General Motors Company (GM) Earnings Call Transcript & Summary

We have General Motors, a company that we believe and we think is arguably recognized many of the industry megatrends long before everybody else really in the industry. They've taken actions to rationalize the business in some reasonably aggressive ways with the sale of Europe a few years back, focused on high-profit trucks and crossovers and really, we believe, really leveraging their core to invest heavily in the future, including EVs with the Ultium platform, Ultifi on the connected car side, and software side. Cruise, obviously, on the autonomous side, OnStar that goes along with the Ultifi, great connected car technology and in many other ways, including stuff like BrightDrop. So they're really far along on their way on this core to future transition, at least in our opinion. Today, we're very happy to have Paul Jacobson, who joined GM, I think, in late 2020 as Chief Financial Officer, and he came from Delta. So another heavy capital-intensive industry. So Paul is very well versed in all things as a CFO in businesses like this. So Paul, we're very happy to have you here today. Thank you for joining us. I'm going to kick it over to you for some opening comments, and then we have a long grill session for you after that. So thanks.

Well, first of all, thanks for that, John. And I might have you reintroduce me to my wife with that intro, that was really kind, because I tell her that, hey, this has been fun. She sees it differently, but it's all good. But I want to thank everybody for coming today. Obviously, the story at GM has had some challenges, but some real successes as well. And as we look at coming out of '23, as we said on our earnings call, we've applied some of the lessons that we learned. I think the year has gotten off to a really, really good start, and I'll talk about the market in just a second. But we're in the early stages of scaling up EV production. We're setting monthly records on the Cadillac LYRIQ. It's already become the second most highest volume brand in Cadillac portfolio, LYRIQ. And it's outselling many of the other luxury imports that are out there, if not all of them. We've seen really good acceptance of that. We are launching with the Blazer. We've got more EVs coming out later this year, and we're on track to hit our 200,000 to 300,000 vehicle production goal that we've set out for ourselves for 2024. On the commercial side, we talked a little bit about some choppiness in January, which we really were hoping and attributed to some of the weather challenges that we saw across the country and pleased to report that February and March -- we're almost done with March, have actually come in really, really strong. So we're seeing gains on the retail side. We've lost a little bit on the fleet side. I would say that's probably a little bit just driven by some specific targeted availability issues, around vans and some midsized trucks. But the retail portfolio is really strong. We are coming off some of our incentives in February and March. You'll remember that we ticked higher in January, primarily as a result of what we call the Ultium promise. So for those approximately 25,000 vehicles that we produced that weren't eligible for the IRA tax credit, the 7,500 hours based on the rules at year-end, we did the right thing. We stood behind the customer. We wanted to remove all the confusion. So we backstopped that 7,500 hours. It caused us to take a little higher on incentives. But we're starting to bring that down and March incentives have actually come back down a little bit even while others are raising some of their incentives. And we've seen shareholding, seen average transaction prices hold in. So all in all, really, really good start to the year and feel good about where we're trending.

If we can start sort of a big picture for a second. I mean there's a lot of consternation on volumes this year, whether it be demand or production. Everybody is kind of operating as a global volume flat to down 2%. U.S. is flat to maybe slightly up. I think in our opinion, it could be up 4% to 5%. As you think about sort of the global stage, how do you think about the environment for demand and production globally and particularly here in the U.S., which is all important from a profit perspective for you guys?

Particularly in the U.S., we came in with a plan that was assuming a 16 million unit SAAR. We've hung in pretty close to that. And I think it's been good. We also, as we've talked about, we assumed a 2% to 2.5% price decline year-over-year. That was, as we said, a planning assumption, similar to what we did last year, not necessarily an expectation. And sure enough is we're 2 in 3 quarters -- months into the year, we actually haven't seen that. So prices have been pretty consistent with where we were a year ago. And I think generally consistent with how we exited '23. So -- so far, and it's a long way to go for the year. But the way it's getting started, demand is actually hanging in pretty strong. Internationally, there have been pockets of challenges. We talked about China being a little bit of a challenge in the first quarter, still believe that we'll post an equity loss in China in the first quarter as we articulated before. But still believe that we'll be able to get to results that are pretty similar to where we were a year ago. It's just going to be a little bit more backloaded as we work through some of the inventory challenges and pricing issues that we have in the first quarter. But overall, I would say that I wouldn't necessarily change much about the way the year has gotten off to a really good start.

