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Operator
Ladies and gentlemen, thank you for standing by.
Welcome to the General Motors Company first-quarter 2014 earnings conference call.
(Operator Instructions) As a reminder, this conference is being recorded Thursday, April 24, 2014.
Your speakers for today are Randy Arickx, Chuck Stevens, and Mary Barra.
I would now like to turn the conference over to Randy Arickx, Executive Director of Communications and Investor Relations.
Please go ahead, sir.
Randy Arickx - Executive Director Communications & IR
Thanks, operator.
Good morning and thank you for joining us as we review the GM financial results for the first quarter of 2014.
Our press release was issued this morning, and the conference call materials are available on the Investor Relations website.
We are also 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.
The content of our call will be governed by this language.
This morning, Mary Barra, General Motors' Chief Executive Officer, will provide opening remarks, followed by a review of the financial results with Chuck Stevens, Executive Vice President and CFO.
After the presentation portion of the call we will open the line for questions from the analyst community.
Mary Barra will then conclude the call with some closing remarks.
In the room today we also have Tom Timko, Vice President, Controller, and Chief Accounting Officer, and Niharika Ramdev, Vice President Finance and Treasurer, to assist in answering your questions.
Now I will turn the call over to Mary.
Mary Barra - CEO
Thanks, Randy, and thanks to everyone joining us today.
It is an understatement to say that the first quarter was challenging for General Motors.
As you know, we recalled approximately 7 million vehicles in North America, and we faced economic instability in some markets across the globe.
Nevertheless, the Company remained profitable, and I am very proud of the way the team has kept its focus on the customer.
Not a day goes by that we don't act and do what we think is best for our customers, what they need, and what they deserve when they buy a GM product.
I will touch on all of these points as I review the quarter and update you on the status of the ignition switch issue.
After that, Chuck Stevens will take you deeper into our results.
Then we will answer as many of your questions as we can.
If you turn to slide 2 you will see a summary of our first-quarter results.
To begin, we delivered 2.4 million vehicles around the world, up 2%.
Sales in Europe were up, and we saw record sales in China; this was offset by lower sales in North and South America and in GMIO, outside of China.
Our global market share was 11.1%, which is down 2/10 of a point from a year ago.
However, Opel Vauxhall gained share in 10 European markets, including Germany.
We also gained 1/10 of a point of market share in China, thanks to the growth of Cadillac and the ongoing success of the Buick and Wuling brands.
Turning to net income, we earned approximately $100 million, despite the $1.3 billion pretax charge for product recalls and a $400 million special item due to a change in the exchange rate, which we use to measure the financial statements in our Venezuelan subsidiary.
Looking next at our EBIT-adjusted results, we earned $500 million in the quarter.
EBIT-adjusted in North America was $600 million, which is down from the $1.4 billion we earned a year ago; the decline is more than explained by the $1.3 billion recall-related charge.
Europe incurred incremental restructuring expense this quarter versus a year ago and lost money, as expected.
However, Opel Vauxhall is getting stronger.
For example, revenue in the region was up 7%, and Opel's revenue was up 9%, and operating losses have been reduced.
Looking down the road, we continue to be encouraged by improving customer sentiment and economic growth in the UK and key eurozone market.
All of this keeps us on track to achieve breakeven results by mid-decade.
In China, our equity income was up about 9% compared to a year ago; however, our consolidated International operations lost money.
Stefan Jacoby and his team are actively addressing the issues in this part of the business, and we expect improved performance as we move forward.
GM South America lost money in the quarter, due primarily to restructuring costs in Brazil and the ongoing challenges in Venezuela.
Once again, GM Financial delivered strong results, earning $200 million before tax.
And finally, our adjusted automotive free cash flow was $200 million, which is significantly up from a year ago.
Let's turn to slide 3, where we have summarized highlights from the quarter.
They include a common stock dividend and other examples that underscore the momentum we have in key markets around the world.
As I mentioned earlier, GM's sales in China set a new record in the first quarter, and our 2014 delivery surpassed 1 million units early in April.
This is the earliest that we have moved into the seven-figure range.
Buick and Wuling are doing particularly well, and Cadillac sales more than doubled.
At Chevrolet, we expect sales growth to accelerate with the introduction of the new Trax crossover, which launches this quarter.
The Trax is a key product because crossover and SUV demand in China is expected to grow at about a 10% annual rate and reach about 7 million units by 2020.
In Europe, our improving market position can be traced directly to the Opel Mokka and our new Insignia flagship.
Cumulative Mokka orders have now surpassed 215,000 units since its launch in the fall of 2012, and the Insignia has topped 85,000 units since its launch in the fall of 2013.
In the United States meanwhile, we earned record average transaction prices in the quarter, which reflect a significant 5,000 year-over-year increase in full-size pickup ATPs according to J.D. Power PIN estimates.
Per our plan, we are selling a much richer mix of crew cab and premium contented trucks today than we were just a year ago.
We are also starting to see the benefit of the new heavy-duty Chevrolet and GMC pickups that launched in the first quarter, along with our all-new full-size SUV.
I know many of you are concerned that negative publicity surrounding our recent recalls will slow our momentum in the United States.
Although it is early, it appears we have not experienced a meaningful impact on sales; and we continue to be optimistic about 2014 because our award-winning new products are performing well and we have more on the way.
Our dealers are an important part of this equation as well, and we just received more third-party proof of just how good they are.
In its 2014 U.S. Customer Service Index study, J.D. Power ranked all four GM brands above industry average.
Not only that, Cadillac was the highest-ranked luxury brand and Buick was the highest-ranked mainstream brand.
Okay, let's talk more about the recall.
I want to begin by stating in no uncertain terms that the ignition switch recall and the factors led up to it are unacceptable to me, to my leadership team, and to our Board of Directors.
It doesn't matter if the roots of the issue are more than a decade old.
This leadership team is responsible for making things right, and we will.
To get the job done, we have assembled a cross-functional team of experts to focus on the recall issue, so the rest of the organization can drive the business forward.
The recall team is being thorough, aggressive, and proactive on behalf of our customers and our stakeholders.
As you know, former US Attorney Anton Valukas is leading our internal investigation, and his investigation is on track.
When the facts are in, we will be transparent and we will hold ourselves accountable.
I also expect to have recommendations from Kenneth Feinberg in approximately the next 45 days.
