General Motors Company (GM) Earnings Call Transcript & Summary

Well, thank you so much for coming back and staying with us. This you won't want to miss. So it's my pleasure to introduce our next session, managing transformation in a dynamic environment. [Operator Instructions] I'd first like to introduce our moderator, Mike Colias. Mike is the U.S. Auto Editor for Reuters. He's long covered the auto industry and for the Wall Street Journal and Automotive News, and he's the author of a 2025 book, Inevitable: Inside the Messy, Unstoppable Transition to Electric Vehicles. So he's pretty ideally positioned to lead today's fireside chat with GM's CFO, Paul Jacobson. And speaking of which we are tremendously honored that Paul has decided to join us. He's a well-known around Detroit and in the auto industry since he joined General Motors in 2020 as the Executive Vice President and CFO. He's established himself as an exceptional leader on GM's executive team, demonstrating a remarkable financial stewardship during some very unprecedented business and industry challenges. From navigating the post-pandemic supply chain disruptions to orchestrating GM's strategic pathway to EV profitability and tariffs and what we can all agree has been a very uncertain policy environment. Under Paul's guidance, GM has delivered impressive results in 2025 with robust earnings and a strong outlook. We are again thankful that Paul has agreed to join us today to share his insights. I'll bring Paul up for a few remarks, and then Mike will join him on stage for the Q&A.

