General Motors Company (GM) Earnings Call Transcript & Summary

All right. Good morning, everybody. I'd wish this were a real fireside chat, it would be a little bit warmer up here. But I'm thrilled to welcome Mary Barra, Chair and CEO of General Motors, and Paul Jacobson, EVP and CFO, both on stage this morning. Thanks very much for making your way to New York today and being at SDC '25.

Absolutely. Good to be here.

Excellent. I'd like to start not in the near term, but really set a broad stage. And Mary, maybe I'll ask you first. You've described GM's future as moving from an automaker to a platform company. Can you explain that vision to someone outside the auto industry? What is changing? And how is GM reacting to that?

Well, I think we continue to be on a journey from an internal combustion engine vehicle, and we have a very strong portfolio to our EV. And in EV, we truly have a platform that has allowed us to launch more than a dozen EVs very quickly and very purpose-built from a range perspective, from a performance perspective and from a cost perspective. And at the end of last year, we achieved variable profit positive. I think that was very important and demonstrates the power of that platform. For both ICE and EV, then you think about it and -- the vehicle really is a software platform. And with the changes that we've made in our software organization over the last 2 years and the talent that we're bringing into the company, we have a very strong platform in the vehicle right now from a software perspective. We're already working on the next generation. And then finally, that sets us up to have a services business. Super Cruise is an important business already, and this is a big year for us because we're going to be doubling the amount of vehicles we believe that will be on the platform or leveraging Super Cruise and generating that revenue. And again, it's the system. Super Cruise has been a best tech from motor trend for L2 or, I'll say, L2+. We have a lot of features that only General Motors has, whether it's trailering, lane centering or now the integration with Google Maps that it's actually taking you on your routes. So I think all these things are building blocks that allow us to be a company that is going to be relevant in the future and set up for, we're talking about L2+ now to L3 and ultimately to L4.

Paul, does that platform approach change the long-term margin outlook? How do you think about kind of the profitability in the different segments like EV software and then on to L2+ or L3?

Well, I think if you look at the historical business model, the overwhelming profitability revenue is all driven by the wholesale action. So it's really about transforming from a B2B into more of a B2C company. And what that does is gives you a tremendous opportunity to leverage not just vehicle sales, which we're really good at, but also the car park over time, so gives you revenue opportunities across the second owner, the third owner, et cetera. And that's why we spend a lot of time talking about Super Cruise adoption as we're coming out of the 3-year prepaid periods for our customers that started this a few years ago. It's really important that we continue to lean in, index that, work that muscle to make sure that we're engaging with customers down that road to be able to drive that. Because as we know, the revenue opportunities after the vehicle is already out there kind of come in at significantly greater margins than anything that we can do in the manufacturing side. So the ability for that platform, as Mary articulated, to be able to deliver services to the customer is really what the next generation of automotive is going to be.

Looking from the outside for investors, this might be hidden under the hood a bit if we just think about the EBIT margin of a certain business unit. Are there any numbers or KPIs you'd point to where investors can say, look, track this over the next 5 years. That's the number you should be looking at.

Well, I think one is looking at Super Cruise adoption. And there's other products that we're looking at or I should say, services that we think we can put on the vehicle. So literally, your vehicle does continue to get better. I think when we talk about not just the sale but beyond, there's our aftermarket sales and parts, and that's a business that continues to do really well. And very importantly, and it reports to Paul, he can talk a little bit about it, is the credit card. And that is going to perform a different relationship and had a very successful launch. I don't know if want to add anything there.

Yes. So we just converted our card over to Barclays and relaunched the new GM Rewards program alongside Barclays. We actually posted a handful of experiences out there for customers to go get. They sold out literally within seconds. So we're really excited about the momentum and to have that -- have the great partner in Barclays to be able to help monetize that. But GM already leads the industry in loyalty. When you look across our vehicles and through avenues like either the rewards program or GM Financial, it's an opportunity to just deepen those relationships and get that B2C muscle built at an entirely different level than what it has been before. And that's where software starts to come in. So we're really paving the way. As far as metrics go, it's not a meaningful dollar amount right now. But as I said, we're paying a lot of attention to the attachment rate of customers whose Super Cruise subscriptions are coming to the end of that 3-year period because that's what we need to continue to lean in on. Because even if it's a small number right now, and then we're doubling the number of vehicles down on the road this year and beyond, that's the momentum driver and starts to unlock what the potential can be. And when you take that across tens of millions of vehicles out on the road in the future, there's a massive opportunity out there.

