通用汽車 (GM) 2012 Q1 法說會逐字稿

Ladies and gentlemen, thank you for standing by and welcome to the General Motors Company first-quarter 2012 earnings conference call.

During the presentation, all participants will be in a listen-only mode.

Afterwards we will conduct a question-and-answer session.

(Operator Instructions).

As a reminder, this conference is being recorded Thursday, May 3, 2012.

I would now like to turn the conference over to Mr.

Randy Arickx, Executive Director of Communications and Investor Relations.

Please go ahead, sir.

Thanks, operator.

Good morning and thank you for joining us as we review our first-quarter 2012 results.

Our press release was issued earlier this morning and the conference call materials are available on the investor relations website.

I 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 contents 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 remarks.

After the presentation portion of the call, we will open the line for questions from security analysts.

Also in the room today we have Nick Cyprus, Vice President, Controller, and Chief Accounting Officer; Jim Davlin, Vice President Finance and Treasurer; and Chuck Stevens, CFO North America and South America, to assist in answering your questions.

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

Thanks, Randy, and thank you to everyone on the call for joining us.

General Motors had another solid quarter.

Our EBIT adjusted results are strong.

We had product success stories in every region of the world especially with Chevrolet.

Among the 20 largest automotive brands in the world, Chevrolet has been the fastest growing over the last two calendar years.

Big market place wins like these are happening because we continue to advance the four strategies that are the foundation of how we run the business.

Simply put, they are design, build the world's best vehicles, strengthen our brands, grow profitability around the world, and maintain our fortress balance sheet.

We made good progress on this strategy last year and we did not let up in the first quarter of this year either.

I will review each of the highlights in my remarks but as you hear them, remember this.

This management team is not getting ahead of ourselves.

We are confident in our plan, pleased with the progress in most areas and we have internal issues we are fixing.

We're not immune to the industry issues like recession or overcapacity in Europe or competition that is intensifying everywhere we do business.

Every day we keep our teams focused on these cold hard facts because it instills discipline and discipline helps deliver better results.

It's certainly reflected in our topline growth, which you can see at the top of slide number two.

GM's first quarter global deliveries and net revenue both increased year-over-year with North America and GMIO more than offsetting the declines in Europe and our flat results in South America.

Globally, our deliveries were up 60,000 units and our net revenue increased 4% to $37.8 billion.

Looking at the bottom line, our net income attributable to common shareholders was about $1 billion, which is down from the first quarter of 2011 but as you know, we had a net $1.5 billion gain from special items a year ago.

In this quarter, we had a special loss -- a loss in special items of $600 million.

Our automotive net cash from operating activities was a much improved $2.3 billion.

Looking at EBIT adjusted, we improved $200 million year-over-year to $2.2 billion.

Our North American businesses drove these results.

Revenue in the region increased 9% and EBIT adjusted increased $400 million to $1.7 billion.

This really speaks to our balanced portfolio of cars, trucks, and crossovers and the ongoing success of vehicles like the Chevy Cruze and the Cadillac SRX, and contributions from new vehicles like the Chevrolet Sonic and Buick Verano.

All these vehicles have significantly better design, fuel economy, average transaction prices, and resale value than the models they replace.

Europe obviously remains a work in progress.

Our EBIT adjusted loss was $256 billion compared to a breakeven result last year -- year-ago.

Net revenue declined about 20%, which reflects our lower sales of vehicles and components as well as the impact of a stronger dollar relative to the euro and the British pound.

These results are disappointing but not unexpected.

We are working hard to identify new revenue and cost reduction opportunities to put the business on a path to sustainable profitability.

GMIO, like North America, remains a source of strength for the Company.

Our EBIT adjusted results of $500 million were down slightly compared with a year ago.

Importantly, GM and our JV partners have continued to grow both sales and market share in China.

We had a record first-half sales of 745,000 vehicles thanks to the successful launch of Baojun, the ongoing success of Wuling and Buick, a solid start to the new Chevrolet Malibu.

The key for us in China has been to stay in offense, which is why I traveled to the Beijing Auto Show last week and announced that we will add an additional 600 dealers in China this year and add one new Cadillac model to our lineup in China each year through 2016.

First car will be the Cadillac XDS luxury sedan, which will go into production at Shanghai GM later this year.

We will follow that up with the Cadillac ELR electric coupe in the near future.

These are important strategic moves because half of all luxury purchases in the world, all categories, not just cars, are predicted to occur in China by the end of the decade.

In South America, our results were essentially flat with the same quarter a year ago.

But they are back in the black and we are starting to see the impact of new product introductions.

In Brazil for example, we launched the Chevy S-10 pickup and the Cruze hatchback this quarter and we are gaining traction with the Cruze notch back and Cobalt, which we launched in the fourth quarter.

The new Cobalt increased Chevrolet's share this segment by almost 13 percentage points over the nameplate sold in the second half of last year and Cruze sales in the quarter ran at more than double the rate of the car replaced.

Finally, our automotive free cash flow was a much improved $300 million for the quarter.

Before I turn the call over to Dan Ammann, our Chief Financial Officer, I wanted to specifically call out some of the major revenue and cost actions we took in the quarter to improve our margins over time.

These are summarized in slide 3.

The most significant is the global alliance with PSA Peugeot Citroen, which we announced in late February.

Management and implementation teams are in place.

We have more than a dozen work streams under way and very soon we will be able to announce the first visible results of the alliance.