Well, thank you all. I was having to look around to figure out who she was introducing because none of that sounds like me. But really appreciate everybody coming out today. And I just had a few minutes of remarks to kind of set the stage and hopefully make for a great interactive Q&A session. I think when you look at this industry, when I came to it, and I remember I did my first equity conference presentation, Mary said, what do you think? And I said, Well, I learned a really valuable lesson. She said, Well, what's that? so well, in the middle of my speech, there was a CNBC headline that had what I said in that. And I said, I learned that the world cares a whole lot more what the CFO of General Motors says than the CFO of Delta. So it's been quite a 5 years. It's just been an incredible run. And when I look around and I think about what we've accomplished as a team and how much transformation the industry had, it's just been really phenomenal. But I think it's just the beginning of what's to come. So when we look at coming off of 2025 and what the last 5 years, it really is about the dynamism that we've had and the transformation that we've seen in this industry, and GM is no exception. We just announced our earnings from 2025. It was a great year, but it's hard not to sit back and think a year ago today, we were in the midst of probably one of the biggest, most uncertain years trying to predict what was going to happen. It was the beginning of the tariffs. We thought we were going to go into an earnings conference call talking about our guidance and so on. And we ended up in a world where we really didn't know at that time, and we reset guidance a little bit later than we otherwise would as we started to get expectations. Fast forward a year, we've obviously been impacted pretty heavily by tariffs over $3 billion last year. We've signaled $3 billion to $4 billion of tariffs this year. But much like I tell my children, it's never as good and never as bad as you think it's going to be when the world hits you with uncertainty. And certainly, that's been the case. We've managed to be able to adjust. And then we just came out last week and talked about restoring back to our 8% to 10% margins in North America, probably about 12 to 18 months ahead of when most investors would have thought we were going to get back there. And a lot of that is really just driven by grit and keeping our heads down and just focusing on where we know we can excel, and that is serving the customer and staying focused on where we are. But so if you look at that, and a lot of that -- I know a theme of the conference has probably been because we hear it all the time, we talk about affordability and where consumers are. We've got an incredibly compelling portfolio of products across the spectrum. We go everywhere from the Cadillac Escalade and full-size SUVs where we've got a 60% market share in those full-size SUVs. And then all to the Corvette and what we've been able to do there in the performance space, legendary products, and we're #1 in retail share in the top quarter of the market. But what a lot of people don't know and really, I don't think have an appreciation for is the amount of improvement that we've been able to do at the lower price points. When you look at the unique products that we have in the Chevy Trax and in the Bolt and so on, what you'll see is that we've actually been picking up some of our biggest market share gains in this space. Last year, we sold over 700,000 vehicles priced under $30,000. Now historically, what you would have heard from a General Motors presentation is okay, well, you made all your money in trucks and SUVs and you gave a little bit of it back at the low end. We've been able to create a portfolio where we can make money top to bottom. And that's really a testament to the ingenuity, the flexibility and the resiliency that the company has seen going forward. So when you look across our ICE portfolio, I think one of the most probably underappreciated facts is what we've been able to do with profitability and scale at the lower price points in the portfolio as a whole. And a lot of that is being driven by what I think is probably the most powerful slide we have that depicts our transformation. And that is how do we make sure that we set up the company to be resilient, to be flexible and to be able to respond to the changing environment around us. And if you go back many years, you'll find an industry that was really full of inventory across the spectrum, lots of pipelines, maximizing production, looking at marginal cost economics. What we've really focused on doing is trying to bring discipline into the business because the consumer is going to change, right? We're going to see a weak economy at some point. Hope it's not this year, hope it's not the year after that, but it's coming. We can't dodge economic cycles. But what we can do is try to minimize the self-imposed cyclicality that we've seen in the industry. So historically, when demand has waned, we've had 4 to 6 months of inventory sitting out there that we've got to sell down while we slow down production while we're trying to generate demand. So what you saw historically was an incentive cycle that would go like this, right? So during those weakest times when you need cash flow to be able to rely on to not only help the business stay afloat, but also continuing to invest in that product cycle for the next 3, 4, 5 years down the road, that cyclicality really hampered and hindered the business because we were chasing demand with lower prices at the same time we needed that cash flow to be able to invest in the future and so on. So what have we done? We've taken probably about 40% to 50% of our inventory out. So we ran -- we ended the year with 48 days of inventory, which ordinarily and historically, if you looked at that, most people would have thought, well, there was some type of plant event, et cetera. That's the discipline that we're talking about. So when you run with a targeted inventory of 50 to 60 days instead of running at 100-plus days that we historically have, when the inevitable downturn or recession or weakness might hit, we're going to be able to respond much, much faster because we're going to be focused on the business forward rather than trying to undo some of the inventory that we had built up over time. And through all that, we've taken a business that has historically been running about $3 billion of free cash flow to one that's been consistently running at the $10 billion range over the last 4 or 5 years. That's important because that's our cushion. That's our safety blanket. So we can absorb short-term shocks to demand. We can absorb short-term shocks to the supply chain because we're operating from that free cash flow surplus. So we're able to invest in the business. We're able to make sure that we're creating that product pipeline and investing in it so that we're here not just today, but tomorrow and the year after and the year after that with a really compelling line of products. But we're able to do that at a time that we can absorb that shock. And that's what that free cash flow is all about. It's also allowed us to continue to invest in a healthy balance sheet. The balance sheet of General Motors has probably never been stronger than where we are today with minimal pension liabilities and really sitting there looking at a strong investment-grade credit rating and one that we think we've got an upward trajectory on our credit ratings going forward. So being good stewards of that. And then finally, balancing that out with being return to shareholder-friendly and making sure that our company is investable because we need to rely on that capital base, and we need to be good stewards of that capital going forward. So it's that balanced approach, combined with that discipline that we've injected in the business that we think is a recipe for us to be successful, whether we see a supply chain crisis, we see tariffs or we see other uncertainties, this is what's helping us get through it. And the results that we've seen over the last few years have been remarkably consistent, irrespective of what challenges and crises may come our way. So let's look ahead. We've seen a lot of change in the last year. But what we see right now is a regulatory environment that is more aligned with where consumer demand sits right now and particularly talking about electric vehicles. We recently announced a charge. We took charges in the back half of the year of about $7 billion in our electric vehicle investments. That's not -- we're giving up. That is not we're throwing in the towel, we can't make electric vehicles. That was about an infrastructure that was geared to be able to make 1 million EVs a year because that's what the regulatory environment was telling us we needed to do. When you look at stringency, greenhouse gas, CAFE, it was all aligned to driving much, much greater penetration than where the consumer was because even in the peak, we were running at about 8% to 10% to 12% EV adoption going forward. So we were tooling up. We were setting up for that. And now with the changes in the regulatory environment, we think demand is going to be much more naturally accretive. So it's not going to 0. It wasn't 0 before the IRA. It won't be 0 now that the IRA is subsiding and the consumer credits are going around. But I think vehicles are going to win. Electric vehicles are going to win in the end. They're technologically incredibly capable, the features that they bring, but it's going to take some time. And making sure that we are there for the customers gives us an opportunity to help bring the cost down at the same time, volume is going to ramp up naturally going forward. We're also investing in America. We've announced $5 billion of onshoring investments, bringing it on by -- in 2027 when that starts, we'll produce almost 2 million vehicles here in the U.S. That's up quite a bit. We've announced the complete retooling of Orion, which was going to be set up as a mass production EV facility is now going to be converted to ICE, but it's going to allow us to bring onshore more truck and full-size SUV production going forward. And that's going to help us manage what the tariff burden is going to be for the long term. So you talk about some of the self-help that we've been able to do, change in manufacturing footprint is a big piece of that enterprise and certainly going to take hold in 2027 as we go. Probably the single biggest transformational event that you're going to see over the next several years, and I think it's going to be a really big win for the auto industry as a whole is that growth in software and services. We've started to increase our disclosures about that, and we talked about being able to get to $7.5 billion of deferred revenue on our balance sheet as well as growing our revenue in Super Cruise, OnStar and other features, paving the way for the software-defined vehicle that is coming our way as we ramp up Super Cruise, we get to eyes off, hands-off autonomy and start to work towards that in 2028. We're building a great foundation. But when you think about the opportunity to interact with the customer, where the customer is and the transformational nature of the vehicle, that's where I get really excited, and we're making great strides in that space going forward. So as we think about where the investment dollars are going, it's going into technology, it's going into the vehicle portfolio and it's going into lowering the cost of our electric vehicles, driving intellectual property here in the U.S. and continuing to drive value and production and great jobs and great investments into the U.S. So we're really excited about where we're heading. And Mike, I welcome you up and look forward to taking you all questions. But thanks for having us today, and thanks for the opportunity to be with you.

