General Motors Company (GM) Earnings Call Transcript & Summary

Our next fireside chat with General Motors. So just to introduce this, I would say we've seen some changes in GM's messaging recently. The most obvious being the increased focus on returns to shareholders. It culminated in a $10 billion share repurchase, so almost 25% of the company's outstanding shares, if GM can sustain this level of profitability, we think that there could be another 15% to 20% in another year. There's obviously some kind of disconnect here, though, because a 4x PE when you're concentrating so much capital on reducing the share count obviously suggests that there's some concern about the underlying earnings sustainability. The counterargument to that actually is that GM may be under-earning because there's so much being invested right now in electric vehicles and other areas. So at the very least, I'm hoping we can tease out that GM's earnings are more sustainable than the valuation would suggest. So with that, I'm very pleased to welcome Mary Barra, the company's CEO and Chair. Paul Jacobson and Ashish Kohli are in the audience, CFO and Head of Investor Relations.

So maybe just first question. On balance, GM actually had a pretty good year last year. Revenue up 10%, EBIT of $12.4 billion, despite the strike, despite an $800 million charge for a recall and you're investing a lot in EVs, but you generated $11.7 billion of free cash flow. So pretty good. Of course, there are things that went right and things that went wrong over the course of the year. And I wanted to ask you, first of all, if you can go back in time, and I'm not talking about ops or micro things, but strategically, if you can go back in time and make a change or 2 that would have resulted in a better outcome, what would those things be?

Well, I appreciate it. I mean, I do think last year was a strong year, and I think the strong performance that we've continually been delivering over the last several years. When you look at the strength of our internal combustion engine business, the portfolio, I think, is one of the strongest portfolios we ever have had. I think that's what's allowing us to have such -- and we're always going to be disciplined to the market that allows us to keep disciplined from an incentives perspective as well as inventory perspective. And I think that's one of the reasons that our ICE business is so strong. If I could have done a couple of things -- I always use the phrase, when is the best time to plant a tree, 20 years ago. The second best is right now. If I could have gone back, I think recognizing as we -- manufacturing is a competitive advantage for us. But I think as we were doing manufacturing some new things, I think spending more time in planning and derisking it because that's one of the things with our EV production last year, especially off the Ultium platform. And so that would've been something that -- and we've really rectified that now, but I think it was like, hey, manufacturing is our core competency, but making modules was something different that we hadn't done, working with different supply base. So I think that would be one issue. And then the second, building out the software team that we did last year, I think that is going to be very, very important and really going in the latter part of the decade, unlock a software business that we've talked about but I really now see the foundation there, the discipline that's been in the software development, the validation process, et cetera. So those are 2 things, I think, would have strengthened our performance last year, but we've addressed both of them, and that's why this is the year of execution and we're on plan.

Okay. So these are areas of focus going forward. Let's talk about the outlook. So the biggest debate here in this circle is the outlook for EVs. It's gotten pretty intense. The adoption curve has been a little bit shallower than people thought. Pricing has come down. There's even some questions about the level of government support that we're going to be seeing going forward from this. On the other hand, when we look at the regulations, we see California and 14 ZEV states saying you've got to be 30% zero emission by 2026. You've got EPA that's talking about 20% in 2027 possibly. I'm also seeing a lot of -- the industry is sort of following that. And if I just look at battery capacity, it was 89 million gigawatt hours of battery capacity last year. It will be 500-gigawatt hours by next year. It's enough for 5 million vehicles. But the consumer may or may not be there, and that's what I'm hoping you can kind of square with us a little bit. So just first of all, what are you actually seeing in the EV market today? Why is it that the consumer there -- isn't there yet? Is it pricing? Is it that the product isn't hitting the mark yet? Or are there other things that give you comfort with how this is all kind of coming together?

