General Motors Company (GM) Earnings Call Transcript & Summary

Well thanks, everybody, for joining us again here at 3 p.m. towards the end of the day. We're very happy to have General Motors up next. There have been many impressive changes that occurred at GM since Mary Barra has taken over as Chairman and CEO, ranging from exiting money-losing businesses like Europe to investing heavily in autonomous technology and Cruise and really investing in the future. However, I think the tough steps to prepare the business to fight through a downturn or a crisis like we're in right now have been occurring behind the scenes and are not well appreciated. And I think this unfortunate event is going to really highlight all these actions that the company has taken to fight through downturns and really thrive on the other side. And I think this is just becoming -- just beginning to become obvious to investors and hopefully will drive much-deserved recognition in the stock which is certainly not showing up at the moment. Obviously, this has been helped -- executed with the help of Mary's talented CFO, Dhivya Suryadevara. We're happy to have both Mary and Dhivya here today to answer some questions over the next 40 minutes.

So I wanted to kick it off to you, Mary, and thanks for joining us, first. And there are a number of hurdles left to restart here in North America, including the labor, some labor pushback in UAW, some hurdles in Michigan and Mexico and some issues through the supply base. They don't really appear insurmountable at the moment but are certainly not a cakewalk. I was just curious if you could run through some of these and some other issues and maybe opportunities that you see as you restart production here in North America.

Sure. Thanks, John, and thanks for having us today. Almost since the moment some of our operations had to shut down, be it in China or other places around the world, we've been working on what it takes to resume production and have successfully done that in China, maintained production in Korea. So all of those lessons learned are now informing what we're doing in North America. We also had great learnings from our Kokomo, Indiana plant and our Warren plant, where we're building ventilators and masks as well as our warehouses that continue to supply the dealers. So -- and all through this process for several weeks now, if not more than a month, we have been working with local government officials, state officials, the federal government, in all of the countries in which we're looking to turn on operations in North America. We're also working very closely with our labor representatives across the globe and specifically in the U.S. with UAW. And I think with all of that ongoing work and being completely dedicated to creating a safe environment for our employees, we do think we're on track to start -- begin to start operations next Monday. In fact, some of the plants that feed into those and our -- all of our warehouses started up this week. And so we are -- we believe that we're on track to do that. And again, it will -- and once we start day 1, we'll start in a very thoughtful, cadenced approach and then continue to ramp up from 1 shift to 2 shifts and to 3 shifts in some cases. And we'll also continue to work and provide information, again with governments and with our unions and with our employees, because ensuring they understand the protocols that we need to operate to be safe, but that it's also making sure we listen to concerns and address those concerns. Because everybody is coming from a different place as it relates to COVID-19, and we have to respect that. And really, this is a time where we're overcommunicating, listening and making sure we provide answers to people.

Okay. And one of the interesting things that's occurred in China as well as the U.S. is the demand has been a bit stronger than people feared, a pretty big snapback in China. And I never thought there would be a day when I would say an 8.6 million unit SAAR in April was a really good sign, but a lot of people were thinking that April might be a 0. I'm just curious how you're thinking about demand and if there's any scuttlebutt, whether it be in China or U.S. or even South America in a Cash for Clunkers-like program. At the moment, demand is, relative to fears, really not quite as horrific as feared. But just what you're seeing in demand and if you think there could be any stimulus program on the other side.

Sure. Well, we've been encouraged by the recovery in China. To your point, it was, I think, faster than expectations. And there is talk in the country of -- there's already been some measures taken to support an increased demand, and there's talk of additional potential stimulus. When we look at the United States, again, where the retail sale is stronger; although on the fleet side, and I think when we look at the rental car companies, you can see the impact there. But -- so we're somewhat encouraged. I think, in the United States and, frankly, even to a certain extent in China, it's too soon to call. So we're seeing encouraging signals, but we're preparing for a variety of outcomes. In South America, I think with where they're at in managing the virus there, I think they're phased a little bit behind North America. So we'll continue to work aggressively there on safety protocols, et cetera. So as we work through this, I think anything that is done to stimulate demand in the early days that goes directly to the customers will be helpful and -- from a short-term boost. When you look at programs like Cash for Clunkers, we know from a climate change perspective that if we get older vehicles off the road, it has an impact on the environment because, every year, cars -- vehicles that are produced are -- tend to be more fuel efficient, have less of an impact from an emissions perspective. And then from a stimulus perspective in the -- I'll say the medium term, we think something that is focused on stimulating EV demand is also important because I think there's still a lot of people who don't really understand all the benefits of electric vehicles. So that's how we look at it and think these programs could be helpful across the industry at different points.

