通用汽車 (GM) 2012 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by and welcome to the General Motors Company third-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 Wednesday, October 31, 2012.

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

Please go ahead, sir.

Thanks, operator.

Good morning, everyone.

Thank you for joining us as we review our third-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 mention that GM is broadcasting this call live 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 Ackerson, GM Chairman and CEO, will provide opening remarks followed by a more detailed review of the financial results with Dan Ammann, Senior Vice President and CFO, who will be joining us by phone.

Steve Girsky, Vice Chairman, will also provide an update on our plans in Europe.

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 lines for questions from the analyst community.

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

With that, I'll turn the call over to Dan Akerson.

Thank you, Randy, and thank you to everyone on the call.

It has been a tough week.

Before I get down to business, I want to say a word of thanks on behalf of GM to all the first responders, relief teams, and volunteers who are doing so much to help people who lost family, friends, or their homes in the storms of the past week.

I'm sure all of us in the room and on the call know someone whose life has been changed by this disaster and they are in our prayers.

As someone who has roots on the East Coast, it makes me glad to see so many people and companies pulling together to speed the recovery.

It will make a big difference for people.

All right, let's get to our results.

This was a solid quarter for GM in almost all respects.

As you can see this at just a glance by looking at all the green up arrows on slide 2. I won't review slide 2 line by line.

Instead I would like to draw your attention to three key indicators.

The first is our global EBIT adjusted of $2.3 billion.

This is about $100 million better than a year ago despite the ongoing negative impact of the European sovereign debt crisis on our business and the industry.

The second point I would like to make is that four out of five, our five business units were profitable.

It's true both for the quarter and for the year to date and it stems from our geographic diversity, strong brands, and financial rigor we are instilling in the business.

Finally, we generated $1.2 billion in automotive free cash flow.

While it's not on the chart, this brings free cash flow to $3.2 billion for the year to date, which is $1 billion better than a year ago.

What is important about this metric is that it's net of spending on new products, plant, and equipment, which is set at roughly $8 billion annually, up from about $6.2 billion last year.

In fact, we have kept our capital spending stable at this high level while some competitors pulled back.

We are not about to do that.

We are here to create a sustained competitive advantage in the marketplace and we can afford to invest in a straight line basis because of our fortressed balance sheet, solid profitability, and global footprint.

As we invest, we are also confident that we will continue to improve our margins by mid-decade.

It will be a function of volume growth, even stronger brands, less complexity, and lower SG&A and product costs, all of which is built into our business plan.

If you turn to slide 3, I will review some of the third-quarter operating highlights that show how we are executing against this plan.

Let's start with the Opel portfolio.

We have continued to invest in new Opel and Vauxhall products even as we work harder to reduce our breakeven level.

In fact, there are 23 new vehicles coming by 2016 and the three newest have been generating a tremendous amount of interest among our dealers and consumers months before they hit the showroom.

For example, the Mokka, which will be the first vehicle in its segment from a German brand, already has more than 45,000 orders with particularly strong interest in Germany, the UK, and Russia.

About half of the orders are for the top-of-the-line Cosmo series and 70% of those orders are equipped with four-wheel drive.

In addition, the Adam, which goes on sale early next year, was the hit of the Paris Motor Show.

It will be produced in our plant in Eisenach, making us the first manufacturer to build a vehicle in this segment in Germany.

With the addition of the Cascada convertible which also launches in early 2013, we will have three new vehicle segments where we didn't compete before, which is a foundation for us to sustain and grow the top line of Opel.

Turning now to Chevrolet, the brand is clearly on a roll.

Chevrolet dealers delivered 1.25 million cars, trucks, and crossovers worldwide in the quarter, which made it the brand's eighth consecutive quarter of record global sales.

What we are seeing is a convergence of customer needs around the world, needs that Chevrolet is able to satisfy with highly functional and very desirable global vehicles like the Spark, Sonic, Cruze, and Colorado.

Nowhere has the impact of this global convergence been more powerful than the United States where small cars have helped drive a 63% increase in consideration for Chevrolet passenger cars since the fall of 2010.

Increased consideration translates into a 56% increase in US mini, small, and compact car sales in the third quarter versus a year ago.

But even as sales of smaller vehicles increased, so did our pickup truck ATPs.

They were up about $2200 per unit thanks to strong sales of new -- of the crew cab and heavy-duty models and lower incentives.

As we move into the fourth quarter and 2013, Chevrolet is going to stay on the throttle as we continue to launch the Malibu 4-cylinder and Turbo and begin the launches of the Impala and the new, all-new large trucks in North America.

We will continue the global rollouts with the Trax and Spin crossovers and the Colorado midsized truck and the Trailblazer SUV and the Onyx small car, and much more.

The third quarter also saw us put Cadillac on a growth trajectory with the launches of the ATS compact luxury sedan and the XTS large luxury sedan.

With these two models, Cadillac now covers 80% of the US luxury model market by volume compared with 50% previously.

New products has also been driving the performance of our regional brands like Buick and Baojun.

The consideration of Buicks has doubled in the United States in one year on the strength of vehicles like Verano.

And in China, Buick, Chevrolet, and Baojun and other brands combined to deliver 10% year-to-date sales increase to a record 2.1 million units.

Even as we execute the most comprehensive product plan in our history, we're making progress on equally far-reaching initiatives that will fundamentally improve our operations over time.

In our consolidated GMIO operations and in GMSA, South America, we posted solid profits and significant margin improvement versus posting losses in the third quarter of 2011.

This is evidence of the impact we can have by bringing the right focus and discipline to our operations.

For example, this quarter we simplified our product development program management.

Under our new flatter structure and executive chief engineered leads programs from inception to production with single point accountability and he or she is accountable for product cost, quality, and the competitive set.

In addition, we are undertaking a top to bottom transformation of GM's IT infrastructure.

Benchmarking proved what we knew intuitively -- GM's outsourced IT model is expensive, inefficient, and outmoded.

Now all of that is changing and it's going to help us manage the business with even more speed and precision.

In Europe, we continue to execute our revitalization program.

We have drawn down our inventories as we said we would, which helped us meaningfully impact our cash flow for the quarter.

We expect that the weakness in Europe will continue to impact our business and the industry for the next several years, so we are being conservative in our planning assumptions around volume and revenue.

With our new leadership team and our comprehensive focus on brand building and cost reduction, we are targeting improved year-over-year results in 2013 and breakeven results by mid-decade.

Steve Girsky is going to join the call after we complete our discussion on the quarter to provide more insight into what we have accomplished so far and what you can expect to see going forward.

Those are just a few examples of what is going on the front lines and behind the scenes.

There are many more projects covering finance, marketing, sales, operations, and other staff, but in the interest of time I would like to turn the call over to Dan Ammann, who will share more detail about the quarter.

Dan?

Thanks, Dan.

