General Motors Co (GM) September 2026 Conference Transcript

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handheld check one two blue handheld check one two one two handheld mic one check dugan mic Please welcome Paul Jacobson, Chief Financial Officer of General Motors, interviewed by Rajat Gupta at J.P. Morgan.

Great.

Good morning, everyone. Thanks for joining. My name is Rajat Gupta. I head U.S. equity research for autos. Very pleased to have with us today, starting day two of the conference, Paul Jacobson, Chief Financial Officer at General Motors. so thanks everyone for joining and thanks Paul for doing this.

Great well thanks thanks for having us it's always great to be at this conference number one I love the venue but two I just love being over here and I'm not shy about saying the questions over here tend to be five years or longer in the future versus five days of trading and and data but you know love the love the strategic focus and the long-range planning because I think that's one thing that we've done exceptionally well. That being said, just a couple of comments about, you know, the quarter, we're almost to the end of the quarter. The consumer continues to hold up really well, probably surprisingly well over the last several years in terms of what we've seen pressure-wise, but that's been great for our portfolio. We're, you know, wrapping up the third quarter. We have been able to take up guidance twice this year, and we're very much on track with our higher range for the full year. So we're excited to finish out 26. We're really starting to look forward to 2027 as we're in the planning cycle. I'm sure we'll have a lot of questions about 2027. So I'm just grateful to be here and thank you all for joining us.

Great. I know like, you know, sell side analysts like me sometimes always tend to start with some of the negatives, but maybe I'll start with the positives today. Thank you. That'd be a good Yeah. The free cash flow has transformed over the past decade. You know, it's average, you know, 10 billion in the last several years. And with some of the cash restructuring on EVs going away next year, looks like a very healthy starting point into 2027. Just give us a sense of, you know, how you're going to prioritize reinvesting, you know, balance sheet returning capital. You know, how does the 2027, you know, cash picture, you know, just change that balance?

Yeah. So, you know, it was it was at this conference a year ago that we talked about the transformation and really focused it on on cash flow. I'm an old school CFO. I believe cash is king. And at the end of the day, it's it's super important to really drive that cash generation in the business and transfer it and make it pass all the way through to free cash flow through discipline capital expenditures. So the team has done an amazing job of transformation here. I mean, if you look at the last decade, you know, the first five years, we averaged about three billion dollars of free cash flow. The last five, we've averaged over 10. And that's that's incredible generation. I think it really starts with an incredible product portfolio, probably the best in our company's history from, you know, price point to price point. And I think it's important that people understand. A lot of times when you think about GM, you think about trucks and SUVs. They are a great contributor and a fabulous business that we have there. But, you know, most people don't realize that last year we also sold over 700,000 vehicles with a starting MSRP below $30,000. So we've really crossed all aspects of the consumer wallet and really tried to be there for as many customers as we can. What that's done, I think, has made us far more resilient. So as you look at the cash flow story and the focus, we've set our capital budgeting around that $10 to $12 billion a year. That's higher than it's been historically. But, you know, our operating cash flow has grown even more than that. So that discipline combined with the performance of the company has been a huge catalyst for us that we plug into our capital allocation philosophy. Invest in the business because it's critical that we're already working on the vehicles that are going to be dazzling customers three, four, five, six years and beyond. Maintain a very strong balance sheet. If you look at our balance sheet, it's probably arguably stronger than it's been in decades. You know, a pension plan that is very close to fully funded credit stats and credit metrics that are on generally sort of positive bias from all the rating agencies across the board and very, very healthy debt loads. And then third is return capital to shareholders. And obviously, that's been a linchpin of our strategy for the last several years. We've retired, I think, over 37 percent of our shares outstanding really since 2013. And as long as we continue to see the type of free cash flow yield and the low multiple on the stock, we feel very committed to continuing to do that. While the actual amounts are a board decision, our board has been very supportive of that strategy for the last few years, as you've seen.

And you've obviously, as you just mentioned, a big advocate for buybacks. What's the payback math and what multiple or yield would you start to consider otherwise? And maybe a little bit of color on 27, given the gap cash flow increases significantly with the restructuring relative to 26.