Mr. Feinberg's counsel will help us evaluate our legal and civic duty.
We will work through the issues and update you as soon as we can.
As has already been reported, we began repairing vehicles earlier this month, and we expect our ability to supply repair parts will continue to increase throughout the spring and summer.
Consistent with our recent communication to NHTSA, our plan is to produce enough repair parts by October 2014 to have the ability to repair the majority of vehicles impacted by the ignition switch and ignition cylinder recall.
Until their vehicles are repaired, we have advised customers to remove all items from their key rings, leaving only the vehicle key.
The key fob should also be removed.
We have conducted more than 80 individual ignition switch tests to demonstrate that the vehicles can be driven safely if these steps are followed.
We have also advised customers that, when they exit their car, to make sure it is in park; or for manual transmissions, in reverse gear with the parking brake on.
Of course, our dealers are empowered to put people in courtesy vehicles or rental cars if that is the right thing to do for the customer.
To date, GM has provided more than 36,000 loaner or rental vehicles through our dealerships.
Based on the expected timing of customers coming to the dealerships the need for loaners should be significantly reduced by the end of the third quarter.
The cost to replace the ignition switches and the cylinder and pay for the loaner cars accounts for about $700 million of the charge we took in the quarter.
The balance of the charge is for the other recalls we announced in that quarter as well.
The overarching objectives for this recall are to repair the cars as quickly as we can and win back the full trust and confidence of our customers, our regulators, and other stakeholders it.
That is why GM's goal is to have the best product safety practices in the industry.
In July 2012 we simplified our product development leadership structure to remove silos and complexity.
In January 2013, we launched a comprehensive program to retool our product quality and durability validation process.
To accelerate our drive to leadership, we organized and restructured our global product development team during the last six weeks.
In March, we promoted Jeff Boyer to the new position of Vice President for Global Vehicle Safety; and he is leading a stronger, more aligned, and cohesive global safety organization.
Jeff's job includes oversight of the safety development process for GM's vehicle systems, the confirmation and validation of safety performance, and the post-sale safety activities such as recalls.
His team will also be creating new mechanisms and analytical tools to help us identify safety concerns earlier and assess them more effectively.
We also know that a big part of putting the safest vehicles on the road is to ensure we have a culture where every employee knows they can bring vehicle safety issues and other ideas forward.
This led us to create the Speak Up for Safety program which launches in May.
Through Speak Up for Safety we will recognize employees for ideas that could make our vehicles safer.
We will also recognize them for speaking up when they see something that could impact customer safety.
The program will include a global 24/7 hotline and a micro-site dedicated to vehicle safety.
This will provide a direct conduit to our safety organization and our problem-tracking system to ensure a closed-loop reporting and review process.
This week we also rolled out fundamental changes in the way develop vehicles.
Going forward, our global vehicle engineering organization will consist of a global vehicle components and subsystems team and a global product integrity team.
The objective is to improve cross-systems integration and deliver more consistent performance across vehicle programs and ensure functional safety and compliance of all our vehicles.
As Mark Reuss said when announcing the restructuring, a vehicle is a collection of 30,000 individual parts; fully integrating those parts into a cohesive system with industry-leading safety and quality is the key to winning in this customer-driven business.
Finally, we will now require all engineers to have their Design for Six Sigma black belts by the end of 2015.
I hope you can see that all of these changes and initiatives will help us accelerate the momentum we carried into this year and throughout the quarter.
Sure, there have been setbacks; that is part of our business.
Nevertheless, our overall progress has been sure and steady.
Our cars, trucks, and crossovers are winning awards and new customers around the world.
Our products' launch cadence is going to make us an even more formidable competitor as we move forward.
And our largest and most profitable regions are strong.
The parts of the business that have weighed us down -- that have weighed down our results are turning around.
And third parties are recognizing something we have known for a long time: we have great dealers who deliver exceptional customer service.
This is the payoff for years of hard work, and it shows in the resiliency that our Company now has.
With that, I would like to invite Chuck Stevens to take you through the quarter in a bit more detail.
Chuck Stevens - EVP, CFO
Thanks, Mary.
Slide 6 provides a summary of our first-quarter GAAP and non-GAAP results.
Net revenue for the period was $37.4 billion, up $500 million, due primarily to the acquisition of Ally International business, while automotive revenue was flat year-over-year.
Our operating income decreased to a loss of $500 million, primarily due to the $1.3 billion charge associated with product recalls and the Venezuela currency devaluation charge of $400 million.
Net income to common stockholders declined $700 million to $100 million, and our diluted earnings per share came in at $0.06.
Automotive net cash from operating activities was $2 billion, a $1.5 billion increase from the same period in 2013.
For our non-GAAP measures, including the impact of the $1.3 billion of recall-related charges, EBIT-adjusted was $500 million in the first quarter, and the EBIT-adjusted margin was 1.2%.
Our adjusted automotive free cash flow was $200 million for the quarter, a $1.6 billion increase from 2013, primarily due to improved working capital.
Slide 7 identifies special items for the first quarter that had an impact on our earnings per share.
At the top of the slide, our net income to common stockholders was $100 million, and our diluted earnings per share was $0.06.
As we advised in our March sales filing with the SEC, we had a $400 million charge associated with the devaluation of the Venezuelan bolivar in the first quarter of 2014 and a $200 million charge in the prior year's first quarter.
This charge had a $0.23 and $0.09 unfavorable impact on earnings per share in each of the quarters, respectively.
On slide 8 we remind you of our consolidated EBIT-adjusted for the last five quarters.
At the bottom of the slide, we list the revenue and margins for the same periods.
Our EBIT-adjusted margin was 1.2%, which includes the negative impact of the $1.3 billion in recall-related charges and an unfavorable 3.5 percentage point impact on margins.
Consolidated wholesale vehicle sales were 1.5 million vehicles in the first quarter, down about 5.5% from the prior period.
Our global market share decreased 2/10 of a percentage point to 11.1% for Q1 2014.
On slide 9, we provide an explanation of the $1.3 billion decrease in year-over-year consolidated EBIT-adjusted.
We earned $1.8 billion in the first quarter of 2013, compared to EBIT-adjusted of $500 million in the first quarter of 2014.
Volume was $400 million unfavorable, primarily due to lower wholesale volumes in GMIO, GMSA, and GMNA.
