General Motors Company (GM) Earnings Call Transcript & Summary

The Barclays Global Automotive Mobility Tech Conference. Very pleased to have with us GM, a lot of news. A lot of interesting things going on here. Very pleased to have with us Paul Jacobson. Some big announcements yesterday on capital allocations and considerations for 2024. And Paul is going to run through a series of slides. And then afterward, we will ask some questions. So with that, Paul Jacobson, the company's, CFO. Thank you for joining.

Great. Thank you, Dan, and thanks, everybody, for joining, whether you're in the room or on the webcast today. I'm joined here today with Ashish Kohli, who is our Head of Investor Relations; as well as Mel McKerracher, who's our Head of Financial Planning and Analysis. That team has been hard at work in terms of looking at the budget for 2024, responsible for the long-term plan, et cetera. So a lot of the work that you've seen accomplished over the last couple of days that we announced really comes out of that group. So really pleased to have them here today. Sorry, I make sure I grab the slide change. So first of all, note our forward-looking statements. We are not BorgWarner. That is not what we're expecting. There we go. Forward-looking statements. As you know, everything is governed by the disclosure language and risk factors, including the Q&A across the board. So let's just spend a minute reviewing kind of what we talked about yesterday in case you all hadn't seen it. We reinstated our guidance after the work stoppage as we had suspended that guidance not knowing at the time the duration or the extent of what we were facing. But we did say at the time that we expected that the business was trending towards the higher end of that range. So when you look at where we reinstated the guidance, take into account the $1.1 billion cost of the work stoppage, and incorporating all of the costs of the new agreement, the $11.7 billion to $12.7 billion of EBIT, the cash flow, the EPS is all very consistent with that. So as we have come through largely the month of November at this point, the commercial environment, I think, remains fairly consistent. We see a little bit of an uptick in some of the incentive pricing across the industry. I'm pleased to report we're maintaining that strong relative position that we've built in terms of the change in the commercial strategy that we've seen over the last couple of years. It's resulting in significantly better EBIT performance than what we would have trended on against sort of the prior way of managing through our incentive portfolio. And our aim is to actually maintain that level of gap that we've created and continue to drive better free cash flow performance and better margin performance for the organization as a whole. We highlighted yesterday that we -- if you look at where our guidance is for the last month of 2023 at this point as well as everything that we earned in 2022, it's $21 billion of free cash flow. So I know there are a lot of questions about our capital expenditure budget, et cetera, and we've been trimming that down. But I'm really, really pleased with the team in terms of that level of free cash flow generation with the investments that we're making. And with yesterday's announcement, I'm really pleased to say that we've now completed the return of over $14 billion of that $21 billion generated in the last 2 years with the ASR that we completed and closed yesterday. We did that with cash on hand. We ended the third quarter with about $29 billion in cash, over $42 billion in total liquidity. That's against a stated sort of targeted cash balance that we've historically had of $18 billion. So once we got some certainty around what the labor environment was going to be, around the uncertainty of the work stoppage as a whole, it gave us the confidence to be able to go ahead and return that capital to shareholders. And we appreciate those investors that have been somewhat patient. As we were leading up to that, we obviously had to build up our cash balances in expectation of the unknown. But as we got through that, we've consistently returned that cash back to shareholders. So what you're going to see from us today, we're going to spend a lot of time talking about the EV trajectory going forward. But I want you to know that we remain absolutely committed to driving to the 8% to 10% margin consistently that we've said in North America while we go through this transition, and I hope that you'll be pleased with what you see on our trajectory for EVs because we still believe that we'll get to a low positive margin in 2025 with our EVs, even with some of the changes to the scale ramp that we've announced lately, and we'll give a little bit of clarity on to what that looks like. Directionally, in 2024, what I would say is that we probably are thinking that things are going to be a little bit stronger than where The Street is today. We're still looking at roughly a 16 million unit SAAR and that's what we're building our plans along. And we believe that our core operations and our cash flow are going to be resilient through that period. Similar to last year, we're making sure that we're being cautious because above all else, I want to make sure that our CapEx budget and what we're looking at for 2024 is affordable within the context of cash from operations generated because if we're going to focus on free cash flow generation, we've got to make sure that we've got flexibility in that should we see any downturn, et cetera. But when you look at the level of free cash flow generation we've got in 2023, there's a pretty sizable cushion there to be able to absorb any shocks to the economy, et cetera. So that's what we're going to manage. But ultimately, we're looking for consistency in some of the free cash flow generation that we've had over the last few years, and continue to do that through cost-reduction programs, et cetera. We do anticipate headwinds from the new labor contract, as we said yesterday, about $1.5 billion versus the prior contract. Most of this, I will tell you, and we said this yesterday was included in our long-term forward projections. We had seen what was going on