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Speaker 1: Bloomberg Audio Studios, podcasts, radio news.

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Speaker 2: Let's turn back to warnings. Shares of General Motors jumping

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Speaker 2: after the company beat earnings and race guidance. The GM

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Speaker 2: CFO Paul Jacobson joined us now for more Paul, the

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Speaker 2: stock is up by more than nine percent. We'll spend

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Speaker 2: some time talking about the numbers, but I just wanted

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Speaker 2: to take a step back with you, just for a

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Speaker 2: brief moment. You've got real experience navigating volatile industries, experience

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Speaker 2: in the airline business, and experience in the auto maker

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Speaker 2: business too. You took over as CFO in the pandemic.

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Speaker 2: Can you talk to us about this year, Paul, Just

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Speaker 2: how agile have you and the team needed to be

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Speaker 2: and how volatile have things been too?

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Speaker 1: Well, Jonathan, first of all, thank you very much for

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Speaker 1: having us. It's a great day to be a GM

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Speaker 1: and celebrate the success of all of our employees and

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Speaker 1: partners worldwide. So really appreciate you being here today, having

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Speaker 1: me today. So you know, at the end of the day,

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Speaker 1: it's just another change. I mean, since coming to GM

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Speaker 1: in we've gone through COVID, we've gone through chip shortage,

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Speaker 1: we've gone through tariffs, we've gone through ev pivots and

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Speaker 1: so on. But what we've really tried to do is

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Speaker 1: create a model that is resilient. And when you look

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Speaker 1: at our balance sheet, you look at our inventory discipline

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Speaker 1: and the way we've gone to market, there's a lot

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Speaker 1: of things that have changed that allow us to be

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Speaker 1: able to react to the world around us faster, and

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Speaker 1: I think that's paved the way for us to have

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Speaker 1: another really strong year in the face of a lot

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Speaker 1: of macro changes.

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Speaker 2: Pull In order to increase resilience and maybe agility, do

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Speaker 2: you have to sacrifice long term planning? Is that something

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Speaker 2: that becomes harder?

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Speaker 1: Well, you know, I think what we've really done well

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Speaker 1: as a team, I think is we've kept focus on

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Speaker 1: that long term vision. So you know, for example, while

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Speaker 1: we've taken a charge on reducing some of our EV

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Speaker 1: capacity reflecting the demand that's out there, we still believe

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Speaker 1: that evs are the future and we think that there's

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Speaker 1: an opportunity for us to take a little bit of

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Speaker 1: a pause in demand growth that we've seen over the

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Speaker 1: last few years, structure really improve it right, size our

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Speaker 1: capacity and make sure that we can be successful as

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Speaker 1: more and more customers adopted. So It's just an example

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Speaker 1: of how we make sure that we're managing the short

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Speaker 1: team within the face of that longer term vision.

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Speaker 3: So what if the big steps Paul, that you've taken

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Speaker 3: in order to remain agile, particularly with supply chains and

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Speaker 3: removing any kind of a direct input from China in particular,

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Speaker 3: how much have you rejiggered where you get your goods?

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Speaker 1: Well, I think we learned a lot in industry from

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Speaker 1: COVID and a focused supply chain that was really susceptible

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Speaker 1: to individualize shocks, and I think we've taken the effort

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Speaker 1: to try to make sure that we diversify our supply

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Speaker 1: chain base. We've made a number of investments, for example,

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Speaker 1: in battery raw materials and other materials in the US,

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Speaker 1: in addition to the four billion dollars that we've announced

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Speaker 1: this year to increase our US manufacturing capacity. So I

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Speaker 1: think it's been a case of making sure that that's balanced.

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Speaker 1: And then when we went through the chip crisis of

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Speaker 1: twenty twenty one, there were some more challenges about making

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Speaker 1: sure that we expand the places where some of our

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Speaker 1: chips are fabricated and our supply base that we use.

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Speaker 1: So this has just been part of it. I think

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Speaker 1: we've learned a lot of lessons over the last five

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Speaker 1: years that have helped us and positioned us well to

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Speaker 1: be able to thrive in ever changing circumstances like we

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Speaker 1: see right now.

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Speaker 3: All this costs a lot of money, and I'm just

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Speaker 3: trying to get my head around. We've all been trying

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Speaker 3: to get our head around where it comes from these

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Speaker 3: extra costs in order to rejigger supply chains to offset

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Speaker 3: any kind of increased costs that might come.

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Speaker 2: Along the way.

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Speaker 3: How much is coming from whether it's freezing labor forces

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Speaker 3: or trimming around the edges, how much is coming from

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Speaker 3: higher prices on consumer vehicles?