So pricing is really interesting because if you look at [indiscernible] across the industry, and you're getting closer to normal, but not -- you're still below normal, 2.5 million total units, normal is 3 million to 3.5 million, whether we get that high again it's debatable. We're looking at vehicles in operation that are sort of late-model vehicles continue to shrink for the next couple of years. At the same time, we also have a CAPU rate that's 70%, 75% in North America. So I mean, you're saying, okay, short-term inventories are rising, sort of installed base is shrinking but then there's also this capacity that could be flexed up dramatically, right? I mean, if we run at 70%, 75%, yet pricing is holding in really well, right? And we generally agree, it might actually be closer to flat, what do you think is really going on here on the pricing side? And when you look at this in an ATP, there's a dealer gross profit per unit that's in that ATP, which often people masks, I mean, people don't understand it's in that layer. And it went from 2,000 pre-COVID to 6,000 peak in '22 and now it's 4,500. So it has room to come down and absorb some of ATP price pressure, it's possible. How do you really think about that? I mean I understand 2% to 2.5% is a good place to plan, but it's not happening. And there's always kind of these moving parts that could say, hey, it can get really bad, but then there's areas of cushion. I mean how do you think about pricing? Because it's a bazillion dollar question for you and the industry at the moment?

Yes, slightly less than the bazillion, but still pretty significant. So look, I would rather be on the side of the coin where we're pricing -- or we're building a plan on some pricing degradation and not seeing it, than the opposite side of that, right? Because what we're trying to do is make sure that we've got a lot of investment to make, and we've been doing that on the EV side as well as refreshing the ICE portfolio. And I think part of what's going on with pricing is we have the best portfolio, probably, in the history of GM. And that's borne out by the customer demand. When you look across the spectrum, whether it's the full-size SUVs or now the new Chevy Trax, which is incredibly popular among folks and even my daughters now want one. So she'll be driving new Chevy Trax in Los Angeles to school. But it's one where that full gamut of the portfolio, customers are really, really exhibiting their preferences, and we've seen that. But I think also, you've got to go back to COVID and the semiconductor, et cetera. I think we learned a lot about ourselves. I think the industry learned a lot about itself as well in terms of how do we manage inventory and production and how do we respond quickly to changes in demand. So we've said pretty clearly, we're going to operate around 50 to 60 days of inventory. And we'll sometimes pop above it, sometimes pop below it, but that's kind of our targeted range. That's well below traditional levels of inventory. So to your earlier question, I'm not sure we ever go back because I've heard similar language from others, et cetera. Ours is just more prudent in terms of how we deliver and how we take some of the slack out of the system. It improves working capital, improves logistics costs, et cetera. So we're doing a good job of that, and the vehicles are selling. But the most important thing we've got to do is make sure that we're customer-centric, and we're building vehicles with features that customers want.

Yes. It seems like it might be a real good guy for the industry and for you going forward. On another hot topic, EVs, right? I mean it seems like, every day, we hear of demand cooling, volumes coming down, particularly here in the U.S., but a little bit on the global side. I mean how much of this do you view as sort of a transitory blip as we're going through the transition because it still is early days. And how much of it do you kind of view as potentially more structural?

Look, I think at the end of the day, everybody's got a pretty clear view of kind of where it's going, where policy wants to go, where manufacturing is going. And I think, ultimately, where consumers are going to go. But the path from A to B nobody really knows what that's going to be. And I'd like to make the statement that most of the people that I've asked to say, what are your thoughts on EV adoption, will draw a line that looks like this, they'll draw a line and it looks like this, but it will always be straight. When the reality is it's going to be choppy, right? There are going to be times where adoption is rapid. There are going to be times when it slows down. We've got to make sure that we are ramping our production to be able to maximize what I think is a real asset of GM, which is our ability to flex production between ICE and EV. And as we've talked about many times before, the plant in Spring Hill, we can pull the levers and we can ratchet up ICE, we can ratchet up EV. We can do down and just make sure that we're nimble. So what we're really trying to do is make sure that we focus not necessarily on the number of EVs versus the number of ICE, but rather irrespective of how that works? How do I keep a margin trajectory consistent and how do I drive the business for free cash flow because that's going to hold in. And by pulling the levers and by using the optionality we have in the business, is actually driving the business to that because it's going to work itself out in the end. And I think we've got a good platform. We've got a good suite of vehicles, and I feel good about where we're heading.