Now the strategy on EV and software and then into kind of monetizing L3+ isn't unique just to GM. Everybody is kind of in the same stage somewhere where they're trying to reposition their business. What's the unique angle or a competitive advantage you think that you're building at GM that will really enable you to capture higher margins in the next decade?

I think -- a couple of things. First of all, we are doing extremely well with the products we have today. I mean I think at the end of the day, in our business, sometimes we forgot, having products, people want to buy, having vehicles, cars, trucks and crossovers, that people want to buy is very important. And we're growing share with both our internal combustion engine portfolio of vehicles as well as our EV portfolio business outperforming the market. So we're growing in both. I think it starts there with having vehicles that are beautifully designed with the right technology, the right safety features are step one. So you've got to have a vehicle people want to buy. And we're able to do that, grow share with a strong pricing. We're maintaining discipline with our inventories, and we're significantly below the industry average from an incentive perspective. So that's a foundational thing for what everyone else is trying to do, and I think we're winning in that with the strength of our product. I think the second thing that sets us apart is our software talent. We have brought in, successfully attracted very strong software talent from the Mag 7. And they've come to General Motors because they realize the opportunity and the fact that the vehicle is a software platform, and they want to be a part of doing that. And Paul and I were just there a few weeks ago, and the amount of improvements that they're making and ways to drive efficiency, take cost out while giving a better performing experience in the car from the software perspective is something I'm very excited about. The system we have in the vehicle right now is not -- it's not kind of clunky when you're switching back and forth if you were in Android Auto or CarPlay. It's a very well-integrated system that is really -- I think the customers -- we're getting strong feedback from the customers. So I think that's the second -- the talent we've got to bring in. And frankly, I think with the hire we just announced last week was Sterling Anderson joining who's got a strong software background. He's got his PhD in robotics from MIT, the experience he had at Tesla and Aurora. Again, those are all areas that we think we've built the foundation, but we're going to continue to separate ourselves. So I think General Motors has been very successful in bringing in talent that our software-defined vehicle as we roll out the next generation will be as good or better than the companies that weren't -- that started with a different construct.

You've definitely got an amazing model cycle right now, and it's showing in all the data, you see the cars being selling, the ramp-up curves look amazing. What did you put in place over the past 5, 6 years to kind of get to this point? And what of that is repeatable for the next model cycle as well? Kind of where is the confidence of what do you need to do to continue on that success.

Well, again, I think it's the strength of our product development team and from -- and starts with great design. But I think one of the things that makes General Motors unique, and this is under the leadership of Mark Reuss and his team, it's how well design and engineering and now manufacturing, engineering work together to make sure that we're being efficient. Our winning with simplicity mindset has really transformed the company. We talked about it last year that with, I'll call it, the first phase of it, being able to save about $200 million from an engineering perspective. So when design is working with engineering to enable a great design that's also manufacturable, that puts us in a very strong position. But then it's really having chief engineers who understand their product. And when I say that it means they understand the customer. For instance, there's a lot of excitement right now with the ZR1 from a Corvette perspective. But there's a lot of technology that we take and learn and then it -- we can leverage our scale to put across the portfolio on other vehicles. So the engineering knowledge, and then I think one of the competitive advantages of General Motors is our ability to integrate the vehicle. The work that we do at the Milford Proving Ground to make sure just the drivability, every aspect of how a customer interfaces with the vehicle is well thought out. That's what people see and feel when they get in our vehicles. So I think that's core to what General Motors is. And we've been very successful in bringing in new talent and taking people who are very seasoned in that, working together to enable great vehicles.

I think this is an area, too, where the finance profession tends to over-index on the cost side. So the historical view of the industry is get your cost down as low as possible. And of course, there's things we can always do to get more efficient. But you can get your costs down in a vehicle so low that people don't want to buy it. And at the end of the day, if you have a vehicle that people don't want to buy, it doesn't matter how little it costs to build, right? So we've got to make sure that we continue to do these investments. And I think the one thing that sets us apart is we've been remarkably consistent over the last 4 years. We've gone after fixed costs. We've done that. But we've also engineered where we need to engineer, design, where we need to design and make sure that we're investing those dollars. And the result is a portfolio that is generating significantly more revenue on a vehicle for vehicle basis than our competitors are. We -- may be example, we do a town hall after earnings, and we talked about the 300 basis points below industry average that we were for the month of April in terms of incentives. That's $1,500 per vehicle on an average $50,000 vehicle. You can't cut $1,500 out by surgically removing a bunch of content without really impacting the customer's perception of it. So we've got to make sure that we strike the balance between being as disciplined as we can but continuing to really focus on where it matters, which is the dollars we spend to the customer to create that demand, which ultimately allows us to price the product and drive superior cash flow.

