General Motors Company (GM) Earnings

Management highlights

- Strategic product portfolio and great execution led to an outstanding quarter. North America is continuing to execute the plan to return to 8% - 10% EBIT - adjusted margins for the full year, with first quarter achieving 10.1% adjusted margin. - Sixth consecutive profitable quarter in China and higher year - over - year results in GMI excluding China. - Tremendous momentum in digital services, with recognized revenue over $750 million in Q1, up over 20% year - over - year, and on track to reach 13 million subscribers by end of 2026. - Had planned downtime in North America during the quarter to install tooling for next - generation full - size pickups. Continued to lead in U.S. and Canada, and was #2 in Mexico, #1 in fleet including commercial deliveries, and #2 in EVs. Crossover business has grown from over 40% of sales to over 46% since 2023 refresh. - Stress testing autonomous technology in digital environment, began supervised on - road testing in California and Michigan, with nearly 90% of code written by autonomy team generated by AI.

Guidance

- Raised updated EBIT adjusted guidance by $500 million to $13.5 billion - $15.5 billion range due to tariff adjustment flow - through. - Expect incremental commodity and freight costs versus original guidance, but FX outlook improved from small headwind to neutral. Increased full - year guidance for year - over - year commodity inflation including logistics and higher DRAM costs to $1.5 billion - $2 billion. - Gross tariff costs now expected to be $2.5 billion - $3.5 billion for the year, down from original $3 billion - $4 billion. - China expected to remain profitable and deliver results consistent with 2025, but international operations outside China may be soft due to Middle East conflict. - Price expected to be flat to up 0.5%. ICE volumes expected to be flat to modestly up. EV volumes expected to be lower as market stabilizes around 6% of U.S. industry sales. - GM Financial expected EBT adjusted in $2.5 billion - $3 billion range. - Adjusted auto free cash flow guide $9 billion - $11 billion, heavier weighting to second half.

Segment performance

North America: First quarter adjusted EBIT was $4.3 billion, with an adjusted margin of 10.1% including a 1.5 - point benefit from the accounting adjustment from the recent Supreme Court tariff decision, netting to an 8.6% margin. China: Sixth consecutive profitable quarter. GM International, excluding China equity income: Delivered approximately $40 million in adjusted EBIT despite Iran conflict disruptions in the latter part of the quarter. GM Financial: Delivered adjusted EBT of $700 million for the quarter.

Risks & headwinds

- War in Iran has raised costs and its duration is uncertain. - Geopolitical uncertainties that could impact business operations. - Uncertainty regarding commodity and freight costs and their impact on profitability.

Analyst Q&A

• Q: Maybe just to start, Paul, just a clarification on the guidance. Can you talk about the offsets from a cost perspective or otherwise to the higher commodity inflation that's leveling to kind of raise the guidance outside of the AEPA, of course.

  A: Thanks for kicking us off today. So I think when you look at the inflation, the pressures that we're seeing, the offset come in a couple of different forms. Number one, we've put a little bit in the bank in Q1 from our outperformance from what we've seen. Some of that was timing, but there was some good core movement on many of the staples that we've talked about, whether it's warranty or EV profitability, regulatory costs, et cetera. But then there is also the playbook that we referenced in our comments, which similar to what we've done, whether it was tariffs or chip shortage or COVID, et cetera, that's worked really well for us. So we're looking at doing that. What we don't want to do, we don't want to rush and do a lot of things that are going to jeopardize or otherwise put at risk longer - term strategic initiatives by overreacting to what's going around us. So we have sort of degrees of freedom in terms of what we're going to do, starting with relative low hanging fruit, maybe deferring some hiring or things like that. But overall, I think we're going to be measured about it. So while we have this uncertainty, I think holding our numbers consistent net of [ AEPA ], I think is the prudent thing to do with all this uncertainty. And if things abate, then we could potentially see upside in the future.

• Q: Paul, I know you're on TV this morning, and I think you mentioned some industry discounting. I was just wondering if you could expand on that a little bit because it doesn't really sound like you changed your own sort of volume or pricing assumption. So is what you're seeing sort of in line with what you expected, call it, 90 days ago? And then just given some of these cost pressures, if there -- if competitors do start to maybe try to price for some of these cost pressures, does that -- do you feel like gives you a little bit of leeway to do the same to cover some of those higher costs you mentioned.

  A: Yes. Thanks, Joe. I would say it's largely in line with what our expectations have been. There have been some really unique things that I think have played out this year among the competitive set that we haven't seen historically. But we continue to, I think, be very disciplined in our approach. I think a lot of the share data that people saw during the quarter was probably more a result of some of the challenges we had with inventory on lots. We came into the quarter light on our targeted inventory levels primarily because we've had such a really strong December, for example. And then with the storm and some other challenges that we had, we weren't really able to catch up. Wholesales call up towards the end of the quarter, but that really didn't show up in showroom we're optimistic that as we get more product out to the dealers in Q2 that we can help to reverse some of the share losses that we saw without getting into heavy discounting across the board. So I think nothing has changed in our playbook. We're going to continue to be tactical and we're going to continue to be disciplined.