General Motors Company ($GM)

Well, thank you guys all for joining again. We're really excited to have one of our keynote panels here. Next up, we have General Motors. Today's Summit is about looking ahead and spotlighting some of the biggest ideas companies are bringing to the table. While the macro backdrop is important, GM is focused on some significant long-term opportunity embedded in its OnStar digital platform, not a new initiative, but one where the scope capabilities and monetization potential continue to expand. So with that, we're very happy to welcome Paul Jacobson, who joined GM in late 2020 as Chief Financial Officer from Delta, who will walk us through some unique opportunities at General Motors. Paul is going to lead off with a presentation, and then we'll join him on stage for some Q&A following. With that, I'll hand it over to Paul.

Well, thank you, Alex, and I understand congratulations are in order. So congratulations on your recent wedding, and we're glad you've chosen to spend your honeymoon with us. We're appreciative of that. But many thanks to your wife and make sure you pay her back and owe her for that. But it's great to be here and really appreciate all the attendance here. I know it's a cold week in New York, but we wanted to use this conference, unlike a traditional fireside chat to actually do a little bit of a deeper dive into our digital revenue. You'll notice, if you've been following us, we've been consistently moving forward in our disclosures around our software business as we've grown it. And that's been very intentional. We wanted it to grow to a scalable number that people can actually see and touch and really interact with versus something that we talked about was going to come and so on. Because as we remember back in 2021, we talked a lot about what connected vehicles will mean. And I think we're finally here to the point you could start to see that tangibly both in our current results, but also give you some insight into how that might grow. We're not going to give any long-term forward guidance here, but we are going to give you what I think is a really good robust methodology on the variables that matter when they're driving both the growth in deferred revenue, but also the growth in realized revenue as well. So you may think OnStar and you may think, well, that's nothing digital about that. It's not new. But what it really is, is the umbrella brand for us. It's got incredible brand recognition among our customer base. It's been around for a long, long time and can serve as that halo, if you will, for what the next generation of OnStar can be beyond just the blue button that you're used to seeing in the vehicle. So let's jump into it. I want to also let you know these slides will be available on our Investor Relations page after this presentation. So you don't need to try to photograph the slides or anything. You'll have them there for download. And if you have any questions or anything isn't clear, the Investor Relations team will be here, obviously, to help out and help bridge the gap where we can. Over the last several years, we've set a very, very clear objective as have others, about using the connected capabilities of the vehicle and what it means for the next generation, not just for the opportunity to create a subscription or autonomous movement, Super Cruise, things like that, but also how do we get into the second and third owner of the vehicle and subsequent owners. Because if you think about the opportunity that GM has before us, and we'll talk a lot about what selling a vehicle today that is connected, what it means, the real opportunity, if you think 5, 10, 15, 20 years down the road is how do we drive revenue and how do we create opportunities to drive revenue across the entirety of the GM car park in the U.S. and even beyond. So when you start to look at the ability to collect revenue and to continue to collect revenue years after the original wholesale, you can see where the revenue model actually starts to fundamentally transform because all -- as we know, these software-like margins that are coming in, in the connected business can actually drive and potentially over time, dwarf even the wholesale business, which is remarkably strong and remarkably large. So we're seeing really positive early results. And this is even before we get to software-defined vehicle, as we've talked about in 2028, where the number of services, the number of applications and the number of ways to interact with our customers is even greater than what it is today. But what it really does today, our go-to-market strategy is really about creating awareness and creating those customer touch points with each and every customer. So what I said is it starts with OnStar, which many people remember is just the blue button that connects you to an operator who can help guide you, can help provide instructions all the way to what is now emerging to the next generation, which is going to be connected intelligence using the intelligence capabilities of the vehicle going forward. But today, OnStar already serves 12 million customers globally, whether it's emergency medical dispatch, automatic crash response, et cetera, all the way up to Super Cruise, as we've talked about before. So this evolution off the base of OnStar is where we see the biggest opportunity. So that's the challenge just to think about it differently. So this talks a little bit about what that journey has been because it has been 30 years, the heritage brand of OnStar, just really telematics peace of mind, et cetera, to today, where we have more connectivity, can give you engage away from the vehicle, things like remote