Well, I wouldn't say there's any trigger for stopping repurchasing. You know, we've been very outspoken about wanting the multiple to move. You know, I think we deserve a higher multiple. I'd be shocked if you had a CFO up here that said they didn't. But you look at our performance over the last few years, the consistency of it, our relative performance against the industry, whether it be pricing or share levels or margins, et cetera, across the board. I think we should have a higher multiple from that standpoint. So we're not shy about saying that. We traded a discount to many of our peers who are underperforming. But I understand that. I mean, I understand the historical cyclicality. That's why last year we chose this conference to really talk about taking away some of the self-imposed cyclicality, maintaining better inventory levels, maintaining better pricing, managing better free cash flow. all of these are cushions against what the next down cycle might be. You know, we don't see any signs of that right now, but it'll come and we need to be ready for that. So I would just say that, you know, it's, there's room for substantial improvement in the multiple. And I think as you see us starting to lean more into the digital and subscription story and what that revenue stream looks like, some of the other businesses like GM defense, et cetera. I think there are opportunities to expand that multiple, but it's going to be a little bit of a journey. And in the meantime, we're retiring shares very, very cheaply at the double-digit free cash flow yield.

Makes sense. Now, we'll come into some of those anti-cyclical pieces in a bit. But quickly, going back to some of the concerns again, going back to the consumer, you described It didn't take you long to get back there, but it's good. But you described, you know, a two-speed consumer, you know, widely called the case-shift economy. Maybe, you know, when you look at sentiment surveys and, like, actual behavior, you know, things tend to be divergent. You know, what's the real risk signal you're watching, you know, when it comes to the consumer?

Yeah, you know, we watch a number of variables every, you know, in some cases daily, a lot of weekly. Try not to get too caught up in the headlines, because I think in your question, there's a really important point, which is we have started to see more than we've seen in decades, divergence between the survey data and what's actually happening on the consumer. And this has been going on for a couple of years where you see consumer sentiment down, but behavior hasn't really changed. And and that's been true across the boards. You know, we've still seen a lot of success in our full size trucks and SUVs and, you know, no sign of that abating. Our share levels have been consistent. The share of industry has been fairly consistent across the board while we've expanded our vehicle portfolio, some of the lower price points. So I would say that the consumer has maintained a strong level of resiliency. We've seen that, the fact that household income has actually grown faster than affordability and so on. So I think a lot of that, you know, is caught up in the surveys, but not necessarily what we see on the crown. We look at, you know, where are, you know, daily sales going? How are they trending against our forecast? We've got a lot of data through our GM financial, you know, subsidiary with $125 billion balance sheet. We can see delinquency trends. We can see default rates, et cetera. Nothing, nothing is materially changed. I think we've come off of the low points of post-COVID where there was such a big injection of liquidity in. But, you know, we've normalized around kind of those pre-COVID levels. So there isn't anything that we see on the immediate horizon that's getting us any cause for concern.

It's like the low $16 million is still like a reasonable base case.

And in a lot of cases, I think it's probably better for the industry because, you know, what we're not doing, and I think this has been a big catalyst for our free cash flow generation, is we're not discounting in search of that next 100,000 units, etc. You know, we're content with, you know, the volumes that we're producing. And for the first time, I think in a long time, we've got real brand equity in our vehicles. And that, you know, that is a sort of pricing premium that I think customers have demonstrated a willingness to pay. And when you look at what the backdrop is, we're in the last year of a truck cycle before we come to the new trucks next year, for example, and probably haven't had a truck offering perform better in its last year of production than what we're seeing right now. And I think the team's done a really good job of managing through the transition. You know, we still have a lot of work to do before we get the new trucks up to full production level. But so far, I think the team's done a really good job of balancing pricing, inventory as we transition to the new vehicles.

That makes sense. I think this is a good segue into just some of the 2027 moving parts. I know you mentioned you've talked about like the positives, you know, last week, you know, there's warranty, you know, So, you know, some mix around the new full-size pickups. There's EV profitability getting better, digital, defense. Maybe, like, instead of walking through, like, the puts and takes again, could you rank some of those tailwinds by size or tell us which probably have the widest range of outcomes, in your opinion?

