General Motors Company (GM) Earnings Call Transcript & Summary

Welcome back, everyone, to our second fireside chat within our EV track here at the Inaugural Evercore ISI TMT Conference. I really couldn't be more excited for our next guest from GM as we really see the company as one of the leaders for essentially all in of the OEMs and transitioning from a predominantly legacy lineup today to a goal of 100% EV by 2035. Now with us today is Kent Helfrich, Executive Director, Global Electrification and Battery Systems; and Tim Grewe, Director, Electrification Strategy, as really some of GM's top executives in engineering, specifically related to electric mobility. So the first, thank you so much, gentlemen, and to the entire GM team for joining us today from IR.

Happy to be here.

Glad to be here.

Guys, we're going to try to talk very specifically because, look, we have great minds in engineering in the two of you. So the first is this engineering question around scale, this idea of a singular platform versus a multi-platform approach to EVs. One of your U.S. competitors recently announced that they may be using 2 different platforms for introducing EVs. Could you talk to the rationale for GM focusing on the singular Ultium platform? And do we need new platforms for certain niche product areas in the future? But maybe just a basic pro/con to the idea of a singular platform and architecture for EVs.

Chris, why don't I -- I'll take that. So Kent Helfrich here. And by way of introduction, I'm responsible for the engineering of all of the electrification parts on the vehicle from the charge port on the side of the car through the wires, converters, chargers, the battery cell modules and pack, the power electronics that convert the power in the battery to the electric motors, the electric motors themselves, plus the calibration system that ties it all together. So kind of soup to nuts in the vehicle from the charge port to the half shaft to the wheels. So having that purview of the propulsion system inside the vehicle gives us the ability to do balancing at the system level. But it's really important when Mary sets out the vision of zero crashes, zero emissions and zero congestion and really points out this unequivocal statement of we want to be an electric vehicle company. That means we have to shift our entire portfolio. And to do that, we really need a platform view and a whole system idea of how we're going to optimize not only the propulsion system, but the vehicle that it integrates with. So for us, the Ultium platform is the answer to our entire light-duty portfolio. So this Ultium platform includes not only the battery cell modules and packs but also the drive units, the electric motors and the gearing and the means to create the torque and connect with that port, front-wheel drive, rear-wheel drive, eAssist all-wheel drive performance wheel drive. So by mixing and matching these different components, we're able to create the entire light-duty vehicle portfolio. So from a capital-intensive perspective, we want to maintain the efficiency of capital. So by redesigning our entire portfolio to be electric vehicles first and not trying to transition a combustion vehicle or a hybrid vehicle to an electric vehicle. But to start with an electric vehicle mindset first, then create the platform of Ultium and then to combine them, that gives us all the tools we need to do a system-level balance and how to make a vehicle or a family of vehicles that everyone loves. So let's kind of zone in on the batteries because that's we're going to spend a lot of time talking about that because batteries is the biggest cost thing here and it's also the newest thing [indiscernible]. We've really focused on launching Ultium with a single format cell. It's going to be a large format cell, it's going to be high energy, and we're going to make a ton of these. And I'm sure we'll talk later about our partnering strategies with LG Energy Solutions. But the idea is if you're going to make, let's say, cells modules packs -- let me start with that a little bit of definition, just kind of get everyone on the same page here. And Tim and I could talk 1 million miles a minute and all day about this stuff. So if we don't define something, please stop us and kind of rewind a little bit. Cells, modules and packs. Cells are the basic building blocks of our battery packs. And you can think of them -- they actually look like large flat [ cleats ]. They're almost 500 millimeters -- one, they're really big. And they've got electrodes at the ends and they all get stacked kind of like in a shoebox. And the shoebox that has, let's say, 24 of these [indiscernible] is called a module. And then these modules get stacked into the packs. And the packs are what's actually integrated into the vehicle. So by varying the number of modules you put into a vehicle, that kind of dictates much energy they [indiscernible]. It's kind of like a bigger gas tank, right? And some vehicles are heavier and they're moving more, so they need a little bit more oomph to get going. So they'll have bigger battery packs in them. Our platform, we use -- this is the same basic cell and the same basic module. And if you're going to do 1 million of these vehicles and each one of these vehicles has 10 modules in it. And each of those modules has 24 cells in it, that's like 240 million cells a year. So you have to have scale. That's what we're talking about when we're talking about scale. So if you start with this platform view and a whole vehicle portfolio solution, and then you have this highly engineered cell module pack concept, then that enables us to really lay this out. Now modules themselves are also very interesting thing. Imagine that shoebox that might have the cells done vertically like this, we can also lay the cells flat, and we can come up with very slightly different modules. And we got 2 or 3 variants of these things. And that makes it very easy for us to have a tall stack or a slightly shorter stack, and we call them [ toast ]. If they're vertically oriented or pancake if they're horizontally oriented -- sorry if you haven't had your breakfast yet. But that's kind of the idea, right? This gives us flexibility in defining our overall vehicle structure. So you take these modules and you put 8, 10, 12 or we can even double stack them in our trucks and do 10, 14, 24, we can do all sorts of different things. And that enables us to get that scale out of the whole thing. So that's just the battery part of it. And so now let's look at the ends of the vehicle where we got the drive units in the front and the rear. With 1 or 2 or 3 variants of our electric motor, we're able to make just a few drive units that we can mix and match in our vehicles. And again, that capital is very efficient at this point in time. And that enables us to do our whole portfolio with not a ton of capital. The secondary effects of this, of course, are where our purchasing processes are very streamlined. Our manufacturing process is very streamlined. We have situational awareness amongst the engineering and manufacturing groups and R&D and product development about what it is we're doing. It's a very, very streamlined process at this point in time. And we can talk a lot about that in the future. This idea of minimizing our capital, speeding our engineering, minimizing our engineering spent, having reusability of manufacturing. I mean this is fantastic. So let me kind of stop there and see where you want to take it because that was kind of a big opening cell, but it is critical to understand that so that you understand our mindset as [indiscernible]

