forward.

And no changes with everything going on to the $18 billion to $20 billion cash level you want to...

No. I mean when you look at the cash, $18 billion to $20 billion plus we carry about $16 billion in revolving credit, we have enough to be able to get through anything that might come our way. But what I'm really proud of the team is we've taken a lot of that historical cyclicality out of the business because the biggest thing that would always happen in a downturn, and I'm not predicting a downturn, it will come one day, and we need to be ready for it. But one of the things -- first thing that would always happen in a downturn is demand would soften and I've got 4 months of inventory sitting out there in dealer lots, et cetera, that I've got to go stimulate demand for while the flood gates are still open on more production coming in. That's what I mean by self-induced cyclicality.

So you take a cycle that should look like this and make it look like that because you're chasing demand at the exact time you don't need to be doing that. So we've taken 30% to 40% of the inventory out. The working capital drain that results from that is a fraction of what it's been historically, which gives me the comfort that between $18 billion to $20 billion plus my revolver capacity, we don't need to take cash up under virtually all circumstances. Now if there's another global pandemic, God forbid or something like that, I'll change that story. But I think if it's typical cyclical stuff, I think they're in pretty good shape.

Excellent. I don't see any questions coming in. So maybe just in the final minutes here, and let's focus on sort of GM more into the future. You've started to talk a little bit more about, let's say, the tech side of GM, right, some of the software, some of the services, you might disagree with this sort of reassessment, but restarting sort of the autonomous venture. But there's also been, it seems like a bunch of tech leadership changes at GM over the past couple of weeks. And I know Sterling is in now. So -- and he's -- I think -- it seems like this is sort of him maybe reevaluating sort of the landscape and how he wants to be organized as sort of GM goes towards this vision.

But maybe you could just shed some light on what Sterling has brought to the organization, what some of these actions are going and when we can start to sort of get a little bit more information and see some of that inflection in that tech business because you mentioned the multiple and that could be one potential factor for the multiple to rerate as the market appreciates that a little bit more.

Yes, for sure. And I'm thrilled that Sterling decided to join us. It's been great getting to know him and working side-by-side with him. He's just a force. I mean he's just brilliant and getting more up to speed with the size and the scale of GM and what it means, but also the opportunity set that's ahead of it. We talked -- we had a GM Forward event a couple -- a few weeks ago, where we talked about that vision, talked about eyes off, hands-off autonomy in 2028 and the retail offering. So while you said we're kind of restarting the autonomous effort, we never really gave it up. I mean what...

I thought you would disagree with that?

Yes. Well, I understand the characterization, but what we really walked away from was robotaxi. And we faced some criticism for that. But when you look at capital stewardship, you really have to ask yourself is, if I have to fund that, which is what we were seeing out in the market was that we were going to have to fund that, can we compete with the 0 cost of capital, Waymo's, Teslas of the world that are doing the same thing. And that's where we said, let's focus our efforts on how do we actually bring that technology package into a retail offering. And that's what we're working on doing and getting there.

And with Sterling's leadership, we think there's an opportunity to do that. But even beyond that, we started to increase our disclosures on software. We've got over $5 billion of deferred revenue on the balance sheet right now. That is starting to come in, and you're going to see more growth into '26 and '27 and beyond in the -- both the deferred balance, but also what we're bringing into the P&L. And that's coming in at a 70% or higher margin, whether it be from Super Cruise or OnStar, et cetera. So there is a big bright future there. We alluded to this in '21. Nobody believed us at the time, and we've been kind of quiet about it as we get SDV 2.0 up and running in the next couple of years.

But importantly, what the commercial team has done with the limited resources that we have has been really impressive, and I think bodes incredibly well for what the future of the industry can be because the more we can derive revenue out of the car park versus just the wholesale model, the potential in terms of the revenue and the margin expansion is -- becomes off the charts, and we're laying the foundation for that right now.

Great. Well, hopefully, we'll be able to talk to you more about that next year. So Paul, thanks again.

Well, the good news is it will accrue to fewer and fewer shares.

Excellent. All good.

Thanks for the time. Thank you.

Okay. Great, and we're live. Thank you, everyone, for joining. This is the 16th Annual Barclays Global Autos and Mobility Tech Conference. I'm Dan Levy. I lead autos research -- U.S. autos research coverage at Barclays. Really pleased to see how the conference has evolved over the years, and we're really glad to kick it off with GM.

A very interesting and resilient earnings power story in the face of what's been an interesting year with tariffs. So I'm going to run through a series of fireside chat style questions. We have Paul Jacobson here, the CFO.

I'm going to run through a series of questions. Anyone who has questions toward the end, we can take some Q&A. If you have questions via e-mail, please e-mail my colleague, Josh Cho, [email protected], and you can ask your question anonymously. With that, we're going to kick it off. Paul, thank you so much. Why don't we just start with -- you've given us periodically on some of these updates, a sense of how the quarter is going. We're toward year-end. You gave us an updated guide on the 3Q call. Maybe you can just give us a sense of how 4Q is shaping up and any developments we've seen?

Yes. I would say, first of all, Dan, thanks for having us, and it's great to be with everybody this morning. It's a rainy day here in New York City. But I would say that the quarter has been going right in line with our expectations. It's obviously been a noisy quarter as we came through October with the sunsetting of the 7,500 tax credit -- consumer tax credit.

But as we look at where broad demand is, it's held in there really well, I think, consistent with the way we had guided for the quarter. There's a lot going on, as we talked about on our call with making sure that we're positioning the company for 2026 with lower EV demand versus the capacity that we've built up. I'm sure we'll spend some time talking about that.

But generally, I think our trends are good. We saw full-size pickups pick up a couple of tenths of share in October. So I know a lot was written about share erosion in September month. And we don't put too much stock in those month-to-month movements, we just are looking at trends. Because what we don't want to do is we don't want to overreact and be impulsive about the discipline that we've achieved in the marketplace. So whether it's inventory discipline, incentive discipline, our competitors are going to do what they're going to do. It's really about making sure that we're getting the vehicles in the hands of our consumers and demand for the vehicles remains really strong, and it has despite the volatility that we've seen across the market.

Great. Okay. Well, you referenced '26. And I think that was to a lot of us, one of the big positive developments on the last call that you did give us a sense that '26 can be stronger than 2025, I think, which to some people early on, that was a bit of a surprise given the tariffs and the way that, that flowed.

But you talked about a number of factors, reduced EV losses, warranty costs, tariff offsets, regs, fixed costs. Maybe we could just unpack. And maybe let's just start with an early look at how you're thinking about the industry right now. Maybe any preliminary views on what type of SAAR because we have a lot of pull forward this year, what type of SAAR you're looking at? And maybe you could just talk about the broad pricing environment that you expect.

Yes. So I mean it's too soon to conclude on what pricing for all of '26 is going to look like. And so it's interesting when we talked about the '26 versus '25, there wasn't anything in there on price. It was just really looking at the things that we know we can control and we can execute better on warranty. We're doing the rightsizing of the EV manufacturing footprint, et cetera. That will give us a tailwind. We expect tariffs to be much more stable, whether it will be enough to overcome that extra quarter in '26, still unsure, but a lot of things are kind of breaking in the right direction.

And then as we look at the regulatory environment, we should start to see some of the savings. And if the administration follows through and is able to make sure that they're adjusting on the GHG, the way they've done CAFE. There's still a lot of procedural stuff that has to happen. There's some tailwind there as well. So I think all of it is sort of girded by the expectation that the consumer is going to remain pretty stable.

And if we're hanging around in that 16 million unit, plus or minus a little bit, I think we can do really well. And that's the power of inventory discipline and ultimately, what we're doing with incentives. It's just much more consistent than having to just try to flex to get that extra unit of sales where it just doesn't make that much sense to be able to do that. So that stability in this market feels like a good environment to us to continue the success and the momentum that we've seen.

You talked about inventory. I think we've seen industry inventory has ticked up the last couple of months, 2.8 million units. We've sort of been in this 2.5 million to 3 million unit range. Are you comfortable with that as a level that can provide -- still provide an umbrella of price discipline in the industry?

Yes. I mean, it may sound a little sacrilegious. I don't really subscribe to the Dave on hand of inventory mechanic because I think you're trying to solve for too many variables at the same time. So if you actually look at our total dealer inventory, it's down about 16% year-over-year at the end of September. So we're managing to that number. And sometimes, the days might be a little bit higher because the SAAR is moving around so much, and we can't flex the capacity that fast.

So we've maintained that discipline. And I think when you look at the way we've responded really kind of over the last, I would say, even 2 to 3 years, to competitor inventory and competitor incentive levels. We've remained remarkably consistent. It's actually done quite well for us in terms of the consistency of our residual values and our sales, et cetera. So I'm okay with where the industry is right now. There's a lot of noise around EVs. And I think there's going to continue to be for the next several months until we find where is that natural sort of non-incented demand level for electric vehicles. We know pre IRA.

It was sitting around 5% to 7% penetration. Maybe we level out there, maybe it goes a little bit lower, maybe it goes a little bit higher based on repeat customers. But we're just going to kind of take it easy a little bit and see where that goes. And I think it's going to take a little bit of time to settle because we have seen a lot of noise out there, both in inventory and incentive levels that, to be honest, post I seems a little bit confusing with some of the competitive pricing that we see.

And maybe just to double-click on the competitive dynamic. One, we have more capacity that's coming into the industry, somewhat '26, but also '27. Two, we know that one of your competitors that had seen share drop quite a bit, another U.S. competitor that's seen share drop seems potentially interested or trying to rebuild that share? So how do you think about that competitive dynamic considering the capacity and maybe some others that might try to recoup the shares?

Well, I mean, I think that goes back to what we've been saying all along because I think many out there we're saying with the change in regulatory environment is our CapEx is going to come down significantly. And we said, no, we don't expect it to, but we will pivot some of our dollars from EV to ICE because we've got to maintain that freshness of the portfolio. It really comes down to the quality of the vehicles. incentives and pricing can have a little bit of an impact.

But when you're producing the type of portfolio that we have that has proven to be really resilient against a lot of those competitive pressures. We think that sustainable and that's where our discipline comes from. So as we go into 2026, we have the new trucks coming in. So we feel really good about where our position is going to be. in trucks, and that will lead to more and more. So I feel good. We continue to believe that we've got the best portfolio in the history of GM and customers are really responding to it.

Okay. Let's maybe unpack some of the cost elements. So I just put a second on warranty. I know this has been a year of headwinds at roughly $1.5 billion this year. There was an issue with L87. Can you just give us a sense of -- what has happened on warranty? And what is the line of sight for the warranty situation to improve?

Yes. So this has been probably 1 of the areas that has probably been most disappointing about our execution, but one that we're all acutely focused on right now. So I think if you really step back and think about what's happened, I think a lot of these things have been driven by supplier quality issues. And I think when you look across the supply base, there's been a lot of challenges with labor retention and so on and so forth, especially as you go down the tiers.

So we're really focused on making sure that we get the sort of quality supervision in there, and we're spending more time helping them with quality systems to make sure that we don't have these big spills that we've seen, but we're dealing with it. I mean the centerpiece of the strategy is, number one, keep the customer we're right at the center of the strategy. So that actually impacted us this year because we took a number of 87 engines out of manufacturing out of the production cycle to get into the field because we saw that customers were waiting too long, et cetera.

So those are the types of conscious decisions where in a short run, it cost us some units that we could have otherwise produced. In the long run, it's absolutely the right thing to do for our customers. And so we'll have a little bit of momentum, I think, that way in 2026 as we're largely getting through that. What we've started to see in the last probably 2 to 3 months is a stabilization of the monthly cash flows because if you understand how the accounting works, it starts with the cash and then it really projects out across the entire car park, the incidence and the cost of the warranty repairs. So the first indicator that we can start to bend the curve down is getting that monthly cash spend flat, bringing it down and then that will start to have a lagging effect on the accrual going forward.

So we're optimistic that we'll be able to turn that as we get into 2026. And one of the things that we're counting on to help give us a tailwind into next year.

Great. Tariffs, you said should be better. And I know there's a lot of moving pieces in that. Maybe you could just help us unpack what's going on? What's in the numbers, what's not in the numbers I think you haven't embedded any benefit from Korea this year. That seems finalized. There's some potential for Mexico, Canada, and we know that -- there was some relief on the parts side, expanding the number of parts codes that are -- that can get the rebate. So maybe you could just walk us through the puts and takes on tariff for both this year and next year. I think the prior guidance you gave was $3.5 billion to $4.5 billion gross, the 35% mitigation.

Yes. So you're right, Korea seems finalized, but it's not. And until it is, we're still paying at that same rate. So we're optimistic that those parties are going to come together and actually get that completed, and I know they're making progress on it. When that gets done, how it gets done in terms of what's the effective date, et cetera. we'll have somewhat of an impact on us for the year, but not huge. But it is going to be a tailwind for us into 2026. We feel very good about that, where it's heading. .

So as we look at '26, we pick up an extra quarter. That's the biggest headwind. But I think we overcome a lot of that when you look at Korea getting done, Mexico and Canada potentially getting done. The expansion of the MSRP offset and keeping that at 3.75 is really a strong level of support for the industry and will help us tremendously as we go into '26 and already helped us in '25. I think we tried to communicate that on the call that it allows us to capture that. So there's current savings, and that's why we took it down from 4% to 5% to 3.5% to 4.5%.

So that will be an even bigger tailwind into next year that will help us overcome that extra quarter. So a lot of moving pieces, you're right, but I really applaud the team for how they managed through this because we didn't panic, right? It was -- we had a playbook. We knew at the end of the day, it was probably going to start high and negotiate back a little bit as the administration made progress with various countries.

But we stuck to that playbook, and it really, I think, worked well for us going forward because all of this becomes easier when you're managing with discipline. So you don't have 6 months of inventory on the ground. So you don't have to respond with discounts et cetera. You're just much more nimble the way we've been running the business. And that, I think, has paid huge dividends for us.

Okay. The EV question, which I think this is -- to us, the largest developments or the largest change in the U.S. industry and really taking away what we call the carrot and the stick. So on our numbers or our guests, you can verify this, if you want, you're probably losing roughly $4 billion to $5 billion on your EVs.

I will verify that's your guess.

Good. Okay. You've talked -- there's a few different levers to improve the profitability. Maybe you can just unpack those between mix, credit, overhead, how do we think about the opportunity to reduce that loss?

Yes. Well, I'm really glad that you mentioned the carrot and the stick because I think the market for most of this year has been really singularly focused on the carry. We read a lot about, well, what's going to happen to EVs when the $7,500 goes away. But what we saw is that the regulatory environment under the prior administration, which was aiming the industry and really sort of prodding the industry to get to 50% EVs by 2030 under the power of the regulatory environment was creating a lot of dislocation, right? So we saw competitors out there discounting EVs by 70% to 80%.

Well, that's not a viable business model. That's a model to acquire credits, right, to be able to basically continue to pay for ICE vehicles. So a lot of irrational behavior when you look at the market for electric vehicles. That's got to normalize and settle down, but I think it's fair to say that the demand is going to be lower than what it was in a world where the carat existed. So we have, for the last few years, been gearing up to be compliant in that world. And as we had said a few years ago, building up to about 1 million units of capacity for electric vehicles. Well, it's probably now going to be a while before we get to 1 million vehicles of demand. So we have the capacity there.

But what we've seen is we started to pull back production schedules and production schedules in '25 was there's a wave of adjustment costs that constantly happen every time you take that down, whether it's suppliers or cost thickening at plants, et cetera. So part of the reason for the charge that we took in the third quarter, and we foreshadowed that there's going to be a charge in the fourth quarter related to this work is how do we get the footprint rightsized so that every EV we produced isn't shouldering a big burden of underutilized capacity.

So I don't like writing off capital. It's certainly not what we intended to do. But with that regulatory change, we have to take a big sort of step change to rightsize what that capacity looks like, and it'll put us on a much more stable footing going forward on our march towards EV profitability. And it's going to be a longer journey. I mean we've said scale is a really big piece of it for us. But when you look at the next few years with what we're doing with LMR technology and going to prismatic cells, et cetera, we've got a road map to consistently improve that EV profitability.

And if we can sort of shed that overcapacity burden and rightsize it and take a couple of sort of clean sheet approaches I think there's a better sort of broader profitability story for electric vehicles over the next 5 years. And as we -- long as we continue to produce to demand, I think that will be good. And I think it will work well for us.

Just on the red credit, can you just give us a sense how much you've expensed this year? And is there a further need for Red credit into next year?

Yes. So '24 is probably the best year because we've already sort of written off the cafe and so on. So 24 was about $1 billion of sort of total compliance costs across the board. And in the past, we've spent as much as $2 billion a year from time to time on credit. So that will be both in accounting savings and a cash savings going forward. We -- I don't think we bought any credits in '25 even before the regulatory environment shifted.

So I think we see that as a tailwind. Again, it's got to be finished because the greenhouse gas is still there, but I know procedurally, they've said that they're working on it. And we expect that, that will be done sometime in 2026, if not sooner, and that will be another tailwind for us.

Then maybe how do you balance the R&D overhead spend? Because you went through a very large product push now that as far as we can tell, after Bolt there's not really any new EV product. So maybe there's not maybe as much product, but you do still want to push forward on maybe advanced technologies. So how do we think about the level of R&D or overhead spend on EVs?

