通用汽車 (GM) 2011 Q2 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to the General Motors Company second-quarter 2011 earnings conference call.

(Operator Instructions).

As a reminder, this conference is being recorded Thursday, August 4, 2011.

I would now like to turn the conference over to the Executive Director of Communications and Investor Relations, Mr.

Randy Arickx.

Please go ahead, sir.

Thanks, operator.

Good morning and thank you for joining us as we review our second-quarter 2011 results.

As you know, our press release was issued earlier this morning, and the conference call materials are available on the Investor Relations website.

We would also like to highlight that GM is broadcasting this call via the Internet.

Before we begin, I would like to direct your attention to the legend regarding forward-looking statements on the first page of the chart set.

As always, the content of our call will be governed by this language.

This morning Dan Akerson, General Motors' Chairman and CEO, will provide opening remarks, followed by a more detailed review by Dan Ammann, Senior Vice President and CFO.

Dan Akerson will then conclude the remarks portion of our call with some closing comments.

After the presentation portion of the call, we will open the lines for questions from the analyst community.

I would also like to mention that we also have Nick Cyprus, Vice President and Controller and Chief Accounting Officer, as well as Chuck Stephens, CFO of North America, with us today to assist in answering your questions.

With that, I would like to turn the call over to Dan Akerson.

Thanks, Randy.

In summary, we had a solid quarter.

Each region posted a profit.

Our cash flow was strong, and most importantly, our fuel-efficient vehicles continue to perform very well in the marketplace, and we have more coming.

Today's results are further evidence that we continue to make steady progress on our plan and on our goal of long-term sustained performance for General Motors, but we have a lot more work to do.

Turning to slide two, our global deliveries and net revenue were both up year over year, reflecting the benefits of our global footprint.

Our revenue was up 19% to $39.4 billion, and we were able to outpace the market, resulting in global share increasing to roughly 12.2%.

We delivered $3 billion in EBIT adjusted, an increase of $1 billion versus the prior year, reflecting the benefits of improved revenue offsetting higher commodity cost and future product cost.

GM North America improved its EBIT adjusted to $2.2 billion, largely on the strength of stronger sales of fuel-efficient vehicles across the portfolio.

And I'm pleased to report that GME, GM Europe, achieved another important milestone of positive EBIT adjusted of about $100 million for the second quarter.

Clearly more work to do, but Europe continues to meet plan, especially our market share in Germany, which was up 0.9 of 1% year over year.

GMIO international operations reported EBIT adjusted of $600 million, up $100 million from a year ago.

And GM South America recorded EBIT adjusted of $100 million, down $100 million from the second quarter of 2010.

During the quarter we have also made good progress, further strengthening our -- in further strengthening our Fortress balance sheet.

We generated automotive free cash flow of $3.8 billion and ended the quarter with available automotive liquidity of $39.7 billion.

All-in-all a good quarter that is another step in our journey of sustained profitable growth.

I will now turn it over to Dan Ammann, who will provide additional detail.

Thanks, Dan.

On slide three we provide a summary of our second-quarter results compared to the prior year.

Net revenues were $39.4 billion for the second quarter of 2011, up $6.2 billion versus the prior year.

Operating income was $2.5 billion, up $600 million versus the prior year.

Net income to common was $2.5 billion, up $1.2 billion versus the prior year, and earnings per share were $1.54 on a fully diluted basis, up $0.69 versus the prior year.

Both net income to common and fully diluted earnings-per-share were calculated using the two-class method in the second quarter of 2011, which we will cover in more detail in a few moments.

Moving to the non-GAAP metrics on the bottom of the page, EBIT adjusted was $3 billion for the second quarter of 2011, up $1 billion versus the prior year.

Automotive free cash flow was $3.8 billion, up $1 billion versus the prior year.

In summary, the second quarter of 2011 marks another solid quarter for the Company and progress against our plan and towards our goal of achieving sustained long-term performance.

Turning to slide four, we did not have any special items in the second quarter of 2011 or in the prior year; therefore, there was no impact to net income to common or to earnings-per-share.

On slide five I wanted to provide you with some additional detail on our fully diluted earnings per share calculation in this quarter, which under GAAP guidelines differs from previous quarters due to accounting for our Series B mandatory convertible preferred.

In short, there are two different approaches to calculating our net income to common and EPS.

Which one we use is a function of our average stock price in that quarter.

Because our stock price for this quarter was outside of the $33 to $39.60 conversion range for the mandatory convertible, we are required to use the two-class method, whereas in the fourth quarter of 2010 and the first quarter of 2011, we use the if converted method.

To summarize the differences between the two methods, net income to common on a reported basis is lower under the two-class method, but a lower share count is used to arrive at fully diluted EPS.

Said another way, the dilutive impact of the mandatory convertible shares is reflected in net income to common rather than in the share count.

Importantly, (inaudible) price had been in the conversion range in the second quarter of 2011, net income to common would have been $2.8 billion, and fully diluted outings per share would have been approximately $1.57 or $0.03 higher.

If you should have any further questions regarding this, the IR team will be happy to provide you with additional detail.

On slide six we provide a walk from operating income to EBIT adjusted.

As we previously covered, operating income was $2.5 billion for the second quarter of 2011.

Equity income was $400 million, which was primarily our proportionate share of income, earned by our JVs in China.

Non-controlling interest represents the non-GM share of consolidated entities earnings, primarily GM Korea.

For the second quarter of 2011, this was zero on a rounded basis.

Nonoperating income was $200 million for the second quarter of 2011, up $400 million from the prior year.

The improvement was driven primarily by favorable results from hedging activities.

This totals to an EBIT of $3 billion for the second quarter of 2011, up $1 billion from the prior year, and finally, there were no adjustments to the quarter, so EBIT and EBIT adjusted are the same.

Turning to slide seven, we provide the composition of EBIT by region for the second quarter of 2010 and 2011.

GMNA's EBIT was $2.2 billion for the second quarter of 2011, up $600 million from the prior year.

GME's EBIT was $100 million, up $300 million from the prior year.

GMIO posted EBIT of $600 million, up $100 million versus the prior year, and GMSA's EBIT was $100 million, down $100 million from the prior year.

GM Financial reported pretax results of $100 million, and corporate and eliminations were $200 million unfavorable for the quarter.

This totals to an EBIT and EBIT adjusted of $3 billion for the second quarter of 2011.

On slide eight, we provide our global deliveries and market share for the last five quarters.

For the second quarter of 2011, our global deliveries were 2.3 million vehicles, up more than 150,000 vehicles from the prior year.

