General Motors Company (GM) Earnings Call Transcript & Summary

Okay. I think we're going to get started here with the next session. Very pleased to have with us Paul Jacobson, CFO of General Motors. GM has been our favorite idea within autos, and we're very pleased to have Paul with us today to discuss the business and the go-forward outlook. So Paul, thanks for joining us as always.

There's a ton we could talk about here, so -- but I want to sort of try to keep it somewhat focused. So let's talk about the -- I want to talk about the here and now, and then let's transition to sort of where we go over the midterm and then where we go maybe a little bit longer term. But we got sales updates yesterday. Things look good. It seems to us like things are tracking in line with sort of what we expected and probably what you expected. But you do have about 3 weeks left in the year. So just curious if you could give us a little bit of an update as sort of how you've seen the quarter play out relative to the guidance you issued at the end of the third quarter.

Yes. Well, first of all, Joe, thanks for having us. And you have been a fan of GM and probably one of the longer ones, too, in terms of recognizing what we've been capable of. And I think when you look at this year, in particular, really proud of what the team has done this year. I think despite when you -- it's hard to even go back 12 months and understand the type of uncertainty and anxiety that was out there. And we were pretty calm from the start and ascertaining what the impact of tariffs was going to be, et cetera. We got definition around it, but we had already started working on what our plans were. And as we sit here with 3 weeks to go in the year, feel really good about how stable we've been able to do that. I mean there's a lot of work going on behind the scenes, whether it's public policy or supply chain or even on the commercial side. But I think it's a really good testament to how we've tried to pivot and run the business to be flexible. We're not complaining about what's happening around us. We're controlling what we can control and taking a lot of that, as we've referred to it recently, self-imposed cyclicality out of the business, tighter inventory, more disciplined incentives, et cetera, it makes the business easier to run, and we've seen that in these times. So when you look at right now, I think the environment -- the demand environment has been pretty for us. Let's set aside EVs for a second because we'll spend some time talking about EVs. It's just a ton of noise in the EV space and probably going to be for a little while. But on the ICE side, really, I thought really respectable numbers in November. I mean demand is holding up. There's a couple of areas we could have done better. We knew we had some supply shortages, particularly on like the Chevy Trax and some of the lower-end vehicles, largely to some of the challenges we had in Korea, where we had some disruptions. Those are all short term in nature. But when you look at trucks, SUVs, et cetera, I think we're shaping up for a good year into 2026 and as we started to lay out that guidance, believing that '26 can be better than 2025, I think has kind of given a collective side of relief from the markets. You didn't really know how to think about the annualization of tariffs, the consumer and so on and so forth. But from what we can see and when you look at the opportunities that are ahead of us in 2026, we're really focused on the cost control items, where can we go and take costs out of the business. And I think that's going to keep that momentum going into next year.

Yes. So let's dive into some of those things. And maybe sort of a good way to sort of transition from what you just sort of talked about and the impact this year and into next is Korea because I think yesterday or the 2 days ago, London came out and said it's retroactive back to November. So I know last time you spoke, you said sort of it's final, but not officially final. Is it now officially final? So we should expect a little bit of upside, I guess, in the fourth quarter. And then we've estimated that could be roughly $1 billion in '26. Is that ballpark accurate that sort of helps keep that sort of tariff neutral to sort of slight benefit in '26 versus '25?

Yes. So let's talk about the short term. So it is retroactive to November 1. That was our expectation when we built our guidance and went on the call. There was an opportunity potentially for some upside if they had gone retroactive to the date of the original deal. In August or when? Back in August, as they had done with some of the other countries. But as I understand it, there was still some tweaking going on between the parties, which meant that, okay, well, we can't make it retroactive back to then because the real deal was November 1. So it is good news for us, and it will help the quarter, but we've built that into our expectations. There's no additional upside from there. As we think about 2026, I mean, the benefit in the reduced tariff rate is actually a little bit lower than the $1 billion. And we said $2 billion of tariffs at the beginning of the year at a 25% level. But we were also actively working on self-help initiatives and thinking about different opportunities to bring that down. And we were successful in doing that. But we do think that is going to be a tailwind next year, just not as much as the whole 50% because the ultimate tariff bill that we're going to pay this year for Korea was going to -- is going to be a lot lower than the $2 billion from the stuff that we've been working on. So as we get into these deals getting finalized, -- and hopefully, we start to see more progress on USMCA, which I think is the next big one that the administration has to take on and certainly has a big effect on us. We're still in the mindset where we think we can be flat to down maybe slightly, certainly lower on an annualized run rate than we were in '25 heading into '26. So as we get into fourth quarter results and into January, we'll give more complete guidance on what we see the '26 landscape looking.

