General Motors Company (GM) Earnings Call Transcript & Summary

Good afternoon, everyone. [Operator Instructions] Please note, today's call is being recorded.

Good afternoon, everyone. I'm excited to kick off our next panel. Can traditional automakers win in the EV transition? With me today are 2 GM executives, you probably know well, Mark Reuss and Duncan Aldred. Mark is President of General Motors and led the leads in all regional operations, North America, South America, China and GM International. Among his many responsibilities are global product development, global design, quality and operational excellence. Duncan Aldred is the Vice President of Global Buick and GMC since 2014. And before that, he held senior positions in sales and marketing at Opel. So with that, let me pass it over to Mark and Duncan.

Thanks, Colin, and good afternoon, everybody, from both Duncan and myself. And we'd like to kick off the session with a really good look at the vehicles that we're introducing right now, which are right behind us, which are the HUMMER truck, and then the SUV, both EVs. And we've got a great video to take a look at some of the behind-the-scenes action as well as the trucks actually in motion and in action. So with that, I'll turn it over, and we'll take a look at the video. Thank you. [Presentation]

Well, that was a great video. Thanks for that.

Maybe just to kick it off with the questions. A lot of EVs are coming. Obviously, we now are well aware of the HUMMER. The LYRIQ is coming. You have the Bolt EUV out. Yesterday, you announced the Silverado electric truck is coming. Which ones should we be most focused on? Which ones you think might be the most successful?

Well, I mean, we're not in it to have any of them not be successful. Obviously, we're in it to win it here. And you'd imagine that. But I think part of our core ethos as a company has been EVs for everyone. And so the importance of EVs at a price point that is at or below the average car price these days like the Bolt and the Bolt EUV. Well, Super Cruise is very important to us as we get that accessibility, the first leg in that accessibility for our customers out there. But also, I think if you look at the price point on the LYRIQ, it will be -- I think it will be very competitive in terms of the crossover market. And HUMMER is special. You just saw how special the HUMMER is. So the HUMMER will be -- it's probably one of the top points of our price ladders on our EVs. So I think they're special, and they're important in very different ways, and that's the way we formulated the portfolio, frankly. So -- and with all of that channel in mind as well. So we need throughput through our dealer channels. We need profitability of our dealers. And of course, we want to be profitable. We will be profitable with the LTM architecture on batteries as we begin to roll these out.

And I noticed customers will be able to reserve the GMC Hummer EV directly from your website. What are your thoughts about direct sales versus the franchise model?

I'll pick that up. Yes, we see our dealers as a huge strength. They offer great geographic coverage. They offer award-winning customer experience, whether it be from a sales point of view and an aftersales point of view. So we're looking to evolve and take big strides forward in terms of making it a better customer experience. That's, for sure, an easier customer experience. And so again, we're offering that facility to reserve a vehicle online in what we call in this reservation phase. That deposit, that down payment, a reservation phase, is actually held by the dealer, and it will be the dealer who ultimately finalizes that order with the customer at a point in time when the vehicle is a few months away from delivery. So we think we're creating the best of all worlds here about the great dealer experience but also adding online capabilities, which we know more and more customers are looking for these days.

And with the distribution network needed for the GMG HUMMER EV, how are dealers receiving this? How are they set up for the transition on the sales and service side? And what are you doing to kind of support that? I guess, EVs will require a little bit different infrastructure.

Yes. I mean this has been a journey. I was going to say, it's been a long journey. It's not been that long because, as you know, the vehicle development process was kind of a record 2 years. But as soon as we were really onboard with this journey and we started putting the plan together, we've been working very, very closely with our dealer body, the representative councils, a GMC dealer council and really plussing what we need to do, not only from a customer experience point of view, from a training point of view, from an infrastructure point of view at the dealer, what charging stations they'll need, what kind of training they will need. And we're in the process, we've finalized now. We're in the process of rolling that out to that dealer network now. So as I said, there will be some special equipment required, special training required, the ability to, for example, take those reservation fees online. And again, all designed to create a great customer experience. Dealers are excited about it. It was an elective distribution strategy. So not every GMC dealer will be selling the HUMMER EV, but we've still got great geographic coverage. And we're in the process now where each dealer is undergoing an evaluation, just seeing what exactly they will need to do to get that -- those charging points in place in -- well in advance of when deals will start -- sorry, vehicles will start being delivered to their dealership.