Yeah, well, I think it's too soon to get into details. And, you know, us even providing commentary on 2027 during the second quarter call is quite early to do that. And the messaging that we really wanted to get across to the market is many of the tailwinds that you mentioned, EV profitability improvement, warranty improvement, the new trucks, and digital revenue growth, all of those are multi-year tails, right? So this isn't something that is just a 2026 tailwind. It's something that at the end of the day is going to continue because we've seen, for example, warranty. trend to really, really high levels. And we've had some challenges ourselves. We're focused on making sure that we are doing right by the customer in everything that we do, because more than warranty expense, there's that, you know, creating a great experience for the customer, which will benefit you way beyond, you know, a little bit of savings warranty. But we've noticed that the cash spend on warranty monthly flattened out, and we're watching it start to trend lower, the warranty expense always lags that, right, when you're looking at accruals. So that gives us some confidence that if we're able to continue to inflect that and move that monthly warranty spend down, that we will see continued benefit into 27 and even beyond. Our goal is to get back to historic levels of GM quality and get back to where we were, and then even go beyond that. We'd like to be a world-class leader in quality. And you look at Toyota and others, I think the number is about 1.2% of revenue that they spend, whereas we're closer to two. So a lot of things in place, a lot of use of technology, both in the manufacturing operations as well as supply chain, and looking at the data coming off the vehicles as well to really try to get ahead of problems, fix components instead of do massive overall changes. And I think the team is really focused on the right things and that should manifest itself. So when you look at that, what we said in the second quarter is all else being equal, you know, these four tailwinds should make 27 better than 2026. You know, we've continued to see the conflict and the hostilities in the Middle East. We've seen that affect inflation and raw materials, oil prices, et cetera. That could provide some pressure. But we still feel confident about the multi-year journey here. And then when you think about 27, it's not just earnings, it's also about cash flow. Cash flow should be substantially better in 27 than 26 because we'll have worked through substantially all of the EV restructuring that we've paid this year. So we expect 27 is going to be another good, consistent year of performance.

And anything, you know, philosophically that's changed in your budget planning process for 27 versus 26, you know, you've had like, you know, a really strong year for price mix and, you know, with the new truck coming, is there like a change in focus within the company on what you're trying to manage, you know, given, you know, you cannot really bank on price every year. I'm just curious if anything's changed.

You know, I don't think anything has changed per se. What I would say is we have more tools, you know, with a new truck. That's going to be a great new tool. But the team has shown a remarkable ability to respond to what's coming at us. You know, the P&L this year, while we've taken guidance up a couple of times, looks different than what we thought it was going to at the beginning of the year, probably a little bit more price, a little bit more inflation, et cetera. And that is the consistent behavior that we've seen over the last several years of our ability to just respond and execute. I love that about our team because it tells you that we don't get distracted by what's going on, whether it was tariffs or whether it's, you know, supply chain shortages or inflationary pressures, et cetera. We pivot, we focus on the problem, we solve it, and then we move on. So I made the mistake, I think it was in February of this year, saying that it was the calmest start to a year since I'd been at GM. And then three weeks later, we start hostilities in the Middle East. So I'm not going to go ahead and say I expect 27 to be a calm year, but I've got the confidence in the team that we'll be able to pivot and adjust. As far as philosophically, I think we've had such a really strong run of pricing over the last several years and notwithstanding the fact that we should have some good pricing on the new truck because there'll be a lot of demand for that new truck. I think we've got to make sure that we're also focused on getting structural costs out of the business, not cutting too deep, right? You don't want to diminish the quality of the product. But at the same time, using AI structurally to try to figure out where we can get rid of and shed a lot of fixed costs in order to make our vehicles more competitive, because there will be inflationary pressures. We will continue to see that. And I I just I don't want to be so reliant necessarily on passing that through to the consumer based on the record that we've had over the last five years. I think we have to prepare for potentially more modest increases in pricing, which means we've got to go focus on execution.