Let's double-click on electrification for a moment. And the Ultium Platform was a bold bet a couple of years ago. What surprised you most over the past couple of years as you think about that process?

Well, I think it absolutely. We had the experience of doing the Spark EV before we did the Bolt. So we had taken internal combustion engine platform vehicles and converted them. And what you end up finding yourself in is, you're making a series of decisions that you're going to have to take something away from the customer, that's why there are so many EVs out right now that don't meet customers -- whether it's range or performance, if it's a truck, can it tow? Does it have the payload, et cetera. When we started with a dedicated EV platform that allowed us -- and the fact that it's modular, we can -- is it 10 mods from a battery perspective all the way up to a truck that's 20 or 24 that really gives us flexibility. So when you look at the portfolio of EVs that we have in North America, we have 13 different EVs that once we got through the challenges of modules, we were able to roll out quite quickly. So we're getting that scale already. The second thing we said when we did this is we wanted it to be battery chemistry agnostic. Just in the last couple of weeks, we announced that by 2028, we'll be rolling out LMR, which allows us to improve energy density by 33%, so we can get more range for less cost, so we can get costs down. That's the type of battery efficiency that we've achieved with this platform. So we're not doing a bunch of snowflakes or one-off where we've got to do a lot of unique engineering. We're able to leverage this, continue to drive the cost improvement from a battery perspective and a performance by leveraging the chemistries. And we started up -- we have the plant in Ohio. We have the plant in Spring Hill, Tennessee that are running at benchmark levels with our partners. So -- and frankly, our module assembly and pack assembly are very strong now too, once we kind of got through that hiccup with a supplier, which is too big a ramp. So I'd say all those lessons learned position us well to be able to be in the market with EVs that people want to drive. And I get letters on a weekly basis of people telling me, they've gotten in one of our EVs and whether it's the LYRIQ or the Equinox or the Silverado and they love it. And they're making -- I just got one this morning where someone telling me, I have a Cadillac LYRIQ already, and my wife drove it, liked it so much, she's going to get one to. I mean, but that matters because you win customers one customer at a time. So when people get into our electric vehicles, they love them. And just to note, even from a European perspective, it's -- I don't know if everybody realized that Cadillac LYRIQ won luxury EV of the year in Germany. I mean I think that's a pretty strong statement of the strength of our portfolio. I don't know, Paul, did I miss anything?

Yes. Hindsight is always 20/20. And so what has it been over the past couple of years, I said, well, we might have approached this differently? And how is that informing kind of your plan going forward on EVs?

Well, I think our plan going forward, we have all the building blocks in place. We made the investments, so we have the battery plants. I think we were smart about what we did with our third plant when we look at where demand is. So I think we've demonstrated the capital discipline that we need to have. But -- so I think we're well positioned to continue to take cost out without taking it from the consumer from an EV perspective. And then we talk so much about EV, the way the vehicle is propelled, but software is very significant. And one of my -- the team we brought in now, as I mentioned, we're seeing such strong performance and the ability to take cost out and really give the consumer more and higher quality software that I -- if I had to do over, I brought that tailwind in a little bit earlier.

When your engineering team and design team invites you to kind of do the test drives and the teardowns, what are some of the cars where you say, well, that saying we need to kind of benchmark us against. So who are the leaders in the space that you're looking at to compete with?

We respect every competitor that we have. And there's -- this is a very complex industry. It's very globally super competitive. And so as we look at that, we're clearly looking at some of the, I'll call it, the EV startups to see what they do. But I think also we've torn down the Chinese vehicles to understand and -- component for component, how the design is put together, we feel we're very, very competitive. I think we know the Chinese auto market is heavily subsidized and with their excess capacity, they're shipping globally. So we're going to continue to look because good ideas can come from anywhere and we're constantly benchmarking. But we're also challenging our own teams. And I think another thing that difference General Motors is our strong relationship with the supply base and the rankings just came out, and I think we're #3, the highest score we've ever had. I spent a lot of time, I was just at our Supplier of the Year conference talking to suppliers and what's important to the suppliers, they get on vehicles that are going to be successful. And I think the work we're now doing together with suppliers to say, how do we make -- how do we take cost out and make it win for both of us. So we both improve our business. And that approach we've had with the supply base, I think, is paying dividends time and time again. I can tell you; it definitely is now as we look to make some changes based on the tariff situation.

