Good morning, and welcome to General Motors Company Third Quarter 2023 Earnings Conference Call. During the opening remarks, all participants will be in a listen-only mode. After the opening remarks, we will conduct a question-and-answer session. As a reminder, the conference call is being recorded, Tuesday, October 24, 2023. I would now like to turn the conference over to Ashish Kohli, GM's Vice President of Investor Relations.

Thank you, Amanda, and good morning, everyone. We appreciate you joining us as we review GM's financial results for the third quarter of 2023. Our conference call materials were issued this morning and are available on GM's Investor Relations website. We are also broadcasting this call via webcast. Joining us today are Mary Barra, GM's Chair and CEO; and Paul Jacobson, GM's Executive Vice President and CFO. Dan Berce, President and CEO of GM Financial, will also join us for the Q&A portion of the call. On today's call, management will make forward-looking statements about our expectations. These statements are subject to risks and uncertainties that could cause our actual results to differ materially. These risks and uncertainties include the factors identified in our filings with the SEC. Please review the safe harbor statement on the first page of our presentation as the content of our call will be governed by this language. And with that, I'm delighted to turn the call over to Mary.

Thanks, Ashish, and good morning, everyone. Thank you for joining us. I'd like to begin by thanking the entire GM team for once again delivering very strong results, including $3.6 billion of EBIT-adjusted in the third quarter. Our supply chain team and logistics partners in North America have done great work improving the flow of vehicles from our assembly plants to our dealers. Our U.S. dealers have helped us outperform the market from a share standpoint with strong ATPs, and essentially flat incentives. We were profitable in every region, including China. And GM International is on track to deliver significantly higher EBIT in 2023 compared to a year ago thanks to our operating discipline and the lift we're getting from successful vehicles like the Chevrolet Montana and the Trax. I'd also like to recognize our teams in Canada and Korea. They reached new competitive labor agreements and ratified them with little or no disruption to our operations. Because we are in a highly competitive cyclical industry, we have been laser-focused on four fundamentals to strengthen our position; they are delivering vehicles that customers love and are willing to pay for, a competitive cost structure, marketing efficiency and incentive discipline, and matching production to demand. Driving these fundamentals has been and will continue to be the foundation of our consistently strong earnings. For example, GM has now led the industry in full-size pickup sales for three consecutive years, and we have led full-size SUVs for nearly 50 years. Our overall incentives have gone from consistently above the industry average to consistently below. And we are on track to exit 2024 with fixed costs that are $2 billion lower net of increased depreciation and amortization than 2022. We're launching several new SUVs this year and next year that will be more profitable than the models they replace. We're also taking immediate steps to enhance the profitability of our EV portfolio and adjust to slowing near-term growth. These steps include moderating the pace of our EV acceleration in 2024 and 2025 to maintain strong pricing. The new launching timing at Orion Assembly also enables us to make engineering and other changes that will make the trucks more efficient and less expensive to produce, and therefore more profitable. Let's dig a little deeper into the steps we're taking with our ICE portfolio to keep margins and EBIT strong in a very competitive environment. Over the last several years, we have bolstered our position in high-margin segments, including full-size pickups, full-size SUVs, and large luxury SUVs. We did this by managing capacity to meet demand, expanding the range of premium trim series that we offer, and with innovations like Super Cruise and the MultiPro Tailgate, and factory-lifted trucks. And we're not going to let up. As I said, we're launching a wide range of SUVs that will have automotive gross margins up to five points higher than the models they replace. The first two are the Chevrolet Trax and Buick Envista. These affordable small SUVs are rapidly gaining market share, and more than 50% of the Chevrolet Trax customers are new to GM. Then, in the first-half of 2024, we begin launching the new Chevrolet Traverse, GMC Acadia, and Buick Enclave, followed by the next generation of the ICE Chevrolet Equinox and GMC Terrain, which begin launching mid-year. Here are the profit drivers. First, they are in growth segments. The larger SUVs compete with in a segment that we expect to grow by 25%, to three million units, over the next three years, and the smaller SUVs compete in the industry's largest segment, which we expect to grow 9% to 3.4 million over that same period. Second, they're outstanding products. They offer more comfort and interior roominess, better cargo space, enhanced safety features, and innovative technologies, including Super Cruise, which will be a segment exclusive in the Traverse. And third, we develop them efficiently. We have simplified the powertrain lineups where we're using 60% of the power and reduce build combination by 80% to 90%. Now, let's look at EVs. Our commitment to an all-EV future is as strong as ever, and we continue to plan to have annual EV capacity of 1 million units in North America as we exit 2025. This will allow us to participate in the EV market upside, but we are also scaling in a way that's consistent with the operating discipline I mentioned. Over the course of 2023, our battery cell manufacturing joint venture in Ohio has made tremendous progress. The plant will be running at full capacity next month, as planned, and they are targeting the production of 36 million cells this year. Next year, production in Ohio is expected to rise to 100 million cells. At the same time, our battery module constraint is getting better, which helped us more than double the Ultium platform production in the third quarter compared to the second quarter. And