Maybe if we switch a little more broadly to battery technology, some competitors are talking about battery costs coming down as much as 60% over the next 10 years. Do you think that's realistic with the current lithium technology?

I do. I think you have to get into what exactly the lithium technology is that they're using. So we have a state-of-the-art nickel, cobalt, manganese, aluminum technology that is -- for now, the recipe is a lithium-protected anode with a proprietary electrolyte. So this will change. We've designed in change and steps in our chemistry that are backward compatible into any of the LTM-produced vehicles. So this is what we're doing right now. And it's very, very good, state-of-the-art, as I said. But if you look outwardly to the future on the cost piece of this, we have to do things like reduce the amount of cobalt that we're using. In fact, we've done that by about 70%. That's what we're going to do. And I think the -- that gets into a better cost from our cell standpoint and our pack standpoint as we deliver better energy density and get off of some of the harder materials that are in the industry today. That's why we announced our partnership with SES around the lithium metal part of that. And then we're also very interested in the silicon piece of that on an anode basis. So these are things that we're actually running and doing right here in the tech center, and we've run cells that we can actually manufacture, prototype and run very fast to do as much as the deep cycle and quick charge repetition that is needed to validate those. So you'll see the next-gen of our chemistry reduce from today's battery costs, at least 60%. So yes, I think that's very possible.

Wow. What about solid state? That was a big topic in our last panel. I mean do you think that's viable? And does that actually impact your -- the plant that you're building with LG? I mean is that going to be rework there?

Yes. I mean, I think, you have to design in, again, these next big steps in chemistry. And we are doing quite a bit in the solid-state arena. But I would also say the experimentation that I described earlier with silicon and then lithium metal anodes are very, very promising. In fact, we've done upwards of 500 deep cycles with those pouches on an experimental basis that is very, very promising and very high potential for us. So the solid-state piece of it, I think, is very viable. But I think there's a lot of room to improve, a lot of the areas of the battery and the processing, frankly, of some of the dry processing, for instance, the high-voltage electrolytes that we're experimenting with. So there's a lot of different elements rather than just one silver bullet. But yes, we think it's very promising.

And you obviously have a pretty strong relationship with LG, with the joint venture plant. Other companies have been doing numerous partnerships with other battery companies. Are you open to working with other battery companies? Or is there just a benefit that you see just being in a tight relationship with one main supplier?

Well, I can say that LG has been a tremendous partner. And the JV we have is a manufacturing-based JV for that plant. But we both bring expertise in very different ways, whether it's the chemistry or the processing of the chemistry to bring down costs and improve quality. And so we are very open. We have an organization called GM Ventures that has brought to fruition, things like SES, which has been in the works for a couple of years from an investment standpoint, but also a technology sharing standpoint. So yes, I think we are always open to different partnerships and different technologies that are win-win from an effort and technology standpoint, whether it be technology on the plant floor, technology in the quality of producing the cells and the packs themselves or the very rapid prototyping and validation of leading-edge chemistries, which happens right here at the tech center. So yes, we are very open to that, always have been.

And any concern about supply chain risks? Last panel actually was talking about the recent spike in some raw material costs. Do you think there's enough cobalt, lithium, nickel to meet EV demand? Could prices spike? And what are you doing to kind of mitigate that supply chain volatility?

Yes. I mentioned that a little bit around how much we've reduced the dependency on cobalt. And we've done that really by inducing aluminum into our formulations here. So the aluminum piece of that is very special. And again, it enables us to reduce our dependency on some of those precious rare-earth things that are difficult to get. The supply chain is going to explode here as electric vehicles come online, and people use those. And so our focus has really been on reducing our dependency on those rare-earth metals and making the breakthroughs on energy density and cost that we know we can do within our own proprietary chemistries that we're developing. Having said that, as we look at some dependency on those rare-earth metals that we have today, we do have to explore very deeply how we supply those for ourselves and our packs into our battery plants. And so we've got a very good, I would say, one of the best, if not the best in the industry, global supply chain, risk management activity within General Motors, anything from tsunamis to chip shortages to hurricanes, fires, you name it, this industry deals with it. And so we've got a lot of experience doing that, but we're not -- there isn't one thing that we're relying on to be okay, if you will. We've got to drive our chemistries to lower costs and lower dependency on those rare-earth metals.

