General Motors Company (GM) Earnings Call Transcript & Summary

Welcome back to DealBook. My next guest is Mary Barra, General Motors Chair and CEO. She's one of the most powerful female CEOs in the country. She leads the automaker, and she has served there for her whole entire adult life. Quite something. And she's now moving it towards an electric future. Over the summer, she announced that GM would increase spending on electric and autonomous vehicles by 30% to $35 billion through 2025, all in an effort towards a goal to overtake Tesla as the market leader in this increasingly competitive space. We want to welcome Mary Barra, who we should say, is also going to be the incoming chair of the Business Roundtable. And it's great to have you back. We've now done this a bunch of times together, and I always enjoy these conversations and in particular, at this moment, given what's happening at GM and what's happening in the car business and EVs.

I want to talk about the strategy. But I just want to ask you about what's going on in terms of the valuations of all of these companies for just a moment, if you'd indulge me, because GM today is worth about $85 billion. Tesla is worth $1 trillion. Ford is worth about $79 billion. Lucid, which literally just has cars coming off launch for the first time, is worth $72 billion. Toyota, $288 billion; and Rivian, which just went public, is now at $66.5 billion. Again, with not a lot of vehicles on the road. What is going on? Does this make any sense to you?

Well, I think what it highlights to me is the huge opportunity. General Motors is so undervalued. And as we start this wonderful period that we are now in because we invested over 3, 4 years ago in electric vehicles with the Ultium platform, as the HUMMER comes out yet this year, as the LYRIQ comes out early next year, and it's just a steady run. We'll have our own battery plant up and running next year. So I'm just excited to get all these vehicles out to leverage the men and women of General Motors and the manufacturing talent that we have. So I see it as a huge opportunity for General Motors to capture significant more value.

But you look at these valuations and say, this makes sense to me? Do you say, this makes no sense to me?

I don't look at it that way. I mean, I look at every competitor as somebody that I respect and that we have to be better, be faster, have vehicles that consumers want to have. Solve the ownership equation. And so that's the way I look at it. And I would say, if anything, it motivates me to work even harder.

Okay. But when you say that there's this opportunity, probably what's happened here? From a stock market perspective, valuation of the company perspective, because everybody, I think, looks at Tesla, and they say, look at this thing, $1 trillion, that's the opportunity set. The question is whether that's really the opportunity set or whether there is, dare I say, an overvaluation. Even Elon Musk has said, he believes the company is overvalued. And so whether you're trying -- that's going to come down, and you're going to get to the middle, that's the goal. Or you think actually that is the opportunity, ultimately?

I think when you have to look at the value creation that can happen -- because it's not just electric vehicles, frankly. If -- I think, is even more of an opportunity is the fact that the vehicle is a software platform, and we started rolling out the electrical architecture to support that back in 2019. We just announced Ultifi that allows us to quickly update and roll out things to customers after they buy the vehicle. Think about it. Your vehicle can get better through ownership, so the software platform. And then the other aspect we have is autonomy, whether it's Super Cruise, Ultra Cruise or Cruise. And so I look at those 3 areas and the TAMs associated with those. And I think we have a tremendous opportunity to grow. So whether is it here, if it's here, in here, is it here, is it here, it's way up there in my mind.

Right now, GM, in terms of the electric vehicle market, you have about 9%, 10% of the market. Tesla has about 63% of the market. 5 years from now, if you succeed, but everybody else has their own success in this space. What does that pie chart look like?

Well, we have said, just like we're the leader today, if you set aside with the distortion that's happening with the semi shortage, we have been the leader in the United States. We've been #2 in China for many years. I think when you get to -- wanting to get to 50% all EVs, you have to win customers that they only drive one vehicle, they only own one vehicle. They depend on that vehicle every day. General Motors has brands that they trust. We have the highest loyalty rating. We have manufacturing plants that are ready to go. And so when I look at our ability to scale, to serve customers, I think we're incredibly well positioned, and we're not going to cede our leadership position to anyone.

One of the fun conversations we've had over the years is about self-driving cars, and who is in the lead and where everybody is. And for a long time, people thought that maybe Waymo, Google was at the top. And Cruise was coming up there. And a lot of people thought for a long time that Tesla was actually going to be way behind because they weren't using LIDAR. They were just using cameras. It feels like things have changed. How do you see it right now?