On slide 4, we provide a summary of our third-quarter 2012 GAAP and non-GAAP results.

Net revenue was $37.6 billion, a $900 million increase from the prior year.

Included in this was a $1.3 billion negative impact year-over-year due to FX translation.

Operating income was $1.6 billion for the quarter.

Net income to common stockholders was $1.5 billion, down $200 million from 2011.

This decline was more than accounted for by an effective tax rate of about 20% in the third quarter compared to less than 6% from the prior year.

Earnings per share was $0.89 on a diluted basis compared to $1.03 from the same period in the prior year and automotive net cash from operating activities was $3.1 billion.

At the bottom of the page are our non-GAAP metrics, EBIT adjusted was $2.3 billion for the third quarter, $100 million improvement from the prior year.

The EBIT adjusted margin was 6.1%, up slightly reflecting solid margin expansion outside of GM Europe.

Automotive free cash flow was $1.2 billion, up significantly from the prior year.

Moving on to slide 5, this quarter we had $100 million special item for the impairment of goodwill in GM Korea.

This charge reduced earnings per share by $0.04 on a fully diluted basis.

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

GMNA's EBIT adjusted was $1.8 billion.

GME had an EBIT adjusted loss of $500 million.

GMIO had EBIT adjusted of $700 million and in South America, EBIT adjusted was $100 million for the quarter.

GM Financial had earnings before tax of $200 million, a small increase from the prior year.

Corporate sector and eliminations was $100 million expense.

This nets to an EBIT adjusted of $2.3 billion for the third quarter of 2012, up $100 million from the same period in 2011.

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

At the bottom of the slide, our GAAP operating income margin was 4.3% for the third quarter, a 0.6 percentage point decline from Q3 of 2011.

Our EBIT adjusted margin was 6.1%, a 0.1 percentage point improvement from the prior year.

Our global production numbers are 16,000 units higher than the third quarter of 2011 and our global market share was 11.6%, a 0.5 percentage point decline from last year but relatively consistent over the last four quarters.

On slide 8, we provide an explanation of the $100 million increase in year-over-year EBIT adjusted for the third quarter.

Our EBIT adjusted was $2.2 billion for Q3 2011.

Volume was $300 million favorable.

Mix with unfavorable $500 million largely attributable to changes in the car-truck mix in GM North America.

Price was $600 million favorable for the quarter due to the strength of our new product introductions and continued pricing discipline on the vehicles that we have launched in prior years.

Total costs were up $300 million which includes a $200 million reduction in pension income as well as unfavorable policy and warranty adjustments of $300 million for the quarter offset with favorable material cost performance.

Additionally as proof of our ongoing cost controls, SG&A was down year-over-year while revenues were higher.

This totals to $2.3 billion for Q3 of 2012.

We now move on to our segment results with the key performance indicators for North America on slide 9. For the third quarter of 2012, our US total share was 17.6%, down 2.1 percentage points versus the prior year when many of our competitors still had supply disruptions due to the natural disasters in Japan.

Our incentive levels on an absolute basis have increased $130 per vehicle from the prior-year period.

On a percentage of ATP basis, our incentives for the quarter were 10.3%, up 0.4 percentage points from the prior year.

This puts us at 107% of industry average levels for the third quarter of 2012.

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

At the bottom of the slide, revenue was $23.3 billion, up $1.4 billion from 2011.

GMNA's EBIT adjusted margin was 7.8% for the third quarter, down 2.2 percentage points from the prior year.

Our US dealer inventory has been declining from the first quarter and is down to 689,000 units.

This translates to 82 days supply versus a 67 day's supply at the end of Q3 2011.

Full-sized pickup truck inventory was approximately 242,000 units as of September 30, 2012, and 209,000 on the same date in 2011.

We have adjusted our expectations for year-end dealer inventory to be in the range of 660,000 to 670,000 units from the previously forecasted 650,000.

GMNA production was 763,000 units for the quarter, a 23,000 vehicle increase from the prior year.

And GMNA market share was 16.9% for the quarter, 1.9 percentage points lower than the prior year, again due to the supply chain challenges in 2011 at some of our competitors.

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

EBIT adjusted was $2.2 billion for the third quarter of 2011.

Volume was favorable $300 million.

Mix with unfavorable $400 million due primarily to lower production of full-size trucks and utilities and increased production of small and compact cars.

Price was $300 million favorable.

Costs were $300 million unfavorable due largely to $200 million unfavorable pension income and $300 million in unfavorable policy and warranty adjustments, partially offset with $200 million in favorable material and freight costs.

Other was $400 million unfavorable due to the absence of $300 million in Canadian dollar foreign exchange gains in 2011 and the absence of $100 million favorable lease adjustment in 2011.

This totals to an EBIT adjusted of $1.8 billion for the third quarter of 2012.

Relative to our earlier expectations, Q3 GMNA outperformance for the quarter was a function of outperformance with respect to price and material costs and some modest element of engineering expense retiming.

On slide 12, GME reported an EBIT adjusted loss of $500 million for the third quarter, a deterioration of $200 million from the prior year.

At the bottom of the slide, revenue was $5.1 billion for the quarter, down $1.1 billion from the prior year.

Of this decline, approximately $500 million was due to FX translation as a result of weaker Eurozone currencies.

The EBIT adjusted margin in the region was negative 9.4%.

GME's production for the quarter was 196,000 units, 27% less than the prior year as we adjusted production to reduce Company inventory.

In fact, we reduced finished goods inventory by about 22,000 units or $400 million from the second quarter of 2012.

This contributed to GME being slightly positive from a cash flow perspective for the quarter.

GME's market share in the region was 8.6%, a 0.2 percentage point decline from 2011.

On slide 13, we provide the major components of GME's $200 million year-over-year decline in EBIT adjusted.

Volume was $100 million unfavorable due to a reduction of 35,000 wholesale units.

Mix and price were also each $100 million unfavorable.

The challenges in these market-driven items illustrate that we must continue to win with new product introductions to be successful in turning around the business in Europe.

Cost was $100 million favorable because of material cost performance.

This totals to GME's EBIT adjusted loss of $500 million for the third quarter of 2012.

Moving on to GMIO on slide 14, we show the region's EBIT adjusted for the most recent periods including the equity income from our joint ventures.

GMIO posted EBIT adjusted of $700 million in the third quarter including equity income of $400 million.

At the bottom of the slide, GMIO's revenue from our consolidated operations was $6.7 billion, up $600 million from the prior year despite an unfavorable impact of $300 million from FX translation.

GMIO's EBIT adjusted margin from consolidated operations was 4.4%, a full 5 percentage point increase from the prior year and our fourth straight quarter of improved performance.

Our China JV net income margins decreased 0.8 percentage points from a strong performance in Q3 2011 to 9.7% in the current period.

GMIO's total production for the quarter was up 88,000 units from the prior year due to increases in both our joint venture and consolidated operations.