Also in the first quarter, sales in China set a record.

As I mentioned before, our sales in Russia were up 29%.

This helped Chevrolet deliver record global sales of 1.2 million units.

Our marketing organization meanwhile delivered two major cost and complexity reductions this quarter.

In January, we consolidated our global media planning and buying services to increase our purchasing power and in March, we reduced the number of advertising agencies that support our Chevrolet brand from 70 down to essentially one.

Also in March, we advanced our strategy to ensure the competitively priced credit is always available to our dealers and customers.

We did it by adding Wells Fargo as a partner in our western US sales region.

They will be a great complement to GM Financial and our existing relationships with Ally and U.S.

Bank.

These are all in addition to the changes we announced in February to further derisk our US hourly and salaried pension plans.

Finally, we had a number of major product announcements with two most recent being the unveiling of the 2014 Chevrolet Impala and our new line of bi-fuel pickups that can run compressed natural gas or gasoline.

With the launch of the Impala, we will have completely transformed our Chevrolet passenger car showroom from top to bottom and this great looking car is going to help us deliver much higher retail sales for Chevrolet in this segment.

The bi-fuel pickups by contrast are primarily targeted fleet customers who want to use clean burning domestically sourced low-cost alternative gasoline -- to gasoline.

On future calls you can expect updates on many of these initiatives and new ones that are designed to make us a stronger, more preferable Company.

Now I would like to turn it over to Dan Ammann, who will give you more details on our results.

Then I will return to close the call.

Thank you.

Thanks, Dan.

Beginning on slide 4, we provide a summary of our first-quarter 2012 GAAP results compared to the prior year.

As Dan previously covered, net revenues were $37.8 billion for 2012, up $1.6 billion from 2011.

GAAP operating income was $1 billion for the quarter.

Net income to common stockholders was $1 billion which rounds to a $2.1 billion decline from the prior year, driven largely by special items.

Earnings per share were $0.60 on a fully diluted basis compared to $1.77 for the same period in 2011 and our automotive net cash from operating activities was $2.3 billion for the quarter, up almost $3 billion year-over-year.

Moving to the non-GAAP metrics on the bottom of the page, EBIT adjusted was $2.2 billion for 2012, up $200 million versus 2011.

The EBIT adjusted margin was 5.8%, an increase of 0.2 percentage points from the prior year.

Automotive free cash flow was $300 million, a $2.2 billion improvement from 2011.

Turning to slide 5, we list the special items and adjustments impacting the first-quarter 2012 earnings.

As I mentioned, our net income to common stockholders was $1 billion and our fully diluted earnings per share was $0.60.

Included in both of these metrics is the $600 million special item for the impairment of goodwill primarily in our GME operations that equals $0.33 per share on a fully diluted basis.

On slide 6 we provide the composition of EBIT adjusted by region for the first quarters of 2011 and 2012.

As Dan previously covered, GMNA's EBIT adjusted was $1.7 billion, up $400 billion from the prior year.

GME's EBIT adjusted was a loss of $256 million, a $300 million decrease from the breakeven performance a year ago.

GMIO had an EBIT adjusted of $500 million, down $100 million versus the prior year, and GMSA's EBIT adjusted was $100 million, equal to its 2011 performance.

GM Financial continued to improve earnings with $200 million from the quarter, up from approximately $100 million in the prior year.

Corporate and Eliminations were breakeven for both periods.

This nets to an EBIT adjusted of $2.2 million billion for the first quarter of 2012.

Slide 7 shows our consolidated EBIT adjusted for the last five quarters.

Moving to the bottom of the slide, our operating income margin was 2.6% for the quarter, equal to the same period in 2011 although both periods were affected by special items.

Our EBIT adjusted margin was 5.8%, a 0.2 percentage point increase from the prior year.

This was driven by a stronger performance in GMNA partially offset with a decline in Europe, which we will cover in the segment reviews.

Our global production numbers are about 4% higher on a year-over-year basis; however, our global market share declined 0.1 percentage points to 11.3% for the first quarter.

Turning to slide 8, we provide a first-quarter 2012 comparison as our consolidated EBIT adjusted to the prior year.

We recently made a few changes to our EBIT bridge methodology in order to provide some more insight into key trends.

Most notably, we previously assigned the net price and costs changes of our new major product programs into the mix category.

We have now split these effects out and placed them into the price and cost categories.

On the left side of the chart, our consolidated EBIT adjusted was $2 billion for 2011.

In the middle portion of the slide, we walked the $200 million improvement for the quarter.

Volume was favorable $400 million, largely driven by increased production in North America and IO.

Mix was unfavorable $200 million due to increased sales of compact, small, and midsized cars in North America, offset with a modest improvement in South America.

Price was favorable $800 million for the quarter due to the strength of our new product introductions and other pricing actions we have taken.

Total costs were up $900 million.

Excluding the $200 million decrease in pension income that we have discussed previously, fixed costs were flat for the quarter.

Our material pricing and freight costs were also unchanged.

We had $200 million impact of material content for our new product programs and the remaining cost increases for the quarter were essentially one-off adjustments totaling $300 million including a $200 million increase in retroactive policy and warranty adjustments and $100 million in restructuring charges.

Finally, we had $200 million lower contribution from powertrain and parts sales, which is included here in the cost category.

Other was $100 million favorable.

This totals to a consolidated EBIT adjusted of $2.2 billion for the first quarter of 2012.