And that flat to down is as USMCA Mexico kind of stands right now. So if something happens there, which you said is probably the next thing administration work on, that would be additional upside.

It could be additional upside. But as we sit here today and as we think about '26 being better than 2025, we kind of narrowed it into those pillars that we talked about, improving EV profitability through the restructuring actions that we took in the third quarter, and we've alluded to for Q4, warranty, better warranty, potentially better ICE performance from compliance, if GHG gets finalized, et cetera, there's some good news there. And then that annualization of tariffs is a part of it. And that's all opportunity available to us before we even talk about what is the consumer going to do hold up. So either it's a bit of a relief valve if we see some weakening in the consumer next year or more importantly, it's additional upside if we could see a stable or potentially even improving consumer environment next year.

So let's start on the -- for lack of a better term, sort of self-help initiatives on the cost side. And you mentioned some of the regulatory stuff, which I guess is self-help, although it's really sort of above you, if you will. So really, let's focus first on warranty and restructuring, rightsizing of the EV business. So you've talked about how you're seeing some better experience on the vehicles and the lag that, that sort of takes into '26. Can you just remind us sort of what gives you the confidence that warranty can be that year-over-year tailwind into '26? Is it just the experiences? Or are there any -- I mean, I know you had some big onetime items from the recall in this year as well. So like order of magnitude, how much could we be talking about in '26?

So it's probably a little bit early to tell, but we think it could be in the $1 billion if not more. So to understand warranty, there's so many things that are going into it right now. Our incidents per 1,000 vehicles has actually been down and trending down over the last couple of years. We've seen a little bit of a pop with some of these supplier-related issues around the L87 engines and some of the transmission issues, which is unfortunate, but these things happen from time to time. But the actual sort of overall quality of vehicles has been improving. So we've seen a couple of different things. Number one, the cost per repair is off the charts. I mean when you have to replace an engine or you have to replace a transmission, it doesn't matter if you're 25% better at having incidents. The incidents are costing you 3x, 5x as much. So we've got to get after that. And I think we're in a good position on the L87 where we should be cresting over the top and starting to come down that hill. There's also inflationary pressures, and we've seen this not just from dealer labor rates in the shop, but also the way state legislators have legislative bodies have changed the laws to help markups. And we see some activity where dealers are taking advantage of that, to be honest. And that's an industry issue. We've seen that across the board. So we're talking to the dealers and making sure that we've got a fair balance about making sure you get the right retail markup and return on your investment for the work that we're causing with the warranty. But let's not make sure that it's over the top. So I think there's some inflationary pressures that we can work on. The bulk of it ultimately is just getting at this cash spend. So what we alluded to is that as the cash spend is going up, your warranty liability is going up at a higher rate because just remember, liability is all about the current spend level projected across the future set of vehicles as well as the vehicles that are out on the road. So the first thing that you have to do is flatten that curve on warranty spend. We're flat -- we're pretty flat on the cash outflows per month. Now we got to bend it down, and that's where the lag effect comes in. So the year-over-year improvement in warranty is really going to be a function of when do we see that curve come down and how much of that benefit do we get in '26. But coming down the curve, if it doesn't help us in '26 as much as it could, it's still going to be a tailwind into '27. So this is about managing it for the long term, and we're all over sort of every variable in the equation to try to get after it.

On the EV side, and you mentioned there's obviously a little bit of noise in the market now. So there was pull forward, now there's give back. We'll sort of see where things settle out. But I think our expectation, I'd say, market expectations are that EV demand will be lower next year than we've seen this past year. You've talked about restructuring, but then Mary and the team also sort of still talk about EVs being sort of the North Star. So can you just help us square those comments, how you're sort of really going about rightsizing the capital that you've already invested, how you sort of think about additional sort of future investment? Because I think that's still one of the, I think, the concerns that investors have here, which is that you're going to be forced to or going to invest in product that really doesn't have the same return profile as the rest of your business.