we are now in the process of installing and testing our high-capacity module assembly lines, which will continue into the first part of next year. We are currently challenged getting some of the critical equipment components, but we have a dedicated team working with our suppliers to resolve all issues and get these lines running at rate. By mid-year, we expect that modules will no longer be a constraint, and we will be focused on building to customer demand rather than setting new production targets. Software is another critical piece of the strategy, and Mike Abbott and his team are actively engaged in the early assessment and in each of these launches. Since he joined our team this summer, Mike has been moving aggressively to build a world-class software organization to fully execute our software-defined vehicle strategy while accelerating our vision. We now have executives with experience from Apple, Google, Microsoft, Amazon, Uber, and other leading tech companies heading up our human interface design group, our product software and services group, our software engineering, and our software strategy group. The team is optimizing the software strategy and fine-tuning the plans for our new vehicles to help make sure we execute with the highest possible quality and customer experience, while positioning the company to drive significant revenue growth from subscriptions in the future. To give the team time to do this, we'll move out the launches of three products, the Chevrolet Equinox EV, the Silverado EV RST, and the GMC Sierra EV Denali, each by only a few months. This will ensure their success. We believe our products will succeed, and the costs are coming out quickly. For example, our cost per cell has already decreased 45% over the last 12 months as production volume in Ohio has ramped up. We also expect to achieve significant margin improvement on our battery electric trucks through engineering efficiency and improvement, supplier cost, and reducing order complexity, buildable combinations, and manufacturing. Another key launch for us is the next-generation Chevrolet Bolt EV. I know there has been some speculation in the market as to why we are developing a new Bolt EV. Our strategy is to build on the tremendous equity we have in the brand and to do it as efficiently as possible. Our prior portfolio plans included several newly designed vehicles in the entry-level segments and a capital commitment of $5 billion over the next several years. So, now let's turn to Cruise. Since the early days of our company, GM has been defining the future of transportation. And today, that's more true than ever with Cruise. In February, we celebrated Cruise becoming the first company to eclipse 1 million driverless miles. Fast-forward to today and they have logged more than 5 million miles, and they continue to expand. Just last week, we announced that GM and Cruise are working with Honda to bring driverless rides to Tokyo in early 2027. We'll do that with our Origin, the world's first-ever vehicle purpose-built for autonomous driving on public roads. As Cruise continues to push the boundaries of what AV technology can deliver society, safety is always at the forefront. And this is something they are continuously improving. In fact, it's our zero-crash vision that keeps us pressing forward. And we know from the data that Cruise AVs are involved in far fewer collisions than human drivers. This remains the focus of their ongoing discussions with government partners and regulators at the federal and state levels. And now, let's talk about strikes. We know we have ongoing strikes at some of our U.S. facilities. I know many of you are concerned about the impact of higher labor costs on our business in the U.S. Let me address this head-on. I'll start with the macro environment. And then, I'll cover how we are positioned to position the business for success. It's been clear coming out of COVID that the wages and benefits across the U.S. economy would need to increase because of inflation and other factors. This has been playing out in many sectors for some time now. I believe that the offer we have on the table with the UAW is better than the contracts that employees at companies like Caterpillar, UPS, and Kaiser Permanente have ratified. The current offer is the most significant that GM has ever proposed to the UAW. The majority of our workforce will make $40.39 per hour or roughly $84,000 a year in salary by the end of this agreement's term. It also includes the cost of living reinstatement, a 25% increase to the company's 401(k) contributions, world-class healthcare with no out-of-pocket premiums or deductibles for our senior members, enhanced paid time off, and several other benefits. Since negotiations started this summer, we have been available to bargain 24/7 on behalf of our represented team members and our company. They have demanded a recorded contract. And that's exactly what we have offered for weeks now: a historic contract with record wages that includes substantial increases, record job security, and world-class healthcare. It's an offer that rewards our team members but does not put the company and their jobs at risk. Accepting unattainably high costs that would put our future and the GM team members' jobs at risk is simply something that I will not do. Clearly, given the industry's changing pricing and demand outlook and higher labor costs, we have work to do to ensure we achieve low-to mid-single-digit EBIT on EV margin targets that we have laid out for 2025. The work has already begun. And I am confident we will achieve our targets and grow from there. So, when you add up all the things we have talked about so far, it should be more clear than ever that we have taken and will continue to take decisive steps to grow our revenue while sustaining strong 8% to 10% EBIT margins in North America through 2025. We are optimizing both our ICE portfolio and our cost structure to continue to deliver strong profits. We are strengthening our EV business. And then, we will accelerate further. And we have assembled a world-class team to deliver new high-margin recurring revenue streams from software-defined vehicles. It does remain a truly exciting time for us. Now, I'll ask Paul to take you through the third-quarter financials in greater detail. And then, we will move to G&A.

