General Motors Company (GM) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to the GMC HUMMER EV Q&A session with General Motors Company. [Operator Instructions] As a reminder, this conference call is being recorded, Wednesday, October 21, 2020. I would now like to turn the conference over to Mike Heifler, Director of Investor Relations.

Good morning, everyone, and thank you for joining us as we have the opportunity to dive deeper into the details of the awesome GMC HUMMER EV, the world's first all-electric supertruck with amazing off- and on-road performance and exclusive features and technologies designed to conquer any obstacle or terrain with excellent range and charging capabilities. Today, you will have an opportunity to ask our leadership questions about this remarkable electric vehicle. For our Q&A session, I'm joined by Mark Reuss, GM's President; and Duncan Aldred, Vice President of Global Buick and GMC. Before we begin, I would like to direct your attention to our forward-looking statements. The content of this call will be governed by this language. I will now turn the call back over to the operator to start the Q&A session.

[Operator Instructions] Our first question comes from the line of John Murphy with Bank of America.

It's kind of hard not to get excited after seeing that video of the truck. It's really great, so congratulations on that. Mark, just a first question. As you look at sort of the price point here, obviously, coming in at the very high end of the luxury truck market, if you will. I'm just curious how long -- when you look at the Ultium powertrain and your EV platform that you stay at these very high price points to justify the investment and how long it will take to really democratize the EV powertrain over time. So is it like 2, 3, 4, 5 years that you're treating as a true luxury product? Or is it potentially sooner than that?

That's a great question. And the pricing strategies -- hopefully, you guys caught some of the pricing stuff that Duncan and his team and that, frankly, everybody is working very hard on. So the first one out of the chute is $112,600, and that's the Series 1 special edition. Three-motor deal, the whole package. After that, we move into other price points, 2 other price points that -- one is below $80,000 and the other one is below $90,000 as we roll out a couple of different -- 3 different packages. So just to make sure everybody is grounded on that. The battery piece of this, I don't think we want to confuse the nature of the truck that we're introducing here, which is a supertruck, and you saw all the features and the price point, which has been very well researched. And actually, people were pretty excited about it last night. Duncan can give you some of those details. But I don't think we should be confusing the supertruck price points with the Ultium battery scale, increase and decrease in the Ultium packs themselves and then the cells. So this one happens to carry a lot of cells. It's a 24-module pack. So it's a big boy-type pack that delivers a lot of power, a lot of great things, including range. But as we move into sort of the higher volume entries here, the next one we've talked about is Lyriq. You'll see a steady progression of those things. As we bring our Lordstown, Ohio JV manufacturing activity up and running, we get the scale. And when we deliver volume out of Factory ZERO here in Detroit and then Spring Hill, you'll see the volume on the car itself, whichever car and whichever plant it is being made in. So I would say, if you're asking me, is it 1 or 2 or 3 or 4 or 5 years, I can say that we have a continuum of scale, efficiency and cost reduction that is very aggressive. And there isn't big breakpoints, but there are steady improvements in chemistry and controls. You saw sort of a wireless control system for the Ultium pack. That's very progressive. That enables us to do lots of things in terms of really discovering how people use the vehicles that we produce, optimizing both the controls of those batteries, but also how many modules that we actually put into the packs for different vehicles can ultimately change. And the modules and the new chemistries are backward compatible with all of our vehicles, which is a huge step. So if you think about it that way, it's probably the best way to think about it.

Okay. That's very helpful. And then just a second question. And Duncan, this is maybe for you or for you, Mark. As you think about the distribution network for a truck at this price point, I mean, volume is going to probably be relatively low relative to a lot of your other products. So I'm just curious how the dealers are receiving this, how they're set up as you make this foray into selling this truck and more EV models over time and what they need to do to be ready for this, both on the sales side and then on the service side.

Yes. It's a good question. We've rolled this out on what we call a participation agreement. So not every GMC dealer will be selling the HUMMER EV. To your point, the volume will be somewhat lower than, let's say, a mass market vehicle. And that's led to about half dealer network electing to participate in selling the HUMMER EV. Obviously, with the speed and the security that we've gone forward with to this point, we've had to keep things very confidential, we've not really been able to divulge too much information to the dealer. And we'll be doing that early in the new year as well. And we may see a change to those numbers in terms of the number of dealers who choose to offer these. And that's fine because, obviously, a throughput will be important. But just again, to pick up on Mark's point on the price points, we just launched the GMC Yukon. And at the moment, we're selling that on average, for an average price, very much in the high $70,000 range, just below the $80,000 point. And again, to Mark's point, this HUMMER EV does begin at $80,000. So yes, whilst it's premium-priced and whilst it's in the premium element of the market, we think there will still be meaningful volume and especially meaningful for the amount of dealers who've elected to take that participation agreement. In terms of what they will have to do, there will be investment in special tools. And obviously, the ability to charge a vehicle as well, and that could have a different cost structure for dealers depending on the type of electric power supply they've got into their individual dealerships. So they're going through that evaluation now as we speak. They've got to do that during quarter 1 of -- between now and quarter 1 of next year. There'll obviously be special training, and we're going to look to provide an exceptional customer experience as well. And that's all coming together to what will be the HUMMER EV customer experience as we start deliveries.