Kent, that's super helpful. I mean I think you answered my follow-up, which was this idea of scale. I think you just gave a streamlined answer. Maybe the two you can also address this idea of insourced versus outsourced because it's a question, right? Does GM have the scale for components internally? Or do you use Tier 1s that could work with many different OEMs, leverage their R&D and scale? So insourced versus outsourced, how do you see that long term?

Tim, you're going to say something. So why don't you take this and then talk about or make [indiscernible]

Yes. So I'd like to introduce the concept of the innovation is really the differentiation when it comes to these products. And just to kind of feed off of what Kent was saying, right, I mean the innovation has to be ready for today and tomorrow, and that was part of this architecture. And so even if you go beyond -- Kent talked about the cell is the foundation and then you build the wall with all the bricks of the cell, very same for motor steel lamination or motor magnet, right? You just -- bigger wall, bigger power, more bricks as you put it together. But then there's a very unique vertical integration like 800-volt charging without an extra converter. And that's what enables us to have this universal charging for the customer convenience. We can do a U.S. wall plug at 110. We can do a 220. We can do 400-volt DC charges, we can do 800-volt DC chargers, all with the same factories and the same concept. And that's some really breakthrough innovation that GM has, whether it be a wireless battery management system to enable that or other technology. So to answer your question, Chris, directly, okay, we go where the innovation is the best, okay? We make, we partner, we buy. And we're finding incredible value by being flexible with that to go after and accelerate the best innovation as it moves forward. And so if you take our joint venture with LG Chem, with the Ultium factories, we've got 2 factories, 1 in Ohio, 1 in Spring Hill. And the amount of collaboration that's occurred there with simulating each operation, simulating what could go wrong in each operation. And then how do you say, well, I'm not only designing that factory for today, but I'm going to design it for tomorrow. So we've got our 70 gigawatt hours of installed capacity in 2021, 2022, but that can go up to twice that with a new technology. And how do you have all of those innovators collaborate so that you can maintain that return on invested capital, but most importantly, you can get to the better answer quickly. And if you look at, again, the all-in nature of Ultium and the Ultium architecture is that we're actually able to go introduce that new technology in basically half the time that it would be in a traditional automotive thing. And so beyond some U.S. OEMs, there are some European OEMs that have similar stuff, right? But they can't do the full bandwidth from the C or the B segment all the way up to a home or super truck. And it was the innovation with all of the multi disciplines that made that happen, where we worked on the Bolt EV, launched it in 2016, increased the range in 2020. And in 2016, we could not imagine a super truck, HUMMER-type super truck. But the innovation and then the fast development time with the culture of the company with the all-in EV all-in strategy, just had all of those multi disciplines, making a new dream and then actually realizing it and delivering it. So when it comes to internal, external, we go where the innovation is the best and then we accelerate it as we move forward with this. And like Kent said, we're a high-volume manufacturer, whether it be battery raw materials, value chain and nickel sulfate, cobalt reduction, 70% less cobalt reduction was a great innovation to drive a 40% cost down that we had there. We make sure that we do all of those things in parallel. And then once we say they're ready, we get them in as quickly as we can.