at Cat, at John Deere, the labor environment across the board, UPS. And we built some pretty sizable increases into our forward expectations. What I'll tell you is the final contract came in above that. But not substantially above that. And that's why we were able to give the commentary we did yesterday that I think we'll be in a position where we can fully offset that $1.5 billion next year, in large part because of the proactive work we did to reduce fixed costs. Plus we've announced winning with simplicity program, reducing complexity across the business. Lots of work going in where I think we're going to continue to see those results, not just for helping EV profitability, but also core to improving profitability in the ICE business because, as we all know, that's the engine that's driving all of the free cash flow generation right now. We do assume that pricing will moderate a little bit with some mixed headwinds from the higher EV volume, and we'll talk about that a little bit as we talk about EVs. But overall, I think we're looking at somewhat consistency across the board. We've got new ICE portfolio entries that are being really well received by the customers across the board. And then you look at next year, as we've highlighted at, we're not done with the work yet, but we do expect spending on Cruise in 2024 will be significantly lower than where we were in 2023. More to come on that as we continue to work through the independent review of what occurred at Cruise, and as we think about the strategy going forward and how we need to modify that. But we'll provide official guidance for 2024 on our Q4 earnings call in January. So let's just spend a minute on the accelerated share repurchase program we announced yesterday. We spent a lot of time with investors yesterday and had some questions about it. I want to clear a couple of things up. First of all, it's a $10 billion program. We talked about why now. Our capital projections, we started to see them trimming down off of the highs that we talked about at Investor Day, and we're going to continue to work on making sure that we can drive efficiencies in our capital budgeting. And I expect and hope that there's much more to come on that. The confidence in forward free cash flow generation, we expect the core auto business to continue to perform well even as we ramp EV volume and as we improve EV profitability going forward here. Obviously, our stock is not where we want it to be. You heard Mary say yesterday that she's incredibly disappointed with where it is. I am incredibly disappointed. The Board is incredibly disappointed. So getting the opportunity to retire a number of shares 15% below our IPO price at $28 the other day, lowers that P/E multiple since our IPO, and 2.5 turns below our average multiple. Clearly, there's a lot of negative sentiment out there about where we're heading. And I think one of the great things that we've accomplished here is the level of resiliency and consistency in the earnings despite pretty serial but different headwinds that we've seen over the last few years. And that's what gives me confidence that we'll be able to work through some of the challenges that we've seen. We're also trading well below the current sell-side consensus representing, as of yesterday before the announcement, almost a 50% discount to the sell-side consensus estimate across the board. So we saw this opportunity. I think in discussions of how we would approach this, you have options of whether you do just a regular buyback authorization and you go to market. We wanted to send a strong statement about our commitment. So those of you that know how ASRs work, we sent $10 billion out the door yesterday. So our cash balance, which was $29 billion, now sits at about $19 billion. We're committed to maintaining that, but it gives us confidence in the forward free cash flow projections, and our desire to consistently return future cash flow back to our owners. There are no prohibitions on our ability to continue buying back stock with next year's free cash flow the year after, et cetera. Those were some of the questions that I heard yesterday. So I think it was a great step forward. I think it represents the company and the leadership's commitment to returning capital to shareholders. I think our capital allocation program, which has been around for a while, needs to be consistently applied. And when you look at where we are, we're investing a sizable amount of our operating cash flow. Our balance sheet is healthy. It's probably about as healthy as it's been in a decade, which tells me that free cash flow should be returned back to owners. And when you look at 2022 and 2023, we've invested in our people heavily. We've invested in the future of the business, and we need to return capital back to where it belongs, which is our owners, and you should expect that we're going to continue to do that. We also were able to increase our dividend by 33% from $0.09 per quarter to $0.12 a share beginning with the January 2024. And we still maintain the remaining $1.4 billion of repurchase capacity under the authorization that was reached last year. So still lots of room and still a commitment to be able to return cash back to shareholders going forward. So let's talk about what I suspect most of everybody really wants to hear from us is to just talk about what EV profitability looks like. And most importantly, what is the margin trajectory? So if you go back to last year, we talked about a 400,000 unit production target by mid-2024 and then getting the North American capacity of 1 million EVs by 2025. We said that we would maintain 8% to 10% margins in North America through the transition. And we expected to see low to mid-single digits before any clean energy tax credits. We also talked about tax credits worth $3,500 to $5,500 per vehicle. And those could add 5 to 7 points of margin. Since that time, we've obviously had some challenges in the ramp. I don't think they're fatal challenges at all. And I think we've identified a lot of the source of it in terms of the technology too and the machinery to be able to stack the cells into modules. It's been a little bit of a challenge for us that