Well, I think when you're looking at such a major transformation, it's never going to be a straight line. And so -- but we definitely believe that EVs will grow, albeit at a slower pace than they were. And I think you've captured some of the reasons. I think one is having the vehicles be purpose-built for what the consumer wants. I mean I think -- I've always said the consumer is very rational. So they're not going to buy something that doesn't meet their needs, whether it's compromises on range, compromises on performance. And so I think getting the right portfolio out, I think the second is affordability. When you look at where the bulk of the new car buying market is, it's in that 30%, 35%, 40% range. So getting affordable EVs. I think it's one of the reasons we've had such success with the Bolt, although it was our second-generation technology. Then I think another gating factor, though, is the charging infrastructure. And all we know about the charging infrastructure is every quarter, it's going to get better. So I think those are some of the factors. I think when you look at GM specifically, I think, we're going to be well positioned because we have a lot of very positive reviews about all of our Ultium-based products. When you look at from a styling perspective, there's no compromise on performance because they're all leveraging the Ultium platform. And I think the other is, we've said in H2 that we are going to be variable profit positive or neutral and getting to positive and then getting to our goal next year of mid-single digits. So we're on track with driving that profitability. And I think we'll continue to see adoption grow, but it's going to be bumpy.

Ultimately, you have to follow the consumer. And we'll see how the products roll out. I know that you're very optimistic about all the things that you have in your pipeline. Does GM have a choice but to pursue this? I mean when we think about the regulations that 30% in the ZEV states and what's going on, to sort of follow the consumer. And I guess, said another way, if you concluded that the consumer is higher or lower, do you have the flexibility to modulate your spending or do other things, partnerships or other things to sort of adjust the cost structure to where the business is?

Absolutely. I mean -- but we do have to make sure we've got a plan to meet the regulations. I've always said we want to have such a strong demand for our EVs by satisfying the customer. And you started by saying we've got -- ultimately, the customer decides. Well, if you have the opportunity to drive an EV, I mean, it's better. If the vehicle meets all of your goals, if you could afford it, if there's robust charging. So as all that moves along, I think we'll see consumers continue to adopt EVs, and I'm very positive about the EVs that we're going to have out there. But as it relates to, yes, we're going to look -- and we've already done a lot over the last 2 years to get -- be more efficient and trim the portfolio, understanding what the customer wants. So better capital deployment. And we can adjust that as we see what the consumer wants, but also 2 years ago, it was like build everything you can. Now everybody is -- again, we have to look a couple of years out. And although it may be this, the line is still going to be going north. As you mentioned, all the ZEV states are going to be important regardless of the outcome of the next election. And so we want to be ready for that, take advantage of that because that is where the future is. And I think we're going to be well positioned from a profitability perspective. And then lastly, though, if there's ways that we can partner with others, especially on technologies that are not consumer-facing and be more efficient with R&D as well as capital, we're all in.

Do you think that there's the potential for regulations to change -- if you're -- I'm not talking about GM specifically, but just broadly for the industry, you guys are doing everything you can. The product is there. Do you think there will ultimately be some accommodation on the regulatory side?

It's hard to say. I think right now, we're very optimistic of what we've been asking for is just harmonize because if you can meet the very stringent EPA goals that they've set, but still find yourself in a fine position with NHTSA that makes no sense. And so I think the industry has come together and communicated, and we're optimistic that the administration is going to address this. Beyond, when you look at, though, it's the latter part of the decade, or early next decade. I think everybody's got to be realistic of what consumer adoption is. But again, I think we will have much better pricing, I mean, this year, we're going to have the Blazer and the Equinox that get into that range of where the biggest affordability is and charging infrastructure will be better. So I think -- as I look at it, we need to be ready for that. And we can't -- we're not going to switch something because something has been happening for the last few months, and we've got to make decisions that are 2, 3, 4, 5 years now.

I want to ask about the way that I'm thinking about EVs and playing into this question of earnings sustainability, I think that, that $12 billion to $14 billion of EBIT that you're targeting this year includes $4 billion of losses on EVs. I know you don't disclose it, but I don't think that you're going to generate a variable contribution margin this year. You get to positive by the end of the year, but you're starting negative, you end positive. You have about $10 billion of R&D. The majority is AV, EV and Software. We know what the AV part is because that Cruise, it's $2 billion. And we know that you have 5,000 engineers and that's another $1 billion. So there's about $3 billion just in EV R&D, probably. You don't have to nod, but that's what I think. There's probably -- there's some fixed costs associated with running Orion and Hamtramck and all these other things. There's people inside. So they easily could be in that $3 billion to $4 billion range. But then you're saying that you're going to get to positive mid-single digit next year. So that is a big tailwind for the company. So let's say you get to breakeven, what do you need to see in order to get to that to get to 0 or to 5% next year?