Thank you, Mary, and good morning, everyone. I would like to start by thanking our team members for once again delivering strong results in the face of several challenges. To those employees that continue to build vehicles through the uncertainties of the UAW strike, thank you for your focus, your commitment to quality, and passion to deliver great products to our customers. In Q3, the UAW strike had a roughly $200 million EBIT impact, and so far in Q4, we estimate the lost production has had an incremental $600 million EBIT impact. Moving forward, we estimate that the impact of the UAW strike to be approximately $200 million per week based on the facilities impacted as of yesterday. We're not going to speculate on the duration and the extent of the UAW strike, and because of this uncertainty, we've chosen to withdraw our 2023 full-year guidance metrics even though our strong underlying business fundamentals were pushing us towards the upper half of the range prior to any strike impacts. After we have a ratified contract, we will provide an investor update to quantify the final impact of the strike as well as labor costs moving forward. Despite these challenges, we're already working to offset the incremental costs. Mary mentioned the great work the team is doing with the net $2 billion fixed cost program announced earlier in the year, and the winning with simplicity initiative to drive further efficiencies and cost savings. Higher labor costs will make it even more imperative that we continue to focus on the most significant and margin accretive parts of the business. Let's move now to the Q3 results. Total company revenue was up 5% to more than $44 billion, driven primarily by our consistent pricing and higher wholesale volumes, which were up 2% year-over-year. We achieved $3.6 billion in EBIT-adjusted, 8.1% EBIT-adjusted margins, and $2.28 in EPS diluted adjusted, inclusive of the $200 million UAW strike impact during the quarter. Production volumes and pricing were up year-over-year. However, these benefits were more than offset from other parts of the business normalizing, including mix and GM financial, along with our continued investments in EVs and crews, resulting in a $700 million decrease year-over-year. Adjusted auto free cash flow was $4.9 billion, up $0.3 billion year-over-year, driven by the continued strength of our core auto operating performance. North America continued to deliver strong results, with $3.5 billion in EBIT-adjusted. Pricing continued to be robust, and we are starting to see the benefits of our fixed cost reduction program, realizing about $500 million year-over-year savings in Q3 from lower people cost and marketing savings. Expected headwinds from pension income, warranty costs, and mix, along with the impact of the UAW strike, more than offset these tailwinds, resulting in a $400 million decrease year-over-year. As we shared in our prior quarter's update on warranty costs, the quality of our vehicles continues to be strong, as demonstrated by the decrease in claim rates year-over-year. However, we have experienced an increase in the cost of repairing vehicles due to inflationary factors. We are committed to reducing the number of claims and finding efficiencies to minimize costs and are optimistic that year-over-year warranty headwinds will begin moderating in Q4. EBIT-adjusted margin was 9.8%, and at the top of our 8% to 10% target range. In the U.S., we continue to drive profitable market share growth with 0.7 percentage points year-over-year in Q3, growing both retail and fleet share. At the same time, we continue to hold incentive spend consistently low and reduce marketing spend by $200 million year-over-year. We have completely modified our approach to incentives over the last few years. J.D. Power PIN data shows our 2021 U.S. incentive spent as a percentage of ATP was one percentage point above the industry average of 6%. In 2023, we are trending about a half a percentage point below the industry average of 3.7%. This $1,500 per vehicle relative performance improvement from 2021 to 2023 equates to more than $3.5 billion in annualized EBIT improvements and is attributable to our strong product portfolio and disciplined inventory strategy. And as Mary mentioned, new and updated products coming in 2024 will have improved profitability, bold designs, and new technology to help continue our sales and pricing momentum. Total U.S. inventory has remained within our 50 to 60-day range, with a slight sequential increase to 443,000 units at the end of Q3. This is a testament to the hard work of our team who have navigated through the continued logistics challenges and uncertainties related to the UAW strike. GM International had a solid Q3 performance with Q3 EBIT-adjusted of $350 million, which was consistent year-over-year. Despite a decrease of $150 million in China equity income, which amounted to $300 million for the quarter, GM International ex-China EBIT adjusted, was $150 million, a significant improvement from breakeven in 2022. I want to take a moment to take the entire International team for the work they're doing to deliver profitable results, including the actions in China to help mitigate some of the industry challenges. GM Financial had a strong quarter, with an EBT-adjusted of $750 million, their fourth highest Q3 ever in spite of higher interest rates and lower used car values. This performance was in line with expectations and primarily due to lower net leased vehicle income. We also saw increased finance charge income associated with portfolio growth, and a higher effective yield offset by that increased interest expense. Corporate expenses were $300 million in the quarter, and consistent with the prior year. Cruise expenses were $700 million in the quarter, and we expect a similar quarterly run rate moving forward as they balance expanding operations with further efficiencies. A larger fleet of AVs and additional resources drove the incremental $200 million of expenses year-over-year. I also want to highlight a few items Mary on our retimed EV volume and product production decisions. These actions will impact our previous EV production targets, including the 100,000 EV target we had for the second half of 2023, and cumulative 400,000 EVs from 2022 to the first half of 2024. We are not providing new targets but are moving to a more agile approach to continually evaluate EV demand and adjust production schedules to maximize profitability. We purposely built flexibility into our manufacturing facilities, and are uniquely positioned among our competitors to be able to flex our production between ICE and EVs. For example, our Ramos facility builds both ICE and EV variants of the Blazer and the Equinox, along with Spring Hill, which builds the Cadillac LYRIQ along with existing ICE vehicles. These actions prioritize Ultium profitability versus volume, which helps solidify our North America EBIT-adjusted margin target of 8% to 10% through 2025, and the cash flows funding our future in EVs, AVs, software-defined vehicles, and other new businesses. Given a more agile approach to our EV transition, we now expect to retime at least $1.5 billion of capital spending at our Orion plant, implement engineering improvements, and improve EV profitability prior to accelerating production of battery electric trucks. We'll provide more detail around EV profitability once we have clarity on labor costs. In closing, I want to emphasize that our EV momentum is building. We see it in everything from cell production, to manufacturing, to software. We continue to install significant EV capacity and have the agility and decisiveness to make further adjustments to both accelerate or moderate our transition to adapt to customer preferences. Higher labor costs are at the top of everyone's mind but will likely be another example of the numerous challenges this team has tackled over the last few years. And I remain confident we'll continue to execute and find solutions to grow EPS moving forward. The cost initiatives we're implementing are not one and done, but rather a change in mindset that we expect will drive efficiencies for years to come, fundamentally strengthening the company. This concludes our opening statements. And we'll now move to the Q&A portion of the call.