Market share in the region was 9.4% for the third quarter, a year-over-year decrease of 0.2 percentage points.

Our market share in China was 14.4% for the quarter, equal to the performance in the prior year and up 0.7 percentage points year to date.

Turning to slide 15, we provide the major components of GMIO's $300 million increase in EBIT adjusted.

The impact of volume was $100 million favorable.

Mix was $200 million unfavorable due to increased production of small and compact cars with lower margins.

Price was $200 million favorable due to the strong performance of both our new and older products.

Cost was flat for the quarter, reflecting our cost discipline.

Other was $200 million favorable due to a net gain from the acquisition of India operations and some favorable foreign exchange.

This totals GMIO's third-quarter 2012 EBIT adjusted of $700 million.

On slide 16, we move onto the GM South America region and look at EBIT adjusted for the last five quarters.

At the bottom of the slide, revenue was $4.3 billion, $100 million decline from 2011; however, FX translation was a negative impact of $500 million on revenue in the quarter.

The EBIT adjusted margin in the region was 2.6%, a 3.6 percentage point improvement from the same period in the prior year where we posted a loss reflecting the discipline and focus we brought to improving margins in this part of our business.

GMSA's production was 222,000 units, down 21,000 units from the third quarter of 2011.

Market share in the region was 17.9% in the quarter, a 0.8 percentage point decline from the prior year.

This loss of share in the market was due entirely to our older product offerings as our recent product launches have gained an average of 9 percentage points share in their respective segments.

On slide 17, we look at the components of the change in year-over-year performance in South America.

Volume was $100 million unfavorable.

Mix was $200 million favorable, due entirely to higher margins for our recent product launches including the Cruze and the S10 pickup.

Price was $100 million favorable due to actions we have taken in Venezuela and Argentina to offset inflation.

Cost was unfavorable $100 million and other was unchanged for the quarter.

This totals to $100 million in EBIT adjusted for the quarter.

Slide 18 provides our walk of automotive free cash flow for the third quarter.

After adding back non-controlling interests, preferred dividends, and undistributed earnings allocated to Series B and deducting GM Financial, our Automotive income was $1.7 billion for the third quarter.

We had $100 million in special items and our D&A and impairment expense was $1.5 billion.

Working capital was a $500 million use of cash due primarily to a decrease in accounts payable related to sequentially lower production in the quarter.

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

Other was a $400 million source of cash, $1.4 billion improvement from the prior year.

This was largely due to differences associated with non-cash P&L items as well as accruals in terms of policy and warranty, sales incentives, and taxes and expense versus cash.

This total is down to Automotive net cash provided by operating activities of $3.1 billion, an increase of $1.3 billion versus the third quarter of 2011.

This sizable improvement in operating cash flow even while net income was down slightly is further evidence of the quality of earnings realized this past quarter.

After deducting capital expenditures of $1.9 billion in the quarter, our automotive free cash flow was $1.2 billion, a $900 million increase from the prior-year period.

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

We finished the third quarter with $37.5 billion of total automotive liquidity consisting of $31.6 billion in cash and marketable securities and $5.9 billion of available credit facilities.

Our book value of debt is $5.6 billion; the $500 million increase from the second quarter is largely due to the consolidation of GM's India operations and some foreign exchange translation.

Series A preferred stock remains at $5.5 billion.

US qualified pensions are underfunded by $13.4 billion including the remeasurement of our US salaried plan, which we will discuss momentarily.

Our non-US pensions are underfunded by $11.4 billion at the end of the third quarter and our OPEB liability is $7.2 billion.

Slide 20 provides a summary of our auto financing activities.

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

Our US subprime penetration in the third quarter has increased over the prior year to 8.1%.

Our US lease penetration is 16.2% in Q3, a 4.7 percentage point increase from the prior year.

Lease penetration in Canada is at 7%, down 2.4 percentage points largely due to an industry shift to APR sub (inaudible).

GM new vehicles as a percentage of GM Financial originations increased to 44% and GM Financial as a percentage of GM's US consumer subprime and leasing business was 18% in the quarter.

GMF's annualized net credit losses remain very low at 2.5% and earnings before tax was $200 million for the quarter, up $22 million from a year ago.

Slide 21 updates the estimates of the financial impact of the salaried pension transactions that we disclosed in June.

We now expect to reduce our US pension liability by almost $29 billion through a combination of voluntary lump sums and annuitization transactions.

Of the participants who were offered a lump sum, approximately 30% have elected to receive one.

Our total cash contribution to the salaried plans to affect these transactions will now be approximately $2.6 billion, which is lower than our prior estimate of $3.5 billion to $4.5 billion.

The P&L charge in the fourth quarter is expected to be $2.9 billion pretax and we continue to expect the ongoing unfavorable impact to pension income to be $200 million per annum.

We expect to complete the transaction with Prudential in early November.

Slide 22 gives a more detailed look at the year-to-date activity of the salaried pension plan.

The plan had liabilities of $36 billion and was underfunded by $2.6 billion on January 1, 2012.

Remeasurements of the plan deteriorated the funded status $1 billion primarily due to a decrease in interest rates partially offset by favorable asset returns.

For the year, we expect to pay approximately $2.4 billion in benefits from the plan.

The cost of reducing the obligation by $28.7 billion through a combination of annuitizations and lump sums will be $30.8 billion resulting in a net cost of approximately 107% of the GAAP liability in order to eliminate nearly $29 billion of pension obligation.

The estimated cash contribution to the plan is expected to be $2.6 billion, leaving us with a salaried plan that will have a slightly more unfavorable funded status to the beginning of the year with a far more manageable total obligation.

Before turning it over to Steve, I would like to address our view of the fourth quarter on slide 23.

GM's consolidated Q4 EBIT adjusted is estimated to follow typical seasonal trends and will be similar to or slightly better than the same period last year.

Within that we expect those same general comments to apply to GMNA.

If these positive trends continue, we may reverse a significant portion of our valuation allowance on deferred tax assets in the US and Canada.

This action could result in an impairment of goodwill in these countries.

Lastly excluding potential reversal of tax valuation allowances, we expect the consolidated effective tax rate for the fourth quarter to be similar to the approximately 20% we had in the third quarter after adjusting for special items.

Now here is Steve Girsky for an update on GM Europe.

Thanks, Dan.

Good morning or good afternoon, everybody.

I just want to take a few minutes and go through a few slides, talk about the situation in Europe.

I want to talk about what we're doing.

I want to allude to what's different compared to the way it used to be run and the message I want to leave you with is despite the terrible economic environment in Europe, we are not sitting still and in fact, I think there are some green shoots sprouting at Opel in the mud.

This is an organization remember, that has lagged way behind their peers in terms of a number of measures, financial market, what have you.

So the first slide talked about how we've refocused our actions with the schematic.

We basically have the customer in the middle.

It is a very simple model.