If I get to follow up. That's the flexibility you have at the plants to swap and add EV versus ICE. Are you able to do that with multiple plants? Or is there a few plants to have that capability because that could be a big advantage as we kind of have uncertain demand.

Yes. It varies by plant and vehicles. So as you know, we pretty much run pretty full capacity on full-size SUVs on the ICE side. Spring Hill is a plant that has the most flexibility, but the module production that we have at Factory ZERO gives us a chance to scale up and down fairly easily. And -- so I think you're going to continue to see that from us. We've got more vehicles coming out because we really want to meet the customer where they are. So when you look at the LYRIQ and the Hummer and now you look at the Blazer, and then when you get the Equinox EV coming out, which will be the most affordable vehicle with 300 miles of range, that's offered. And so we think we've got the right recipe. And we've just got to be able to manage that. But I think what the team has done a really good job of is looking at fixed cost, looking at margin performance, looking at pricing to really drive what's been fairly consistent free cash flow.

And when you think about this, there's a lot of EVs coming to the market, there is competition from the incumbents, Tesla and now also from the Chinese. That's more globally, but eventually maybe here in the U.S. How do you think about sort of differentiating the GM product in what might be somewhat more of a crowded EV field over time? Is it Ultium and Ultifi enough to do that? Is it doing it at the high end with LYRIQ and the Escalade IQ, I mean how do you think about how you differentiate the product in that new world order with this new competition that's coming in, which is pretty extreme.

Yes. Well, I mean, it starts with the brands, right? And we lead in brand loyalty. and we've got to keep that up. But you don't lead in brand loyalty by just keeping the product consistent, you've got to continually raise the bar similar to what we've done with this most recent generation of trucks and SUVs across the spectrum. So give customers what they want. Loyalty is a good starting point. Digital connections is another one, right? How do you make it as easy and as seamless as possible for people to continue to own your vehicles by giving them the things that make their lives easier. And we're working through that. I think when you look at the software team that we brought in, really, really accomplished group of folks that know not only tech but also how to connect that to the customer and really do it from that customer perspective. And then lastly, we got to get our cost down. We've been pretty good. We'll get the $2 billion cost reduction program done this year. I feel very, very good about that. And we've got to keep that up. We've got to maintain discipline around the structural cost because we've got to be able to compete around the world. And the only way we're going to do that is producing great vehicles very efficiently.

And if you think about scale on the EV side, right, you have it on ICE side right now. How do you think about where you need to get to drive the scale and the adequate margins and return on invested capital you need there? Is there constraints internally? Is there constraints on demand or the constraints in the supply base? How do you think about getting to scale and what that really means for GM?

Well, I think, number one, it's got to be paced and measured. So I'm a believer that we need to stay with capacity slightly ahead of adoption and where we think adoption is going to go because I don't want to be in a situation where we get an uptick, and we're not there to meet it. We saw that over the last couple of years, and we weren't there for that when I think it would be a little bit of a different picture if we had more of our Ultium vehicles out on the road and people can see their capabilities and begin to have them talk about. We just haven't had enough on the road. So I don't want to be behind the curve playing catch-up because I think that leads to what we've seen in the industry doing some short-term things of trying to just fix solutions rather than really mold around that platform. On the capital side, I'm a big believer and the company has really embraced this and capital budgeting is a function of 2 things. Number one is affordability. Am I generating enough cash flow to pay for it. The reality is when you look at our free cash flow, we're generating a lot. And we have the wherewithal to invest more. But the second leg of that stool is, do I have the resources in place, the fixed cost infrastructure, the people, the facilities to be able to deploy that capital effectively. So if we were to spend significantly more, we're going to go hire more engineers, get more facilities and so on, but we want to make sure we balance that with keeping our fixed costs down. So we're not growing too fast. And that's the other governor on capital investment. So I think the team has done a good job. We've we kind of pivoted up. We've kind of scaled that back a little bit as we brought the cost structure down. I think you're going to see more of that coming in terms of really, really prudent management of the capital budget.