has really severely impacted that 400,000 in this. As we said at our third quarter call, we want to make sure that we're continuing to drive volume. But most importantly, what we're trying to do is drive volume consistently, and do it in a cost-effective way going forward. So as we think about the business, while the ramp has been a little bit bumpy, we have worked through that. And I think as we get to middle part of 2024, we expect that to be normalized and no longer a constraint. Importantly, we are still building cells. And as you'll see in the presentation, we are actually driving a pretty sizable increase in cell inventory because we want to realize the efficiencies and the scale efficiencies of the Lordstown plant without just kind of whipsawing production as we deal through this module issue. So we've incurred some costs for cell storage, et cetera, that are baked into the 2023 numbers that we'll talk about, and it's some of the source of the improvement from '23 to '24 going forward. So let's talk about how do we define EV profitability. So our EV profitability, as we think about it, consists of EV parts and accessories. It contains all digital and software-enabled services. Keep in mind that right now, that's a lot of investment that's going into the software-defined vehicle framework going forward. And since all that's the lion's share going into EVs, we want to make sure that we're incorporating that. It includes BrightDrop and GM Energy. And while those businesses are getting scaled back considerably, as you saw us announce BrightDrop, we're actually rolling that back into North America. And the reason for that is really to save a considerable amount of overhead that got created as that business was looking to do things beyond the vehicle. What we've said is we need to focus on making sure that we get the vehicle that customers want, get it built profitably and grow it from that foundation. And if there's a business to be had beyond that, there's an opportunity to do that later. But the team was really working on a lot of different things that I think this is going to help us to remain focused on making sure that we achieve what's absolutely critically necessary for us going forward, which is profitability in those vehicles. And then it also -- our definition of EV profitability includes greenhouse gas benefits, which will transfer internally across. We'll burden the ICE portfolio for that, and we'll incorporate the benefits of the GHG credits with EVs, I think, is consistent with everybody else. So we've moderated some of our EV growth projections. We do still expect to have 1 million units of capacity by 2025. But we've actually taken that opportunity to what I would say is be a little bit more measured in the growth and the expansion. So we've retimed the Orion plant. I think a lot of that got reported as we were afraid of what EV demand was going to do, et cetera. That's actually not true. What we did is we saw an opportunity. We still have an opportunity to scale trucks at Factory ZERO in Detroit-Hamtramck. But we have the opportunity to delay and defer Orion to actually incorporate several changes across the board. We highlighted some of those station changes, et cetera, process work that's going to make the vehicle production more efficient at scale. So we felt it was important to actually incorporate that now rather than rush and make it a significantly costlier endeavor to actually shut down projection to retool some of those plants. We felt like that was the prudent thing to do. We save a little bit in the CapEx budget in 2024, and then also make sure that as we're ramping, we're ramping smartly going forward. So what are we going to talk about today? We still believe EBIT margin in the mid-single digits is possible with the benefits of the clean energy tax credits. That's consistent. I would say it's at kind of the lower-end pre-credits that we talked about at Investor Day. Some of the things that are impacting that are the higher labor costs, et cetera, that we've seen going forward. But we do anticipate a lot of tailwinds going forward in terms of how we think about this profitability and where it's going. Some of these things are just going to be with the passage of time. We've already done it, and it's just a matter of lapping some of the higher costs in 2023. Some of it is commercially oriented. So for example, the $800 million charge that we took in Q2 associated with LGES was part of a resolution of commercial issues with them. Where we get future benefit, that's much greater than the $800 million, and it's in the billions of dollars across the board in terms of our savings that we're going to get. Because by working together with LGES, we've actually been able to close an additional $1,000 per vehicle savings to our previous supply agreement by focusing on supply chain efficiencies, fixed cost utilization, et cetera. So as we think about that in total, we continue to drive towards our goals. I'm trying to speed up a little bit here because I think this is the slide that probably is the one that we need to spend the most time focusing on. So it's no secret that at the end of the day, our EBIT margins are substantially negative. That -- I've said today, they're nonsensical, or meaningless largely because if you keep in mind, we have put together a lot of infrastructure. We've put in infrastructure on cell plants. We've put in infrastructure on factories and facilities. That has been significantly underutilized to date, but we're building for the future. So as we continue to ramp up, we're going to see pretty significant benefits going forward. And as you look from 2023 to 2024, we actually expect over 60 points in EBIT margin improvement on the EV portfolio in 2024. How do we get there? About 60% of this is really going to come from scale due to higher volume. We won't share specific volume numbers, but expect that we're going to have a meaningful step-up in volumes as we work through the module challenges that we've seen. And the fixed cost per unit in 2024 is going to be about $20,000 a vehicle lower in '24 than it was in '23. So you can see that as we look at relative profitability across the