We have work streams going on on variable profit and fixed costs.

Those two drive our breakeven and we also have a work stream on cash generation.

Everything we do has the customer in the middle.

It's a very simple model.

It's not complicated.

The business used to be run in an overly complex manner.

The next slide talks about what we have done on the team.

I just want to remind everybody that we placed some of our strongest company leaders on the Opel Supervisory Board -- Ammann, Barra, [Sacha], Tim Lee.

The point of this is that Opel is not an island unto itself.

It's an integral part of the Company.

I can tell you in prior years Opel would basically run itself.

They wouldn't ask nor would they get a lot of help from the organization and today we are getting a lot of good idea flow from around the corporation into Opel and frankly back the other way as well and we will allude to some of that.

We have also made significant changes in the operational leadership of the organization.

Basically if you take the top 18 people who were here a year ago at this time, there's only about four or five left.

We've brought in people from the outside.

Alex Partners Restructuring Executive, Thomas Sedran from Volkswagen; Michael Lohscheller, who was the CFO of Volkswagen of America; from Skoda, Alfred Rieck, who ran Skoda Sales and Marketing in China.

In addition, we utilized our bench strength and/or transferred or promoted some of our best internal talent to prominent positions in Europe.

As I've said before, over the course of the year we have changed a significant portion of the leadership team to drive a culture of urgency, accountability, and new ideas in the region.

We basically put together a strong mix of talent here.

We got people from outside the Company.

We got people from outside the European organization, and we got some people from within the organization.

The goal is to generate positive cash flow and profitability in Europe.

The next slide looks at some of the actions we have taken.

We have refocused our go to market strategy and are focused on improving the image of the Opel brand and strengthening the quality of the market share.

I would say looking at from the outside looking in, this was the difference between us and the others.

Our brand image has deteriorated over the last several years.

The bankruptcy was part of it.

The poor relations with the Works Council was another part of it and we are working very hard.

We know we are behind here and we are working very hard to bring us back to where we were and frankly better than that.

This gets accomplished by doing things such as marketing the positive brand attributes and not just a price point.

We know our product is good.

Our products win awards over there and we put our money where our mouth is.

So for example in Germany, we have our love it or return it marketing campaign.

This was an idea by the way that was not generated in Europe.

It was generated outside of Europe, and we took it into Europe and it's had great acceptance.

Basically, we are enthusiastic about our products.

We think you will be too.

If you buy one of our products and you are not enthusiastic about it, give it back.

Frankly, we have gotten I think 10 cars back so far out of about 25,000 sold.

That's 0.04% of the people have given their cars back; not 1%, not 0.5%; 0.04%.

We've also been re-engaging in the participation of local soccer sponsorships in Germany after being removed from the space for over 10 years.

We had third-party studies done in September and October that have shown that consumer consideration in Germany is already modestly improving after years and years of decline.

Also in September, Opel gained share in nine European countries.

Again, these are small proof points but they indicate a positive trend and reflect the green shoots that I've talked about before.

We are also maintaining internal discipline not to chase bad market share.

For example, in the UK we have lowered our daily rental sales while at the same time improved our retail share.

So overall, share in the UK is down a little bit, but our retail share is way up.

In fact, Vauxhall is now the fastest-growing retail brand in the UK.

We will continue our product development assault as been mentioned before; 23 new models, 13 new engines through 2016.

We are not walking away from product.

We continue to put product on the road.

These numbers include near-term launches in entirely new segments for Opel Vauxhall, like this year's Mokka and Adam, and next year's Cascada.

We have 45,000 orders on hand from the Mokka from dealers and customers.

Frankly we can only deliver about 30,000 this year.

It has been a long time since Opel has had a product that is this tight.

In addition, we see upside opportunities in growth markets in Central and East Europe.

Opel sales are growing twice as fast as the market overall in Russia and there's similar growth opportunities for the brand in Turkey.

As part of this strategy, Opel has now entered Australia with a strong product line-up.

We are taking aggressive actions to improve the profitability on all our current and future products as evidenced in this year's variable profit on the current generation, Astra has improved by EUR500 per vehicle through a combination of favorable pricing and material cost reductions, all accomplished without sacrificing customer valued attributes and features of the vehicle.

We have extended this initiative out for the entire lineup of current vehicles.

We are also looking to expand the availability of Auto Finance in the region for our potential customers.

Most European OEMs go to market with a captive finance arm.

Getting a captive finance arm in the US has helped a lot.

Obviously we don't have a captive finance arm in our arsenal.

For perspective, today GMAC is only active in eight countries in Europe.

As we previously announced, we are an active bidder for Ally's International business, which would deliver benefits from both a cost of funds perspective as well as open up opportunities to improve vehicle sales with more attractive consumer finance offerings.

Finally, our alliance with PSA will help us leverage our joint development of the four recently announced product programs to increase our scale in the region at significantly lower development costs.

We are in the process of finalizing our joint purchasing efforts and assigned our logistics needs in GMA to the Gefco subsidiary of PSA where we expect to start seeing measurable savings in 2013.

Let me talk about cost and cash preservation.

We have reduced Company and dealer-owned inventory by 100,000 units since February.

Inventory in this organization peaked in February.

February through September of this year, we've reduced by 100,000 units and we would expect another 20,000 unit reduction by the end of the year.

Of this 120,000 unit improvement, about 90,000 units will be from Company-owned inventory representing a 47% reduction.

Something that's different here than in other markets is Opel had a significant amount of Company-owned inventory.

We know from history in the past that that is not a good strategy and we are rapidly working to take that down.

This intense focus on inventory management is a prime reason for GM Europe attaining positive cash flow during the third quarter.

I realize it's a small step.

I realize it was largely inventory reduction, but this was a big reach for this organization and again it's a small win to be positive cash flow in this difficult environment for an organization that hasn't had a lot of wins over the years.

GME's total fixed costs are expected to be down $300 million in 2012 from 2011.

We are targeting another $500 million reduction in fixed costs from 2013 through 2015.

It's important to note that these are net fixed cost reductions, not gross fixed cost reductions, and include absorbing and offsetting general economic increases and expected increases in pension expense as well as restructuring expenses in D&A.

Including these cost savings is the 2600 headcount reduction in 2012.

This is -- frankly this is not new news to the people internally.

Frankly we are 2300 people through this.

We are not in the habit of announcing things and doing them.

We would rather do them and then announce them.

We're getting this done largely from voluntary separations and early retirements and we will continue to drive further headcount reductions in the future in line with demand.

As previously announced, we have also implemented short work provisions.

We are expected to bring a moderate level of savings in the near-term.

These savings also recognize the efficiencies we have gained with our recent Ellesmere Port labor deal.

Some of the beneficial provisions from the deal include frozen wages, introduction of entry-level employees, closed entry into the defined benefit pension plan, reduced shift premiums, and much greater operating and work rule flexibility.