Mix was $300 million unfavorable, primarily due to country mix in GMIO and product changeover in GM North America associated with Q1 launches.
Price was $1.8 billion favorable, due primarily to the strength of North America.
Total costs were $2.1 billion unfavorable, primarily to incremental recall-related charges of $1.2 billion, increased material costs associated with new products of approximately $1 billion, and $200 million in incremental restructuring costs.
Other was $400 million unfavorable, primarily due to foreign exchange.
Slide 10 gives our year-over-year EBIT-adjusted performance by segment.
I would like to highlight that we changed our reporting structure to reclassify the results of our Russian subsidiaries previously reported in our GMIO segment to our GME segment; the prior periods have been revised for comparability.
GMNA EBIT-adjusted was down $900 million to $600 million in the quarter, including $1.3 billion in recall charges.
GME came in at a $300 million loss, including $200 million of incremental restructuring costs.
GMIO decreased to $300 million; and GMSA recorded a loss of $200 million for the quarter.
GM Financial continued to deliver solid profitability, with $200 million in earnings before taxes.
And our Corporate sector was a $100 million expense, for the total of $500 million EBIT-adjusted in the quarter.
We now move on to our segment results with the key performance indicators for GM North America on slide 11.
For the first quarter of 2014, our total US market share was 17%.
Our retail incentive levels on an absolute basis are up marginally compared to the prior-year period.
On a percentage of ATP basis, our incentives for the quarter were 10.9%.
This puts us at 106% of industry average levels for the first quarter of 2014.
This is down from 115% of industry average in the prior-year period, as we managed through the sell-down of the prior generation of full-size trucks.
Turning to slide 12, we show GMNA's EBIT-adjusted for the most recent five quarters.
At the bottom of the slide, revenue in this segment of the business was $24.4 billion, up $1.4 billion from the same quarter in 2013.
That is an increase of over 6%, driven by record average transaction prices.
GMNA's EBIT-adjusted margin was 2.3% for the quarter, which included the negative impact of 5.4 percentage points associated with recall-related charges.
Our US dealer inventory was 815,000 units at the end of the first quarter, or about 83 days' supply, which is basically flat on a days' supply basis compared to the same period last year.
GM North America's wholesale vehicle sales were 807,000 units for the quarter, a 22,000-unit decrease from the first quarter of 2013.
And North American market share came in at 16.5%.
On slide 13 we provide the explanation of the $900 million year-over-year decline in GMNA's EBIT-adjusted.
GM North America's EBIT-adjusted was $1.4 billion for the first quarter of 2013.
Volume was $100 million unfavorable due to the lower wholesale vehicle sales.
Mix was $100 million unfavorable, primarily due to limited availability of some of our full-size SUVs such as the Escalade, as many of the new models launched later in the quarter.
Price was $1.7 billion favorable, driven by recently launched products such as our full-size trucks, Cadillac CTS, and Chevrolet Impala.
Cost was unfavorable $2.3 billion, primarily due to $1.2 billion in incremental recall-related charges, $1 billion in material costs associated primarily with recently launched products, and increased promotional expenses associated with the Winter Olympics.
Other was $100 million unfavorable, primarily due to FX.
This nets to an EBIT-adjusted of $600 million.
On slide 14, GME reported an EBIT-adjusted loss of $300 million for the first quarter, including $200 million of incremental restructuring costs.
Revenue was $5.6 billion for the quarter, up over $300 million and 6.6% due to the success of our recently launched products and improving market conditions, as the industry increased 5.1% compared to the prior year.
EBIT-adjusted margin in the segment was a negative 5.1%.
Europe's wholesale vehicle sales for the quarter were 291,000 units, up 16,000 units from the first quarter of 2013.
Our European market share in the first quarter was 7.3%, a slight decrease from the prior year, driven primarily by the wind-down of the Chevrolet brand.
On slide 15, we provide the major components of GME's $100 million year-over-year decrease in EBIT-adjusted.
Volume was favorable $100 million, driven by sales of the Opel Mokka and new Insignia flagship.
The impact of mix was flat quarter-over-quarter.
Price was unfavorable $100 million as we continue to see competitive pressure in the European market.
Cost was $100 million unfavorable as incremental restructuring costs of $200 million were partially offset by favorable material performance.
Other was flat quarter-over-quarter as the unfavorable FX impact of the Russian ruble was mostly offset by the favorable impact of the British pound.
This totals to GME's EBIT-adjusted loss of $300 million for the first quarter of 2014.
Overall, continued improvement, all things considered.
We now move on to GMIO's profitability for the prior five quarters on slide 16.
In the first quarter of 2014, EBIT-adjusted was $300 million including equity income from our joint ventures.
This was down $200 million as weakness in consolidated operations more than offset the strong performance of our China joint ventures.
At the bottom of the slide, GMIO's revenue from our consolidated operations was $3.2 billion.
This was a $1.1 billion decline from Q1 2013, primarily due to lower wholesale volumes and approximately $200 million in unfavorable foreign exchange, primarily associated with the Australian dollar and South African rand.
GMIO's EBIT-adjusted margin from consolidated operations was a negative 8.8%, down 6.9 percentage points from the prior year.
This was primarily due to unfavorable mix in the Middle East related to product launch timing.
Our net income margin for our China joint ventures was 11.2%, down 0.5 percentage point from the prior year.
GMIO's wholesale vehicle sales were 162,000 units for its consolidated operations, and 934,000 units for our China joint ventures, where the number of deliveries in the quarter reached a new record.
Our market share in the region was 10%, a 0.2 percentage point increase from last year.
Our market share in China remained a very strong 15.2% for the first quarter, up 1/10 of a percentage point from the prior-year period.
Turning to slide 17, we provide the major components of GMIO's year-over-year performance.
Volume was $200 million unfavorable, primarily due to lower wholesale volumes in the Middle East, India, and Thailand.
Mix was $200 million unfavorable, primarily due to lower sales of full-size trucks and SUVs in the Middle East, due primarily to launch timing.
Price was flat compared to the prior period.
Cost was favorable $300 million, primarily related to reduced manufacturing, lower depreciation expenses, and savings related to the wind-down of the Chevrolet brand from Europe.
Other was $100 million unfavorable, primarily due to Korean noncontrolling interest and FX.
On slide 18 we look at GM South America's EBIT-adjusted for the last five quarters.