Great. If I could just sneak in one follow-up. Duncan, you said that GMC Yukon is at somewhat similar price range or zip code. I mean should we think about that as where the volumes might go for this new EV or the HUMMER EV when we look at the pickup and the SUV combined?

Well, we're not going to really specify volumes today. But I think with this $80,000 starting price, which was important to us, I think we'll get meaningful volumes. And again, I think it's a great statement for GM and for GMC and for the electrification of the industry as a whole.

Your next question comes from the line of Rod Lache with Wolfe Research.

I echo what Murphy said, the truck looks awesome. Just -- I was hoping just to talk to you a little bit more broadly about your volume aspirations not just for the truck, but just even bigger than that. You, at one point, talked about getting 1 million units by 2025. And I think that when you said that the thinking was maybe half of that would be in North America, but you've got 20 models that you're working on and now at least 3 plants that are being converted. Is there the potential to exceed that targeted volume?

Look, I think from a corporate standpoint, we still stand by your first point, which is 1 million units by '25. And what that mix is -- may change a little bit. So we're not entirely wed to X number of vehicles in North America or China or wherever. But because we are changing our portfolio, and you can see how rapidly we can deploy some of those changes as the market continually changes. So we want to get as close to those changes and get that agility as we can, Rod. But we're definitely looking at the transition as some good growth opportunity for General Motors, as you see by the plants that we've just invested in. So the plan is to do to the great things we're doing today, like Escalade, Yukon, Denali, Tahoe, High Country, all the utility pieces of that. And then the pickup truck volume that we have today were just constrained by, frankly, the capacity we have. But -- and you see some capacity increases in our 10 speeds and in other places in our truck portfolio. But that's very strong and will remain strong, and we'll keep investing in that as well. But this is really a growth opportunity for us. And if we do it in an agile way, which you can see some of our capacity spending, we're going to have the ability to do both. And I think the way to look at it is really this is investing in the growth of GM for the future, and that's it. And so we stand by a lot of those, except for maybe the mix, if that makes sense.

Yes. And just secondly, there's been kind of a long-standing debate about direct sales that some new entrants are pursuing in the market versus the franchise model. And it's interesting that at least here initially, you're allowing consumers to reserve the vehicle directly from you. So I'm just wondering if that is something that you plan to do more broadly. And if that happens, does the model change a bit just because the dealer doesn't have to stock cars? And does the relationship and margin kind of change over time?

Well, I think you probably read about it, and Duncan spoke about it as well. The participation agreement that we have in place for the HUMMER EV that we're talking about today certainly allows some of those things. And our dealers are really excited about it because if you look at some of the costs that are held traditionally across the industry, there's ways to reduce the cost that the dealer has to endure and also tighten up the efficiency of that model. But also, I think, at the end of the day, the service and how do people really want to buy cars. There's not 1 way, there's a lot of different ways that people like to buy cars. And it may depend on your age or your location or the vicinity to a dealer or the kind of vehicle that you're purchasing. All those things are factors in that. I think if we really look at the waste that can be eliminated from a dealer cost standpoint in the system, those are the opportunities, I think, that are really fantastic. And -- but we also want to have a service network in place for our dealers that -- and our customers, more importantly, for vehicles. And so some of our competitors may have a direct sales model. But when it comes to the service piece of it, what is the long-term answer to that? Well, we've got sort of the best of both worlds. But we have to get the waste in the system out of it. I think that's where we're focused. Duncan, if you want to add anything to that. But...