Thank you. Our first question comes from Rod Lache with Wolfe Research. Your line is open.

Morning, everybody.

Morning, Rod.

I was hoping you could provide a little bit more color on the slower demand growth for EVs. Obviously, GM is just getting started now with mass market Ultium products, still the fastest growth segment within the market. And just at a high level, is this kind of an assessment of the premium that you think EV buyers are willing to pay or are you less optimistic on the IRA becoming a point-of-sale benefit next year? And just given the investments that you're making, why wouldn't lower volume or pricing assumptions affect the 2025 EV earnings expectations?

What I would say is the observation about slowing EV demand growth is something that everybody's been talking about. We've seen it in competitor earnings profiles, et cetera, but I want to be clear, we're not seeing that in our portfolio right now. Now, admittedly, that's in considerably lower volumes than some others that are out there, but we continue to see strong demand for our portfolio, and we're making progress on increasing Ultium EV production, with Ultium products up 2x in Q3 versus Q2. So, we are scaling. But what we've seen here is an opportunity to slow some of that scaling down and take advantage of some of the learning that we've seen through the engineering and manufacturing process in the early stages. And what it allows us to do is to build a stronger foundation before we scale aggressively upwards. So, that's really what we're seeing. I wouldn't chalk it up necessarily to price. And what we're seeing in our portfolio is our customers have been remarkably resilient in the order book, continuing to keep their orders on the books.

Great, thanks, Paul. And just secondly, obviously there's consequences to almost any change that affects the business. At a high level, do you think that GM will need to make adjustments to the company's product strategy to adjust for higher labor costs than some of your competitors? And can you clarify whether this $2 billion net fixed cost reduction contemplates a scenario for UAW costs?

Rod, this is Mary. Yes, we're committed to the $2 billion that we've talked about. And we already have tremendous work underway to continue to take costs out of the business. So, I don't really think this changes our product portfolio. As Paul said, as we get further into the transformation to EV, it's a bit bumpy, which is not unexpected. And so, what we're moving to is something that we can react in a much more agile way to make sure that we have the right vehicles. And I believe our portfolio that we have that looks at the most important segments, and make sure that we have the right entries. We're already seeing strong demand for entries when we have EVs that people actually want to buy. So, I think there is a lot of focus in the portfolio to have the right cells, but just to give ourselves more flexibility. And I think the Bolt EV versus the previous AV that we had in the portfolio was a great example. We were able to get the Bolt EV more quickly. As we've mentioned, it will require a lot less capital to deploy. And frankly, we're leveraging the strong customer enthusiasm that people have for the Bolt EV. So, it's decisions like that where we're still going to have the right portfolio but do it more effectively from a cost and timing perspective.

Great, thank you.

Thank you. Our next question comes from Itay Michaeli with Citi. Your line is open.

Great, thank you. Good morning, everyone. So just first going back to the Ultium targets in 2025, could you just review the factors that are allowing you to maintain that low-to-mid single-digit EV margin target? Given the lower volume, maybe you could touch upon any changes to the LG relationship, from maybe recent changes there? And also, if you could quantify a bit some of the engineering changes you alluded to that can enhance profitability?

Sure, thanks, Itay. And exactly as Paul said, we're taking steps to better position ourselves as we expand. But we are very much committed to the low-to-mid single-digit margin target in 2025 for our EVs. And it's not one thing, it's multiple things. So, first, as I mentioned just a minute ago, it's having the right products in the right segments that have the right features, the right range, the right functionality, et cetera. That's number one. And I think the Silverado EV is a prime example when you look at the range that vehicle has in bidirectional charging. So, also, the feedback that we're getting on the Blazer EV is outstanding as well. So, those are just two examples. It's also the fact that we'll be well into the scale of the battery cells at that point in time. And I already mentioned how much the cost has come down just from having one module to virtually having, by the end of the year, on plan, we'll have the Lordstown plant fully ramped. And then we're on track for the other plant. So, getting the Ultium battery cells scaled will be another important piece. I talked about, last time, what we're doing with winning with simplicity. And really honing in and going to market in a simpler way that, frankly, we think is better for the consumer because they're not overwhelmed with the number of choices they need to make. And taking that kind of order complexity and build combination complexity out drops a tremendous amount of cost to the bottom line from designing it, engineering it, sourcing it, and planning for it to get lineside. And then we've seen product improvements. With the Ultium, it was our first generation. We learned a lot from the Bolt that went into how we designed this first round of Ultium product, but we're already seeing improvements we can make in Ultium, and then improvements we can make beyond the EV platform in these vehicles that will make them more efficient. And it's appropriate application of things like giga-castings, which is already on the C8. We learned a lot on the CT6. It will be a part of CELESTIQ. And there's other vehicles that we haven't announced yet that it will be an important part of. So, it's, frankly, looking at fundamentally everything. But we remain committed to get there. And, frankly, where lithium prices are trending is another enabler.

That's all very helpful. And as a quick follow-up, maybe wanted to touch upon Cruise, with Cruise really scaling now to multiple cities and making a lot of progress, any just thoughts on funding going forward, as well as any strategic thoughts you can share as Cruise goes into the next stage of growth?

Well, we're going to have a lot more to say about Cruise in the latter part of this year. Paul will be at a Barclays Conference. We also will have fourth-quarter earnings, and then our Investor Day. So, we do believe that Cruise has tremendous opportunity to grow and expand. Safety will be our gating factor as we do that, and continuing to work with the cities that we're deploying in. So, we'll have more to say about that at a later date. But rest assured we do have funding plans that will support Cruise's expansion.