So more recently, on the Chevy Blazer, there were some software issues. And I just wanted to kind of run through that and sort of maybe the lessons learned. But also in that question sort of maybe a second part, you brought up connectivity. I think people kind of pass-through connectivity when I think about autonomous and EV and nobody is talking about connectivity anymore, and you guys have through Ultifi and OnStar and your software that you're embedding in vehicles now, great connectivity. How do you leverage that connectivity? I mean because some bulls are saying, "Oh, you can create all these incremental subscriptions maybe over time." But us, we kind of look at this in a little more practical term of like the $1.2 trillion -- $1.1 trillion to $1.2 trillion that's goes away from you guys outside of your dealers and outside of your purview to capture revenue, which is equal to or greater than the $1.1 trillion captured at the dealerships right now. In stuff that's kind of blocking and tackling, so that connectivity could help you capture more of that iceberg of opportunity underneath the surface. I'm just curious if you could talk about the software issues and then what connectivity really could bring to the table for you? Because it seems like it's massive and really and nobody's really focused on that right now.

Yes. Well, I mean software architecture is hard. And I think you've seen a number of people have challenges, not just us, and we're not immune to it. But I think the important thing is, okay, how do you learn the lessons and how do you scale up. So we've invested pretty heavily into incremental validation work. The teams that we brought in are really focused on doing this at scale. And that's what we need to do. And at the end of the day, with the stop sale that we had on the Blazer and things like that, I'd rather get it fixed before we put it into customers' hands, even if that costs us a little bit on working capital because we've got to make sure that the customer is impressed with the capabilities of what we deliver. So I think they handled that well. I think we've put some things in motion to help that. But this is a journey because you've got to get connectivity right and that means you got to get the vehicle architecture, right, to be able to do that. I think the potential of the vehicle is still really high. And I think there's still a lot of opportunity around that. But we've got to make sure that we're bringing the customer along with that. The customer knows what the features are and how it's going to make their lives easier. And then begin to build a vehicle around that. And I think there will be a lot of revenue opportunities. I think in the frenzy of the last few years when people tried things like [indiscernible] for heated seats and features that people are already comfortable with. That's not the way to do about it. It's how do you make the vehicle additive to their experience. And that will draw even tighter bonds to future vehicle sales as well.

Got it. There's been a lot of partnerships, investments to help secure supply of key components. I mean, it'd be on the chip side, lithium side. I was wondering if you can kind of talk about those broadly as things are maybe a little bit slower on the EV side, if some of that was a little bit of an overinvestment, getting ahead of your skis on some of that stuff or whether it's still behind, I mean, sort of your take on that and really what that means for the capital intensity of the business and sort of the vertical integration of the company, which some claim is exactly the way to go, some claim it's exactly not the way to go. So -- I mean if you talk about all that, that would be great.

Well, I think some people like to talk about the business in really short term. bites and increments. And the reality is we're playing the long game here from that standpoint. So still a big believer that what we did was the right thing to do, and we'll be proven out because I think it's important to highlight what we did and why we did it. Number 1 is security of supply on critical components and critical components that qualify for the IRA. While we're in that sort of early stage production because there's lithium and then there's IRA compliant lithium, there's nickel and there's an IRA compliant nickel. And we took some chances in a portfolio approach with some new technologies here in the States, particularly around lithium with LHC and with CTR. And it's become a little bit more challenging for them with lithium prices coming down. But there isn't anything that we have done that either puts us into a position where we have a lot of lithium that we don't know what to do with or a lot of material that we don't know what to do with or we're stuck paying historical prices that are well above market. We bring patient capital to these ventures. But we also expect that that's going to mean that we are getting a deal, right? Sometimes that means we'll take on floor pricing risk to make sure that the venture can be successful. But in exchange for that, I want to cap so that if lithium goes into strong demand like it did last year and a couple of years ago, I don't want to have to pay those, right?. So that's 1 way to do it. We've done tiered discounts where there's less of a discount as the price goes down, as the price goes up, there's more of a discount. So a lot of things that we've done in a balanced way to make sure that we don't get stuck behind an adoption curve that is driving uneconomical investments for us. And I think the team has done a really good job of that, whether it's lithium or it's nickel or it's graphite and then some of the deals that we've done.