industry, we're actually absorbing a significantly bigger piece of a fixed cost today that as we scale up starts to come down on a per unit basis, and then it will continue to decline another $5,000 in 2025. We also have significant EV expense that's going in there. And while we see allocated EV expense that'll grow as EV revenues grow going forward, it will grow at a substantially lower rate than what we see in terms of production, just given the fixed engineering that's committed and dedicated to EVs right now. We expect about a 20% improvement primarily from mix. So we'll see higher variable profit Ultium vehicles, like the HUMMER and the Blazer EVs, and significantly fewer Bolts in 2024 as we shut that line down and then reintroduce the next-generation Bolt, which will be on a much, much lower cost Ultium LFP program as well. And by doing that, and again, this was a point of confusion, I think, when we originally disclosed it, people felt like we were using the Bolt as a proxy for Ultium. That's not true. We're actually going to incorporate Ultium battery management system with an LFP product on a redesigned Bolt that's going to be substantially more profitable. And by doing so, we actually were able to take about $5 billion of future program capital out of our forward projections. Because the alternative to retiring the Bolt was to create a new low-cost entry -- low-price entry. We already have that with brand recognition, et cetera. So it's an example of how we're realizing synergies in the organization to actually back off some of the capital that we've seen going forward and deploy capital much, much more efficiently. So we -- sorry, flipping pages here in the wrong direction. And then we expect a 20% improvement from battery costs, including battery raw materials as well as scaling of the battery joint ventures. I mentioned the efficiencies that we've seen with respect to Lordstown and wanting to make sure that we keep that production up. We'll also have that as we get into '24 and '25 with Spring Hill coming online and getting working up to full capacity. Ultimately, this will significantly decrease our reliance on more expensive imported cells, which we've been taking in 2023. We're working with our partners on that. Battery raw materials continue to be volatile. But as you look at what lithium has done, I'm sure many of you are paying attention to that market, when you look at lithium plus the combination of other battery raw material prices, we expect over a $4,000 per vehicle improvement in cost from '23 to '24. That will take us a little bit of time to start realizing. As I mentioned, we've got battery cell inventory that we've got to work through as we get into. But when you look at all of this coming forward, we actually believe that we're on a trajectory, and we're committing to get to a trajectory to be variable profit positive in the second half of 2024 with our EVs. Then as we turn to 2025, we get more benefits of volume and scale. We get further benefits from battery cell costs, et cetera, as we achieve full capacity. And we expect that we'll hit our mid-single-digit margin targets in 2025 including the IRA, et cetera, benefits that we have. And the reason we want to talk about that is really for simplicity. When we look at vehicle programs, we're targeting that the vehicle programs need to be stand-alone, hit our margin targets because we've got to prepare for a world excluding IRA in the future. But while the IRA is here, it's something that we think for ease of transparency and comparability, we're just going to report a single number going forward, and that's the shift from the low to mid-single digits to now the mid-single-digit EBIT target by 2025 going forward. So what gives us the confidence? It's really about execution. And while our execution has been somewhat challenged to date, we believe we've identified those challenges. And we've got a portfolio of really, really strong vehicles coming forward that meet the range in charging characteristics that customers are looking for. And we believe that with this purpose built, that we can actually continue to drive demand with features and price points that customers want and be competitive going forward. So I think in many presentations, us and others have talked about, well, we want to be the next Tesla. We don't want to be the next Tesla. We want to be the best GM that we can be, which is consistently providing the margins and the cash flow that we have, and we believe we can do that with the EV portfolio that we have coming up as well as the future opportunities with our new joint venture with Samsung, which will bring even lower-cost batteries online in 2026 and beyond. So while we're spending our time talking about 2025, this is a long consistent trajectory that we believe is going to drive cash flow and the margin performance consistent with what we've highlighted over the last couple of years going forward. But it's not just about EVs. It's about maintaining cost discipline across the organization. And as we talked about yesterday, we've taken out over $800 million from our marketing budget. We've reduced our head count through a voluntary employee package, separation package that is going to drive about $1 billion of savings annually for us. Most of those people are already gone. There's a few that are working through some transition. But by 2024, we'll fully realize those savings. Other head count areas, et cetera, the streamlining that we've done at BrightDrop, I think, shows a consistency and a willingness to continue to refine the core business as well, not just focused on the vehicles themselves, but just driving efficiency across the organization. So ultimately, we believe we're going to drive consistently strong cash flow, consistently strong margin and, as we said yesterday, consistently return capital back to shareholders across the board. And for that reason, I still believe that GM is a really, really strong investment even at the prices of the increase yesterday, and you're going to continue to see a commitment to drive shareholder value from the company going forward. So with that, I'll turn it over to Dan, and we can open up for questions.