Yes. Thanks. I think that's exactly right. I see this as an optimal solution. We're obviously adapting and learning a lot from the COVID world or the post-COVID world. I think we've just shown last night how we can reveal or launch a new vehicle in a remote way, in a different way and get massive impact. It was the #1 search for -- term on Google yesterday, for example, in the whole industry or outside the industry, just on Google. Record-breaking views and hits on social media. So we can draw this mass awareness of a new vehicle launch. With the reservation process, again, to Mark's point, we have worked with the dealers. So whilst the customer can just go online in a very simple, quick, 4-step process: He chooses his vehicle, chooses his dealer, puts his information and confirms and credit card details. Now that deposit is actually lodged with the dealer. And again, down the line, the dealer will firm that up as we get near to production. So again, just another example, I think, of really optimizing and using the dealer network as a competitive advantage. It does give us that customer experience and that aftermarket excellence that Mark talked about. It does give us a great geographical spread that we will meet if we really want to fulfill our vision of a 0-emission future where all over the country people are buying and enjoying electric vehicles. [Audio Gap]

I have a follow-up on just distribution, then I have a question on labor and costs. On distribution, just following up on Rod's point on consumer experience. Any way we can control or help make sure the consumer has a one price experience adjusted for levels of content and that kind of thing? And obviously, a dealer can give you whatever they want on a trade-in. But I think one of the advantages that Tesla has, if I can just be upfront about it, is that when you do click 5 or 6x on your iPhone or you do go to a store, you know you're not -- at that moment, that day, you're not going to pay higher price than anyone else that bought up the car at that moment for that exact type of car, right? And they can push those updates to their channel and their websites pretty much instantaneously. And so it'd be a real shame if you made these wonderful investments in product and culture and technology and network and then you still had this really kind of something that on the distribution side resembled a kind of Babylonian. It's no fault of your own. That's -- and listen, the consumers have been trained to do that, but you kind of see what I'm getting at. Is there any way you could, I'm not saying you've got to test a loophole in terms of the direct-to-consumer, but control that price? Because if you have these wonderful units out there going for $5,000 or $10,000 off depending on which dealer gives you what deal, that could be a real disaster. Any thought on that?

There's lots of thoughts on that. Yes. I'm sorry.

You know what I'm getting at, Mark. I just want to kind of [indiscernible]. It's a problem, right?

I know exactly what you're getting at. Yes, it's a problem. It can be a problem. It depends on the vehicle, it depends on the channel and depends on the dealer. But I can tell you with this vehicle -- Duncan, why don't you tell them exactly what we're doing here? Because this is a shining example of what you just described.

Yes. So we understand the issue you raised completely. And when we basically reimagined what a vehicle could be with the HUMMER EV in terms of what it can do, we also said we have to reimagine what the customer experience is going to look like. And you highlighted one of the things that can be a potential dissatisfy for customers, and that's variable pricing or haggle pricing. So our ambition here and our objective here, it's more than an ambition, is that this vehicle -- you've seen the prices that it's available on the Internet, just below $80,000, $90,000 and $100,000 for the 3 standard models. And that really is the price you see is the price you pay. There will be no incentives there. There will be no trickery. That is what we call a net price, first of all. Secondly, we are, again, working closely with our dealer partners, and we're trying to construct a dealer margin in such a fashion that, again, that it really is a no-haggle price. So not only is it a net price, free of incentives or no incentives. But also when it comes to the dealer experience, it will be the price you see is the price you pay as well. And we're also looking at our advertising standards, our advertising covenants of just how we go to market with this. And again, we came up with various rules and regulations around that, which, again, will mean that you won't see price variability in terms of when a dealer may choose to advertise these products. And of course, we'll be doing the predominant amount or the promotion on this vehicle, anyway. But what we should -- what all those things wrapped up should deliver is a very -- a one price experience for our customer from the brand, from the website right through to the dealer level. So we do expect to solve the issue that you just said there.

So Adam, we're going to call it Ultium pricing just for you, Adam.

Follow-up for you, Mark, on labor. A lot of our clients are saying, GM, the legacy guys just can't -- they can't migrate to EVs culturally because the union will somehow screw it up. And I thought it was very telling yesterday, the support from labor for these things. And of course, you're offering them a ton of investment at a very important and sensitive economic time, $20 billion over 5 years or so. So I'm just wondering -- and I'm not asking for any collective bargaining details here by any stretch. But just conceptually, am I right in thinking that GM is in a pretty good position to offer the unions some job security and real investment in a future with a terminal value. And then in return, you get some flexibility or otherwise labor costs or rules that might look favorable relative to an incumbent ICE program. Is that -- just at a high level, am I off there?