This increase was largely attributable to the successful of our global fuel-efficient product offerings.

For the second quarter of 2011, our global market share was up 12.2%, up 0.6 percentage points versus the prior year, and the global vehicle industry was up approximately 280,000 vehicles from the prior year.

Slide nine provides our consolidated EBIT for the last five quarters.

For quarters in which there were special items, EBIT adjusted is represented by a line.

As previously covered, we recorded EBIT of $3 billion for the second quarter of 2011, up $1 billion from the prior year, but this marks the highest EBIT to date for GM on an adjusted basis.

I also wanted to highlight for you that we have added operating income and EBIT adjusted to margins to the bottom of the slide, reflecting our internal focus on these metrics.

For the second quarter of 2011, our EBIT adjusted margin was 7.5%, up 1.4 percentage points from the prior year and marked the highest level yet for the Company.

While we made good progress in the second quarter showing operating leverage, we still have significant work to do to fully realize our margin opportunities over time.

On slide 10 we provide a year-over-year comparison of our consolidated EBIT.

Starting on the left, our consolidated EBIT was $2 billion for the second quarter of 2010.

Moving to the middle portion of the slide, we walked the $1 billion improvement in EBIT.

Volume and mix was favorable $600 million.

This includes $900 million favorable volume, driven by a 0.6 percentage point increase in global market share, as well as increased US dealer stock builds.

The mix was unfavorable $300 million, largely driven by North America.

Price was favorable $1 billion, highlighting the value customers see in our vehicles globally.

Costs were unfavorable $400 million, including a $300 million in engineering, $200 million increase in advertising, partially offset by reduced depreciation and amortization, as well as lower restructuring charges.

Also included here is approximately $200 million in increased commodity and freight costs net of supplier performance.

Other was unfavorable $200 million.

This includes the absence of favorable 2010 Canadian net monetary liability adjustments and favorable lease residual adjustments in 2010 also in GMNA, offset by the consolidation of GM Financial, which was not included in 2010 results.

This total is for the second quarter of 2011 EBIT adjusted of $3 billion.

Turning to slide 11, we will now cover the segment reviews starting with GM North America.

GMNA deliveries were 784,000 units for the second quarter of 2011, up 68,000 units from the prior year.

The increase was driven by a 270,000 unit increase in the North American industry, as well as a .4% increase in GMNA marketshare.

US market share was 20%, up 0.6 percentage points from the prior year.

On slide 12 we provide what we view as key performance indicators for GM North America.

The two lines on the top of the slide represent GM's US total and retail share.

The bars on the slide represent GM's average US retail incentives on a per unit basis.

And our US retail incentives as a percentage of average transaction price and compared to the industry average is noted at the bottom of this slide.

For the second quarter of 2011, our US retail share was 17.6%, up 1.3 percentage points versus the prior year and down 0.6 percentage points versus the prior quarter due to the absence of the first-quarter sales programs.

Our incentive levels on an absolute basis have declined significantly from the prior year, as well as sequentially.

On a percentage of [ATB] basis, our incentives were 8.9%, down 2 percentage points versus the prior year.

This puts us at approximately 103% of industry average levels for the second quarter of 2011, flat versus the prior year.

In terms of incentive levels, our plan continues for us to be at approximately the industry average for the year on a percentage of the ATB basis.

These results per share on incentives demonstrate the impact of our plan to produce great vehicles that customers are willing to pay for.

Turning to slide 13, we have GMNA's EBIT and EBIT adjusted for the last five quarters.

GMNA's EBIT was $2.2 billion for the second quarter of 2011, up $600 million versus the prior year.

Revenue was $23.1 billion, up $2.8 billion versus the prior year due to the impact of increased volume of $2 billion and improved pricing of $800 million.

GMNA's EBIT adjusted margin was 9.7% for the second quarter, up 1.8 percentage points versus the prior year and substantially improved over the last two quarters.

US dealer inventory was 605,000 units at the end of the second quarter, consistent with our plans to build in the first half of the year and deplete in the second.

At the end of July, we had reduced our US dealer stock levels by 67,000 units, down to 538,000.

We anticipate that we will end the year with levels slightly above year-end 2010, but at comparable days supply.

On slide 14 we provide the year-over-year comparison of GMNA's second-quarter EBIT.

Starting on the left-hand side, GMNA's EBIT was $1.6 billion for the second quarter of 2010.

The middle section of the slide details the $600 million improvement in GMNA EBIT.

Volume and mix was favorable $300 million.

This includes $600 million improvement related to increased volume, due to a 7% increase in industry volume, 0.4 percentage point increase in our market share, and approximately 20,000 unit increase in US dealer stock bills.

I would like to mention that starting this quarter we have included variable manufacturing expense as part of volume in these walks mixed with unfavorable $300 million due to increased sales of compact cars and reduced sales of large passenger cars and full-sized SUVs.

We will cover full-sized pickup inventory in more detail on the following slide, but I wanted to provide you with some insight related to the year-over-year comparison.

As I mentioned, we increased US dealer inventories by approximately 20,000 units more than we did last year.

Of this, full-size pickups accounted for approximately 37,000 units in the quarter, which would be about the equivalent of $350 million on a volume and mix basis.

Price was favorable on a year-over-year basis by $800 million due to the success of our new fuel-efficient vehicles, prior pricing actions to offset commodity costs, as well as an approximately $600 per unit reduction in US retail incentives.

Costs were unfavorable $200 million.

This includes $200 million in increased engineering, $100 million in increased marketing, partially offset by $100 million in lower DNA, as well as $100 million in increased pension income.

Also included here is $100 million net increase in commodities and freight.

Other was unfavorable $300 million versus the second quarter of 2010.

This includes approximately $200 million decline related to the absence of favorable Canadian net monetary liability gain that we experienced in the second quarter of 2010 and $100 million decline due to the absence of favorable lease residual adjustments that also occurred in the second quarter of 2010.

The total is an EBIT adjusted of $2.2 billion for the second quarter of 2011.

On slide 15 I wanted to provide you with additional transparency around our full-size pickup US dealer stock levels.

Starting with a box at the top of the page, we had approximately 209,000 units of full-sized pickups in US dealer stock at the end of July.

This is the equivalent to 115 days supply on a selling day adjusted basis and is down from 219,000 units and 122 days supply in June.

Our objective is to be at about 200,000 units by year-end, which we will expect will translate to approximately 90 days supply at that time on a selling day adjusted basis.

This would be an increase of approximately 40,000 units or 20 days supply over year-end 2010 levels.