Yes. And I think this -- I'm going to be a little bit more long-winded on this answer because I think you've got to provide the overall context because when we were sitting here a year ago, the apprehension in the investment community was the $7,500 is going to go away. The President has made that a signature that we're going to take away the consumer tax credit. Everybody was worried about that. Nobody saw coming the regulatory framework changes, which was the stick to the $7,500 credit. And when you really sit back and digest the overall economic impact of the regulatory environment on the $7,500, the $7,500 was a drop in the bucket compared to the cost of the stick. And that was what was really driving the industry. So you saw and you still, to some extent, see the behavior even post September 30, where manufacturers were offering massive irrational incentives on EVs. Some manufacturers out there offering 50% to 70% incentive levels. There's only one reason you do that. It's not to have a successful EV business model. It's to accrue and acquire credits to be able to continue to sell your ICE franchise. So that's the type of irrational environment that I think what this administration has pulled back from is saying, look, we want an industry that makes the vehicles that consumers want. And there are some consumers that want EVs. We've seen it, and that's grown over time. It was there before IRA. It popped after IRA. It's come back now that it's come back down since IRA consumer tax credits are gone, but it's not 0. And it's likely not going to be 0. So when you think about all that landscape and what does it mean for GM, we were basically creating the infrastructure to comply with the laws and the regulatory environment heading into 2030, which was going to require 50% of all vehicles sold to be EVs. And we have always talked about the penalties for violating GHG stringency. It's far greater than 100% of the net sale value of a vehicle, let alone the margin. So nobody is going to do that. So we set up this infrastructure to be able to do that. And now what we're having to do is to pull that back. So I don't -- I'm not a fan of writing off capital investments. I think we've got to be very disciplined to try to minimize that. But if ever there was an opportunity or a situation that drove that, it's this seismic shift in the regulatory environment. So what we're doing is going and saying, I'm never going to get EVs to profitability if I'm producing 150,000 to 200,000 EVs on a capacity set that was tooled to build 1 million because everything is costing 5x as much in terms of overhead absorption, et cetera. So ultimately, what we're doing is going through manufacturing segment by manufacturing segment and say, what kind of capacity do we take out because of the regulatory piece of it so that we get a more accurate picture of where our EV trajectory is. And that's why we haven't talked about variable profit or EV profitability this year because it's just noise, right, until you get that rightsized and really understand it. We're making good progress on reducing the cost of the vehicles. That's been totally absorbed and hidden by supplier claims, fixed cost allocations, cost thickening from underutilization of plants, et cetera. So what we've got to do is we've got to get out from underneath that. That was part of the restructuring charge that we took in Q3. We've alluded to more work. That work is still going on in Q4. We're not prepared to talk about what it is today. But the intent of all that is to rightsize that footprint to make sure that going into 2026 in this new environment, whether EV adoption sits at 5% or 7% or it goes back up to 8% or 9%, we're in a position where we can actually have much more transparency into the profitability of those vehicles going forward for us and for our investors. So that's where a lot of that upside is going to come because, like I said, even though this year, we were reducing the costs, the losses were continuing to grow because you have onetime charges coming in all the time.

You had certain facilities, which were, let's say, EV dedicated. You have others like in Tennessee that were sort of more flexible. You did mention, right, EVs aren't going to 0. There is still some demand. And again, I think most people would agree that with enough time, right, you will see EVs start to sort of move higher again. Is that flexible capacity model something you will look more towards as you -- if and when you sort of begin to reinvest in the business? Or is the dedicated facility something you'll need to reevaluate?

Well, I think it's a combination of both. I mean, at first, it starts with the capabilities of the plant, right? You've got to make sure you've got the right plant setup that can absorb the makeup space, et cetera, to be able to do ICE and EV on the same line. Spring Hill is a great example of that. I think Fairfax, we're going to be able to do that as well. Other plants are just geared towards one or the other. So Factory ZERO now becomes the sort of linchpin for EV production that was going to be Orion, but that was going to be at such volume. We weren't going to be able to fill it for years at a lower EV demand or EV penetration. So the natural switch, which we announced earlier this year was to pivot and onshore more truck and get some incremental SUV production at Orion on the ICE side, while still sort of optimizing the capacity utilization at Factory ZERO. So that's an example of us pivoting, and it's expensive. There's no doubt about it. But I think when you look at $4 billion of incremental capital that we announced this year for reshoring, but we only took our capital guide up by $1 billion a year for 2 years. That's the type of pivoting and dynamic management that we need to do because the priority has changed, right? The more we can do that and the more nimble we can be there, I think the greater longer-term returns for shareholders we can drive.