I don't think you're off. And I'm not going to sit here and detail, I can't, collective bargaining things. But I would say this. I would say some of the supposed or rumored opposition to electric vehicles from our -- these are our employees. Look, I mean, they're represented, but these are our employees, right? I mean you go into Factory ZERO and look at the total remake of an old plant like Detroit-Hamtramck, and you see the energy and enthusiasm on the floor. We took the Lyriq, the Cadillac Lyriq down to Spring Hill yesterday for an announcement and put it on the floor. I mean people -- I mean this is generational, right? I mean as the workforce changes from a generation and age and enthusiasm and all that from that standpoint, these people are really excited. Our employees are super excited to make these, to be involved with retooling factories for the future, all that stuff. So I think there's a total excitement that maybe hasn't been there in a while around what we're doing and how we're doing it. And we're inclusive. And we're going to go as hard as we can, and we're going to be as competitive as we can. And I think you're right on.

I'll just finish by saying 2 words: crab walk. I don't remember -- I think the last time GM blew up the Internet was back during the technology and stuff thing a few years back. But crab walk, I think some investors are crab walking back to a stock that they had written off here. So well done to you guys.

Thank you. That means a lot to me. Thank you, Adam.

And the last question comes from the line of Johnson, Brian with Barclays.

Just a few questions. So first, this is clearly targeted by design as the performance into the market, I call it -- to use the competitor's label for that market, the Raptor end of the market. But what would you say in terms of migrating pickups down into the broader market? What do you hope to learn from the Hummer that could affect the timing and design of those?

That's a great question. And this is the first vehicle off of our battery electric truck platform, which is right there, synergistic with our battery electric vehicle platform, which is more crossover and car-oriented. So in Factory ZERO, this is being capacitized, obviously, for this first. I think doing it the way we're doing it, yes, there's a marketing phasing piece of it that's hugely attractive for us. You get a nameplate under GMC like HUMMER with the capability and all the cool things that you just saw from the truck. The other piece of this is to exercise the technology with Hummer first, not unlike what we're doing with some of the Cadillac's first and the manufacturing system and the mainstream, high-volume things like pickup trucks, this is the first one. It's going to lead to all the learnings from a battery standpoint, from a volume standpoint, from a build standpoint. All of those lessons we do as we roll out this truck will be taken into every one of the Ultium platforms. But most importantly, I think how to do this at scale, whether it's the cell, the module, the electric drive unit, the actual difference in how we construct the cab versus a true body on frame, regular pickup truck versus what we're doing here with an integrated back on a very different structure that no one has seen yet, those are huge learnings for us and how to get a different package on battery electric pickup truck that maybe for Chevrolet or GMC proper. Those are huge learnings. And frankly, it then trickles down into midsized truck, like our midsized truck segment with Colorado and Canyon. So the importance of this truck right now is just what you said. It's the learnings for everything, from propulsion to body shops to construction for a pickup truck that's quite different than a body-on-frame internal combustion engine pickup trucks. So all of those things, we've designed, we've engineered. And now it's time to learn and get scale and go at it. So hopefully, that makes sense.

Okay. And final question on the pickup truck platforms. Can you give us any update on the discussions with Nikola vis-à-vis the Badger platform and the overall relationship?

Yes, for sure. And I did a little bit this morning with Phil LeBeau, and I'll say the same thing. We're continuing the discussions. The big opportunity for us, and I think you all know this, is the commercialization of what I think is the best fuel cell in the world, which is a shared view by Honda and Nikola. We have it. We're in a manufacturing joint venture, obviously, here in Michigan at Brownstown with Honda. And so the opportunity for us is in the Class 7 and 8 space, which is a highly desired space for us to be in. Even though we don't make those trucks, I would love to be in it with that fuel cell because that's where you start seeing the infrastructure build-out. You see the repeatable routes. You see the real savings from an operational cost standpoint. And we can really go to town on taking the next step in electrification, which is fuel-cell electric vehicles, which we got to get into production with. We've got to learn and we got to get the scale, and then we can further expand that. But that's what's very exciting for us. We're in those talks, and that's where we are right now.

Does that mean it's shifted away from helping them with the Badger pickup?

Not necessarily. There was a fuel cell in the Badger too, which I didn't mention, which should be a highly attractive place for us to do that as well. So those -- yes, I was just mainly focusing on the fuel cell, but for both vehicles, yes.

Thank you. I'd now like to turn the call over to Mike Heifler for closing comments.

Thank you, operator, and thank you, Mark and Duncan. As you can see, we are super excited about our path for the GMC HUMMER EV, which will blend extraordinary on-road performance and unprecedented off-road capability, all with 0 emissions. So thank you, again, everyone, on the call for taking the time to join us today.

Ladies and gentlemen, that concludes this conference call for today. Thank you for joining.