Yes, I imagine that supply chain team has been pretty busy this year.

They're good. They're pretty good. They're excellent. Yes.

What about the e-powertrain? How much should we think about you think you need to do in-house versus outsourcing to suppliers? And if you are outsourcing things, what are you going to do with your engine transmission plants that you have today?

Well, I think you see some of our conversions are already beginning to happen, where we're going to actually design, engineer, produce, for instance, some of our drive -- most -- all of our drive unit family that we have. So we've done that over the last 2 years. And when we can start to convert some of our old traditional transmission or actual engine plants, there'll be some of that, but we're still going to produce internal combustion engines here for many of our products as the changeover happens. So I don't see a big risk in that. And then how much of it are we actually going to do in-house, look, I mean, we rely on all kinds of suppliers, whether it's Tier 1, Tier 2, Tier 3, Tier 4, these are very complex electromechanical devices at the end of the day, in the actual architecture of Ultium and how it's applied. So the suppliers may be doing different work, but we still have excellent relationships with our suppliers. And we are still going to rely on a great supply base to produce what may or may not be fully engineered in-house, but most of these things we've chosen to vertically integrate. And you have to ask yourself what is the car company of the future? What is that car company? Is it piston engines? Is it stamping? Some of the core expertise that we have in the company, whether it's die casting in great places like Bedford, those are very, very intense skill sets that we're going to retain. And so we're going to do a lot of it ourselves, but the reliance on how to actually put those systems together and integrate them, we do that with our supply base, always.

And how should we think about the assembly of an electric vehicle? What I understand it's a little bit easier, a little less complicated. I mean how much savings do you see versus a traditional internal combustion engine on the assembly line?

Yes. I think it depends on how you set up what modules you're going to actually deliver into the plant versus what you actually do in plant. And so we've got a great relationship with our union partners and all of our employees in GM that work in our assembly plants to try and get as much of that work as you can, that's new work into our assembly plants and select the things on a module basis that may come from Brownstown from a battery pack standpoint, where we assemble the battery pack and bring it into our final assembly plant. So people -- I've read this, people should really look at the manufacturing strategy of an OEM in their plants and how they're laying out the batteries, the cells themselves, the packs themselves, the electric drive units, all those things because the work could actually be much more in a final assembly plant than it is today, but it's very different. And it may not be quite as modular of what we brought in before on an internal combustion engine, if that makes sense. So we may do a full power cube on an internal combustion engine at an adjacent facility, bringing that into a final assembly plant, whereas we may say that we want to do electric motors or power control units or whatever it is or seats. We may say that we want to do that in the plant itself within the 4 walls or adjacent to the 4 walls at some of our final assembly plants. So those strategies are very different. And so doing an apples-to-apples on just hours per vehicle in a final assembly plant, I don't think is the right way to look at it.

Got it. And maybe if we talk a little bit about EV profitability. I think in the past, the prior generation of the Bolt you'd admitted was not profitable sounds like at a positive factory variable margin, but maybe not covering the R&D and SG&A that went into those vehicles. How is that changing with latest Bolts and the next-generation technologies? When do you actually start seeing positive operating margins? I imagine the HUMMER at the $100,000 price point is going to still be pretty good.

Yes, that will be okay. I think you really have to look at the scale that we're laying out, Colin, and think about how different -- just the battery itself is from a chemistry standpoint and cost standpoint, that's a big difference. We're talking huge percentage differences on the battery itself, but also -- I would also think about how we're going to scale and how much we vertically integrate on a high-volume set of portfolio entries. And we have done a Volt. We have done a Bolt. We have done an ELR. But have we really set up the business around a full portfolio by brand, by channel and filled it and scaled it? And the answer is no. And so we've got a huge opportunity here to do what we really know how to do well, which is to scale for quality, for cost and deliver the highest value for the customer. And get the margin for it because of it. So we've got a huge opportunity in front of us because we're all in.