All right. Great. Thanks for that rundown, Paul. Good stuff. And a lot going on in GM, a lot going on in the industry. I think I'd like to focus a little bit on 2025 just for a minute. I just feel like every automotive executive I talked to last year was just -- they were just stuck. It's in limbo. We can't make a decision. We know what's going to happen next. Do you feel like the dust has settled at this point where you're confident in making big capital decisions and that the policy is not going to shift under your feet this afternoon or tomorrow or next month?

Yes. Well, look, I think from an industry perspective, I don't -- there's still a lot of things that we have to get resolved, right? But what I think is we have the direction, right? I think we understand where it's going. Tariffs are here. Tariffs are going to stay. The industry is important. We know that, that the industry is very important to the administration and competitiveness. And when you look at the jobs that we create, making sure that we can be globally competitive is important. We've already made a number of investment commitments about bringing on. I mean, spending $5 billion over a couple of years is a pretty big statement. If you thought that tariffs were going to be a temporary or a single administration thing, you probably don't think about spending that kind of money. You try to think about, okay, how do I temper it in the short run. But I think what we're seeing is a little bit of a shift. And then the revenue that's coming into the U.S., I think, is going to be something that future presidents, future administrations value as well. So what's the best thing that we can do to make sure that we manage over the long term, but at the same time, make sure that we can stay competitive and have the right footprint to be competitive globally.

All this extra cost coming into the system, I imagine it's created some interesting conversations with suppliers. We had a supplier, I think Steve from a Tier 2 earlier talking about just the battles that have been going on. I mean, how have you been working this out with the supply base given all the -- I mean, if it's $3 billion for you guys, multiply that across the industry? I mean how has this all been sorted out in the last year?

Well, I mean, I think I wouldn't choose the word battle. I think there are good sort of healthy conversations that happen within families and within enterprises. But we try to take it from the approach of how do we solve the whole. I mean in the grand scheme of things, we want our supply base to thrive, to make money and to continue to have stability going forward. We need that across the enterprise, et cetera. Sometimes suppliers get better valuations than we do and better multiples and so on. I mean we just need to figure out how do you strike that balance. Tariffs is a piece of it. But as you know, we have MSRP offsets that are meant to help facilitate that supply chain to not get penalized for producing vehicles here. And that's worked well. I think everybody is learning that. And it's -- if you look at our tariff expense, it's been a little bit choppy as things take time to work their way through the system. But it's one that I think we're starting to learn and starting to work on. I think more than just the tariffs, though, I mean, you look at EV supply chains and so on, a big component of the restructuring charges that we announced and what Ford announced and others has really been around that supply base, too, because we commit -- get our suppliers to commit to certain volumes that we can't deliver, and we don't want to produce when we know that the demand isn't there, et cetera. So working through that and trying to hit that reset button. What we found happening on the EV side in 2025, and this is where we slid back a little bit in our profitability journey was the constant ratcheting back of production forecast as we saw that and ultimately culminating in the $7,500 consumer tax credit going away, kind of signaled, okay, we're going to be in this lower demand period for a long time. So we felt it was important rather than to try to chase that falling demand perpetually is to try to say, let's reset, let's establish the right foundation with us, with our suppliers and try to figure out what's the baseline that we can grow and grow in a stable way for the benefit of us and the supply base.