The management has also targeted capacity utilization over the medium term.

We're taking our Astra production from three plants to two.

In addition, we have no allocation of future product to the Bochum site after the runout of the current Zafira.

This is one of a number of issues that are subject to negotiations and/or consultations with the relevant unions and Works Councils.

We have announced recently, in fact yesterday, an important initiative with the state, with the government and state of North Rhine-Westphalia to establish an all-new inclusive work group that will explore ways to strengthen economic development including work streams of future utilization of the Bochum sites and their highly skilled workforce.

This initiative did not preclude or force any solution but it is a responsible action taken now to prepare for issues that based on the current scenario we will likely face in the future.

We are also implementing -- reduced our third shift at Eisenach in the first half of 2013 and we will make a final determination on the status of our Strasbourg transmission plant, which is currently under review.

These are all actions in addition to the 2010 disclosure -- closure of our Antwerp, Belgium assembly plant.

Let me go to slide 28.

This recaps our balanced plan for GM Europe to restore profitability.

Three streams -- revenue, variable cost, and fixed cost, and we've got work streams going on in each place.

I should emphasize we have intentionally taken some prudent and conservative assumptions.

For example our 15 total European industry estimate is less than 5% rebound versus the low 2012 levels.

We believe our heavy investment in new product and entry into new segments together with our improved go-to-market strategies will allow us to sustain our current market share and hopefully grow it, but we are not banking on that.

Additionally, we have no significant pricing reduction outside of material content recovery in our assumptions.

The full run rate recognition of any future plant closings would be incremental to our baseline assumptions.

The point where is we're developing a plan that is not highly dependent on external environment dramatically improving over the next several years.

So let me conclude with the last chart.

GME's adjusted loss for 2012 is going to be somewhere in the $1.5 billion to $1.8 billion depending upon the level of Q4 restructuring activity.

For 2013, we are targeting GME's EBIT adjusted results to be slightly better than 2012.

This is in spite of our expectations for 2013 total European industry demand to be 4% to 5% less than 2012's depressed levels.

Lastly, we're targeting GME to be in a breakeven EBIT adjusted position by the middle of the decade.

With that, I want to turn it over to Dan Akerson.

Thanks, Steve.

I will keep my closing statement very brief because we've covered a lot of ground today and we are looking forward to a robust Q&A.

So I will end with a couple of [key] thoughts.

As you look at the Company and compare to where we stood 12 to 18 months ago, you can see that we have adhered closely to our strategy to make GM a more nimble, profitable, and formidable competitor.

Our product plans are in very good shape and we are starting to see green shoots take hold on tough issues like complexity reduction, pensions, and Europe.

We have demonstrated real progress to restoring our consolidated operations in GMIO and our GM South America business to solid profitability.

We are now -- have GME targeting breakeven results by mid-decade.

That's because we now deal with problems in the business methodically, systemically, and as a team.

Our opportunities are even greater than our challenges and I hope it's clearer than ever that we are running the business in a way that will continue to drive strong results, address risk, and create a foundation for continued success.

Thank you and now let's open the line for Q&A.

(Operator Instructions).

John Murphy, Bank of America Merrill Lynch.

Good morning, guys.

Just three questions, one in North America, one on Europe, and one on GM Financial.

First on North America, it was a good quarter.

It went pretty well but you still have a pretty good margin gap with Ford.

I was just wondering what you think you can do to close that roughly 400 basis point margin gap we saw in the third quarter.

It seems like you guys have a lot of great products that are holding the line on pricing.

I'm just trying to understand what's driving that gap and how you close it?

Sure.

Chuck, do you want to take that?

Yes, we track where we are -- how we are performing verses Ford very closely.

We have been doing that over the past 2 1/2 years.

We've got a good understanding of the gap.

Obviously it has widened thus far this year.

I think that there's three specific work streams.

One -- and we've talked about it a couple of times -- we are going to go from having the oldest portfolio in North America to the freshest portfolio in North America over the next couple years and a big portion of that portfolio refresh is going to roll through to the bottom line when you think about full-sized pickups and the improvement in margin versus Ford where we are currently at a pretty significant discount.

Secondly, Ford is about two years ahead of us relative to getting scale on global architectures and we have talked about increasing our volume on global architectures from somewhere around 40% to 80%, which would put us in the range of Ford and Volkswagen and I think that's going to be obviously a big opportunity for us that has got a bit longer tail.

The third and I think both Dan and Dan talked about it, was transformation initiatives specifically around SG&A, some of the IT, in sourcing activities, and other fixed cost initiatives that we're working on.

And I think that will have a short and midterm benefit.

So just to sum it up, we have a clear understanding of the gap.

We know what we have to do to close it.

There are short, mid, and longer-term parts of our roadmap to close that gap and I think the first and most important tranche of that will be the product launch cadence over the next couple of years.

That's very helpful.

Steve, just on Europe as we look at what's going on there, it seems like you are reducing the headcount but I'm just curious, how much opportunity there is from natural attrition, if you will be able to sort of on a net basis shrink your workforce pretty significantly between now and 2015?

That was one of the special parts of what happened here in North America that got you back to profitability.

And also as you go through this curve between now and 2015, will you be looking for any help from your suppliers to save more costs?

Because it seems like the suppliers are making a decent amount of money over there and you're not.

It seems like there's some cost-sharing that should be going on.

So let me get to the first one, John.

We've got three buckets really.

We use natural attrition.

We use early retirements and then we use voluntary separations.

Those are three tools that we have been using so far.

I would say the opportunities going forward are as good as they have been in the past.

I'm not going to give you a specific number because, frankly, we're solving for a cost number, not a headcount number.

But the goal here is to manage our fixed costs down over time and that's the target.

The second one was the material costs.

The material cost performance in Europe frankly has been among the best in the Company and we are going to continue to work this.

We had a big project around Astra.

It has been successful.

We need to take that frankly across the European perspective.

But to be honest with you, Mary has taken that across the whole Company.

So I would say there's more but this is not let's go beat up our suppliers and squeeze them for another dime or something like that.

This is -- are there creative solutions where we can reduce the cost of our products or do things differently?

That's what we're working on and a lot of that came out of Astra and there's more there.

So we think there's money in the near-term and then there's also money longer-term, which Mary Barra has alluded to in the past.

Thanks and then just lastly on GM Financial, with 44% penetration of your sales, you are getting sort to old school levels where GMAC used to run as far as penetration.

If you get Ally Financial, the International Ops, it seems like you are almost recreating GMAC before you got into the mortgage business.

Is this the kind of thing that we should think about in out years that can be earning $1.5 billion to $2 billion as you rebuild the business there?

Yes, just to clarify on the 44%, that is the percentage of GMF business that is GM, not the other way around.

So GMF still does a reasonable amount of third-party subprime business primarily used business.

So just to clarify on that.

But having said that, GM Financial, we are running at a clip of $200 million a quarter for the last several quarters.