lock, unlock, remote start, things like that. But what the future is, is that connected intelligence and how do we use the software platform of the vehicle to actually make the driver's experience even better, make their lives easier and use that as an opportunity to further deepen the relationship that we have with the end customers across the board. So we're not just a wholesale B2B enterprise like we've been traditionally and the way that many of you have thought about GM for a long time. So that ultimately drives all the way up to connected intelligence, lets us use AI assistant voice user interfaces, et cetera, looking for directions, gaming and entertainment, using natural language for adjusting the temperature in the cabin and so on and so forth all the way up to security services, the ability to start your vehicle with a pin or freeze your vehicle for anti theft protection through all the mobile app, through everything that we've got across the board, it gives us these extra platforms to be able to connect. So what's different today? And this is where I want to spend the bulk of our presentation because I think when you look at the revenue modeling, we've had a lot of questions around where does the deferred revenue come from? How does it actually get realized. So let's talk a little bit about what's different. Since model year '25, all new vehicles sold by GM come with OnStar basic services. And we give that subscription for 8 years. And there's a method to that because, number one, we're building that relationship immediately, that direct relationship with the customer, giving them reasons to interact with us and giving opportunities to sell them into premium packages, et cetera. The other thing it does is it gives us a natural connection point to the second, the third, the fourth owner that might have that vehicle over that 8-year period in order to take advantage of it. They give us their e-mail, set up their account, et cetera, and they take advantage of that and gives us that opportunity. But it's not just here's the subscription comes with the vehicle, and we leave it at that. In fact, roughly about 50% of customers are actually upgrading to some of our different packages, whether that's the Protect package, the Connect Plus package or ultimately the OnStar 1. That ultimately combines everything. And with you have Super Cruise, you can put that into it. So people are either taking the 8-year included package, which goes immediately in with every sale into an 8-year revenue deferral or they're upgrading and they can upgrade in a 3-year package, they can upgrade in a month-to-month package, et cetera. And as that revenue is earned on a monthly basis, we actually bring it into the P&L. So what we're seeing is 25% of our customers are upgrading to that Protect, roughly 25% are upgrading to the Connect and more than 50% of our total paying customers are actually doing the OnStar 1 and bringing that together. So ultimately, what we're seeing is customer choice coming in, driving that value and paying us that revenue into it. So what we've got to do is create that model for sustained revenue growth, both the product offerings, but also that connectivity increasing across the number of vehicles that are driving out on the roads, and that number starts to grow every single year when you include those connected services like basics with the purchase of the vehicle. So you're driving significantly more engagement with every vehicle on the road and opportunities for customers to really drive additional purchases in the future. And that creates much less churn when you get that basics package as well. So much of the deferred revenue that you see on the balance sheet today is really locked in. It's already been sold, and it is going to come. And then there are opportunities even to grow that realized revenue with more interactions from the customer. In fact, we've more than doubled our monthly active users with the app. It's been a long journey to get there, but what we see is that momentum really starting to take hold. And that's what excites us the most about where we are. But the important thing is -- and this is the question that finance has to ask is, well, if you're going to give the basic package for free, how are you not going to dilute that base of customers that was already paying for a subscription. And as you can see from this chart, the gray bar represents the paid subscription. So it goes back to the legacy OnStar system. And the dark bar is what you see in terms of the revenue deferrals and what's included in the basic services. And you'll see that the gray bar hasn't changed. It's just we've stacked it on top, which means that the opportunity, the throughput of the paid services isn't changing by virtue of the fact that we're giving some of the basic foundational stuff included in the purchase of the vehicle. So what that means for us is that gives us that exponential opportunity to grow and what we think we can do over time across the board. So this is the long-term opportunity to convert these prepaid customers to subscription services going down the road. And what you see in Super Cruise, we've talked about this number before, but we had about 35,000 vehicles come off the 3-year subscription of Super Cruise last year, and we converted them to a subscription at a rate of about 30% to 40%. What's exciting about that is there are about 250,000 vehicles that are coming up over the next couple of years. Because remember, the vehicles that are coming up now were just coming out of the chip crisis where Super Cruise was one of our most affected chips that we saw in '21, '22 before we started to normalize in '23 