At the bottom of the slide, revenue was $3 billion in the first quarter, a $700 million decrease from 2013.
This was due primarily to unfavorable foreign exchange associated with the weakening of local currencies in Brazil and Argentina and reduced volume in Brazil, Argentina, and Venezuela.
The EBIT-adjusted margin in the segment was a negative 5.2%, unfavorably impacted by instability in Venezuela and restructuring in Brazil.
GM South America's wholesale vehicle sales were 208,000 units, 25,000 less than the first quarter of 2013.
South American market share was 16.3% in the quarter, a 0.9 percentage point decline from the prior year, primarily due to Argentina and lower production in Venezuela.
On slide 19 we look at the components of the $100 million decline in profitability in our South American segment.
The net impact of volume was unfavorable $100 million, due primarily to reduced wholesale vehicle sales in Brazil, Argentina, and Venezuela.
Mix was flat.
Price was $200 million favorable as we took action in Argentina and Brazil that partially offset foreign exchange in those markets.
Cost was flat compared to the prior-year period.
Other was $300 million unfavorable, primarily due to the unfavorable foreign exchange in Brazil and Argentina.
This totals to a $200 million loss for GM South America in the first quarter.
Slide 20 provides our walk of adjusted automotive free cash flow for the first quarter.
After adjusting for noncontrolling interests, preferred dividends on Series A, and deducting GM Financial, our automotive income was $100 million for the quarter.
We had $400 million in non-cash special items, and our depreciation and amortization expense was a $1.4 billion expense.
Working capital was a $400 million source of cash.
The $1.3 billion increase in this category is primarily related to one less payment cycle and increased vehicle production in the quarter.
Other was a $100 million use of cash, a net $700 million improvement from the prior year, due primarily to the incremental recall accruals.
This totals down to automotive net cash provided by operating activities of $2 billion.
We had $1.8 billion of capital expenditures in the quarter, for a total adjusted automotive free cash flow of $200 million.
On slide 21 we provide a summary of our key automotive balance sheet items.
We finished the quarter with $27 billion in cash and current marketable securities, and $10.4 billion in available credit facilities, for a total available liquidity of $37.4 billion.
Our book value of debt was $7.2 billion, and the book value of our Series A preferred stock remained at $3.1 billion.
Our US qualified and nonqualified pension plans are underfunded by $7.2 billion, and our non-US pensions are underfunded by $12.2 billion.
Our unfunded OPEB liability decreased to $6.2 billion in the first quarter.
Slide 22 provides a summary of our auto financing activities.
GM Financial reported their results this morning and will be holding an earnings conference call at 12 o'clock.
Our US subprime penetration in the first quarter came in at 7.9%, a modest increase from the prior-year period and slightly above industry penetration.
Our US lease penetration increased 3.2 percentage points to 24.2% in Q1, as we took advantage of higher residual values on our recently launched new products to begin closing the gap to competitive leasing levels.
Lease penetration in Canada was at 23.4%, up 13.3 percentage points from the prior year as we moved to a level more in line with industry averages.
GM new vehicles as a percentage of GM Financial originations rose to 70%.
And GM Financial's percentage of GM's US consumer subprime financing and leasing was 21% in the quarter.
GM Financial's annualized net credit losses remain low and improved to 1.8%.
And their earnings before tax-adjusted were $221 million for the first quarter, up $41 million from the prior period.
Turning to slide 23, although our overall results were overshadowed by the impact of recall charges, we had very strong financial results this quarter.
Setting aside the recall-related charges, the total Company core operating performance is on plan for the year.
GM North America is on plan, and early results indicate that our recently launched products are being well received in the market.
We continue to expect light vehicle SAAR to be in the 16 million to 16.5 million unit range.
Consolidated International Operations are on plan as we continue to work through the expected challenges of managing the launches of our full-size trucks and SUVs in the Middle East, as well as the restructuring efforts in the region.
Europe is performing ahead of plan as the industry continues to improve and the success of our recently launched products continue to deliver results.
Products such as the Mokka and the redesigned Insignia led the Opel and Vauxhall brands to their highest market share in several years this past March.
China is also performing ahead of plan, where we continue to set sales records.
GM South America is considerably weaker, as the environment in Venezuela and other markets continue to be challenging.
Additional challenges that we will need to manage include unknown market impacts in the US due to the recall actions; foreign exchange headwinds in Russia and South America; and political and market volatility in several emerging markets.
Needless to say, we have much work to do; but Q1 was strong, all things considered.
Now, Mary and I will take your questions, after which we will have some closing remarks.
Thank you.
Operator
(Operator Instructions) Rod Lache, Deutsche Bank.
Rod Lache - Analyst
Good morning, everybody.
Can you hear me?
Mary Barra - CEO
Yes, we can.
Rod Lache - Analyst
Okay.
Well, I have a couple things that I will throw out there.
One is, North America; can you talk about that $1 billion of content cost increase in the quarter?
Should we be netting that against the $1.7 billion of price to basically conclude that 35% of that pricing is dropping to the bottom line?
Do you need to have that level of pricing going forward?
Or do you expect to have $1 billion a quarter of content growth?
And then secondly, at one point, Chuck, you had indicated that you were expecting a net cost reduction of around $1 billion in North America in 2015 versus 2014; and there were a few components of that: fixed costs, and logistics, and purchasing.
Is that still the case?
Or are some of the changes that are being made to product development or warranty accruals going to have an effect on some of those cost-savings expectations?
Chuck Stevens - EVP, CFO
Yes, let me take your first question -- or the first part of your question first, Rod.
As we have talked about before, a lot of the net pricing on new products -- and remember, net pricing that we show is the impact in the current quarter for those products that have been launched in the last 12 months.
So you are right, the $1 billion of material cost related to content really needs to be netted against the $1.7 billion or so of net price associated with newly launched products, resulting in kind of a net roll-through to the bottom line of $700 million.
I think we have talked about this before.
We would expect to see in the first half of the year a pretty significant year-over-year improvement in pricing driven by launched products.
And then we would see it tail off in the second half of the year because we will be through the full 12-month launch cycle of the full-size pickups.
At the same time, you will see on a year-over-year basis the material costs associated with content drop off as well.
So that is how to think about that.
On the cost reduction, $1 billion, I don't recall saying that was all in 2014.