Has that pendulum swung back the other way and now they're scrambling to get into internal combustion and other powertrain programs to make up for that lost volume in EVs?

I don't think it's swung much. In fact, one of the questions that we get a lot from the investors is, okay, well, now that the regulatory environment has changed, you're going to ramp up ICE production. Well, it's not like we had a lot of pent-up capacity. We sunset some models and we're extending some models and so on. But we've been producing because if you go back 4 years ago, when we did our Investor Day back in 2021, one of the things that investors, I don't think really fully believed was that we could grow share in ICE at the same time, we were growing share in EVs. They thought that was a zero-sum game back in the time. But what we've been able to do is attract a lot of customers that are new to GM through the EV portfolio while bringing even more customers and growing share in the ICE portfolio with our products. And so that's been great. But it means that there's not this valve to go in and say, let's ratchet up production of ICE vehicles. It's not about that. It's about making sure that there's continuity in the supply and what we can do.

I want to come back to powertrain mix in a minute. Just a few more on trade. I mean it feels like, in general, the trade deals we've seen or at least that have been outlined have settled around at 15% mark. I don't haven't checked my phone in the last 15 minutes, so it may have changed. But is that like the 2 big ones are still hanging out there, right, Canada and Mexico. What would you guys like to see in USMCA renegotiation? What can you handle? What's the message to the administration right now?

Yes. Well, I think there's a lot of power and value in North America, right, and what we can do and how we work together. And I think it's a case of making sure that the auto industry remains competitive across the landscape. So one of the things that was core as some of the deals were being struck is let's make sure we have alignment that we're not just one-offing deals that actually give those countries an advantage over us because this might be last or later in line. And I think the administration has been responsive and been really good about making sure that we protect the competitiveness going forward. Longer term, I think it's -- and I think it's on the docket to get done this year. We would like to see trade deals that allow us to continue to thrive and be competitive as a trading block across that. I think we've demonstrated our commitment to bring more production, more assembly into the U.S. But we need that integrated supply chain base to continue to work to make sure we're competitive.

Yes. You guys have made it clear that you're going to be building more cars here, also going to come at a cost, would you say last week, like $1 billion, $1.5 billion onshoring headwinds for the year. I mean, how do you -- can you just kind of give us some insight on how you make these decisions? I mean, I'm sure there's a lot of benefit to building domestically, but you've got to weigh that against the cost and what you decide to bring back, what you're asking your suppliers to either onshore or move around. I mean how do you put all these puzzle pieces together?

Yes. It's a great question. And the $1 billion to $1.5 billion that we talked about as a pressure for this year was not just manufacturing, it was investments in software and services as well. But what you get is we're staffing up right now with not really any production out of Orion, but we've got to get people hired and trained and facilitated so that we can start production in 2027. And we said that was broken out to about half and half between the software and services and the manufacturing side. So that will start to work its way through is then we start production. But what we're really looking at is if you think about the tariff, you think about everything that goes versus paying higher wages here in the U.S., it balances it out. And ultimately, it's an accretive decision for us. I think as you go down the tiers of the supply chain and you think about onshoring, and this is where U.S. content, MSRP offsets and things like that, have to make it all work together is you can't necessarily just onshore the entire supply chain, not just from a wage perspective, but more from a labor perspective in terms of the local markets trying to absorb all those new jobs, et cetera. It's very different than I think it was 5 years ago. So making sure that we have the time to be able to make the right adjustments for the long term rather than just overreacting or swinging the pendulum, as you said, too far in one direction. We're trying to be very, very, very thorough about it, but trying to make sure that these moves are permanent and resilient.

The words chip shortage, I think is kind of a trigger term in this room probably that we're hearing it more with these memory chips, the dram chips that are being siphoned off into the data center boom. Any sense right now on how big a deal this is, how concerned people should be, what you guys are doing about that?