So call that $800 million a year, so we're off to a very good start from a fundamental profitability contribution perspective on the one hand and also helping us sell more cars on the other.

So we are very pleased with how this initiative has taken hold over the last couple of years that we've had ownership of this business.

We are, as everybody is aware, pursuing the Ally International business and we see a similar opportunity there to not only have that business be profitable and earn a nice return in its own right but also to most importantly help us sell more cars around the world and have some of the same success there that we've had with this business.

So having said all that, we don't want to go back and recreate a $300 billion monster, which is what GMAC was at the peak back in 2006, so we see a happy medium where we have a strong capability from a financing perspective but we're also letting other financing providers be very active in the market and bring liquidity and attractive pricing into the marketplace, so we're taking a balanced approach.

Great.

Thank you very much, guys.

Adam Jonas, Morgan Stanley.

Good morning, everybody.

A question, a couple questions on Europe.

First quarter from the guidance for the fourth quarter when you allowed this $300 million of, say, wiggle room of the full-year European loss based on how much you restructure, can I ask within the larger company EBIT guidance of a flat to slightly improved profit year on year, how much have you allowed for the restructuring of Europe of that $300 million?

I'd just say it's within that range of sort of flat to slightly better so I don't read too much precision into that.

We are just trying to give some directional perspective both at the European level within the range we've talked about but at the Company level.

Thanks, Dan.

Also on fleet in Europe, can you confirm roughly how much of Opel has been running fleet this year if we include, say, the corporate business fleet in Germany?

Is it up -- how does it compare to the last year qualitatively?

Our share of -- let's put it this way, this is the way the fleet is different, as you know better than me, in the different markets.

So the bad fleet in UK is going way down.

In fact, retail share I think is up, John Stapleton can correct me on the call about 6 points in the UK.

In Germany, our share of the self registered cars is going down also as we are trying to withdraw from that business.

So I look at it as, Adam, self-registered and daily, -- what's our share of self-registered and daily rent business -- sort of we call it short cycle business.

And that share is going down for Opel Vauxhall in Europe in the most recent months.

Chevrolet, I don't have the numbers in front of me, but I could -- we could get you that.

All right, that's fair.

Just a final technical question again on Europe.

In the 2010 10-K, when you disclosed the agreement of the intercompany facility, I know you don't provide details anymore to the intercompany facility but at the time there was I think a EUR0.7 billion equity commitment.

Given all the [losses] since then, it might be reasonable to think that that equity balance might be a negative number if not a large negative number.

I just want to confirm are there any legal or regulatory implications in Germany of having a business with negative equity capital?

Is there anything that might force a top up from GM or can you just keep going negative without any regulatory threshold?

Thanks.

Obviously if there were any legal or regulatory issues, if they were to arise we would deal with them.

But as Steve commented on, we are very focused on cash around the whole Company, as evidenced by the cash flow results for the quarter, but in particular in Europe through the inventory reductions which we talked about last quarter as needing to happen.

They have now happened and contributed to the European business actually generating a little bit of cash in the quarter.

By the way, Adam, I just got a note -- Europe fleet -- all fleet is about low 40s.

Mokka will be in the low 20s.

Fantastic, thank you.

Tim Denoyer, Wolfe Trahan.

Thanks, one on GMIO in terms of the sustainability of the margin improvement, can you talk about how much of the margin improvement was from the consolidation of the India ops and can you give a little bit more color on what the drivers were there and if you expect those going forward?

Sure, the India op consolidation was a double digit number, not a triple digit number.

In terms of the overall performance, we've been focused really over the last year or so on a series of operational actions market by market, country by country both on the revenue and sales side, quality of sales, cost, SG&A.

You've seen the flat cost result this quarter despite the meaningful growth in the business.

So this is -- a lot of this is fundamental operational discipline.

Having said that, I wouldn't just roll this quarter's result forward and extrapolate this fully into the future.

I would say to characterize the IO business, sort of operating environment right now, we are seeing some of the strengthening that we have in the consolidated operations from a margin perspective is offsetting some of the pricing pressure that we are continuing to see in China.

It's no secret the China market is growing more slowly than it had been.

We are getting a bit more than our share of that, which is encouraging, but there is pricing pressure on that market and we expect to see that continue to come through.

So I think what we end up with here is a bit more balanced profit contribution in I/O between the consolidated operations and China and obviously the more diversification, the more balance we have on our earnings, the better off we are.

Just to follow up on some of the specific markets, is it Russia and Thailand that they are really driving some of that balance?

Then do you see any impacts -- do you see any ongoing impact from the labor issues in Korea in the quarter?

No, I would say Russia, Thailand, and Korea is actually -- Korea in its context as both an end market and as a major manufacturing hub for us is contributing nicely to some of the improvement here as well.

So I'd say it's fairly broad-based and reflective of some pretty heavy operational focus that we've had going into a lot of the markets around the I/O region.

Okay but did you lose a third shift in Korea because of the labor contract?

No, we are business as usual in Korea.

Okay, thanks very much.

Itay Michaeli, Citi.

Thanks, good morning.

Steve, just a couple questions on the breakeven target in the (inaudible).

I apologize if I missed it but did you share what your view of the overall market would be, market share assumption?

And then lastly, I was hoping you could quantify what the assumed contribution margin is at GM Europe by mid-decade and how that compares perhaps to 2010 and 2011?

I don't know, how much of it do we --?

Itay, it's Dan.

I would say that that we are not betting on a significant improvement in the economic outlook.

I would say what we are looking for in terms of that mid-decade objective is a level of stabilization and things stop declining and maybe tick up a little bit but not a huge hockey stick at all.

Then between the buckets of sort of revenue, variable profit, and fixed costs, variable profit margins as Steve mentioned, we are getting some nice improvement from a material cost perspective on some of the initiatives that we have had.

We are getting improvement in terms of the model mix.

We've got significant opportunities to improve further on that country mix, so on, the new products that we are launching do have better variable profit margins than some of the existing product, which is encouraging.

And then we have given you the fixed cost targets that Steve laid out as being another element of it.

So I would say in total, it's not fundamentally different from what you've seen in the North America turnaround over the last few years, which is you end up with something that looks somewhat like a third to a half on the cost side, a third to a half on the revenue and variable profit side, and sort of balanced between those.

And I think we will see something similar here in terms of the path back to breakeven.

And I would just add, we are not banking on big share improvement in this plan.

That is not the -- but we are putting the tools in place to grow our business, okay?

This credit company, the new product, the Mokka, the Adam, the Cascada -- you know, I saw a German review of the Cascada.

They compared it to an A5, which gets $5000 to $10,000 more in revenue than ours.

So we're putting tools in place to grow our business but that's not what we are banking on here.

Absolutely, that's helpful.

And just to clarify, how much of the PSA savings is embedded in the mid-decade target?