I think I indicated that in our glide path going forward to 10% EBIT margins, that we expected to pick up about 100 basis points of cost between 2014 in 2015 driven to a large extent by material and logistics savings, primarily material cost optimization, with fixed costs over that time frame, the next couple years, being relatively flat.
Efficiencies and non-marketing related SG&A, like global business services, IT, and some manufacturing efficiencies offsetting headwinds in incremental marketing and D&A.
And I would say that plan still holds and that is what we are executing to.
Rod Lache - Analyst
Okay, great.
Thank you.
Operator
Brian Johnson, Barclays.
Brian Johnson - Analyst
Hi, a couple questions, and I actually think the two are related.
The first represents -- is around the price versus cost trade-off you are making or you made first quarter in pickup trucks.
And the second is then overall cadence of earnings in GMNA and overall.
Then the first question is, your share in pickup trucks, roughly 34%, (inaudible) 35% first quarter; but it looks like you had very good price even net of content costs.
Is that the kind of trade-off you're going to be looking to make going forward through the year?
Or do you see stepping up on the volume and down a bit on the price as we go into the spring selling season?
Chuck Stevens - EVP, CFO
I would say first and foremost we are going to continue to demonstrate incentive and pricing discipline.
And I think we have seen that through the launch of the full-size pickups thus far, and it has rolled through our results.
At the same time, we are going to be competitive.
And we talked about the February 6 call that we had, the need to address some of the competitive challenges at the lower end of the market, especially Silverado.
If you actually look at share year-over-year, Sierra is up year-over-year, Silverado is down; and that is primarily at the low end of the market.
We have taken action in March and in April to address that.
So far, based on early PIN reads, we have picked up about 160 to 170 basis points a share on a retail basis, full-size pickup.
So we are starting to get traction.
But we need to do that, Brian, in a very balanced way.
We do not want to give up the gains that we have made on mix, moving our crew cab mix up, and the higher contented premium vehicles that we are selling.
And we think we can accomplish both if we are smart about our go-to-market execution.
Relative to earnings cadence, I think it is fair to say back in February, and January for that matter, we indicated that Q1 was going to be in the range of 10% to 15%.
I think it is safe to say we performed better than the 15% as a percentage of our total earnings for the year.
Broad-based, across-the-board improvement versus our expectations, across all of the regions, fundamentally cost driven.
So I think what we are going to see the rest of the year for both North America and the Corp is more normalized Q2 through Q4 earnings.
Brian Johnson - Analyst
So does that imply that there is a step down off of the seasonality?
That is, those are going to be seasonally weaker, hence you are maintaining your overall guide?
Or you are going to see how the year goes and there might be room to move up?
Chuck Stevens - EVP, CFO
Yes, I would say that we have not changed our view for the year, which was overall, excluding the impact of recalls, we expected earnings to be up in aggregate, relatively flat margins.
What I would say is we have changed the shape of the curve.
We performed better than we expected in the first quarter, so we will have to trim some of the expectations Q2 through Q4.
Brian Johnson - Analyst
Okay, thanks.
Operator
Adam Jonas, Morgan Stanley.
Adam Jonas - Analyst
Thanks.
Good morning, everybody.
First question is a two-part question.
First, on the recall, 7 million units obviously creates an enormous amount of showroom traffic and an opportunity to convert that traffic into new sales.
So could you outline, perhaps, how successful have you been so far in getting folks coming in and holding the hand and obviously helping them with a real issue, but also perhaps helping to convert a sale in the process?
The second is, following the expiry of the NOL rights program under Section 382, could you confirm whether General Motors has any more poison-pill type of mechanisms in place that could be used as defense in case of any stake pulling?
Or is there no such thing at this point?
Thank you.
Mary Barra - CEO
Adam, I will take the first question as it relates to the 7 million unit recall.
And actually, it is 6 million actual vehicles, but when we -- and then you look at the total amount of issues that were recalled.
We do see that as a huge opportunity.
It is a little too early; we're in the early days.
It was just a couple weeks ago that we started having part kits come in so we can do repairs.
Our dealers are well positioned to do that.
We have had excellent dealer communications and actually really reworked our processes to be very responsive to the customer, in that we are shipping parts kits by VIN to dealers, to make sure that we get to the customers and we don't have one dealer that has excess parts and another that is waiting for parts.
We have also put the tools in the hands of the dealer that they can offer employee pricing to that individual or someone in the household.
And I would say anecdotally right now, we are getting feedback from customers that -- in fact I spoke to one last night that had had their vehicle repaired, and sent a note to me saying they are a loyal GM customer.
So again, your point is well taken.
It is going to be how well we manage it.
I think with this our dealers have been externally recognized for the type of customer service and satisfaction that they are providing.
They are geared up to do this, and I am confident that they are going to be demonstrating our focus on the customer as we go through this and it will have positive results.
Adam Jonas - Analyst
Thanks, Mary.
Chuck Stevens - EVP, CFO
And, Adam, on the second part of your question, we don't have a poison pill.
Adam Jonas - Analyst
Thank you very much.
Operator
Itay Michaeli, Citi.
Itay Michaeli - Analyst
Great.
Thanks.
Good morning, everyone.
So maybe shifting over to Europe, it looks like, excluding restructuring, GM Europe was pretty close to breakeven.
I know Russia is now included in there.
So first can you quantify the Russian impact?
And could GM Europe actually be profitable excluding Russia?
And if so, what does that mean in terms of the outlook for breakeven in GM Europe, perhaps outside of Russia, for the next couple of years?
Chuck Stevens - EVP, CFO
First, we haven't changed our guidance on breakeven in Europe, including or excluding Russia.
It is mid-decade.
Second, I am not going to provide country-level profitability, Itay.
The regional results in Europe, we lost -- excluding the impact of recalls, we lost $100 million, which is a $100 million improvement versus the first quarter of last year.
I would say that is certainly a good sign.
We are starting to get traction.
The industry has performed better than we expected, and we are performing better than we expected.
And I indicated in the other considerations section of the deck that we expect to Europe to perform better than plan for the year, and I think we are seeing some of that in Q1.
But from an overall perspective, mid-decade breakeven is still our objective.
Mary Barra - CEO
Yes, and Chuck, I will just add to that.
I think if you really look, the strength in Europe is really product driven, and I think Karl-Thomas Neumann has done a great job of shifting the conversation from some of the issues at Opel to the products.