So we talked about warranty. We talked about the EV profitability. There are other elements, which you sort of alluded to from a regulatory environment. One is just sort of the absence of credits, right? I don't think you've quantified despite us sort of asking multiple times if you're willing to today, that would be great sort of what it was in '25 and how much of an easy sort of unwind that is in '26. Beyond that, I think the thing other investors are really focused on is mix. And I think your message has been that this is a big -- this is a potential tailwind over time, but maybe not that meaningful in '26. But correct me if I'm wrong and just sort of how you sort of view mix going forward. And really, I think one of the things we struggle with is like it seems like a very difficult exercise to actually figure out where demand left unconstrained by a regulatory environment can go because we don't really know what the market looks like because you and your competitors have been supplying the market with vehicles to meet some of these onerous regulatory requirements. So how do you think about that as an organization? And is -- you mentioned the $4 billion investment in the U.S., a lot of that was or some of that was for trucks, SUVs. That can be viewed as a little bit of a sort of maybe tariff mitigation. But is the other way to sort of interpret that as a clue to where you think industry mix can go?

Yes. Well, first of all, on the regulatory and compliance front, what we have talked about is in 2024, we spent about $2 billion on credit. Now that's not an annual number because you're buying ahead and you're amortizing them over years. But last year was about $1 billion in compliance expense that we ran through and roughly half between GHG and CAFE. You've seen us write-off in Q3. We wrote off about $120 million of CAFE credits. Those are now 0, but we also had liabilities going forward that net out from that and so on. So CAFE is done. And the administration is continuing to look at the standards in addition to zeroing out the penalties. So I think that's all good in terms of getting consumers what they want to buy. The other piece on the GHG, which constitutes the other sort of half of that expense load, and it's been trending at a little bit of a higher rate in 2025 just because of the mix that we've been producing, it's not done yet. We expect that to be done in 2026, in which case, there would be a headwind a tailwind because we are expensing the credits right now and the compliance costs that we won't have to next year. So we do think, assuming that they're on the time line that they say they are and what they're working towards, we do think that there will be a tailwind for that in 2026 and part of what's giving us the confidence going forward. On the bigger question, I think that is the next 5 years, the fundamental strategy piece that we've got to get right because we've been shaping up for the last 2 to 3 years, a portfolio that was going to be compliant with the prior standards. So that meant more EV offerings, fewer ICE offerings. And now we're pivoting that back. So we've said pretty publicly, we're still going to invest in EVs. The investment in EVs is going to be very different than what we saw in the last 3 years, where it was about building a portfolio, getting more entries, which you have to do if you're going to get to the type of penetration levels that the prior administration was looking for. We have that portfolio. There's no reason to not necessarily still offer them because you've got a lot of sunk costs into it. You got to make sure that you're going to be able to build them profitably and before you scale up, but we have that opportunity to do so. So instead of the capital that we're spending today is not about proliferation of the portfolio, it's about getting the cost down. So LMR technology, prismatic cells, et cetera. These are going to take thousands of dollars out of the cost of the EVs and position us well for when EV demand starts to grow again or if there's a regulatory shift, et cetera. So when we talk about EVs in the long run, we still do think that long term, customer adoption is going to go up. The capabilities, the performance of electric vehicles and what they can do is winning people over. What is causing that to be slow is the anxiety of range of charging speed of charging locations. That's going to get fixed over time, and it's going to improve over time. But what we do know is that roughly 80% of customers who have bought an EV have said their next vehicle purchase will be an EV. So you're starting to mount with some smaller, albeit slower growth rate of incremental adoption, but you're also starting to bring in the people who might be on their second or third EV that are coming in. So that's what I said before that before the IRA, EV adoption was in the 5% to 7%. So it's reasonable to believe that maybe that goes to 6% to 8% over the future. But right now, it's just noise. I mean you look at our November numbers for EVs, they were down, right? Well, of course, they were down because some people bought their November EVs in September or August. So I don't think we're going to know where natural demand for EV sits for probably 4 to 6 months before we start to see some consistency out of that. And we start to see what is the competitive environment going to be because really we're still seeing increased discounts and incentives on electric vehicles today when everybody has a sense of where the direction is going. So there's 2 reasons that why a manufacturer would do that. Number one is they're worried about whether the compliance relief actually happens or not, and they still got to get credits. or number two, they might be liquidating their inventory. So in a world where the competitors are liquidating their inventory gets us actually a cleaner sheet and a cleaner landscape to bring our EVs, which people have adopted pretty well based on the mileage and the capabilities and so on to actually come to the market in a much more rational environment, where we think that could be helpful. So what we're really doing now is thinking about producing EVs in lower volumes while we work on cost reductions and we work on market stabilization. And then hopefully, as we get into '28 and '29 and we get the lower-cost battery cells with more capability, then we start to see adoption take up, and that could be a recipe for us to be really, really successful.