Approximately 10,000 units of this increase are in support of an expected improvement in full-sized truck segment and overall industry sales.

The remaining 30,000 unit increase is a planned buffer to support 2012 planned downtime to perform facility upgrades ahead of the next generation full-size truck launch.

Referencing the graph on the bottom of the page, we have provided GM's historical US full-size pickup sales, which is represented by the blue line.

Also provided on the graph is US country of sale full-sized pickup capacity on a three-shift basis.

As you will note, our sales volume has reduced substantially versus historical levels and has just begun to recover in 2010 with further improvement expected in 2011.

Our three-shift capacity has been reduced as well from 1.3 million units when we had five assembly plants to approximately 780,000 units on a three-shift basis today.

In 2012 we expect our available capacity to be reduced further to 642,000 units due to planned plant downtime.

In order to ensure we have adequate supply in a growing industry, we are building dealer stock of approximately 30,000 units to support this downtime.

We had planned to build this buffer over the course of the year; however, as a result of the slower selling rate in April and May, we had built more quickly and subsequently have reduced second-half production schedules accordingly.

In the event our sales don't meet our expectations, we intend to manage inventories with production cuts while maintaining competitive incentive levels.

Turning to slide 16, I wanted to provide you with some additional transparency into GMNA's results on a sequential basis.

This is not a slide that we plan to share with you every quarter; however, we felt it might help aid your understanding of current trends in the business.

In terms of the information displayed on the slide, we have the sequential EBIT adjusted walks for the last four quarters totaling down to the year-over-year comparison that we reviewed on a prior slide.

We have always shared with you some of the sequential EBIT walks displayed on this slide in prior quarters, so I will not be covering them all here.

What I would like to do is direct your attention to the fourth row, which provides the sequential walk of GMNA EBIT adjusted from the first quarter of 2011 to the second quarter of 2011.

As you recall, GMNA reported an EBIT adjusted of $1.3 billion in the first quarter of this year.

The impact of volume was flat quarter over quarter.

This includes the impact of a 10% increase in North America industry volume, 0.8% percentage point increase in market share, offset by lower dealer stock builds of 33,000 units in the US and in Canada, as well as a 35,000 unit increase in daily rental volume in which the P&L impact is deferred.

The mix was favorable $200 million due primarily to increased full-sized pickup volume and reduced passenger car and compact SUV volume.

Price was favorable $600 million due to the vehicle price increases and the reduction of sales incentives in the second quarter.

On average our retail incentives were approximately $800 per unit lower in the second quarter.

The costs were flat versus the first quarter, but include decreased engineering expense offset by approximately $200 million increase in policy and warranty reserves.

In the second quarter of 2011, we took a $300 million charge related to our prior period policy and warranty-related expense.

In the first quarter, we incurred a $200 million charge related to our Canadian dollar net liability position that did not repeat in the second quarter, driving a $200 million improvement.

Other was unfavorable $100 million, includes a number of small items.

This totals to an EBIT adjusted of $2.2 billion for the second quarter of 2011.

On slide 17, GME deliveries totaled 483,000 units in the second quarter of 2011, up 40,000 units versus the prior year.

Increase in deliveries is attributable to increased sales of new generation Opel Meriva, new generation Opel Astra, as well as higher sales in Germany.

The price was flat on a year-over-year basis.

Costs were favorable $200 million, including approximately $200 million in lower restructuring charges, $100 million reduction in manufacturing, partially offset by $100 million in increased engineering.

Other was unfavorable $100 million, which is mostly the net of various foreign exchange related items.

This totals to GME's EBIT adjusted of $100 million for the second quarter of 2011.

As seen on slide 20, GMIO deliveries totaled 780,000 units in the second quarter of 2011, up 9000 units versus the project despite a 0.5 million reduction in industry volume driven by the Japan crisis.

GMIO marketshare benefited from gains made in key markets.

In China stronger Chevrolet and Buick sales supported GM growth in a declining industry for the quarter, which led to a share increase of 0.2 percentage points from the prior year to 13.3%.

In total, we expect the China industry to be up modestly for the year versus 2010.

The second quarter of 2011 was also an important milestone for GM in South Korea as we phased out the Daewoo brand and successfully launched the Chevrolet brand.

The successful launch of the Chevy Aveo, Orlando and Captiva led to our second-quarter marketshare of 9.8%, up 1.6 percentage points from the prior year.

Regarding India, our marketshare was negatively impacted by our lack of a mini diesel entry in the larger segment of the market, while fuel price changes further improved the value of diesel-powered vehicles.

However, we expect that our July launch of the Chevy Beat diesel will allow us to take advantage of the current market conditions and lead to additional growth in the second half of the year.

Turning to slide 21, GMIO posted EBIT of $600 million, up $100 million versus the prior year.

Equity income from joint ventures in China was $400 million, flat versus the prior year.

GMIO's revenue was $6.6 billion, up $1.3 billion from the prior year due to increased volume of $600 million, favorable foreign currency exchange of $400 million, improved vehicle mix of $200 million, and favorable pricing of $100 million.

Noted below our revenue was GMIO EBIT margins from consolidated operations, i.e.

excluding equity income and non-controlling interest, as well as total net income margins for our China JVs.

As you can see, GMIO's EBIT margin from consolidated operations decreased slightly versus the prior year to 3.4%, and total China JV net income margins also declined slightly.

On slide 22 we provide the major components of GMIO's $100 million improvement in EBIT adjusted.

GMIO's EBIT was $500 million in the second quarter of 2010.

The impact of volume and mix was favorable $100 million.

Price was favorable $100 million, driven primarily by increases at GM Korea and Holden.

Costs were unfavorable $200 million, including $100 million in increased commodity costs and $100 million in increased engineering expense.

Other was positive $100 million, primarily driven by favorable foreign currency derivatives in Korea.

This totals to GMIO's second-quarter 2011 EBIT adjusted of $600 million.

As seen on slide 23, GM South America deliveries totaled 273,000 units for the second quarter of 2011, up 42,000 units versus the prior year.

Increase was driven by a 234,000 unit increase in South America industry volume, partially offset by a 0.3 percentage point decrease in GMSA marketshare.

The decline in GMSA marketshare was attributable primarily to a 0.8 percentage point decline in Brazil share due to competitive pressures in the age of our portfolio there.

However, our share in Brazil improved .3 points sequentially versus the first quarter of 2011.

Turning to slide 24, GMSA's EBIT was $100 million for the second quarter of 2011, down $100 million versus the prior year.

Revenue was $4.4 billion, up $800 million due to increased volume of $300 million, favorable impact of foreign currency of $300 million, as well as favorable pricing of $100 million.