and beyond. So you're starting to see that growth in renewal opportunity come up even more across the board. So let's look at what the deferral piece looks like. As we mentioned, so when you sign up for OnStar base or when you purchase a vehicle, you're signed up for OnStar Basics, that revenue defers over 8 years. We've already expensed all the hardware of the vehicle. Same is true for Super Cruise that all that hardware gets expensed with the wholesale. So if you think about where the P&L sits against the traditional viewpoint of selling vehicles, we're recognizing all the expense, but we're deferring the revenue that's associated with that subscription. So naturally, that amortized revenue comes on at a significantly higher margin than the vehicle itself. And in a way, that overexpensed hardware actually sort of says you're almost under earning in the current period because you're not getting any revenue associated with what you're selling in terms of the hardware. So the OnStar basics is 8 years. OnStar 1, if you buy a package subscription is over 3 years. And then Super Cruise comes with that 3-year period originally. So what this stacked bar chart shows you is of the deferred revenue that was on the balance sheet at the 2025, how that amortization schedule looks. And the reason we do that is you can model that going forward as you see the revenue -- deferred revenue growing and ultimately create your own models as to what that can mean for us going forward. Because we've already said that 2026, the deferred revenue balance will approach $7.5 billion. So we have significant opportunity to just grow that deferred revenue, but also importantly, grow the realized revenue over time, which you can see here in that blue line. The black line represents the deferred revenue growth. The blue line represents what's actually being recognized in it. So as you can see, as that deferred revenue continues to grow, the annual realized revenue is going to grow on a lagged basis over time until we reach a level of equilibrium, and then you'll see that sustained in the results going forward. As we said, the deferred revenue here is also going to be recognized at a much higher margin because, like I said, the costs have already been in. And the good news is we're doing this sort of on the baseline load of R&D. In fact, our research and development budget is actually down a little bit year-over-year, even though we're diving more into software. So the cost, if you will, to be able to grab this additional revenue or be able to drive this additional revenue is actually really already in the baseline in the foundational system. So this represents what I think is a pretty significant opportunity that still is not fully realized in the value. And one of the reasons why we have said publicly and the Board has taken the positions, we -- despite retiring all the shares that we have, we still see considerable undervaluation in the model as well. And that's why we're continuing to drive our share repurchase program. So this breaks down the deferred revenue balance by product where you see between Super Cruise and Protect, Connect and fleet services. Fleet is another great area for us. We don't emphasize it the way some of our competitors do. But that is a big piece of this, whether it's telematics, vehicle location, optimization services, et cetera. We have a pretty sizable fleet component within this as well. But when you look at all these services, and you can see the growth in Super Cruise of where we are, both in the realized and the deferred revenue. And that installed base is going to continue to grow. One of the things I think that's been a challenge is in order to get Super Cruise today, you've got to buy bundled higher-level package starting with the model year '27 full-size trucks and then expanding from there. We're actually going to offer Super Cruise as an option. So you don't have to necessarily buy a more expensive package to get it. And the point there is to try to drive adoption to drive purchase to get more of those Super Cruise connected vehicles on the road. We're also expanding globally, South Korea, Middle East, Europe and opportunities for that globally as well. So I think we're up over 700,000 miles of Super Cruise-enabled roads in the U.S. That's going to continue to move forward. And as we've talked about with the autonomous capabilities of having eyes off in 2028 on the highway and then continuing to grow that in the future to more door-to-door type services. That's the expansion path that we see and not even modeled in what you see today of the deferred revenue, obviously. So there's a lot of opportunity here. We see this as a really strong growing asset, 13 million subscribers by the end of this year, approaching $7.5 billion of deferred revenue and $3 billion of recognized revenue this year. So we think that this is a significant value driver. You're going to hear us talk more and more about that and as well as roll out more of the product team with the ability to demonstrate where the future of this goes. So we're pretty excited about that because if you only have 13 million subscribers today, and I think there are over 45 million GM vehicles on the road in the U.S. you can start to see where the exponential growth can take hold over the years as we continue to increase connectivity into the vehicles, and we continue to increase those features for our customers. So I hope that this was helpful. I know it was quick. We want to leave time for questions in the fireside chat as well, but I thought it would be a good opportunity for us to lay that out at this conference and grateful for the opportunity to do so. Alex?