And Paul, you shape the -- let's say, the volume ambitions of the EV segment quite specifically looking at consumer demand. Can you remind us of kind of where you are for '25 and how you would expect the EV business to trend?

Well, I think going into this year and certainly last year, expectations were quite a bit higher, I think, than where they are for EV adoption heading into '25 and what we do for the rest of the year. I think the important piece is, and going back to the investment that we've made, I mean, 4 years ago, we were behind where the EV curves were going. Adoption was increasing at a pretty significant rate; we didn't have the production capacity. We are making all the right investments to build the foundation and to build the platform. And we built that capacity. And now we're in a good spot where we've got more capacity than we need, which allows us to be able to flex and respond to where demand is. We've always felt like this was a case of we need to help the customers come along to that. I think the way that looks in the future is going to be different. It's not going to be as much carrot and stick in all likelihood between the regulatory environment and tax policy as much as it's going to be the old sort of roll up your sleeves and win customers over. And I think the approach that we've taken to date, where we haven't engaged in nearly the same level as the industry on incentives, but we have focused on delivering range and capabilities to the customers. And that's why our share is growing faster, even though the growth rate has slowed down quite a bit, growing faster than our competitors. So what we've got to do is make sure that we maintain that discipline going forward. And we've said a lot that our journey to profitability in electric vehicles, a big component of that has been and we will continue to scale, right? Because we've built this infrastructure, we get to grow into it. That's a much better position to be in than somebody who has just put together a couple of vehicles, and they can't get it out of the supply chain because there isn't enough volume to drive it, et cetera. But what we can't do is be so focused on profitability in that journey that we overproduced. There's a big incentive out there to do that. Historically, the industry has done it a lot. We've got to make sure that we maintain that discipline on the revenue line to make sure that we're not playing with customers' residual values and taking a vehicle that they just bought 3 months ago and slashing the price because we need to incent it heavily. So we're going to continue to be disciplined. And that might mean that we have -- the profitability of EVs doesn't improve as fast as we would otherwise like it to be, but the long-term, intermediate-term outcome is much better than us trying to solve to a single variable. But in the meantime, the capital that we're going to be spending in the future is going to be increasingly focused on getting costs out of the platform while maintaining customer amenities and content rather than blasting that out to a lot of vehicles. We've got a really good portfolio out there. There are great benefits to each one, depending on which segment the customers want to choose to be in. And I think we've got a good platform leading into whatever demand might be going forward. But it's always going to be much better if it's natural demand that's coming in versus if it's forced demand through third-party forces.

If demand is slowing down and kind of the targets are pushed out a little bit, does that give you an opportunity to revisit the CapEx you're spending on EV at this point in time?

Well, I think like I said, the CapEx is different now than it was over the last 2 to 3 years. And if it was really oriented around a lot of different entries and getting more variety, you might slow that down. the capital to go in and make the changes to the battery chemistry and the production that we have there with what we announced just very recently, those are multiple thousands of dollars of improvement in the cost of supplying power and propulsion to the electric coals. We should keep doing that type of capital to drive that efficiency. But yes, depending on where the regulatory environment goes, we might have to pivot some of that capital into extending and refreshing ICE vehicle programs, et cetera. So we're going to continue to do that. But I think what we have done, and it's a real testament to Mary and Mark especially is we've crafted a portfolio that is winning. And that portfolio has a lot of embedded flexibility in it, whether it's the plant at Spring Hill, where we can produce ICE and EV on the same production line or it's the capabilities across multiple price points, where we are more profitable in small and midsized SUVs than probably we've ever been from that standpoint. And it's a testament to making sure that we're creating these products efficiently. But with a desirability that allows us to go to market in various different areas and environments. And that's what the team has really done. So this portfolio matters. And I think the historical perspective that comes into our relative outperformance in terms of what we've done on cash flow and go-to-market, I think, is lost amidst that history because it gets dismissed as a cycle. It's been a very different and very intentional change in our approach of how we go to market and what the portfolio looks like.