We will now move to our segment results for the key performance indicators for GM North America here on slide 9.

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.

Our US retail incentive spending as a percentage of average transaction price and a comparison to the industry average is noted on the bottom of the slide.

For the first quarter of 2012, our US retail share was 16%, down 2.2 percentage points versus the prior year.

Our incentive levels on an absolute basis have decreased $360 per vehicle from the prior year.

On a percentage of ATP basis, our incentives were 10.4%, down 1.3 percentage points from the prior year.

This puts us at 109% of industry average levels for the first quarter of 2012.

For April, our retail market share was 16.2% and our incentives are estimated to have been 10.3% of the average transaction price.

On slide 10, we show GM North America's EBIT adjusted for the last five quarters.

For the first quarter of 2012, EBIT adjusted was $1.7 billion, up $400 million versus the prior year.

Moving to the bottom of the slide, revenue was $24.2 billion, up $2.1 billion versus 2011 due primarily to increased volume.

GM North America's EBIT adjusted margin was 7% for the first quarter, up 1.3 percentage points from the prior year.

US dealer inventory was 713,000 units at the end of the first quarter or 86 days supply versus 574,000 units and 75 days supply for the first quarter of 2011.

GMNA production was 862,000 units for the quarter, a 76,000 vehicle increase from the prior year of which 44,000 units were due to full-size trucks and SUVs.

As we indicated in the prior quarter, this build up of full-size trucks is in preparation for the planned downtime that is scheduled through the balance of 2012.

GMNA market share was 16.7% for the quarter, 1.6 percentage points lower than the prior year.

This decline is due to reduced volumes from our older and discontinued product offerings.

Turning to slide 11, we provide the year-over-year view of GMNA's $400 million improvement in EBIT adjusted.

Starting on the left-hand side, EBIT adjusted was $1.3 billion for the first quarter.

Volume was favorable $600 million, driven by increased full-size truck and compact and small car production.

Mix was unfavorable $300 million due primarily to increased production of compact, small, and midsized cars more than offsetting the impact of the increased truck production.

Price was $400 million favorable on a year-over-year basis.

Costs were $300 million unfavorable this quarter due to $200 million in unfavorable US pension income and $100 million expense for a skilled trade special attrition program resulting in 1400 voluntary retirements.

Other was unchanged for the quarter.

This totals to an EBIT adjusted of $1.7 billion for the first quarter of 2012.

We will provide you some perspective to the impact of the full-size truck production ebbs and flows on earnings for GM North America later in the presentation.

Moving onto slide 12, GME reported an unfavorable EBIT adjusted of $256 million for the first quarter, a decline of just $300 million from the prior year.

At the bottom of the slide, revenue was $5.5 billion for the quarter, down $1.4 billion from the prior year.

This decline was due primarily to $1 billion in lower vehicle volume and $300 million in unfavorable foreign exchange translation.

The EBIT adjusted margin in the region was a negative 4.6%.

GME's production for the quarter was 292,000 units, down 52,000 from the prior year partially attributable to an industry that had a 6% year-over-year decline.

GME's market share in the region was 8.2%, 0.2 percentage point decline from 2011.

Turning to slide 13, we provide the major components of GME's $300 million year-over-year decline in EBIT adjusted.

Volume was $200 million unfavorable, driven by a decline in the industry and a 0.2 percentage point loss of share.

Mix and price were essentially unchanged for the quarter.

Cost was essentially flat due to $100 million decline from decreased sales of powertrain, parts, and accessories offset with favorable manufacturing expenses of $100 million.

Other was $100 million unfavorable due to foreign exchange.

This totals to GME's EBIT adjusted of negative $300 million for the first quarter of 2012.

On slide 14, we show GMIO's EBIT adjusted for the past five quarters including the equity income from our JVs.

In the first quarter, GMIO posted EBIT adjusted of $500 million.

Moving to the bottom of the slide, GMIO's revenue from our consolidated operations was $6.1 billion, up $900 million from the prior year due to increased volume of $400 million favorable vehicle mix of $300 million and favorable pricing of $200 million.

GMIO's EBIT adjusted margin from consolidated operations decreased 1 percentage point versus the prior year to 2.1%.

Our China JV net income margins decreased 1.8 percentage points from a strong performance in the first quarter of 2011 to 10.2% in the first quarter of 2012.

Our GMIO production for the quarter was up 101,000 units from the prior year with increases in both consolidated operations and our joint ventures.

Market share in the region was 9.4% for the first quarter, a year-over-year increase of 0.1 percentage points driven by an increase in China market share from 13.6% to 15.1%.

On slide 15, we provide the major components of GMIO's $100 million decline in EBIT adjusted.

The impact of volume was $100 million favorable due to increased production in our consolidated operations, as we previously discussed.

Mix was unchanged for the quarter.

The effect of price was $200 million favorable.

Costs were unfavorable $400 million due to $100 million product recall, $100 million increase in manufacturing expense, and a $100 million increase in material content for major product programs combined with several other minor items.

Other was unchanged for the quarter.

This totals to GMIO's first quarter 2012 EBIT adjusted of $500 million.

Turning to slide 16, GMSA's EBIT adjusted was $100 million for the first quarter of 2012 essentially equal to the performance from a year ago.

Revenue was $3.9 billion, also unchanged from last year as favorable pricing and mix offset a decline in volume and unfavorable foreign exchange.