So Tim, it really sounds like it's going to be a flexible strategy and evolving strategy. But to your point, it's always going to be technology-led. Whether it's the components or whether it's the cells themselves, GM is going to evaluate each to make sure that they're on sort of the leading edge of the technology push.

Absolutely, right. We were the first out there with an affordable 238-mile EV in 2016 with the Bolt EV. And that was great technology in that cell, but it can also be battery raw material technologies, okay, that we're pursuing to get that fundamental raw material costs down. Because those are still the most expensive components in the vehicle, and how do you accelerate that? It could be manufacturing technology with a dry electrode coating to reduce your processing cost or your footprint within the dry rooms inside of the factories. It could be some of our -- what we call breakthrough chemistry. We've got a lithium metal anode that we got working on a multilayer pouch today in our R&D labs. 46 issued patents, another 40 on the way where we're collaborating and we're accelerating. And that thing will be ready faster than any of us would have predicted even 3 years ago. And so keep those competitions going. But I kind of call it cooper-tition rather than competition because you've got to do it all in parallel and you got to keep running together to make it real, right? The best technology that can happen in an R&D lab, if it totally causes you to scrap your capital and do something totally different inside your battery cell factory, it's not something you can change the entire portfolio where you can just do it on an incremental volume increase-type situation. And so that's where GM is very strong where they prepare for the future without added burden or cost where you're just building extra dry rooms because you may want to increase capacity someday. But you keep the dry room very lean, very agile, so it can accept that new technology when it does become available. And the breadth of the company and the partners that we have that we work with just talks about how we all can benefit by accelerating each other and doing things faster than we ever thought we could.

So maybe, Tim and Kent, we talked a little bit about the technology, the strategy, if we talk a little bit about now the capacity side, right, we all see this volume coming. And then the question is, is the rest of the industry ready, right? So specifically, we talk about batteries and cell production. There is different views out there to how much of cell production actually needs to be done in-house by an OEM just to have enough basically supply if we can't rely on external providers. VW, one of the largest EV providers in Europe, is talking about 70% or 80% in-house by sort of mid to end of the decade. Could you talk a little bit about GM's plans there? You talked about LG, but maybe you could flush out the idea of sort of this in-house to -- sort of out-house for cell production specifically.