And Mary, maybe just to follow up on that, particularly on the truck side, there is -- the demand was relatively strong. And given inventory positions going into the crisis, we're okay. It seems like the inventory levels are really leaning out, particularly in your truck portfolio, in a big way. I'm just curious as we look at sort of the restart, I know you're kicking off next week, but May is going to have small production levels. As you look at this very lean inventory and potentially as we go into June, almost shortage of inventory, how do you see pricing on these trucks and demand? And is there an opportunity here to -- I mean, what is a take price to keep price in a way that's different than I think a lot of people fear in a crisis like this?

Sure. Yes. I think a couple of things. We've been very encouraged by the strong truck demand and been able to respond to that. Clearly, we're going to be focused on our full-size truck plants, and we're very excited to be launching the full-size SUV that will -- we were able to do the changeover during this period. So we'll be starting to ramp up, and those vehicles should be hitting the showrooms in June. So I think those are both going to be very important and strong for us. I would say through the end of last year, because of the strike and now through this period, our dealers have done a phenomenal job and really have learned to sell deep into the inventory. And so that's been advantageous for us and for the dealers. And so we'll continue to do that. And then as it relates to incentives, we're trying to make sure we maintain the discipline. I mean we have -- you have to be present in the market to -- it's not necessarily a sliding scale that -- so you need to be competitive, but we're trying to be very thoughtful and disciplined in how we go to market as well

Okay. That's helpful. And then maybe Dhivya, turning to the second quarter, and you gave us a tremendous amount of detail in the earnings call, so we appreciate it. And you've indicated that it will be roughly a $7 billion to $9 billion cash burn in the quarter. Our estimates kind of indicate, when we back into what the EBITDA -- auto EBITDA would be, about $1 billion or $2 billion loss. But as you think about that second quarter, what are the major assumptions that drive this? And if you think about sort of a recovery post 2Q as some of this pent-up demand maybe gets released and you get production back up and running, I mean, how should we think about the cash flow through the remainder of the year?

Sure. So John, what we shared at earnings was a scenario in which production was down about 60% to 70% year-over-year and an 8 million to 10 million-type SAAR in the U.S. here for Q2. So with that particular scenario, we said $7 billion to $9 billion of total cash flow. And obviously as you point out with the level of uncertainty out there, both on the supply side and the demand side, it's something that -- it remains fluid. So you've got to take it in that context. And thinking about the drivers here, the $7 billion to $9 billion, the way we think about the outflows is we put a lot of austerity measures in place, especially as it relates to fixed costs. And that's running at about $2 billion a month after austerity. We have continued work we've done on CapEx and some of the austerity measures there in our noncritical CapEx spend. And that would run at about $1.5 billion for the quarter. And beyond that, you'd obviously have working capital unwind as well as sales allowances. We think working capital is at the levels that I talked about, for production would be about $3 billion to $4 billion of an unwind. And sales allowance would be clearly driven by where the SAAR is, and we're thinking about $2 billion to $3 billion of an unwind there. So those are sort of how we think about the outflows. And obviously on the inflows side as we start production here, we will start to get contribution from our vehicle sales. And we're continuing to have aftersales and OnStar contributing to the revenue and bottom line as well. So we think there's a $3 billion to $4 billion of inflows coming from those. And we're also taking actions on accelerating dividends from our subs. And whether it's China or GM Financial, we think there's another $1 billion to $2 billion of liquidity actions that we can get here. So again, rules of thumb as you think about this on how to size it. But clearly it will depend on production and demand here. And to your question on beyond Q2, looking into Q3 and Q4, the part that would unwind -- or rewind, I should say, would be working capital. And that would be typically pro rata based on production and demand. And as the level of activity starts to pick back up there, you're going to have to see how the customer response, how the SAAR is to predict any numbers for Q3 and Q4, and obviously it's too soon to tell.