Getting to cap allocation. And I think your EBIT forecast this year outlook is 12% to 14%, I think it was there. There's tremendous spending that's going on for EVs. I mean horseshoes and hand grenades is kind of our rough estimate. I wouldn't ask you to plus this but kind of $5-ish billion, maybe more, plus or minus that would kind of put you in the stratosphere of the upper teens on EBIT generation, exiting that out. Those are the kinds of numbers have been used for 25 years that you would have looked at somebody like they were completely out of their mind, right? Your core business is far stronger than anybody is recognizing at the moment.

For the record, it's on sale with a historically low multiple too.

That's where we're going to, the cap allocation. There in lies the opportunity I think. As you think about the cap allocation because you're still generating a ton of cash to go along with this, once again, also including this massive incremental investment for the future when it comes. How do you think about cap allocation? Has anything changed in your framework. And clearly, it has recently with the share buyback, that you guys are going hot and heavy on which I think investors are pretty happy with and the stock price is reacting to it. And then also, kind of before we're talking about sort of the cadencing of EV investment, could some of that be cadenced more slowly to go with what's happening in the market to therefore allow for higher EBIT and cash flow generation in the short run and maybe greater return to shareholders or even some of the building up on the balance sheet to then be spent in the future. There's a lot of moving parts in that. But I mean, how do you think about cap allocation and how things may be changing given the strong performance and then potentially toggling how you're laying capital out for the future?

So I'm a big capital allocation guy. It's kind of a lot of the ways that I learned this trade of being a CFO as well. I think capital allocation is probably the most important thing that we do. You assume you can run the business regularly and you can respond to it, but how you allocate capital is what shareholders hire us to do. So I think we've got a good policy. I would say that we're deploying it much more consistently nowadays than we have been. So we went through some challenges of COVID and the chip crisis and labor uncertainty and so on, and that caused us to build up a lot of cash and just kind of put the third leg of the stool on hold, which is explained by the $10 billion share repurchase. So the steps in our capital allocation is first invest in the business. We are a business that is capital intensive because we've got to continue to refresh the portfolio. And we can tweak it, we can narrow it, we can rechange the focus, et cetera. But we're working on a fairly long cycle time for products, and we've got to make sure that we're staying ahead of where customer trends are, et cetera. So I think that's been really, really balanced. At the same time, we're also having to pivot and change manufacturing facilities, conveyance systems that can't support the weight of an electric vehicle and going in and updating plans, et cetera. I think we've done a really good job of balancing that while CapEx is higher than that kind of 7% to 9% trend line that we've seen. It's actually still pretty reasonable, especially when you look at the financial outperformance and cash generation of the business where it stands today versus where it's at 5 or 7 years ago. So I think that's been really good. The second leg of the stool is the balance sheet. And you look at our balance sheet, you look at the way our pensions are funded, we're actually in really, really good shape. And I think there can be logic for trying to take our credit ratings up a little bit from where they are, but there's not necessarily an urgency to it because I don't think you get a big bump in cost of capital. I think there is some bump in stability that you could get, particularly with the captive. But we're in a really, really strong position, which leaves the third leg of the stool, which is returning capital where it belongs, which is back in shareholders' hands after you've deployed what you can effectively. So you look at what we've done, more than 2/3 of our free cash flow now over the last couple of years has been returned to shareholders. And I think we need to be able to do more consistent returns as that. So as we manage the business for free cash flow, we pivot where we can. So you saw us delay the truck plant in Orion by a year. Some of that was in response to demand. Some of that was in response to some early lessons that we saw -- we picked up at Factory ZERO to find ways to change the product and change the manufacturing to make it more efficient to produce. So we were meant to do that. We took advantage of some of the slowdown to be able to incorporate that. You've also seen us slow down on vehicle programs. So the Bolt is a great example of that. We talked about how we had earmarked, nothing in the immediate short term, but we had earmarked about $5 billion for a whole new line of affordable electric vehicles. We took that out because what we saw with the demand for the Bolt, the customer response to the Bolt was an opportunity to retool that with Ultium with LFP in a model that will significantly improve the profitability versus the prior line. And we saved billions of dollars in capital because it's much easier to do that than it is to go create a whole new line and launch those vehicles. So a lot of capital discipline and a lot of responses to what you've seen the market changing. But that's what I mean by making sure that we're nimble. We're not giving up on the long game of where we think this is going, and I think we're really well positioned. And then the last thing I'll say about it is we talk to everybody at every weekly senior leadership team meeting we have. The #1 thing that we've got to get right is we've got to get EVs to profitability in 2025. And everybody is singularly focused on that. We've already seen some good step function improvement because remember, we said we'll be variable profit positive this year by the second half of the year and get into that mid-single-digit margins in 2025. We're making really good early progress. A lot of it this year is scale, scaling into what we've built. But we've got to continue to manage that.

