Speaker 1: Bloomberg Audio Studios, podcasts, radio news. Now.
Speaker 2: One stock that we're keeping a close eye on this
Speaker 2: morning is GM shares are lower active. Company said it
Speaker 2: will take a one point one billion dollar hit to
Speaker 2: profit from President Trump's tariffs. Let's bring in General Motors
Speaker 2: chief financial officer Paul Jacobson for more. Paul, it's great
Speaker 2: to have you with us. I want to talk about
Speaker 2: potential levers that you can pull here because my understanding
Speaker 2: is that you really haven't raised prices to this point
Speaker 2: to offset some of those costs. I know that you're
Speaker 2: taking other measures, but is it possible that you could
Speaker 2: raise the sticker price on some of your vehicles to
Speaker 2: make up some of that hole.
Speaker 3: Well, good morning, and thanks for having me today. It's
Speaker 3: a beautiful day here in Michigan, and you know, we're
Speaker 3: celebrating another another good quarter. And you know, I think
Speaker 3: obviously tariffs have had some pressures. We've adjusted to them.
Speaker 3: But as we just said on our earnings call, we're
Speaker 3: ninety days into this, and you know, our plans are
Speaker 3: still very consistent with what we said at the beginning,
Speaker 3: and we're going to continue to execute on that. You know,
Speaker 3: we've got a strategy here that is both short term
Speaker 3: and long term. And the shorter term we've talked about
Speaker 3: our ability to offset thirty percent of the tariff impact.
Speaker 3: That's through some cost austerity as well as some manufacturing
Speaker 3: changes and pricing. But we think that as we maintain
Speaker 3: our consistent pricing strategy, where you know, we look at
Speaker 3: the demand for our vehicles and where that sits in
Speaker 3: our disciplined inventory approach, that we can continue to absorb
Speaker 3: that and reflect that in our traditional and sort of
Speaker 3: consistent pricing actions rather than going out and announcing big
Speaker 3: tariff related increases because we don't think that's necessarily good
Speaker 3: for the consumer as well. So pricing is a part
Speaker 3: of it, but nothing out of the ordinary or extraordinary
Speaker 3: from what our current strategy has been.
Speaker 1: How much flexibility do you have to make adjustments to
Speaker 1: supply chains here to meet the evolving auto tariffs and
Speaker 1: the parts that tariffs might hidden of the supply chain.
Speaker 3: Well, there have been things that we've already been working on,
Speaker 3: so really kind of since COVID, we've been looking at
Speaker 3: creating more resiliency in the supply chain, and we've onshoed
Speaker 3: a lot of things as we as we mentioned in
Speaker 3: our last call. Only about three percent of our direct
Speaker 3: purchases come from China through the supply chain, so that's
Speaker 3: helped us a little bit in terms of being proactive
Speaker 3: on that. Obviously, we'll do some resetting in partnership with
Speaker 3: our supply chain partners, but you know, it really starts
Speaker 3: with our manufacturing footprint. Earlier in the quarter, we announced
Speaker 3: four billion dollars of investments over the next couple of
Speaker 3: years to increase production in the United States, And when
Speaker 3: we're done with that, which will start in about eighteen months,
Speaker 3: we'll be producing more than two million vehicles here in
Speaker 3: the US, so comfortably putting us in a position where
Speaker 3: we most produce more vehicles here in the country than
Speaker 3: anybody else. So we're working on those and also partnering
Speaker 3: with the supply chain across the board. So while we
Speaker 3: you know, have a pretty sizable tariff impact this quarter,
Speaker 3: as we've talked about, it's not a surprise against what
Speaker 3: we told the street at the beginning of it, and
Speaker 3: our plans are executing well according to our playbook.
Speaker 2: Let's talk about how those plans play out over the
Speaker 2: course of twenty twenty five. Because GM has said that
Speaker 2: you can offset one third of that four billion to
Speaker 2: five billion dollars in terriff exposure later this year, as
Speaker 2: more of your mitigation efforts really start to take hold,
Speaker 2: can you give us a timeline there one might we
Speaker 2: see some of those efforts actually start to bear fruit
Speaker 2: in terms of offsetting some of these costs that you're
Speaker 2: dealing with.