Okay. That's helpful. And Mary, I mean when we think about a lot of what's going on right now or what Dhivya just outlined and the great -- I mean it's a tough environment but good performance on earnings at least by what we're looking at relative to the horrific macro environment. You're in the second round rationalization actions, I think, since 2015. I think total cost saves are in the ballpark of $11 billion. So there's a lot of wood that's been chopped already in your cost structure in the business that really put you in this good position. But as you work through the COVID crisis, I'm just curious if there have been any other opportunities that have been elucidated by the stress or the issues you're facing right now. I mean there's a lot of cost-cutting that's going on, so I'm not sure how much more you can possibly go after. But have you seen anything new? Or is there any light bulbs or light been shined on any other opportunities?

I think there has. When we had -- we went in and very swiftly took actions to preserve liquidity. And I'm really proud of the GM team because they've been keeping the product programs that we focused on, on track, finding different ways to do work, the move to online. And the touchless -- the contactless tools for like Shop.Click.Drive in the dealers has been something that people migrated to very quickly. And the company is adding even more features to support the dealers in that. So I think there's definitely an opportunity to take out more costs because we've learned we can do things in different ways, and we can do things faster. And I think also how we go to market, working with the dealers, I think, is an opportunity as well. And then we've used this as a time to stay very focused on our EV and our AV portfolio to make sure that those are strong and that we can even look to potentially accelerate those as well as keeping the full-sized SUVs on track that are very, very important. So I do think there's opportunities to further improve our cost structure and to support the customer in a -- even in a more thoughtful way as we live with the virus for a period of time.

Great. I think, Doug Karson, you had a couple of the balance sheet questions. You want to?

Yes, sure. Thanks so much, John. This question may be for Dhivya. GM successfully completed a $4 billion bond deal on top of what many thought was already solid liquidity. In light of some of the cash burn figures you gave and how solid the pre-COVID operations had been, can you share with us the thought process around the added liquidity and how you balanced that with added cost of debt and how it affected the balance sheet?

Sure. So with the financing we did recently, it was really a comprehensive transaction. We had the $4 billion bond deal together with a $2 billion additional bank facility that we put in place. And the way we think about this, we -- it was opportunistic, and we thought that this is the most prudent thing to do to further shore up our liquidity and give us flexibility beyond what we got from the revolver. So the way to think about it is, obviously with the plants restarting next week as well as cash starting to come back into the system from vehicle sales as well as the working capital rewind that I talked about, that will help us with our cash balance and building that back up as well as paying back the revolver. So the way to think about this transaction is more opportunistic to further shore up liquidity because we are in an uncertain environment to, John, your point earlier. There's volatility both on the production side and demand side. And so we think it's just an additional layer, which we think is prudent to have.

That makes a lot of sense. Kind of along those lines. As you thought about your liquidity and bondholders are kind of a risk-averse bunch, they ask often, if GM had to borrow more money and get secured financing or there other options, I don't want to get ahead of us because it looks like your liquidity is very strong, but what are some of the thoughts about your secured financing capabilities, if at all?

Yes. So as you point out, we do have a significant amount of liquidity. And the way I'd think about it is, and some of the more draconian scenarios that I pointed out during earnings, whether it's no production through the end of the year-type scenarios, we have enough liquidity to go into the fourth quarter even excluding the bond offering. And now with the bond offering and the bank deal, that will get us into 2021. So at this point, there is no need to consider secured borrowing. So technically, that's an option available to us, but there's no plans to pursue that at this time.

Okay. And then my final question before I turn it back over to John. Bondholders are very focused on investment-grade rating. I know GM worked very hard to get a solid IG rating. And now with COVID, there's so many more challenges to maintain ratings across the entire auto universe. If you could just share with us some thoughts about defending the IG rating, how important it is, any conversations you've had internally or with the agencies about how to protect that rating would be helpful.

Sure. So our commitment to a strong investment-grade balance sheet and a strong rating continues. It's -- we're absolutely committed to that. And as we think about all the actions we've taken, whether it's on the operational side or on the balance sheet side, on the operational side, we're continuing to strengthen the business. Just as we talked about now, with the actions we've taken, underperforming businesses and addressing the cost structure, all of these go operationally towards a -- the whole strong investment-grade type ratings. And obviously on the balance sheet side, we have had a target cash balance and liquidity balance which is intended to weather through troubled times like this. And it's certainly been helpful as we weather this current crisis. So as we come out of this, we expect to build the cash balance back up and get the target cash levels and debt levels to our original goals prior to the crisis, and our -- I can't speak for the agencies, but from our perspective, it is a goal that is extremely important to both the auto company as well as our finco.