Perfect. Thanks for that, Paul. That was a great presentation. Just wanted to follow up on the digital offering, and then we'll sort of get into the demand environment a bit later. But you walked us through the evolution of your digital offering and sort of pathway towards connected intelligence. What specific enhanced features and functionality improvements are planned for 2026 and 2027 to maintain a competitive differentiation in the market?

Well, I mentioned some of those in the presentation in terms of the security services and the additional sort of enhancement that we're doing to the digital side. So what really, at the end of the day, we've got to have a constant expansion going forward. And that's what the capabilities of the vehicle today are not the capabilities of the vehicle that we're going to see in '28 and beyond. So I think the team has done a good job of continuing to drive that focus. We mentioned some about the safe lock and the ability to be able to use the connectivity of the vehicle to put a pin in to make sure the vehicle can't be stolen or you can shut it down and so on. So that and among a number of other features are on the way. And I think a bunch that we haven't even thought of yet today, and that's where the excitement really comes in.

I wanted to just ask a question on -- I think you said roughly 40% renewed their subscription. Did you do any like studies on why the choice made to renew or what new consumers you thought about not renewing, and that's a pretty high figure to have 40% conversion.

Yes. So 30% to 40% on Super Cruise at the end of the 3 years. We think it's a function of a couple of things. Number one, the 3-year period, the 3-year initial period, I think, is important. It gets people used to it. It gets them lots of opportunity to try it, sample it, maybe get comfortable with it if they're not initially comfortable with what a hands-off driver assist program might look like. And that's a longer period than many of our competitors who in the shorter period, see lower adoption rates. And we think that some of that is actually driven by the fact that people just don't have enough time to get used to it. If it's a 90-day subscription, well, I can't make a decision on whether I -- $30 a month. So 3 years, I get comfortable using it. When we look at those customers that don't renew, there's a few things that stand out. Number one, they tend to be very local drivers. So they're not doing a lot of highway miles, et cetera. So if you're just driving in your local community, running errands with your vehicle, going to from work, staying off the highways. There's not much of an opportunity to really interact with it. And those customers wouldn't see a lot of value in paying a subscription for it. Rural, some rural owners, et cetera, that may not live in an area where Super Cruise is really prevalent on the roads, which is why it's so important for us to continue to expand that with over 700,000 miles of highways and roads, we're going to continue to improve that capability. And I think there's an opportunity to capture some of those. So for whatever reason, they just don't use Super Cruise a lot, even though they purchased it upfront. So that's what we traditionally see. What I think is really important about that 30% to 40%, it's held up as the number of vehicles up for renewal have come up. So we're optimistic. The team is working hard to make sure that we can maintain that level of attachment even as we start to double like we will this year, the number of vehicles that come off of their free trial period or prepaid trial period.

Yes. I wanted to talk a little bit about the autonomy strategy and how the autonomy strategy sort of weeds into this. I guess as you transition from the current Super Cruise offering to, I think, eyes off hands-off level 3 autonomy launching, I think, with the Cadillac, Escalade IQ in 2028. How will the company's pricing strategy and go-to-market approach for these more advanced features differ versus the current Super Cruise model? And what incremental revenue opportunity do you see from this upgrade?