The EBIT adjusted margin in the region was 2.1%, down 0.2 percentage points from the prior year.

GMSA's production was 203,000 units, down 28,000 units from the first quarter of 2011.

On slide 17, let's look at the components of the year-over-year performance in South America.

Despite the production decrease, the impact of volume rounded to zero.

Mix was favorable $100 million due to a shift in Brazil to our higher-margin vehicles such as the recently launched Cruze and S-10 pickup.

Price was favorable $100 million largely related to increases in Venezuela and Argentina.

Costs were unfavorable $200 million driven by manufacturing increases of $100 million and several other smaller items.

Other rounded to $100 million favorable due primarily to a gain on our purchase of GMAC Venezuela.

This totals to an EBIT adjusted of $100 million for the South America region in the first quarter.

Our results for South America indicate that our new products in the market have begun to turn around profitability in the region.

We still have key launches remaining for the year including the Cruze hatchback, Sonic, Spin, and others that are on track and will contribute to our product renaissance in South America along with the additional cost actions that we are pursuing.

Turning to slide 18, we provide our walk of automotive free cash flow for the first quarter of 2012 as well as the prior year.

After adding back non-controlling interests, preferred dividends, and undistributed earnings allocated to Series B Preferred, and subtracting GM Financial, our automotive income was $1.2 billion for the first quarter of 2012.

We had a non-cash special item of $600 million.

Depreciation and amortization and impairment was a $1.4 billion non-cash expense.

Working capital was a $700 million use of cash due primarily to seasonal increases in inventory and accounts receivable, partially offset with an increase in accounts payable.

The working capital in 2011 was impacted by the termination of in transit financing that we've discussed in prior earnings calls.

Pension and OPEB cash payments exceeded expense by $200 million in the quarter.

Other was negative $100 million, due primarily to non-cash P&L items.

This total [stands] the automotive net cash provided by operating activities of $2.3 billion.

After deducting capital expenditures of $2 billion in the quarter, our automotive free cash flow was $300 million, a $2.2 billion improvement from the prior year.

On slide 19, we provide a summary of our key automotive balance sheet items.

We finished the first quarter with $37.3 billion of total automotive liquidity consisting of $31.5 billion in cash and marketable securities and $5.9 billion of undrawn credit facilities.

On the bottom portion of the slide, our book value of debt and Series A Preferred Stock are $5.4 billion and $5.5 billion respectively.

US qualified pension plans are underfunded by $12.9 billion on our balance sheet.

Our non-US pensions are underfunded by $11.6 billion at the end of the first quarter and the OPEB liability is $7.3 billion.

Slide 20 provides a summary of key operational metrics related to our financing activities.

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

Our US subprime financing in the first quarter has increased over the prior year to 8.2% and once again exceeds the industry average.

Our US lease penetration of 12.6% is lower than the prior year due to lower numbers of returning lessees.

Lease penetration in Canada is at 8.9%, a full 5 percentage points higher than the prior year.

GM new vehicles as a percentage of GM Financial originations is 45% and GM Financial's percentage of GM's US subprime and leasing is 23%.

Both metrics are higher than a year ago as GM Financial continues to grow its financing business and its importance to GM.

GM Financial again saw strong credit performance in its loan portfolio with annualized net credit losses of 2.5% for the quarter, 1.5 percentage points better than the prior year.

GM Financial's earnings before tax were $181 million for the first quarter of 2012.

Before we move on, I want to mention that GM Financial just launched its commercial lending services business last month.

This gives our dealers in the US another option for their floor plan financing and insurance, capital, real estate, and construction loans and cash management programs.

We will update you on the performance of this piece of the business in future quarters.

Before I turn it back over to Dan, I want to share a few points regarding the 2012 outlook on the next slide.

As we stated in our sales call a few days ago, we now expect US light vehicle sales for the year to be in the 14 million to 14.5 million range.

This is a 0.5 million unit increase from our prior projection.

Also due to the timing of our scheduled full-sized truck plants down time, we expect the financial results for both Q2 and Q3 at GM North America to be in the same range as what we recorded for Q1.

Specifically we expect Q2 and Q3 full-sized pickup and SUV production to be lower in the second and third quarters than it was in Q1.

Finally, we continue to examine the effects of taxes in the many countries in which we operate and now believe the effective tax rate will be greater than the 10% we previously producer discussed.

Going forward, we will likely have a rate similar to what we had in Q1, which was 12% to 13% excluding the effect of special items.

We may still experience some tax rate volatility within a specific reporting period due to variations in country-specific profitability and tax liability.

With that, I would like to turn it back over to Dan Akerson for his summary and closing remarks.

Thanks, Dan.

I will keep my closing comments very brief because I think the highlights speak for themselves.

Sales increased and so did our pricing power.

EBIT adjusted and EBIT adjusted margins both improved and so did our cash flow.

Going forward, our plan is to deliver results like this but with a bit more balanced scorecard.

That means all four regions must become flawlessly and reliably profitable.

I believe we will get there.

It's going to be purely a function of execution, execution on process improvement and complexity reduction and flawlessly executed vehicle launches.

All told, we have more than 20 major product launches in 2012.

The Cadillac ATS and XTS in North America will be entering segments where we don't compete today and the ATS represents a serious challenge to the hegemony of the BMW 3 series in the compact luxury segment.