Perfect, that's very helpful. Thank you.

Thank you. Our next question comes from Joseph Spak with UBS. Your line is open.

Thanks. Good morning, everyone. I want to follow up on the Ultium strategy and the changes being made. How adaptable is this program for implementing these changes? Are the insights you've mentioned that you intend to apply to Silverado also applicable to other products, or should we anticipate the need for an Ultium 2.0 platform in a few years compared to the current market?

As we've already said, the Ultium platform is chemistry-agnostic. And so, we will continue to look to make programs. And as we go forward, we will adapt. There'll be, I think, Ultium 2.0 as we get into the latter part of this decade, as well as many other parts of the vehicle. Again, I think it's hard to really explain without being in person. And we'll do this when we're together at our Investor Day, of the simplification that we can do to the vehicles that makes them easier to build. And, frankly, the mindset change we've had from a complexity perspective is pretty significant. So, again it's yes, there's going to be improvements. We'll continue to drive efficiencies in the Ultium platform. But it's also, broadly, across the entire vehicle.

Okay. Mary, you mentioned that the Ohio battery joint venture is expected to reach full capacity by the end of this year, which I believe is around 35 gigawatt-hours. How does that joint venture, of which you are a partial owner, intend to align its output with GM's own electric vehicle demand? Will there be a continued ramp-up in production, and are there plans to build some inventory or seek additional offtake? Additionally, does this updated timeline for electric vehicles affect any of the other battery joint ventures that are set to come online?

No, we plan on having the ramp at Lordstown continue as it is. And the plant in Spring Hill comes online next year. And then we have plant three in Michigan that follows, and then the work with Samsung. We'll keep all of those on track because we believe strongly that we need those cells. Now, obviously, if we have to evaluate and slow something down, but at this time we don't see a need to do that with the plans that we've outlined here.

Okay, thank you.

Hey, Joe, just on that, again, I want to reiterate. We're going to respond to demand. And we're going to make sure we have the right products at the right time, but we're not overbuilding.

Perfect. Thank you.

Thank you. Our next question comes from John Murphy with Bank of America. Your line is open.

Good morning everybody. Mary and Paul, when you think about the capital commitment that's going on in the business lobby, it's always very large, but with EVs and things that are shifting on technology and products, product plans, it seems a little bit more uncertain, a little bit more dynamic, and it has historically. Do you think about returns on capital as we shift into this EV world? Can they potentially be higher and shorter-dated? So, they give you more flexibility to make changes like you just did with the vault, or are we still thinking about sort of seven to 10 year decisions like we did on the ICE side? I think there's a lot of folks that think this is a real risk, but it sounds like it also might be an opportunity to be more flexible?

Yes, good morning, John. Paul, I think that's what we're aiming to and I think creating the foundation of reducing complexity and buildable combinations and more simpler engineering design manufacturing, I think is going to give us that agility going forward. I think the other thing that you're going to see us, and I think the Orion announcement is a good example of this, is we're also engineering improvements on the fly. So, I think if you look at the historical record, it would be you produce a vehicle, you would identify some improvements in customer features, profitability, et cetera, and you'd wait for a mid-cycle model improvement to actually go in and implement those changes. It's really more of a mindset that's, I would say more conducive to software that says, here's an opportunity to really improve the profitability, the capability of the vehicle, let's go ahead and put it in line. So, the Orion decision represents an early application of that, where we've seen a slowing in the demand growth create the opportunity to go in and build these from the ground up as we expand and scale up. And I think it's going to make us more nimble in the future and ultimately lead to more consistent ROIC.

And then just one follow-up on the strength in sales year-to-date. The U.S. market really seems to be buoyed by fleet sales more than retail at the moment, and you guys usually have a better line of sight and visibility into orders from your fleet customers. So, one, if you can confirm that strength has really been driven by fleet relative to expectations at the beginning of the year. And two, is there visibility that this is going to last kind of like it did in '10, '11, and '12 sort of as a consistent driver of the upside of the cycle early in the cyclical recovery?

Well, I think, John, we've been consistently talking about pent-up demand from the last couple of years, and that's been really evident in the fleet customers. But I would say that the retail share gains and the performance of the retail customer has been strong as well. In fact, we've seen gains in market share pretty consistently this year, both from fleet and from retail, while we've increased production, while we have kept incentives down, and while we have reduced marketing spend. So, I think it's a real testament, especially to the North America team for what they've performed through and what they've done in the face of that strength. And while we hear reports out there in the macro that consumer sentiment might be weakening, et cetera, we haven't seen that in demand for our vehicles, and we've been pretty consistent about that on the retail side as well. So, we're continuing to enjoy that, and I think we're operating from a much more disciplined lens around margin improvement as a result of what we've seen in that transformation.

Okay. Thank you very much.

Thank you. Our next question comes from Emmanuel Rosner with Deutsche Bank. Your line is open.

Thank you very much. Good morning. First, a couple of clarifications on the 2025 targets for the EV business, so, low to mid-single-digits margin. I think when you initiated that guidance, this was excluding the IRA sale manufacturing credit, but I think including them, you could have gone to mid to high single-digits. Is that still very much the case, or are you saying that now including IRA, you would be at the low to mid-single-digits? And then on the volume piece, or I guess the capacity piece, to the extent that your capacity is flexible between EVs and ICE, would you consider reducing the 2025 EV capacity target in the future of the industry dynamics or demand that was weaker than expected?

