1 00:00:02,360 --> 00:00:06,720 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. 2 00:00:06,880 --> 00:00:10,360 Speaker 2: Paul, we're talking to you. I'm normally focused on automaking 3 00:00:10,400 --> 00:00:13,640 Speaker 2: as a business. It's now very close, closely related to 4 00:00:13,640 --> 00:00:15,440 Speaker 2: the kind of stuff that Joe and Kyley talk about 5 00:00:15,440 --> 00:00:19,120 Speaker 2: every day because of the tariffs. You've announced a four 6 00:00:19,160 --> 00:00:21,799 Speaker 2: billion dollar investment or plans to invest four billion dollars 7 00:00:21,840 --> 00:00:24,320 Speaker 2: over the next two years bringing production back to America. 8 00:00:24,360 --> 00:00:27,240 Speaker 2: This is essentially what Donald Trump is pushing for. This 9 00:00:27,280 --> 00:00:30,440 Speaker 2: is what he wants companies to do, and now you're 10 00:00:30,480 --> 00:00:32,879 Speaker 2: actually making it work. How much is this going to 11 00:00:33,000 --> 00:00:38,519 Speaker 2: offset the five billion dollars worth of hits GM is 12 00:00:38,640 --> 00:00:40,400 Speaker 2: expected to take from the tariffs. 13 00:00:40,560 --> 00:00:42,240 Speaker 1: Well, Matt, first of all, thanks for having us so, 14 00:00:42,320 --> 00:00:44,280 Speaker 1: I think you know this announcement that we made is 15 00:00:44,720 --> 00:00:46,960 Speaker 1: worth much more than just the tariff side of it, 16 00:00:47,000 --> 00:00:49,319 Speaker 1: and tariffs are obviously a piece of it. Is we're 17 00:00:49,360 --> 00:00:51,880 Speaker 1: reacting to the new dynamic that's going to be out there, 18 00:00:52,400 --> 00:00:54,680 Speaker 1: and it'll offset a good bit of it. So we'll 19 00:00:54,680 --> 00:00:57,200 Speaker 1: move about three hundred thousand units of production. Some of 20 00:00:57,200 --> 00:00:59,760 Speaker 1: it is new production and incremental some of it is 21 00:00:59,760 --> 00:01:03,800 Speaker 1: a sh shift, but reoptimizing our manufacturing footprint and taking 22 00:01:03,840 --> 00:01:07,280 Speaker 1: advantage of some underutilized capacity in the US. But it's 23 00:01:07,319 --> 00:01:09,920 Speaker 1: also about, you know, creating security for our people. You 24 00:01:09,959 --> 00:01:12,480 Speaker 1: look at the Orient plant, we would tailor that to 25 00:01:13,040 --> 00:01:16,399 Speaker 1: produce and scale evs really fast. The market is obviously 26 00:01:16,520 --> 00:01:19,000 Speaker 1: changed and pivoted a little bit. This gives us an 27 00:01:19,000 --> 00:01:23,800 Speaker 1: opportunity to reallocate that plant better utilize it for internal 28 00:01:23,800 --> 00:01:26,920 Speaker 1: combustion engines on trucks and full size SUVs where we 29 00:01:27,000 --> 00:01:29,400 Speaker 1: know the demand is really strong for them, and that's 30 00:01:29,440 --> 00:01:32,720 Speaker 1: great for our utilization, our efficiency as well as for 31 00:01:32,800 --> 00:01:36,320 Speaker 1: our consumers and our people as well. So it's about 32 00:01:36,319 --> 00:01:39,000 Speaker 1: more than just tariffs. But with this will be about 33 00:01:39,040 --> 00:01:42,400 Speaker 1: two million vehicles produced in the US for the US, 34 00:01:42,440 --> 00:01:44,240 Speaker 1: and we're continuing to make those investments. 