GMSA EBIT adjusted margins declined 4.1 percentage points to 1.3%.

As we discussed during the first-quarter call, our South America operations are in the midst of an aggressive product portfolio overhaul.

By the end of 2012, we plan to introduce nine new products in Brazil alone.

In fact, across the South America region, we plan to introduce 40 new products by the end of 2012.

On slide 25 we provided the major components of GM South America's $100 million reduction in EBIT versus the prior year.

The impact of volume and mix was flat versus the prior year.

This includes approximately $100 million in improved volume, offset by $100 million in unfavorable mix.

Price was favorable approximately $100 million, partially related to increases in Venezuela and Argentina driven by inflationary pressures.

Costs were unfavorable $200 million, including $100 million of commodity and local material costs increases, as well as $100 million unfavorable labor economics.

Other was flat.

This totals to GMSA's second quarter of 2011 EBIT adjusted of $100 million.

Turning to slide 26, we provide our walk of automotive free cash flow for the second quarter of 2011, as well as the prior year.

After adding back noncontrolling interests, preferred dividends and understood earnings allocated to Series B and subtracting GM Financial, our automotive net income was $2.9 billion for the second quarter of 2011.

Depreciation and amortization was $1.6 billion non-cash expense, a $100 million improvement over the prior year and flat with the first quarter of 2011.

Working capital was $100 million source of cash, primarily due to one less supplier payment offset by the impact of seasonally lower Accounts Payable balance versus the first quarter.

Pension and other paid cash payments exceeded expense by $400 million, and other was a source of $700 million in cash and largely can be explained by the impact of the dividends received from our China JVs netted against the reversal of our non-cash equity income.

This totals down to automotive net cash provided by offering activities of $5 billion, a $1.2 billion improvement over the prior year.

After deducting capital expenditures of $1.2 billion, our automotive free cash flow was $3.8 billion, which is a $1 billion increase over the prior year.

In terms of capital expenditures, we expect the run-rate to accelerate during the second half and total approximately $7 billion for the year.

In the second quarter of 2011, capital accruals exceeded cash outflows by $700 million, which we expect to reverse out.

In addition, we expect increased spending in support of near-term product launches, including the Chevy Sonic, Buick Verano, and the new Chevy Malibu.

On slide 27 we provide a summary of our key automotive balance sheet items.

Strong operating performance during the second quarter of 2011 resulted in further enhancement to our already strong liquidity levels.

We finished the second quarter with $39.7 billion of total liquidity, consisting of $33.8 billion in cash and marketable securities and $5.9 billion of undrawn credit facilities.

On the bottom of the slide, our debt and book value of Series A preferred stock was $4.7 billion and $5.5 billion respectively, which is a significant reduction from levels a year ago.

US qualified pension plans were underfunded by approximately $11 billion.

This does not replace the impact of the approximate $2 billion stock contribution completed in January, which became a planned asset starting in July.

Furthermore, we continue to make progress toward our de-risking objective despite recent market conditions.

Obviously the Company has made good progress on the balance sheet.

Our strong cash position, minimal debt and improved pension funded status are all part of our Fortress balance sheet strategy.

This will allow us to invest in our product development consistently throughout the cycle, absorb external shocks and ultimately return cash to shareholders.

Slide 28 provides a summary for key operational metrics for GM Financial.

GM Financial reported their results earlier this morning and will be holding an earnings conference call at noon.

As I discussed during the first-quarter call, the two primary objectives of our order financing strategy is to provide certainty of availability of financing throughout the business cycle and increased competition and transparency among lenders.

As noted under the GM sales penetrations portion of the slide, our US subprime financing has increased over the prior year to 6.8% and is well above the industry average.

Our US leasing penetration of 13.3% has also increased over the prior year, but was down versus the first quarter due to reduced incentive levels and still trailed the industry average.

GM Financial has expanded its lease offerings into Canada with the acquisition of FinanciaLinx.

Our leasing penetrations have increased over 5 percentage points over the prior year to 8.4%, but are still below the industry average.

GM new vehicles as a percentage of GM Financial originations and GM Financial's percentage of GM's US subprime financing and leasing volume have both increased significantly since the second quarter of 2010 when GMF was an independent entity.

GM Financial continues to maintain prudent credit underwriting, posting very strong credit performance in the second quarter with an annualized net credit loss of 2.4% in its loan portfolio.

EBT was $144 million for the second quarter.

Turning to slide 29, in summary, the second quarter of 2011 marks another solid quarter for the Company and progress towards our goal of achieving sustained long-term performance.

Our portfolio of fuel-efficient vehicles continues to perform well in the marketplace, helping drive a 0.6 percentage point increase in global share.

We delivered $3 billion in EBIT with all regions profitable and $3.8 billion in automotive free cash flow for the quarter.

Importantly, our EBIT adjusted margin were improving both globally and in GM North America.

We continue to make progress restructuring our Europe operations.

However, we still have more to do.

In the near term, we must focus on flawless execution of our global product launches, including the Buick Verano and Chevy Sonic in the second half of 2011.

We must continue to control our costs and importantly leverage global growth.

Finally, we must continue to strive towards sustained long-term performance.

Based on our current industry outlook, the Company expects that EBIT-adjusted in the second half of 2011 will be modestly lower than in the first half and that full-year 2011 EBIT adjusted will show solid improvement over 2010.

Now I would like to turn the call back over to Dan Akerson.

Thanks, Dan.

Turning to slide 30, I wanted to take a few minutes and reassess where the Company is relative to the IPO investment thesis that we reviewed with you about six months ago.

We continually review our status versus the strategic objectives internally, so I thought it would make sense to review our assessment with you as well.

As you will recall, we indicated during the IPO roadshow that there were three key elements to long-term sustained performance by General Motors.

First, a new business model that is built around the vision to design, build and sell the world's best vehicles.

Second, to leverage GM's leading position in key growth markets into sustainable profitable growth.

And third, reduce the Company's risk profile so that we are in a position to invest in new products during good and bad times, smoothing the workload in the product development factory, reducing churn, and most importantly, consistently launching great products in key growth markets around the world.

Turning to slide 31, at GM everything starts with great products.

Nothing else matters if we don't deliver products to our customers that they believe are great and are willing to pay for.

On this slide I show three examples of recent US product launches -- the Chevrolet Equinox, the Buick LaCrosse and the Chevy Cruze.

The slide shows the changes in segment; retail market share; ATP, average transaction price; and 36-month residual value of the current product versus the product it replaced.