Well, first on the first question, we remain committed to low single-digit margins IRA. Nothing has changed there. And so, as you said it would be similar to ICE-like margins with what we believe we know the IRA to be. We still are waiting for final clarification from Treasury on a couple of aspects of that. And then, again, as Paul outlined, with the flexibility we have in Ramos, with the flexibility that we have in Spring Hill and our plants, I don't think it's that we'll adjust down the amount of capacity that we'll have. It's just that we're going to be able to respond very quickly to EV or AV depending on where the customer is and what they demand. So, I think we're going to need the capacity and again the flexibility that we have is I think going to be one of the ways that GM is going to be better positioned to serve the market for both ICE and EV as we move in this transition period.

Okay, that's helpful. And then, I guess more broadly for the overall business, just clarifying your net cost reduction target of $2 billion. This is, I assume this is before any labor cost inflation expected from the new contract. But can you please clarify this? And assuming that this does not include that inflation in the net reduction, what sort of actions are you contemplating to try and offset that labor cost inflation? What could be done above and beyond the $2 billion to offset any additional cost increase?

So, good morning, Emmanuel. It's Paul. What I would say is that the $2 billion is around controllable fixed costs and we remain committed to being able to do that. The implications of the UAW contract when it is agreed to and ratified will flow significantly and largely through cost of goods sold in our margin performance. So, when you look at the ways that we have to offset that, those are things that affect the EV profitability, et cetera going forward. So, what we've got to do is make sure that, number one, we sign a contract that we know we can compete in the global marketplace because we want to make sure that these are good jobs and they are good jobs for the next people as well that are going to taking over. We are protecting the brand, the company, the franchise, and the future. So, we are going to have to look at potentially reducing fixed costs further. We are going to have to look at efficiencies across the board in engineering and designing the vehicles. And that's a little bit of trying to get ahead of some of those inflationary pressures that we saw with the steps that we have taken earlier this year. So, we are going to continue to look at doing that. And we've got some work cut out for us, but we are committed to making it work.

Great, thank you very much.

Thank you. Our next question comes from Adam Jonas with Morgan Stanley. Your line is open.

Hi, good morning. Mary, you've acknowledged for some time that the General Motors share price is not really getting any credit for the cruise business. I think many would argue that at $29 a stock might even be implying a negative value for cruise, which I think you'd reckon would be pretty ridiculous. So, my question is, besides continuing on growing and executing on the business, I know we're going to learn a lot in the next year. Is there anything else that your management team or board could possibly do to unlock value for the cruise business?

Adam, first of all, I completely agree with you. I think the stock is undervalued. Even if it was just an ICE and EV and software company, I think the cruise piece of it is further. I think as we continue to expand cruise in a very thoughtful way, focused on safety, I think people will see and start to unlock. I mean, just last week we announced the opportunity that we have with Honda and Cruise and General Motors in Japan. And so, to be able to be involved in driving expansion, not just in the United States, but globally, I think it's going to be an important part of Cruise's mid to longer-term future of success. So, we do believe in the technology. As I said in my remarks, it is safer than a human driver and is constantly improving and getting better. And that's what we're focused on doing.

It's really amazing to see the growth in San Francisco. I know people that use it every day. Just a follow-up for Paul, you guys have been very specific, I think within a range at least of a 2025 EV target of the mid to high single digits without IRA. You're obviously not disclosing where EV margins are today. So, I'm not going to press you on that because you would have disclosed it. You're choosing not to. But I think in some of your comments, if I heard you correctly, Paul, you said you're not doing it today because of the labor situation or you know until you get the clearer picture on labor but when we get through this standoff with the UAW, can we expect that you will be specific of what the starting point is in the next year? So, we could understand the delta from how loss-making the EVs are today clearly they're loss making but had to put a number on it, so that investors can have greater transparency the delta. Is that something you can commit to please?

Yes, good morning, Adam. First of all, just to clarify in your comments, the target is low to mid-single-digits ex-IRA. I think you said mid to high in your question. I just want to correct that for the record. But yes, clearly look as we said repeatedly this year the margins in EVs are just relatively nonsensical mainly because we've got a big scaled infrastructure with limited production across the board. So, we are absolutely committed to presenting that roadmap and we'll do that at our Investor Day and the decision to push out Investor Day was really we've got a lot of good strategic data points to put out there. We want to make sure that it wasn't something that was dominated by the UAW. So, when the weather gets a little bit warmer in Charlotte in March, we'll have that Investor Day. We'll provide that roadmap including kind of where we've come from and where we're going to get to that low to mid-single-digit margin target, and we're making good progress internally.

Thanks, Paul.

Thank you. Our next question comes from James Picariello with BNP Paribas. Your line is open.

Hi, good morning everyone. I'm curious to get your thoughts on incentive spending for the fourth quarter and just the overall pricing backdrop in North America; I mean obviously we have production limitations type of strike right now. But just how are U.S. inventory data supply trending, today relative to quarter-end and just any color there would be great. Thanks.