35 00:01:44,400 --> 00:01:48,520 Speaker 2: I bought Silverado ZR two a couple of years ago. 36 00:01:48,560 --> 00:01:51,040 Speaker 2: Mine came out of Mexico. You're going to be moving 37 00:01:51,320 --> 00:01:53,480 Speaker 2: most of that production, I guess to the US, right, 38 00:01:53,560 --> 00:01:56,760 Speaker 2: most Sierra production to the US. Equinox production does that 39 00:01:56,800 --> 00:01:59,280 Speaker 2: come mostly the US? To What are we seeing in 40 00:01:59,360 --> 00:02:01,279 Speaker 2: terms of the model that are hanging out of miss. 41 00:02:01,240 --> 00:02:05,040 Speaker 1: Yeah, we'll have equinox ice production in spring Hill, I'm sorry, 42 00:02:05,120 --> 00:02:08,680 Speaker 1: in Fairfax. Spring Hill is going to be the Blazer, 43 00:02:09,160 --> 00:02:11,600 Speaker 1: but Fairfax is going to be another great implementation of 44 00:02:11,600 --> 00:02:13,600 Speaker 1: where we're going to be able to produce ice and 45 00:02:14,480 --> 00:02:17,880 Speaker 1: evs on the same production line, creating that flexibility for 46 00:02:18,000 --> 00:02:20,160 Speaker 1: us to be able to respond to consumer demand as 47 00:02:20,160 --> 00:02:21,080 Speaker 1: it continues to grow. 48 00:02:21,520 --> 00:02:23,960 Speaker 2: Have you changed sourcing for any of the parts, because 49 00:02:23,960 --> 00:02:27,840 Speaker 2: it's not obviously just about the final assembly with these vehicles. 50 00:02:27,840 --> 00:02:32,240 Speaker 2: There's a ton of content and you want to have that, 51 00:02:32,360 --> 00:02:35,320 Speaker 2: I guess is as much domestically sourced as possible as 52 00:02:35,320 --> 00:02:35,919 Speaker 2: well to save. 53 00:02:35,840 --> 00:02:37,640 Speaker 1: On costs, well, I think you know, with what the 54 00:02:37,680 --> 00:02:40,800 Speaker 1: administration is set up here with the MSRP offsets is 55 00:02:40,800 --> 00:02:43,480 Speaker 1: giving us time to help retool our supply chain, so 56 00:02:43,919 --> 00:02:48,679 Speaker 1: incentivizing growth and production in the US. Recognizing that the 57 00:02:48,720 --> 00:02:50,840 Speaker 1: supply chain taps time to shift. So we're going to 58 00:02:50,840 --> 00:02:53,240 Speaker 1: continue to work with our supply base to try to 59 00:02:53,280 --> 00:02:57,720 Speaker 1: maximize the efficiencies across the entire value chain and utilize 60 00:02:57,720 --> 00:02:59,840 Speaker 1: those off sets where we need to and shift production 61 00:03:00,120 --> 00:03:01,799 Speaker 1: that makes sense and where we're able to. 62 00:03:02,040 --> 00:03:05,200 Speaker 2: I should say, to save on tariff costs because you 63 00:03:05,280 --> 00:03:07,160 Speaker 2: obviously source a lot of these parts outside of the 64 00:03:07,280 --> 00:03:11,960 Speaker 2: US because the actual production costs are lower. How much 65 00:03:12,040 --> 00:03:14,600 Speaker 2: higher is it. How much more expensive is it to 66 00:03:15,240 --> 00:03:18,519 Speaker 2: build a part like an engine or a transmission to 67 00:03:19,120 --> 00:03:22,160 Speaker 2: assemble a truck in the US than it is, say 68 00:03:22,160 --> 00:03:22,760 Speaker 2: in Mexico. 69 00:03:23,000 --> 00:03:25,520 Speaker 1: Well, it's far more complex than that, Matt, because I 70 00:03:25,560 --> 00:03:29,400 Speaker 1: mean there's obviously the hourly labor differential, and that's a 71 00:03:29,400 --> 00:03:32,040 Speaker 1: big piece of it. But we can save money and logistics. 72 00:03:32,040 --> 00:03:35,680 Speaker 1: We can save money and plant utilization and filling up capacity. 