Just real quick and Doug has a question, but the volume in 2025 that would go along with that profitability. Have you guys -- you're talking about 200,000 to 300,000 this year. What sort of volume gets you -- I mean I know you said that yet, you might pass on that. That's fine.

Yes. We've not given any volume because like I said, I think the journey is about profitability. So what we have said is it's the low 200,000s to get us the variable profit positive in the second half. But we also said, if you go back to what we said in the fall, we talked about 60% of the profitability improvement from '23 to '24 is volume driven. That goes down significantly '24 to '25 because we're kind of growing and optimizing into what we've built. So it's less of a driver in '25 than '24, but we've got a lot of efficiencies that we can build in.

The balance sheet is in great shape. You've got leverage almost at all-time lows. Is that a figure you want to keep leverage low kind of as we head into kind of uncharted EV territory or if there's opportunities for acquisitions? Or do you think there's some flex on the leverage where you could bring it up a little bit and still maintain the rating?

Well, I think our colleagues at S&P and Moody's and all the rating agencies, we've got a great relationship with them. And one thing that we've said very, very consistently is we want to be a strong investment-grade company. We need that for the stability of the captive because the captive brings a lot of value to us and requires pretty consistent access to the capital markets to run efficiently. So I don't think about it in terms of doing a step function change and levering up the company. I think we're in good shape. Like I said, I could make a case for making our ratings a little bit higher, but I wouldn't make an urgent case to do that to the extremes of saying, "I'm going to ignore a historically low multiple on the stock while we're continuing to buy it back and make sure we're accruing value back to shareholders that way.

Maybe we could switch gears to Cruise. I mean just curious, as you think about that business, I mean, spending has been pulled back. management team has been changed over, great technology. There was an unfortunate event and some -- maybe mismanagement by the local or sort of the cruise management, and that's been dealt with. It's a really great technology and it has a huge opportunity for you. I mean, in some of our estimates that you guys can do $1 billion in EBIT by major city in the U.S., that's our estimate, not yours, but I'm not going to push you on that, but because it's conjecture on our part. Where does that stand? And where is the cap allocation of that stand? And that really is one of the things that is very different within GM than any other automaker on the planet at the moment. So just give us an update on cap allocation, spending is going on there and the potential that you guys foresee in that business because it's huge.

So we still see a lot of promise in that business. Nothing has changed around the technology. I would say that we've been heavy into studying exactly what happened, making sure that we did our own independent review of the situation, and that work's largely concluded, and we've talked about that. And you've seen step function change in terms of how we're interacting with the regulators, and we've intentionally slowed it down because we've got to get to the point where we build credibility back with the public and where that is. And we've mentioned a slower ramp than what we were planning. So being focused and narrow. And then once you prove it out going wider versus going wide where we were, and that's allowed us to really scale back on a lot of operational and administrative resources around building out the commercial, the real estate, finance, things like that, while still continuing to lean heavily into the engineering side of it because the other review we did was on the technology. Technology is really good, and it's in good shape. So we're working to marry that out. And then the last leg of that stool is the strategic review, which we're making really good progress on, on what does this look like going forward. So I think we know that we've got to keep spending more disciplined than where we were, which is consistent with having a narrower launch view. But I would say, we're making good progress on that. And we'll have more to say about it, but we want to maintain both the urgency of getting the technology because we do think that it is really strong, and we've built a good lead over many of the others that are out there. But we've also got to be capital disciplined and find the right way to be strategic about it. So that work is ongoing.

Yes. Is there any potential in it, we're not suggesting a float or anything like that, but bringing other strategic partners for capital investment and other ways to help fund that or defray some of the capital and spending there? Or is it the partners that you have right now? I mean, some of the stuff [indiscernible] been pulled back. I mean there might be opportunities to partner and bring up the capital and allow the strategic partners in?

Yes, we're really looking at everything, and that's the point of the strategic review that's the optimal way to do this because there's obviously been a lot of capital available for AI. And this is one of the most complex AI implementation that's out there. So we're looking at that. We're looking at how do we protect and preserve the IP that we've created, how do we create a great work environment for our people. And how do we get the brand back out there where it needs to be and get it back out on the road. So that's all the work that's ongoing now, and we'll have more to report later.