But it's only -- so you could get maybe to variable profit on the first leg, but to get true profitability, you do need that scale eventually, right, that volume inflection. Is that fair?

Well, I think what we're trying to do is to bring down that breakeven point with the restructuring work that we're doing right now because if I have to grow into 1 million units of production capacity, yes, there's a lot more scaling than if I cut that capacity down significantly to something that's more manageable for the next 5 to 10 years and where we think that's going to go. It's going to be a lot faster for me to actually fill that up.

So we talked a lot of -- we focused on a bunch of the potential tailwinds into '26, but this is -- as I'm sure you quickly learned since coming to GM, it's a very complicated business. There's lots of -- there's always puts and takes. So one of the things which you've alluded to a little bit, but I was wondering if we could just spend a second on is launch costs next year because you do -- you are planning to, I think, refresh the full-size truck platform. There's usually some costs associated with that. Now you're always launching stuff. So I don't know whether that seems like a larger program than normal. So maybe there's a little bit of an incremental headwind there. And then you mentioned -- you alluded to earlier, some of the additional capacity of the $4 billion in the U.S. I think that starts maybe late '26 or really more '27, but some of that presumably needs to get spent in advance of that. So how do we think about that level of investment on the cost side next year?

Yes. It's not something that's over the top. We're worrying about it because we're always constantly refreshing something. But we will have some sort of restart-up costs for -- at the end of '26, getting Orion up into '27. So we'll have to start staff up ahead of that, et cetera. But all stuff that we think we can absorb and still be better in '26 than we were in '25. But when you look at that truck platform, I mean, it's a real opportunity to take the gains that we've gotten in share and the performance that we've seen on our incentives and relative incentives to the industry and really amplify that on a really high-quality, highly desirable new platform. So we're excited to see that come in. And I think that's going to be a good opportunity for us as we get into 2026.

And anything to note on material costs or metals, like we've seen a little bit of movement in metals. Is that anything worrisome?

It's -- I became sort of inundated 5 years ago when I started with worrying about every possible variable. And what we've got to do is just make sure that we manage that. There's going to be noise in there. I think the consumer has been really resilient over the past several years on price. I'm not sure that going into '26, we can count on that same backdrop into '26. Nothing in the data indicates that there's any weakness, but you just got to be ready for it. So as we've done in past years, we'll probably come into the year conservative on our commercial and our revenue assumptions. because it's easier to adjust the business if pricing and incentives are stable than it is to hit the brakes on everything else and bring it back. So we use that as a bit of a disciplinary tool in our own budget setting process so that spend doesn't start to accumulate because in any budgeting exercise, people want to spend to their initiatives first and then deliver their performance later, right? So we can't be in a scenario where we start to raise our costs and then not see that performance come in. So we use that as a real disciplinary lever on the business.

But in terms of that sort of K-shaped recovery we have been seeing, you don't really see any major changes from that from the consumer.

I mean there's nothing in the data right now that would indicate. Again, if you filter out the EV noise, some of the small crossover noise that I mentioned earlier, November looked a lot like October. We have fewer production days in December, and we got to get through the seasonality issues. But I think the year is going to close out well and very much in line with our expectations. And heading into next year, a lot of reasons to be optimistic.