I think one is scaling. And we've said this year to be able to meet our goals over -- if we make over 200,000 -- we said 200,000 to 300,000 Ultium-based EVs. So scaling is going to be a huge piece of that. Then when you look at the cost that we're taking down, continuing to drive battery costs down, I think we're one of the best companies positioned -- regardless of what happens in 2 years, 4 years, 6 years related to IRA, we're benefiting from it right now because even before IRA came into being, we had made a decision from a supply chain perspective and battery cell production in this country. So we're well positioned to take advantage of that. And again, you're absolutely right, our earnings power can increase as we get to EV profitability, and I would say we're on track.

What do you think is the biggest competitive advantages that GM has? It would look to me like you have benchmark costs if you're actually achieving that, that kind of margin. So maybe you can elaborate a little bit on that. And when you're bringing these EVs out, the price point is a big driver. But what are the attributes that you're trying to focus on that you think will make those products successful?

Well, when you look at the EV portfolio, and we're not just recreating the ICE portfolio. We're looking very specific to say, do we have the right -- of all the different segments in our industry, covering the most segments, but also focused on the segments that have the highest volume and the highest revenue generation perspective. And I think that's where we're very well positioned. I think the other thing is, again, with our EVs, you're not having to make trade-offs. I mean these are -- they've got the right performance, they've got the right range, they've got the right functionality from a feature perspective. So when you look at that, I think that's what gives us an advantage. We invested early in the Ultium platform. I know we've got to prove it this year, and we will and we are. But I think that's a huge advantage where other companies are in the process and have to frankly go through all the learnings that we did about putting your own platform together. And when you look at what we did with Ultium, it's scalable, supporting an Equinox all the way up to supertruck like the HUMMER, that is giving us an advantage of scale. And so scale is going to be important, having the right vehicles because I think that gives us -- we're confident -- we have confidence in our pricing.

Let me ask you a broader question about competitiveness. One of the observations we've made is, GM looks like it's one of the most efficient manufacturers in the industry. So when we look at it, last year, we estimated that Ford had $3,500 per vehicle labor, Stellantis, $4,000. You were $3,100, something like that. Toyota's at $3,100, but with lower -- you have a higher labor cost per hour than they do, and you have the same labor cost as them. So that's just a great indication of efficiency. So I don't know if that's well known. You probably know that.

Yes. And I appreciate you bringing that point up because -- and you know what, there's still opportunity there. We continue to drive for efficiency. And one of the big things that we've worked on over the last couple of years is simplifying the product, simplifying the build, simplifying how many options, how many buildable combinations. And frankly, that works for the customer. It helps our dealers. And just -- I think it's another thing that causes us to have discipline with our incentives because we're not having this a vehicle that's sat too long on the dealer lot and now it's in everybody's best interest to move it. Manufacturing is a competitive advantage for us. And like I said, we have line of sight to improve it this year.

On the other hand, you have $1.3 billion of higher labor cost because of this contract. So I'm hoping you can talk about from here, just given that reality, what do you need to do to sustain manufacturing competitiveness? Do you see opportunities in some of these things that we're hearing about in automation, open-box manufacturing? Does this affecting your business planning going forward? What are you doing going forward to sustain that despite that headwind of higher labor costs?

Everything you said, and I think you're absolutely right. We're looking at how do we build more efficiently. We have always focused automation on areas where either you're causing an ergonomic issue for the employee or it's just hard from a quality perspective to get the consistency. And there's a lot changing in an automation perspective. But I still think the best way to really work on managing labor costs is how you design the vehicle and whether it's open box, or gigacastings, you've got to make the right decision there. And we actually have a dedicated team working on that cross-functional to look at how do we -- as we launch our upcoming plans, how do we drive even more efficiency, but it starts with how you design the vehicle. And the work where we have the product engineer and the manufacturing engineer together, starting in the design studios, I think, is going to yield a lot because there's -- you have less to automate. You're just making the product easier to build. And that gives you more manufacturing efficiency, it also gives you higher quality.

What's the time line for when we actually start to see that? And is there anything you can share in terms of metrics and targets on what you think you can actually achieve over the next couple of years?