Yes. Tim, why don't I start and then you can fill in the blanks on this one. So it is actually informative to start with the idea of what we did with our manufacturing joint venture with LG Energy Systems. It's not just a manufacturing joint venture. We actually also announced this time in direct development agreement them. And by partnering deeply with LG ES, we actually brought our manufacturing capability to them. They're great electro chemists, but in my opinion, I think we're better manufacturers. I mean just the basics of how to set up manufacturing facilities and management of material, et cetera, et cetera. We also tied up with our purchasing organizations to go further upstream into the supply chain. And this enabled us to actually do, again, the system-level balance that I talked about in my opening remarks. What we're able to understand what are the cost drivers in the raw materials and precursor materials that are coming in the supply chain. How does that affect the cost of the battery and the effectiveness of the battery? And then we also really focused on the recyclability and the sustainability of the manufacturing process and then also once the batteries on the field. So by being really concerned about everything from the beginning to post delivery to our customers, that gives us the ability to be the best partner in the industry. And that's something that we bring as [indiscernible] manufacturer and our manufacturing folks are absolute ninjas when it comes to being able to interpolate and project base to improve the manufacturing process. But this also means that when we create our own capabilities and our own IP and our own lock internally, we choose how to participate that IP into our various partnerships. So we're not permanently wed to LG ES. They're not permanently wed to us. They have different partners, and we've also announced different partners over time. So the make-purchase-buy strategy that Tim articulated is very active right now, and it stretches all the way back into the supply chain and all the way future into sustainability and recycling. And I think that's really important. That's what we stand for. And Mary is very, very clear on our responsibility for sustainability and responsibility for our manufacturing footprint. So that was kind of a broad statement on how we approach our joint venture. Our joint venture isn't an end in and of itself. But it's part of the entire fabric and part of the story of what it is we do and who it is we are. So Tim, anything else I should add to that?

Yes. And I'd like to say that we have the telematics and we've got the field experience with how these batteries are used, whether it be a daily use rental or any type of an environment with a customer or personal use vehicle that we have. And so it's been actually very fascinating and enabling where through the LLC, we can go then go work with that entire value chain and say, well, okay, from an environmental, social and corporate governance point of view, right, you want to minimize the CO2. But it also reduces your cost with your energy. And you look at, well, okay, and I'll take cathode active material as an example. And the calcination, the high-temperature ovens and the 8-hour processing that goes on in that, we can actually say, well, okay, let's put these collaboration teams together to say, why do you do that? Why isn't it 4 hours? Why is it different temperatures? And here's the customer to the calcination direct link to say, does that really add value? Or can we optimize that? And then how do we take that technology because that 8 hours can turn into a minute with the new plasma processing technology. And how do we have that, reduce the cost significantly, but also do the environmental, social and corporate governance benefits that come along with it. So an example, even today, though, to, Chris, come back to your original question, right? I mean we got the joint venture for the 24 cells that Kent was talking about in Ohio and Spring Hill. But in our China applications, in Asia, we actually buy the cells from a company called CATL. And the architecture was designed to be able to not only have the best solution for the year and the moment, but give you regional flexibility to tie all that together. And the nice part about being an OEM with that is you're living the reality of high-volume production, and you get to know the nuances of both of those models and then it's not -- I go back to that cooper-tition term, right? It's how do you reduce them both, right? How do you take everything and then go make that bottom of the cost curve keep on dropping lower and lower, quicker than we ever expected.

Tim, you led right to my next question on the cost curve because your -- GM has some leading targets talking about $80 per kilowatt at the pack level by mid-decade. Obviously, that would push us towards mass market adoption of EVs. Can we talk a little bit about -- you talked about development teams. How much is in GM's control to get to that $80? And then also, do you need some of these moon shots like your investments in SES and solid state? Or is that something beyond $80 per kilowatt?

They all coexist. I hate to give you a complicated answer, but I'm an engineer. And the world is a lot more complicated because they all coexist. And if you look at the fundamental cost curves at a cell level than at a pack level, right, as we're doing this heavy, heavy expansion, right, we control more of it not only for having the best results right now, but learning and finding out where the true costs are. And the things that a lot of people don't think about is, what is a scrap? What's the balance of aligned run rate on an electro-coated line versus a scrap you have or the change over time? And where are the real costs? And so when it comes to those models, even if it's not us doing it with our manufacturing engineers or our sourcing experts with that, we have the transparency in that value chain to find out, well, what was the reality of this production and then how do we go drive it down lower further and further? And so to say we're not tied to controlling. We're tied to understanding and driving the cost down.