Great. Thanks so much for sharing that. And I'll turn it back over to John.

Great. Thanks, Doug. Mary, I just wanted to ask about product and product cadence. It seems like through calendar year 2020, so model year '21, you've had a great replacement rate by volume measures. You were wrapping it up here with the SUVs. But as we get beyond calendar year 2020, the pace of nameplate intros seem like they remain very high, but some of them are what are probably intrinsically going to be lower-volume, high-priced EV introductions. So I'm just curious, how active a decision is that -- sort of that ebb and flow in the product cycle? So I kind of just remembered the 10 vehicles shoehorned on your EV Day right before the crisis hit here in the U.S. and kind of going around and thinking, I mean, I think even ask you guys, for the most part, it looked like $50,000-plus vehicles, which inherently have lower volumes. So I'm just curious how you think of this ebb and flow in the product cycle. And it seems like it's going to ebb lower, but there's a greater focus on the shift in powertrain. I mean, how active is that? And how do you think you'd manage that going forward?

Well, I think if you look at our core products and, to your point, the work that we've done with the new midsize SUVs, the full-size trucks, then the full-size SUVs, along with some of the other products, we do have a strong cadence right now. And we're going to continue to invest and upgrade the core products. But we are very, very focused on electrification. We think it's the right path forward. We think with the Ultium battery platform that we shared on our EV Day and the partnership we have with Honda as well as the position that we have in China, where we all know EVs are going be a critical part of being successful in that market, we're well positioned to present a full-range lineup of EVs into the marketplace. And we're going to continue to do that. We'll look for opportunities to accelerate. And we do see that there is -- with the scale that we have, that will lower our battery cost and give us all the benefits of scale. We think there are going to be volume opportunities as well in the midterm, and that's what we're focused on. So we're going to keep pushing that, and you'll see us with a lot of intensity. And then we would -- on our -- I'll say, our internal combustion engine, I think you see with every new vehicle that we come out with, you see a focus on improved fuel efficiency and improved emissions, and we'll keep that focus as well. So I'm pretty excited about the product portfolio that we're -- that you know of and we're launching as we speak and what's coming in addition to what we shared on EV Day.

Okay. That's helpful. And when we think about the future of GM, it seems like there is a great sort of recognition that selling x number of vehicles with higher upfront profits makes more sense than selling 2x at lower profits, so to kind of think about this sort of in roundhouse terms, one, because you're more profitable ultimately upfront; but two, there's -- it seems like a growing recognition of monetizing the ongoing relationship with the customer via products like OnStar and others. How do you think about sort of balancing sort of volume versus upfront profits, versus the lifetime stream of potential income from the consumer over time? And is there a real shift in paradigm that's going on here in the industry?

Well, I think there's a huge -- continues to be a huge opportunity with connectivity and all that enables and generally, a bit different margin and can -- also very cash generative. And so when you think about the foundation that we have with OnStar with the safety and security features, and remote access is one of the most used features in that on a day-to-day basis, we think there's more opportunity in the subscription model for us. Right now, we've got about 20 million vehicles on the road, and only about 1/4 of them are connected and paying a subscription. But we also -- there's a limited set of services that we provide. I think when you look at what we're doing to increase that, the fact that we have global -- our new digital electronic platform that allows for over-the-air updates, there's much more that we're working on. And we'll share over the next period of time that we think we can grow the subscription part, and it will be a very important part of our business. I wouldn't say we're trading one off for the other, but I see it as additive.

Okay, and also kind of staying in the same vein of the future potential here. How do you think about allocating scarce resources to Cruise? I mean it's about $1 billion a year. It seems like there's a little bit of cost-cutting that went on there or is going on there that was reported in the last couple of days. I'm not sure it was announced but reported in the last couple of days. It seems like the commitment there is still unwavering. We've kind of talked about that before. But do you need to spend $1 billion a year? Could that be something that could be rightsized smaller? And then also, as you think about what's going on right now, there appears to be somewhat of a shift in consumers' minds that we'll see how sticky this is of moving away from ride-hail, rideshare, what might be an AMOD fleet in the near term and the long term. Yet there seems to be a huge positive shift towards commercial product delivery, whether it be food or everything else that people want delivered to their home. So there's kind of a yin and a yang. On the consumer side, maybe opportunity may be going down, and the commercial side may be going up. I mean just how do you think about this business? And is the $1 billion a year the right number? Or could you maybe achieve what you need to achieve at a lower level? And where do you see EV technology be monetized best in the business model going?