Well, I mean, we're certainly seeing inflationary pressure from it. And I think I go back to 2021, that was my, I think, my second month on the job that I got an e-mail and I said, well, that -- we're not a semiconductor company. Well, we kind of are. When you think about all the chips that are in our vehicles. But it's one that our team did a really good job of working with our chip producers and suppliers to make sure that we had as much continuity as we could. It wasn't without some challenges. But I think we went through that probably better than most every other automaker did over the long run. There were some that were positioned with a lot of inventory heading into that shortage. But overall, I'm really pleased with how we went through that. Right now, we see this as a cost issue for us. We don't necessarily see it as an availability issue, but we're constantly out there trying to make sure that we have access to the chips. The good thing for -- I think, for us and for the auto industry is we're kind of that foundational demand for memory chips. So yes, there's a spike for AI, for data centers, et cetera. But in any good business, you've got to have that foundational demand that you can count on that's always going to be there. And I think the chip makers and the memory chip makers want us and need us for that basis. So I don't know that the scarcity issue is going to present itself as we don't get chips as much as well, we're going to have to pay more for them. But as we've seen, these things tend to go in cycles. So we'll get through it and we'll survive and we'll fight another day, and we'll continue to focus on GM.

One more kind of supply chain related. I mean you guys talk a lot about supply chain resiliency. I gather it's a big focus of the company. I think it has helped you guys get through some of these recent shocks. I'm just -- the rare earth thing really spooked a lot of people last year. I don't know if it led to real shutdowns, but that one just seems really tricky because China is so dominant. They leverage their dominance in rare earths. GM has done a lot in this area, I think, more than most. You got to set up alternative supply chains even domestically. I mean what's a realistic time line though for kind of controlling your own destiny there?

Well, I think we've been focused on this really kind of since COVID. And when you have COVID and the chip shortage back to back, what you realize is that supply chain concentration globally carries more risk than maybe it has historically done or maybe the perception of that risk is a lot more acute given the nature of the pandemic and what we saw. So we've been focused on trying to drive resiliency and diversity in the supply chain really since 2021. This isn't easy. I mean this is an incredibly complex business when you look at all the threads, but really focused on -- it's not necessarily geopolitical. There are geopolitical risks, but it's really more about what can happen in one part of the world that doesn't affect the other part and so on, and that works. So we've been working on trying to differentiate that. We did a lot of work in metals, particularly around EV supply, invested in lithium companies, invested in chemical companies in CAM, et cetera, that we've been on this path to try to focus on some vertical integration to get a little bit more control over the supply chain, similar to what others have done. So I think we've made really good progress with that. I think it's going to help us in the long run overall. And again, it's not -- it's not about U.S. versus China. It's just about trying to -- how do you concentrate the supply chain where you're actually building the vehicles to drive that diversity across the globe and ultimately make it more resilient.

You referenced the big policy shifts in Trump 2.0 here with EV policy, CAFE, big rollbacks in EVA or at least proposed. I mean this regulatory framework for so long was like dictated a lot of what the OEMs did in terms of product development and go-to-market strategy. I mean how has this changed? I know in the short term, you guys said this is going to help this year, right, $1 billion or $2 tailwind on that. But like bigger picture, just how does this change? You wake up one day and all this stuff that had been kind of guard railing you for 2 decades is gone. I mean, what's that like inside the company to decide where to go next?

Well, it's never easy as a CFO to write off billions of dollars of capital investments. So I think there has to be the reality check of, okay, here's where we are, here's where we're going. And how do we think about positioning the company for success. I think the ultimate winner in all this, I think, is the consumer because you're right, historically, what the consumer could buy was really driven by the government and the regulatory side of the business. And now we have an ability to meet the consumer where they are. It doesn't mean everything goes into more gas-guzzling. In fact, we just rolled out our Gen 6 V8 engines, which are the most efficient V8 engines we've ever produced and continuing to drive on that efficiency curve because I think consumers want that. They want efficiency. They want more clean vehicles and so on. You see it in some of the hybrid growth. You see it in the electric vehicle adoption that's still happening and the fact that 80% of electric vehicle buyers only want to buy an EV going forward. So we've got a lot of anxiety and range and charging investments that need to make to get that to take hold at a much bigger level. But that's what I mean when I say I think EVs win in the end. It's just going to take some time to get there. So very consumer-friendly. And when you have a business that you've tried to position to be resilient and dynamic in these environments, you can respond faster. And I think that's what GM has been able to do.