And if I could -- for those on the line, if you have your questions, again, write them in because the last 5 minutes, I'll try to get to your questions. I'm going to -- since I have the smartest guys in the room here, I'm going to try to pick their brains and go a little bit further on solid safety. This is such a popular technology discussion with -- amongst investors because, obviously, there's a step-level change. You guys have an investment in SES. Not too much information is known about them. There's some academic papers. There's some discussion of their use of liquid polymer separators. I would love to just learn a little bit more about that path. I think you put out some 2024 initial targets there on production. But anything that you could expand on solid state as potential technology or SES individually would be extremely helpful.

So let me just start by talking a little bit about our partnering strategy, and Tim, I'm going to leave the technical details to you. So partnering with SolidEnergy Systems, or SES, this is a small company, an early company and -- but GM through GM Ventures has actually been invested with them for like 6 years. So we've constantly got a scout mechanism looking for opportunities to engage with innovative, early moving individuals and companies out in this technology space. And our goal is to grow the pie. Our goal is to enable them to be successful. We want to get the best technology earliest into our capabilities. But this is the same as our make-partner-buy strategy has already been played out. This is -- we're going to actually raise all boats to a certain degree, but we're going to be first. And that's to our benefit, but it's also the industry's benefit. So there are other companies like SES that we've invested in and others that we're talking with and working with and we don't talk about these things very publicly. And we have our own internal R&D arm, which keeps us all very honest, right? Because you might call us the smartest people in the room, our goal is to get the most value out of whatever room we're in, right? And that means we got to be in a lot of rooms and having a lot of connective discussions and getting people aligned with our vision and working together to make the technologies come to fruition. So Tim, let me leave it to you to talk a bit more about our future technology plans and how this is all going to play out.

Yes. So specifically with SolidEnergy, right, that's another great collaboration that we have going. And just to kind of background a little bit of today, in a carbon-based anode, we call it graphite anodes, I kind of think of it as the parking garage that you got to park those lithium ions in, okay? And then you want them have to be stable and safe in that cathode so it can last the life or in the anode so you can last the life of the vehicle, right? SolidEnergy System is a great example of you can park all those lithium ions without the structure of a parking garage, and you can have them be very uniformly coated. And with that, you can make a lot more room in the cell for your other parts of the cell, which results in higher energy density, which then multiplies throughout the system, where now you can have the same range vehicle with a much smaller battery pack. Or if the market demands, you want to go to a super hyper range vehicle, you can make all that happen. And so right now, that's part of that cooper-tition that we do with our technology partners to say, well, a lot of technology companies that don't have the telematics, they don't have the manufacturing experience, how do we make 1 plus 1 equal 10? And then how do we go develop that together to introduce it into our vehicles as quickly as we can. Now the other part of the technology road map is there's a lot of other good technology out there. Kent mention the silicon technology that we're working with LG Chem and other technology partners on. And so when it comes down to the future is so bright with cost reduction because you have similarly yet competing technology out there. And quite frankly, once you get the cells out of the crash zones, where they're small enough on the vehicle that you can eliminate the extra protection and the mass that goes with that. And then you have the rest of the Ultium system with a wireless battery management system that can just take it right away, and you have the calibration that Kent's group has and the ability to introduce it quickly because you knew the science from the basic material through that value chain, all the way up into to cell manufacturing and then into the pack and vehicle manufacturing, you can do it with high confidence right away. But it all starts with what are the customers really doing and how do you have that telematics get down to this technology partner like SolidEnergy Systems.

That's very helpful, guys. I mean -- and if I'm paraphrasing, it sounds like SES and solid state is one thing in sort of the bag of technology options, silicon's another. And so again, you're going to use this coop strategy to see what's ready first and basically continue as a leader in technology.

And just to reiterate, our Ultium platform is chemistry agnostic. And that's why it's so important for us to be future-proof to the extent that we know and there's so much changing so fast. The platform is so critical because when the changes come, we don't want to have to redesign the vehicle. And this is what we've achieved and even the earliest generation of the Ultium platform. So I think that we're well prepared for what we envision is on the horizon right now. And eventually, this will all change, and there will be new iterations of everything. But the pattern that we're setting up and the culture that we're setting up inside our engineering and vehicle development organizations inside the GM are going to be able to accommodate whatever comes down the pipeline.