I mean I think we see it as a pretty sizable opportunity because the step function improvement in what the capability is going to do with that autonomous solution really changes it, right? Because if you can go full eyes off, you're talking about being able to get things done and so on. So we think the value is there. It's too soon to be talking about how we might price it. We've got to get closer to when we go to market, and we'll talk about that. But I think those features and the additional capabilities of the system really present a pretty remarkable opportunity for us going forward when you -- especially when you start to scale it. So much like this did, it will start a little bit slow because it's only going to be on one model, but we want to make sure we get the integration work done and fully integrated into the vehicles, and you'll see it expand pretty rapidly after that.

And then I guess just a follow-up on that. What specific autonomous driving milestones should investors expect before you get to more of a full eyes off, hands off level 4 type of deployment? Can you just walk us through your autonomy road map?

So we're going to continue to sort of increase our disclosures on that, and you'll hear more from Sterling and the team this year as they continue to make progress and give some pretty clearly defined milestones as to how we're going to ultimately get from here to there. But suffice it to say, the team is working really well. I think -- we talked about some cost inflation, additional costs that we're building into the system this year for additional talent to bring in. So I think Sterling has done a really good job of assessing the team, assessing where the capabilities are and what we need to do to upgrade. So we're making the investments and feel pretty good about the progress that they're going to make.

Paul, maybe we'll kind of talk on growth opportunities. Perhaps internationally, how has this been adopted in some of your other markets? And then maybe if we can kind of talk about the power of AI and could that help your cost structure or advance some of the technology maybe more quickly than your team even anticipated?

Well, I mean, I think for sure, there's -- we're just kind of rolling out more of the global expansion of some of these products and the early returns are good. It's just too small to really scale at this point. AI, I think when you look at it first and foremost, you got to think about how can it benefit the customer and where can you do that? Because we know customers today are increasingly expecting more digital, more software, more capabilities, more of what the car can do for them. And we've got to build that in. And you start to see some of that groundwork being laid in what we're doing here with the connected OnStar system and connected intelligence. As far as what AI can do in the business, I think just like every other business out there, the opportunities to do things more efficiently, cut down development cycles, drive whether it's overhead reduction or more efficiency, more productivity among the administrative levels. I think there's a tremendous opportunity ahead of us. And I think we're in the process of enhancing a lot of our legacy systems and getting it ready and also deploying AI throughout the organization. Every single one of us as a business leader is challenged to find applications in our day-to-day lives. That's true, whether it's finance or marketing or manufacturing, engineering, et cetera. And I think you're going to only continue to see that grow.

Perfect. I wanted to shift and talk about the current demand environment, if that's okay. So I guess on the surface...

But everybody came to here.

So I guess on the surface, the regulatory backdrop in the U.S. seems quite compelling for you. You have the rollback of many of the emission standards, federal tax incentives, allowing OEMs like yourself to prioritize higher-margin accretive ICE vehicles. I guess can you just talk about how you're positioned to capture these near-term tailwinds and monetize sort of the recent policy change? And then what are the current headwinds in the current demand environment? I guess, potential higher gas prices for longer has been a theme here. Can you just talk about how you're monetizing the favorable regulatory backdrop and then your sort of outlook on the current demand environment?