Well, to your point, John, we remain unwavering in our commitment to Cruise. I think what you saw them do was just a very prudent action because we're focused and always have been crystal clear on the mission to get the technology developed, that it truly is safer than a human driver. And we're making good progress in our milestones toward that, so that work will continue. I think the tightening that they just did was in nontechnical areas and just, again, with lessons learned and seeing what we can do differently to tighten that focus. But our commitment is the same. And then as it relates to, I think, the market opportunity, clearly, and the Cruise Origin, which we revealed in January, huge opportunity to move people in an environment that, I think, if you think back to that vehicle, has a lot of opportunity to present the type of environment people are going to want from a cleanliness and, to a certain extent, their own space. But that same vehicle is also very applicable to package delivery. And so we'll continue to aggressively work on both. We're very pleased right now to be delivering food to those in need in the San Francisco area. And so I think there's a huge opportunity on both because if you think about today's rideshare, if you don't have the driver, that takes out one element that will cause people potential concern. So I think there's business potential in both people moving and also packaged goods, and we are full speed ahead.

Got it, okay. And then if we think about what's going on with Honda right now, they've made a substantial investment in Cruise. I think the latest agreement was that GM was going to build EVs for Honda. I'm just curious what -- how far this goes with Honda. I mean it's obviously a very good company, makes great products but is leaning on you in your partnerships for some advanced technology. Is this something that's a precursor to more of a combination with Honda over time or -- and/or are there other partners that you think bring a lot to the table technically like Honda that can help out and you might see a lot more partnerships over time?

So first on Honda, the relationship we've had with Honda has been multiple years, starting with fuel cells and then AV, EV and the -- leveraging the platform now and Onstar and connected services. We have tremendous respect for Honda. The 2 companies and their technical teams, we work really well together. And so I don't have anything specific to announce right now, but we're going to continue to look for other opportunities to continue to collaborate and work with Honda that allows us to have win-win solutions, both on being more efficient with capital as well as being more efficient with engineering dollars. But we also are very open to looking for other areas to leverage with potential other companies, other OEMs to solve some of the transportation solutions and, as the future of mobility evolves, how we'll play an even stronger role in that. So very, very happy and very pleased with the relationship that we have with Honda, but we're going to continue to look for ways to be more efficient and fuel growth within the company.

Okay. And then maybe switching gears to GMF, Dhivya, for a few minutes. There's a lot of pressure in the market on used vehicle pricing. I'm just curious how you think about that and what might be slightly tougher credit metrics from some of your customers at GMF and how that impacts the business in the short run. I would imagine it probably works out normally in the long run. But in the near term, how much pressure is there coming from deteriorating credit metrics and falling used vehicle prices?

Yes, sure. So from a short-term standpoint, the earnings before tax for GMF will be impacted this year because of the 2 factors you talk about, John, both the credit losses as well as residuals. And our assumption for credit losses for this year is in the range of 2% to 2.5%. You saw a tickup in Q1, and obviously you're going to see more of an impact in Q2 as well. So put together for the whole calendar year, we're thinking 2% to 2.5%. And from a residuals standpoint, there's a lot of estimates out there from the industry experts. And they range somewhere between 7% and 10% for 2020, and our estimates are in line with that as well. So the way to think about it is, what's the capital cushion that GMF has? And the scenario that I just painted with the expectations for credit losses and residuals, we think that even if you double those, you're going to still have a -- it's still going to be appropriate amount of capital left at the finco. So it's capitalized well. The team has done a great job from an underwriting perspective and risk management perspective over time. And leverage is at a level that's manageable as well, and they have a sufficient liquidity cushion. So the finco stands in a pretty good place. And obviously in addition to that, they're helping customers and our dealer base and increasing their penetration as well in times like this. So everything is progressing as planned with the finco.