Yes. So what I would say is it's really sort of compartmentalized. So all of the R&D right now is on architecture changes, battery cell changes and pack changes Kirk Kelty is doing an amazing job as is Sterling Anderson getting up to speed on the business and really having an influence. And that's part of, okay, let's shift from product proliferation and making sure that a strategy that follows the compliance environment to get to 50% EVs has to have a broad swath attached to it because you have to reach many markets to be able to get there. We've got that. We've put the capital into it, and we can work on now improving the profitability of 1 of those vehicles through structural architectural changes.

But the bigger piece and where I think the real importance is it's not just EVs, it's also on ICE, it's on the software-defined vehicle. We had a tech forward day for the media a couple of weeks ago and really started to lay out eyes off hands off by 2028 and getting to software-defined vehicle, which is going to be what the future is. And we think that, that can be done with our approach, both in EV and ICE going forward. So irrespective of what the next regulatory environment looks like, we're going to be well positioned to drive that software and tech revenue into the P&L as we go out over the next few years.

Okay. I just want to talk about margins more broadly. And I told you I've put in a little joke that any GM historians out there. spotty, executives from GM used to go around with pins, this must have been like some 20 years ago, that said 29%, because it used to be 29% markets share. You have pins on your lapel. You're obviously not at 29% share, but you had pins on your lapel. So you're talking a lot about 8% to 10%, but I don't see a pin on your lapel that says 8% to 10%. So when does that 10% come out?

Well, you can't see my 8% to 10% tattoo or my inventory discipline tattoo over here, et cetera. But No, I actually didn't know that those pins existed, but I will tell you that we talk about it a lot. And it's really important to us to be able to prove that we can get back to that 8% to 10% margin over the next couple of years, even in a tariff environment.

And I think back to when I started and what a lot of the mantra was in '21 and '22 was can GM preserve 8% to 10% margins with EVs. And we said at the time, we can grow EV share at the same time that we can grow ICE share, and most people thought it was a cannibalization story, well, it wasn't. We actually grew ICE share and EV shares simultaneously, and we had gotten to that point where we were running pretty consistently in that 8% to 10% range. then tariffs came in, it was, okay, well, 8% to 10% is a dream.

You'll never get back there again. And now we're saying that we think we can do it within the next couple of years with a good product road map, but it's not one that says we have to take a lot of price we might take price. Price is going to be a function of what are the features that we add in model years and what do customers perceive as the value in our vehicles. but there's a lot of things that are directly in our control on the cost side that we still think we can go after work our way back into that world where we can get to 8% to 10% margins in a post tariff world. And I think that's a huge success story coming off of where expectations have been for the last 5 years.

We were at a conference in Europe and hopefully, many of you have looked at the materials on our Investor Relations page because we kind of outlined how different we looked than where we were 10 years ago. structurally. I mean we're running about 2 to 3x free cash flow, very consistently year in and year out. And this is a story that I think even with the run-up that we've seen since earnings, I think is a bit underappreciated because there's still the legacy cyclicality thought about where we're going. But I think what we've done here is we've created significantly less self-induced cyclicality. So when you think about the effect that inventory and incentives had on the business, you were basically sitting on a pile of finished goods that as demand waned, you were chasing demand down with price. So it had this amplifying effect of cyclicality.

And I say all that because I think it's made us more nimble. And that's where I think we can look at $3.5 billion to $4.5 billion of tariffs and say, okay, what do we need to do to adjust the business, let's do it as quickly as we can and let's get back to where we were. And I think that's worth something. And I think the market is they're starting to recognize and realize that maybe a 6 multiple on that business, is a little bit too big of a risk premium that's based on historical norms, not really based on a forward look of what we can continue to do.

I agree.

I do, too. I own a lot. I don't think you can.

You just of the drivers you've talked about, the reshoring costs and software, is it software and services? Is it fair to say that the reshoring is probably dimensionalizing it the largest of the 3 opportunities? Or how would you dimensionalize these opportunities?

Well, I mean, I think reshoring is as much of a sort of cost mitigant as giving us some incremental growth. So as we've looked at Fort Wayne, what we did with the line rate there and what we're doing with Orion we'll get some incremental SUV production, which we can actually use for optionality.

We could produce a little bit more. We could take the pressure off of Arlington, who has been under a lot of stress. They do an amazing job there. But getting a relief valve is also pretty important. So I think it just gives us more flexibility. The software story is really more about the future.

It's -- as I learned pretty quickly, when you think about the business model of manufacturers, we've made well over 90% of all of our profitability from the wholesale event. And -- yes, we get some customer care and after sales, parts and accessories, et cetera. But largely, it's a wholesale business. This gives us an opportunity over time to monetize the car park. And you think about the explosive amount of growth that you can see in revenues and margin performance if we're able to capture even a small slice of that.

I think the last estimate there is about 55 million GM vehicles out on the road, that we get a little bit from. But when you start to say, okay, that's going to grow from a software-defined vehicle base and get opportunities for people to continue to engage with the company for years and years. that's where it's really game changing. And between now and there, I think what we've taken as an approach to say, we're going to run the business for disciplined free cash flow performance. We're going to continue to buy down our share count, and get that share count rightsized while we can do it at a really substantial discount to what the future value of the company is going to be. And I think that's going to pay huge dividends for us down the road.

Okay. So on that topic, maybe like you've given us a brighter outlook on 2026. You have cash that's nicely in excess of the $20 billion target. So how should we look at the capital allocation framework going forward? What percent of the cash flow -- free cash flow, should we expect to be allocated toward cash return to shareholders and share buyback specifically.

Yes. I mean I think if you look at it, while we haven't put out a commitment that says, this is how much it's going to be, just look at the way we've deployed our cash flow this year in the last couple of years.

So we've already given the guidance that we think CapEx will tick up just a little bit. over the next couple of years, $10 billion to $12 billion instead of $10 billion to $11 billion. It's very reasonable and as much as people like to say, well, when are you going to get back to $8 billion, $8 billion on an inflation-adjusted basis is $10 billion today. But we're doing it with much, much more efficient cash generation if you look at our yield on cash -- or cash conversion, I mean, it's more than double what it was 5, 6 years ago.

So I think the business is much, much more resilient. And that means we can invest a little bit more even adjusted for inflation, but do it within that disciplined mindset. The second thing we do is we need to continue to protect and make sure that we strengthen the balance sheet. We paid down about $1.5 billion, a little bit more than $1.5 billion of debt this year. It's was a really good investment for us. Just pay it as it matures. We're not rushing into a bunch of balance sheet fixing because I think we're in really good shape with the pension and the on-balance sheet debt. And then that leaves returning cash to shareholders.

So if you look at what we've done in the year-to-date, it was about $3.5 billion if you if you just assume we do the same in the fourth quarter as we did in the third quarter, that's about $5 billion. plus or minus, it's pretty consistent to what you've seen over the last couple of years. So we continue to watch it. But I'll tell you, even with the run-up that we've seen in the stock, it still feels very, very cheap when you look at it, not just against our competitors but against other industrials. And I think that's, like I said, a burden of the history. But it takes time to be able to convince the market that it is different this time. And I know that from my prior industry as well and -- but it's a discussion and an argument worth making because eventually, it does work. And I think the key to all of that is cash flow because it becomes really, really difficult to ignore that free cash flow. And the company has done an amazing job of flipping the script on that versus history.

Okay. I want to just ask a question about tech because after the earnings call, and you referenced that there was the GM Forward event, you laid out sort of your tech road map path to eyes off driving 2020. So maybe you can just Give us a sense of what the revised road map is now for advanced ADAS. What can do you want to play in making consumer EVs? And maybe just on resource allocation. I think the GM that we've seen in recent years is 1 that is trying to get a delicate balance of pushing forward on technology, but really being much more efficient on resource allocation. How do you think about that and your use of partners as opposed to doing things fully internally, that's maybe a bit more resource intense.

Yes. I think we continue to believe that partners can play a role on a but we want to make sure that at the end of the day, we control that key value, which really comes back to the data and we don't see that. So there are things that will never do better than what the market can do around maps and voice and things like that.

But there are a lot of things with the vehicle specific that we can do well and that preserving that is really, really important. So I think we're trying to bridge that gap between how do we remain capital disciplined. At the same time, we're investing in what we need to do for growth. And I think the best example of that is the rather tough decision we made with Cruise in terms of saying we've got to abandon robotics cause at the end of the day, that was going to cost us tens of billions of dollars to ramp up that fleet. We don't have cost of capital to be able to do that. And as we went out to the market and look for capital.

There was some capital there. but it was all sort of capital behind us that said, okay, as long as GM is willing to foot the bill will come along and right along with us. That was something that as we look at the cost of capital disadvantage that we have with other players and capital availability, it was the right tough decision. So we've taken that resource or we saved $1 billion a year on it. But we've taken that resource and we brought it in and said, let's focus on personal autonomy.

So we're doing that from a retail perspective. We're #1 guiding factors is safety. I mean that is just paramount to the GM brand that we've got to do. And then number 2 is how do we get an affordable system out there that leverages the expensive system that we have built with crews, and really helps us move forward into more of a retail platform. So I think we've got a good road map that's achievable.

Like I said, Sterling has been a great addition to come in and help guide that team and lead that team. And we feel confident that we're going to get there. So eyes off hands off by '28, and that will just continue to expand and roll out from there.

Okay. Folks, any questions? All right. Go ahead, Jim.

Paul, we were talking about earlier, but if you look at the demographic that your U.S. customer fits, how has that changed versus 5 years ago? Was it like the top 10% of income earners in the U.S. today versus 5 years ago, it was the top 15%. Is it more concentrated in that upper demographic group. And then second, what information do we have about those buying patterns? Are they holding the vehicles for 4 years on average, 3 years? Just kind of curious how that's shifted and how that gives you some additional confidence in that demand for your product in the next couple of years?

Yes. It's a great question. It's one that we probably wrestle with the most is how do you take all of the data that's coming about the U.S. economy and sort of dissect it down into what it means for us. I think, first of all, we've got a broader portfolio than we've really ever had.

I mean when you look at the success of the Chevy tracks, which is #1 in the small SUV. We can do that profitably even in the tariff world and that is a game changer for us because historically, it was you make all your money in full-size trucks and SUVs and you try not to give it away in the other markets. But now we can make money across the spectrum and the midsize pickup trucks are another great story for that. I think, number one, the breadth of our portfolio is a little bit stronger.

But I'm a big believer that there's not just 1 economy in the U.S. There are multiple economies that we're dealing with. And I think that's where you can see some of the information about the value seeking in the retail environment that maybe we have pushed an industry, maybe industry pricing has pushed some people into the used car market that weren't there and maybe the historical 17.5 million unit industry is maybe 16.5 million or 17 million now in the future, at least until we start to see some rate relief or more wage growth.

But I think that customer, especially at the top end for the full-size trucks and the full-size SUV has been remarkably resilient, and we continue to see them buying in similar patterns that we've seen before. I think availability has hampered that. So I think to the extent people are holding vehicles longer, it's a little bit based on that availability noise we've seen over the last 3 to 4 years, but certainly not holding people back from buying at those levels. And we've got to watch that. We got to be flexible, but that's why we maintain that inventory discipline. So if we do see a softening I think we'll be able to come through it more consistently than maybe what some of our competitors with more inventory might be able to do.

We'll squeeze in one more.

[indiscernible] $55 million on any number is a huge number, but question is, will a manufacturer view to retain the [indiscernible]. Can you -- what is the [indiscernible] continues or [indiscernible] Google where somebody coming with a side starting [indiscernible] to break the assumption of [indiscernible].

So what we're really focused on is, okay, how do we take the control modules, make those our own and then use people off the side of it. So partnering with Google, for example, helps, but it layers into that. But we actually, at the end of the day, control a lot of that vehicle.

[indiscernible]

Yes. Yes. And that's the definition of where we are with software-defined vehicles and ultimately, the platform that we're building to be able to commercialize going forward.

[indiscernible]

Yes. It will take a while to get there, but that's the future.

Great. I think we're out of time. Paul, thank you so much.

Thanks for your time. Thanks, everybody, for coming.

Good morning, and welcome to the General Motors Company Third Quarter 2025 Earnings Conference Call. [Operator Instructions]

As a reminder, this conference call is being recorded Tuesday, October 21, 2025.

I would now like to turn the conference 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 third 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; along with 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 our 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.

Good morning, everyone. I want to begin by recognizing the dedication and hard work of our entire GM team, including our employees, dealers and suppliers. Their agility in helping navigate a rapidly changing regulatory and policy environment while keeping our customers at the center has been outstanding. Thanks to their efforts and our leading portfolio of vehicles, we delivered another very strong quarter of earnings and free cash flow.

In the U.S., we achieved our highest third quarter market share since 2017 with strong margins, and our restructured China business was profitable once again. Based on our performance, I'm pleased to share that we are raising our full year guidance.

I also want to thank the President and his team for the important tariff updates they made on Friday. The MSRP offset program will help make U.S.-produced vehicles more competitive over the next 5 years, and GM is well positioned as we invest to increase our already significant domestic sourcing and manufacturing footprint. We appreciate the administration's ongoing support for American Innovation and jobs, and we look forward to progress on trade deals with countries like Canada and Mexico.

As trade policies have evolved, we have acted with urgency and discipline to strengthen GM's position. Earlier this year, we announced $4 billion in capital investments to onshore production at plants in Tennessee, Kansas and Michigan over the next 2 years. Today I'm happy to share that we have decided to more than double the planned Chevrolet Equinox production at our Fairfax assembly plant in Kansas, above and beyond what we announced earlier this year. Once these investments come online, we plan to produce more than 2 million vehicles per year in the United States.

We are also investing close to $1 billion to build a new generation of advanced fuel-efficient V8 engines in New York. Importantly, we are maintaining our capital discipline while addressing this production and creating new jobs in the United States.

We are also monitoring the supply of certain chips from China. This is an industry issue I know you're all aware of. While this has the potential to impact production, we have teams working around the clock with our supply chain partners to minimize possible disruptions. The situation is very fluid, and we will provide updates throughout the quarter as appropriate.

On the regulatory side, our portfolio and capacity plans over the last several years had been heavily influenced by steadily increasing stringency requirements for fuel economy and emissions. To meet these requirements, we were working aggressively to install and scale EV capacity. Now with an evolving regulatory framework and the end of the federal consumer incentives, it's clear that near-term EV adoption will be much lower than planned. This is resulting in higher variable costs as we expect to utilize less capacity across our EV plants and supply chain.

All of this drove our decision to transition Orion assembly from EV to ICE production and to sell our joint venture-owned cell plant in Michigan to LG Energy Solution. It's also why we recorded a $1.6 billion special item charge in the third quarter. $1.2 billion of the charge is for noncash impairments, most of which are related to the Orion transition, reductions in battery module assembly capacity, our decision to stop development of next-generation hydrogen fuel cells and the write-off of CAFE credits and associated liabilities. The remaining $0.4 billion is for cash charges related to supplier contract cancellation costs.

Our retail product portfolio is unchanged. We will continue to build award-winning products like the Chevrolet Equinox EV and the Cadillac Escalade IQ, which have been very successful with customers. We're proud of them and we believe their performance will improve even in a smaller market.

However, we have decided to stop BrightDrop production at [ CAME ] assembly and assess the site for future opportunities. This is not a decision we made lightly because of the impact on our employees. However, the commercial electric van market has been developing much lower than expected, and changes to the regulatory framework and fleet incentives have made the business even more challenging. Our actions on BrightDrop and our ongoing work to reset our capacity will cause us to recognize a charge in the fourth quarter. By acting swiftly and decisively to address overcapacity, we expect to reduce EV losses in 2026 and beyond, making us much better positioned as demand stabilizes.

EVs remain our North Star, so we will continue to invest in new battery chemistries like LMR, new form factors and other architectural improvements to drive improved profitability.

I'm equally confident in our ICE strategy. It is clear that ICE volumes will remain higher for longer. We lead the industry today, and we are increasingly well positioned to meet strong sustained demand. For example, we are onshoring production of the Chevrolet Blazer, developing a next-generation Cadillac CT5 and redesigning and extending the Cadillac XT5. And when Orion assembly comes back online in early 2027, it will produce the Cadillac Escalade and then add our next generation of full-size light-duty pickup trucks.

Looking ahead, our top priority as a leadership team remains returning North America to our historical 8% to 10% EBIT margins. To do this, we will continue to drive EV profitability improvements, maintain our overall production, pricing and incentive discipline, manage our fixed costs, and further reduce our tariff exposure net of our self-help initiatives. In addition, cross-functional teams are attacking our warranty expense by addressing the root cause inside GM at our suppliers and at our dealerships.

We are also executing plans to grow software and services like OnStar and Super Cruise to generate even greater revenue during and after each vehicle sale. So far this year, we have recognized nearly $2 billion in revenue from OnStar, Super Cruise and other software services, and our deferred revenue was up 14% from Q2 to almost $5 billion. That's off a base of 11 million OnStar subscribers, which is up 34% year-over-year. This includes more than 500,000 Super Cruise customers, which nearly doubled year-over-year. We expect robust double-digit revenue growth through the end of the decade with gross margins of about 70%.

We also continue to make great strides in our autonomous strategy and in the development of our next-generation software-defined vehicle platform. It will be transformational because we will be able to evolve the software layer of each vehicle independently from the hardware-defined physical layer. For customers, their vehicles will become smarter, more capable and more personalized over time. Our platforms will be more stable and last longer. We will see large reductions in complexity. And we will create new revenue streams from features and services.