Yes. I think I don't think you can talk about '26 without spending just a minute on 2025, which really, as you look back on it now, is almost a setup year, if you will. It was a year where we -- just over 12 months ago, we were thinking that tariffs were going to be the end of the business model and the success that we've seen. We didn't actually ever feel that, but that was a lot of the anxiety that I think the market was feeling as well. And what we found is that the auto industry is really, really important to the administration. So even implementing tariffs, they wanted to make sure they can maintain competitiveness. And I think they've found a nice sort of narrow path to do that. Would we rather not pay $3 billion in tariffs? Probably. But at the end of the day, I think what we've seen is we can adapt to that. we can overcome it and use it as a little bit of a speed bump before getting back on track. And that's what we did. So whether it was the go-to-market strategies, the fixed cost reductions that we did or the manufacturing footprint changes that we made, we were able to offset more than 40% of that tariff, which was ahead of our goal, largely because tariffs were a little bit lower than what we originally forecasted for the year. And then on the regulatory side, we took some pretty sizable charges at the end of the year to write off all of the capacity that we essentially had to build as a result of where the regulatory environment was going, get us the capabilities to produce 1 million EVs a year. We don't need that. And it's clear for the next several years that EV adoption is going to be lower, the trend line, the growth rate in EVs is going to be lower. And that's okay because I think what it does is it gives us the opportunity to go in and get more cost out of the system. We've got LMR technology. We've got prismatic cans coming in over the next couple of years. So just sort of keeping a relevant volume to make sure that the brands remain relevant and the vehicle models remain relevant in the customers' eyes, positions us to be able to grow that as we get more financial sustainability in those vehicles as well. So that was a lot of hard work. It's not behind us. As we know, we have a significant sort of special cash headwind in 2026. We are working very aggressively to get that behind us. My goal would be to have all of this behind us by the end of the second quarter. And the team working with hundreds and hundreds of suppliers going in and trying to negotiate these claims and making really, really good progress with it. So I feel good about getting that behind us. Now when you look at '26, I think I may have jinxed it because I said a few weeks ago at a conference that this was probably the most stable start to a year that we've seen in my 5 here. And -- but I will take credit for saying I don't know what's going to happen, but something will. It turns out we got our something. And so far, I think we haven't seen on the ground in -- at the retail level. We haven't seen any meaningful shift. January was really, really light as we know, but that was as much to do with the weather as anything else because I think nobody was going into a car dealership in the eastern half of the United States for probably 2 weeks because of the mass of weather. We lost a little bit of production at Arlington, Bowling Green, et cetera. But that seems to have normalized. February was right on track. March so far, I think, is looking good. So overall, I think we are pretty much on track with where we thought. Now if you look at the historical models, usually, it takes 4 to 6 months of sustained high oil prices before people start to think, well, maybe I should go for less mileage or maybe I should buy down, et cetera. I don't think we see that, and we certainly don't see it today where we are. If anything, we're challenged a little bit with low inventory in some key products, particularly like the Cadillac, Escalade and some of the full-size trucks as we retool for the next generation of trucks beginning later this year. So we knew we were going to lose that production. But all in all, like I said, generally on track with where our guidance is and nothing that we've seen in the sales data to indicate there's any concerns. We hear this drumbeat of affordability. I think it's pretty consistent with what we've been hearing for the last few years, but certainly isn't affecting people's purchase decisions. And then I'll just close by saying I think GM has the broadest portfolio when you look at price points of any of the big D3 manufacturers and arguably more than most manufacturers. We sold over 700,000 vehicles last year with an MSR or with a base price below $30,000. That positions us really well, I think, in all of the ends of the market. So the fact that we're able to make money at that low end, I think, is a really strong testament to what GM has been able to do and why we are so bullish on our portfolio because we think it has a sustainability to it through various iterations of the cycle.

That leads me into -- GM has generated extremely healthy cash flow over the last several years despite tariffs and COVID and the like. How is the firm prioritizing capital deployment across CapEx, new tech initiatives, new dividends, share buybacks? And we've got a lot of credit investors that came to the event and GM is a very important kind of part of their portfolio and balancing all that with your solid investment-grade ratings.