One of the other things you've had to focus on a lot since you've come to GM is supply chain management, diversity of supply, right? And I think -- and I think there's a couple of things going on here, which I'd like to touch on. So one is, right, there was a report that you trying to get the supply base to deemphasize China. I was wondering if you could sort of spend a minute on that and comment on that. The second is there's -- over the past couple of days, there's been a lot of media and reports and a little bit of worry on memory for automotive and how there could be a shortage maybe at some point next year or maybe in '27 or at the very least some additional prices. So how are you viewing those 2 parts of the supply chain?

Yes. So first of all, on the resiliency project is what we call it, it's not so much deemphasizing China as it is deconcentrating or taking out the concentration that we've had in. And this is work that really kind of began in the immediacy of post COVID, where we saw ourselves really susceptible to geographic shocks to the system, whether it was some of the fires that we saw in Japan, the chip shortage as well as COVID in and out of China and back in again and so on that we realized we just needed to actually distribute our supply chain a little bit more. So that work has been going on. And I think we're probably farther ahead than most of our competitors in that work. And we're in the sort of final legs of it, and that's why you're starting to hear more and more about it. But it's raised our costs a little bit for sure. You can't do that, but it's important because it's overall stability of the company and the supply chain as a whole. So that work is ongoing, and we should be able to finish it in the next -- within the next couple of years is what we're looking to do. On the broader piece on chips, I think the nature of chip buying has really changed since 2021 and the chip shortage that we have. And you're still seeing some of that with Nexperia. So for example, some of our chip costs right now are -- we're spending more money on chips right now because we're having to go source them from all over the place to make sure that we maintain production. So we've seen some cost pressures in the current quarter as a result of that going forward. But the team has done a great job of finding them and make sure they're balancing them in our production. And I don't think we've had nearly as many production challenges that some of our global competitors have. But the way we buy chips is different because the other thing the auto industry buys is typically older generation, lower-margin chips that if you're a chip manufacturer, you look at that and say, I don't -- I would rather not use my capacity to build that. I'd rather build the next generation of higher-margin AI chips, et cetera. So we've had to make investments. We've had to co-source. We've had to go in and whether we do a prebuy commitment or we do some capital injection joint ventures, et cetera. The way we're buying those chips is very different. I think that will help protect us into the future against what those demands are.

Okay. One question, and we'll open up to the audience. And just as a reminder, if you scan the QR code on your table, you can get a question. It'll show up on an iPad, and I'll ask a question on your behalf. But before we do that, just obviously, one of the question that always comes up and we're saving it for the end, but capital allocation. So you've been aggressive buyers of your stock over the past couple of years. The cash remains really, really high. We did talk about some of the other sources that you need to use for that cash, some restructuring, right, some -- a little bit higher sort of CapEx. But overall, the cash generation still remains pretty strong. How do you think about the pace of returning that cash over the coming years here?

Well, look, I think at the end of the day, we've seen a little bit of an uptick on our multiple. But by any measure against the market, against the industry, against our own historical performance, we're still, I think, pretty significantly undervalued. And I think the Board feels that way as well. So buying back the stock is one of the best investments that we can make. We still have the same capital allocation policy that we've been following very carefully, which is, number one, invest in the business. Our capital budget of $10 billion to $12 billion for the next couple of years is informed by 2 things. One is affordability. We can afford to actually invest a lot more, right, with the type of cash we're generating. But number two is, do you have the infrastructure to deploy it effectively? And the answer is we're kind of at a limit there because I don't want to have to go hire a lot of logistics people, buy real estate, get more engineers, et cetera, to be able to absorb that additional capital base and actually bring our margins down because of the fixed costs associated with managing that capital. That's not an effective use. So I think we're in a good position where we're investing in the priorities that are important for the next 5 to 10 years or more, and we've got to continue to balance that. So we're in a good range on that $10 billion to $12 billion. Second is the balance sheet. Balance sheet is in great shape. We used an opportunity to pay off some maturities this year. We don't really have any maturities next year of any size, some capital leases, amortization, et cetera. So there's a little bit of work we can do, but there's no urgency to go out and say the balance sheet needs to be fixed. It's in a really good spot. So that leads to the third leg of the stool, which is returning capital to -- and we've established a really good track record of not only buying back shares, but also starting to step into a bigger and bigger, more meaningful dividend. I think we're going to continue to do that. The priority is as long as the stock remains as undervalued as it is, the priority is to buy back shares. And I think you'll continue to see that from us going forward.