In Europe, we are introducing the Opel Mokka, a small crossover which will feature two small gasoline engines and diesel engines equipped with stop-start technology and it will be available with state-of-the-art comfort and safety features.

At GMIO, one of the major launches is the Chevrolet Sail in India.

The Sail is the first passenger car developed by Shanghai GM and the Pan Asia Technical Automotive Center.

A major global launch is the new Chevrolet Colorado, which is based on an all new midsized truck architecture developed by GM Brazil.

Eventually it will be on sale in 60 markets around the world including the United States.

All of this product activity should lead to growth and with our new business model and significantly lower risk profile; it will improve our profits and our cash flow generation as well.

Thank you and now we will open the line for questions.

(Operator Instructions).

Brian Johnson, Barclays Capital.

I just want to get in two questions, Europe and then just a bit -- we've heard a lot on the sales calls about fleet strategy.

We would like to hear it from the leadership.

First of all in Europe, it looks like pricing was maybe a little bit better.

Can you give us a sense of where you are on dealer and Company owned inventories?

Are those getting in better shape?

And then before we get any hopeful labor cost and capacity and other restructuring, should we be thinking about this level for Europe or can it improve from here?

Was this somehow unusually better?

On the inventory question, I would say that we ended the first quarter still with more inventory than we would like to have and we will be working that down over the balance of the year, but our objective is to work a good chunk of that down through the second quarter.

As it relates to some of the cost actions and so on, we are making progress I would say sort of week to week on the cost front.

Not everything will come with some big announcement but there's a lot of activity and progress going on in the background, so there's year-over-year cost improvement.

There's quarter-to-quarter cost improvement, but there's still more work to do on that front.

And on North America, you ran about 26% fleet mix.

One competitor who disclosed it was more like 37% but would actually talk about their execution on the commercial side.

Is fleet about where you want it?

Do you see an opportunity to penetrate segments there?

Are you deliberately holding back?

In addition, if we kind of look at the gap between very strong retail pricing levels and maybe less overall in price when you get to the segment results, is there pricing pressure at all that is emerging in the fleet segment due to some competitor actions?

Yes, let's talk about overall in general.

I think that on a go-forward basis we will see our fleet penetration continue to come down marginally from 26% down into the low 22%, 23% range as we launch new products that have traditionally been daily rental fleet products like the new Impala that was mentioned earlier, which is a pretty high penetrating fleet.

At the same time we are trying to improve our mix between daily rental and commercial, government fleet, and that competitor that you mentioned has been very, very aggressive obviously in that segment of the fleet business.

And that is putting a bit of price pressure specifically on the commercial and government fleet business, but obviously that is something we are going to continue to work to grow and supplant some of the daily rental.

With that said, unlike past years, the overall fleet business is reasonably profitable.

Obviously, the mix is not as rich as retail, but it certainly isn't a loss-making part of the business as it was in the past.

The only thing I would add to that is what you are seeing to some extent is the effect of the daily rental caps that we put on our new vehicles that we're introducing to preserve the residual values.

And as the old Impala rolls off and the new one rolls on, or same for Malibu, same for some of the Cadillac products, you are going to see those caps kick in and we're going to be very disciplined about what goes into the daily rental business.

That is part of what you're seeing.

Okay, thanks.

Peter Nesvold, Jefferies.

Good morning.

Maybe one quick question on the quarter and then maybe a bigger picture question.

So on the quarter when I look across all the different segments, costs year-over-year seem to be going up or seem to be a headwind.

Volume, mixed pricing, generally working in your favor.

Dan, you kind of addressed them individually in the segments as we went through, but is there something bigger picture that's happening, whether it's materials inflation, whether it's labor inflation, that is sort of the common thread there?

No, I would say -- I would characterize it as follows, which is for the whole Company for the first quarter, fixed costs were basically flat year-over-year excluding the $200 million of pension income headwind we have in North America.

So as we described on the earlier call, the last quarter call, we are going to have an $800 million headwind this year as a result of lower pension income.

So you've got to take that into account, number one.

Number two, I would say material pricing as a general matter is essentially flat year-over-year and that's generally across the board.

We have additional material content coming in as a result of richer content on new vehicles that was about $200 million for the whole Company.

Then we did have a handful of sort of more one-time type items.

We had over $200 million of retroactive policy and warranty adjustments here in North America and we had about $100 million associated with the product recall in IO, so there were some items along those lines that are less recurring in nature, if you like.

Then there is $100 million restructuring charge here in North America associated with a special trades SAP program.

So I think you got to break it down into those items to understand it.

In IO and in South America, there has been some inflation from a manufacturing cost point of view, so those would be the main elements.

Thank you and then one quick strategy question.

The JV strategy, so news release is out, possible tie up with Isuzu and certainly I don't expect you to comment specifically on that situation.

But coming off the heels of the Peugeot tie up recently, it seems like there has been some kind of change in strategy here to go back to strategic alliances globally.

And I'm hoping you could just talk bigger picture about what GM hopes to accomplish with further tie ups?

Are you not big enough on your own to accomplish a lot of the objectives that you are seeking with some of these?

Thank you.

Let me talk about that.

Yes, we are big enough to handle it on our own.

Second point, don't always believe what you read.

Understood on the Isuzu, but -- okay, I will just leave it at that.

The only thing I would add to it, third point would be, we have a lot of work to do on the PSA alliance.

We have a lot of people working on that.

We're making good progress.