This work is exciting and full of opportunity, and we're hosting a media event in New York tomorrow to hear from the leaders who are executing our technology strategy. We will share more on these and other initiatives with you as we go forward because great vehicles, innovative technology, a rewarding customer experience along with strong financial results will continue to set GM apart in an increasingly competitive landscape.

Thank you, and I will now turn the call over to Paul to discuss the quarter in more detail.

Thank you, Mary, and good morning, everyone. I also want to start by recognizing the entire GM team for delivering another quarter of outstanding results, driven by our compelling portfolio of internal combustion and electric vehicles.

We continue to demonstrate disciplined incentives, pricing and inventory management while attaining a 17% U.S. share in the quarter, up 50 basis points year-over-year. Our U.S. incentives remain below the industry average for the 10th consecutive quarter. During the quarter, we reduced dealer inventories by 16% year-over-year, ending at 527,000 units. ICE inventory is turning quickly, and we actively managed EV inventory down by almost 30% since the end of the second quarter, bringing it to a more appropriate level as we move forward.

As we highlighted at a recent conference, this performance exemplifies how the team has structurally transformed GM over the past decade to focus on profitable growth and durable cash flows. We have successfully adapted to evolving macro conditions while restructuring underperforming business units. Combined with a leaner cost structure and the support of GM Financial, these actions have enabled us to significantly improve free cash flow efficiency while maintaining a strong, resilient balance sheet.

Let's now turn to the third quarter financial results. Total company EBIT adjusted was $3.4 billion, down $700 million year-over-year. This included a gross tariff impact of $1.1 billion, which was a little less than we had expected due to lower import volumes from Korea. We were able to offset more than 30% of this amount through go-to-market, footprint and cost initiatives.

The administration's recently announced expansion of the MSRP tariff offset broadens the scope of parts eligibility for the program and will make U.S. vehicle production more competitive. Additionally, this supports tariff mitigation in 2026 and beyond while we work to adjust our supply chains. On heavy-duty tariffs, the impacts to GM will be minimal and are already factored into the tariff guidance we've provided.

Adjusted automotive free cash flow was $4.2 billion, partially aided by $300 million in cash tariff offset reimbursements, which have now commenced and will continue into Q4. North America delivered Q3 EBIT-adjusted margins of 6.2%, enabled by record crossover deliveries and strong performance of our full-size pickups and SUVs. As in the second quarter, EBIT-adjusted margins in Q3 would have been around 9% excluding tariffs, well within our prior margin target of 8% to 10%.

Pricing was up modestly year-over-year with model year 2026 incremental pricing being partially offset by a small fleet headwind. EV sales reached record levels in Q3, supported by a pull forward in demand ahead of the consumer purchase incentive being eliminated. GM solidified its #2 position in the U.S. EV market with 67,000 deliveries and a 16.5% share.

In October, we are not surprised to see EV demand soften significantly, and we expect this trend to continue into early 2026 before we see what the natural demand is for EVs. Throughout this period, you can be assured that we will build the demand and continue to focus on improving EV profitability, including through material cost reductions by leveraging larger module sizes and new battery chemistries.

Warranty expense was a $900 million headwind year-over-year in the third quarter. This is too high, and we need to do better. That being said, our customers always come first, and we are committed to looking after them as we take a comprehensive, multipronged approach to reduce warranty expenses. We are asking our dealers in the spirit of partnership to help us lower warranty repair costs. We are also pursuing deeper supplier quality validation and leveraging data, AI tools, OnStar connectivity and proactive over-the-air updates to identify and resolve issues faster.

Internally, GM is managing repairs to minimize customer inconvenience, and we are refining repair processes, such as shifting from full transmission replacements in many cases to targeted component fixes, which have already yielded substantial cost reductions. In fact, because of these actions, we've seen overall warranty cash outlays stabilize over the past few months.

Turning to GM International. GM China is continuing its successful turnaround and is comparing favorably to many of its global peers. In the third quarter, our market share grew 30 basis points year-over-year to 6.8%, and China equity income, which has now risen for 4 consecutive quarters, was $80 million. We continue to expect the full year to be profitable.

GM International ex China EBIT adjusted was nearly $150 million and remain relatively stable year-over-year, supported by strong full-size pickup and full-size SUV sales in the Middle East.

GM Financial posted another solid quarter with Q3 EBT adjusted of $800 million. They continue to deliver value for our customers and dealers while paying a $350 million dividend in the third quarter.

Regarding capital allocation, we invested $2.1 billion in capital projects, paid down $1.3 billion of balance sheet debt and repurchased $1.5 billion of stock in the quarter. Despite a challenging external environment, we've repurchased $3.5 billion in stock year-to-date. As a result, our diluted share count at the end of Q3 stood at 954 million, a 15% reduction year-over-year. Looking ahead, we expect our share count to continue trending lower as we continue to repurchase shares.

Regarding our outlook, let me now walk through our updated guidance, along with key supporting assumptions. Based on strong product traction, ongoing disciplined execution and assuming minimal production disruption from the chip issue Mary mentioned earlier, we are raising our calendar year 2025 guidance to EBIT-adjusted of $12 billion to $13 billion; EPS diluted adjusted of $9.75 to $10.50 per share; and adjusted automotive free cash flow of $10 billion to $11 billion. This increase reflects our confidence in our underlying business performance and also incorporates the administration's recently approved expansion of the MSRP tariff offset.

We expect capital expenditures to be at the lower end of our $10 billion to $11 billion guidance range as we recalibrate our plan in light of policy and upcoming footprint changes.

Our gross tariff exposure for 2025 has improved from the original $4 billion to $5 billion gross impact to a range of $3.5 billion to $4.5 billion, driven by the expansion of the MSRP tariff offset. We expect to offset around 35% of this lower gross tariff impact through go-to-market cost and footprint initiatives.

Relative to deliveries, we now expect a calendar year 2025 total vehicle SAAR of around 16.5 million units. From a wholesale perspective, seasonality will play a role in Q4 relative to Q3 with 7 fewer production days in the U.S., along with lower EV wholesales following the phaseout of the consumer credit.

For the full year, we continue to expect North American pricing to be up 0.5 point to 1%. In the fourth quarter, model year 2026 pricing will be partially offset by higher seasonal industry incentives. We will maintain disciplined production levels and are on track to achieve our year-end inventory target of 50 to 60 days.

GM Financial is on track to deliver on its guidance of $2.5 billion to $3 billion of EBT adjusted for the full year, reflecting continued strong performance.

Now looking ahead to 2026, we have multiple levers to carry our current momentum forward, including progress on EV losses, warranty costs, tariff offsets, regulatory requirements and fixed costs. As a result, we expect next year to be even better than 2025.

In closing, GM is stronger and more resilient than ever. We are adjusting our business to a new tariff and regulatory environment. In addition to the self-help initiatives I mentioned earlier, we are expanding our U.S. capacity and working together with our suppliers to increase U.S. content. We see a clear path back to our historical 8% to 10% EBIT margins in North America over time and remain committed to continuing to repurchase shares in accordance with our capital allocation policy.

Thank you, and I look forward to your questions.

[Operator Instructions]

Our first question will come from Joseph Spak with UBS.

Paul, maybe just can we dive in a little bit on some of the updated tariff disclosure? You lowered the gross by $500 million from the MSRP offset. You mentioned more parts. Is that specifically some of the language around engines in the release from last Friday?

And how exactly does that work? Because I thought the rule of thumb was if you had about 80% USMC content on a vehicle made in the U.S., it was basically effectively no tariff. So it seems like it's an additional reimbursement. I just want to understand how that flows through.

Yes, joe. So the President's announcement on Friday did a number of things beyond just the heavy-duty tariff. It included the lengthening of the MSRP offset to 3.5%. It also included the ability to designate parts into 232 that expands the pool of eligible parts. So that's where we're seeing some savings on the tariff. And these are parts that are imported into the U.S. for U.S. production. So that expanded pool of parts gives us some ability to use that MSRP offset a little bit more. So that's where the savings are being driven from.

Okay. And if that's all in the fourth quarter, again, like all else equal, does that imply it's like $1.5 billion year-over-year tailwind into '26?

Well, I mean, we haven't given any specific guidance on '26 yet because as we've said before, we need to get Korea results, et cetera. But as we've said that we expect that we can be in a position where our net tariff exposure, which is net of our self-help initiatives, could be lower in '26 than it was in 2025 despite having an extra quarter that we have to lap. So that's what we're setting our sights on. We'll have more details as we give 2026 guidance as more of these deals get finalized.

Okay. And then I guess dovetailing off that, I know you mentioned in the slides and in the commentary, you expect a stronger 2026, and some of the levers you have. I was just wondering if you could touch, if you don't mind, on maybe some preliminary high-level industry or macro factors, especially since it seems like there's some incremental concerns in the market about the consumer and credit. So how do you sort of preliminarily view demand into '26 and maybe also some of the competitive dynamics with the competitor having some additional product in the pickup segment?

Yes. Well, look, Joe, I think it's too early to start to speculate on 2026. I think our commentary that we could see '26 being better than '25, you start with, if the environment is the same, there's a lot of tools that we have that can lower our costs and drive better performance. And we've touched on some of those, and we're getting better at warranty, reducing some of our EV losses, the net tariff burden, et cetera.

So we'll obviously have more color as we complete our 2026 budget and get to our full year guidance in January. And we'll have a better understanding of where the consumer is and where the macro sits as well.

Our next question comes from Itay Michaeli with TD Cowen.

Just a first question on just the shifting emissions regulations. I'm just curious if you could talk about the extent of which over the next few years, it could allow you to sell more ICE full-size pickups and SUVs. As we think about our Orion capacity, should we think about that as effectively incremental volume growth opportunity for GM? Or is it sort of, to some degree, just a tariff mitigation from [indiscernible]?

As we look at shifting emission regulation, first, we -- all the signals are there are going to be less. We've already seen some of it change. We are waiting, and I think it will be early into next year where it's finalized. But anticipating that we're going to be able to sell our internal combustion engine vehicles for longer.

There's a couple of triggers. First as we announced that installing Equinox into Fairfax, we have unmet demand from an Equinox perspective. So that's one upside. The second is around full-size trucks. And right now, we -- our demand -- we are supply-constrained from a full-size SUV. So when Orion comes online, that's going to give us an opportunity to fully maximize really what is the franchise for GM with full-size utilities.

And then with the truck, some of it will be -- we'll be shifting more to the U.S. to -- from a tariff perspective, but also there could be global demand from a full-size truck perspective. So I think some of it is tariff mitigation, but there definitely is upside on some of the vehicles that have been constrained and demand has exceeded what we've been able to build.

Terrific. That's very helpful. And then maybe as a follow-up, Mary. It's great to see the progress on Super Cruise and software and services. Curious how you're thinking about your next generation of Super Cruise. And maybe if you can also talk about where you are in the journey to personal AVs with the cruise team. Just love to get maybe an update on how you're thinking about the road map there.

Sure. Well, I'm really pleased when we look at what we're having, that we're continuing almost with every quarter, Super Cruise gets better. We've now done integration with Google Maps. So our vehicles can follow a planned route when Super Cruise is engaged. We're working -- the cruise team and GM are working, and we have vehicles now that are operated by trained test drivers to gain more and more insights to train the next generation of features.

Also bringing Sterling Anderson on, in addition to his product expertise, obviously, from his time at Aurora has significant expertise in the autonomy area, and this activity is now under him. So I think you're going to see Super Cruise continue to get better and better.

We also are working on our next-generation software-defined vehicle that will really be a step-function improvement and I think put us at parity or potentially better than the best in the industry today. And we'll be sharing more about that on our GM Forward event. But I think that positions us well. And we're going to keep working, because we do believe it's going to be very important from -- to have personal autonomy and the PAV work. And we see Super Cruise continuing to build that we get to a full level for over time.

So we're definitely committed from an AV perspective, but we're making progress, I would say, driver assistance technology with Super Cruise. And we're really excited to see the adoption rates and the attach rates that we're seeing from a Super Cruise perspective.

Our next question comes from Dan Levy with Barclays.

Wanted to just jump back on to the tariffs. And it looks like your mitigation is yielding stronger benefits. Maybe you could just unpack that a bit because it seems like in the market, pricing is a bit maxed out. We haven't seen the type of price increases we would have expected. So looks like you're probably getting benefits off the other 2 buckets you've discussed, which is cost and footprint. What's the runway on actions there and how this plays out in '26? Just to be clear, the current guidance for '25 tariffs does not include any easing of Korea tariffs, is that correct?

Dan, thanks for that question. So let me start with the first part. So if you go back to what we said at the beginning of the year, we really kind of highlighted 3 buckets: go-to-market, footprint changes and fixed cost reductions.

So go to market, we were pretty quick out of the gate talk about changing our pricing forecast for the year, if you remember in the first quarter call. And that's held up. And we still expect to be up 0.5% to 1% on pricing year-over-year, somewhat helped by model '26, continue to help by the disciplined inventory and incentive approach that we've taken across the board. So that continues to bode pretty well for us.

On the manufacturing footprint piece, we have some of those savings. As you recall, we announced an increase in the [ line rate ] in Fort Wayne that's given us a little bit more utilization there, that has flown through. But the bulk of that is really going to be when the capital expenditures that we announced this year start to take effect in late '26, early '27 time frame.

And then the third bucket is fixed cost. So I think we've done well to be disciplined there. We've seen a flattening of the curve pretty much, and I think we're maintaining that discipline. So all of those things we expect will hold into 2026 and the manufacturing footprint bucket can expand a little bit. And that's where we feel comfortable that we, I believe, we can get our net tariffs to lower than what they are in 2025.

And you're correct that there's no impact right now on any Korean changes in our guidance. We're still waiting for that to be finalized.

Okay. Great. I have a follow-up I wanted to ask about EVs. And wondering, you've talked about the opportunity for improving some of the EV -- reducing some of the EV losses that you have. Maybe you could just give us a sense of what you might be assuming or the parameters on whether it improves reduced overhead spend, reducing some of the EV sales. And then how do we think about the EV lineup in this environment when, on a true economic basis, presumably, most of those vehicles have had problems or challenges on a variable profit basis, how you think about the need to sell those vehicles if you don't have the regulatory requirements out there?

Well, first, we do see EVs as being our North Star. The consumer feels -- or indications that we have really strong EVs as we've seen our market share grow throughout this year. So we think we've got EVs people want to have. We did expect that we'll see EV sales slow in October and probably in Q4 based on the pull-ahead that we saw in Q3. So it's really going to be into early next year when we're going to know what true EV demand is. But we will -- our plan is to keep the retail EVs that we have again because they're so strongly recognized from a leading perspective. And what we're really going to focus on is working on costs.

We also are going to stay true to what we've said before that we're going to build to consumer demand. We're not going to overbuild. We're going to maintain that discipline. We're going to maintain our discipline from an incentive. We're about half of what the rest of the industry is from an EV incentive perspective. So that discipline, I think, has paid off.

And then we're going to work on how do we improve the EV profitability. As Paul mentioned, we have several layers -- or levers to pull. For instance, all the work we're doing on complexity reduction, commonizing parts. Having an EV platform once we make a change, we can work it across all of our vehicles quickly. So that's the advantage of having the dedicated EV platform. We're investing in new battery technologies, LMR, that will allow us to take cost out of the vehicle in a -- from a significant fashion.

And so those are just a handful of things that we're working on to improve EV profitability as we go forward. But continue to stay in the market and have strong EVs because we do think they're the future.

And Dan, I'll just add one more thing too, because, obviously, the EV demand is going to be pretty choppy for the near future, we think, as we come out of the 7500 and what we've already seen in October with some pretty significant pullback in demand. We do think that the EV market is going to stabilize from a supply standpoint. We had a number of competitors out there that really we're selling EVs for whatever they could get for them because they really wanted to get the credits on the environmental side. So we do think it will be a more stable environment.

While we have faced that competition with much more stable incentive levels in our portfolio, I think that will bode well for us in a more stable market as well. So I think that vehicle quality that Mary talked about against a more stable backdrop is going to be helpful as well.

Our next question comes from Mike Ward with Citi Research.

Just as an outsider looking in, it seems like there's been a pretty significant cultural shift at General Motors to move fast. And I'm just curious, does that make GM less capital intensive as we get to less volatile market environments? And what's the best way for us to track that? Is it cash flow? Is it CapEx to revenue? How should we think about that?

Well, I'll talk about the cultural shift. I definitely think the team has really excelled in this area, from, as we get a challenge, and I've always said with all my experience at GM, when we have a clear challenge in front of us, that's when the team does their best work, aligns and really exceeds expectations on what they're able to do. And I think you've seen that time and time again through COVID, through the semiconductor shortage, through some of the challenges we've had post COVID. And now this year into a dramatically changing regulatory environment and a change from -- the change to EVs as well as tariffs.

And I'm really proud of the team for the results that we are delivering and sharing with you today because I think it speaks to the agility of the team, the speed. We don't sit around and look to blame others. We just say, okay, here's the situation, how are we going to adjust to it and how quickly can we do it? So I think as we go forward, there will be several things that we can look at. I think making the changes we've talked about from a footprint change and saying we're going to maintain our capital discipline within the $10 billion to $11 billion range is one proof point. And I don't know, Paul, if you want to add any others.

Well, I look at it very similarly. And I think also, Mike, the capital discipline, the inventory discipline and what we've learned really since COVID, I think, has helped us be more nimble. So the sluggishness of over-inventory, oversupply of times long ago, I think, helped -- hurt us in terms of being able to respond because you were always carrying around that weight by being leader, it is allowing us to go faster.