Right. That makes sense. You know, maybe like just on the point on price and the trucks and just quick update on, you know, the new pickup. up, you know, I think December was the launch. I mean, is that still on track? And by when do we expect to hit like a full run rate? And then in that context, is 2028 like the real like volume upside here versus 27, you know, for these trucks?

Yeah, I think that's the right way to think about it. So when you're starting a new program, the first and most important thing is you've got to scale and you've got to do it with quality and changing over with such big changes that we're seeing, making sure that it's executed well. So as you transition that, the first thing that you see, and you've already seen some of it, we've announced that we'll be short 35,000 trucks in the fourth quarter as we're kind of cutting over year over year. That's part of it. So the transition is going well. I would say that all the testing of the new powertrain and then the vehicles that are coming off, the pre-production vehicles are doing well. We'll start to see those vehicles hitting showrooms at the end of this year. And then we'll scale up production from there. So what tends to happen in these new product launches is we'll probably begin production with a richer mix. So that's where you can kind of see some of that pricing and mix benefit next year. But volume will probably be flat until we get to the back half and sort of the end of 27 and start scaling. Right. Excuse me, even more. So that's where I think this is not just a story about 27. It's also a story about 28, where we potentially have more volume on the trucks as well. Got it.

And then maybe just a quick more broader industry question on that topic. We've heard and read a lot about new on-shoring investments in the US.

Do you worry at all about potentially you know getting into an excess capacity situation over the next couple years and then how would you know you manage uh manage that you know if it happens yeah well i think i think the united states is the uh the most lucrative auto market in the world uh and and that's uh evidenced by what you see many competitors uh doing in terms of aiming more capacity i think that's been a defense and a pivot um away from some of what we've seen of chinese competition throughout the world. And the U.S. becomes a little bit of a safe haven. So, you know, I think we've got to be competitive. That's where I talk about structural costs as well. But more importantly is focus on customer execution and our vehicle portfolio. So I feel like we've got an asset in that space. That's certainly been demonstrated with our pricing strategy and our relative pricing that we've seen where, you know, we're anywhere from 150 to 250 basis points below industry average on discounting while we're maintaining our share. That's a really strong position to be in. So I think what we've got to do is we've got to focus on executing our playbook, not worry as much about what competitors are doing on the discounting side, but just have the confidence in our vehicle portfolio. and it's held up really, really well through the face of it. And I think it's contributed to some of our outperformance that you've seen relative to the industry. So we've got to maintain our discipline, not get too excited about overproducing ourselves. And I think at the end of the day, things are going to work out for us as long as we stay focused on the customer and the vehicle portfolio.

That's good. I just want to pause there for a second to see if there's any questions from the audience here. None yet, but we'll continue. So on one of the other tailwinds on digital, did want to spend a little more time on that. You know, you've talked about the $7.5 billion default revenue balance plan this year, $3 billion recognized revenue this year, growing double digits. You know, how much of that growth over the next couple of years is locked in, you know, just from amortization versus, you know, new subscriber editions? Any way to think about that split?

Yeah, so we gave a presentation earlier this year I would encourage everyone to go look at it on the website. I think it was in February of this year. And we tried to lay out as much as we could about the accounting and how the revenue is recognized. But there is a substantial sort of increase as we continue to increase the deferred revenue balance that more and more of that is coming in. So a good bit of that revenue growth is already baked in. But we also see, for example, I think we had 35,000 vehicles this year coming off of the three-year period for Super Cruise, and we're seeing attachment rates of new subscriptions at 30% to 40%. That number, the 35,000, will double next year because we're coming off of the years where we were constrained by the chip shortage, and we'll see more and more. Also, with the new trucks, there's going to be Super Cruise available on more vehicles. We're trying to widen that aperture so it's not just in premium trim levels and you can buy it as a feature. So we're excited about getting more penetration in there that's going to ultimately lead to more subscriptions. And then lastly, you know, we've talked a lot about what OnStar Digital can do with AI, connected vehicles, et cetera. We see a lot more product offerings in the future that beyond just that sort of base level of OnStar Basic that amortizes over a period of time after you buy the vehicle, there's opportunities for additional subscriptions and services for customers. And we see pretty good take rates on that as well. And as we can broaden that product portfolio, we think there's room for even more growth than what we've seen.