Yes. Well, for the fixed income investors, I know GMF is a serial issuer. Sorry, but not sorry that we're not issuing as many GM bonds because the company is doing incredibly well. We will have a couple of refinancings in all likelihood over the next couple of years. But being a legacy treasurer guy myself, I actually enjoy not issuing a lot of debt. That's a good thing. So especially against some of our history. But I think if you look at all of the metrics where we are, the one I'm probably the most proud of for the organization is that free cash flow because what that represents is really the lifeblood of performance because free cash flow and ultimately, operating cash flow actually allows you to build the foundation for the future to continue it. It's one thing to have a great portfolio that doesn't generate a lot of free cash flow. You can't sustain that in the future. You can't invest in the next generation and the next generation. So what you end up doing, as we've seen some of our competitors do is cut a lot of content out of the vehicle and make the vehicle overall less desirable for consumers because you're trying to cut costs to maintain that level of cash. And I think we've been able to do it with a very different nontraditional go-to-market approach. We talk about a lot about inventory discipline and incentive discipline. That translates to over $3 billion a year of additional like-for-like revenue performance versus our competitors, which goes straight to the bottom line and a big reason why we've gone from a legacy of generating about $3 billion of free cash flow to generating $10 billion or more for the last 4 years. How we prioritize that is, first and foremost, like I said, we've got to invest in the business. We've got to maintain a portfolio advantage. We've got to maintain our ability to deliver value to the customers because that's ultimately what's driving our retail sales and where we see continued room for improvement and evolution as you've seen through the connected services and what the vehicle can do. So it starts with that. We're taking that up a little bit from where we've been for the last few years from $10 billion to $11 billion up to $10 billion to $12 billion for '26 and '27. And that really is continuing the base level of product investment, but also adding some of the manufacturing footprint changes. So we're really good, I think, as an organization at prioritizing and making the right trade-offs for the organization. I will tell you that there are a whole lot more than $10 billion to $12 billion of ideas, but it's that discipline. And what we talk about internally is capital budgeting is a function of 2 variables, not one. Most people think about it as, well, can I afford it? Well, we can afford to invest more. I mean we're generating over $20 billion of operating cash flow. If the right answer was, let's invest $15 billion to $16 billion of CapEx, we could do that. The second question, though, is what the gating item is, is every time you take your CapEx budget, you've got to hire more engineers, more supply chain, more logistics, acquire more real estate, get more tooling, et cetera, to make that capital deployed effectively. And when you think about the fixed cost that you have to add to the system, that's what starts to impact the margins. So we've struck this balance of saying with the assets and the resources that we have, what is the amount of capital that we can invest reasonably and make sure that it works and then we can deploy it successfully. And that's where we get the $10 billion to $12 billion. So it's a matter of prioritizing those ideas. The second priority is the balance sheet. And the balance sheet is arguably probably never been stronger or it's been a long, long time since it's been as strong as it is. The pension is nearly fully funded. We have a little bit of a deficit in the salaried plan. There's no real priority to go in and fund that other than to keep it kind of at 80% or higher. I think it's sitting around 86% right now. But the hourly plan is nearly completely fully funded even after the negotiations of '23. And we have a really good asset management team that is ensuring that we derisk that for the future. So the balance sheet is strong. We just met with all the rating agencies. We do that twice a year regularly to go through the business, but then also have a very good relationship with them to talk about initiatives and how the year is going. I think they're generally fairly optimistic with how we've navigated tariffs and where we sit today. Iran obviously, will affect their view, but it's hard to argue with the type of consistency and the performance that we've had. And then lastly, it comes back to distributing and returning capital back to shareholders. We've chosen buyback as the vehicle of choice because we think we're still undervalued. We're undervalued against our historical context. We're undervalued against industry peers even if you change the industry peers that you should be compared to as we think we should. But despite the fact that the stock has gone up 50%, we -- or has doubled, sorry, we still see opportunity there to continue to drive that. In the meantime, we're continuing to use some of the savings of the dividend from the fewer shares to raise the dividend and make the currency even more valuable for our investors and reward them for the long term, while at the end of the day, we have these initiatives in place like connected services where we see can fundamentally transform the P&L.

Right. That's great.

Perfect. I think we will have to leave it there. We're right at the 40-minute mark. So we want to thank Paul for an excellent presentation, and thank you all for joining. So thanks again.

Thanks for your time.