The teams are working well together and that's where we are focused right now.

Great, thank you.

Adam Jonas, Morgan Stanley.

Good morning, everybody.

I'm glad I don't ask the Isuzu question, then.

Thank you for that, Dan.

A question about 4Q seasonality in North America.

Last couple of years seems to show this kind of big dip in the fourth quarter.

It's been kind of new to the industry but given the pace of the shutdowns and disruptions in the middle part of the year, can you help provide us a little bit of a hint of what the year-end might look like relative to this ballpark $1.7 billion North America run rate for the middle of the year?

That's my first question and I just have one follow-up.

Okay.

So we are not providing any specific commentary on the fourth quarter at this point other than I would say that the seasonality that we have seen in the last couple of years is getting a bit disruptive this year quite obviously as a result of the truck plant down times.

So I think while it is too soon to tell what's going to happen in Q4 because it's going to be a function of the industry and everything else, the cadence that we have seen sort of middle two quarters of the year is going to be a little different this year.

Great and then just a quick follow-up on China.

Can you update us on your progress at getting back to 50-50 with SAIC?

Yes, it's complicated by -- you have both the city and/or provincial government review, which is through, and then you have the national policy review.

They are equivalent to the SEC is where I understand it resides today.

So both Boards have reviewed it, passed it to the provincial/city review and now it is at federal, so we've had both I would describe as productive and cordial discussions, dialogue.

And just like in our own country, you wait for the government to -- and they are not on the same clock we are.

That is kind of the way I would put it.

So we expect some action here in the near term and we will let you know as soon as we have any further developments.

Thanks, Dan.

John Murphy, Bank of America Merrill Lynch.

Good morning, guys.

Dan, I appreciate the detailed walk on North America but one item that you guys put out in your release was the capacity utilization number and for North America, it was 103%.

I was just curious if there were any inefficiencies of running over 100% or any impact in your cost that maybe if you were to build a little bit more capacity and get closer to the mid-90s or back to 100, that would be better.

I'm just trying to understand if there was any penalty in the quarter for premium freight or overtime or anything that would have depressed the quarter.

No, I think we are quite comfortable running at that level of capacity utilization and even higher.

So if I was looking at the -- and Chuck can chime in here as well -- but if I was looking at the Q1 North America result relative to last year, you obviously have the 1.7 versus the 1.3 but you've got to take into account the $100 million restructuring item, the $200 million policy and warranty retroactive adjustment and the $200 million of pension income headwind when you look into that comparison.

Got it, and if we were to think about this and to follow-up on the earlier question, you guys have given us sort of the pressure you are going to see from the changeover from the GMT900 in the second and third quarter, which I guess is helpful.

But that's kind of giving us the punitive guidance for the next couple of quarters.

Obviously launching new products usually creates some real good upside in revenue and in profits.

There is no way you could give us some directional guidance as to looking at the fourth quarter as maybe saying it will be similar to what we saw in the first quarter ex those items you just mentioned?

It seems like you're giving us the negative without the positives.

We are not going to give further perspective at this point in terms of Q4 specifically.

But I would make a more general comment, which is we are clearly on -- on the vehicles that we have recently launched, think about the Sonic, the Verano, the Malibu, Eco, that has just kicked off here, we are doing really well and we are really pleased with how those are performing.

Where we have had a little bit of drag has been more on some of the products that are getting longer in their lifecycles and we have a very significant turnover of products coming here in North America I think 70% of the total portfolio over the next -- this year and next year.

And obviously a lot of that is in our very profitable segments as well.

So we have the refreshed larger SUVs, the Lambdas, obviously everything going on on the truck front; two critical new entries with the XTS and the ATS into the Cadillac portfolio and really high-volume lucrative segments for us there.

So there's a lot of good activity coming on the launch side, too early to put definitive perspective around that from a quantitative point of view, but a lot of good things to come over the next 12 to 24 months.

Qualitatively I would add, though that this discipline you are seeing with respect to pricing incentives and whatnot and what it does for our residuals in terms of how we are handling our fleet, it bodes well.

When you look at Sonic, it gets -- we're getting about $1000 more per car in that segment and I think within two or three months of introduction, we were second in the segment.

Same thing is happening with Verano, so these new products that are rolling out that are a bit up contented, we are able to hold price and get a premium.

And so when we look into these new product launches, there is a reason for the discipline that you are seeing that sometimes it's difficult to remain as disciplined as we have been when you look at some of the activity of our competitors.

That's very helpful.

Then just lastly on Europe, just thinking about the restructuring there in the context of what's happened in North America, the big driver of the change in North America was really headcount reduction in the retiree health care deal.

A lot of that was because you had a very old workforce in North America and you were able to take advantage of the attrition curve.

As we think about the workforce in Europe, what sort of -- what is the age parameters or the population demographics over there?

Would it be possible over the next couple of years -- and it's probably going to take time to run through that attrition curve similar to what you did in North America and maybe run special buyouts or special attrition programs over in Europe to really fix that part of the business structurally going forward?

You are going to see headcount coming out on a continual basis along the general (inaudible) that you describe.

We are -- there is a fixation on plant closings and so on but those take time and are challenging, as demonstrated across the industry.

But at the same time, we are continuing to focus very much on matching our manned capacity to demand and adjusting headcount within the parameters along the lines of what you identified to get there as soon as we can.

I think the demographics are quite similar to what we saw in North America.