Would there be a point where we get more separate disclosure on digital as like a separate segment entirely, you know, within your walk? I mean, is it too early?

I don't know that we would do it as a separate segment. We've certainly ramped up our disclosure and we've been very deliberate about how we've done that. You know, remember back in 2021 at Investor Day, we put some grand plans together and talked about $20 billion of digital revenue by 2030. $11 billion of that was subscription services. So we're not necessarily there, but we're not that far behind that when you think about getting deferred revenue approaching $7.5 billion and continuing to grow at double digits. So we expect that $3 billion of recognized revenue at really good margins, software-like, as we've said, we expect that to continue to grow and expand. So So pretty excited about what this means for the future. You'll see disclosure continuing to grow. I don't know that we want to go full bore into making that a separate segment because it is so tied inextricably to the vehicle itself as well. But we do think it's an important piece that investors do understand. And we're committed to continuing to talk about it.

And you're making a slight change in your pricing approach next year. with Super Cruise being standard and some of the high-end trims. When Isoff arrives in 28, do you expect the pricing model to resemble today, or do we expect that to change?

We really haven't made any decisions about how to price that yet, but we don't have to. I think we have a little bit of time as we look through that business case. It's going to be small at first because you want to make sure that you get it integrated into the vehicle well and make sure that as you expand it out, you don't disrupt production with any challenges, work out some of the bugs. So I think we feel very good about the trajectory that it's on, the progress that we're making. We think consistent with the reviews that we get on Super Cruise, that that's going to be a hit with customers, and it'll create even more opportunities, not just to help increase vehicle demand, but also create opportunities down the line for subscriptions.

Makes sense. Just want to pause you for a second, once again, to see if there are any questions. So we run through a lot of the positives, you know, or the tailwinds into next year. I think the one major headwind is obviously commodities or an uncertain area, you know, with the logistics and some sourcing costs. You know, at our conference last month, you know, you had announced the four and a half billion purchasing facility. Can you give us a little more color on how that came about? You know, what categories, you know, are more important to protect, you know, within that facility for you? We'll start there.

Well, you know, I think what we've seen over the last several years has been myriad of disruptions across the supply chain, whether it's whether it was COVID or geopolitical or logistics, et cetera. And, you know, what we saw was a really unique opportunity to partner with some of our relationship banks, including, thank you, JP Morgan, that helped with that facility that can serve as basically an insulating layer. You know, the way that we were able to structure it means that we can maintain sort of consistent free cash flow without having a really big inventory build. But at the same time, it provides us some cushion inventory across the board to help with a more resilient supply chain. So we think it's a it's a good strategy. I would say that, you know, there's there's a lot of work that's been done on chips in particular, because that's been an area that we've seen over the last few years. It's been really volatile. So we're we're excited is the wrong word. But we're glad to be able to do that to increase the resiliency of our production in the future. And I think that can ultimately become a competitive advantage for us and ways, creative ways to use our balance sheet that I don't think everybody has the capacity to do.

Right. And any early indications around 27 as we stand today around just commodity related headwinds, you know, where we are with DRAM or logistics costs? Obviously, that's been a big component this year, you know, or is it still too like soon to get into a lot more detail?

It's still too soon. You know, we're putting our budget together now. We always get that approved by the board in December and we'll have more color as we get closer to the year. But we've seen so much volatility in pricing. You know, remember when we talked at the end of the first quarter, we outperformed consensus in the first quarter. We didn't take guidance up at that point because we talked about the uncertainty of commodities caused by the conflict in the Middle East. We saw it come down a little bit, and now we see it at levels that are even higher than where we were earlier this year. So it's that volatility that makes it difficult to look at the business 12 to 15 months ahead and see where that is. So that's why we articulated it the way we did about 27 that said, number one, all else being equal. Number two, these are multi-year tailwinds. And we feel good about that. The amount that that's going to be offset by commodities, by inflation, et cetera, we just don't know yet. But we'll start to develop that and provide more color as we get into January.