During the IPO, we provided early data on Equinox and LaCrosse, and here you can see both products continue to perform very well.

In fact, both the Equinox and the LaCrosse have improved their segment retail market share by approximately 10 marketshare points, while at the same time $3800 and $7000 increases in average transaction prices respectively.

The one data point that is not on the chart is that more than 40% of the buyers for Buick LaCrosse are coming from non-GM brands.

We have also highlighted the Chevrolet Cruze versus the Chevrolet Cobalt, which has seen an increase in segment retail market share from 6.2% to 12.5%, while at the same time increasing the average transaction price by approximately $4000 and commanding a 7 percentage point increase in residual value.

Globally we have sold approximately 330,000 Cruzes this year through June and 64,000 in June alone.

I would be remiss if I did not remind you that the Chevrolet Cruze was the best-selling passenger car in the United States in June.

During the IPO roadshow, we discussed the importance of designing, building and selling the world's best vehicles.

That continues to be a work in progress, but slide 32 shows an important metric to judge the Company's progress in that area.

This slide shows GM's total global and US share going back to the year 2005.

For the first time in a long time, we have stabilized US market share, halting the erosion of US market share that occurred over an extended period of time.

Our US launch product cadence in the next couple of years is further reason for optimism that we can continue to stabilize if not grow our US market share.

Soon to be launched new products like the Buick Verano, Chevy Sonic and the Malibu and the Buick Regal and LaCrosse with eAssist are the right fuel-efficient products at the right time.

We are moving into a period with robust product cadence.

And globally we are well-positioned to increase our share based on our footprint in key growth markets around the world.

We have further important launches this year such as the Opel, Vauxhall Zafira, MPV in Europe and the Baojun 630 in China.

The key message we delivered during the IPO and as previously mentioned is GM's strength in those markets around the world that are expected to grow the most in the next five years.

Slide 33 provides you an update of how we are planning, how we are performing in the most important growth markets.

The first column shows 2010 industry volume by region of the world totaling 72 million units.

The second column shows the number of units in the industry is expected to grow from the end of 2010 through 2015 by region of the world as estimated by IHS Global Insight.

As you can see, the global industry is expected to grow approximately 24 million units or 33% over five years.

It is not surprising the largest growth area will be countries -- the countries of Brazil, Russia, India and China, accounting for about half the growth.

GM is the collective market leader in these countries with a 12% share in the BRIC countries and more than 13% share in China alone.

The fastest-growing market in the world is expected to be North America, the second fastest, I'm sorry, with growth of about 6 million units or 25% of the total growth in the global industry.

GM, again, holds the leadership position with approximately 19% market share in the first half of 2011.

In Western Europe where growth is expected to be approximately 1.5 million units, we hold the number five market position.

And, in the rest of the world where growth is expected to be more than 4 million units, we hold the number three market position with marketshare of approximately 8%.

In summary, GM is better positioned today than it was than any other automotive manufacturer in the world to take advantage of the expected growth in the industry.

Our job is to grow that position with initiatives like launching 60 new models or major upgrades in China in the next five years, including the launch of the Baojun brand.

In addition, the entire Company is focused on designing, building and selling the world's best vehicles to ensure we preserve our leading global position in key markets.

Turning to slide 34, the third and final strategic initiative we discussed during the IPO was for GM to have a significantly lower risk profile.

Two key elements to this were breakeven near the bottom of the cycle and having a Fortress balance sheet with sufficient liquidity to withstand a shock.

We have a very good start at improving the Company's breakeven with all regions profitable in the second quarter.

With regard to breakeven in North America, despite a US SAAR of a pretty mediocre 12.8 million units through the first half of the year, GMNA has delivered EBIT adjusted of $3.5 billion.

While there is always more work to do, we are pleased with our breakeven point in North America and are committed to keeping the breakeven low as the industry improves by staying extremely focused on optimizing fixed costs.

We must ensure we leverage the expected growth in the US industry into the bottom-line results.

In terms of GME, we previously communicated our plan to deliver breakeven EBIT adjusted before restructuring for the year.

Through the first half of the year, GME has accumulated EBIT adjusted of approximately $100 million, including restructuring charges of $100 million.

Although not satisfied with breakeven performance, we have reduced the risk profile of the Company by lowering the breakeven in Europe as well.

The last pillar of reducing risk profile of the Company is to have a Fortress balance sheet.

We define this as minimal debt, a fully funded and de-risked pension plan, and prudent liquidity reserves.

A Fortress balance sheet will be important as we continue to make strides to achieve an investment grade credit rating.

I cannot stress enough the power of reducing the risk profile of the Company.

The combination of a lower breakeven, a fortress balance sheet will allow us to invest in engineering, marketing and capital expenditures through the peaks and troughs of the cycle, and we will yield important synergies and returns that we are just beginning to understand.

So turning to slide 35, in summary, we continue to believe the combination of one, a new business model focused on building great products that drive higher share and that we can sell at higher prices; two, being the best positioned automotive manufacturer to take advantage of anticipated global industry growth; and three, a lower risk profile made possible by a Fortress balance sheet positions us well to deliver long-term sustained growth for General Motors.

Thank you, and now operator, we can open it up for questions.

(Operator Instructions).

Brian Johnson, Barclays Capital.

I wanted to drill down on the cost progression in GMNA because it actually stood out in contrast to some of your competitors even putting back in some of the manufacturing.

Question number one is, how much were the variable manufacturing costs that are now in the volume?

And then question number two is, did you take any actions during the quarter to better control costs in North America?

Are we seeing the benefit of maybe some global parts sharing or manufacturing or other programs, and do you expect this kind of cost restraint in a period where others have been seeing commodity costs, material cost pressures developing to be able to continue?

I will let Chuck answer the variable manufacturing question, but what we are trying to do here, as I've signaled previously, I think is we are trying to hold structural costs essentially year over year.

I think we gave you a sense on the last call that we would expect to have some improvement in the second quarter relative to the first quarter.

You will recall that we had in the fourth quarter of last year costs ramp up around Cruze and Volt launch.

Some of that carried over into Q1.

We are seeing some rolloff of that into Q2 and expect it to flatten out in the balance over the year.

So this is really consistent with us delivering what we had indicated previously, which is essentially a flat structural cost year over year.

And relative to the variable manufacturing expense, when you look at the implications of direct labor, as well as indirect material, we estimate the variable manufacturing expense at roughly $1400 to $1500 a unit and use that in our analysis of the impact of volume.

And I would just add one thing on the end, which is to your point, we are continually focused on cost opportunities here.