Okay. We'll flip to the audience questions here pretty soon, so make sure to get them in. I mean you guys were getting a lot of traction on your EV business in the last 12 to 18 months. Some really cool stuff coming out, moving up the sales charts. But at this point, how do you sustain -- I think you have roughly a dozen full EVs on the market. I mean how do you sustain that in a depressed sales volume that we're seeing now?

Well, I think it's about consumer choice, right? And the entries that we have there are pretty strategically positioned across both the brands and the various price points. And I think it's something that's there for consumers to choose. Most of the capital and the cost of that is sunk so as we go forward, we've got to work on getting to variable profitability at every vehicle level going forward. And that's with the LMR chemistry and the prismatic cans that we're switching to that are going to save us thousands of dollars in the cost of an EV are going to help us on that journey going forward. So I think about it as that uncertainty is a little bit of a blessing in disguise because with lower EV demand, it gives us a period of time where we can focus on that architecture, we can focus on getting the cost down as we start to see a ramp coming out the other side. And I think that that's going to be the trajectory we see as we make more investments into charging and so on. So I like where we are. And I'd obviously rather see more growth and see more scale because I think it's easier to drive to profitability when you have the scale that we do. But that's going to take a little bit of time. But I don't think it's a terrible thing where we sit in terms of our ability to buy a little bit of time to fix some of the cost challenges.

Just one more for me. It's kind of a longer-term strategic question. But with these carrots and sticks in the U.S. regulatory environment kind of being gone, the incentives to buy EVs, the rules that were pushing companies down this path, where does the motivation come from, I guess, to try hard on this part of the business? I know that Mary has said this is the North Star. I think she called it the end game recently. But it sure seems like it'd be tough to sort of push in that direction when every step you take is sort of not great for the bottom line, at least not right now.

Well, I mean, I think every company, every industry has some things they do really, really well that drive cash and profitability and some things that are future investments. And whether they're loss leaders in retail or their R&D or growth businesses. And if you think about EVs as a growth business, a couple of things stand out. Number one, we've got scale, we've got technology. We've got battery expertise. We need to get better at making them if you believe that they're going to be there for the long term. Second, you've got the backdrop of what I think is probably going to be a more rational EV industry going forward. You had players out there that were offering 70%, 80% incentive levels of cost, that's not a profitable business venture. That's not the company that wants to go in and try to get a foothold in a new industry. That's somebody who's buying compliance, right? It's the only way to think about it. So when you strip that compliance stick out, as you mentioned, you expect that there's going to be some rationality. Either people are going to say, I don't have to discount as much or perhaps I'm going to exit the business as Ford in their announcement announced that they're going to exit a segment of electric vehicles. I think you're going to see that across the industry, which leaves a really interesting market for us to be able to grow into if we're willing to be patient. And like I said, with the lower scale, and with our financial performance and the buffers that we've created, we have an ability to incur some short-term losses to be able to get to that tail end. So you even have Tesla saying they're going to stop production of the Model S and Model X. So you're starting to see this position very differently, where I think with our portfolio, we have an opportunity to really go in there, grow our share and do it in a way that happens and it coincides with our improvements in profitability to set us up really, really well over the next 3 to 5 years.

Okay. Well, I left a lot of meat on the bone here. So I'm sure the audience will pick us up. This one is on hybrids. It looks like GM hasn't had a hybrid in its portfolio. We've heard you're adding it. Do you have resident expertise or you partner on that technology?

Yes. So we've done hybrids in China, and we've done hybrids before and some of the first ones. So I think where we look at it today is just making sure that we understand where the market is. And we've got a number of vehicles whose mileage and performance and costs are actually superior to many of the hybrids that are out there. And we've seen our -- we've seen share gains in that space as well. So I think what we don't want to do is rush into it. We've got really good efficient ICE vehicles. We've got really good efficient battery electric vehicles. And there are some opportunities in there that we're continuing to try to think about. But we want to make sure that we're measured and focused on the portfolio we have.

Okay. This one says, you sounded optimistic about revenue GM can gain from software services. Can you expand on that? How willing will consumers be to pay additional money for services at a time when ATPs are already at record highs?