And as we make those decisions faster, I think we're better able to implement them. And that's really what the last few years has been all about, whether it was tariffs or chip shortage or COVID, the team has done an amazing job.

It shows up in the numbers. And it looks like when it's -- the surplus cash, you're just going to keep buying back the stock until we see otherwise. Is that the right way to read it?

Well, I think we'll continue to be wedded to our capital allocation policy. As you saw during the quarter, we invested in the business, of about $2 billion. We repurchased about $1.3 billion of debt retired that, and repurchased about $1.5 billion of stock. So that balanced capital allocation has served us really well and we expect to continue that.

I think the other thing, Mike, to think about is the upside that we have from a software and services perspective, we have incredibly talented engineers and people across the company who have been here who really know how to do great vehicles, pair them up with the team that we've been able to bring in from many of the different tech companies from a software perspective and from an [ AD ] perspective. I think we're marrying the 2 worlds very successfully and I'm really excited about what we have coming in the future, not only the discipline of the core business, but what we can do from a software and services perspective. And we've shared a little bit about that with what we have with OnStar and Super Cruise. But we think there's growth opportunity there with very attractive margins. So I think there's a lot to focus on as we go forward.

Our next question comes from Mark Delaney with Goldman Sachs.

Congratulations on the good results. You mentioned you expect GM North America margin as to get back to 8% to 10% over time. Can you help us better understand what might have to happen to get back to that level? And how feasible do you think that margin level is without a substantial reduction in tariffs?

Mark, thanks for the question. As we said earlier this year, that's our aspirational target, and we're not making excuses about what's happening to us. So I think giving some time to adjust the business is what gives us confidence to be able to get back to that 8% to 10% level.

So we talked about some of the levers in the script about having a lower net tariff burden, whether it's agreements that get done or we continue to exercise our self-help and make sure that we're balancing the other inputs around the P&L, is helpful. We've got, we believe, the opportunity to come over the hump on warranty expense. As we said, cash outflows has stabilized. That's a good indicator. So the liability has to catch up a little bit on the accruals. But hopefully, as we get into '26 and into '27 and beyond, we'll start to see some tailwinds on the warranty piece of it.

We think rightsizing EV capacity is going to be an important step for that too. As we've seen -- we talked a lot over the last couple of years about scaling into EVs was going to be an important driver of cost savings to fill that capacity that we had to build given the prior regulatory environment, making sure that we're balancing that burden in the future is going to help us. And like Mary said, we could be successful in EVs in a smaller demand set, but one that's much more natural than really the artificial environment we've been in, which was really compliance driven.

So going forward, we think there's a lot of forces there that can help us do it, and we're aiming to do that as soon as we can.

My other question is on supply chain. I'm hoping to better understand where GM and its supplier stand with aspects, including aluminum, semis and rare earth in light of the recent events. And do you have visibility into how many weeks of stock GM and the suppliers have in some of these key areas and how fast you might be able to bring up the additional sources of supply if necessary?

Sure. Well, I think just overarching, we've been working on for a few years to have supply chain resiliency after we live through COVID and the semiconductor shortage. And so from a battery raw materials, where Paul has led the activity to really work to source where we can from a North America perspective, we said either onshore or ally shore, and I think those investments will continue to pay off. We saw it from a magnet perspective. And Lithium Americas, I think, is another strong another strong investment that we've made.

I think when you look at the specific situation around Novelis, we are minimally impacted. We've been able to find alternative sources. So I don't think that's going to have an -- be an issue for us.

And then as I said in the opening remarks, we are very hopeful from the China chip situation. And we know -- we understand, I should say, that the governments are talking, that are involved in this, and hoping that they will work through that, though our team had jumped into action with evaluating where we have potential disruptions and what different sources we could use. So the team is working around the clock to get that done.

And I don't have any specific timing to share with you, but I think that we're very hopeful this is going to get resolved in the meantime. But the team continues to work as we speak to make sure we continue to identify other sources that we keep running.

And that's really common course for us in GM right now with some of the different supply chain challenges we've seen over the last couple of years, whether it's natural disasters or other issues affecting it. So our -- we have an incredibly strong supply chain that I'd like to recognize. And also, the partnership we have with suppliers are working with us. I think this is where relationships matter. And we're going to continue to work to resolve. So I don't have any specific and we'll keep you posted as we have clarity.

Our next question comes from Ryan Brinkman with JPMorgan.

After another strong quarter of performance from GM Financial and given the seemingly increased investor interest in consumer auto loan performance, I thought to ask on what you're seeing on that front, how your overwhelmingly [ prime ] customers purchasing above industry average transaction prices might be faring relative to the average borrower or even to the subprime borrower where it seems much of the concern may lie in the aftermath of the [ Tricolor ] bankruptcy?

Recently, you shared some stress testing of the GMF portfolio. I think you're relatively more bullish on the consumer. But in the event that employment were to weaken in the U.S. in fact, did enter a downturn, what type of performance could investors reasonably expect from the GM portfolio?

Ryan, I'll start and then I'll turn it over to Susan Sheffield who's on the line as well. She's done a great job of taking over after Dan, and the team has done a, what I would say is continue to be really strong, and hold them up as what I would say is probably the best auto captive out there for sure, and their execution has been strong. Susan?

Yes. Thanks, Paul, and thanks, Ryan, for the question. What we've seen so far in our portfolio performance as a consumer that's been pretty resilient. We've seen credit performance kind of as we would expect to see given the credit mix on our portfolio, which is predominantly prime. As we've said, even in the less than prime space, in the subprime space, which is a very, very small part of our portfolio, that performance too has been pretty consistent. Yes, there is some stress for those borrowers, but they continue to be employed. And so performance, again, really as expected. And we see the normal seasonal trends that we see, but charge-offs were pretty flat year-over-year on -- so at 1.2%.

So again, pretty resilient consumer. We're tracking everything very carefully, but performance has been good.

And then as far as the stress test, we have a very strong balance sheet, and we manage our business to make sure we have a strong balance sheet and we can weather any changes that might come along. And unemployment history would tell us that, if unemployment rises, that will have an impact. But we are in really good shape from where we sit now, and again, seeing a pretty resilient customer.

And again, I would say from an affordability standpoint, given the breadth of products that we offer at GM at multiple price points, we're able to serve the customer there and get them into a vehicle that they can afford.

Okay. And then just lastly for me. If I would just sort of combine the comment on Slide 23 that '26 is expected to be even stronger than '25, which is now guided to $12.5 billion of EBIT at the midpoint, if I sort of combine that with what I thought I heard you say in response to an earlier question that you haven't included the tailwind from lower Korea tariffs, which I've estimated at $1 billion, because they haven't been finalized, and presumably for the same reason you haven't included any tailwind from the elimination of GAC or corporate average fuel economy credits because some of those promulgations have yet to be finalized, and I estimate that at $1 billion, is it fair to say that, under some potentially likely circumstances here, that $14.5 billion of EBIT is even on the horizon as reasonably possible next year?

Well, thanks, Ryan. I don't think we're going to get into any specific commentary directionally on your model. I appreciate the thoughts. There's a lot of things that can change going forward. But as we said, we do expect that 2026 can be better than 2025 assuming a similar macro backdrop going forward for all the reasons that we articulated.

So we're going to continue to just focus on executing the business and executing the plan, and that's worked really well for us, and we expect it will in '26.

Our next question comes from Adam Jonas with Morgan Stanley.

So Mary, this is my last GM conference call, which is bittersweet. It's bitter for me, it might be sweet for you. But I just have to acknowledge the consistency of the team's execution through some really challenging environments. You have higher margins and higher growth than Tesla and you trade at 6x earnings, not 200x earnings. So basically, you guys have been kicking butt and proving the skeptics, including, at many times, myself included, very, very wrong. So I just wanted to acknowledge that for the record, and bravo to the team.

Mary, I've got a couple of questions for you. First, China, do you see a future for Chinese OEMs participating in the U.S. market? And if so, how do you see that evolving?

Well, first, Adam, I really appreciate your comments. I couldn't be more proud of the team, of not only the strategy that we've outlined, but the agility to handle all the different changes, and the execution is really paying off. And although you and I haven't always been completely aligned, I always appreciated the ability to discuss it. So I wish you well in your next assignment.

As it relates to China competition, I have no control of what's going to happen from a China perspective of where they compete and where they don't. What I will tell you is General Motors is focused on making sure we have beautifully designed vehicles with the right technology, at the right cost. We understand those vehicles very well from our -- not only from our JV in China, but also from the comparisons that we've done. And so we're aiming to compete.

We need a level playing field, and I've been pretty vocal about that. But given a level playing field, we plan to compete, and with better vehicles that customers want to have like we're doing today.

And just as a follow-up on autonomous vehicles. It does look like the autonomous vehicle problem, once seen as basically nearly impossible, is getting solved -- is getting solved. If you haven't been in Austin recently or SF, I mean, I know you guys get around, it's incredible. Now you've recalibrated your autonomous efforts to focus more on the ADAS and Super Cruise and the personal autonomy side. And thanks for the disclosure of the $200 million of revenue, anything of how profitable that is would be helpful. But you are -- and you did say in your comments, you're still committed to bringing a Level 4 autonomy. But I think you caveat it by saying to personal vehicles.

I'm wondering, are you rolling out robotaxi? Or is it just let's do the personal first and see where it goes? And in that vein, what milestones can we expect for 2026 on your autonomy journey?

Yes. First of all, I am really pleased with the performance from Super Cruise today and the fact that it continues to get better. And as I said, we're enjoying 70% -- approximate 70% margins on that business.

We are focused on personal autonomy and Level 4. We're not in a Rideshare 1.0 today. And when you look at owning a fleet and all the other aspects that go into running a robotaxi fleet, that's not our core business today, that's where we're focused. We're focused on individual vehicles. I think we've seen, even with Rideshare 1.0 today, people leverage those, but they still want to own a car and that freedom of I can go where I want to go, when I want to go. And so we think that's going to be with us for an extended period of time. But personal autonomy on those vehicles will be very important.

We'll have more to share as we get into next year what our milestones are, but I can tell you the team is working aggressively. And as I said before, the software team, in partnership with the cruise resources, along with Sterling Anderson, who joined from Aurora, I think puts us in a really strong position. So stay tuned on those '26 milestones. And like I said, there'll be a bit more that we'll be sharing tomorrow in our GM Forward Media Day. So appreciate it, Adam, and best of luck to you.

Our next question comes from Emmanuel Rosner with Wolfe Research.

I was hoping to drill down a little bit more on some of these levers you have for continued progress in 2026. And maybe starting with the EV losses. Can you maybe help us better understand or dimension some of the recent actions you've taken in Q3 and Q4, writing down some of the EV assets and sort of like shifting your own capacity? Just those, all else equal by themselves, by how much does this improve your EV structural costs?

Emmanuel, I think if you look at this year, we talked about being able to improve our profitability with higher volume. And what we've seen is when we get into a situation where we have sequential step-downs in production capacity, it really wreaks havoc throughout the supply chain, logistics, supplier ramp-up costs, et cetera. So we found ourselves sort of chasing that downward.

And what we really ultimately realized is for now, under the changing regulatory environment, we expect EV demand growth to slow pretty significantly from what it was going to be. And so we need to make sure that we rightsize the capacity footprint to be able to not have to absorb a lot of those fixed costs. So while it's unfortunate, I think it is a quick adjustment to the reality around us that we're facing, and we're pivoting to be able to do that.

So the charges that we took in the quarter will help that a little bit. And as we've said, we're continuing to review this. We do expect there to be some additional charges in 4Q. We haven't fully sized that up. But as we do that work and ultimately finalize that in the quarter, I think we'll have a better view of how we can translate that to '26 and beyond.

Understood. And then on the CapEx front, the lower spending presumably on the EV side, is there any opportunity or appetite to reduce overall CapEx for the company? Or is there a lot of need for this to be reallocated elsewhere?

Well, I think, Emmanuel, we've talked about this fairly extensively. If you look at the inflation adjusted numbers, our capital expenditures are pretty much in line with where they were at the end of the last decade before COVID. I mean the absolute numbers are higher. But the inflation adjusted numbers are actually pretty similar, while our cash generation is up exponentially. So I think where we have strong affordability of what we can do with the investments, I think we've demonstrated some resiliency.

As you look at capital expenditures going forward, what we've said is the last couple of years have been about expanding the portfolio of EVs for the next few years. It's going to be about lowering the cost and making structural improvements to the battery cells and to the architecture going forward as well as some now incremental investment into internal combustion engine vehicles because those are going to be around longer and probably more in demand than they otherwise would have under the prior regulatory environment. So balancing those capital needs within the constraints of how much cash we're generating, I think it's hard to poke at our free cash flow generation and what we've done with that discipline. So I think we're very, very good where we're at, at the $10 billion to $12 billion range, for the next couple of years.

Our next question comes from Chris McNally with Evercore.

Mary, echo the applause on the [ stellar ] execution, I think, shared by most on the call just to start. But maybe a bit of a boring question for Paul. Ironically, I think one of the parts of this year's upside, which has not been the expected major contributor that we all thought, was pricing. And Paul, when we reconcile some of the average wholesale unit price that we see that we can back into, it's up almost 5% Q3, it's up 2.5% year-to-date, but the walk guide is only up 50 basis points to 100. You talked about the fleet drag on Q2. But would we have seen that in the wholesale ASPs as well? I apologize, it sounds like a modeling question. But what are we missing between the wholesale pricing and pricing in the walk?

When we've gone to market and looking at incentives. I think we've seen some step-up in incentives on the EV side generally across the industry, and a little bit of incentive pressure as we've seen throughout the quarter from some of our competitors. I think we've maintained some pretty remarkable discipline in the face of all of that, and I think that's continuing to serve us well.

So I don't think I would complain about being up 0.5% to 1% on pricing this year in the aggregate going forward. We want to continue to make sure that we balance our performance against customer affordability issues and GMF and everything that Susan mentioned as well. So I think that's an important piece of the puzzle. But maintaining that discipline, I think, is going to be helpful for us into 2026.

And then, Paul, that's just the follow-up. Is one of the pieces on the walk you talked about as some of the lower EV losses will be lower EV incentives? So even though it's kind of a mid-teens 10% portion of the overall sales, the incentive isn't quite high there because of the competitive environment and as those are walked down, that's a piece of this year-over-year EBIT walk for ICE and maybe -- for EVs and a little bit of ICE on the overlay?

Yes. I think it's a little bit too soon to tell. I mean we certainly have seen a lot of behavior from competitors where they increased incentives into the face of the pull-ahead demand in September, et cetera. I mean that really looks like a sign of kind of liquidating a lot of inventory, and we've seen inventories come down, which I think portends for a more stable supply-demand balances as we talked about earlier.

So for what it's worth, our incentives, as disciplined as we've been on the ICE side, the difference between us and the industry on the EV side is actually even more stark. So we expect that that can be stabilized for us. And the customers that want EVs, and let's remember, there was EV adoption before the $7,500 tax credit and there will be EV adoption afterwards, I think those customers are looking for the quality and the range of vehicles that we can provide with our platforms. And I think that will bode well for us. But we certainly expect that we can get into a stable run of improving profitability. But we do have a ways to go, and we're going to be patient about how we do that.

Our last question comes from the line of Federico Merendi with Bank of America.

One question on the back of what Adam asked about China. During the quarter, you mentioned that you're partnering with Hyundai for the development of new vehicles, and I believe it was for South America. Is that the strategy of GM to go or at least to compete with Chinese OEMs going global? And is it -- should we think about GM going after the international markets once again?

Well, I think in many of the international markets, we have a strong business today. Paul mentioned in his comments, the Middle East, we're seeing very strong full-size truck and full-size SUV. We've seen progress in our South America markets, and the Chevrolet brand is doing well there, and it's also considered a premium brand in many of the South American markets.

I think the partnership that we announced with Hyundai speaks to what I think the industry can do more of, do things that the consumer -- or not consumer-facing where we can save from an R&D perspective and, in cases, save from a capital perspective, and we're looking to do that and get those efficiencies to make our vehicles even more competitive. So I think it's a broad strategy and we really have a strong partnership with Hyundai that we'll continue to evaluate as we go forward for additional opportunities.

And maybe I missed on this, but what are the working assumptions for 2026 in terms of tariffs for Mexico and Canada? Should we expect that something will be -- I mean, what are you expecting there?

Well, right now, the tariffs are 25% and 35%. I know there's conversations going on between the governments. But I'm not going to get ahead of that. So we're just continuing to monitor it just like you. So there's nothing -- no change built into our assumptions.

Thank you. I would now like to turn the call back to Mary Barra for her closing comments.

Thank you. And I want to thank everybody for joining us this morning. I want to reiterate my confidence in the strength and adaptability of our team and our vehicle portfolio, which we believe has set GM up for long-term success. Our immediate priorities are clear. We are committed to restoring North America to our historical margin levels, accelerating the expansion of our software and services business, on top of great vehicles.

We also see significant new opportunities ahead. Our investments in advanced technologies, manufacturing and talent are creating a more resilient, innovative GM capable of leading through change and delivering strong results for our shareholders.

So in closing, I'd like to thank our employees, dealers, suppliers and other partners once again for their ongoing dedication, hard work, because I believe this continues to set us apart. We're focused on building great vehicles, providing exceptional customer experience and creating lasting value for all of our stakeholders. And I look forward to updating you on our progress in the quarters ahead.