Okay. Great. All right. So we have some time for Q&A. So I'm going to kick off with some questions. I also have my colleague, Andrew Keches, who leads coverage of the OEMs on the IG credit side. So thank you, Paul. A lot to unpack here. But maybe I wanted to just start with if we could decompose the bridge, so to speak, to breakeven. And I think we could think of it in a few different ways. There's going to be the contribution piece. There is some volume assumptions. And then there is a fixed cost piece as well. And then I assume the IRA side is fairly mechanical, that's your portion of the $45. So maybe if we could just start with what types of contribution margin are you assuming? What volume? I think this year you're going to do -- we're just tracking like roughly 100,000. What should we assume by 2025 in terms of volume? And then on contribution margin? If you're at, call it, $9,000 on a total portfolio basis today, where do you think EVs could be by 2025? You said it's going to be positive in the second half of '24. Where does it start to settle out at?

Yes. So I think the part of the challenge with the volume numbers and what you've heard us say about 2025 is we're going to have 1 million units of capacity in 2025. But I think we -- there's been some of the challenges on the production ramp, which we admit and are continuing to resolve to fix. But there's been a lot of questions out there in the industry about what is demand doing. Demand is still growing. And while that rate of growth has slowed, I think, and I've said before that I think demand is going to be choppy. So by holding to 1 million units of production capacity by the end of 2025, should we see any declines or should we see any softness, we're going to produce demand that's out there. So while we can build the business on capacity and scaling benefits, et cetera, we're going to have to see what the market looks like across the board and what the receptivity of the vehicles has been. I don't want to stuff vehicles into a market that doesn't want them or into heavily discounting products that customers aren't responding to. But we do think we've got a really strong portfolio going forward. So we'll get into the magnitude of the contribution margin and where we were -- where we are on sort of relative EBIT, '23 to '24, as we give our 2024 guidance in January across the board, but sizable improvements in variable profit contribution going forward and ramping up into 2025.