And, you know, we've heard from some, you know, for industry peers, you know, you know, looked at some of the Chinese competitors, like benchmark their cost and like their bill of materials. You know, what do you benchmark to? Is there a philosophy around that? You know, and how much more opportunity there is, you know, just, you know, just on lowering the cost of the vehicle itself?

Well, I mean, I, you know, I think the Chinese manufacturers have done a, you know, pretty stellar job of keeping costs down. And we've seen that in the way that, you know, they're having success throughout the world. You know, I think we've got to execute our playbook. As I mentioned before, there are structural costs that we have to figure out how to drive within the business and really drive that discipline across the board. But also, when you look at many of our products, they have premium features and content compared to, you know, what some of the lower price vehicles are out there. I think sticking to our brand roots, focusing on where we have loyalty and where we are really strong is going to continue to be a winning play for us, whether it's Chinese competition or anywhere else. I think just a special shout out to our team in China in particular, because a lot has talked about China in the world, but China in China, the business, the industry has struggled. We've seen that with the auto industry there. Thank God we we restructured when we did. The team did an excellent job. And I think when you look at foreign manufacturers operating in China, it's it's hard to think of anybody other than GM that's doing well in that space. And, you know, it's it's a challenge. It's a slog. But what the team has done there is really commendable and, you know, really glad we did it when we did, because I think it put us ahead of what we've seen at the consumer there domestically.

Got it. And you've obviously extended your JV there by a couple more decades, you know, help us think through the thought process around that, you know, in context of all the challenges. Does this give you more optionality? And also from an earnings standpoint, you know, is this like a good sustainable base of earnings to think about for the company?

Yeah, I don't know that it's material, you know, to what we do. It's a nice to have, right? And, you know, what the restructuring enabled us to do is to create an operation there that is self-sustaining. It's self-funding. It drives that cash and, you know, is known to return cash back to the States through dividends and performance dividends over time. It'll be a little while because we've got to build up the profitability base of the company again. But, you know, it's a good, solid contributor. And if you can get it to the point where it is self-sustaining, it makes sense to keep it. And I think, you know, together with our partners at SAIC, I think we've demonstrated an ability to work together, you know, through some really difficult challenges. And, you know, that partnership is worth extending, especially if you can make it work without a significant sort of influx of capital into the business, into a highly competitive market. So, you know, we see that as a nice to have, you know, there's opportunities to grow that business, there's opportunities to, you know, potentially drive into exports from China with SGMW and SGM. And that's what we're working towards, is to make it to be a continue to be a successful business for us.

It makes a ton of sense. And since we're on that topic, I mean, given the global events of this week, you know, your thoughts on, you know, potential entry of Chinese vehicles into the US, you know, I know there's been a letter out there. Just give us like, you know, where you are on that stance.

Well, I mean, I think this will probably be a hotly debated topic for a long time, but I think it's important that we've got an industrial base in the U.S. and an administration that's been focused on growing that industrialized base. We've onshored more than $5 billion of investment to bring on board. We've got to make sure that we maintain our competitiveness across the board and focus on that sort of equal competition across the board. So, you know, I think we're focused on creating and producing our portfolio. I think it's one that resonates with customers. And as long as we continue to focus on that, you know, I think the company will continue to do well.

Got it. And just on that point, you know, on the loyalty side of things, I did want to dig into some of the new initiatives, you know, insurance, rewards programs, things like that. You know, so beyond OnStar, like what other ways are you digging into, you know, to expand that relationship with the customer? Or maybe if you can go into a little more detail around the rewards program and then insurance, like how sticky, how much more stickiness can that create?