Is some of that within the $500 million of fixed cost savings?

Most of that is outside of the window.

Most of it -- because the programs are largely outside of the window, most of it is out of the window.

Great.

Last question, Dan, I think I heard you mention that you're targeting higher inventory at year-end in North America.

Can you talk about what's driving that decision -- just a more optimistic outlook of demand or what particularly drill that increase in inventory target?

It is just as we look at the sales performance and sales outlook relative to production, it was a change from 650,000 to 660,000 to 670,000 area, so it's not a big change.

We just wanted to signal that ahead of time.

So nothing, there's nothing significant to read into that.

(multiple speakers) I would say the days supply at the end of the year is still relatively consistent with where we had guided before and last year at the end of the year, somewhere in the range of 65 to 70 days.

So part of that is stronger industry as well.

Excellent.

Thanks so much, guys.

Brian Johnson, Barclays.

Good morning.

I want to talk a little bit more about Europe, both from a kind of -- more from a strategic perspective but first a little bit of -- just on the volume revenue side, housekeeping.

When you say no share improvement, that really means no share improvement and are you assuming therefore that you're holding share in Western Europe?

(multiple speakers) Or are you seeing a little bit of share decline in Western and increase in Eastern?

Yes, there will be some mix shift from west to east.

I don't have it in front of me, Brian.

If it's important, we can figure it out.

We will get it to you.

Okay, and then kind of two strategic questions.

As you put this plan into place and I'm sure this -- we could make the same comment about your competitor, how have you been thinking about the rise of Volkswagen and their aggressive push for share in Europe and make sure that you are not just closing the gap on profits today but have a viable business that wherever they push their scale and price points to in the future, we will be breakeven or better than breakeven.

So we have two ways to handle this.

One is will we rely on the global scale of GM and the other is we rely on PSA scale to get intra-region scale.

So there's two ways we are going to go about this.

Basically that's what we do.

That's basically our two options.

We've got a global GM that we can leverage and the regional PSA that we will leverage.

Okay, are there any purchasing savings from PSA in this plan?

Well remember, the savings are outside the window but ideally there will be purchasing savings both on the technical and the commercial side.

Okay, so this plan other than Gefco isn't assuming PSA?

Not a lot.

Small maybe in the last year.

Which gets on the last strategic question.

A lot of noise in the press that GM is looking to sell Opel, looking to form a JV together with PSA, that Fiat is knocking on your door wanting a three-way joint venture in Europe, which as we point out, could have some accounting benefits at the minimum.

I guess two questions.

One, anything to any of that?

Two, how do you keep everyone in Europe focused on the ground game when they pick up the press every day and read the rumor of the day?

Well, we are doing -- we're not going to comment on any of that stuff, naturally.

You can't solve a problem by magically making something -- accounting go away.

So we've got to focus on our problems and we're very transparent with the organization internally, what our issues are.

We're keeping it in front of people.

The product is speaking for itself.

Brian, we have not had a product as tight as the Mokka in Europe in a long time.

We're basically going to fill 60%, 65% of what people want of that car, so that's going great.

The reviews on the Adam are spectacular.

We keep that stuff in front of people.

We focus on cash flow, getting positive cash flow in the quarter was a big win for these guys.

Remember we used to be way behind everybody else here.

We used to be way behind in share and revenue and profits were way behind and granted it's still bloody out there, but we are making some progress.

We've just got to keep pointing out these small wins to these people, keep building on them because small wins lead to big wins.

We know the competition is bad.

The pricing environment is difficult and we're just going to work our way through it.

We have got a plan.

The plan relies a lot on GM and the help we get and the idea flow we get in GM and we're just going to keep doing that.

So we've got to keep the noise away.

I think we've been doing a pretty good job of keeping our noise down as far as it goes with the Works Council and stuff like that and you can start to see that, frankly, in some of the surveys we do about brand consideration in Opel.

So we're doing the best we can on it.

Okay, thanks.

Rod Lache, Deutsche Bank.

Good morning, everybody.

Just first a couple additional questions on Europe.

Is there like an external inventory reduction target that you have for this year?

How much non-GM inventory are you taking down, which is what ultimately drives your revenue in that region?

And then also is the PSA relationship consistent with what you envisioned when you established it?

Has it changed at all?

Is there the potential for other parties to get involved just as a broad brush comment, to get additional intra-regional scale?

Is that a different way of asking the same question, Rod, or what?

Let me ask you -- so on inventory, I thought I gave you the target.

Did we give a target?

Yes, we have an additional opportunity in the fourth quarter to take it down further from where we are.

We made a pretty big move in Q3 so we are looking to get the Company-owned inventory down to the area of 100,000 units by the end of the year, which is a 75,000, 80,000 unit decline from where it was earlier this year.

So that has been a big focus and a big effort and will contribute nicely to working capital overall.

Just while we're on that topic, I would point out that we have had a pretty big focus on working capital across the Company over the last period of time and we are starting to see some of the results of that flow through from a cash point of view and we see additional opportunities going forward on that as well.

I was more focusing on the dealer-owned inventory, which drives the revenues.

The dealer-owned inventory will continue to go down as well.

The number that Dan said, we hope to be under 100,000 Company-owned.

Just so you know, that's the stretch target.

The dealer inventory --

We're not putting out a specific objective on that.

By the way, Rod, one of the changes we made here -- and call it crazy -- but this Company used to build cars without dealer orders, okay.

We don't do that anymore.

I know it's something that used to happen but it doesn't happen anymore and that's driving a lot of this working capital inventory cash generation here.

The other thing I would point out is it is going to be hard for you guys to book keep this number since the inventory peaked in the middle of the first quarter.

So it's not like it's going to be easy.

You can -- it ends on the quarter, so to speak.

Is the PSA relationship changing at all versus what you envisioned just given the situation in Europe or not?

Is it changing?

I don't know if it's changing.

I don't think it's changing.

We continue to work on the programs.

There's small issues here and there but nothing to speak of.

Okay, can I ask just two other regions?

North America, how should we be thinking about launch costs?

You've got this massive number of launches here over the next two or three quarters.

Anything we should be keeping our eyes out for?

Lastly, any benefit in China at this point you are seeing from some of these market share shifts with the Japanese obviously suffering a bit here at this point?

I will take the China question and then Chuck can address the launch cost question.

I'd say in China, we haven't seen any sort of fundamental change at this point.

I think we are getting a little bit of benefit as are others, so we are not looking at that as a permanent trend at this point in time.

I think it's a sort of temporal disruption and we will see how it develops.

But it's a blip from our perspective at this point.

We'll watch how it transpires.

Okay, Rod, on the launch-related costs.

In the short-term in Q4, I would say quarter-to-quarter we are probably go to see a little bit from a manufacturing perspective.

We are getting ready to start up the Arlington contiguous stamping plant, which will support the next-generation full-size utilities.