Knowing you when you say reallocating capital, there's a lid on CapEx, I'm assuming this is not spending more. This is spending differently.

Well, I think we have to watch that. I don't think that the -- at the end of the day, the market fears of CapEx are suddenly going to spike because we have too onshore everything. That's a reaction. That's not actually a strategy to think about it. We're being very deliberate in how we think about it, how we think about what the tariff environment is, what the tariff environment is going to be, what the EV environment is going to be, where ICE is going to be, et cetera, and we balance that. But as we've talked about before, I mean, capital budgeting is a function of two things. Number one is affordability. We can certainly afford to spend more than we have been, right? You look at our free cash flow. It doesn't mean it's the right thing to do because the second piece, which is probably even more important is can you implement it effectively because in order to spend more on capital, you've got to hire more planners, more supply chain, more engineers, more technical people, your fixed costs start to creep up. So we've got to make sure we strike that balance across the board. But if we spend a little bit more than what we've been spending in the last couple of years, it's done very thoughtfully and done with a lens of its temporary and within the realms of what we can afford and not to get our fixed costs out of whack.

And generate your return?

Absolutely. We thought that was a given, good clarification.

We talked about EV side; we talked about kind of the combustion engine cycle. What about the drivetrain in the middle? What about the hybrid, which is notably absent from your portfolio in the U.S.

Well, again, we know how to do hybrids. We just launched a successful hybrid in China, and we're growing share after we've done the restructuring. But from a U.S. perspective, everybody has to understand, when you have a hybrid, you've got two propulsion systems on the vehicle. We've also had ups and downs with hybrids in the past in North America, specifically the United States, where the adoption went up and then its quickly went down. Customer research says, especially with plug-ins, people don't plug them in, so they don't even get the benefit of it. So we will have the right hybrids in key segments because we think it's a smart thing to do, especially in a world that we're seeing a lot of change. But we also think getting to the end game and deploying capital on getting EVs to be profitable and approaching being on par with where our ICE profitability is. We think that's the better long-term play because that's where the industry is going to go. I very much believe that's where we're headed. And every month, charging gets a little bit better. And there's the industry association with IONNA. There're still startups continuing to invest in this space. We have a very successful partnership with the Pilot Company and that's one of the highest rated, if not the highest rated charging experience when you're going on a road trip. So again, we will -- we know how to do the technology. We have it in our portfolio for where we think it's important to have and we'll announce it as we go forward on what segments are we well on our way to having that. But we don't want to get distracted in what's -- and deploy a ton of capital and engineering resources on something that again, the customer has already gone through a cycle once of not appreciating, valuing and therefore, delay the end game, which we think is the longer-term play.

Is this something where the partnerships you've been talking about for the past couple of years might come into play? I mean you've announced some partnerships with other OEMs. Is there anything that can help you in that arena to also save CapEx ultimately and join forces on some of these initiatives?

Well, we have a very long-term partnership with Honda. We have announced that we have a memorandum of understanding with Honda, and I think you'll see more, I don't have anything to announce today. But I think you'll -- we're continuing to strengthen. And those are opportunities in some cases, clearly to share an engineering and R&D dollars, which I think is important and some of it will lead to, I think, driving more efficient capital as well, depending on how we decide to capitalize the things that we work on together. So I think there's an opportunity both from an engineering and a capital side as we move forward, and we'll have more to share as we look forward.

So we've talked about EV and software. Let's talk about ADAS and autonomous vehicles. And maybe we'll start with the Cruise experience. And I'll just ask what did you learn? What did you take away from your Cruise involvement? And what's next?

Well, I think we want to be clear when we made the decision with Cruise. We made a decision not to continue to deploying capital in rideshare. Rideshare is not our business today from an Uber or Lyft type of perspective. Running a fleet like that is something that we looked at the capital that was going to need to be deployed because someone needs to own that fleet. And we thought the technology is important, and we believe that it's going to be a differentiator and something that customers will expect over the medium to long term for personally owned vehicles. And so that's where our focus is. We had tremendous talent within technical talent with Cruise. They are now working very closely with the GM team as we move from what I'll say, L2+ today with Super Cruise to L3, we have plans, specific plans there and then beyond. So we -- I think what we've learned and continue to understand is how important this technology will be for the future. And we have a great understanding, and we've got strong technical talent continuing to work on it.