I think we continue to see opportunities to do more with less and to do things more efficiently all around the Company.

And that is a big focus for us, but it is a continuous focus, not the focus on any one particular quarter.

So do you think there is further cost opportunities as you absorb further commodity costs, or are there not further commodity costs to absorb?

Well, commodity costs will do what they are going to do.

Obviously that is outside of our control ultimately.

But, as we said previously, we are looking to offset our commodity price increases with our own price increases for our products, as well as supplier performance, and we are continuing to focus aggressively on costs across the Company and continue to see opportunity there.

And just similar in Europe, is there further cost reduction as we go through the year as you get the benefits from the plant closures and additional discussions with the labor force?

I would say a lot of the cost restructuring or cost benefits from the restructuring have been there at this point in time.

We will see some incremental opportunities, but the majority of that is in the results at this point.

Adam Jonas, Morgan Stanley.

First, on China there was some discussion in the media that you and I think even your own comments that you were looking into potentially negotiating to recapture that lost 1% with the JV.

I'm just wanted to know where you stand on that.

And second question, have you communicated or can you today communicate a level of US treasury ownership that would eliminate TARP compensation limitations?

Because I don't believe you have communicated that.

That would have to be a doughnut, or can it be a level above zero?

Well, let me first talk about China.

We have the right to -- the option to purchase back that 1%, and we have expressed that.

Understand we have strong ties, relationships with SAIC, and as you probably know, they are restructuring their own Company as we speak.

So once that settles down, then I think you will see the transaction take place.

We have disclosed that, I think, in our K and Qs, so nothing more to report on that.

There are two levels of TARP oversight.

One is for what I will call ordinary TARP companies, and then I think there were seven companies that got extraordinary status, and we are extraordinary.

No more comment on that.

Yes, you are.

Well, thank you.

And, as a result, there were UST regulations written on top of the TARP legislation that are more stringent, and it is a doughnut, to answer your question.

In other words, until technically unless there is some change in the regulations -- and I have no reason to expect there will be -- there is -- they have the right -- the US government has the right to oversee compensation for our top 25 people and top 100 at various levels of involvement until they have exited their investment.

Thank you.

That is very clear.

Rod Lache, Deutsche Bank.

A couple of questions.

First, I am wondering do you still expect breakeven ex-restructuring in Europe this year?

Yes, EBIT adjusted, so excluding the goodwill impairment last quarter.

Okay.

So then on a reported basis, after restructuring, the number in the back half would be closer to a $400 million negative versus a $100 million positive in the first half?

Is that fair?

I'm not sure I followed your math.

Well, I think there is $200 million of restructuring in the back half, right, that you were planning in Europe?

Is that right?

Directionally, that is correct.

Okay.

So it looks like Europe will be down back half versus the first-half.

I guess my real question is, you made this comment on EBIT being slightly lower in the back half versus the first half.

Does that apply to North America, or is that something that is driven more by some of the other regions?

It applies -- the comment specifically applies to the whole Company, but I would apply it to North America as well as (multiple speakers).

Okay.

And I think Nick Reilly was in the news talking about a more positive outlook for Europe next year.

Could you give us just a few of the key bullet points on what you expect to drive the significant profitability outlook for next year if that is the case?

I will try to handle that.

I don't know precisely what Nick said.

I read everything, I saw some, but maybe you saw something else.

But I do think 2012, of course, depending on macroeconomic drivers, but we have stabilized share and started to grow slightly in Germany where we lost most of our share.

The Vauxhall brand has been reasonably consistent in the UK.

We had some progress on our cost structure, particularly in one plant with regard to further restructuring, which will show sustained better cost performance in 2012, and that is why we are going to see additional restructuring charges in the second half of this year.

And the product cadence in Europe is not dissimilar to what we are seeing in some of our other regions.

Certainly not what we are seeing -- what we are going to see in South America, but there are a number of new product introductions in Europe.

So I think the management team in Europe, which has done a very, very good job, there is a fair degree of cautious optimism that with a slightly better cost structure and a slightly better improvement in terms of product and market stabilization and possibly some growth that we will have a better 2012 than we did 2011.

Okay.

And just hopefully, three very quick ones.

Could you just talk about what is driving the margin decline in the China business?

There seems to have been some positive mix here with SGM up and Wuling down.

Secondly, can you just give us the incentive stock adjustment in the pricing in North America?

And then lastly, has anything changed on the level of cash that you want to have in the business just in the long run?

So, on the China margin, it is really a handful of puts and takes in there.

There are some tax-related items.

Remember that is a net income margin, so it is after taxes and so on.

So no -- nothing significant that you need to extrapolate or anything else was there.

On the cash level, I will let Chuck answer the stock adjustment question.

On the cash level, there is no change to our perspective there.

We have been very clear from the outset about the Fortress balance sheet, the benefits of it.

As Dan alluded to in his comments, we expect to get some significant benefits out of the business by bringing much more stability to the product development organization, much more consistency to the way that we are investing in that.

So we see opportunity there, which is a function of the strategy that we have.

But there is no real change to the overall liquidity requirement picture.

Which period are you looking for the stock adjustments for year over year or sequential?

In the second quarter, my recollection was that there were some incentive changes that happened around April 2.

So you would have had to make some adjustments to what was out in dealer stocks in the period.

Let me give you the sequential improvement.

As Dan indicated, net price was favorable $600 million.

Of that, about $100 million was related to base vehicle pricing, some of the actions that we took to mitigate the material and freight increases, economic sales allowances primarily reduced retail incentives in the US was worth about $400 million, and the stock adjustment was about $100 million quarter to quarter.

John Murphy, Bank of America/Merrill Lynch.

Just to follow up on those comments on pricing, obviously it was very strong in the quarter.

A little bit weaker in the first quarter.

I'm just trying to understand in your guidance what you are really expecting in the second half of the year for pricing actions, in particular given the fact that some of your competition may really be ramping up their incentive activity.

When I think about the second half versus the first, obviously the vehicle pricing that was put in place, along with the model year 2012 increase, which was just about 1%, will drive some improved topline pricing, again primarily to offset material and commodity headwinds.

The incentive piece is a little bit more uncertain.

Right now we are looking at kind of flat incentive spending H2 versus H1, primarily because of the uncertainty around what the Japanese might do once their stock levels are back up to reasonable levels and then what the competition might do relative to following or not.

So I think there is a bit of look and see around what might happen with incentives, but the base vehicle pricing will be improved in the second half of the year.

But you think there would be a competitive response if Toyota came out with aggressive incentives?