To me a really important signal is the strength of the Insignia, which is the flagship, and that is being very well received.
So I think that is a very strong signal that it is a product-driven recovery and the shift in the messaging over there is to the product.
Itay Michaeli - Analyst
Absolutely.
And a quick clarification on North America, if I may.
Is target still to gain market share for the full year?
I think that was the target you laid out in January.
Is that still part of the pricing plans and how you go to market for the rest of the year?
Chuck Stevens - EVP, CFO
That is still one of our objectives for the year, to grow market share year-over-year.
Itay Michaeli - Analyst
Perfect.
Thanks so much, everyone.
Operator
John Murphy, Bank of America Merrill Lynch.
John Murphy - Analyst
Good morning.
Just a question for both of you, two aspects on the recall.
Mary, I just wonder if you could comment on what impact you think your recall and maybe the recalls throughout the industry might have on product development costs and speed, basically the cadence of product intros.
Then Chuck, it looks like there is not a lot of this that was added back, so it looks like a lot of the cash was spent in the first quarter.
Just trying to understand the timing of the cash conversion of the accrual of the $1.3 billion for the recalls during the course of the year.
Mary Barra - CEO
So if I understand your question correctly as it relates to product development, I think if you look at the announcements that we have made, I see the organization acting more efficiently.
When you look at the way the Jeff Boyer organization, and the global vehicle safety, and then the product integrity team is going to pull it together, we have had the chief engineers very involved as we have looked at this structuring change that Mark just announced recently with the product integrity team and a team devoted to the components and subsystems.
So I think it will speed along.
I don't see it changing the engineering cost to develop new vehicles.
And then when you look at the safety organization and our ability, the pieces we are putting in place and the way we're going to work across the organization, I think it is going to allow us to increase our speed once we understand an issue.
And ultimately, if you discover an issue and you, first, discover it more quickly and then root-cause it more quickly, overall, that is going to be a lower impact as well.
So I don't see an increase related, if I understood your question correctly.
John Murphy - Analyst
Yes, that's it.
Then, Chuck, just on the timing of that cash payment?
Chuck Stevens - EVP, CFO
Yes, so the Q1 cash flow did not include a significant level of cash costs associated with the recall.
Pretty minimal, primarily related to any payments that we made on courtesy transportation and/or a loaner.
The fundamental cash spend associated with the recall will start to fall when we are repairing vehicles.
So if I look at the cadence, it is going to be weighted Q2 through Q4 pretty evenly for the rest of the year.
That is when the cash costs are going to roll through the results.
John Murphy - Analyst
Okay, and then just one follow-up question on North America.
On slide 13, mix was a slight negative.
Obviously, we had the HD and the large SUVs launch.
When do we actually start to see the benefit from those flowing through on mix?
I would imagine we'd have seen some of that in the first quarter.
But is the bulk coming in the second quarter?
Chuck Stevens - EVP, CFO
I would think that we are going to see improved mix on a go-forward basis Q2 forward.
But a lot of the improvement associated with the full-size utilities and HDs will fall into price in Q2 on a year-over-year basis; and we will start to see favorable mix again on a year-over-year basis in Q2 being driven by full-size pickups that were launched last year in the latter part of Q2.
John Murphy - Analyst
Okay, great.
Thank you very much.
Operator
Ryan Brinkman, JPMorgan.
Ryan Brinkman - Analyst
Hi, good morning.
Thanks for taking my question.
I believe that a member of the Canadian General Investment Corporation recently discussed potentially divesting their GM stake this year.
So I know you said before that you don't intend to approach either Canada or the UAW relative to their stakes; but that if they came to you, you would be a good listener, like in the case of the U.S. Treasury.
So I am curious if you can say whether they have approached you.
And then if you can't, maybe just more generally, what are your feelings about whether you think there is currently a buying opportunity in GM's stock for either the Corporation or for investors?
Chuck Stevens - EVP, CFO
The Canadians have not approached us yet.
We read probably the same press release that you did.
I think the best way to answer that question, Ryan, is we have demonstrated the willingness to be opportunistic in the past, and we will have to see how this develops with the Canadian share sale.
I think your second question was around do we think from a General Motors perspective it is appropriate to go into potentially the open market and buy back stock.
And I think there is a number of other issues that we need to deal with right now before we think about that.
And I will leave it at that.
Ryan Brinkman - Analyst
Okay, then.
Great.
And then just on China, very strong margin there, 11.2%.
I had thought over the last couple calls that we'd discussed that you were experiencing some headwinds there relative to new facility expansion expense; the investments that you are making to drive Cadillac sales could pressure margin near-term but help medium-term.
Should we think about that differently now?
Have you cycled past that?
Chuck Stevens - EVP, CFO
Well, I think what we said for China for the year is we expected margins to be similar to 2013 levels, somewhere in, call it the 9% to 10% range.
Q4, the margins were 7.6%, and that was driven by some startup-related expenses and we have kind of cycled past that.
Generally, Q1 is a richer margin quarter if you think about the cadence.
But I think we are still feeling pretty good about margins in the range of 9% to 10% or relatively flat year-over-year in China.
Ryan Brinkman - Analyst
Okay, great.
Thanks.
Just last question, follow-up to that.
I know that your consolidated I/O EBIT walk doesn't really breakout the drivers within China, but sort of lumps equity income together.
Can you maybe talk about how those pieces are moving over there?
How is price changing year over year-end for the full year?
Or however you would like to break out price and mix and costs, etc., just high level.
Thanks.
Chuck Stevens - EVP, CFO
Yes.
High level, volume is favorable; mix is favorable as we start to sell more Cadillacs and SUVs.
Price is a headwind.
The net pricing dynamic in China, the [statistic] has generally been around 3% per year, negative 3% per year; so we expect that to be a headwind.
Material costs will be a tailwind, and fixed costs will be a headwind as we continue to expand our manufacturing footprint.
Ryan Brinkman - Analyst
Okay.
Great.
Thanks for the color.
Chuck Stevens - EVP, CFO
Broad strokes.
Ryan Brinkman - Analyst
Yes, appreciate it.
Operator
Patrick Archambault, Goldman Sachs.
Patrick Archambault - Analyst
Yes, a couple.
Just on the charges, housekeeping.