Yes. So it may seem countercultural, but I am a bit of an optimist as a CFO. It doesn't mean I'm not skeptical, but I'm an optimistic skeptic. And I think this is a great space. And what we've got to do as a company is make sure that we are finding ways to be able to deliver value to the customers in ways they don't expect. And I think the technology capabilities, as you've already seen, really taking off in vehicles, whether it's in hands-off driving or ultimately going to autonomy and going to connected services within that vehicle are really accelerating pretty rapidly. So we've got to have the right foundation to be able to deliver value to the customer where we can. OnStar is a great sort of long-term example of that. But you think about the capabilities and what that means for people to take that franchise and digitize it and make sure that there are other opportunities there to interact with the vehicle, whether it's making reservations at your restaurant or full concierge or using AI to help make your life easier in the vehicle. Those are the things that I think people are going to be willing to pay for because they pay for it today at the same time they make a car payment. So how much of that can you consolidate and bring into the fold and ultimately make it a purchase decision for the customer. So we're optimistic that I think with that software platform, we're going to be able to deliver a lot of really new great experiences. And as you look out over the next decade and even beyond, I think it's going to be tough to recognize what a vehicle is 10, 15, 20 years from now in terms of its capabilities and what it can do. And I think we can be great players in that space.

Kind of a narrow one on China. I'll try to broaden it a little bit. I mean, can you touch on a long painful decline in market share there? It sounds like some green shoots you guys talked about last week, fourth quarter market share profitability up a little bit. What can you tell us about the restructuring in China? And what changes can be sustainable given that market's structural problems with overcapacity and never-ending price wars?

Yes. So we obviously have a good, strong business with a long history in China. I think we were one of the first U.S. companies to go over there. And it historically had been a $2 billion equity contribution. It's probably not going to go back there. But what we found and what we were able to do with our partners is restructure that business to be successful in a smaller slice of that market. And I think that's been -- what that's allowed us to do is to capture the brand equity and the share and the recognition that we have as being a long-time participant in that market with the right infrastructure to be able to be profitable at a smaller level than we were. And that's no small feat. I mean when you look at the work that our partner did with us some really tough decisions that had to be made. I mean closing plants over there is a really hard thing to do. And it takes a lot of courage and a lot of commitment by both partners to be able to do that. But if you look at since we completed that restructuring, we've been able to be profitable, and it's been much smaller. So for me as a CFO, it's, okay, I've got a really good business that is producing cash flow and it's driving returns. It's smaller than it's been historically, but the competitive landscape there is going to make it really difficult to ever get back to where it is. So let's make sure we can use it for what it is, self-sustaining really good, consistent cash flow, not the size that it used to be, but still stable and good. And I think that's where we can be really strong and good players there.

Obviously, that oversupply the symptom of that is a wave of exports out of China to all over the world, places like Europe and Latin America. I imagine with your footprint, you're seeing that most in South America where you're coming across Chinese brands. I mean, is that a pressure point in that market? What have you guys had to do to try to counter that?

Yes. Well, I think the biggest impact so far has been in Europe, and you've seen that. We don't have any...

Question that way...

But I think it's important because I think it foreshadows and it shows the competitive pressures that South America, Middle East and others may be behind that, but you can see the type of intensity and competitiveness that those vehicles bring to the marketplace. So therefore, we've got to be ready. We want to be a global competitor, and that means focusing on products that customers want, being able to do it as efficiently as possible. So I know a number of folks went on a tour of some of the AI and robotics and things that we're doing in the plants to help drive efficiency and safety and consistency through the plants. We've got to always be focused on making sure that we can compete globally on a level playing field anywhere in the world. So South America is going to be a big area, too, from that. We've got a good long history there, some good -- really good products in that space. And the team has done a good job of making sure that we're responding to that competition where it is. So it's going to require focus, but it's also going to require to make sure that we're making investments where it makes sense to do that to continue to try to preserve or even grow in some of those ultra-competitive markets.

What about the prospect of having to compete against Chinese brands in Canada, in here? It seems to be on a lot of people's minds lately.

Yes. I mean at the end of the day, I think we've got to be focused on driving what we can for GM. Obviously, the health and the well-being of the U.S. auto industry, I think, is important for the economy as a whole. So I think it's making sure that wherever competition is, it's a level competitive playing field and that the tariff environment is one that balances those competitive forces to make sure nobody has an advantage if they're going to come into the market. And I think we can hold our own. You look at the vehicles that we produce and where we have really good footholds, I think that's a sustainable advantage for us.

There's one on AI here. How is the usage of AI in vehicle physical development, software development and simulation changed in GM over the past year?