Okay. We've got 2 more to sneak in here. You talked about $2 billion in net cost reduction to the program. I was wondering if you can give us an update on progress on that main components. And then one thing that you mentioned before is that the pension is well funded. You have somewhat of an older workforce. Is there an opportunity to run aggressive buyouts and accelerate attrition and retirements to maybe even up that number a bit over time. And the great thing about that is then you get to pay them out of the pension assets and they pull out of OpEx and there's a real -- I think there's a real opportunity there over time. So maybe you can talk about your current plans and maybe stuff like that, which might be...

To be clear, the dollars are the same.

The dollars are the same, but can help -- it helps earnings and cash flow in the core company, right, because you have a lot of capital over that pension plan.

So if you look at the 2 biggest components of the $2 billion cost program, we did the voluntary severance program last year, right? So we still have a little bit of annualization coming in this year, but that's largely baked and that's how we got to more than $0.5 billion last year. That's about half of it. That's about $1 billion on a run rate basis. And I think the team has been pretty disciplined about bringing headcount back in. We've used that as some of the opportunity to refresh and reskill, but mostly, it's just been be more efficient. And operate with fewer people. And I think the company has adjusted well and we've got to remain disciplined on that. Second big chunk has been on the marketing budget. And Norman de Greve and the marketing team have done a really good job about optimizing some of the marketing spend. So we're down about $0.5 billion on that. And that's been good because at the same time, our share has gone up, our pricing has held in which tells you that the team has been doing a really, really fine job of targeting that marketing spend differently and making sure that it's effective. So we've saved on engineering. We've talked about simplicity and reducing complexity in the business. We're taking out buildable combinations. That's going to have even more downline benefits because the less complexity you have in this process, the less inventory, the less real estate, the less handling you've got throughout the entire system. So those savings will continue to ripple through and will ultimately lower our maintenance -- our manufacturing cost per unit. And that's what we need to keep doing while we're also focused on making sure that we're driving operating leverage in the fixed side of the business.

Got it. We have 3 minutes left. I just wanted to use this time. If you think about the stock, I mean, we obviously have to buy, I think the stock has tremendous upside. But there's sort of a massive chasm of the bulls and the bears in the market. I mean you obviously see your stock is in opportunity, you're buying it back, like crazy, which I think is responsible in...

I wouldn't say crazy.

But in a way that it does indicate sort of a lot of belief in the value of the company, which I agree with. What would you say to the folks out there that are thinking your stock is a mid-$30 to $40 stock and are just not believers at the moment. And where do you think the big disconnect is the market. Once again, it provides an opportunity for cap allocation, accretive share buyback. So some ways you could argue, it's not the worst thing in the short run. What would your message be to the other folks that are incredibly bearish. And where do you think the biggest disconnect between reality and their view is?

Well, I think a couple of things. Number one, I think we really leaned hard a few years ago into the growth narrative. And -- I did that, too, and I'm guilty of that as well. And I think there's a really good growth component to our story because most people that and even some of your colleagues out on the street have written that this is EV at low margin at the expense of ICE at high margin, and it's just a cannibalization game. And what we've said before is we can grow ICE while we're growing EVs, and we've actually done that. So when you see the double-digit revenue growth, I think there are many elements of the growth narrative that have taken hold and held on. And we're much closer to $200 billion revenue company than we were 3 years ago. And that's a good thing. And we've done it while margins have held in as well. So I think in that process, and this is where I admit some challenges as well. I think we alienated some of the value investors. We talked about capital investment, capital allocation wasn't as consistently deployed. I think we're sort of reembracing some of that value routes when you look at where the multiple sits, not only against our historical but against the other OEMs that are out there. Clearly, there's been a disconnect. And I think that's something that you can solve with consistency. So when you hear us talk about margin performance when you hear us talk about incentives when you hear us talk about free cash flow, know that those are the big drivers of what we're aiming for. And I feel good that we're going to be able to get that credibility back.

Great. We completely agree. And I think there's a lot of upside in the stock. So we really appreciate you being here, we appreciate everything you do at GM. And keep up the very efficient capital allocation. We appreciate it, Paul.

Thanks for having us. Thanks everybody for being here.