I think there are tremendous opportunities across the board to deepen the relationship with the consumer. We've already got a good basis with GM Financial. You know, when you look at their net promoter scores, they're really significantly higher than the rest of the industry in the banking industry. And that's important to maintain because what that means is customers will come back to GM for their next vehicle and their next vehicle across the board. I think GM insurance is another opportunity to further that. And the team is doing well at growing that business. That's a tough sort of regulatory environment state by state in the U.S. that you've got to go get approval. They're expanding their ability. And we've seen some early signs of things that I think are benefits, but maybe not primary benefits that we thought of. You know, we've always believed that we can acquire customers more cheaply. And, you know, if you see a lot of U.S. TV, you'll know that some of the most recognizable characters in commercials on TV are insurance company ads because they're all over the place. And you see that. We've got much, much sort of cheaper sourcing costs in terms of, you know, when you buy the vehicle and lots of opportunities to line up and provide value to the customer. But the other side of it, too, is, you know, we see our ability if you have, unfortunately, if you have an accident, we can replace your vehicle faster than many insurance companies. We can repair it with higher quality parts and GM parts. So there are opportunities across the board to help us improve performance of our businesses as well. And then lastly is I'm really excited about GM Rewards. We haven't spent a lot of time talking about it yet because much like digital a few years ago, we're building up a base. And, you know, I'll tease it a little bit now. But we're seeing really, really strong growth with our new partner Barclays on the card. But I'm most excited about, you know, I hired a longtime friend who he and I worked at Delta together on the early days of the Delta American Express relationship. Then he went to J.B. Morgan. Then he went to Visa. He's he's in charge of our rewards program and loyalty program and teaching us a lot about loyalty and really having an impact across the board. So if you think about it, there's opportunities to combine GM rewards points, the credit card with financial offerings, with discounts on your insurance, and a lot of different rewards that I think are really exciting. And we're seeing some pretty sizable growth in that portfolio and increased activity, which is the sign of a healthy loyalty program. You want to make sure it's a little bit counterintuitive. You want to make sure that you're burning points in a healthy way, which means you're investing in that customer because the more you do that and the more you create opportunities for customers to use the currency, the more they're going to try to acquire and save the currency. So really good early signs in that business and excited about what it can do. Great.

I have one question there, Jose. good morning paul thank you very much the question around you mentioned longer term thinking and strategy in the company i look at the european market 12 percent market share from chinese oems i look at electrification really accelerating in europe and then i look at your business i mean 11.5 billion free cash flow i think on the upper end of the guidance and transaction prices above 50 000 this is the definition of premium segment for us here in Europe, right? So premium company. But sort of four or five years down the road, how do you think about the balance sheet you need to have to withstand everything that could come in terms of disruption from market shares in the US? And also that technology platform to be reactive, to be able to adapt into electrification, because we see in Europe, we see a large acceleration. And we're seeing now the benefits of the companies that have done the work or are flexible, the multi-power, multi-power trade strategy. and the ones that are kind of playing catch up.

But I think it starts with the structural improvements that we've made in the business. And, you know, you look at that free cash flow, that is the number one insulating layer against a downturn and making sure that you can maintain positive free cash flow through a downturn. That would be my ultimate goal. And, you know, while I've said I don't wish for a recession, much like a final exam in college or university, you're ready for it, right? Nobody wants to take the final, but you find a point in time that you're ready for it. And I think when you look at the inventory reductions that we've made, the go-to-market strategy, the lower incentives, there's a lot of reasons to believe that when the next downturn hits or when it comes, we're going to be substantially better prepared for it. And it will be less of a shock than what it's been in the past, the digital revenue and the digital offerings are going to be a big piece of that. And I think it's too soon to say that if a downturn were to happen tomorrow, the digital and subscriptions are going to save us. But that's certainly where we're heading. And when you think about the size of the car park in the US, nobody has the type of scale that we have as you increase the proliferation of STV 2.0 and the connected capabilities of the vehicle to be able to do that at scale. So I think it's a very different GM 15, 20 years from now. And one that I think is even more resilient than it is now. But what I'm focused on is, you know, how do we get real recognition in the valuation for the resiliency that we've created? Because I think the market is too fixated on the past across both the industry and GM as a whole. So there are a lot of reasons to be optimistic about the sustainability of cash flow. And, you know, I'm excited to see where it goes.

Great. Thanks, Jose. Any other questions? Maybe like just final couple of topics here, you know, just touching on AI a bit.