One of the key features you see increasingly adopted in China. And of course, we've got FSD in the U.S. is what I'd call navigation on autopilot. You get in the car, you put in the destination, the car handles the majority of the drive itself. It's not necessarily autonomy because the driver is still supposed to be in charge. But if I look at your technology, you're getting towards that. And so what is your road map kind of -- can you give us a sense of is these 5 years away, is this longer way for you to really expand the capabilities of those vehicles to handle kind of end-to-end Super Cruise.

We continue to add features to Super Cruise. I mean we're still the only ADAS system that allows for trailering, which I think is very important because, again, a lot of times people really enjoy using Super Cruise when they're on a road trip and that's likely can often involve trailering. We have lane centering, and we now are rolling -- in the process of rolling out the integration with Google Maps. So it will know where you're going in the route and guide you there. I've already experienced it. So it's -- we're continuing to add features and move in that direction, moving on a road map to L3 and beyond.

Is the limitation of kind of just being on highway and not on off-ramp right now, is that mainly a software limitation within the cars? Or is that also hardware limitation? So can you retrofit, for example, some of the cars on the road now if the technology becomes available.

Well, I think we are able to add, and we have been adding features to our existing portfolio as we roll that out. Some require as we go forward, depending on what generation I think as we continue to have more and more vehicles that have our, I'll say, SDV 1.0 or we've called it VIP, I think that enables us to continue to upgrade, so it's not a clear-cut answer, but I think every -- with vehicles we're putting into the marketplace right now, we can continue to add those features.

And Paul, right now, that's a big portion of the service revenue, the software revenue that's coming in, the continued kind of conversion of customers on to that technology. If you take a really long-term view is L2+, maybe even L3, is that's going to go the way of the airbag, the nav system, the seat belt. Is it going to be commoditized in the long term?

Well, I mean, I think, first of all, the Super Cruise is a relatively small component of what we think in terms of total services. We've had OnStar for a long time. And that produces significantly higher margins across the enterprise and has continued to be a strong force and a strong contributor to the P&L, even as technology has continue to improve in the vehicle. So we think that's an opportunity to continue to leverage that direct point with the customer. And ultimately, the automakers that are going to thrive in the end are the ones that are going to be able to continue to enhance the vehicle and continue to improve the experience going forward. And I think that applies to ADAS as much as it applies to software and the capabilities of the vehicle as well. So I think we've got to continue to go into it as if there is a real sort of long-term differentiator that's going to be possible. but we can continue to assess that. And that's what we're doing right now. And part of the reason why we opted not to continue to put capital into the rideshare business, instead focus on that personal autonomy component and enhancing that as a much better use of our capital base than building up a rideshare enterprise, which, in theory, there are going to be multiple players and that will ultimately get commoditized.

For your platforms...

Can I just add to that, though, even when you think about what right now with L2, might it become commoditized many years from now, I don't think can predict, but right now, Super Cruise continues to be distinguished as the best and MotorTrend called it the best technology because of our focus on how we integrate from moving where the vehicle is in control versus the individual, how we are monitoring to make sure the person is paying attention, so from a safety perspective and just a comfort level where the person in this environment understands what's happening. I mean there -- so even with technology that maybe you can say over time is going to be -- become more standard, the way in which you integrate into the vehicle, I think, matters. I think that's what Paul is talking about from how we can continue to differentiate ourselves.

We've covered a whole bunch of the aspects of the platform strategy. You've got a good model cycle; you've got the EV components in place. You're improving on software. And if I take a step back for the past decade or even since the GFC, you've been successful in rightsizing your global portfolio and concentrating on the more profitable bets. Is there may be an opportunity to turn that around. If you look at the global market share, I think GM is down from 10% pre-GFC to around 5% globally now. With the technology in place, with those building blocks, is there actually an opportunity to think differently around global sales than you might have for the past couple of years?