Well, I see Cruise as being incredibly well positioned. I mean Cruise literally in San Francisco is one permit away from being able to actually charge for rides in San Francisco. And it will be the only AV company working in a dense urban environment. And we know that's a tougher AV solution to solve. So I couldn't be more proud of what the Cruise team has accomplished. And I think one of the reasons there, I think, in the lead is because of the deep work that they're doing with General Motors. I mean the deep integration of the technology, the fact that we're leveraging all the automotive know-how for the Origin that comes out in a year. So I'm super excited about it, but then we also have Super Cruise and Ultra Cruise, which are a Driver Assist technology, but continuing to be more and more capable. Our technology has independently been assessed to be the best. And so I feel like we have a very robust plan as it relates to autonomy, coming at it with solving the super-hard problem and then taking costs down, but also continuing to increase. So I wouldn't trade our autonomy position with any one.

So I'll let you claim that you're in the lead, if you like.

Yes. I like it.

Order and afterwards. Because I'm sure you study this.

I do. But the one thing in autonomous, I think you've got to look at who actually has vehicles on the road. I mean, I don't know if you saw the video just a week ago. Kyle took the first ride. No one -- I mean, we're seeing how people on the street respond is pretty cool. So I think in a space where there's not complete transparency of who's really how far, I look at what we're doing, and I think that's what legitimately puts us in the lead.

How concerned are you, though, that there will be an accident? You've seen this, by the way. I mean, the attention on when there's an accident with Tesla, there is so much attention on the Autopilot feature and whether it's being mis-marketed. I know you're not doing that. But how concerned are you about that? And we've talked -- and I think I probably asked you this question before over the years. Politically, when do you think it will be palatable to the country? Right now, we have about 30,000, 35,000 deaths on the road every year. But if I told you that number came down to even 1,000, but it's the robot, it's the computer that creates that accident, that creates that death, will the public accept that?

Well, I think when you look at how you can impact safety, I mean, right now, we know of the deaths that you talk about, just in the U.S. alone, over 90% of them are caused by human error. And autonomous vehicles don't drive impaired. They follow all of the traffic lines. They can, I think, process information -- with all the cameras and the compute power, they can process information faster. And so I think it's ultimately safer. And then when you take General Motors' knowledge of safety and how to put vehicles on the road and how to demonstrate that, I think that's going to be a compelling case.

Right. Policy question for you. Washington question for you. In particular, incentives, tax incentives for EVs. As you know, you have become now the beneficiary to some degree of this latest bill in that there will be a bigger tax incentive for your vehicles because you have union labor than there will be for other vehicle makers, including the likes of Tesla and Toyota. Is that fair?

Well, I think the new legislation that's coming, I think what's really important to do is to level the playing field from the fact that the early movers were penalized. I mean we've already used our 200,000 credits. So people who are just now rolling out an EV, they have a $7,500 advantage. I mean, I think when I look at the trained workforce and then wanting to have jobs in this country and good paying jobs, I think the bill is set up to incentivize what the country is looking to build is a strong middle class.

So I'll make it more complicated. It appears by my math, that on average, Tesla employees who are not unionized appears, on an hourly basis, maybe making more money than unionized workers, for example, at GM.

I'd have to see the information because it's not just the wage per hour. It's the benefits, it's the health care. There's a pretty robust -- my last look at that, that was not the case. But again, there's not perfect transparent information. But what I would say is I'm incredibly proud of our workforce, our represented workforce hand-in-hand with you again.

But you appreciate that it does disadvantage the other auto makers.

I think that, again, everyone has an option to do that. I mean, people have different positions. What I can say is we feel working with the UAW together, we've made great strides in safety and quality and training. I mean if you think about it, one of the other things that has to happen is a robust workforce that knows how to build electric vehicles. We work in partnership with training with our unions.

Let me read you what Elon Musk said about this, though, because you probably have read this. He wrote, "This is written by Ford and UAW lobbyists as they make their electric car in Mexico. Not obvious how this serves American taxpayers."

Again, I think that it clearly incentivizes to be in this country because remember, there's a component of built in the United States and then by jobs that are good paying jobs. So I think that how the legislation turns out, I mean that's not a done deal, that Build Back Better plan is not completely approved. What we're very supportive of is making sure that there's not a first-mover disadvantage. But then I look at the other aspects of it, I think it lines up with the administration's agenda.

Let me ask you a related question. I'm sorry to harp on Tesla, but I know it's a company that you and others look at as, frankly...

I'd rather talk about GM though.

I know. But I don't want to talk about Tesla in this regard, but I want to understand it. You spent a lot of time with this new administration. And interestingly enough, they've had a number of meetings around EVs. And somewhat surprisingly, at least to some, Tesla has not been invited to those meetings. Do you know why that is?

I have no idea. I'm not in charge of the guest list.

But do you sit there and say, this is a little strange, given the role that they played?

Andrew, I don't.

You don't? You really don't...