You know, you briefly mentioned about, you know you know agents you know reducing like number of hours and you know of work how does it translate into more measurable outcomes for you today you know just a cycle timing you know cost per vehicle where are the opportunities that you're seeing with AI well I think it's across the board you know we we have a we have a healthy competition among all of Mary's senior leaders where every month we show usage by by function and department we're not we're not winning uh in finance um but uh you know we're kind of middle of the pack so i think we can improve our own ai usage uh as well uh but that's a that's a good healthy competition across the board but i i think you know we we are just at the infancy of understanding how this is going to transform the business um we have our own future of finance initiative um this is a multi-year journey to increase the connectivity and the flow of financial data across the system so that, you know, the analysts of tomorrow, maybe today analysts are spending 80% of their time looking backwards. What's the variance to budget, variance to forecast, variance to prior year, et cetera, and trying to explain what happened in the business and 20% thinking about tomorrow. AI is going to allow us to completely flip that where analysts of the future are going to be spending 80% of their time focused on what's happening in the business today and what's around the corner, that makes us more effective as a finance team across the board versus sitting here thinking about what's happened and extrapolating that AI is going to do that so much faster than any of us can. And it really gets into, you know, more performance measurement of analytics and where's the business going and what can we pivot forward looking. That's the way finance helps to come to the table. You know, I think the most exciting things are going to be, you know, the customer facing initiatives and what can AI do in the vehicle, the way phones have kind of transformed our way of life. Smartphones have. Vehicles, I think, are going to do the same thing and provide a lot of capabilities for customers. But beyond that, you know, how do we use it to shorten product development cycles? How do we use it to improve supplier quality and quality in our own manufacturing? It's changing really rapidly. And I think our job is to try to harness that for both productivity and customer features across the board. So I'm excited to see what that's going to mean. But I think the business will be more efficient. It has to be. Otherwise, companies who can't get more efficient are just going to fall further and further behind in that race. Right.

I mean, yeah, you talk about internal analytics and talk about customer. I mean, when it comes to things like supplier negotiations, you know, stuff like that, you know, are you seeing any opportunity there? You know, agents talking to each other on the supplier side and GM side?

Well, I don't think about it necessarily in terms of trying to be advantaged in negotiations. I think the company and the manufacturer in the future that's going to be successful is one that partners with it. I've said unapologetically to suppliers and publicly before, I want to live in a world where suppliers make more money off of GM contracts than they do off of any other customer that they work with. because I want them to have the incentive to invest in the GM relationship, whether it's technology or quality or efficiency, et cetera. But with that comes a really high standard, right, which is deliver products on time in the right volumes with quality all the time or share in the burden that's created for our customers if you're driving a shortfall. So, you know, I think the model of the future with AI is how do you connect AI systems to say, here's what I have coming up, how can you meet that need and how can we work together rather than how can I get an extra penny off the unit cost? Because if you can do that, you can do it much faster. You know, I think when people look at zero sum negotiations, they often forget about the cost of the negotiation, which is delaying ultimate benefit, right? So if you're haggling over how to produce this next state-of-the-art component, every day that you do that is a day that the state-of-the-art component isn't in front of the customer and isn't generating revenue for both of you. So that's where I think, you know, AI can get really magnified in terms of the benefits, because if we can move faster, there's a lot of things that can change about the industry and de-risk it for the future. So excited to see where it goes.

Yeah, great. Just one last one, you know, going back to where we started, you know, 10 billion free cash for the last five years, your multiple still hasn't moved. Without asking you to make a bold case, you know, where is consensus most likely wrong on GM in either direction?

Well, I mean, I think consensus is generally sort of trapped in the old thinking. I mean, when you look at our performance and our relative multiple to some of our competitors, it's easier for the market to say that our competitors can replicate what we've done versus what we can do to take it even higher than what we've seen. I would just say that I don't think it's easy to do what we've done. We've gone through a lot of change, a lot of cultural change in the way we think, the way we go to market. And, you know, that's just a testament to the team at GM to do all of that while we've been through probably some of the most volatile years in our history. So really proud of what the team has done. We're not done yet. We're excited about what the future holds. And we're going to be working hard for our customers, for our people, and for our shareholders every day.

Great. I think that's a good way to end. Absolutely.

Thanks for the time. Thank you all.