It sounded like what you took, the $1.3 billion applied to 6 million vehicles in total.
As I understand that this is something that is evolving, but as far as you can tell with all the issues and costs that are visible now, is this largely behind us as a one-timer in the first quarter?
Or would you expect to have subsequent catch-up charges in following quarters?
Mary Barra - CEO
As we look at the whole process, what we have done is we really redoubled our efforts to make sure, if there were issues that had been lingering, that we got in, we understood it.
We put more people in that organization to make sure we quickly get to issues.
I can't predict the future to say what will happen as we go forward.
But what I can say is we will respond to big or small issues as quickly as we can.
And in doing that, with the speed of responding -- allows us to I think really minimize the impact as you get to a smaller population.
So that is what we're going to do going forward, and we are going to remain focused on the customer as we look at these issues.
Chuck Stevens - EVP, CFO
And, Patrick, relative to your question, the $1.3 billion that we took in Q1 covers what we think is going to be the overall cost to repair and courtesy transportation for the recalls that we announced in the first quarter.
Patrick Archambault - Analyst
Okay.
No, that's helpful.
And just on South America, maybe we can spend a little bit of time there.
Obviously, it is very little visibility on the macro front.
But are you -- I know you have been restructuring Brazil; but are you considering maybe more assertive actions?
Like potentially rethinking the Venezuela manufacturing footprint, even if you are not rethinking sales in Venezuela, or stepping up the level of restructuring activity in the region.
Because it does sound like -- and then maybe if you have a sense of what -- your expectation, even if it is something with wide parameters around it, what your expectation for that market might be that you are rolling with.
That would be helpful.
Chuck Stevens - EVP, CFO
Yes, let me start 10,000 feet and work my way down a little bit.
At the end of 2011, early 2012, we embarked on a four-pronged approach specific to Brazil, but also across the rest of the region, on how to take and continue to drive the improvement in the region.
Product, with a real launch on -- real focus on product launches.
And I would say that the most recently launched products are doing extremely well in Brazil and in the rest of the region.
They now account for about 75% of our volume, so we are very pleased with how we have approached that.
Second was to really work on our fixed cost.
And we continue and will continue to make progress and take actions from a fixed-cost perspective, both SG&A and manufacturing.
In the Q1 results we had a roughly $50 million charge for continuing restructuring.
We finished up the closure of the San Jose passenger car facility.
We just got an agreement with Gravatai and a three-year labor deal with 0% real economics associated with it.
So we continue to work through that.
The third piece was really to work through material costs, localization, and logistics.
And we continue to work through that.
I would say it is unfortunate.
We have made significant progress in Brazil and other markets over the past couple years, but the economic environment has moved just as rapidly as we have been making changes or making improvements.
And we will continue to do that.
We are very strong in Brazil.
We have got a great dealer network.
We have got a great portfolio now, a very strong brand, and that is a place that we are going to focus on to win.
Relative to Venezuela, look, we like Venezuela when it is running normally.
It hasn't run normally for the last three quarters.
Clearly that is weighing down our results.
We see no resolution in the near term.
We continue to work very, very closely through the Brazilian government and also directly with the Venezuelan government to try to determine when things will return to some level of normalcy there so we can build and sell vehicles.
It can be a very constructive market.
So we are weighing our options very, very carefully there.
If there is an opportunity going forward for some normal business, we certainly don't want to pull out and go back in.
We have shown before when we do that, typically it is not a good outcome.
But we need to just continue to monitor that.
Patrick Archambault - Analyst
That's helpful.
And just on the market, one of the suppliers that reported earlier had a 10% down light-vehicle estimate for the region, which struck me as pretty severe.
Any kind of ranges as to what you guys are thinking about in your base plan now?
Chuck Stevens - EVP, CFO
Yes.
As I indicated on the other considerations chart, we expect South America to be weaker than expected.
So if we go back to January, our view at that time, three months ago, was that South America should be improved year-over-year.
That is not going to happen.
We are not going to have improvement year-over-year in South America.
We see no resolution in the near term to Venezuela.
And I would say I don't necessarily agree with the 10% industry downtick, but I would say the industry's softer than we expected in Argentina and Brazil.
Patrick Archambault - Analyst
Okay, terrific.
Thanks a lot, guys.
Operator
Colin Langan, UBS.
Colin Langan - Analyst
Great.
Thanks for taking my question.
You commented earlier that you are still targeting higher market share in North America, and that April was coming in strong.
Are you not anticipating any market share loss following the recall?
How are you thinking about the near-term market share impact with all the negative headlines?
Mary Barra - CEO
Well, if you look at the strength of the product portfolio that we have, as it is coming out we are just on the -- really in the middle of -- so bringing out the full-size trucks, the heavy-duty trucks, the SUVs.
We have more launch products coming.
And we see strength both from the reception and then also some external assessment of those vehicles.
And we haven't seen anything meaningful to date, and we plan on continuing to serve these customers well as they come in.
And that, coupled with our products, we are going to focus on that to minimize if any impact occurs.
But right now, again, we haven't seen anything meaningful.
Colin Langan - Analyst
Okay.
Any color on a potential civil settlement, at least maybe in terms of the timing you might announce something (technical difficulty)
Mary Barra - CEO
As I said, we expect to have recommendations from Ken in 45 days or so.
So I don't have anything more to comment.
As you can imagine, it is a complex situation as we evaluate both the legal and civic aspects of this.
But we are working with him; and as soon as we have something to share, we will get it out.
Colin Langan - Analyst
Okay.
And then just thinking about restructuring, what is -- is the $1.1 billion that you initially guided to, is that still the right number?
How should we think about that, how it plays out through the year?
Chuck Stevens - EVP, CFO
Yes, the $1.1 billion is still the right number.
And as we indicated, the majority of that is really related to the planned closure of our facility in Bochum, with the balance being spread in the other regions outside of North America.
We indicated that the weighting would be more front-end loaded.
We had all-in about $300 million of restructuring in Q1.
So I would expect that, as we move through the rest of the year, to start to come down a bit, but still in that $1.1 billion range.
Colin Langan - Analyst
Any actions in GMIO?
Because obviously the consolidated operations remain a bit weak and you did have the exit of Chevy.
Is there any plans in place there?
And when should we expect a restructuring in that region?
Chuck Stevens - EVP, CFO
Yes.