Speaker 3: We'll really begin to see that in the third quarter,
Speaker 3: in the fourth quarter as we as we've told investors,
Speaker 3: you know, some of it is pricing, and you know
Speaker 3: our pricing was up in the first quarter. It was
Speaker 3: about flat here in the second quarter, but we've expected
Speaker 3: pricing to be up about a half a percent to
Speaker 3: one percent for the full year in twenty twenty five.
Speaker 3: So as Model year twenty six comes out, we start
Speaker 3: to see some of the benefit of that. Going forward,
Speaker 3: there's some cost initiatives which will be coming in in
Speaker 3: the second half of the year. The team's done a
Speaker 3: good job of making sure that we're maximizing efficiency where
Speaker 3: we can, so we don't have to put all the
Speaker 3: burden on our customers to absorb all that. So I
Speaker 3: think we're in good shape. The second half should should
Speaker 3: be better and should be more offsets than what we
Speaker 3: saw in the second quarter as we're just adjusting to it,
Speaker 3: but that remains consistent with that thirty percent assumption that
Speaker 3: we had going into the year.
Speaker 2: Paul, and this isn't specific to GM, but I do
Speaker 2: wonder how you can have confidence to say, you know,
Speaker 2: the third quarters when we might start to see these
Speaker 2: efforts fare through, given that it feels like the tariff
Speaker 2: landscape in particularly dramatic periods, can change day to day.
Speaker 2: And from where you're sitting as the CFO of General Motors,
Speaker 2: is your opinion that the current tariff structure, the current
Speaker 2: stance of this administration, does this make US manufacturers, US
Speaker 2: automakers actually be more competitive at the end of the day, Well,
Speaker 2: I think.
Speaker 3: Over the long term, certainly, we do believe that it
Speaker 3: can be more rational and more stable industry for US
Speaker 3: across the board, and we're going to work through that.
Speaker 3: We've already announced significant plans to increase production here in
Speaker 3: the US. It started with the decision to increase the
Speaker 3: line rate and our production rate in Fort Wayne, where
Speaker 3: we'll produce another fifty thousand trucks and SUVs on our
Speaker 3: trucks on that line going forward, and that'll hit us
Speaker 3: this year so that's already taken effect. The changes that
Speaker 3: we announced earlier this quarter, will start to see those
Speaker 3: in about eighteen months across the board, So you know,
Speaker 3: I think it clearly is having the intended result and
Speaker 3: one that I think will be met good for us
Speaker 3: going forward over the long run. We are optimistic about,
Speaker 3: you know, bilateral trade deals and as they work through,
Speaker 3: in particular with Canada and Mexico and also Korea with
Speaker 3: our footprint there, but where we feel comfort in the
Speaker 3: fact that the auto industry is very important to us
Speaker 3: as well as it is to Korea, so we believe
Speaker 3: that they'll be able to work out a deal and
Speaker 3: ultimately that'll be good for both countries.
Speaker 1: What can you tell us about any future capital allocation?
Speaker 1: Is GM planning to do any share buybacks, especially in
Speaker 1: light of some of the cost reduction efforts you're taking
Speaker 1: in the second part of the year.
Speaker 3: So capital allocation is one thing that I think we're
Speaker 3: really proud of as a team and what we've been
Speaker 3: able to deploy consistently. First, we invest in the business.
Speaker 3: We'll be investing ten to twelve billion dollars over the
Speaker 3: next couple of years. That will allow us to both
Speaker 3: improve and continue our great vehicle portfolio, but also these
Speaker 3: footprint changes that I mentioned earlier. But even with that,
Speaker 3: we're producing sizeable free cash flow and we're able to
Speaker 3: make sure that we protect the balance sheet as well
Speaker 3: as return capital to our shareholders, and we've established a
Speaker 3: pretty good track record for that. Earlier this morning, we
Speaker 3: announced that we've resumed share repurchases in the month of July.
Speaker 3: As of June thirtieth, we had four point three billion
Speaker 3: dollars remaining under our authoryation and strong free cash flow projected.
Speaker 3: So I think it's something that the shareholders can benefit
Speaker 3: from as well as we drive this efficiency into the
Speaker 3: business to ultimately help mitigate some of this terrif exposure.
Speaker 3: So overall, I feel good about where we are and
Speaker 3: we're working hard for the shareholders.
Speaker 1: Paul Jacobson, Chief financial Officer of General Motors, we thank
Speaker 1: you so much for joining us this morning.