That's great. And guys, I'm going to ask one last one and then I'll switch to some good Q&A from the audience. I'm going to do a real hard one and throw out a tough question, but sort of if you can give a succinct answer for time. We talk about chemistry, maybe organic chemistry. The idea of hydrogen as a role in total green energy, it's not your guys specific. But do you see it playing a role in passenger vehicles? Or do we think it's primarily going to be commercial vehicles? Obviously, GM has Hydrotec, which is a JV. So tough question, but just sort of curious your high-level view.

How about, I'll do 10 seconds. So hydrogen for us means hydrogen fuel cells, not combusted hydrogen. And hydrogen fuel cells creates electricity and electricity is what we're making with the Ultium platform work for us, right? So we have announced partnerships around our fuel cells for Class 8 commercial trucks, and that's just electrification at a large scale. So what we're doing with Ultium, which is a light-duty portfolio solution for us, is informing what we're doing with Hydrotec for the larger vehicles. And there are other applications for Hydrotec and hydrogen fuel cells. We've been working on them for 25-plus years. So we've got a great depth of knowledge on what to do in electricity.

Perfect.

And Tim would add to that. And again, it's this all-in EV strategy that we have with how do you have the Ultium motors and the basic building blocks, then be able to reuse at some of these larger applications so that you get all that benefit to the scale. And then how do you find the innovation? We've engaged with Honda to commercialize the leading fuel cell technology that both companies can use. EVs are a very good solution for the light duty, and that's our mainstream approach with that. And then working on some of the Class 7, Class 8 truck opportunities, it is all part of the -- I couldn't tell you 5 years from now where will it be, but it will be a viable option in some applications.

Perfect. I know we could spend another half hour talking about the hydrogen and EV, so I appreciate it. Wanted to cover some of the questions from the audience. And again, I'm going to combine 1 or 2 because they sort of hit the same topic. ESG investing is so important. And part of ESG is this idea of well to wheel, but also back to another vehicle. So W2WW and it's the idea of recycling. Could you talk a little bit about how GM sees their strategy in cell recycling? And it's obviously early, but this is something that's going to be more and more important as time goes on.

So a quick answer. All the battery packs that have ever been returned to General Motors, we've either repurposed or recycled. So this is something that we understand. We've actually developed our battery packs from volt, V, victory, through Bolt, B, bravo through our Ultium platform to be recycled. And we're enabling the value chain to actually do that. And Tim already mentioned that we've very specifically recently made an announcement about recycling the manufacturing scrap because this is high value. And eventually, you'll see the recycling circle of life getting closed in a meaningful way with lithium-ion batteries is going be just the same as [indiscernible] batteries over now. You don't keep rebuilding LED mines, we just recycle the [indiscernible] and we create new batteries out of it. Same idea.

Great. And then guys, we really have about 120 seconds left. A couple of questions about Ultium third-party sales. Look, if you're going to have scale within GM, imagine for players that are not as big, you have made some announcements with Honda. Is this something that we're expected to grow over time? Again, there's a lot of start-ups out there where GM can help out other players who just don't have that internal R&D.

The short answer to that is yes. We're open for business, and it's -- and like you said, we've already announced a great relationship with Honda and there are others in the works.

And I'll just add, one of the proudest technologies that we have is our wireless battery management system where that cell module is a plus or minus in water connection. And that's how easy it is for another OEM or some other use to say, here's what I'm going to integrate that into my specific portfolio. And you want more performance, want more range, you run them in parallel. You got a lot of flexibility there with a very friendly user interface. It's already cybersecure. It's already very capable with incredible bandwidth over the year, download is already there. I really think we're going to see the innovation inflection point really take off in this industry with that kind of capability.

Well, Tim and Kent, I wish we had more time, I think that we can go on for another half hour, but I really wanted to thank you guys, a lot of great points about GM basically doing whatever it takes to lead from a technology standpoint in electric mobility. So gentlemen, thanks both for joining. For those listeners on the line, feel free to email us to learn more about GM's electrification strategy or if you want to be put in contact with the company. And with that, I'll say goodbye. But thank you again.

Thanks, Chris.