1 00:00:02,759 --> 00:00:08,319 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. Now. 2 00:00:08,360 --> 00:00:10,719 Speaker 2: One stock that we're keeping a close eye on this 3 00:00:10,760 --> 00:00:13,960 Speaker 2: morning is GM shares are lower active. Company said it 4 00:00:14,000 --> 00:00:16,759 Speaker 2: will take a one point one billion dollar hit to 5 00:00:16,840 --> 00:00:20,440 Speaker 2: profit from President Trump's tariffs. Let's bring in General Motors 6 00:00:20,480 --> 00:00:23,680 Speaker 2: chief financial officer Paul Jacobson for more. Paul, it's great 7 00:00:23,720 --> 00:00:25,240 Speaker 2: to have you with us. I want to talk about 8 00:00:25,239 --> 00:00:28,400 Speaker 2: potential levers that you can pull here because my understanding 9 00:00:28,400 --> 00:00:31,720 Speaker 2: is that you really haven't raised prices to this point 10 00:00:31,760 --> 00:00:34,239 Speaker 2: to offset some of those costs. I know that you're 11 00:00:34,240 --> 00:00:37,360 Speaker 2: taking other measures, but is it possible that you could 12 00:00:37,440 --> 00:00:40,040 Speaker 2: raise the sticker price on some of your vehicles to 13 00:00:40,080 --> 00:00:41,200 Speaker 2: make up some of that hole. 14 00:00:41,840 --> 00:00:44,239 Speaker 3: Well, good morning, and thanks for having me today. It's 15 00:00:44,240 --> 00:00:46,920 Speaker 3: a beautiful day here in Michigan, and you know, we're 16 00:00:46,960 --> 00:00:50,159 Speaker 3: celebrating another another good quarter. And you know, I think 17 00:00:50,200 --> 00:00:52,919 Speaker 3: obviously tariffs have had some pressures. We've adjusted to them. 18 00:00:52,920 --> 00:00:55,400 Speaker 3: But as we just said on our earnings call, we're 19 00:00:55,520 --> 00:00:58,080 Speaker 3: ninety days into this, and you know, our plans are 20 00:00:58,080 --> 00:01:00,960 Speaker 3: still very consistent with what we said at the beginning, 21 00:01:01,480 --> 00:01:03,680 Speaker 3: and we're going to continue to execute on that. You know, 22 00:01:03,720 --> 00:01:06,520 Speaker 3: we've got a strategy here that is both short term 23 00:01:06,560 --> 00:01:09,080 Speaker 3: and long term. And the shorter term we've talked about 24 00:01:09,080 --> 00:01:11,800 Speaker 3: our ability to offset thirty percent of the tariff impact. 25 00:01:12,120 --> 00:01:16,120 Speaker 3: That's through some cost austerity as well as some manufacturing 26 00:01:16,200 --> 00:01:19,679 Speaker 3: changes and pricing. But we think that as we maintain 27 00:01:19,760 --> 00:01:23,399 Speaker 3: our consistent pricing strategy, where you know, we look at 28 00:01:23,440 --> 00:01:26,800 Speaker 3: the demand for our vehicles and where that sits in 29 00:01:26,920 --> 00:01:30,880 Speaker 3: our disciplined inventory approach, that we can continue to absorb 30 00:01:30,920 --> 00:01:34,120 Speaker 3: that and reflect that in our traditional and sort of 31 00:01:34,160 --> 00:01:37,920 Speaker 3: consistent pricing actions rather than going out and announcing big 32 00:01:38,240 --> 00:01:41,399 Speaker 3: tariff related increases because we don't think that's necessarily good 33 00:01:41,440 --> 00:01:43,840 Speaker 3: for the consumer as well. So pricing is a part 34 00:01:43,880 --> 00:01:47,160 Speaker 3: of it, but nothing out of the ordinary or extraordinary 35 00:01:47,200 --> 00:01:48,680 Speaker 3: from what our current strategy has been. 36 00:01:49,440 --> 00:01:52,880 Speaker 1: How much flexibility do you have to make adjustments to 37 00:01:53,240 --> 00:01:57,960 Speaker 1: supply chains here to meet the evolving auto tariffs and 38 00:01:58,200 --> 00:02:01,240 Speaker 1: the parts that tariffs might hidden of the supply chain. 