That being said, we still have not matched production to demand.

And I think before the next quarter's report you will see some more information coming off from the Company.

We're not in a position to comment further today but I will say what we said in the past.

We have engaged all parties at specific levels and are in dialogue all the time.

And not to get into the details on that though, if we look at the attrition curve in the US, it was really sort of in the 5% to 7% range naturally if we went back to the mid-2000s.

Could we think about the same kind of thing in Europe and then maybe as you did in North America get that up to something that could be closer to 10% over time?

I don't have the specific numbers in front of me but I would say that it may not be quite as advanced as what it was here but same general direction.

Okay, thank you very much.

Rod Lache, Deutsche Bank.

Good morning, everyone.

There was a question earlier about whether you can sustain this run rate for Europe or whether the destocking that you commented on implies further deterioration.

I was hoping you can maybe just comment on that.

And in Latin America just separately, it sounds like you believe that you have turned the corner and just wondering if you think that you can maintain profitability at this point going forward or whether some of these launches are large enough that there should be -- there would be some volatility in terms of the earnings that we should be expecting?

As it relates to Europe, there's obviously a different impact between Company-owned inventory and dealer inventory.

I would say it is the Company-owned inventory that we will be most significantly working down over the next quarter or two.

So obviously the other piece of the equation is what's happening from a sales perspective and we will obviously see how the market unfolds there.

Then on South America, I will ask Chuck to comment on that.

Yes, I would say encouraging Q1 results.

From an operating perspective, we were slightly above breakeven, so as mentioned, we started to get some traction.

But I would say going through the year, there's a lot of challenges we still need to manage through and I would suggest some volatility from a quarter-to-quarter perspective in earnings.

We've got some restructuring activities to take care of as we head through the summer.

We've got a number of product launches that are cadenced out through the rest of the year.

FX recently has in Brazil specifically has turned into a bit of a headwind that we are going to have to manage through.

And then continued demand on legacy products as we roll over into the new portfolio is going to be a challenge that we are going to have to manage through.

The good thing on the new launch products, good market acceptance, good profitability, better than the vehicles that they replace, we are kind of working our way through that transition right now.

We're about 30% to 40% of the portfolio are new products.

By the end of the year, we will be in much better position.

So I think volatility this year but kind of the core underlying performance of the new products is going to put us on a decent glide path by the end of the year.

Yes, we expect to leave the year at a relatively good run rate.

We have launched four of the nine and all four of those have gotten good acceptance, good traction, but I agree, foreign currency is a bit of a headwind and you do have just a transition in the launches.

So there's a lot of moving parts in South America but it's a lot better place than it was six months ago.

Okay, Dan Akerson, you just came back from China, it sounds like, and there's been a lot of talk in the market about pricing deterioration in that region.

I was hoping maybe you can just comment on what you guys are seeing.

Is that a factor behind that net margin deterioration that we see on that slide on the China business or was that something else?

Well, I think -- just to give you a slice, if you look at the end of year and through first quarter, first-quarter overall market was down about 2%.

We were up I think 8.5%, 8.7%, almost 9%.

Call it 8.5% and we actually gained market share in China at just over 15%.

That is through the quarter, which was up almost 2% plus.

So there is pricing pressure but the thing that we find really good is the products are selling and we've got new ones coming out.

As I mentioned, Baojun is out.

In the first quarter I do think there was a bit of an anomaly.

I don't know if I would say we have got a kind of a true run rate gain of a couple of marketshare points but because the first quarter is traditionally stronger for commercial -- light commercial vehicles and Wuling had a very strong first quarter.

That being said, so did Chevrolet and so did Buick.

We hit an all-time sales record for the quarter.

Price is a factor but I just think our products are being very well received.

If you step back from it, our biggest challenge I think is to continue to play offense.

That's how we're going to hit this.

We want to hit a 5 million unit run rate coming out of '15 going into '16.

And it was an ambitious goal we put out last year but if you look at where we are, where we were, where we are today, that is achievable, not for certain but it is achievable.

So there are many variables in here, mix, volume, price, but where I would say China is off to a pretty good start this year.

Thank you.

Tim Denoyer, Wolfe Trahan.

Good morning.

A quick question on the 1400 skilled trades buyouts that you had in the quarter, can you get a sense of what the payback period might be on that?

Yes, the run rate savings associated with that net of moving some people around will be roughly $60 million to $70 million a year, so the payback is going to be a little over a year.

Okay, thank you.

Then a quick follow-up on China in terms the sequential -- or the year-over-year margin decline that you saw of about 200 basis points.

Can you give a sense of how much of that was sort of mixed with the new Baojun brand and how much was pricing?

The first quarter of last year was an unusually strong quarter as well, so it's a little bit of a difficult comparison year over year.

But I would say overall there's been a couple of trends that have been underlying the China margins over the last few periods.

One is the mix impact of bringing in Baojun some of the costs associated with that launch and the ongoing sort of mixed change associated with it.

Secondly, there has been some element of pricing pressure at different points in the market.

And then thirdly, the margins we are reporting here are mid income margins and are therefore after-tax and have been impacted by some tax increases so that each of those play some parts.

Can you give us a sort of change in tax rate?

It's a whole bunch of different components of taxes in different ways, so I don't have the number off the top of my head.

But it's a reasonable portion of what you're seeing.

As an adjunct, Cadillac was up 79% year-over-year.

That's good, but it's only 30,000.