Well, a little bit different, but just what I talked about before because simplification plays a role. I mean if you have less main body wiring harnesses into the plant, through the whole system, you didn't have to design it, source it, sequence it into the plant and get it on the vehicle. So that we've already said for this year, we'll save about $200 million from an engineering perspective. And there's more to be saved. We haven't quantified it or made it public, but I think it's going to allow us to continue to improve our manufacturing.

Let's switch gears to Cruise. There's been so many major strides in the technology, also challenges. I was wondering if you could maybe address whether your views have evolved on GM's role in AV and rideshare. Obviously, it's an enormous potential market, requires a lot of capital, requires a lot of attention. So how -- just give us an up-to-date view on what is your perspective on that? And what does GM want to accomplish over the next couple of years?

Yes. I mean I think we have an incredibly valuable asset with Cruise and its technology right now. And as we've been more deliberate -- clearly, we could have handled -- or Cruise could have handled the transparency and dealing with the regulators and first responders better. At GM, that's actually something we do very well. So we've stepped in and are assisting there. So when I look at the tremendous asset we have, we're going to continue to work on making sure we keep the critical talent in that role, continue to advance it from a safety perspective. But as we go, and we've talked about starting in 1 city and demonstrating the model, and a big part of that starts with building the right regulatory relationships, building the right relationships with first responders and helping the community understand that this is safer, and we've already demonstrated safer than an average driver will continue to improve there, but it's safer. And when you think about the opportunity for people who, for whatever reason, can't drive today, giving them mobility, there are huge benefits with autonomous technology that I believe, as we get farther along, is going to be a huge opportunity from a personal autonomous vehicle perspective. So we have a very important asset. We're in the -- we -- the reports came out. We were transparent about what we learned with the Quinn Emanuel report, the assessment that was done by Exponent on the technology, which I think is very, very positive. What we thought happened from a technology perspective, we understand that, and that allows us to continue to improve. So we're working that plan in the next couple of months. I think you'll hear us come out with a plan that's more deliberate and is going to not just be solely technology-focused but really helping people understand the benefit. And you want to get to a point where a community is like, "I want you here because you're improving the quality of life for the people who live in my city or municipality."

Yes. I totally agree with you on everything that you said about the benefits of the technology and where you are and that you need to be in that, but there's the technology as it applies to GM vehicles and then there's also the business of rideshare and making that a global enterprise. Is that second part something that you're still committed to? Or is that kind of a TBD, because what you're doing now in demonstrating is much more focused? Is that really going to be part of GM's role in the future?

We're evaluating what the right go-forward plan is, that's right for General Motors and leveraging this -- the investment that we've made in this asset that I think, again, we're either a leader or among the very few leaders with the advancements that we've made. So I don't have anything specific to share right now, but we're looking at what is going to be the best path to unlock value, not only for the General Motors shareholder because we're the majority owner, but also the Cruise shareholders. So you'll hear more from us in the upcoming months.

Well, I guess the question that investors are asking is there's -- the company is placing a lot of scrutiny on where it's investing capital and where the returns are going to be. And there's probably more questions about that aspect of it than many of the other things that you're involved in. The assumption or the question that we get a lot is, well, this is the level of spending that we see right now, $1.5 billion or so, but it could easily go back up over the next couple of years. Do you think that, that's an appropriate framework for investors?

I think what investors have to think about is we're going to make investments that we invest to generate the right return for our owners, our shareholders. So as we look at what is the best way to create value with this asset and also strengthen our business for the longer term because I think this technology is, I believe, as we move forward in the next handful of years, will be table stakes of what customers expect and from a safety benefit from across the board. That's -- we're being very thoughtful as we do that work right now. But I would tell investors we're going to deploy money that we believe is going to generate an appropriate return. I think we and I have a reputation that if we're doing something and we feel the markets changed, the situation changed, we're not going to just -- we're going to adjust our strategy. I think we've demonstrated that. And I think the discipline we have on capital allocation with where we compete, what we did with Opel, how we've trimmed the portfolio this year, I think they should look at that track record.

Yes. It makes sense. I'd like to ask you about software. Maybe just at a high level, it's very -- it's critical to your future products. You're putting a lot of money into developing software in the Ultifi Platform. Maybe just give us kind of a high-level view on what are your learnings at this point? What is the plan at this point for that business?