Okay. Another question within the contribution margin piece. You said by 2025, 80% of that bridge and the second part of your improvement is on battery costs. You gave last year a target of $87 per kilowatt hour by '25, I think it was, and ultimately $70 on a cell basis. Are we still tracking to that? Is it better/worse? And I realize now the numbers are a little bit meaningless because it's on a Bolt, which is not like indicative, but what should we think of on a battery price basis?

Yes, I would say that where we sit today, we would probably need battery raw materials to come down a little bit more to hit those targets. We're probably trending above those targets. We've seen some higher costs on cell to pack in terms of some of the work that we've been doing going forward. But the team is hard at work at getting back on track for that. I think we have seen some goodness and cooperation in the commodity space. I'm pleased to see that for '24. And I think that's going to continue to be volatile. And especially as you get into 2026 and beyond, that's where we expect some of the investments that we've made in some of the raw material producers to start pay dividends and go forward where we'll have a more consistently priced supply going forward and not subject to some of that volatility that we've seen. So overall, I would say we're trending a little bit behind on that, but nothing that's not manageable.

You also had on your slides that part of your bridge includes services, software. You laid out a grand software strategy. How much are you leaning on other ancillary revenues to drive that contribution margin improvement?

Yes. So when we look at a vehicle program, and we look at every single program at multiple gates through the development cycle across the board, we're tracking both a vehicle profitability and an enterprise profitability. Because, number one, you want to make sure that the enterprise profitability is there so that when you are putting in hardware costs that the lead engineers don't necessarily want to do, there's revenue that's tied to that, right? Because if you look at minimizing the cost of the vehicle, there's going to be decisions that get made that ultimately impact the revenue-generating capability across the board. But on the other hand, you can't allow a vehicle to only get through the gates based on the software benefit because all you're doing then if you do that is you're actually increasing the risk of the firm because you're saying I'm taking the margins that I used to earn at wholesale and now I'm saying I'm going to earn those over the life of the vehicle across the board. That's not actually positive for the organization as accretive as software can be. So what you've got to do is make sure that you're looking at the vehicle gates and then you're looking at the enterprise and the ancillary benefits attached to it to make sure that you're not actually fundamentally increasing the risk of the company by saying, what used to be my return on day 1 is now going to be spread over the next 5 years across the board. So that's the way we're looking at that. So in that respect, we look at software, we look at digital revenues, et cetera, as accretive to where we can go. And that's consistent with the long-term plan that we've been highlighting for each of the last few years to where we say we can keep margins stable. And then as we get more vehicles on the road, and get a software-defined platform out there, then we start to see margin expansion as we get closer to the back part of the decade. So Mike Abbott, who's joined has just -- he's a rock star, and he's doing an incredible job, and he's going to be featured at Investor Day in March, and we'll have more detail on what we're doing there.

Okay. One more before I want to pass the ball to Andrew. The other part of this equation is the fixed cost, right? And that's -- 2025 is not an end game for you. Obviously, there's a lot more to go from there. And the reason why -- and you're saying that you're getting a 60-point improvement tells us that the margins are very low right now because of its fixed cost. So how should we think about the overhead or fixed cost spend in 2025? How flexible is that number?

Well, what we've committed to is keeping our controllable fixed cost flat to '22 through 2024. 2025, we see a little bit more inflation on the depreciation side just based on some of the investments that we've got to make. So the team is hard at work at identifying offsets to try to offset as much of that as we can. So what we've really done is taken a curve that had a slope, and we've significantly altered it by bringing that down. And we're going to continue to do that work. I think the team has looked at things really creatively, and I think we've challenged the historical mindset. So what I'll tell you is historically, marketing spend was a percentage of revenues, right? Okay. I understand that. That can be linear, et cetera. But at the end of the day, it doesn't necessarily drive all the revenues. And the last few years has been a good case in point. Pricing has been driven by scarcity. It's been driven by quality. It's been driven by a lot of different things. But at the end of the day, we've been able to do that. While we've reduced our marketing spend, pricing has been consistent. Market share has gone up, incentives have come down. So what it tells you is that decision-making that went into the $800 million reduction is sound. And I think that can help create more momentum. Same is true on the administrative side. If an organization that's saying, I need this many people to do X, now that X people are gone, the business is still performing really well. And I think what that's doing is creating this culture of continuous improvement that's going to help us drive and continue to drive more efficiency in the over functions of the organization.

Andrew?

Paul, just to follow up on the discussion yesterday. So you've talked about the $18 billion of cash for a long time. But if we look back at it, that's really served more as a minimum, sort of a floor. At times, you've run well above that, this year included, for a lot of obvious reasons. So the announcements yesterday will bring us back down to that level. But you've also talked about more consistent cash flow from the business going forward. You're reprofiling some of the EV spend. You're not going to have the UAW this year. So I guess the question is, going forward, are you more comfortable running at that level instead of using that level more as a floor? And then the follow-up would be, you've talked about aspirations to be higher rated over the long term. Is there an opportunity, as some of that cash rebuilds through cash flow in 2024, where you could do something to optimize the balance sheet as well? Or is the focus primarily just on the shareholders at this point?