Yes, good morning, James. So, in terms of incentive strategy, like I said in my prepared remarks, I think the team deserves a lot of credit for really transforming the approach and the go-to-market strategies, not just around incentives, but how we market the vehicles and really across the board that has been a huge contributor to some of the profitability that we've had on the backs of the strength and the consumers and the products that we're producing across the board. So, I expect that strategy to continue. Certainly as we looked at quarter-end, inventories had trended a little bit higher, and of course, this varies on a product-by-product basis. And we're watching that very closely in partnership with our dealers to try to make sure in light of the work stoppage that we are getting vehicles to market where we have them. So, we're going to continue to manage that very tactically across the board, but everything that we're seeing in the demand set right now is pretty strong for our vehicles, and we expect that to continue through the rest of the year.

Okay, that's helpful. And then, my follow-up, can you just confirm the materials and freight impact in the quarter and just at a high level as we think about next year based on current commodity spot pricing, any visibility you might have in supplier costs, just how we can think about this cost bucket for 2024? I believe the 2023 guide, the prior 2023 reflect for an expectation of neutral; any color there would be great. Thanks.

Yes, it's a little early to get into that. We're in the midst of our budget process right now, but what I would say is we have seen some logistics and delivery pressure that we've talked about before, particularly with vehicles coming into North America from Mexico with rail challenges, et cetera. So, I expect there will be parts where there's some inflationary pressure, but as we've said over the last couple of years, the amount that we spend on expedited logistics, et cetera has been coming down as the chip shortage and some of the supply chain shortages have been tempered from the peaks in 2021 and 2022. I will say that there's a bit of concern on my mind in terms of the supply chain's ability to ramp up after the work stoppage. Obviously, we're focused on getting this finalized as quickly as we can. But it's important that we don't end up in a situation where we can't ramp up to full production because the supply chain has to rebuild, et cetera. So, we're watching that closely and making sure that we're in a position, but more to come on 2024 as we work through that and work through the budget.

Thanks.

Thank you. Our next question comes from Dan Levy with Barclays. Your line is open.

Good morning. Thank you for taking my questions. I’d like to start by discussing the relationship between volume and price mix. Before the pandemic, your annual volume ranged from about 3.2 million to 3.6 million units. This year, the consensus suggests it will be closer to around 3 million units. With the increased labor costs and uncertainty surrounding electric vehicles, which many consider to be a cost challenge, you've successfully demonstrated the advantages of mixing and shifting towards more profitable units. This was mentioned in your prepared remarks and indicates a slight shift away from focusing solely on volume. How much more can the business prioritize mix and profitable units while reducing the emphasis on volume?

Well, Dan, I appreciate the question. We really want to focus on both, but it's got to be profitable growth. When you look at the EVs and even our ICE vehicles, I just mentioned that the Trax, 50% of the customers for the new Trax are new to General Motors. So, from an EV's point specifically, we think that along the coast where EV adoption is higher, that's going to be a growth opportunity for us over the next several years. And we're going to just focus on continuing to have winning ICE and winning EV products that people want to buy. And so, I don't I felt like your question is saying, are you just going to shrink? And the answer is no. That's not our intent. Our intent is to be profitable and then grow and expand, and we think we have the opportunity to do that.

And Dan, I think I'll add that, I think the challenges of the last few years, I think have taught us a lot about ourselves and about the quality of our products. And it all starts with that when you create products that customers love. You have an opportunity to think about the business. So, while the profitability and the margins have gone up, we've been really focused on that. But some examples of that are what we're doing with buildable combinations, what we've been doing with marketing spend, et cetera, it's really focused on driving at the unit level, the margin improvement across the board. So, focusing on those premium mixes where we know the demand is focusing on the premium vehicles where there's supply constraints. Those are lessons that we can take into the future going forward and are going to help us not just with ICE profitability and margins, but also help pave the way for an EV strategy that is really focused on consistent margin performance going forward. So, incredibly proud of what the organization has done, and certainly think there's more to come. Now we've been doing all of this in a lower SAAR environment and feel really good about our ability to continue that should we get back to more historical normal levels at higher volumes across the board. So, I think it's been good lessons learned, and you never let a good crisis go to waste. And I think that's where we've seen some really good long-term permanent learnings for the organization.

Great. Thank you. And then, second question, I wanted to just go into the dynamics behind the battery plants. Thank you for the commentary earlier that you're starting to run at capacity on Lordstown. Spring Hill that sounds like that's a slight delay. I think that was just the launch this year staying at 2024. Lansing is after that. Maybe you could just give us a sense on where the other two battery plants stand? And to what extent is the gating factor more on supply versus more so listening to the near-term demand. And if you need to, you can delay some investments to ramp on the other two battery plants?

As I mentioned earlier, we expect to have the Lordstown plant operating at full capacity by the end of this year, which will allow it to function at full capacity next year. The Spring Hill plant is set to begin operations early next year. Although it was originally scheduled to launch at the end of this year, there were a few weeks of delays due to construction, but now it is back on schedule. We believe we will require all the cells from both plants. Regarding the Michigan plant, we anticipate demand will be there as we remain flexible and responsive to customer needs; we can make adjustments as necessary. Currently, we are focused on the timeline for the plant launches, with the fourth plant likely starting very early in 2026 and making solid progress with Samsung. We are not reducing the ramp-up of the battery plants. It's clear that battery cells are a key constraint in the industry, and we believe we will need all of those cells despite the ramp changes we’ve made with Orion and other programs, which typically involve just a couple of months of adjustment.

Great, thank you.

Thank you. Our next question comes from Colin Langan with Wells Fargo. Your line is open.

Great. Thanks for taking my questions. The UAW made a big announcement about the concessions at the battery plant. Just wondering if you have any color there because I was a bit surprised because that's in a joint venture, so I wasn't sure how you actually could give concessions. Any color on what the nature of that agreement is and how you're able to kind of come to terms with them there?