Yes, this is one of the areas I'm -- as I said earlier -- I wish I would have brought in the team that we have now earlier, but they're here now have completely -- and it's Mike Abbott, but he's brought in just an incredible team. We've hired people from Google, from Apple, from Meta, many, many tech companies, and they're excited to come because of the mission. I mean they see the opportunity. I mean they say, "You guys have got great vehicles, we know software." And so we've already revamped the software development process and more importantly, the validation process. And so with that, as we implement that process with every future vehicle, I think we're going to have software that exceeds customers' expectation. I think it's a way for us to differentiate from an experience perspective. So I'm very excited about it. Right now, we're going through a little bit of learning pains as we make this transition, but the robustness of what the system is now, of how we'll do software, and I've spent a lot of time with the team. I'm 100% confident we've got the right direction.

So this, you feel is going to be a competitive advantage of General Motors going forward?

Absolutely.

I want to ask about China. So switching gears again. So we are constantly hearing that the Chinese are able to produce vehicles for 30% less than Western companies. We hear that from automakers around the world. What happens to GM in China where you're producing and presumably have a kind of a more level cost structure? What do you think ultimately that market looks like? And what learnings are you bringing from that operation into the rest of General Motors?

Well, for years, we've been looking at what are the strengths, opportunities, what we've learned in China and bringing that back. I think, though, when you look at the Chinese market, it's very different than it was 5 years ago. When you look at the number of domestic companies that are producing EVs. But we also -- there's going to be an adjustment there because the number -- there's only a handful of companies that are profitable from a domestic perspective; that can't go on indefinitely. So there's going to be a sorting. But I think when you look at where we play in the strength of our brands, I think it's more on, I'll say, the premium or luxury side. And then, of course, we have the investment in SGMW. And I think they compete very, very well at a very price-sensitive parts of the segment. So I think it will be a different role that we play. But when you look at the strength and the growth potential in China, I think, it's a market that we want to play in appropriately, and I do think it's more at the premium and the high end.

Okay. Is there anything that you're taking out of China and bringing into the rest of the organization?

Well, we regularly benchmark. We've been over there several times now travel has opened back up and looking at what are the features. I mean, I think the changes we're making in software, I think, are going to be very important. But I also -- you also have to look at a lot of the technology in China is in China, for China, by China intent, whether -- and when you look at privacy, when you look at how autonomous technology, it's -- even as a global player, your technology in China is China-based. And so I think that's got to be better understood of how that plays around the world. But of course, we're looking and I think I don't discount any OEM. There's something we can learn if they're doing it better, we're going to work to implement that. So -- but I think there are some things that are just structurally different for China in China than it will be around the rest of the world.

Makes sense. And you did mention that you're bringing some of the hybrid technology that you have in China into the North American market to diversify the product portfolio in the next couple of years as well.

Because of the changes that we've seen from a regulatory environment. So definitely.

A lot of debate about the pricing environment and price normalization. And I think a lot of people who look at this industry just see an aberrational environment over the next -- the past couple of years with this 30% increase in average transaction prices. What are your thoughts on what normalization will look like? And are there any reasons why GM should outperform the broader market?

I think if you just look at where we are in incentives, as we're getting to more normalized and Paul shared on the earnings call, we built in 2% and 2.5% from a pricing down perspective. But that we're not -- we're prudent in the way we put our plan together and give guidance. If that doesn't happen, then that's just profitability that we can continue to return to shareholders. Where I think we're unique and it's already been proven out is we're not #2 from an incentives perspective. We're below industry average. And this is coming out of COVID, and I think on the strength of our ICE and what will be our EV portfolio. And I think we priced right as we are putting these products out there. So I think what is going to give GM the opportunity and the advantage is the strength of our portfolio and the customer interest.

So do you think that you would outperform that? And then based on what you see today, I mean, you're starting out at a fairly level pricing.

But I would say, I think we're outperforming today based on where our incentives are compared to the rest of the market.

Yes. Great. Let me open it up to the floor if there are any questions. A couple more. Go in the back, Julia.