Before I close, I would like to recognize, though, the tremendous progress our Cadillac Formula One team has been making. We're rapidly approaching a historic moment for our company and the sport. In March of 2026, Cadillac will become the first American car brand on the F1 grid at the season opener in Australia, and will race for the first time on U.S. soil in Miami in May. The recent announcement that Apple will broadcast F1 exclusively in the U.S. will put the Cadillac brand in homes of multiple audiences and help us build even stronger connections to an estimated fan base of 52 million people in the U.S. alone. And when we think about F1, it's very aligned with where the Cadillac brand is today with all the work we've done to make it a true luxury American brand.

So thank you, everyone, again. I look forward to talking to you next quarter.

Thank you. That concludes today's conference. Thank you for participating, and thank you for joining.

Thanks for coming. I'm Ryan Brinkman, the U.S. automotive equity research analyst at JPMorgan. Very excited to get going with our next presentation, which is with the Executive Vice President and Chief Financial Officer of General Motors, Paul Jacobson. Paul is going to walk us through a slide presentation, and then we'll engage in a fireside chat.

Thank you, Ryan. Well, good morning, everybody, and thank you for taking the time today. It's been, I believe, more than 10 years since GM has done a public presentation in Europe. So we thought we'd actually take this opportunity to talk a little bit about what's changed maybe since you attended the last one first for some of you in the room or for those of you that may have studied it in business school when you were younger across the board. But super excited to be here, and I want to thank Ryan and the JPMorgan team for allowing us to come into this conference.

By way of introduction, for those that may not know a little bit of my background, I spent many years coming to this conference as the Chief Financial Officer at Delta and came to be one of my favorite conferences to attend. And -- so we're delighted to be back here and share a little bit about the GM story for those of you that may not be as familiar as what we've done over the last decade. So I want to thank you for coming, and thank you for the time. I don't usually even stand up in a podium to do this, but we thought it was such a really good resilient story that we wanted to make sure we get it out.

Of course, the presentation is going to be subject to our safe harbor statement if we change it. There we go. All the risk factors, et cetera, are in our public statements and public findings. So I want to talk about what is different because a lot of people will look at automakers or sometimes they're called legacy automakers and think that this is a tired dinosaur that is gone by the wayside and being replaced by new entrants across the board with a lot of pressure. But the reality is this is a business that still very much benefits from scale economies and where we are. But what we've done over the last decade is really to make us structurally better.

So if you think about the history of this business, it really has been focused on selling that incremental vehicle, high labor cost, high capital intensity, high manufacturing costs. If you can squeeze one more unit out of it and sell it for a marginal profit, you ultimately win in the end. I can tell you from a long history in an industry that suffered from some of the same challenges and behaviors of looking at marginal revenues, we've gotten much more optimized and much structurally better. And we'll talk about how we did that through a number of initiatives that you see on the page here, including restructuring our global businesses. All these businesses were underperforming. And as a result of it, focused not on quantity of sales but rather quality of sales across the board.

We have exercised significantly greater discipline in the business, and that is one of the most powerful driving forces, I think, for the U.S. auto industry, but more importantly, for what GM has been able to do to differentiate ourselves. And I think you'll be surprised about how that is. We remain #1 in large pickups and SUVs in the U.S., which is a tremendous accomplishment and obviously an incredibly lucrative business line for us and for everybody that participates in it. We've regrown a large captive finance company that ultimately gives us the ability to withstand shocks to the economy when banks may not be lending in vehicles as much as they traditionally would like to or they're not willing to take that risk.

It's not just an engine for us to continue to sell vehicles in those challenging circumstances. It's also an engine that drives loyalty for us with our GM Financial customers being among the most loyal GM participants across the board. We, of course, as always, and what we need to continue to do going forward, focused on a leaner cost structure. We're taking fixed costs out of the business. We're driving more efficiency across the enterprise, and there's surely more of that to come over time. And then lastly, our balance sheet is light years ahead of where we were just 10 years ago. So we're not here to predict a recession, only to say that one will come one day. We know that. But we're going to be far more resilient going through it than what we've seen before as a result of many of these steps that we've taken across the board.

So what does that mean? Actually our EBIT, notwithstanding some of the shocks that we've seen globally, is up more than 40% over the last decade. And I'll tell you later that it's much, much more efficient in terms of what we've been able to generate. You'll see that the North America business has actually grown by over $8 billion over that time period. In fact, the revenue we're generating in North America is more than we generated as a consolidated global enterprise back in 2015.

But importantly, the quality of sales is much better. So despite the fact that the China business isn't what it used to be and likely never will be what it used to be, we're still profitable there, and we're doing it with far more capital efficiency after our restructuring of last year than what we've done before. So it's still a great accretive piece of business to us going forward. But you can see that ultimately, we're much, much more resilient than what we've been.

So how did this start? It really started 10 years ago with the tenure of Mary Barra. And when I first met Mary about 5 years ago today, as I was interviewing to take this role, I was really impressed with what she did out of the gate and what she's been willing to do, which is make the hard decisions. It is really hard to sit back and assess where the business is and close manufacturing facilities and pare back and scale back underperforming businesses. But that's exactly what she and the team did when she took over. And as a result of that, we are more focused. We're more concentrated than we've been historically, but we're actually much, much more efficient than what we've been.

So we divested the Opel and Vauxhall businesses. We exited Europe, primarily because we had massive manufacturing complex, massive headcount and footprint here that just wasn't going to be sustainable for the type of market share that we could generate. Interestingly, we are attempting to come back into Europe over time, but we're doing it in a much, much more disciplined way, capital efficient, setting up distribution offices, but really sort of legging our way in with our electric vehicle portfolio where we can, but being disciplined about it and not realizing and setting up a significant amount of fixed costs and capital requirements going forward. We phased out sales and manufacturing facilities in Southeast Asia. We exited India. We wound down Holden. All of these operations were additive to the quantity, not additive to the quality of our earnings going forward. So you can see in the bottom of this page, while we have become more concentrated, actually, we're generating -- in 2024, we generated $157 billion in North America on the revenue standpoint and have actually restructured the international business to improve it by $2 billion annually over the last 10 years.

So despite the fact that our wholesale volumes are down 30%, our revenues are up 25% instead focusing, like I said, about the quality of earnings. And we're continuing to strategically look at international opportunities as they might come our way.

I hinted in the original page -- the starting page about the discipline and how powerful that is. And I want to spend a minute talking about that because not only do I think we are more disciplined leading to better quality earnings, I think this page highlights some of the biggest resiliency improvements that we've seen. We're not going to take the cycles out of the business. But what we are going to do and what we, I believe, have done successfully is taken out the self-imposed cyclicality in the business. So if you rewind and think about what we've done over the last 10 years, historically, the company would keep over 90 days, almost over 100 days of inventory on the ground at dealers. Customers would walk into dealerships. They'd see a number of vehicles on the lot. They'd choose one that best met their standards and what they were looking for.

But the reality was that involved a lot of carrying cost of inventory, but it also required heavy discounting and low to those who would face a recession with that type of inventory balance because with demand waning just at the time you have maybe 4 months of inventory out there, your only answer to meet the production demands -- or supply and production was to discount and discount heavily. So what would inevitably happen as demand was slowing, discounts were increasing on this revaluation of this entire inventory pool out there, often leading to draws on working capital in excess of $5 billion to $7 billion at the time that the company could least afford it.

So fast forward to today, we've got targeted inventory levels of 50 to 60 days. So it's probably the greatest lesson that we learned through COVID and through the chip shortage is that inventory discipline can yield better financial results and believe it or not, better customer satisfaction. Because what customers are saying today is I am comfortable waiting a couple of weeks to get the vehicle that has everything on it that I want. And that is a far better situation for us to be in than what we were before where we would have to induce that sale of a vehicle on the lot because we didn't meet 100% of what their needs were, and we would give a discount to the dealers in order to sell that vehicle going forward.

So the net result of this is not only our inventory levels down, but also our incentive levels are down. We have the second lowest incentives in the industry, and we look a lot more like Toyota than we look about some of our traditional counterparts. But importantly, if you look at the bottom of that page, look at what incentive levels have done since the last 10 years, and you see that stark decline coming out of the lessons learned of COVID and the chip crisis, and we've stayed there. So that means that the revaluation of the inventory, should we face a downturn is going to be billions of dollars less than what we've seen historically when you're running at a 10% to 11% incentive level across the board. But this lower incentives is worth $3.5 billion of annualized EBIT across the board, and that's cash that flows straight to the bottom line and ultimately through to the cash flow statement with our capital discipline philosophy.

Not all of our competitors have adopted this philosophy. And in fact, we have faced pressure from heavy discounting from some of our main competitors over time, but we haven't wavered from this strategy. And as a result of that, we've managed to hold on to this revenue premium that we've gotten versus the industry. At the same time over the last several years, we have gained market share. So that is previously unheard of in the business, and it speaks to the quality and the performance of our vehicle portfolio that is winning customers over despite the fact that we've got premium pricing. That is the recipe for success and far greater and far more sustainable than going through and just cutting costs and ultimately having to pass that through back to customers and dealers because we don't maintain the inventory discipline.

We talked a little bit about large pickups and large SUVs. This obviously remains a bellwether in the U.S. industry. And we have a disproportionately large share of this business. And it's one that has been remarkably resilient. In fact, many analysts felt like coming out of the inflation cycle over the last couple of years and higher interest rates that we'd actually see contraction in this business, but we haven't. We've seen pricing stability. We've seen people continuing to demand higher and higher trim levels and packages and get into premium pricing, and we've continued to sustain that. This is going to be really important for us as we see the regulatory environment shifting in the U.S., and I'll talk about EVs a little later in the presentation. We are not abandoning EVs by any sense. In fact, we think that they're going to continue to be a growing part of the equation, although it might be slower than where we were just a couple of years ago because of that regulatory environment. But we're going to keep this portfolio fresh, and it's going to continue to drive the cash flow that we need to continue to invest in the structural improvements that we need to make to EVs going forward.

I talked a little bit about the captive finance company. This is an important tool for us. As I mentioned, not just providing sustainability through a cycle as bank lending starts to pull back in a downturn, we can be there to meet the customer where they are. But also, we have a leg up on loyalty. With the relationship that we set up with our customers, we know that they are significantly more likely to buy a GM vehicle at the end of their lease or their loan versus somebody who finances with a third-party company.

And you can see we've more than doubled our earning assets since 2015. And this has been a remarkable company under the leadership of Dan Berce, who has just retired, but with Susan Sheffield running the company now, feel very comfortable with where GM Financial is going to be and doing it in a way that is disciplined so that we're not extending credit to people that we shouldn't or to challenge credits, but ultimately driving that high-quality, high relationship-based credit availability going forward.

It wouldn't be a finance presentation if we didn't talk about leaner cost structure. But I want to make sure that we stress that this isn't the GM of old. One of the things before taking on this role, I spent time looking through the history books. And GM has been a remarkably financially disciplined company over the years historically. But the problem is when you take a finance-centric view, the tendency tends to be to overfocus on cost reduction. Now you can make the cheapest, most efficient vehicle on the planet. And if you build a vehicle that doesn't have the content that customers want and they don't buy it, it doesn't matter how efficient you are. We have to focus not just on cost discipline, but actually redeploying cost savings into those features and into that content that customers want and are willing to pay for. And that's where you see the real advantage, I think, of what we've done over the last several years is we've gone after fixed cost.

In fact, if you look at our fixed costs, they remained relatively flat despite all that revenue growth that you've seen going forward. But we're able to redeploy some of those cost efficiencies into the vehicle to improve both quality and content to make the vehicles more desirable. That pays back in the form of the revenue premium that we talked about before. So while we've seen and these presentations in the states tend to be much more focused on this quarter or this week or God forbid even this day or this month of what's going on in the short run. But we're focused on making sure that we sustain the success, and that means investing in our products. Increasingly, we'll have to use AI tools to make sure that we reduce our fixed costs to drive that efficiency in the business that we can. But we can never ever go and get cost savings out of removing content and removing features from the vehicle.

It's going to be more efficient to put them in when we get into software-defined vehicles and we start to get a presence there, but we can't fall into the trap of ultimately cutting back. So we've been focused on doing these cost reductions the right way. And I think we're going to continue to do that, and I think there's additional benefits going forward. Probably the most stark difference from the last time we were here is our balance sheet. And you can see how much improvement that we've seen. Not only have we brought debt down, but we have -- we're almost completely fully funded in our pension as well. We've improved that by more than 80% from where we were before. So the large draws on cash flow at the time that we can least afford them is what is driving a lot of that consistency in our performance going forward, which is also going to help us withstand any shocks that we see to the system, whether it be regulatory like through tariffs or ultimately through an economic downturn.

We have the balance sheet strength and the fortress now that we need to be able to fund innovation to be able to maintain cash return to shareholders or take advantage of strategic opportunities that might come our way. And in fact, we've continued to do that this year, in fact, paying down $1.25 billion of debt with cash that was maturing in October. We just paid it down early under the call provisions that we had in that note, further demonstrating our commitment to this balance sheet even as we are actively returning capital to shareholders.

So it's one thing to drive cash flow and durable cash flow into the business. But the most important thing is what do you do with it when you raise it. We take a philosophy of capital discipline that's really driven by 2 main variables. Number one is the simple one. That's affordability. Can you afford to spend the capital that you have? And the reality is we're generating well over $20 billion in operating cash flow and have for the last few years. We're adjusting to tariffs, and I think that will rectify itself over time as we're able to adjust the business to that new reality. But the fact is we could afford to spend a lot more on capital than we do now. We're spending $10 billion to $11 billion this year. We're going to spend $10 billion to $12 billion in '26 and '27 to accomplish some of the re-footprinting that we need to do to adjust our business and bring onshore more domestic production. But we can do that in a disciplined way.

And a lot of questions that we get are, can we return back to the $8 billion, $7 billion that we spent over the last decade on average? And the answer is I don't think we have to. First of all, if you look at inflation adjustment from the years of $8 billion, that's the same and the equivalent of about $10 billion nowadays. So $10 billion to $11 billion is actually on a real basis, pretty similar to what we spent historically despite the fact that we're generating significantly more operating cash.

But that brings us to the second variable in determining what the right capital budget is. And that is what can you deploy effectively? So while we could afford to invest more capital, in order to do that, we would have to hire more engineers, more supply chain people, acquire more real estate, spend more on logistics, spend more on warehouse space, et cetera, to accomplish all of this. And we don't want and we don't believe we can afford that fixed cost burden that comes with deploying that capital and ultimately, the margin compression that will result, which is why we've settled on $10 billion to $12 billion, and we think we can do that effectively while maintaining a quality vehicle portfolio for our customers. And that's what the most important piece is. Oftentimes, and I've had the privilege of being CFO for more than a decade, I never want to work for a company that runs out of ideas, but I never also want to work for a company that tries to employ and implement every single one of those ideas. You can't do it. You can't spread yourself that thin. You can't deploy capital as effectively as when you do it in a tactical and strategic prioritized manner.

So what that's allowed us to do is actually be much more shareholder-friendly and return capital to shareholders. In fact, we've retired more than 30% of our shares outstanding in the last 3 years. That's what we mean by commitment to returning capital to shareholders. That hasn't been without its criticism, but it is, in fact, the owner's money. And when we don't have deployment opportunities to grow that money on behalf of our shareholders, we have an obligation and a duty to return it to them, and that's what we've done. We've seen some multiple movement. And as Ashish and I were talking the other day, we take great pleasure in the fact that our free cash flow yield is down to 13% because it's been at 20% for the last couple of years.

And what that tells you is people are starting to understand. We don't earn the type of valuation overnight. We took decades to do that, and you see that type of low value multiple, et cetera. But just a few years after deploying many of these tactics that we have in terms of driving the business for cash flow and returning that cash flow to shareholders, we're starting to see that multiple expansion. And we've broken out of that traditional range that we've been in, in the 10 years since the IPO. And the last 5 years has obviously been significantly better than that.

That capital allocation framework is something we're committed to invest in the business. That has to be first, maintain a healthy balance sheet. We've done that. And as I've demonstrated, a much stronger balance sheet than what we've seen over the last 10 years. And third, allocate capital back to shareholders.

We're doing that with a low dividend, but we're focused and we'll remain focused on retiring shares at these low valuation rates as long as we can continue to do so. And so you look at our proven execution, it's revenue growth, it's EBIT growth, it's margin expansion. And yes, this year, we're going to see some margin compression with $4 billion to $5 billion of tariffs hitting us. But as we've said, we think we can get 30% of that offset through a number of initiatives, including go-to-market strategies, re-footprinting as we talked about, as well as cost efficiencies and taking fixed costs out of the business.

As we expect tariffs to normalize and as we see the U.S. entering into new trade deals as it has with Europe, with Japan, with Korea, although that's not finalized yet. And ultimately, we believe with Mexico and Canada, we should see stability in the tariff environment, but we expect that we'll keep the self-help that we've generated going forward, ultimately bringing down and compacting that net tariff exposure going forward and allowing us to work our way back up to 8% to 10% margins in North America over the coming months and years going forward.

So we're really well positioned to be able to withstand this and ultimately adjust, but it really comes down to being nimble. How do we focus on these forces that hit us from time to time, whether it be a pandemic or whether it be a supply chain challenge or whether it be tariffs, how do we just really focus and adjust our business? The next one of those is really EVs. We've seen a massive seismic shift in EV demand, EV regulatory environment, et cetera, over the last 5 years and perhaps no greater change than what we've seen really in the last 8 to 12 months going forward. We're coming from an administration that was really focused on electric vehicle penetration such that there were large consumer incentives in place to get customers to buy them, but that was backed by a regulatory framework that was extremely punitive if the demand didn't reach the standards that were set. Those standards were 50% EV penetration in the U.S. by 2030.