Right now, the Ultium team that is a separate company is negotiating; that the employees at Lordstown voted to unionize, and so that local leadership team is negotiating with the UAW to have their own agreement. We did have some conversations and we did put an offer on the table that would put the Ultium cells under the scope of the master agreement and we believed at the time that it would allow for which it must have benchmark economics and also operating flexibility because the battery cell plant is very different than some of the traditional operations we won right now, but at this point that offer remains open, but the focus is on Ultium getting their own agreement.

Got it. Just we're still in early days at EVs. There seems like demand is eased already, and it's great that you have the flexibility to kind of switch between EV and ICE, but the regulations in the U.S. kind of push easy at least at some point in the future, do you think there's any change in the tone of Washington potentially pushing out some of those targets? Doesn't it become a bit of a challenge if consumers aren't interested in buying EVs and you're just the only way to sell them would be to hit your margins, right?

Yes. I mean, obviously, we provide regular input into the administration and the regulatory agencies. I've been very clear and on the record that the regulations can't get in front of EV demand at some of which will be enabled by having a robust charging infrastructure. So, we regularly have those conversations, and we'll do what it takes to meet the regulatory environment as well.

Got it. All right, thanks for taking my questions.

Sure.

Thank you. Our next question comes from Mark Delaney with Goldman Sachs. Your line is open.

Good morning. Thanks very much for taking the questions. I very much appreciate the plan to be flexible on the cadence of the EV ramp and the opportunity for GM to implement some incremental cost reductions, but given that scale was one of the key inputs in EV profits, can you just better understand if there is a certain minimum amount of volume that you may need to be yet in order to reach your low to mid-single-digit EV margin target in 2025?

Yes, good morning, Mark. So, what I would say is it's a little bit of a step function, right? So, as we build a plant or transform a plant, we've got to fill that up to maximize efficiency, so the decision to defer Orion is really an example of not rushing to build that full infrastructure before we know that we can fill it up. So, ultimately it leads to more of an efficient transition. So, what I would say is we've got good capacity at the facilities that we've already transformed and we're working to scale those to that capacity as quickly as we can. So, it remains a big part of it, but I think you're going to see a little bit of step changes through the transformation as we bring that incremental capacity online, but that's part of our plans; it's all rolled into the targets that we've outlined on our ability to hit the low to mid-single-digit margins on EVs in 2025 and then grow from there.

Thanks for that, Paul. And then, on the international business, the company was profitable including in China, despite what's been a difficult market backdrop. Can you speak in more detail on how you think the international market will progress from here? Thanks.

Well, if we first start with the GMI market X China, again, we see a really strong improvement across all of the countries that we're in from South America to the Middle East to Korea, et cetera. We're going to continue to focus on and the - one again it's operating discipline. It's also having the right products for those markets and understanding in some cases, especially in markets like South America where we price for what's happening from a current foreign currency exchange perspective. And we are seeing the products because of the strength of them hold up. So, very pleased with where the GMI markets are. And as you focus on China, China is still - we are looking for potentially a modest recovery continuing into Q4. But the real focus for General Motors in China is to make sure we get our Ultium products out there from a Buick and a Cadillac perspective. And then, also focus on the right products from an SGM Wuling perspective. And then, remember we are also expanding for premium import. And we think those three initiatives are going to position us well even in the uncertain market that we are facing in China that gives us a lot of optionality at the - I'll say the entry level on the value part of the market, the mid part of the market, and then at the top part of the market.

Thank you.

Thank you. I would now like to turn the call back to Mary Barra for closing comments.

Great. Well, thank you, Amanda. And thanks everybody for joining the call today. It's clear that we are dealing with a lot of near-term uncertainty. And then, also, the - I'll say the transition that - to EVs that will have ups and downs. But I hope it's equally clear that we are going to be acting with purpose. We are going to remain agile. And we are making sure we have a system that has the ability to respond to where the market is. And our commitment is to deliver a strong and profitable ICE business as well as a strong and profitable EV business for our future. In addition, I think if you look deeper into the organization that Mike Abbott has built from a software perspective, this is really foundational for us to be able to capture additional revenue with a very different margin profile than some of the aspects of the vehicle and the business that we have today. And then, finally, we see tremendous opportunity with Cruise. And we'll continue to work across not only this country working with our regulators to make sure we can deploy Cruise safely. I know the UAW contract is one of the biggest sources of uncertainty right now. But I want to remind you with what I said earlier, we will not agree to a contract that isn't responsible for our employees and for our shareholders. We need to make sure we have a contract that is going to allow us to compete and win in what is a challenging market for EVs and also allows us to support the business that we have with strong margins in our ICE business. When we do reach an agreement, we will schedule an event shortly thereafter to discuss the economics and our strategy for managing them. And as Paul said, we will host our next Investor Day in March to go even deeper into the ICE, EV, AV, and specifically our software plans. When you look at our growth businesses especially Cruise and software, we are at an inflection point right now. And we see tremendous upside opportunity and growth. And so, we look forward to discussing each of them with you in more detail as we move forward. So, make no mistake, GM is very committed to all EV future. We are not changing any of our goals there. We are just trying to make sure the company is more agile and resilient so that we can be successful as we manage this transformation. So, want to thank you again for joining us. Thanks for your questions. And I hope everyone has a good day.

Thank you. That concludes the conference call for today. Thank you for joining.