Just appreciate you coming and talking to us today. Appreciate the thoughts as well. Could you give -- what you could tell us about kind of what's next for Cruise, whether it be in California, elsewhere? Kind of how do you think that time line plays out with what you know and what's in front of you?

Well, I mean we're working. I think one of the important steps is wherever we deploy and we've talked about, as I said, deploying in 1 city. It'll be working with the regulatory environment, that varies widely state to state. There's some states that have it at the state level versus allowing it to be at the municipality level, which I think is going to be important. So I don't have a specific announcement to make today, but in the pretty near future, I think we'll be signaling where we're going to deploy yet this year. So more to come.

Anything else. Let's talk about the...

[indiscernible] 5 years out [indiscernible]

So 5 years from now.

The same question I got...

Well, I think that's the strategic work that we're doing right now, so I don't want to get ahead of that. Just only to say that I do believe the technology is very important for the industry. And I think the position we have, it's a true asset. And we've got to work to how are we going to deploy that to generate the most value creation.

Thank you very much for talking about manufacturing. GM just bought some gigacasting competency and so on. Then you talked about unboxed and how you're integrating looking at things cross-functionally. Tesla is way ahead, BYD is way ahead with the modular approach and so on. What is kind of your time line for implementation on these -- in this new approach to manufacturing and so on?

Well, I think we -- with every new product, we can implement more. And in some cases, we're going back and maybe updating what we have in an existing product. So I don't think it's like wait 2 years and boom, it's there. It's gradually happening right now with every opportunity as we deploy capital. Clearly, the biggest opportunity as we launch a new vehicle. One of the reasons we delayed Orion a year for our next battery electric truck platform is we saw areas where we could be more efficient, and we wanted to deploy the capital more efficiently and launch it right to begin with. And so -- but there's things happening right now today of driving that efficiency into the vehicle. And as we look at what is the right structure between gigacastings and -- it's a system. You can't just look at how easy it is to build the first time. You also have to look at repairability because insurance is -- if your insurance costs are so high from a replacement perspective, that all factors into the cost of ownership. We have a lot of expertise already in gigacastings from the CT6 all the way now to what's happening on the CELESTIQ. So our team very much knows how to do that. We're looking to optimize it across all factors, not just one.

When we heard Jim Farley this morning, he was all about Pro and the focus on Pro as a growth vehicle. Given that GM has just as much if not more presence in the fleet side with your trucks, do you see a similar strategy for GM as well?

Well, absolutely. I mean we have a very strong commercial business. We've just pulled it all together with GM Envolve, and that is a competitive opportunity for us as well. And I think with the EV products that we're going to have across our commercial fleets, I think that's going to be a strength and a differentiator for us as well.

How big is the commercial vehicle business for General Motors because it seems like that's just a huge profit center for the company?

It's a very important part.

Heavy-duty trucks.

Absolutely. And we haven't broken out specifically, but it's a very significant piece. And I think as we go forward, we can talk about that more because I think we have a leadership position there.

Are you just at a high level? Are you sort of feeling very good about the outlook for that business because of all the infrastructure spending and all the things that we're hearing about broadly in that space. Is that something that you're looking at for the North American business that might be underappreciated as a source of strength.

It is a source of strength today. When we look across, and I think it will only get stronger as we look at our different fleet customers and have software that helps them manage their fleet better as well as start to blend in EVs where it makes sense. And the EVs we have, whether we launched the Silverado with the Work Truck because talking to our fleet customers, knowing what they want, the solutions we're helping them with charging and planning. So I think that business will only continue to grow. Because even with some of the EV piece of it, I mean the ICE piece is very, very strong today and will continue to be. But on the EV piece of it, even when you look at maybe a slowing or a slower growth of EVs from a retail perspective, virtually every company has set goals from a carbon perspective. So I think that gives us a big opportunity as well.

Let me ask about the IRA because that's -- we're debating this. And where does this go, right? You've got, let's say, a 50-50 election at this point. And if it goes one way, then -- if it goes Republican, then you could see the extension of the Trump tax cuts. There's going to be some focus on how do you pay for that? And IRA seems to be a big focus for -- in those circles on the pay-for side. On the other hand, GM seems to be so well positioned to benefit from the IRA with domestic manufacturing, the sourcing came together really quickly. So your team did a remarkable job of really kind of positioning the company better than just about anybody else. I think that GM is the only company that across the board is now qualifying. So what is your view on that? And how does that affect GM's strategy?