Okay, first, obviously a big one is the wind-down of Chevy in Europe.
We also announced the cessation of manufacturing operations in Australia, and we are working through that as we speak.
That has a bit of a tail on it because we are going to continue to wind that down over the next two or three years.
Stefan Jacoby and his team have went country by country and started to work through some of the issues that we have.
And the way I think about consolidated operations, outside what I just talked about -- the Chevy wind-down and Australia -- is, we have got to get the portfolio right.
We recognize that.
We have got portfolio weakness in Southeast Asia and in India, in South Africa, in some of these other markets that we need to deal with.
So that is first and foremost.
It starts and ends with great products, and then we need to put in place the right business model around that, which means manufacturing footprint, dealer network, the right level of localization, the right commercialization or industrialization of that portfolio.
And that is all work in process.
I would expect to see as we move from Q1 through the rest of the year some improvement, primarily driven by improved results in the Middle East.
The rest of the improvement in the consolidated operations, that is going to fall into 2015 and 2016.
This is going to be a multi-quarter journey.
Mary Barra - CEO
I would just add, though -- and I just went through with Stefan each of those countries yesterday.
And if you look at it, in addition to everything that Chuck talked about, we've got the right people.
I think you all know this is a detailed business; as Chuck said, you've got to have the right products, you've got to have the right understanding of the marketplace, and going to market every single day.
I feel very confident with several country leaders that we now have in place under Stefan's leadership.
They are just going to keep -- again, it is a multi-quarter journey, but they are definitely on the journey and they are looking at it the right way.
So I think you'll see positive momentum there.
Colin Langan - Analyst
Okay.
All right.
Thank you very much.
Operator
Joe Spak, RBC Capital Markets.
Joe Spak - Analyst
Thanks so much.
One quick one.
While I wouldn't expect it to be large, are there any costs associated with dealing with the suppliers related to the recall?
Chuck Stevens - EVP, CFO
What do you mean costs associated, related to the suppliers?
Joe Spak - Analyst
I mean, I guess, how are you handling that transaction with the suppliers?
Chuck Stevens - EVP, CFO
Yes, what we are doing is doing everything we can do to ensure that we are getting parts produced, the right parts produced as quickly as possible so we can take care of our customers.
So we are paying and funding what needs to get done in order to make sure that we are getting the supply.
Mary Barra - CEO
Yes.
And I would say we have had tremendous cooperation with the suppliers, working right from the senior leadership of the company.
Great participation, and they are completely supporting our goal to get parts as quickly as we can, to get these vehicles repaired as quickly as we can.
So it has been working quite well.
Chuck Stevens - EVP, CFO
And just a technical point, the costs associated with those parts, that is in the $1.3 billion.
Joe Spak - Analyst
Okay.
Perfect.
And then just as we think about some of the other regions, and I harken back to your comment and North America with the pricing, but then offset for some of the content thing.
And you have talked about how improvement in other regions of the world needs to be product-driven as well.
So -- and I realize each of these markets are different, so I don't know if you want to go market by market or maybe we specifically could focus on Europe, which I think is the closest to a turnaround.
Should we also expect that sort of relationship, where you are able to get a little bit of price, but then you have to pay for it a little bit on the content side?
Or is it such -- is that market such that you are not actually going to be able to fully price for the content to be competitive?
Chuck Stevens - EVP, CFO
I think that is a question that you need to answer on a specific product level.
For instance, as an example, the next-generation Insignia, depending upon the content technology that we apply to that vehicle, has the ability to recover more price than the next-generation Corsas.
So we have to be very smart about how we apply content, how we industrialize it, how we make sure that we are getting the lowest possible cost.
Because not every segment can afford the kind of pricing improvements that we have seen on full-size pickups or full-size SUVs or the CTS or vehicles like that.
Mary Barra - CEO
I would just add to that, I think it is getting the right content on the vehicle for the segment.
And that is -- there has been a tremendous amount of work done to have a much better read by segment by market.
What is the key content that is going to be valued by the customer, and therefore they are willing to pay?
And then to look at that there, especially as we look at some of the products that are going to continue to be launched over the near term, a lot, I will say, better work done to leverage our global scale in the material cost aspect of those products.
So it is a balance between the two.
But -- so it's the right content and then really leveraging our scale in a way we hadn't done in the past.
Joe Spak - Analyst
Okay.
Then Chuck, just one point of clarification.
When you say Europe is tracking ahead of plan, is that core Europe or Europe as we used to think of it?
Or is that net of Russia which is now inclusive and you have indicated that could be potentially a headwind?
Chuck Stevens - EVP, CFO
Yes, just to be clear, that is Europe, which includes Russia.
We have restated our prior results.
And ahead of plan is versus what we talked about back in January from a Europe perspective; so that is versus our plan.
Again, mid-decade breakeven.
Joe Spak - Analyst
Okay.
Thanks a lot, guys.
Operator
Thank you.
I will now turn the call back over to Mary Barra.
Please continue with your presentation or closing remarks.
Mary Barra - CEO
Thank you very much.
Well, first of all, I really appreciate everybody's questions today.
And I would like to close this call with a simple message that I think really encapsulates everything that we have covered today and everything we are doing as we move forward.
If you look at General Motors as we have moved past the bankruptcy, we have really been a Company that has demonstrated being proactive at every turn, and we continue to do that.
And I will tell you, I have been in many global employee forums and talking to employees via email and other mechanisms.
There is definitely the culture; and I see this as an opportunity to even accelerate our culture change to make sure that we are fast responding and a truly integrated organization, really dedicated to having great products.
We will continue to face down every issue we have, both internal and external, and also more aggressively pursue the opportunities.
Because there's challenges in the marketplace; there is opportunities in the marketplace.
And we are going to continue to minimize the challenges and really go after opportunities, I think, in a way we haven't always done.
So I hope today's discussion gives you more confidence in our customer-focused strategy.
We are living it.
And it is easy to say it and put it on a piece of paper.
As you go through difficult times, you have to prove it, and we are demonstrating that every single day.
I hope you also have confidence in our 2014 outlook and our long-term potential.
So thanks for your time, and I will turn it back to Randy.
Randy Arickx - Executive Director Communications & IR
Thanks, Mary.
Thanks, everybody, for your time today.
We appreciate it very much.
Thanks, operator.
Operator
Thank you.
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.