39 00:02:01,920 --> 00:02:04,880 Speaker 3: Well, there have been things that we've already been working on, 40 00:02:05,000 --> 00:02:08,040 Speaker 3: so really kind of since COVID, we've been looking at 41 00:02:08,080 --> 00:02:11,560 Speaker 3: creating more resiliency in the supply chain, and we've onshoed 42 00:02:12,240 --> 00:02:14,440 Speaker 3: a lot of things as we as we mentioned in 43 00:02:14,440 --> 00:02:16,720 Speaker 3: our last call. Only about three percent of our direct 44 00:02:16,720 --> 00:02:20,320 Speaker 3: purchases come from China through the supply chain, so that's 45 00:02:20,440 --> 00:02:22,680 Speaker 3: helped us a little bit in terms of being proactive 46 00:02:22,760 --> 00:02:26,160 Speaker 3: on that. Obviously, we'll do some resetting in partnership with 47 00:02:26,280 --> 00:02:29,919 Speaker 3: our supply chain partners, but you know, it really starts 48 00:02:29,919 --> 00:02:33,000 Speaker 3: with our manufacturing footprint. Earlier in the quarter, we announced 49 00:02:33,000 --> 00:02:35,520 Speaker 3: four billion dollars of investments over the next couple of 50 00:02:35,600 --> 00:02:38,760 Speaker 3: years to increase production in the United States, And when 51 00:02:38,800 --> 00:02:41,360 Speaker 3: we're done with that, which will start in about eighteen months, 52 00:02:41,880 --> 00:02:44,280 Speaker 3: we'll be producing more than two million vehicles here in 53 00:02:44,320 --> 00:02:47,359 Speaker 3: the US, so comfortably putting us in a position where 54 00:02:47,360 --> 00:02:49,800 Speaker 3: we most produce more vehicles here in the country than 55 00:02:49,840 --> 00:02:53,480 Speaker 3: anybody else. So we're working on those and also partnering 56 00:02:53,480 --> 00:02:56,040 Speaker 3: with the supply chain across the board. So while we 57 00:02:56,600 --> 00:02:59,280 Speaker 3: you know, have a pretty sizable tariff impact this quarter, 58 00:02:59,320 --> 00:03:01,639 Speaker 3: as we've talked about, it's not a surprise against what 59 00:03:02,520 --> 00:03:04,480 Speaker 3: we told the street at the beginning of it, and 60 00:03:05,120 --> 00:03:07,919 Speaker 3: our plans are executing well according to our playbook. 61 00:03:08,160 --> 00:03:10,480 Speaker 2: Let's talk about how those plans play out over the 62 00:03:10,520 --> 00:03:13,720 Speaker 2: course of twenty twenty five. Because GM has said that 63 00:03:13,760 --> 00:03:16,440 Speaker 2: you can offset one third of that four billion to 64 00:03:16,480 --> 00:03:20,400 Speaker 2: five billion dollars in terriff exposure later this year, as 65 00:03:20,440 --> 00:03:23,880 Speaker 2: more of your mitigation efforts really start to take hold, 66 00:03:24,160 --> 00:03:26,280 Speaker 2: can you give us a timeline there one might we 67 00:03:26,320 --> 00:03:29,400 Speaker 2: see some of those efforts actually start to bear fruit 68 00:03:29,440 --> 00:03:31,720 Speaker 2: in terms of offsetting some of these costs that you're 69 00:03:31,760 --> 00:03:32,239 Speaker 2: dealing with. 70 00:03:33,040 --> 00:03:35,480 Speaker 3: We'll really begin to see that in the third quarter, 71 00:03:35,560 --> 00:03:38,480 Speaker 3: in the fourth quarter as we as we've told investors, 72 00:03:39,120 --> 00:03:41,000 Speaker 3: you know, some of it is pricing, and you