I think there is some uncertainty there.

Last year in March after their -- the challenges they had, they came out very, very aggressively in the latter part of March/April timeframe, and the competition did not necessarily follow.

We did not follow for sure.

It depends on what happens.

John, I will just add it is very much wait and see and see how it unfolds.

I have heard credible arguments on credible cases for all sorts of different scenarios, and so I think it is just too early to predict at this point.

Yes, given there is not enough inventory, it would be odd that there would be higher incentives.

Just on free cash flow in the second half for the year, I am just wondering if there are any big swing factors other than just the slight fade in EBIT that you were -- you have outlined for us?

Is there anything on working capital or pension contributions or anything else?

I recognize CapEx will be up, but are there ever any other factors that would hamper cash flow or aid cash flow in the second half of the year?

As I pointed out, one of the big benefits in the second quarter were the dividends out of China.

They come in in the second quarter each year, so that is a once a year item.

We took you through effectively the first quarter was $600 million after adjusting for [upping] in transit, $3.8 billion in the second.

CapEx will be up fairly meaningfully in the second half of the year, but beyond that, there are no other significant unusual items.

And then just lastly, on capital allocation, with the stock down where it is right now and given the cash balance that you have and the potential overhang for stock coming, I mean is there any reason that you would not maybe be a buyer just in the open market on the stock right now given how ridiculously cheap it is at these levels?

I mean we are obviously looking at capital allocation, but again, I go back to our fundamental strategy here, which is we want to keep the Fortress balance sheet.

We want to -- invest, number one, in the product portfolio and so on, and we are doing that.

We obviously have ample liquidity to go ahead and do that.

We are keeping a close eye on obviously the pension situation as I have indicated previously.

We are going to watch that through the end of the year and decide what additional actions if any might need to be taken around that.

We are obviously in a very volatile asset environment in a very volatile liability environment right now for the pension plan.

Interest rates are all over the map.

They are down dramatically, and as you know, that increases the liability.

On the other hand, we are more fixed income centric than some other pension plans.

So we really want to keep a close eye on that.

It is $100 billion plan, as you know.

We want to see what happens with that through the end of the year.

And then beyond that, obviously we have an objective to ultimately return cash to shareholders, but when and how and in what form that happens, no decisions have been taken on that.

Okay.

I promise actually the last question.

You guys ran 103% cap ut North America in the quarter.

I was just wondering how high that cap ut can go before there become any sort of diminishing returns?

Can you get up to 120%, 130% before you start seeing diminishing returns?

I'm just trying to understand where that can go.

It was pretty impressive in the quarter.

Yes, when you look at the capacity utilization across our facilities, the average is 103%.

But we have got a number of facilities that are running north of 120%, including our full-size pickup facilities right now.

So I think we can sustain 120% to 130% level, and that was kind of the plan when we are looking and going through the IPO about not having to add brick-and-mortar on a go forward basis.

It was to more fully utilize the plants on three shifts.

Chris Ceraso, Credit Suisse.

Just a couple of items.

I appreciated the walk-through on the truck inventory.

That was very helpful.

But if I look at the size of the industry, the penetration of pickup trucks in the market and your market share, it would seem that we would need a significant increase in each of those or some of those in order for you to tap out the 640,000 units of restrained capacity that you would have next year.

So could you give us some color on where do you see pickup trucks as a percent of industry?

Where do you think the industry SAAR would be or your pickup truck share?

What combination of those items would require you to need more units beyond the 640,000?

Well, we have seen pickups run at about 11.5% in the last month or two, which is a more typical level as we look at it.

So that is what we would be thinking about there.

Our share of the pickup truck segment has run pretty consistently in the high 30s.

So we are not looking for a -- we are not making any heroic assumptions on that.

So it really comes down to what is the SAAR going to do.

We are obviously sitting here today looking out of at a fairly uncertain and in the view of a lot of people fairly bleak economic picture.

That has changed in the last few months.

It can change again.

And so you don't need to see the SAAR pick up too significantly from here before you get into the kind of numbers that we are talking about, and what we don't want to do is get into a situation where we end up being meaningfully constrained either.

So it is a balance.

Given the lead times and so on, we have to take a view.

We have taken the view that we have described here.

Obviously if the environment does not improve in well onto next year or even along the way, we will be modulating production as we go.

Okay.

And then you're doing preparation in 2012, but the launch is still in 2013, correct?

We are not going to comment on specific launch timing, but the preparation work is in 2012.

Okay.

And then, again, on the pickups, some of your competitors have done well with some smaller displacement turbos.

Is that something you think you will have as an option when the next generation launches?

Our plan going into the K2XX is we have not announced specific powertrain lineups, but we are certainly going to have a competitive lineup of power trains.

Okay.

And then just the last one, Dan, on the taxes.

I know this is difficult, but what should we assume here on a go forward basis either in dollars or percent for tax on a book basis?

So this quarter was a little unusual because we had the release of some provisions, which is why you saw a tax benefit rather than a tax expense.

But going forward, as in other tax events, you should assume what we indicated previously, which was round numbers of 10% effective tax rate.

Himanshu Patel, JPMorgan.

A couple of questions.

When you think about the cost structure for GM North America in 2012, when you look at the controllable costs like engineering or what you would broadly define as structural, can you give us some directional color on what happens to that bucket next year?

On an overall basis, I would say relatively flat year over year with productivity improvements offsetting variable manufacturing, engineering being relatively flat.

We are looking at reasonably flat levels of marketing.

So in those pretty big three buckets, I think from a planning perspective they are flat year over year.

Okay.

And then on slide 12, the ratio that you guys calculate on average incentives relative to ATP and that ratio compared to industry average, I think, Dan, you had mentioned that in Q2 the ratio was about 103%.

Q1 looks like it was about -- it looks like for the first half it was about 109%.

And I think you are indicating that it would be 1 to 1 for the full year, which implies it's got to be a 90%, 91% rate for the back half.

Just given -- I'm just trying to understand what are the puts and takes there?

Is it your anticipation simply that the competitors raise their incentives as the Japanese quake impacts (inaudible) and GM just does not follow?

Or is there a sequential decline in GM's incentive spending in absolute terms that you guys are anticipating?

Well, what I say, we are saying approximately, and part of the reason we are saying approximately is it's not exactly clear to the earlier discussion how things are going to unfold with the Japanese with the supply/demand equation.

The key message is that for all of last year for the second quarter of this year we were clearly at or around -- I think last year we were slightly below this year or this year or this quarter we are right on.

That is the way that we are conducting the business.

That is the way that we're going to run it going forward.