Absolutely. I think that's a growth opportunity for us. And Europe is a great example. But we're going in -- as we have still no seller's remorse from the decision, we made with Opel several years ago. But as I look at now, it is an opportunity for us. We have great EVs, I mentioned already the recognition that our EVs are getting there. I think there's some stabilization that needs to occur in the European market from what are -- what is the regulatory system going to -- or regulatory requirements going to be? How are they going to make sure that there are not vehicles coming in that are literally being dumping going on. But I think as that market stabilize, which it will, and it's an important market, I think that's a growth opportunity from an EV perspective. I also think as we look at some -- the opportunity, we are successful in the Middle East, but we have more opportunity to grow there. Our business is strong in South America. There's been some upon from a macro perspective there. But -- we continue to be strong and frankly; our vehicle is doing well even with the Chinese competition. So I think -- and we're growing here. And then when you look at other opportunities to have to grow, for instance, with GM Defense. The -- it's a very good business for us when we're taking parts off of our part shelf integrating and delivering highly capable, for instance, the Infantry Squad Vehicle, a highly capable vehicle where we're leveraging our existing components. So it's more effective and it's faster. And we're getting, I think, nice reception from different -- from the Pentagon as well as other allies with the opportunities there. Those are just a couple of areas that I think we can continue -- we've grown for the last few years. I think we can continue to demonstrate growth over the long term even on our base.

You just mentioned the competition between BYD and GM and others, of course, in South America. What are you learning there? And maybe also how does that inform how you view the Chinese market if you're successful against BYD in South America?

Well, I think it's important if you go -- if you look at China today, I mean the China market -- any time you have a market where they're in the midst of a transformation on propulsion and you have 100 new domestic competitors, many of whom aren't profitable and also I think some of the largest are being, I should say, I think, are being subsidized. It creates an interesting dynamic. We needed to restructure our business. We did that last year. That is on track right now. We also are rolling out a portfolio that we need from a new energy vehicle perspective that's key from a China perspective. And as I said, we're seeing -- we're on track with the restructuring plan, and we're seeing share growth. And so we know how to compete and have products, and we're at the premium level with Cadillac and Buick. So I think there is a smaller but important way we can participate in that market because over time, I do think that market will in the midterm, have an opportunity to grow when you look at the density of vehicles versus the population.

Before we start wrapping up, I would be remiss if we didn't talk about tariffs today. I will contain it. But I'll still ask kind of what have you may be learned over the past couple of weeks that gives you kind of an edge or where you see an opportunity where GM might actually carve out something that is not all bad kind of move that raises costs across the industry.

Well, I think first, step back and look at what General Motors has successfully navigated and shown agility and resiliency, whether it was COVID, the semiconductor shortage, some of the supply chain challenges that have plagued us since COVID, and we continue to outperform. I think when you look at from a tariff perspective, we actually, as we went through COVID and semiconductor, I have to give Paul a lot of credit for this because we reflected and said we need to have a much more resilient supply base and started taking steps 5 years ago. So from a North America perspective, we've increased our U.S. content by 27%. That's incredibly significant. When you look at battery raw materials and some of the key areas we've invested and we're going to continue to invest. But we're not just starting now because of the tariff situation. It's something we started working on several years ago. So the decisions and the investments we made will be coming online late this year, next year into the following year. So I think those types of decisions, and we -- at that point, we were looking to have to say, okay, no one has a perfect vision of what the future is going to be, but we can look at where we need to have that resiliency. So we're taking that same mindset. Again, we're taking the fact that we have a great relationship with the supply base, to look at how do we make smart decisions? How do we use it to drive scale? How do we look at where the suppliers have opportunity and open capacity? Where do we have open capacity. So I think you're going to see us be very resilient and again strengthen our business as we move forward. And in some cases, seize opportunities where the vehicles are so successful, it'd be nice to have more.

Paul, you quantified a bit the impact that the South Korean imports into the U.S. have. And those are some of your most affordable vehicles that also are a great entry into the GM family. So it'd be sad to lose them altogether. So that can't be the strategy. But at the same time, if the tariffs kind of remain, that provides probably quite a bit of cost headwind to those cars. So how are you thinking about the dynamic with the vehicles from South Korea?

Yes. Well, I mean it's a little bit of a wait-and-see approach, right? We're still contribution margin positive on them. I think we're optimistic that as the administration continues to work with other countries on bilateral deals that Korea is going to be an important trading partner. They're a solid ally, et cetera. So I don't think we want to rush to make any decisions about the long term while we're in this position where it's sitting at a 25% tariff. And I would say the highest likelihood is that's going to be lower, and we'll be able to assess that from the standpoint. But the business we have over there is really strong. The vehicles have probably never been better in terms of what we're bringing over. And I think there's still a lot of opportunity there.