And maybe just a follow-up on GMF. When you look at the penetration with the consumer, it seems like you're about where you want to be the book would bill over time. But it does seem like there might be some underpenetration on dealer floor plan financing and relationship with dealers. Where does that sit? And in sort of this disruption at the moment, is there an opportunity to get tighter with the dealers on floor plan financing? Or is that something that's not a key focus for GMF?

No, I think it is a key focus. Right now, GMF provides financing to almost 30% of the GM dealers in the U.S. from a floor pan -- floor plan perspective. And what we've seen is dealers who do use GMF with their floor pan -- floor plan financing have better sales performance. And also, we see GM Financial's penetration of the retail sales is notably higher for those dealers. So it's a win-win for both of us. And we're going to actively seek to grow. We already are -- grow that market share over time by making sure the dealers understand the value proposition and how it improves their business and then also with being competitive. So we see this as an opportunity to grow as well as we'd like to see our support for GM retail sales, which is around 45% right now, to get over the 50% level. And that's largely going to come from the loan side of it because we already finance almost 100% of the leases.

Okay. That's helpful. And if we think about the dividend from GMF, it was, I think, $400 million in the first quarter. And I think, Dhivya, you mentioned there might be another $400 million coming later in 2020. So I mean that's $800 million in a tough environment. I'm just curious, is that the right sort of ongoing dividend to think about? And how should we think about the sustainable dividend from GMF up to the parentco in "normal times," presuming we'll be in that hopefully next year?

Sure. So they are -- GMF is positioned to pay their dividend, which is double of what we had in 2019. So 2019, they paid about 200 -- $400 million to the parent. And now we're expecting about $800 million -- at least $800 million this year. So you can see that from the time when we announced a full captive strategy and how they've been growing the book, they're now in a position where they're starting to dividend up to the parent. And the way to think about it is, their -- to your point earlier on penetration, that's going to continue, and the balance sheet will grow a bit more and stabilize at those levels. And the dividend will end up becoming equal to the net income at that time frame. So you will no longer need to hold back capital at the finco to sustain a growth in the balance sheet. And we would basically take the entire net income and dividend that back up to the parent. So that's the steady-state goal. And obviously there's a path to get there between now and then. And we'll continue to increase the size while leaving an appropriate capital cushion at the finco in the next several years here.

Okay. And then if I could just ask one more question on dividends from sub-businesses. You mentioned that you could potentially squeeze some cash out of China and GMF. When you think about China, what is the dividend that you're expecting this year, if you can disclose that? And what do you think is a reasonable ongoing dividend to think about either level or sort of parameters that we could kind of estimate going forward?

Yes. I think it's important to look at our China operations and recognize that they have consistently been paying dividends since 2003. And we do expect to receive a dividend from the China JV this year even with the COVID-19 situation. And as we look in the near term, as the effect of the virus subsides, we expect to revert back to a quarterly equity income rate of about $200 million. And then as the market recovers and as we successfully transition to EVs, there's -- we'll -- we are working to have that continue to increase.

That's very helpful. And maybe if I could sneak in one last question in the last 3 minutes here. As you look at getting to the other side of this crisis and thinking about cap allocation priorities between product developments, future-proofing the business and growth, cash restructuring and then, sort of selfishly from an equity investor standpoint, reinstating the dividend, how do you think about those things? And when do you think we'll get back to normal? What does a normal capital structure look like? And what do you, like once again, selfishly, need to see to think about reinstating the dividend?

So we remain very committed to the capital allocation framework that we rolled out in 2015. As you know, the first pillar is to reinvest in the business to generate appropriate returns greater than 20% on our invested capital. We're going to continue to do that, look for those opportunities. And I'm quite excited about what we have coming. And I think there's huge growth opportunities for us as well, especially when we look at what we have from an EV and an AV perspective. Second, we are committed to having an investment-grade balance sheet. I think what we're experiencing today validates that that's very important that we do that. And then the third pillar is to do what's right as it relates to our shareholders. And clearly, the dividend is a decision made by the Board. But if we do pillar 1 and then pillar 2, we will make the right decisions as it relates to how we reward the shareholders.

Okay. Great. Well, with that, we thank you very much for your time, Mary and Dhivya. We appreciate the time you're giving the investors today. It's incredibly helpful and elucidating the current events and the future strategy of GM. So we greatly appreciate the time. Thank you so much.

Well, thanks for the opportunity.

Thank you, John.