Exactly where the year comes out, given the Q1 and the unknowns that could happen this year, we think it will be approximately around the industry average, but we cannot be that precise at this point.

Okay.

And in South America, I think you guys have mentioned for a couple of quarters that there are some product cycle issues there that are leading to the anemic margins.

I'm just trying to understand is there anything else structural going on in that market in terms of new competition?

I think Volkswagen recently made some comments as well that indicated their South American margins would start fading in the next couple of years.

I'm just trying to understand good that business get back, revert back to historical margins, or should we not really use that as a bogey anymore?

We have identified two things.

One is we are having a very radical product overall as we have talked about at some length.

So that is going on, and you all well understand the costs associated with that.

But I would say that there has been some change in the market dynamic down there.

The Koreans have shown up very aggressively in the market and have been pricing aggressively and competing aggressively.

So whereas you had a market that was really pretty stable in terms of the top three between ourselves, Volkswagen and Fiat, there is a new entrant, and they are pushing fairly hard.

So how all that shakes out in terms of once we get the portfolio overhauled and so on, we don't precisely know obviously.

And the other point I would make is that it is a little bit of a story of two markets down there.

It is sort of Brazil versus all the other markets, and we continue to perform from a margin point of view pretty strongly in most of the other markets outside of Brazil.

Obviously Brazil is the biggest market, and that is where we have the biggest product aging issues if you like.

So there are a number of variables in there, but there is more to it than simply a product overhaul.

And Dan, do you anticipate -- I guess just not to beat a dead horse, but just the comments on returning cash to shareholders, just relative to your thinking versus, let's say, start of year or maybe six months ago, it just sounds like maybe you guys are expressing a little bit more uncertainty on the outlook.

What has changed for you?

Is it more just macro concerns about the SAAR next year, or is it your view that maybe pension contributions next year need to be higher than what you were thinking before?

I'm just wondering what -- if you could shed some color on that?

I don't think there has been any real change.

I think what we have indicated previously is we certainly want to see how the rest of this year shakes out, see where we end up the year with pension and everything else, and your contract negotiations and credit ratings.

There is a lot of variables in the equation here.

So there is no fundamental change to the way that we are thinking about capital allocation and the timeline in which we are thinking about it.

Itay Michaeli, Citigroup.

I just want to clarify, do you still expect North America structural costs to be flattish 2011 versus 2010?

And then with the change in the reporting of the variable expenses and the volume, can you just remind us what the structural costs year over year have done first half of 2011 versus first half of 2010?

Sure.

The short answer to your first question is yes, so we expect it to be about flat year over year.

And then Chuck, on the first half over first half would be up slightly, right?

Yes, we are up slightly first half of 2011 versus first half of 2010.

We expect to be down slightly H2 to H2 and relatively flat year over year.

Great.

And then on the pickup truck launch, I know you are not sharing the actual launch date, but was there any pull-forward internally of the launch, even a minor one at GM?

And if there was, was there any impact at all to how you thought structural costs might fair in 2012 versus your original plans?

We are not commenting anymore on the truck launch date than we have.

I don't -- Chuck gave an answer earlier on the structural cost for 2012 versus 2011 for North America, and we see that being roughly flat as well.

Excellent.

Just lastly, with the recent macro concerns out there, Dan, can you just remind us I know you do this quarterly assessment of your US breakeven point, where you see that today just in light of what has changed in terms of commodity costs and mix and other things in the industry?

Yes, no real change in that.

Patrick Archambault, Goldman Sachs.

I just wanted to tie a couple of comments that have been made together with slide 16 as we move from first half to second half and just get a sense of where some of these factors are going to trend.

I think if I can summarize what has been said so far, I think price might actually increase a little bit modestly.

I think mix seems like it would be a headwind.

Volume, one would expect that seasonally it would be down.

And then I guess from Itay's question, it sounded like, I thought you said structural costs might actually be down sequentially.

Although if I remember well, there is a pretty big seasonal increase usually at least in the fourth quarter just because of launches.

So is that the right way to think about those pieces moving from first half to the second half?

I think that is all fair.

The only slight adjustment I would make is that structural costs in the second half as opposed to first half is probably roughly flat as well.

Thank you.

That is very helpful --

Volume is obviously -- volume will be what it is going to be.

As the market unfolds, we will see how that transpires.

Sure.

But I guess maybe if I were to just refine that, just from a seasonal perspective, you probably have a schedule earmarked for Q3 that is probably lower, right?

Yes, clearly.

We have more seasonal shutdowns in the second half than first half, yes.

Another question I had just again on the pension.

I know you have had a couple of questions on this, but -- and it is clear that you have not made up your mind about capital structure actions yet.

But is there a possibility or an ability to actually combine buy-backs, which people have asked about, and contributing that stock to the pension fund?

I know that they are obviously -- given at the time of the IPO, there was a contribution made of stock.

But, on the flip side, it sounds like you have talked about defusing the liability in the future, which may not be possible if you put a lot of equity into it.

But I just wanted the thoughts on the possibility of that.

Again, no decisions have been made.

But I would take your point and I would agree with it that putting more stock into a pension plan would be at odds with the de-risking strategy that we are following.

So I think that is less likely.

And then the last one, can you just comment on the tone of upcoming UAW negotiations?

Obviously there is a lot that has to be discussed I'm sure in coming months, but how confident are you in the ability to prevent that contract, that new contract from increasing your structural costs?

I'm going to take that one.

It is a stated goal between ourselves and the UAW that structural costs are critical.

We have looked -- we are looking at other options and alternatives to throw it into the category, if you will, of variable costs contingent upon results, not unlike our bonus plan for most of our management.

I would characterize the relationship and the dialogue as being constructive.

I think both parties understand the need for the Company to prosper for anybody to have any future prospects of -- a company that goes back to the old cost structure would not bode well for General Motors or the industry quite candidly.

So there is a kind of sober recognition that we are partners joined at the hip.

One cannot prosper without the other doing well, too.

And so I think we are off to a good start.

But, as you note, there are going to be areas we don't agree on, and we are going to have to find common ground and we will.

But I think you can rest assured that both sides of the table understand the issues surrounding structural costs and the ability for the Company to continue to do well in the future.

Mr.

Arickx, I will now turn the call back to you.

Please continue with your presentation or closing remarks.

Okay.

Thanks, operator.

Thanks, everybody, for your time this morning.

We look forward to talking to you soon.

Ladies and gentlemen, that does conclude the conference call for today.

We thank you for your participation and ask that you please disconnect your lines.

Have a great day, everybody.