Got it. Any thoughts on the EV start-ups? It's like pretty hard to keep track of them these days. I mean what do you think about the competitive landscape? Do you think these start-ups are going to take meaningful share? How do you think this all plays out?

I think to use something that I'm sure you guys have seen and read, but only the paranoid survives. So you have to assume they're going to take share, and you got to assume they're going to do a great job. And that's our mindset. And so that sort of cements our will to win as a company and really gets us focused. And I've been here long enough to know that when we focus on something, like a HUMMER or a LYRIQ or a Bolt or the electrification of the whole company and the transformation of the whole company, this company will get it done. So I feel very good about that. And I think competition is very healthy for us. So I look at it that way, and we've got to be better than everybody. So that's the mission.

And then on charging, it can be a limiting factor. Can you remind us of your major partnerships on the EV charging side? And do you think that strategy is going to be sufficient? Or is more work needed to be done on the charging side?

Well, I think a lot has changed since I would have answered this maybe 2 weeks ago with what the Biden plan is for infrastructure with around 500,000 charging stations by, I think, 2030 was the number I read. That's a huge commitment. But we've already made a lot of progress. We've tripled the number of DC fast-charging stations with our partner in EVgo. And so that's happening right now. And so that's the kind of momentum that we need to see. And in fact, I actually spoke to a group of the power companies' CEOs from across the country, probably 2 weeks ago. And they are very eager to be on the leading edge of whatever municipality they're in, in supplying charging stations actually together with some of those different computing power companies to provide power infrastructure they see as a huge opportunity not only for greenhouse gas and global warming but also growing their business around supply and electricity for electric vehicles. So we've got some really good, sustainable momentum from those folks that we may not have had in the past because we didn't have the critical tipping point of the industry transformation in place. And so now they see it, they can read about it. They see it coming with our products. So that's going to be a very powerful force as well to get things put in place. So you've got a lot of things coming together there, including our partnerships that, I think, is very exciting.

And I guess just a final question. All the stats on the HUMMER. I did notice Super Cruise would be a feature. I believe consumer reports ranked it the best system in their last report. What -- can you just remind us the rollout of Super Cruise across your vehicle lineup? When will this become more of a standard vehicle -- a standard feature since it's such a good system?

Yes. We're pretty much rolling it out across the whole company, 22 models here in the next few years. So there's a cadence. I could give you a very detailed chart on it. I don't want to do that bore you with that, but we just introduced it on the Bolt EUV. In fact, I'm driving one. So tonight, when I go home from work, I'll get on the highway again and Super Cruise hold in my Bolt EUV, which it's a pretty liberating feeling I got to say, and that's our first non-Cadillac application. So you'll see it in our -- obviously, our SUVs with T1 with Cadillac. We're rolling that out very shortly. In fact, it's already rolled out. So every product that we put out there going forward, you're probably going to see Super Cruise in it. So hopefully, that's very exciting news that is for me, I love it.

Yes. I mean I'd add to that as well, if I may. Obviously, it's on the HUMMER EV, which is fabulous. We're going to be introducing. We've already spoken about this on the Sierra pickup truck next year as well. So again, first time, it's been put in a, let's call it, a traditional powertrain, a pickup truck, but really exciting and amazing technology that is going to be coming to a lot more people.

Might be able to tell what's that, too, Duncan, right?

Yes. We might be able to tell you that as well. Yes. Yes. I mean it's just phenomenal technology. I mean it's things that put a smile on your face, the ability to overtake and go around the line change that was on the video there. I mean it really is a remarkable feature.

All right. Well, I think we're actually out of time. So I appreciate. Thank you, Mark and Duncan. And for everybody else, will -- the next session actually starts in just 5 minutes, which is one of their hurdles for trucking to go green. Thank you, everyone, today, and thanks, again.

Thank you, Colin and Wells Fargo, for hosting us today. I appreciate the opportunity. Thank you.

Thank you.