know 73 00:03:41,080 --> 00:03:43,040 Speaker 3: our pricing was up in the first quarter. It was 74 00:03:43,040 --> 00:03:46,320 Speaker 3: about flat here in the second quarter, but we've expected 75 00:03:46,320 --> 00:03:48,360 Speaker 3: pricing to be up about a half a percent to 76 00:03:48,440 --> 00:03:52,160 Speaker 3: one percent for the full year in twenty twenty five. 77 00:03:52,240 --> 00:03:55,120 Speaker 3: So as Model year twenty six comes out, we start 78 00:03:55,120 --> 00:03:57,760 Speaker 3: to see some of the benefit of that. Going forward, 79 00:03:58,000 --> 00:04:00,560 Speaker 3: there's some cost initiatives which will be coming in in 80 00:04:00,600 --> 00:04:02,240 Speaker 3: the second half of the year. The team's done a 81 00:04:02,240 --> 00:04:05,880 Speaker 3: good job of making sure that we're maximizing efficiency where 82 00:04:05,880 --> 00:04:07,920 Speaker 3: we can, so we don't have to put all the 83 00:04:07,960 --> 00:04:12,640 Speaker 3: burden on our customers to absorb all that. So I 84 00:04:12,640 --> 00:04:16,279 Speaker 3: think we're in good shape. The second half should should 85 00:04:16,320 --> 00:04:19,400 Speaker 3: be better and should be more offsets than what we 86 00:04:19,440 --> 00:04:22,040 Speaker 3: saw in the second quarter as we're just adjusting to it, 87 00:04:22,480 --> 00:04:25,200 Speaker 3: but that remains consistent with that thirty percent assumption that 88 00:04:25,240 --> 00:04:26,320 Speaker 3: we had going into the year. 89 00:04:26,800 --> 00:04:29,160 Speaker 2: Paul, and this isn't specific to GM, but I do 90 00:04:29,279 --> 00:04:32,240 Speaker 2: wonder how you can have confidence to say, you know, 91 00:04:32,320 --> 00:04:34,760 Speaker 2: the third quarters when we might start to see these 92 00:04:35,080 --> 00:04:37,240 Speaker 2: efforts fare through, given that it feels like the tariff 93 00:04:37,320 --> 00:04:41,680 Speaker 2: landscape in particularly dramatic periods, can change day to day. 94 00:04:41,720 --> 00:04:45,000 Speaker 2: And from where you're sitting as the CFO of General Motors, 95 00:04:45,480 --> 00:04:48,320 Speaker 2: is your opinion that the current tariff structure, the current 96 00:04:48,360 --> 00:04:52,360 Speaker 2: stance of this administration, does this make US manufacturers, US 97 00:04:52,440 --> 00:04:56,560 Speaker 2: automakers actually be more competitive at the end of the day, Well, 98 00:04:56,560 --> 00:04:56,960 Speaker 2: I think. 99 00:04:56,839 --> 00:04:59,599 Speaker 3: Over the long term, certainly, we do believe that it 100 00:04:59,640 --> 00:05:02,640 Speaker 3: can be more rational and more stable industry for US 101 00:05:02,640 --> 00:05:05,240 Speaker 3: across the board, and we're going to work through that. 102 00:05:05,720 --> 00:05:09,760 Speaker 3: We've already announced significant plans to increase production here in 103 00:05:09,800 --> 00:05:13,039 Speaker 3: the US. It started with the decision to increase the 104 00:05:13,080 --> 00:05:16,400 Speaker 3: line rate and our production rate in Fort Wayne, where 105 00:05:16,440 --> 00:05:21,640 Speaker 3: we'll produce another fifty thousand trucks and SUVs on our 106 00:05:21,680 --> 00:05:24,640 Speaker 3: trucks on that line going forward, and that'll hit us 107 00:05:24,920 --> 00:05:27,839 Speaker 3: this year so that's already taken effect. The changes that 108 00:05:27,880 --> 00:05:31,599 Speaker 3: we announced earlier this quarter, will start to see those 109 00:05:31,640 --> 