It's on a small base but 30,000 units is a lot.

And we still -- we are importing a fair number of those, exporting into China.

We are also building a fair number but as Cadillac starts to build there, we will have better margins than we do today.

Are there any specific sales targets for Cadillac there?

Yes.

It is our goal over a three- to five-year period.

I would say on the longer end of that to produce as many Cadillacs on the same order, I won't say the same number but we produce about 180,000 here in the US a year and we would like to be in the 150,000 to 180,000 range within the next three to five years.

So I don't have a specific goal for next year but we are not -- we are serious about this and we think we will have the right products for that market as well.

Thanks very much.

Chris Ceraso, Credit Suisse.

Thanks, good morning.

I wanted to dig in a little bit in North America on slide 11, where you show volume plus 600, mix minus 3.

If I put those together, volume and mix adds 300.

Relative to the 76,000 or so increase in units, that seems like a pretty small contribution.

So I'm wondering what that is and I'm guessing there's a few things here.

Could wholesales have been lower than production?

Maybe there's some issues with the mix within the mix.

Maybe it's the aftermarket thing you mentioned.

Is it rental accounting?

Why does the contribution level seem thin relative to the pretty meaningful increase in volume?

Talking specifically about volume to start with, obviously the biggest driver of the volume increase was full-sized pickups and full-sized utilities, that drove a fairly significant number.

On the mix side, as previously mentioned, quarter-to-quarter full-sized pickups and full-sized utilities were up a bit, 30,000 units or so or year-over-year, but more significantly was the increase in Sonic, Cruze, and midsized vehicles, which drove the mix deterioration.

Do those have a positive dollar contribution?

Yes, they do.

Okay, was there anything with regard to maybe wholesales being lower than the change in production or any of the other rental accounting or anything else like that?

No, on a Q1 to Q1 basis, there was very little factory unit sales adjustment related to daily rental accounting.

Okay, then a follow-up on the cash flow.

I thought that as you guys built inventory and production was rising that you would generate cash from working capital.

Here in the quarter, you had a use of cash in working capital.

So I'm wondering about that.

And then just what to expect on a go-forward basis if you're talking about North America profits being flat from quarter to quarter, is cash flow flat or is there some way that cash flow gets better than what you did here in Q1?

I would say the way to think about cash flow or the way to think about the working capital piece of it specifically is there's a fair amount of seasonal move in working capital.

Q1 is typically a cash -- a working capital cash outflow coming out of the holiday shutdown and then building inventory and production into the first quarter, so Q1 tends to be an outflow.

Q2 and Q3, you tend to recapture that and then Q4 tends to be roughly neutral.

Again that's just a general perspective.

I would say that we have been working recently on working capital as a specific focus.

I think we have opportunity within working capital and we are going after that on a pretty specific basis.

So that's a more general comment but in terms of the quarterly cadence, think about Q1 as an outflow, Q2 and Q3 we recapture it, and Q4 tends to be flat.

And is CapEx a little bit high relative to what you were going to do on a full-year basis?

No, CapEx we've indicated around in the range of $8 billion for the year and we ran $2 billion in Q1.

Okay, thanks.

Itay Michaeli, Citi.

Great, thank you.

Good morning.

Last quarter you provided an outlook slide with the different arrows from metrics.

I was hoping you could update us on some of those particularly costs excluding the pension now that I think you've reclassified some of the cost components as well as just the price versus mix on a full-year basis and marketshare globally?

Sure.

So I would say industry outlook, no real change there.

Market share, global market share, we were down from 11.4 to 11.3 in the first quarter.

We had indicated flat for the year.

I would say that's the one element on here where we think there's probably some potential pressure driven by North America, what we have seen in Q1 here.

So a little risk around that.

Volume, we continue to see favorable for the year.

Price, we continue to see favorable and I think demonstrating that through Q1 here.

On the mix side, no real change in perspective there.

On costs and again, this was excluding the pension income, through Q1 as I said, we had basically flat fixed costs.

We had basically flat material and freight -- material pricing and freight and we expect on a general basis to be in and around that for the year.

There will be some variability on the fixed cost side as we move through some of the plant changeovers and things like that; there will be some costs incurred there.

But I wouldn't say there's a fundamental change on that front.

And then CapEx, as we've indicated, will be up.

The thing that we've changed in terms of classification versus what we showed you in Q1 is moving the material cost increases associated with new product programs and the price increases associated with those new product programs.

What we had done previously was net those two together and that would show up the mix.

We've taken it out of mix and put it into price and cost from a material perspective.

And so the net of those we expect to be positive for the year so we are getting more price than we are adding material costs, which is obviously good.

That is the reason we have broken it out that way is to keep track of that, so as a result of that, you may get a little bit more negative on the mix side than you might have been thinking about just from a reclassification perspective.

I appreciate all that detail, Dan, and a quick follow-up and I apologize if I missed this earlier, but the sequential improvement in the European losses, can you give us a rough walk on how you got there?

Was it some of the inventory build or just costs, maybe a combination?

Just a little color there would be great.

Sure.

Some of it was restructuring, so about $150 million odd of restructuring I think from memory and there was some cost improvements sequentially and some of it was the production versus sales component and inventory, so some of each of those.

Perfect, thanks so much.

Mr.

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

Please continue with your presentation or closing remarks.

Thanks, operator.

Thank you, everyone, for your time this morning.

We will be 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, everyone.