I really -- I don't give that a lot of thought. There's a lot of things I think about as it relates to competitors. But as I look at who's building the middle class, who has great opportunities for a very talented workforce, that's not something I give a lot of thought to.

Okay. Let me ask maybe a different question, unrelated to policy but really related to the vehicles and the infrastructure around the vehicles. Again, I'm going to mention Tesla, but you'll see where this is going. Tesla makes this deal with Hertz recently or at least we think that there's a deal in place.

Yes. I don't know what's true there.

We don't know what's true. But part of the reason that at least the stock market seem to give them some more value was because they said that there's a lock-in effect that if Hertz has 100,000 of these vehicles, it's not just the vehicles. But it's the infrastructure and the supercharging stations that they're ultimately going to be buying as well and that, that creates a long-term lock-in effect. And I'm curious how you think about that lock-in effect and whether you think that's real and whether you need to be doing the same thing effectively.

Well, we already have announced at our Investor Day that we're investing over 75 -- or $750 million in creating the infrastructure because we know that customers -- they tell us because we talk to customers all the time. And it's got to be a beautifully designed vehicle in the segment they want. It's got to have about 300 miles of range, but then they want to know that there's a trusted infrastructure. And so we're working with a number of startups. We're doing our own investment because we think people need to be able to charge at home, at work and then on the road. And so we're looking to solve that solution for everyone. But I think, ultimately, having a charging infrastructure that's open to everyone is the way that we're going to accelerate EVs faster.

Do you think it's ever going to be seamless when it comes to these different stations that are going to be run by different companies across the country? In the same way, again, I go back to Tesla, the way that's set up.

With what we're doing, it's we're kind of almost -- if you can think about the aggregator, it's go to myChevy app and you select. And we're working with all of these partners to make sure it's easy. It's one-click payment, reservation, know it works. All of those things are going to be very important. So we're working to do that broadly.

We were talking to the Secretary of State earlier, and we were talking in particular about what's happening in Taiwan and semiconductors. This is having a huge impact on your business. Where are we right now?

So I think we're seeing fourth quarter get better than third quarter. I think third quarter, we were a bit disproportionately hit because of COVID in Malaysia. But as we move forward, we're seeing fourth quarter better. We have line of sight on '22. The second half of '22, I think, is going to be even better. And we see a very robust road map with all of our products coming out. We'll have a new truck capacity with new enhanced vehicles that trucks that are -- have more featured, more models, the Super Cruise and they're more greenhouse gas efficient. So we're working on that journey. And so I see '22 being a very strong year for us, a strong North America year, at what everybody focuses on around 10% margins.

Separately, I wanted to talk to you a little bit about back to work. You guys never stopped working. But in terms of vaccinations, you have not required employees to be vaccinated from what I understand. Thus far, you strongly encourage it.

We strongly encourage. We strongly encourage. We provided a lot of education. Our medical director is outstanding, and we've shared a lot of information. But right now, we're still trying to encourage. Obviously, we're looking at the implementation related to the presidential order. And so we're going to continue on that journey, and we're going to work with our partners.

And what's that been like? What are they telling you?

Who?

The employees. Are they saying -- what do you think the percentage is right now? Do you know?

From our salaried workforce, where we've asked them to tell us, it's quite high. I'm very pleased with how high it is. We have not done that same request for our represented folks. And again, we're looking across the globe. We operate everywhere. And so everywhere, we're encouraging people to get the vaccination. We're encouraging them to let us know, so we can make good safety decisions of how we run the operations. But again, we're working with our partners and educating. And we're finding that every week, more and more people are getting vaccinated.

If there is a mandate, do you imagine -- and have you started to try to sketch out and do the math of how many people might walk off the job? And what kind of impact that could have on the company?

We have a great workforce. I don't see it as a walking off the job situation at all. I mean, look at -- they came to work and have been working for well over a year following safety protocols. I mean, we're very proud of our record, where we have not had facility spread of the virus. And so I look at how dedicated our workforce is, we'll work through it. I'm betting on them.

You're betting on them. You've taken on this new role or you will be taking on this new role at the Business Roundtable. And I just -- I wanted to ask you how you think about that role and how you think it dovetails or doesn't, in certain cases, with GM itself.

Yes. I think there's going to be times where we're very aligned, but I have a job as the Chair and CEO of General Motors to represent what's in General Motors' best interest in how we move forward. BRT, it's a slightly different role. There, we're representing over 200 companies, making sure that we have a voice, and we're working together with the administration with -- across the country. So there'll be times where they dovetail. There'll be times where I'm going to have to put my GM hat on or my BRT hat on, and I'm prepared to do that.

So yes, who gets the first preference?