It's growing exponentially, and we've got a lot of expertise and a lot of people that are a lot smarter than I am that are finding ways to drive the efficiency, shortening cycle times and making sure that we're employing AI to almost be that agent for the design, for the engineering tech, et cetera, to help them process information faster, help us process changes faster to make sure that we can continue to drive that efficiency, everything that we do. So there's a consumer bent that we talked about, but there's also the production bent. And then ultimately, there's the administrative side. So even in our own corporate finance, the ability to use that to go in and answer the questions about organization, about variances, about history, about trend lines, et cetera, really helping us drive insights. So we have a finance department that isn't focused on reporting what we just did. They're focused on improving what we can do for the next quarter and the next year and the next decade after that, allowing us to be better strategic partners to the business as well.

I don't see one here on affordability, but I think it's important enough to throw one in here. I mean you talked about how you guys -- I think you have a fair argument to make that you're selling several volume models, right, under 30,000. That's a lot more than a lot of other OEMs are doing. At the same time, I think your average transaction price is around $52,000 above industry average. I get that's loaded Escalades and Silverados and that stuff is expensive. I mean how big a concern is this for GM? Is there more to do on this? And do your shareholders think that this is a problem that you guys need to solve? I mean, why not sell another Yukon Denali instead of 5 Malibus if you can get more profit doing it?

Well, I mean, I think at the end of the day, we have enough production capacity and scale to be able to produce at all these different price points. And I think the under $30,000 price point is a market that has seen a lot less product than it did 10, 15 years ago. Many people ran away from it. Our team, hats off to them, created a few products that ultimately we can make we can grow, we can scale and we can do it profitably. That's something that's historically been elusive to some of the bigger U.S. players. So I think there's a real opportunity for us there to continue to penetrate and be there for those consumers at that price point. But at the same time, there are still consumers that are buying full-size SUVs and loading up on trim packages and continuing to buy where they see value. So at the center of all of that is where do you create value at all these price points, so customers are attracted to it. And in that respect, I don't think it's as much about trading one customer for another as it is finding a way to efficiently supply across all of those product segments and ultimately try to surprise and delight consumers with what they can get for their dollars, wherever they choose to spend.

That's getting a customer in the door at an entry level that can potentially grow with the brand is a part of the thinking here?

Absolutely. We've got that at all levels of the spectrum and meeting customers where they are is a recipe for long, long-term success.

Well, I suppose I can close by asking maybe -- this is a fairness question because for years, we all in the media have asked you guys about the low stock price. And now it's at a record high. So I'm just wondering what you think is resonating with investors now, what they're seeing in GM maybe that they didn't a few years ago.

Well, some people, me included, would say it's still low. We're still -- despite the improvement, we're still trading at a double-digit free cash flow yield. And I think I -- one of the things that I say internally is we didn't earn a discount to the market overnight. That was a lot of years of really challenged over cyclicality, et cetera. We're not going to earn our way out of that overnight. But what you've seen is a heightened level of confidence in our ability to maybe brush aside some of the uncertainties that historically would have had a material impact on the business and the industry. And what we're trying to do is differentiate ourselves by saying, look, we are a balanced investment through the cycle. So I think if you look at one data point, you'd have to look at the free cash flow because it's really the product of all of the discipline we've injected into the company, whether it's inventory discipline, capital discipline, incentive discipline, et cetera. Making sure that, that comes together into a business that investors can start looking beyond this quarter's consensus and earnings results and into how do -- how are we going to grow our profitability from '26 to '27 to '28. So the latest catalyst has been getting back to that 8% to 10% North America margin irrespective of $3 billion to $4 billion of tariff pressure. Nobody was expecting us to do it as quickly as we can. But we also laid out there's a growth trajectory into 2027 as you look at some of the tailwinds that we've got. So I think driving that consistency is going to continue to drive rewards to our shareholders and make us even more investable than where we are today.

Great. Thanks, Paul. Appreciate you walking us through the GM story. That was good stuff.

Thanks for the conversation.

Thank you, Mike. Great. So thank you, Paul and Mike. That was an excellent discussion. I hope you guys enjoyed that and got your questions answered. Another warm round of applause for Paul and Mike, if you don't mind. And now we're going to take a 10-minute break. There are snacks in the hallway because we're the Fed, and we feed you. But we don't want you to go hungry. Again, bathrooms behind the conference wall. Please be back here by 2:00 because we have an excellent afternoon session planned for you. And I've got the first one. So don't stand me up.