And no changes with everything going on to the $18 billion to $20 billion cash level you want to...

No. I mean when you look at the cash, $18 billion to $20 billion plus we carry about $16 billion in revolving credit, we have enough to be able to get through anything that might come our way. But what I'm really proud of the team is we've taken a lot of that historical cyclicality out of the business because the biggest thing that would always happen in a downturn, and I'm not predicting a downturn, it will come one day, and we need to be ready for it. But one of the things -- first thing that would always happen in a downturn is demand would soften and I've got 4 months of inventory sitting out there in dealer lots, et cetera, that I've got to go stimulate demand for while the flood gates are still open on more production coming in. That's what I mean by self-induced cyclicality. So you take a cycle that should look like this and make it look like that because you're chasing demand at the exact time you don't need to be doing that. So we've taken 30% to 40% of the inventory out. The working capital drain that results from that is a fraction of what it's been historically, which gives me the comfort that between $18 billion to $20 billion plus my revolver capacity, we don't need to take cash up under virtually all circumstances. Now if there's another global pandemic, God forbid or something like that, I'll change that story. But I think if it's typical cyclical stuff, I think they're in pretty good shape.

Excellent. I don't see any questions coming in. So maybe just in the final minutes here, and let's focus on sort of GM more into the future. You've started to talk a little bit more about, let's say, the tech side of GM, right, some of the software, some of the services, you might disagree with this sort of reassessment, but restarting sort of the autonomous venture. But there's also been, it seems like a bunch of tech leadership changes at GM over the past couple of weeks. And I know Sterling is in now. So -- and he's -- I think -- it seems like this is sort of him maybe reevaluating sort of the landscape and how he wants to be organized as sort of GM goes towards this vision. But maybe you could just shed some light on what Sterling has brought to the organization, what some of these actions are going and when we can start to sort of get a little bit more information and see some of that inflection in that tech business because you mentioned the multiple and that could be one potential factor for the multiple to rerate as the market appreciates that a little bit more.

Yes, for sure. And I'm thrilled that Sterling decided to join us. It's been great getting to know him and working side-by-side with him. He's just a force. I mean he's just brilliant and getting more up to speed with the size and the scale of GM and what it means, but also the opportunity set that's ahead of it. We talked -- we had a GM Forward event a couple -- a few weeks ago, where we talked about that vision, talked about eyes off, hands-off autonomy in 2028 and the retail offering. So while you said we're kind of restarting the autonomous effort, we never really gave it up. I mean what...

I thought you would disagree with that?

Yes. Well, I understand the characterization, but what we really walked away from was robotaxi. And we faced some criticism for that. But when you look at capital stewardship, you really have to ask yourself is, if I have to fund that, which is what we were seeing out in the market was that we were going to have to fund that, can we compete with the 0 cost of capital, Waymo's, Teslas of the world that are doing the same thing. And that's where we said, let's focus our efforts on how do we actually bring that technology package into a retail offering. And that's what we're working on doing and getting there. And with Sterling's leadership, we think there's an opportunity to do that. But even beyond that, we started to increase our disclosures on software. We've got over $5 billion of deferred revenue on the balance sheet right now. That is starting to come in, and you're going to see more growth into '26 and '27 and beyond in the -- both the deferred balance, but also what we're bringing into the P&L. And that's coming in at a 70% or higher margin, whether it be from Super Cruise or OnStar, et cetera. So there is a big bright future there. We alluded to this in '21. Nobody believed us at the time, and we've been kind of quiet about it as we get SDV 2.0 up and running in the next couple of years. But importantly, what the commercial team has done with the limited resources that we have has been really impressive, and I think bodes incredibly well for what the future of the industry can be because the more we can derive revenue out of the car park versus just the wholesale model, the potential in terms of the revenue and the margin expansion is -- becomes off the charts, and we're laying the foundation for that right now.

Great. Well, hopefully, we'll be able to talk to you more about that next year. So Paul, thanks again.

Well, the good news is it will accrue to fewer and fewer shares.

Excellent. All good.

Thanks for the time. Thank you.