00:05:34,719 Speaker 3: in about eighteen months across the board, So you know, 110 00:05:34,800 --> 00:05:38,400 Speaker 3: I think it clearly is having the intended result and 111 00:05:38,480 --> 00:05:40,440 Speaker 3: one that I think will be met good for us 112 00:05:40,839 --> 00:05:44,360 Speaker 3: going forward over the long run. We are optimistic about, 113 00:05:44,480 --> 00:05:47,360 Speaker 3: you know, bilateral trade deals and as they work through, 114 00:05:47,400 --> 00:05:51,080 Speaker 3: in particular with Canada and Mexico and also Korea with 115 00:05:51,120 --> 00:05:54,159 Speaker 3: our footprint there, but where we feel comfort in the 116 00:05:54,200 --> 00:05:56,600 Speaker 3: fact that the auto industry is very important to us 117 00:05:56,640 --> 00:05:59,200 Speaker 3: as well as it is to Korea, so we believe 118 00:05:59,240 --> 00:06:01,760 Speaker 3: that they'll be able to work out a deal and 119 00:06:01,839 --> 00:06:03,640 Speaker 3: ultimately that'll be good for both countries. 120 00:06:04,240 --> 00:06:07,800 Speaker 1: What can you tell us about any future capital allocation? 121 00:06:08,240 --> 00:06:11,400 Speaker 1: Is GM planning to do any share buybacks, especially in 122 00:06:11,520 --> 00:06:13,760 Speaker 1: light of some of the cost reduction efforts you're taking 123 00:06:13,839 --> 00:06:14,840 Speaker 1: in the second part of the year. 124 00:06:15,560 --> 00:06:18,200 Speaker 3: So capital allocation is one thing that I think we're 125 00:06:18,240 --> 00:06:20,320 Speaker 3: really proud of as a team and what we've been 126 00:06:20,360 --> 00:06:23,400 Speaker 3: able to deploy consistently. First, we invest in the business. 127 00:06:23,920 --> 00:06:26,440 Speaker 3: We'll be investing ten to twelve billion dollars over the 128 00:06:26,440 --> 00:06:29,559 Speaker 3: next couple of years. That will allow us to both 129 00:06:29,640 --> 00:06:34,440 Speaker 3: improve and continue our great vehicle portfolio, but also these 130 00:06:34,440 --> 00:06:38,440 Speaker 3: footprint changes that I mentioned earlier. But even with that, 131 00:06:38,480 --> 00:06:42,839 Speaker 3: we're producing sizeable free cash flow and we're able to 132 00:06:42,920 --> 00:06:45,280 Speaker 3: make sure that we protect the balance sheet as well 133 00:06:45,320 --> 00:06:48,040 Speaker 3: as return capital to our shareholders, and we've established a 134 00:06:48,080 --> 00:06:51,160 Speaker 3: pretty good track record for that. Earlier this morning, we 135 00:06:51,200 --> 00:06:53,960 Speaker 3: announced that we've resumed share repurchases in the month of July. 136 00:06:55,640 --> 00:06:57,920 Speaker 3: As of June thirtieth, we had four point three billion 137 00:06:57,960 --> 00:07:02,679 Speaker 3: dollars remaining under our authoryation and strong free cash flow projected. 138 00:07:02,800 --> 00:07:05,159 Speaker 3: So I think it's something that the shareholders can benefit 139 00:07:05,200 --> 00:07:08,760 Speaker 3: from as well as we drive this efficiency into the 140 00:07:08,760 --> 00:07:11,960 Speaker 3: business to ultimately help mitigate some of this terrif exposure. 141 00:07:12,080 --> 00:07:14,600 Speaker 3: So overall, I feel good about where we are and 142 00:07:15,200 --> 00:07:16,760 Speaker 3: we're working hard for the shareholders. 143 00:07:17,600 --> 00:07:20,680 Speaker 1: Paul Jacobson, Chief financial Officer of General Motors, we thank 144 00:07:20,720 --> 00:07:22,400 Speaker 1: you so much for joining us this morning.