No, I would say that if you look at our capital allocation policy, we particularly invest in the business, maintain a healthy balance sheet, return cash to shareholders. I think what we've got to acknowledge is that the balance sheet is really sound right now. It's probably in the best position that it's been in a decade, including the pension funded status, et cetera. Even with some of the pension enhancements that we've given to the hourly employees, we're still in pretty good shape. So when I look at the stock price and I look at the trade-off of what a ratings improvement can get me versus actually returning cash where it belongs to our owners, that's a no-brainer right now. Over time, I think we'll continue to look at the balance sheet. If there are tactical opportunities to improve it, we'll do it. But I don't think there's a big strategic imperative to go off these levels. Now we've got a great relationship with rating agencies. We previewed the transaction that we did with them and remain committed to those statements that we've made across the board. I think the $18 billion target specifically is a target that's somewhat dated. The balance sheet is actually stronger than it was when that was established. So I do think that operating at $18 billion or in that ballpark, is actually really, really strong and really good. So I will tell you that I'm just a big believer and I think I've got a track record in corporate finance and as a CFO that cash on the balance sheet finds a home and 99% of those homes are bad, right? So leaving cash on the balance sheet is not a good thing because it gives people a license to spend. And those aren't necessarily the most efficient, highest priority things to spend on. So I'm a big believer in returning that excess cash flow to shareholders and making sure that it goes into the hands of those that are invested in us so that they can invest where they want. And I think that's a strong commitment going forward. And I expect that we'll be in a position to consistently return cash back to shareholders going forward in accordance with our free cash flow as long as our balance sheet remains healthy.

Great.

Do you want to ask one more?

We can't.

Are we okay going over by it?

I'm meeting with most of the people in this room next. So I...

Well, I'll sort of end with sort of a high level one. Listen, 2 years ago, you laid out a very grand growth strategy ahead and doubling revenue by 2030. And I think where we stand today, some of these -- it feels like some of these growth aspirations have been peeled back maybe a little bit. Now some of them -- Cruise, you're still committed. EVs, you're still committed. But BrightDrop, for instance, is an example of a company we're scaling back. So how should we think about how the strategy today has changed versus where you were 2 years ago that the focus was very heavily on growth?

I think, first of all, I don't think our strategy has changed at all. And I think if you look at the revenue growth even over the last couple of years, we've actually grown revenues much faster than even you and others anticipated going forward. And that's on the strength of the sort of revitalized ICE portfolio, et cetera. And with the limited EVs that we've seen, we've actually increased share when a lot of folks thought that share was going to come down as EV penetration increased going forward. So we still look at that. I mean, the Investor Day 2021 was about resetting the narrative, both internally and externally. It was about setting ambitious thinking, right? Because if this is just an industrial company where we used to sell ICE vehicles and now we're going to sell EVs going forward, that's not exciting. It's not inspirational across the board. We see EVs as a growth story. We really do. And we believe that we're going to get there. The first thing we've got to do is create the vehicle foundation and do it profitably with the types of margins that we expect in our portfolio going forward. And from there, the business builds. So I don't necessarily think we should be judged as to whether we get to $300 billion of revenue or $250 billion because nobody ever thought we were going to get to $250 billion. Yet here we are north of $170 billion just a couple of years later, which a lot of people didn't think was possible as well. So we're going to continue to prove it. We're going to continue to drive that. We're still holding to the overall fundamental strategy of ICE, EV, software, AV across the board. The composition of that might change from time to time. But I would say those are tactics, that's not strategy across the board. And the reality is things happen and it requires some tactical moves. The path to EV profitability, much like EV demand and EV penetration, is not going to be a straight line. So what you've got to do is you've got to take that vision and combine it with the resiliency that we've shown for COVID, for supply chain, for semiconductors and know that bumps in the road aren't going to deter us from where we're going to. And that's about execution. And I don't think we get an A+ for execution by any means. I think there's still room to improve it. But the first step to a cure is identifying it and making sure that we're addressing it. I think we're on top of that. And as a result, expressing continued confidence in where we're going on EV profitability. And I think we'll get there in a sustainable way and a consistent way going forward.

Great. Okay. We'll leave it there. Paul, thank you so much.

Thank you. Thanks for the time.