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Speaker 1: Well, I think if you look at what GM has done,

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Speaker 1: we've saved a lot of money by rationalizing our inventory balances.

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Speaker 1: So we used to keep probably about forty percent more

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Speaker 1: inventory on the ground at our dealerships around the country,

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Speaker 1: and we've cut that down. That's frees up a lot

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Speaker 1: of working capital to be able to invest and redeploy

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Speaker 1: back into the business. But it also makes sure that

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Speaker 1: we can change much more quickly to changing demand around us.

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Speaker 1: So our pricing has been stabilized, and I think that's

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Speaker 1: given us a little bit more comfort to invest a

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Speaker 1: little bit more than what we have historically, but still

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Speaker 1: making sure that we're very disciplined with our capital allocation

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Speaker 1: because we still have opportunities to pay down debt and

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Speaker 1: also return capital to shareholders. So it's that balanced approach

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Speaker 1: that I think has really paved the way for our success.

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Speaker 4: Paul, you and your colleagues in the industry recently had

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Speaker 4: a big win in Washington, a little bit of a

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Speaker 4: prie when it comes to the arrangement on the timeline

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Speaker 4: for the tariff costs for imported auto parts. What else

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Speaker 4: are you asking in terms of terrorfully from.

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Speaker 1: Washington, Well, you know, I think I want to praise

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Speaker 1: the administration for really listening to the concerns of the

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Speaker 1: industry and making sure that they're helping us to be

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Speaker 1: positioned to be really success full as one of the

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Speaker 1: largest US industrial producers that are out there, And the

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Speaker 1: announcements that were made Friday essentially take what had already

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Speaker 1: been done by the administration in the spring and expands

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Speaker 1: it a little bit to be able to use those

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Speaker 1: MSRP offsets on a wider variety of parts that we're

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Speaker 1: bringing into the country, and as a result of that,

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Speaker 1: we were able to lower our total tariff forecast for

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Speaker 1: the year by about half a billion dollars from where

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Speaker 1: we started the year. And I think it's that proactive

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Speaker 1: partnership in terms of really making sure that we can

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Speaker 1: remain competitive and help to drive more investment into the US,

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Speaker 1: which we've done.

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Speaker 4: So do you expect more reprieves, especially as the US

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Speaker 4: goes into negotiations next year with Mexico and Canada.

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Speaker 1: Well, I think what we're looking for is a little

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Speaker 1: bit of stability. Obviously, this year has been a bit

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Speaker 1: of a transition year for US. The handshake deal that

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Speaker 1: we have with Korea. We're really eager to get that finalized.

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Speaker 1: We do have some production of some of our lower

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Speaker 1: cost models in Korea that help with some of the

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Speaker 1: affordability concerns of our consumers here in the US. But

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Speaker 1: also obviously Mexico and Canada are going to be really

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Speaker 1: important to us. But as we look at those deals

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Speaker 1: being finalized and we start to look into twenty twenty six,

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Speaker 1: we think that there's actually an opportunity for us to

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Speaker 1: do better in twenty twenty six, and we've done in

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Speaker 1: twenty twenty five and start to work our way back

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Speaker 1: up to those eight to ten percent targeted margins that

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Speaker 1: we set for ourselves before the tariffs were put in place.

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Speaker 2: Well just find me. Can we stay in Ahia and

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Speaker 2: finish on China? For a long time, we've said on

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Speaker 2: this program, this must be the most competitive market on

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Speaker 2: the planet in any industry. How difficult is it to

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Speaker 2: operate in that country right now? And how much hard

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Speaker 2: is it going to get in the future for us

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Speaker 2: sort of makers like yourself.

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Speaker 1: You know, about a year ago, Jonathan, we undertook a

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Speaker 1: pretty ambitious restructuring program in China with the realization that

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Speaker 1: you know, we were probably not going to be as

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Speaker 1: big in China as we have been historically going forward

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Speaker 1: with the amount of just tremendous competition that's in the

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Speaker 1: country going forward. But you know, together with our partners,

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Speaker 1: we were able to restructure that business and we've been

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Speaker 1: profitable every quarter this year and look to be able

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Speaker 1: to sustain that. So it's really about making sure that

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Speaker 1: we're right size for where we are. We've got great

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Speaker 1: products over there, we've got a long legacy, and we've

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Speaker 1: got a good partnership that I think has really paved

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Speaker 1: the way and with that work that the team did

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Speaker 1: in China. Really proud of what they accomplished and think

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Speaker 1: we can be sustainable there.

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Speaker 2: Well. Appreciate your insight and your experience as always, Sir

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Speaker 2: Paul Jacobson. There the General Motors CFO