First, I have to give all the credit to Paul here because Paul has led this activity, working -- because it's more than just a purchasing and supply chain. It really is from a -- where we've done partnerships, investments, et cetera. So I think we do, to your point, have a very well thought-out strategy that's -- allows us. But remember, we were on that path even before IRA. If you had asked me a month before IRA was passed, I would have said, I don't think it's going to happen. So that was our strategy anyway. So I think we're well positioned. While there's all this debate about what's going to happen, depending on what happens in the election, we're already seeing the benefits of it, I think, pretty significantly compared to virtually every other car company as you mentioned. So our goal, though, we always viewed IRA as a transition. It wasn't going to last for forever. And so I think the work that we're going to continue to do to improve once we get profitability next year to continue to improve it, will just derisk whatever is going to happen with IRA.

Let's talk about just to bring this all together, 3 most important targets for General Motors this year. What are the things that you're focusing on the most to deliver that you think we should be watching?

Well, I'll do what you do on the analyst call, and I'll have a couple of parts to each -- the 3. But when you look at our strategy, it's continued to generate the strong performance in our ICE business, demonstrate the strength of Ultium, which is going to allow us to get to our profitability goals for this second half of this year and next. It's the right software, and we've talked about that in the vehicles. And then fourth, though, it's relaunching Cruise appropriately to create shareholder value. So when we do all of that, that's going to enable us to meet our commitment from a guidance perspective across revenue, across EBIT and across free cash flow, which I think is going to be very, very important and then appropriately recognize and reward our shareholders for that. So I mean this is a year of execution for us. I'm really excited. Like I said, I know we're only 6 weeks in, but we're 6 weeks on track. And this is going to be a really, I think, high performance year for GM.

What's the hardest thing? What is the biggest challenge that you've got in the next 12 months that where you'd say, look, if there's going to be some risk that would be noticeable, this is where it would come from.

I think the good thing and what I like about it is where I think we have the opportunity, it's stuff that's within our control. It's getting the vehicles out there and right and getting the software. And in the short term, we're working through some challenges we have, but I'm confident we'll get through that with the team we have, and then it's ours to execute, though. Obviously, if there's macro changes, we know this is an industry, and I think we've also demonstrated the agility to respond to what -- if something happens and there's more opportunity in EVs or there's more opportunity in ICE, we can toggle. I mean Spring Hill can build EVs, it can build ICE. We have the opportunity where we can crank up in some of our plants our ICE production. We can add shifts at Factory ZERO, et cetera. So I think we're really well positioned for what's unknown of what's going to happen this year from a transformation perspective. We'll turn those dials and meet our guidance.

What do you think will surprise investors the most? You're hearing, Paul, Ashish and you are talking to investors all the time. You're hearing all the same questions that I'm asking. When you think about what you're able to do versus what -- where those questions or doubts or concerns are, what would be the things that you would point to?

Well, I think the biggest thing that we need to demonstrate because last year, we didn't, so -- and I own that is, we've got to demonstrate that we can build Ultium-based products and the market wants them, and we can achieve our profitability goals. Because if you think about it, as we go -- even though we've said by 2035, our light-duty portfolio will be all EV, guided by the consumer, but the strength of our ICE business next year and working toward profitability on our EV business with the right software and then the addition of how we strengthen or leverage the investment we have in Cruise. I think we're uniquely positioned to really re-rate the company based on performance this year. And that's why I like the fact that it's in our control.

And capital returns, those continue?

We've said we have a goal that we want to get -- or work is to get our share count down. We'll continue to do that. When you look at the last handful of years, it was COVID, then it was semiconductor shortages, and then it was all the supply-based challenges. I think pretty quickly, when we saw the business getting to, I'll say it, a new sense of normal, we did the ASR. And we're going to keep that capital discipline. Our capital allocation framework hasn't changed. We're optimizing and making sure we're spending the right amount of money of reinvesting in the business to generate the right returns, keep a strong balance sheet, and then the rest is going to be returned to our shareholders.

Right. Very clear. Well, thank you very much, Mary. Paul and Ashish. Great to see you.

Thank you.

Thank you.