Last year, EV penetration sat at about 7%. So we were facing a regulatory crisis. And as a result, you've seen a lot of pricing pressure in the U.S., heavy discounting by both domestic and import players because they weren't building an electric vehicle franchise. What was really happening in the industry was they were buying compliance credits to make sure that at the end of the day, we didn't face the punitive GHG penalties that were coming our way in the world where we didn't sell 50% electric vehicles.

With the Trump administration coming in, they have said we're going to scale that back. Not eliminate it, but they're going to go back to probably a standard that looks a lot more like what the standard looked like in the first Trump administration, where we have serial achievable GHG improvement year after year. And ultimately, combining the removal of consumer incentives, which will occur in just a couple of weeks, but also combining that with the end of the regulatory framework that was putting us in a box that would have ultimately resulted in significantly smaller U.S. auto industry because we wouldn't have been permitted to sell the internal combustion engine vehicles at anywhere near the volume we would have sold them without selling the EVs that we found customers weren't adopting at the rate that the government wanted.

So what does this mean for us? We've invested heavily in a platform, and the platform of electric vehicles has been very successful for us with consumers. We achieved the #2 status in the U.S. with the Chevrolet brand alone as the #2 player. Cadillac is the #1 luxury EV player, and we solidified ourselves as the #2 player in the U.S. EV market to Tesla. Now as we have said, we haven't been able to do that profitably yet. The journey to profitability was heavily driven by scale. And the reality is we're probably going to scale up much slower now over the next few years. But we're in a position now where we have the opportunity to deploy the capital into electric vehicles not to proliferate the portfolio, but rather to focus on structural cost reductions within EVs.

So you've seen recently, we've announced a new battery chemistry, lithium manganese-rich, which has essentially the cost profile that looks like LFP with the energy density of the high nickel that we're used to. And when you look at combining that not just at the cell level, but all the way to the pack level, there are savings of several thousand dollars per vehicle while not sacrificing or reducing the customer range that people want going forward in order to continue to want electric vehicles. We're also deploying capital on a new electric vehicle architecture. This will make a significant seismic shift in the profitability per vehicle. And we're going to be able to do that on lower volumes in the short run as we rightsize to customer demand and where we go forward.

And ultimately, as I've said, we believe EVs are a winning formula for the U.S. consumer over time. And we can get there by giving consumers the products that they want that meet their range needs and their charging speed and the charging infrastructure. For how much is made about the administration's is often reported war on electric vehicles in the U.S. That really isn't true because one of the things that the administration is continuing to do is actually invest in the charging infrastructure. We know this is one of the biggest obstacles to further adoption is the range anxiety and the availability of charging. But the government is continuing to invest in that. And with us adopting the North America charging standard, we believe that there's an opportunity here to significantly improve the charging capabilities of our vehicles going forward for customers and ultimately continuing to grow our share.

But it will be a little bit choppy. We've seen a pull ahead in EV demand in the last several weeks because if anybody is contemplating an electric vehicle purchase in the U.S., they're probably going to do it before September 30 in order to capture that $7,500 tax credit. So we're going to see some noise in October and November, and I expect that EV demand is going to drop off pretty precipitously. We need to give it time. We need to let it settle and understand where is that natural demand going and how do we meet that natural demand and ultimately try to lead customers to electric vehicles. That's going to take a little bit of time. We'll probably have to adjust our footprint a little bit, but we're committed to meeting customers where they are and leading them with the portfolio that we've built in electric vehicles that we do believe will be successful for both the intermediate and the long term as well.

So to close, I think we're a very different General Motors than the last time that my predecessors presented here in Europe and one that we're incredibly proud of, but one that I think makes the company significantly more investable than where we've been at any time in the last decade. And I learned early on in my finance days, but worked under some pretty stellar leaders as I learned how to be a CFO. But the one thing that is tried and true from every CFO over time is that cash is king. And when you run the business for cash flow and you're disciplined with that cash flow, good things happen. And that's what we've seen over the last several years with our story and one in which we hope and we endeavor to continue for the foreseeable future.

So thank you for your time. And Ryan, I'll turn it over to you for Q&A.

Great. Thanks so much, Paul, for that presentation. I thought to start at the highest level possible. To ask you as the CFO of one of the companies, the S&P 500, with the most amount of revenue domestically in the United States, what your latest thoughts are with regard to the economy since the investors in the room have an odd mixture of apprehension about a slowdown, jobs market revision, et cetera. At the same time, a lot of animal spirits and optimism around rate cuts. What are you seeing in terms of the traffic at your dealership, the retail sales, the latest? And also, too, don't you have a lot of insight into the thinking and forward planning of small, medium, large business owners and fleet operators, your commercial sales operations. Curious what you're seeing on that side of the house as well.

Well, the consumer has been remarkably resilient. And I think as we've talked about over the last few years, there have been a lot of reasons to believe that we were at peak cycle and it was going to come down, whether it was the inflationary cycle that we saw taking money out of people's pockets. It was higher interest rates, increasing monthly auto loan payments by $200 from where they were at the lows. It was industry pricing, et cetera. But the consumer has been remarkably resilient, and we've seen that continue with our vehicles. I think one of the most interesting things, and I touched on it in the presentation, is that nobody would have believed with less inventory and customers waiting for vehicles that customer satisfaction would be up.

But that's exactly what we see. The dealers see it in their scores as well. So this has continued. And I think there are opportunities for easing of interest rates to take off some of that affordability burden. But I think time is going to tell on this one. But I think what we'll find is that perhaps the peak wasn't as peaky as it traditionally has been because of affordability concerns. Because traditionally, if we were looking at peak cycle, we would be looking at demand sets in the U.S. of 17 million, approaching 18 million units. We've really been trending around that 16 million to 16.5 million unit mark. And that could be because we've shrunk that because of some affordability concerns. But what we've proven since COVID is whether it was a 14.5 million unit industry, a 15 million unit industry or now around 16 million, we can be remarkably well performing through that time period. And I think those adjustments have helped.

So the theory potentially is that by taking off the peak of the peak, the bottom is actually significantly more stable than what we would have traditionally seen. And I think, unfortunately, it's probably going to take a downturn to prove that out over time. But all we can do is just be as resilient as possible. But we haven't seen any signs that there's any weakness or fatigue among consumers right now.

You highlighted the success you've had in electric vehicles in the U.S. this year. Your sales are up substantially, doubling. Tesla sales are down over the same time. Back to the -- I think it was the November '22 Investor Day in New York. I thought it was maybe overly optimistic at the time, you were talking about, hey, EVs are going to be additive to our business because they're on the coasts and it's not going to take away. I'm just curious with the -- I mean in one of your recent months, I think 31% of Cadillac sales were electric, right? Are you seeing any evidence in terms of the trade-ins, et cetera, that people are trading in Teslas for Cadillacs? Or how are you gaining share on that side of the business and not losing share on the ICE side?

Well, we did set out to do that a couple of years ago, and we talked about how our portfolio would be accretive. It's not that somebody would buy a GM electric vehicle at the expense of a GM ICE vehicle that they would have otherwise purchased because when you see the penetration of the vehicles that we produce on the coast, as you mentioned, we were significantly underpenetrated. So this gave us an opportunity to go into markets and see some success that we hadn't traditionally been in. And that's been true.

At the same time, we've gained share in our EV portfolio, we've also gained share in our ICE portfolio at the time, and that speaks to the quality of the portfolio that we have overall. And I think as we've talked about, again, many people have speculated that we can't keep that revenue premium that we've generated, but we've done it through a period where we had one competitor that had significant late model year carryover and they did some heavy discounting. We didn't match them, and we picked up share. We had another competitor that had a significant blood of inventory that they had to work through and much was written about how that was going to be the end of the disciplined incentives. We didn't change our incentives. We picked up share.

So it's that discipline that I really hand to the go-to-market team and the commercial team in North America to be able to focus on our supply and our demand as a way to actually drive that more efficient pricing and ultimately, consumer behavior that we've been able to do, and it's really worked well for us.

Yes. And you can see that the reduced EV incentives are going to be a headwind for EV profitability. But what about the tailwind to profitability from less ICE engine regulation? Ford's CEO recently stated he thought this could be a multibillion-dollar opportunity over just the next 2 years. What is the latest that is happening there, do you think? And what are the milestones that investors should be watching for? And how could they start to think about sizing the opportunity? Is it as simple as paring back the -- I think you spent $3.5 billion on purchasing credits from other automakers since 2022. Is it the savings in the credit expenditure? Or are there other benefits like maybe you'll sell a richer mix of vehicles sold or maybe you have a higher share in that part of the market or maybe you can -- there'll be maybe more rational pricing for EVs. What do you think the implication is going forward for you there?

Well, I think when I started, a lot was being written about the death of the internal combustion engine and how that franchise should be valued at 0 and everything should be EVs. And certain analysts reversed that very quickly and said, well, it's not about EVs, it's about ICE. But the one thing that this means is that the ICE tail is now fatter and longer than anybody ever thought it was going to be under the regulatory environment before. But you're not going to get there without making some investment because many people were phasing out ICE vehicles in anticipation of having to get to 50% EVs by 2030. So there's going to be some refreshing that has to be done.

But the reality is that, that is going to be a much bigger cash flow engine than I think anybody has thought historically. So I think that's net good for us going forward. We never really talked about the regulatory burden on ICE vehicles until it became extreme with the last regulatory environment. But the reality is while this is a negative for electric vehicle profitability because the credit stream that was worth thousands of dollars when you sold an EV and everybody benefited from it and Tesla has had periods where that was the only source of profitability with selling those credits, those are now going to be essentially worth 0 depending on what the administration does with GHG.

But while it's negative for our EV profitability, it's accretive for the enterprise because we sell far more vehicles that were subject to needing those credits. And as you mentioned, we've spent billions of dollars buying credits. That was only going to go up over time as we saw that stringency curve increase over the rest of the years of the decade. And that's now potentially not going to be there. That's an opportunity savings, but also the savings within the baseline profitability of what we'll see because what we would do is we would buy credits and then we would amortize those over time. So we do expect -- assuming all of this carries through, we do expect some EBIT accretion as a result of not amortizing those credits into the P&L anymore.

Now after tariffs came out, and we learned it was a $4 billion to $5 billion headwind, and that was really just the 3 quarters of the year. I don't think investors were all that confident you could get back to 8% to 10% margin in North America with that big headwind and yet you've outlined your plan to do just that. And I don't think you've put a year on it, but within a couple of years, I think, is what you might be thinking about. And just building on your last statement about how it's net accretive to the business, the reduced EV incentives and the reduced ICE penalties, could there be even a scenario where you don't just get back to 8% to 10%, maybe you do even better than you targeted pre-tariff because you get back to 8% to 10% on the restructuring, on the in-sourcing, the resourcing, the pricing. And then you can add this net tailwind from ICE and EV regulation changes. Is that possible?

Well, I mean, I think it's certainly in the future, and we haven't even talked about the software opportunity that exists, but we've highlighted $4 billion of deferred revenue that sits on the balance sheet today from Super Cruise and OnStar that's continuing to grow and expand over time. And we are well on our way to hitting those goals that we ultimately crafted back in 2021. We're not going to hit it by 2030, but we're on track to be able to hit it subsequently after that as a result of software-defined vehicles.

So it's not just structurally within the business. It's also ultimately evolving to that digital franchise that we've been talking about, and we're much closer to that. So as we think about this journey, in the coming couple of years, I think there is regulatory tailwind. I think there is an opportunity to reduce our fixed costs even more than what we've done. That can be a tailwind. We're achieving this despite the fact that we've seen significant increases in our powertrain and warranty -- policy and warranty expense. Hopefully, and with the work that we're doing to improve the quality and reduce the cost of those warranty repairs, we crest over that. We could see some tailwind there.

I talked about in the presentation, the opportunity to improve EV profitability. There's a lot of things that are working for us right now that ultimately are not just margin accretive, but we think cash accretive to the business as well. So we've got our sights set on going beyond that. It's too soon to call that because as I've learned in this business, lots of things happen. And perhaps the best advice I got when I was talking to friends and colleagues about this opportunity, somebody once told me, be careful because you can't sneeze at General Motors without it costing $1 billion. And it's true. This is an expensive business, but it also means that there are sizable opportunities ahead of us, too, with that operating leverage that we're driving in the business. And I'm pretty excited about what that holds.

I'd love to get your thoughts on the robotaxi market, the market for personal autonomy. Obviously, a lot of headlines right now with Waymo scaling with Tesla scaling, albeit with the driver still in the car. But you've charted a separate course, what you're calling personal autonomy. There was a company at our conference last month, Faraday Future, kind of hitting on some of the same themes saying that to make a truly safe, truly capable autonomous vehicle with all the sense of redundancy that is required, that it really is not economical over the foreseeable future to scale robotaxis, but there's a better chance that we could make progress nearer term in the luxury market where people are willing to pay more for that. And just thinking -- obviously, we've got a great strategy with Super Cruise, but beyond Super Cruise, the really autonomous vehicle, what is the time frame you're thinking about there? Why is that more attractive at least for General Motors than robotaxi?

Yes. So we were actually on the leading edge of autonomy back in 2016 when we purchased Cruise. And that team did a lot of great work in advancing the technology and the practicality of getting vehicles out on the road. When we made the decision to wind up Cruise and ultimately bring it in, it wasn't a decision that was based on autonomy. It was based on robotaxi. And the reason for that is we saw a, call it, $10 billion to $15 billion capital need to build that robotaxi business to get it to breakeven and something that we didn't see was sustainable with our cost of capital and some of our capital constraints.

We went to the market. We looked and we found people that were willing to invest, but they were only willing to invest subject to our continued investment. And as a result of that, we ultimately said it's probably not the highest and best use of our capital to fund a robotaxi business, but let's take that technology and find a way to put it into our vehicles. So we're mapping out an evolution to go from L2+ in Super Cruise to L3 to L4 over time for our customers. And we think that, that's something that's much more achievable than us funding a robotaxi business.

So those tech companies that have the benefit of a much higher valuation, a much lower cost of equity are free to continue to go build that business. And maybe one day, we can play a part in it as a supplier or ultimately, maybe even a technology supplier to them because we do have a lot of expertise. And with Sterling Anderson coming on board, he's done a great job of sort of harnessing all of that and articulating a vision that is rallying a lot of people behind it. So we're excited about what it can bring and what it can mean for our customers in the future.

Okay. Great. Well, with that, we are out of time. So please join me in thanking Paul for all the great color and insight.

Thank you, Ryan.

Okay. So once again, I'm Ryan Brinkman, U.S. Automotive Equity Research Analyst at JPMorgan. Very happy to get going with our next presentation. Highlight of the conference, General Motors. Back again this year Paul Jacobson, Executive Vice President and Chief Financial Officer.

I'm going to turn it over to Paul for some introductory remarks, and then we'll engage in a fireside chat.

Thanks, Ryan, and thanks, everybody. Are we on? Are we good? Thank you. Thanks, everybody, for taking the time and come in and for those that are on the webcast today. As always, we appreciate that.

So far, so good. As we look in the quarter, July, I think, was a month that was generally in line with our expectations pricing-wise. We continue to make sort of incremental strides on our relative pricing. I think we saw a little bit of slight uptick in industry incentive levels while we were down. But overall, very much in line with what we talked about for the quarter. We are seeing, I think, as others have probably reported, a little bit of pull ahead activity in EV sales in particular. No surprise there as consumers who might be contemplating an EV purchase, obviously, have an incentive to do so before October 1 with the elimination of the $7,500 consumer tax credit. But generally, very much in line with where we sit.

We've seen the administration make progress on trade deals, including Korea, and we're eager to see that get finalized. As we've talked about, Korea is one of the important 3, if you will, to us, in particular. So while it's too soon to tell based on where and when that deal ultimately gets finalized, there's potentially hundreds of millions of dollars of savings there on our tariff bill for 2025 and certainly, what we expect to be a pretty meaningful contributor to '26 and beyond. We have seen a little bit of noise in steel tariffs aluminum, semiconductors, et cetera. So we're still generally consistent with that $4 billion to $5 billion. And the company is making really good progress on its 30% offset that we've committed to for 2025.

As we think about what 2026 is and beyond, it's too early to provide any meaningful commentary as to where it is because we still, obviously, the administration is still working with Mexico and Canada, and we're looking for other trade deals to get finalized and so on. But what I would say is the administration, as they've said publicly, very committed to the U.S. auto industry, and we look forward to continued productive conversations with them about making sure that we can remain very, very competitive however the tariff landscape gets resolved, and we're eagerly anticipating that.

So as we think about 2026, our vision ultimately is that the tariffs normalize at or potentially below where they've been for 2025, and we can keep our offset. So when we look at that 30% offset, a lot of self-help in there, including fixed cost reductions, manufacturing footprint changes as well as go-to-market strategies. We want that to be sticky. So ultimately, we can work our way back up to that 8% to 10% margin level as quickly as we can in a new world where we expect some tariffs to be permanent going forward.

So I think the team is making good progress on that. We'll obviously provide updated 2026 guidance and initial guidance as we get to the end of the year and with our fourth quarter performance. But overall, I would say the year is trending very much in line with what we expected. And to look at a $4 billion to $5 billion impact with sort of very short notice in 2025 and still to be able to produce $7.5 billion to $10 billion of free cash flow, I think, is a real strong demonstration of what the resiliency is of the General Motors team.