We are also taking up a third shift in Arlington, so those are related to the next-generation products from a manufacturing perspective.

On a year-over-year basis kind of looking forward, we had quite a significant increase this year in manufacturing projects, so I don't see a big headwind next year from a manufacturing standpoint.

There could be some increase, but in the scheme of things, I don't think it's going to be substantial.

The biggest spend we will have next year is really from a marketing perspective.

We have got 13 Chevrolet launches next year, Cadillac CTS, and all of those take some marketing support, so I would think that marketing spend would go up year-over-year.

We're still working through the 2013 detailed plans but that's my feel at this point.

Okay, great.

Thank you.

Chris Ceraso, Credit Suisse.

Thank you, good morning.

Just sort of maybe to pick up where Chuck left off on marketing spend, do you think that there is a pricing gap for your trucks in the marketplace relative to the peers that you expect to close with a new product?

What is the scope of that?

Is it $2000 or $3000 a vehicle?

What is your expectation on pricing for the new product?

We have been pretty consistent in our discussion around our gap versus Ford.

We've got the oldest truck, we've been tracking for the last couple years give or take a discount of $500 to $1000 a vehicle -- a combination of MSRP and incentives.

I would say our expectations at a minimum, we would be able to close out that gap once we launch the next-generation truck.

Obviously at the end of the day, market dynamics will play a hand in that.

Dodge has been extremely aggressive lately especially in regular cab and extended cab, but the expectation is with the newest truck with what we think this truck is going to be from a customer acceptance perspective, that we should be able to release close the gap that we've had versus Ford.

Okay, then not to beat a dead horse but just to come back to the Europe inventory if I think about what's at the dealers and what's Company-owned relative to the pace that you are selling, do you have a current number for where your day's supply is in Europe broadly and where do you want that to be?

So it is in the low 70s call it give or take combined.

That would be a combined number.

We would like to frankly take it lower.

Part of that is we will be driven by the fact that we don't build cars without dealer orders.

More importantly, if you look three or four years ago, call it two-thirds, one third or 60-40 was a dealer versus Company-owned and that has reversed itself, which is a bad -- which is not a situation we want to be in, so we're trying to get it back.

Now just to understand, we are a little different in that we have cars on boats that count in our inventory so of the low 70s, there is some call it a low double-digit number that's sort of in transit, so that's a little different than others may have.

Does that help you?

Yes, that's perfect.

Maybe one on the notion of brand building at Opel you mentioned sponsorship for soccer again.

Can you come back to that and talk about the Manchester United deal?

Is that going to be Opel or is that going to be Chevy?

No, that's Chevy.

(multiple speakers) need to rebuild the brand at Opel why would you do such a big splash on the Chevy brand?

That's a Chevy global deal because Man U has got fans around the world and frankly Opel can't afford that.

Opel sponsored a football team in Germany called Dortmund.

It's quite a good team because the team frankly was almost bankrupt three or four years ago and they have hired a new coach who is very charismatic.

He's a brand ambassador for Opel and the team has turned themselves around from being near bankrupt to be one of the most successful teams in Germany.

We think it's a great story for Opel and it's really that and the love it or give it back are really starting to resonate with people there.

So this is a metaphor for the brand, the football club that turned itself around?

It's uncanny how similar it is.

Let me jump in there on Man U. This is Dan Akerson.

First of all, Europe still is somewhat of a patchwork quilt in terms of fan loyalty to specific clubs.

I have read some of the commentary about Man U and why did we do that for Europe?

Quite frankly we did not do it for Europe.

Manchester United was not going to sell well in Germany or France.

Manchester United, there are 350 million fans, rabid fans of Manchester United in China.

They have more fans in China than there are people in the UK.

This was for emerging market strategy for Chevrolet on a global basis, as Steve said.

Then you have specific regional brands such as Buick or GMC or Opel where you have a below the global market perspective and that's why we are looking at it from that perspective, as Steve outlined.

But Manchester United is a global play.

It's not a European play.

By the way, if you look up Dortmund, they beat Real Madrid last week.

Steve has become a soccer fan.

Ryan Brinkman, JPMorgan.

Good morning, thanks for taking my call and thanks, too, for all the additional color on Europe.

Maybe one for Steve.

Could you please speak to the situation of your capacity utilization in Europe?

Where does it stand currently?

Where do you think you need it to go in order to break even?

And where would it need to additionally go in order to earn an acceptable rate of return?

You mentioned that the potential actions regarding Bochum and the shift at Eisenach.

How far do those steps alone get you?

We are in the low 70s by our math right now.

We need to -- there's a number of activities that we will pursue to improve that.

Some of it is reducing shifts, as we have alluded to.

Some of them are bigger.

Some of them we have -- we've said in the past there's the opportunity to produce non-Opel product in these plants.

We can explore that also, so we have plans in place over the next four years or so to take that up materially.

I don't want to get into any more detail around that through both sides of the equation.

All right, separate question and maybe for Dan.

Can you talk about some of the drivers of the net income margin that you earn on your equity stake in the China JVs?

It looks like on slide 14, that there has been an 80 decline year-over-year and there has in general been a modest downward year-over-year trend of this figure in recent quarters.

But I don't think that you call out the drivers like you do in the case of your consolidated operations.

You mentioned pricing pressure in China on the call but is it also maybe fair to suggest that the lower margin relates in maybe large part to adverse mix shift?

For example, earning the same amount of margin or close to the same amount of margin on Chevy as on Buicks but selling more rulings relative to Buicks?

I would say it is both of those have contributed, both the mix of ruling versus Chevy, Buick and increasingly Cadillac, so that mix has moved a little unfavorable for us as it has for the whole industry.

And then on top of that, there's some pricing pressure, so it's both of those.

Okay.

Last question then just regarding the pension derisking, there weren't any questions on that.

It looks like the cash contribution required in conjunction with the Prudential transaction is going to be quite a bit less than you had guided to so does this mean that the percentage of salaried retirees who accepted the buyout offer may be tracked better than you had originally thought?

And if so, how might that factor into any potential desire to make a similar offer to additional GM retirees?

As we announced, the take-up rate on the lump sum side was 30% which obviously says to us that a lot of retirees valued having that alternative put in front of them.

So it was a good deal for them and provided them with flexibility and optionality for their retirement savings and plannings.

We are very pleased with how these transactions have come together overall.

We think it's a good deal to move $29 billion of pension liability off the balance sheet effectively of a price 107, a 7% premium, so we think that's compelling.

It's an important part of our overall pension strategy for the year.

We see continued opportunity to further manage our pension obligations as we move down the road.

We're not going to do anything radical above and beyond the strategy that we've laid out and been executing to over the last couple years, which is steady and progressive derisking and funding of our pension plans.

Thanks, congrats on the quarter.

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

Please continue with your presentation or closing remarks.

Thank you, operator.

Thank you, everyone, for your time and attention this morning.

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.