Well, I think I'm going to have to look at what role that I'm in. In fact, I think Doug McMillon and Jamie Dimon before have done an excellent job of balancing that. And I'm going to follow that same path. So...

Let me ask you about political funding because it's an issue that a lot of people are focused on. And us following the January 6 riots on Capitol Hill, you know this, GM was one of the many corporations that put a pause on political funding but you have restarted that funding. And in some cases, have made donations to some of the Republican members of Congress who have voted against certifying the Biden election. Can you explain that decision?

So we look at -- we don't agree with everyone. We give it to both parties, and we don't necessarily -- a PAC donation is not necessarily an endorsement of every single thing that person has done. And so -- but we do look on balance. We've added additional requirements of what we're looking for since that time. And we'll stand behind the decisions. We have a committee that looks at that, so it's cross-functional. It's debated. And we think it's also important, though, at times to have that influence. And so we'll continue to be very measured and make sure we're also, as we go forward, consistent with our values.

What do you think of not spending any money in Washington? Would you ever say to yourself, you know what -- I mean, here you are, and you're going to be running the Business Roundtable. But what do you think of the idea of just saying, you know what, let's get money out of this, we're not going to do it.

I think it's -- those are easy things to say. The unintended consequences and how it really turns out, I think, are what most people don't understand. Believe me, we've had those discussions at General Motors.

And what's the...

Well, we, on balance, made the decision that in a very measured way, looking at what we do, consistent with our values, and we thought it was in the best interest to -- for the company and for all of our stakeholders that we have a voice.

I want to pivot to the issue of energy. We were having a conversation with Ken Griffin just before, and we have the CEO of Exxon coming in just a moment. And there is a big debate about why energy prices and oil prices have moved as high as they have. There are some people now saying that this is actually a function of ESG, of companies moving towards some of these goals that is actually removing or reducing the investment in drilling and the like. And that that's going to -- if it's not a problem today, it's going to be a problem in the future. How do you think of that?

Well, I think we have to look at how do we make this transition in a way that we don't leave anyone behind. I mean, as I look at transitioning to EVs, we're going as fast as we can. But again, if we don't make sure that, that customer who only buys new vehicles, but all they can afford is $30,000, and that's why we are targeting. You'll hear more about it at CES, the Chevy that we'll have in that range. We have to make sure we bring everyone along. And so I think we have to have an aggressive plan, but we also have to make sure that we don't have unintended consequences and cause shortages. And I think that's what corporate America needs to look at and, frankly, the globe to make sure we do this as fast as we can, but not in a way that it causes more harm than good.

I should mention GM, I believe, is on board to sign this global deal to eliminate new car emissions. This is by 2040. But -- and that's with Ford and Daimler and Volvo. Volkswagen and Toyota are not expected to sign on though.

Look, we said earlier this year that we aspire, and I'd say it's more than an aspiration, it's a plan that by 2030, all of our light-duty vehicles sold in the U.S. will be electric, and we're working to accelerate that plan. I can't speak for other automakers. I think in a lot of cases, from a major automaker, we've set that path that others are now following, but we're full steam ahead. We're full EV ahead.

Do you have predictions about what's going to happen to the price of oil over the next 12 months or...

There's probably better people than me....

But I'm sure you guys have been thinking about this in terms of just supply and I mean I was just...

Well, I'll quote our Chief Economist, who says, "It will continue to be moderate." Now that's a person who's studying it day in and day out, so I'll share her views.

Finally, I always like to ask you this question before we end. What car are you driving right now?

So right now, I'm driving a Bolt EUV. I'm loving it. I think it's so -- really, when people get to drive an electric vehicle, I think they're going to find that they're not giving anything up. In fact, they're getting that the customer experience is great. I have to admit, though, I'm waiting for my HUMMER because...

How many cars do you have? Do you actually get to -- do you own them yourself? Or do you just...

Well, the EUV is -- I was driving as part of the company, but I own a handful of cars as well. My husband and son are Camaro Firebird enthusiasts. We do own a Corvette as well. We'll soon own a HUMMER. And I've got my name on the list with the 200,000 other hand raisers for the LYRIQ.

What number are you on the list?

Well, I try to be fair. So -- but probably, I think it's important for me to demonstrate our products, but I signed up like everyone else for the HUMMER. You got to ask.

I'm sure there's someone at the other end that says, is that Mary, our...

Kept texting my -- the head of GMC Buick of when -- because we -- actually, when we started the HUMMER, the -- we actually overloaded the Internet. And so I was texting him saying, "But I managed to get on the list."

Okay. Well, we look forward to seeing you. With that, Mary Barra, thank you for being here.

Thanks for the opportunity. And it's always great to talk to you.

Always great to talk to you. We're going to be back in just a moment.