And one of the things that our team has talked about for a future investor presentation is to really shape that landscape of how different we are today than where we were, say, 5 or 10 years ago, almost pre-COVID because the changes that we've made, I think, in the business and the way we run the business, much more stable GM, much more resilient General Motors and much more flexible to be able to adapt to changes like this, whether it was COVID, whether it was a semiconductor shortage, tariffs, et cetera, or potentially a future downturn. We think we're much, much less exposed than what we've been historically and continue to want to drive home the point for investors and prospective investors that the risk return for trade-off for General Motors with the current performance as well as the lower risk going forward, we think, is a really good value play for others.

So appreciate you all being here. Ryan, look forward to answering your questions.

Great. Thanks for the introduction. I thought to ask first on tariffs, specifically from the perspective of the gap between the industry-wide cost of tariffs and the associated pricing recovery so far. The cost of tariffs stepped down a few times now. First, we thought that they might run high single-digit percentage of the retail price after the exemption for USMCA compliant parts, relief for other parts and as these individual country deals have been reached, maybe now it's tracking more in the mid-single digits as a percentage of retail price, but automakers still have not raised price anywhere near that much. How have industry prices tracked relative to your own expectation? And how do you see the burden sharing may be evolving over time between the automakers, the consumer, et cetera?

Well, I mean, I think we have adopted from day 1 a view where we need to take it upon ourselves to figure out the strategy to help the company continue to perform. And we pretty early on had developed what I would say is a 3-pillar strategy, go-to-market initiatives, manufacturing footprint changes and then the third is fixed cost reductions across the board, and we highlighted those 3 buckets as getting to our 30% offset.

As we said in our -- I believe it was our second quarter call, our first quarter call, we didn't necessarily need to see any incremental price changes to be able to fill up that bucket, if you will, of our offset strategy. We went into the year thinking that pricing was going to be flat to down slightly for the year, and we revised that up 0.5% to 1% for the full year. So we have seen some price certainly at General Motors, and that's evidenced through our relative incentive performance as well as what you see in our average transaction prices. So we feel good about where we are. And we don't want to be in a position where we are dependent on what the industry can or can't do.

We have adopted, I think, a very independent pricing strategy, and we're going to continue to do that because what you've seen with lower incentives and generally sort of higher average transaction prices is that we're still picking up share. And that really goes to the heart of the quality of the vehicle portfolio that we have right now. That puts us in a position of relative strength because I can achieve some of that offset either by taking price where we can or more importantly, by even picking up volume, not the traditional ways in the auto industry where typically share gains were purchased by higher incentives or by heavy discounting. We're not seeing that. We've been picking up share fairly consistently over the past few years despite the fact that we have lower incentives in the market.

So lots of different levers that are available to us in that whole net revenue equation. And the team has done a tremendous job of working at the customer level to make sure that we're able to take advantage of that portfolio and where it sits.

The second leg of that stool is manufacturing footprint changes. We announced earlier this year, $4 billion of investment that will raise our capacity in U.S. vehicle production almost 2 million units including some incremental full-size SUV production that will help take some of the burden off of Arlington and also give us additional flex capacity that we really don't have today with the Arlington plant running as efficiently as it does today. So that's going to ultimately result in fewer incentive or lower tariffs for us going forward.

And then the third is making sure that we're not making excuses because if the pricing isn't there, I don't want to come to the investor base and say, we couldn't offset it. It's just a reduction in earnings power is go drive more lean behavior in the fixed cost structure, which I think we can continue to do. And I think there are opportunities for us to trim that even further going forward as well.

So overall, we need to get to back to that 8% to 10% margin level in North America as quickly as we can. And I think we've got a road map to be able to do that. It may not happen overnight. But like I said in my opening comments, if we can earn $7.5 billion to $10 billion of free cash flow in the meantime, while we're dealing with the maximum impact, that's still not a bad situation to be in and commensurate with our capital allocation strategy, one that I think benefits the shareholders.

Yes. And that does lead into my next question, which is, is there a residual impact? I mean you haven't quantified how you get all the way back there. You given us a lot of the pieces of the puzzle. I mean, it's $4 billion to $5 billion gross headwind over 3 quarters in 2025. And you haven't said we can really annualize this, but if you were to sort of simplistically annualized, it comes like $5.3 billion to $6.7 billion, with at least 30% offset would mean the headwind on a net basis would fall to less than 3.7 to 4.7. You said Korea was $2 billion, I know you haven't updated for that just yet, but so $2 billion in 3 quarters, annualized, that's $2.7 billion. You got 40% relief there from 25% tariff to 15%. So that would seem to help $1.1 billion annualized. Now we're down to like 2.6 to 3.6. Still some wood to chop.

You've announced these actions, though, that you haven't quantified like spending the $5 billion -- the $4 billion on the plant, $1 billion on Tonawanda. How much is that going to save you? How much can that further whittle down this residual sort of 2.6 to 3.6, I'm kind of penciling in. And then I'm sure there are other things that you're -- so you've got the plans, you've announced that you haven't quantified it. There's probably other things you haven't even announced yet, but you're working on, right? So how much further improvement do you think you can make over what type of time frame? What would be a good outcome for GM?

Well, unlike our budget meetings, I'm not going to check your math. I'll trust you on that for the sake of time. But as a general rule, I mean, if you look at Korea going from 25% to 15% directionally, you're correct on that. We don't know yet Mexico, Canada. We don't know what the future of MSRP offset or other provisions that the administration has done. So that's why it's too early to start to triangulate on what a number for 2026 might be.

But like I said, what we've been setting business up for is to get that 30% offset. That's kind of just putting a stake in the ground of saying, what can we do really quickly to do this. But over time, irrespective of whether the tariff level is $4 billion to $5 billion, $5 billion to $6 billion, $3 billion to $4 billion, the idea is, okay, I've got that stake in the ground. Now let's go from there and readjust the business to what we need to do in order to be able to deliver that 8% to 10% margin that we've seen over time. So that is all taking shape.

We'll begin our budget process really kind of starting now for 2026. There's obviously a lot of uncertainty there with the different trade deals that are taking hold. But we'll have a plan and we'll put a plan together that I think does what it takes. And that's one of the things that I hope the market understands and appreciates about GM is we may not have all the answers today, but what we've got a team is that it's proven the resiliency and the ability to create plans very tactically to go execute and to hit our numbers going forward. So while it's too early to commit as to whether we can get to an 8% to 10% margin next year, I certainly think that there is a road map that can get us back there over the short to intermediate term.

Yes. And I think that your whole attitude to all of these unforeseen headwinds in recent years, whether it's the pandemic or is it the chip shortage or it's tariffs is like it's not an excuse we're going to find a way to make our numbers get as darn close to it as we can, it's very refreshing. At the same time, what would be a reasonable estimate of how it might shake out those things that are outside your control? I heard you say in the opening remarks that you expected tariff rates to be down next year. I mean, well, yes, of course, with Korea being down for the whole year, is that you're just making an estimate sort of the anniversarizing of that? Or do you think that the rates applied to Canada and Mexico, which are now higher than Japan and Korea and those could come down.

Kevin Clark from Aptiv yesterday predicted that they'd be 15%. The rating agency panel yesterday, S&P Moody's, Fitch were saying that they thought USMCA would continue without huge changes. Treatment for copper tariffs, they're stackable now, unlike this deal in aluminum, that doesn't seem consistent, they're all metals. Maybe there's some speculation automakers could get credit for the vehicles that they export against what they bring in. I mean that would seem to make a lot of sense. So curious your outlook there, whether it implies incremental changes versus what's already been announced or just kind of the roll forward?

Well, I mean, I'll let others be in the prediction game, and we can talk about their estimates and so on. But I think if you just listen to what the administration has said, it's clear they're going out and dealing with countries on a sort of one-by-one basis, and they've ascribed importance to getting a lot of these deals done. And I think Mexico and Canada are both very important trade partners and deals that want to get done. I think they are kind of setting a road map for how they want to think about that. But that still has a long way to go on it. I don't want to imply that we know anything more than what others do. But what we have heard very publicly is that the administration is very committed to the U.S. auto industry and wants it to remain competitive.

I think a lot of the actions have worked in terms of creating incentives to move to the U.S. as we've announced with $4 billion of capital investment into the U.S. plus another almost $1 billion for next-generation V8 engines in Tonawanda. That is working, it's taking hold, and it's one that I think we can make sure we adjust the business to. As to what the actual rates are going to be, again, the administration is going to decide that, and we'll figure it out, but I take them at their word. And certainly, at the conversations that we've had, that they're committed to making sure that we remain competitive. So whether that is through constructs like the MSRP offset that they've implemented or its absolute lower tariff rates. I think at the end of the day, we'll be in a situation where we'll be more in line with where the global landscape is, if not potentially slightly better than that, given some of the economic disadvantages that we might have producing here versus in other low-cost jurisdictions throughout the world.

So I think that portends for a brighter future down the road, but it's going to take time to implement these things going forward. And that's a road map where if you say at the end of the day, the industry is valued by the administration and we're not going to be disadvantaged by all these other deals implies that it's going to be lower than what it is today. So when we do that and we keep the stickiness of our offset strategy going forward, you start to narrow that gap of what the net tariff impact is, whether that's full year 2026 or not is going to be a function of how quickly these deals get done. So that's why we're being somewhat cautious about '26. But I would say I remain relatively optimistic vis-a-vis 2025 as to where we're going to go and how much certainty we'll have.

Great. And what more can you tell us about the $4 billion, $5 billion investment to reshore the full-size pickup trucks and SUV production as well as the Blazer and Equinox for Mexico to invest in the new generation of V8's. It's an important part of reducing the headwind from tariffs, but does it potentially go beyond that? Will you maintain the ability to produce trucks in Silao and Oshawa such that overall capacity goes up were Arlington and Fort Wayne, I think they were running pretty much flat out such that maybe your straight time labor costs go up, but you can pay less over time or you can sell more trucks. How much can the onshoring help you? Or what is the payback period on that $5 billion.

I got to give you credit, Ryan, I've been here almost 5 years. It's the first time anybody has asked me if the industry could benefit from more capacity. But it gives us flexibility, what I would say going forward, particularly as it relates to full-size SUVs. We know we have demand that outstrips supply for our full-size SUVs. We know we put a strain on our people in Arlington, and this is going to be a little bit of a relief valve and the potential option. But I think what we've got to do is absolutely maintain our discipline.

As it relates to Silao, obviously, we'll have some capacity there. I think the question will be, does that become principally export capacity? Or can it be flex? But to go in and start to build expectations that we're going to use all this capacity to overbuild really goes against all the disciplined strategy that we've really taken on over the last 4 years that I think has provided a real benefit to GM and ultimately speaks to -- that was close, ultimately speaks to some of that resiliency that we talked about in the face of the downturn because we don't expect when we see in the next economic cycle, whenever that might be, we don't expect to have nearly the working capital drain that we've had historically because we'll have less inventory and significantly less incentives leading into it and it won't perpetuate itself the way the past cycles have done.

So there's no reason to abandon that because we might have the option for more capacity. I think that can be something that we really don't want to get addicted to. So when we look at the footprint changes, we're really thinking about how do we onshore it to mitigate tariffs but also, there's another wildcard here, too, which was in the recent One Big Beautiful Bill Act that was passed and there's a tax deduction for consumers for U.S. purchased vehicles. And increasingly, over time, that could be a question that people ask their dealers going forward, where was this vehicle built, et cetera. So we think that there's some incremental demand attached to these moves as well and not just pure tariff avoidance versus potentially higher labor and supply chain costs.

You're talking about the auto loan interest. Yes, I wanted to ask about the implications for GM profit from those shifting regulatory framework with regard to EVs, in particular, such as the expiration -- the early expiration of the $7,500 federal consumer tax credit as well as the removal of the penalties for noncompliance on greenhouse gas and corporate average fuel economy.

It seems like some things are helping you, some things that are hurting you, quite a few moving pieces with tailwinds from needing to pay fewer fines and credits, potentially a richer mix of vehicles sold, maybe more vehicles sold. But then the headwinds also from the less pricing support. Wonder to, less maybe irrational pricing activity on the part of some people selling vehicles under cost so they can just get a credit. So a lot of moving pieces. There was even a discussion on the last earnings call of yet another layer of nuance. I think you said the math is complicated very quickly, right? Relating to needing to maybe write off some of the credits maybe already purchased. So can you just help us dimension all of these headwinds and tailwinds or maybe just wrap all up and say what the net impact do you think for GM might be?

So suffice it to say, it's really complicated really fast. But just trying to sort through that, what we already know today is that the administration has handled CAFE. So CAFE penalties were zeroed out. So any credits that we had will have to be written off, any credits that we had purchased, but any forward liabilities that we'd already accrued also get written down. We think that those 2 things are essentially a wash and it will be somewhat immaterial on 2025 going forward. It will save us money in 2026 and beyond for sure. We haven't disclosed exactly what that is because we're waiting to really do it all kind of at once. GHG is not resolved yet. There are commitments from the administration to do that, but it's important that we let them run their process and get done what they need to do.

But suffice it to say, we do think that this is net accretive for the enterprise for the long haul going forward. And a lot of it has to do with where EVs are. So first of all, if GHG penalties are eliminated, and that's just for discussion purposes, I don't know that, that's where it's going to go, then that means that electric vehicles are going to be less profitable than they are today because everybody, including us, takes value of the credits that are created, which is a couple of thousand dollars plus per vehicle that you see for those GHG credits. So the burden to get to EV profitability goes up but it's a net positive for the enterprise. And that net positive for the enterprise versus the status quo is quite a bit better when you think about where we were trying to go for 2030 because what was really creating the irrational behavior was the steepness of the stringency curves going up to expected 50% or mandated 50% adoption by 2030 in a market that's sitting at about 7% to 8% right now.

So that was leading to a lot of heavy discounting behavior, people trying to drive volume because they weren't interested in selling EVs as much as they were interested in creating credits that were otherwise going to potentially be short going forward. So we think a lot of that is probably going to go by the way. So in fact, I would be surprised if there aren't fewer EV retailers or EV sellers in the next 4 to 5 years, assuming GHG is relaxed than there are today because many people were selling EVs just so they could continue to sell their ICE franchise that they've done quite well with.

So I think the market becomes more rational from that standpoint. The enterprise gets net better immediately from that standpoint. So when you look at what EVs are to us, we think that there is still continued opportunity for us to significantly reduce our losses and ultimately drive that portfolio to profitability. It might take a little bit longer in the face of lower demand. But when you look at the structural changes that we've announced with LMR battery technology, going to prismatic cans, the new agreement with LGS as well as with Samsung SDI. We think there are a lot -- there's a lot of room for improvement in our structural cost. While we continue to put product out there that is actually accreting quite a bit faster than the rest of the market. So we know we've got a winning portfolio. But structurally, we've got to get there to where the costs are lower overall. But in the meantime, it's net, like I said, immediately better for the enterprise if GHG gets resolved.

And given these changes, how are you thinking about -- are you thinking any differently about allocating capital within the automotive business? How should we think about overall CapEx moving with the incremental $5 billion? I know you haven't really increased it for the year so much, although those investments extend into next year, too, of course. But does the investment to produce gas trucks [ Nordion Township ], does that just replace what you were going to spend there to produce the electric trucks? And does the investment in Spring Hill and Fairfax mean you now spend less at [ Raimo Seres Pay ]? And then with respect to the capital left over after what you do reinvest in the business, does the regulatory backdrop make you want to operate with any different levels of cash or leverage?

Well, the last question first. No change to our cash or leverage. In fact, I think it's served us very well in terms of maintaining that $18 billion to $20 billion. I think we have taken incremental opportunities to pay down debt. You're seeing that this year with the $2 billion maturity. We refinanced some of it, but we're paying cash down with the rest of it. We did some refinancing earlier with a bond offering on taking out the Department of Energy loan and that was really to restructure the battery JV a little bit. So no changes to the overall balance sheet strategy.

On capital, what we've said is with this incremental $4 billion, the Tonawanda investment that goes from 4 to 5 was already in our forecast going forward. But the incremental for $1 billion, we're going to take CapEx guidance from 10 to 11 this year to 10 to 12 over the next couple of years, which implies, number one, there is some overlap from money that we would have spent in Orion anyway. It's just different capital. And then number two is also rebalancing things that we can do to make sure that we prioritize that discipline. So our job as a finance team and as a management team is to allocate capital effectively. That doesn't mean when there is an urgent need to do something that you weren't planning 5 years ago, it doesn't mean that you should just increase your spending. You've got to be proactive in reprioritizing and making sure that we allocate within that range. So I think 10 to 12 is still a very reasonable range for us. It allows us to generate significant amounts of free cash flow.

Within that CapEx we're -- we've still been investing pretty heavily in our ICE portfolio. I think there are potentially opportunities to expand, extend the life of some vehicles as you've seen us do before. But within the EV portfolio, it's less about creating new vehicle platforms the way we've been doing for the last 3 to 4 years as much as it is capital that is really focused on changing the architecture and driving in both manufacturing and engineering cost savings into producing those vehicles. So it's money well spent, unless you believe that EVs are going to completely go away and we don't believe that to be the case. And we certainly don't see it in any consumer data or consumer behavior. And I think it's worth noting that the administration is continuing to invest in charging infrastructure that's an important piece to help lay that groundwork. But we do see this as something that we can be successful in and we're setting non-Tesla records today with our EV sales. And as we continue to get those more efficient and build scale, we think there's a recipe there to be successful in that, too.