Maybe turning a bit to the broader view of the GM stock, which is valued as it is valued today and if we look kind of towards other elements like Tesla, there's a big valuation gap. Now Tesla has a lot of other elements, but are you comfortable with where GM sits today? Or what would you tell investors when they're looking at your valuations and kind of wondering why the free cash flow yield is so high.

Well, I wonder if a CFO has ever been up here and said they're comfortable with their valuation, probably should be fired if I said yes to that question. But no, I mean -- and I think, look, this is a journey and something that we've done. I mean the industry has been really tough for a long time. And yes, there are others out there that come into favor and out of favor from time to time. What we're really trying to establish is just a really consistent track record, get out of as much of the cyclicality. And yes, this is a cyclical industry, but behaviors that we and others in the industry do, actually amplify that cyclicality. We overproduce. We create a lot of inventory. We have to discount it because demand falls, et cetera, maintaining that steady discipline of how we go to market, how we set up our inventory, how we produce and really focus on that consistent both margin, share, and cash flow generation is going to be the recipe that I think over time really works. And we've tried to lean hard into that with the buyback activity that we've done over the last few years and really kind of changed this into a little bit more of a math equation rather than the emotional equation that exists, and I think makes many of your clients and other sell-side clients quite happy with the volatility that gets generated. But what we're really focused on is let's just run the biz consistently through this. And when Mary talks about the track record that we've had over the last several years through a lot of really challenging environments. I mean, keep in mind what the attitude was about the chip crisis. It was all going to fall apart. And we and others in the industry had some of our best years ever during that timeframe. I think we've learned and applied a lot of those lessons going forward. Tariffs, probably not going to be as bad as the market reacted to and we'll be able to mitigate that. And I think if we can establish a track record, of just staying focused and making sure that we keep our focus where it needs to be, which is on the customer and producing great vehicles that the customer wants. I think there's a great recipe for success. And yes, we may have to pause the buyback from time to time as we go through periods of uncertainty, but it doesn't mean that our resolve hasn't changed. And I fully expect that we'll be back into the market repurchasing shares as we get into the second half of the year.

And if I could just add, too, and Paul is absolutely right. So just to build on, though, we're also making investments in what I think differentiates the automakers who are going to be strong in 5 years, 10 years from the investments that we've made from a software perspective. We're not abandoning and SDV 2.0 doesn't care what the propulsion system is. It's going to go across our EV and our internal combustion engine portfolio that gives us a stronger platform and will be done very efficiently and gives us a platform as we go from L3 to L4. So in the areas where I think that this -- how people move is going, we're making those investments in a very smart way, not waiting for them to become commoditized and get them. We're being smart about how we do that. But I think when you look at what the vehicle is going to be in the future, we're well-positioned. And then from an EV perspective, Paul talked about already, we're going to make the investments to continue to take cost down because we know another differentiator is demonstrating that our EVs are profitable, we have the right software, we have the right autonomy. And that is really where the industry is going. I think that's why some have different valuations because there's a view on that. We're going to prove it to everybody. But those are the foundation things we're doing that are frankly quite different than a lot of what are labeled our traditional peers.

I think that's a great bridge to take a 3-, 4-, 5-year view. And I'd ask, what are the three most critical things that GM needs to execute on in those next 3 to 5 years?

Our strategy has four pillars, so I'm going to give you four. But...

I walk right into that.

It's going to continue to be -- to have winning products from an internal combustion engine perspective, continue to grow share, continue to differentiate ourselves with products people want to have. Then it's EV, I've talked about getting EVs profitable and continuing again to have these that people want to pay for that we're able to have the right pricing as well as below from an incentives perspective because we're disciplined and focused on the customer. It's that software platform. And I would say we're very -- I'm very pleased with where we are now as we roll out our next generation. We'll be as good, if not better, than anyone in the industry from a software perspective and then building on that autonomy. Those are the four things that I think are the future, not just the business the way it is today. And we're not making knee-jerk decisions of, oh, the regulation might change. We're not going to -- we're going to stop doing this, we're going to stop doing that. No, we're looking where the long game is I think because of the strength, because of our discipline, because of our platforms, we're able to make those decisions to have a successful business today, tomorrow and 3, 4, 5, 6, 10 years from now.

Excellent. I'd almost say we'd leave it there because I don't think we can wrap this up better. Mary, Paul, thank you very much for being here. Thanks for the time. I know you've got some meetings to get to. Thank you very much.

Thank you. Thank you very much. Thanks.