Great. Thank you. And moving to China, at the conference last year, headlines were very gloomy. You just come off of a 2Q in which your sales have fallen 29% year-over-year, resulting in the lowest share in 20 years. You went on to report 3 quarters of equity of loss in the first 3 quarters of '24. But actually, the headlines now, they look a lot different, right? Your sales rose year-over-year in 2Q for the second straight quarter. They're up 20% year-over-year, driven by GM battery electric, plug-in hybrid and EREV sales up 50% NAV sales. And year-to-date, GM is the only automaker to have gained market share, the only foreign automaker to have gained share in China. So 3 straight quarters that...

And profitably.

3 quarters of profitability. So pretty sharp turnaround. How have you managed it so far? What's next?

Well, it was a year ago that we talked about outlining the need for a restructuring plan, and I would never put you into this category, but there were many in your industry that didn't believe that we could do it. And that was one that I think we've maintained steadfast confidence in the team. And my congratulations go out to the team in China in working collaboratively and also grateful for the cooperation of our partner there to do the things that were necessary because what we said was we need to learn to be successful in a smaller market share than what we've had historically. The years of generating $1 billion equity contribution, equity income contributions probably not going to come without a lot of capital, and we're not interested in putting capital into that highly competitive market.

So what do we do to fix it without a capital injection? And the team came through really, really well with a plan to rightsize the operation but also put new vehicle programs out there that while it didn't require any capital from us to use some of the cash internally to do that. And now we've got a product portfolio that is gaining share but is gaining share on a much more responsible footprint than what we've had historically. And those are tough decisions to make in a bilateral multinational partnership that I'm just so incredibly proud of what the team has done there and the results speak for themselves. We said we were committed to delivering a profitable organization and investment in China without injecting new capital from the United States into it, and the team has done just that.

So I think it's another example of the sort of tactical resiliency that the team is able to display in the face of changes and one that -- if I had one wish with a stroke of a pen, I would get everybody to acknowledge how incredible the team is at really adapting to that change and creating a little bit of a premium for that level of resiliency because again, I think it's just another great example of what the team can do.

Absolutely. Let's see if maybe there's some questions in the audience. I see one in the side and one upfront. Thank you.

Just on Korea, if the tariff rate is 15%, are you profitable in those operations? And then on the emission credit relief, how much cash was paid for those in '23 and '24?

So in '24, it was about $1 billion on credits. I think it was about evenly split between CAFE and GHG, but understand that the timing of credit purchases with CAFE and with GHG can be very different. GHG credit purchases tend to be really opportunistic as you saw from Ford and others in terms of when they're available, you tend to do big deals and try to solve multiyear problems when they're not available do smaller purchases, et cetera. So it's not necessarily indicative of what any single year was because there was a lot of volatility in those purchases.

The way our accounting works on that is CAFE because the penalties are estimable we'll expense that. So there will be an expense savings for us in '25 and '26, as I mentioned. Earlier, we expect the write-off of the credits we purchased to roughly offset with the liabilities that we've accrued this year. So I don't think that's going to be material, but it should be a big -- a fairly sizable expense savings next year as it relates to CAFE.

GHG, because the penalties aren't really estimable it really is you buy the credits and you amortize them over time. So there's no change to GHG accounting right now because we don't have any framework for what GHG is going to look like going forward. But suffice it to say, there's a pretty sizable amortization that will be affected by what happens with GHG. So we're committed to providing information as soon as we get that and as soon as we get more clarity as to what that's going to look like, and we'll unpack that as we get into '26 and get more knowledge.

As it relates to Korea, we do believe that under 15%, assuming when it gets finalized because it hasn't been yet that we can produce vehicles profitably. And that's what we're committed to doing, and if we need to figure out actions that need to be taken to ensure that we can produce vehicles there profitably, we'll take those same as we did with China and making sure that, that's a successful enterprise for us going forward. But we'll see as that gets finalized going forward. Those vehicles we produce there are doing quite well, which is why we've said even when they were just contribution margin positive at 25% that it gave us the luxury of being able to continue to produce them because they are good vehicles, but we'll see what that has to look like when we see the rules finalized.

Paul, I wanted to -- I went back and looked at the October '24 Capital Markets Day. Great job executing in a world that's radically changed. And most of Ryan's questions were focused on that. But coming out of that, your product portfolio strength in North America, if the industry is just flattish over the next year or 2, can you kind of share with us what you think the growth of that product portfolio can translate into in terms of relative growth through mix, the pricing power, the share gains? Can we think about maybe 1% or 2% outperformance relative to the industry over the next couple of years, given your view of the product and the competition?

And then two, I don't want to forget the software services revenue side. And can you give us a quick update on how that is actually growing in this environment and what that can help?

Yes. So first of all, in the vehicle portfolio, it is as Mary and Mark have said, and they've got far more experience in this space than I do or will ever have. I don't think I'll ever get to the point where I eclipse Mary and seniority. That's maybe material nonpublic information, but I'm probably not going to work for 50 years.

But what I would say is that the vehicle portfolio is incredibly strong, and we see that and incremental share gains. We're not running this to drive a lot of share gains. We're taking the share gains as a function of our overall go-to-market strategy, which I think commands a bit of a revenue premium when you look at us against any of our closest competitors going forward. And one of the things we've been criticized in the past couple of years for not being as rigorous or aggressive on cost cutting as some of our competitors have but you look at it, and as I've said before, you can have the most efficiently produced vehicle in the world on a cost basis, and if nobody wants it, it doesn't matter. And what really has to be noted here is the value that we're giving to our consumers with the content and what they're willing to pay for and that's where you see it driving results.

So whether that comes in the form of better pricing because I'd love to be in a world where we can count on just a little bit of incremental pricing every year and just be consistent about that rather than the ebbs and flows of over cycling in the business. There is some upside potentially as we look into 2026 going forward because we're continuing to invest to make sure that content is fresh, and we can keep that advantage over our competitors that we've seen over the last couple of years. But also, I think structurally, there's a lot of costs that potentially come out of the system, whether we talk about tariffs potentially being lower, depending on how deals happen or the net tariff exposure being lower or what we were just talking about CAFE. I mean that could be potentially hundreds or thousands of dollars per vehicle where you could get some advantage.

But we've got to let that settle out. We've got to figure that out. But we're certainly thinking that, as I've said, as you get into '26, '27 and so on producing a road map that's going to get us back to that 8% to 10% margin range and the vehicle portfolio is a big, big piece of that and serves as the foundation, not only for share gains, but also for the software side. And I'm really glad that you asked that.

We talked on the last quarterly call about $4 billion of deferred revenue because I think, and if I had it to do over again, I might talk about it differently. We've kind of been so fixated on the level of reattachment as people's Super Cruise subscriptions expire after 3 years, and we're doing really well in that space, but it's still on relatively small numbers. We didn't really probably pay as much attention or communicate as much as we should about that deferred revenue balance. So whether it's OnStar -- basic OnStar services that are included in the purchase that we charge customers for or announce new Super Cruise subscriptions that $4 billion of deferred revenue is coming on at a significantly greater margin as it amortizes in. So that balance is going to continue to grow, the ultimate revenue recognition is going to continue to grow. And that's coming in at for Super Cruise because we've essentially expensed all the hardware at the time of wholesale. That's coming in at close to 100% margin outside of the additional R&D to make it better.

So there's an evolving story there that I think is accruing faster than a lot of people think and putting us on track not to necessarily get to the 2021 levels that we said by 2030, but certainly accruing to get relatively close to that and picking up a lot of steam in a way that I don't think people appreciate. And there will be more disclosure on that as we get further along that journey.

We'll now take our final question.

Could you describe -- and I saw you outside, so I shouldn't have -- I'm embarrassed, describe sort of the road map that you're thinking about autonomous activities at General Motors?

Yes. Sure.

The article yesterday, you're going to hire back Cruise employees?

Well, I mean, look, at the, yes. Thank you for asking it more tactfully than Ryan did. But look, when we made the decision that we made with Cruise, I think many people reported it as we are abandoning AV. That was never the intent. What we said we were doing is we were shelving robotaxi, and we were shoving robotaxi because the capital commitments that were required and from our conversations with the market, weren't going to be supported at a level without us putting a substantial majority of that required capital. And when you look at what our alternative uses are for capital, when you look at our cost of capital, we are not the most efficient program to go in and start and fund and build organically a robotaxi business.

So we said we were going to take those resources, fold them into GM and ultimately focus on improving personal autonomy and achieving personal autonomy. So whether it's improving Super Cruise on the evolution to get to L4, that's always been our commitment. So what I would say is Sterling has come in and done a great job and look forward to you all hearing more from Sterling as he continues to get his feet underneath them. But there was a lot of sort of talent volatility in that play. And I think people are getting behind their understanding division and where we're going, and that's resulted in a few people. Potentially, you've said, I wasn't going to stay now I'm going to stay, et cetera that's not uncommon. I don't necessarily think it's newsworthy, perhaps it was because it was Cruise and GM et cetera, but these things happen all the time, but what I will say is we've got a lot of momentum. We are absolutely committed to making sure that we continue to evolve personal technology in the vehicles and autonomy is one of those things that is going to be really important in the future.

Great. Thank you. We are out of time. So please join me in thanking Paul for the excellent....

Thank you.

Good morning, and welcome to the General Motors Company Second Quarter 2025 Earnings Conference Call. [Operator Instructions] 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 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've 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 6 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 1 player. Today, there are 30 and Chevrolet is now the #2 EV brand, thanks to the success of the Blazer EV and the Equinox EV. And in Q2, Cadillac became the #5 EV brand overall. Cadillac has also become the luxury EV leader, fueled by the launch of the Escalate IQ and conquest rates that are above 75% for the Lyric and approaching 80% for the OPTIQ.

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 Ionis 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.

And a more than 50% improvement in just 3 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 upfront for 3 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 nonmembers. To build on our leadership positions in ICE and increasingly in EV and develop new sources of competitive advantage in EV 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, [ Barak Turowski ] to lead our efforts under Apple veteran, Dave Richardson, who leads software and services engineering.

[ Barak ] 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 Springhill and 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 SpringHill 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 cost.

Foundation work is almost done and more than 50% of the sales structure has been erected. We have also confirmed that Altium cell Springhill 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 content.

In large truck packs, we believe the potential savings from LMR [indiscernible] 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 repursed 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 or 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 disciplined 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 maintained 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 offset. 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 billion 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 2 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 enhanced 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 prop updates.

Our annual capital spending outlook remains unchanged at $10 billion to $11 billion for 2025 with a modest increase to $10 billion to $12 billion projected for 2026 and '27. 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 L 87 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 trends and are facing these challenges head on with the top priority always being our customers. We provided extended warranties in some instances and taken other proactive steps to support those affected, including shifting some supply of our components to our aftersales 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 in 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 cost 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 billion to $3 billion. The team continues to grow the portfolio, while paying a $350 million dividend to GM during the quarter.

Credit performance in used vehicle prices remain healthy reflecting relatively stable underlying consumer demand and market conditions. Now turning to the forward outlook. Our guidance in most of our underlying assumptions remain unchanged at EBIT adjusted in the $10 billion 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 billion 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 3 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 in 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 Orion 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. SAAR of around 16 million units. This implies a second half SAAR in the low-to-mid $15 million range. Pricing remained 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 billion 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 1/3 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.

[Operator Instructions] Our first question comes from the line of Michael Ward with Research?

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

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

Exactly. Yes.

Yes. So as a reminder, with the sell 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 will 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 EV sales in 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 we expect that 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 $4 billion to $5 billion with mitigation, what would be the best case scenario. We get a settlement with U.S., Canada, Mexico, Korea, what would the impact look like over the -- right now, like for this year, if the world changed tomorrow, and I went back the other way. And then what do you have strategically that helps you from a performance standpoint as you go forward with your -- the $4 billion investment?

Yes. Michael, -- it really -- I mean, obviously, our tariff impact would be lower if the tariffs with Mexico, Canada and Korea were lower. So that would have an immediate impact. You have to look at how much lower it's going to be to know what the total impact there would be, but that would have immediate because, as Paul said earlier today, we have continued to bring the vehicles in from Korea because their contribution margin positive and they're very much in demand.

I mean, customers love those vehicles. 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 improvement 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 we're on a, 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 are potential for some upside the way we look at it?

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

Yes, I don't think anybody can predict what's going to happen.

Our next question comes from Dan Levy with Barclays.

Wanted 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 the third-party data. Retail is the vast majority of your sales. Maybe you could just double-click on the dynamics there.

And 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?

Thanks for that and not surprised by the question. I think a couple of things. #1, 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 we think that's some normalization. I mean we're still comfortable with our pricing assumption of up 0.5% 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. 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, 1 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 I think to the extent that we see pricing change. We're going to continue to look at it according to where we see the demand for our products, which remains strong, and I expect well into the future.

Okay. Great. That's helpful. Second question is just about the EV strategy going forward. And I appreciate the commentary about 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 been a broad lineup across price points, but the profitability has been challenging. And I think these changes indicate profitability is probably going to get a little trickier.

So especially given you're losing some of the scale benefits, which was to drive profit. So 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 points. Is that we just see higher price points and that's the strategy?

Well, I think we're -- we have a very strategic EV portfolio when you look at luxury trucks and then the affordable vehicles like the the Blazer and the Equinox EVs. And so we think we're covering the market very well, before we even had IRA and the $7,500 tax credit and some of the other portions of that, there still was demand for EVs. And we think as charging grows, and that's 1 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 2-car family that have a garage that they can charge, it makes a lot of sense to have that 1 of those 2 vehicles be an EV.

So I think as we get through this period, and we go through with the potential pull ahead before the September 1, 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 and I think we'll start to understand what world EV demand is -- what we have been saying is that 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 a lighter architecture is 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 to the market for later in this decade into next decade, and we truly offer consumers 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 will start lower and potentially grow more slowly. But we're well positioned to do that. And 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 grow till you 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 to 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.

Our next question comes from Ryan Brinkman with JPMorgan.

I wanted to ask on the impact of tariffs on your earnings power as we move beyond this year. Earlier, you've called out $4 billion to $5 billion of tariff impact over the course of 2Q to 4Q '25, so annualizing to maybe $5.3 billion 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? 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?

Yes. Ryan, I'll take that one. Thanks for the question. We have -- we highlighted that of the $4 billion to $5 billion, about $2 billion of it is Korea. And as Mary mentioned in her comments and a recent question that 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 there is a possibility and a likelihood, if you will, that ultimately a tariff rate gets set at a lower level, which would ultimately bring that impact 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 part 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 will 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 I think we've got a longer-term plan to be able to mitigate a substantial part of this. We're obviously looking for things to normalize around these trade deals that will get done. And we expect that will happen. But it's too soon to extrapolate that as a run rate into the future.

Our next question comes from Joe Spak with UBS.

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 such as maybe commodities and/or maybe there's something with the mitigation efforts? Just any color you have there?

Yes. 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 $4 billion to $5 billion despite all the changes that we've seen going forward. So it might be slightly higher in the third quarter and kind of what we're thinking right now.

On the cash side, we actually expect that cash impact potentially to be lower. 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 billion 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. I know in your K, you disclosed it last year, you expensed $1 billion 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?

Yes, 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, et cetera. So what we know today is the Cafe penalties under the 1 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 that already booked.

That's going to basically be a wash for us. So I don't expect any material adjustments from Cafe. GHG obviously has not been fully answered. We have comments from the administration and in the 1 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 what -- 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 month by month, quarter by quarter, year by year improving our EV profitability. So I think it's a huge opportunity.

Our next question comes from Itay McKelly with TD Cowen. .

Just first on the guidance, just given still the wide range second half of the year, $3.5 billion to $6 billion. I'm just curious with 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, Itay. As we have continued to practice as we generally use midpoint convention 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 -- 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 -- 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.

Great. That's helpful. And then 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 target. -- at the end of the year. That obviously fluctuates with changes in demand. But clearly, the vehicle count, as we highlighted in our comments, was down pretty significantly year-over-year. We have responded, I think, the right way with some component availability into our customer care and after sales group to address some of the more specific warranty issues to make sure customers 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 will 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 rate.

Our next question comes from Adam Jonas with Morgan Stanley.

Thanks, everybody. And 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, I think that this market is 10x 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 naphtha partnership you're talking about very well. Also, we have a very long and rich history with GMF excuse me, GM robotics, GM 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 relationships that we have.

But as we look at automation overall, our first look is 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 is 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 triple level perspective, free full 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 functions. 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 that we -- 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. It 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 the 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 Reno, their margins are worse than Silantis. They would really love to have your GMI margins. So -- so add this to Elon, it seems to be also exiting the auto industry, clearly pulling capital out of the business and doubling down on AI and automine robotaxis. So how does GM expect to be profitable with EVs when players like Tesla are apparently cannot.

I was 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 and your in-house work, something -- when you benchmark Tesla, why are they loss-making and you feel that you can be profitable?

Well, I think 1 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 Cheverolet, 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 technology and safety we put into an Equinox.

We're -- that's what we're known for. And that beautiful design without cell efficiency. As Paul said in his opening remarks, we still believe we have trendous 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 grow 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 2 family -- 2 car families that have an opportunity to have 1 of those vehicles in the garage BEV even before the charging infrastructure is there. So it's going to be beautifully designed products with brands, people, truck 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.