73 00:03:35,800 --> 00:03:37,800 Speaker 1: So when you when you fill up a plan, it 74 00:03:37,840 --> 00:03:40,480 Speaker 1: actually makes it more efficient for every vehicle out there, 75 00:03:40,560 --> 00:03:43,560 Speaker 1: not just the ones that you're moving production into. So 76 00:03:43,640 --> 00:03:46,080 Speaker 1: we look at that as an enterprise wide calculation and 77 00:03:46,160 --> 00:03:49,680 Speaker 1: think we can get to an equivalency where ultimately we 78 00:03:49,680 --> 00:03:52,240 Speaker 1: can be competitive with producing in the US as well. 79 00:03:52,440 --> 00:03:55,920 Speaker 2: One of the things that you can produce fewer of 80 00:03:55,960 --> 00:03:58,720 Speaker 2: in the US is magnets, the rare earth minerals that 81 00:03:58,760 --> 00:04:01,360 Speaker 2: we've all learned much more about than we ever expected 82 00:04:01,400 --> 00:04:03,760 Speaker 2: to in the last week or so. How is your 83 00:04:03,800 --> 00:04:07,440 Speaker 2: access to those rare earths right now? Because there's concern 84 00:04:07,640 --> 00:04:12,120 Speaker 2: that production and a lot of US factories could. 85 00:04:11,920 --> 00:04:16,200 Speaker 1: Slow Yeah, we haven't experienced any slowdown as of yet. 86 00:04:16,240 --> 00:04:19,440 Speaker 1: It's clearly a risk that everybody is watching from that standpoint, 87 00:04:19,440 --> 00:04:21,160 Speaker 1: But what I would say is our supply chain team 88 00:04:21,240 --> 00:04:24,320 Speaker 1: does an excellent job. Similar to what they did through 89 00:04:24,320 --> 00:04:28,160 Speaker 1: the supply the chip crisis semiconductor shortage that we had 90 00:04:28,200 --> 00:04:30,360 Speaker 1: a few years ago. Our team did a great job 91 00:04:30,360 --> 00:04:34,279 Speaker 1: of responding, maintaining agility, working with our suppliers to try 92 00:04:34,279 --> 00:04:37,120 Speaker 1: to balance production as best we can, and they've done 93 00:04:37,160 --> 00:04:40,240 Speaker 1: a great job so far with this situation as well. 94 00:04:40,640 --> 00:04:43,600 Speaker 2: What is your thought on any kind of vertical integration. 95 00:04:43,720 --> 00:04:45,680 Speaker 2: I mean, the concern or the problem I guess with 96 00:04:46,400 --> 00:04:51,120 Speaker 2: rarest isn't just the mining, but also the refining of 97 00:04:51,160 --> 00:04:54,000 Speaker 2: them is mostly done in China. Have you tried to 98 00:04:54,120 --> 00:04:56,120 Speaker 2: convince suppliers to do more of that here? Are you 99 00:04:56,200 --> 00:04:58,120 Speaker 2: trying to get your own supply here? 100 00:04:58,440 --> 00:05:01,320 Speaker 1: We've done a number of initial whether it's with Lithium 101 00:05:01,360 --> 00:05:05,040 Speaker 1: Americas or a joint venture with Pastco around a lot 102 00:05:05,080 --> 00:05:08,400 Speaker 1: of battery raw materials, particularly the lithium side, which is 103 00:05:08,760 --> 00:05:11,080 Speaker 1: a little bit easier to do and a little bit 104 00:05:11,160 --> 00:05:14,120 Speaker 1: less capital intensive. But we've helped fund that, We've taken 105 00:05:14,120 --> 00:05:17,839 Speaker 1: equity positions, we've helped to fund products and projects across 106 00:05:17,920 --> 00:05:20,240 Speaker 1: the board. But we've been working on this for a 107 00:05:20,279 --> 00:05:22,919 Speaker 1: long time, really since Covid is trying to increase the 108 00:05:22,960 --> 00:05:26,720 Speaker 1: resiliency of our supply chain both you know, from a pandemic, 109 00:05:26,800 --> 00:05:30,400 Speaker 1: from just a de risking perspective, and we're in a 110 00:05:30,480 --> 00:05:32,800 Speaker 1: pretty good situation with where we are. We still have 111 00:05:32,839 --> 00:05:34,960 Speaker 1: some work to do, but there's a lot of things 112 00:05:35,000 --> 00:05:37,120 Speaker 1: that we can do thinking creatively with our partners. 113 00:05:37,440 --> 00:05:40,279 Speaker 2: What are you thinking about prices right now? You obviously 114 00:05:40,480 --> 00:05:44,359 Speaker 2: raise prices on a regular basis. Right if we're not 115 00:05:44,720 --> 00:05:49,279 Speaker 2: experiencing deflation, you're going to try and stick with the pack. 116 00:05:49,360 --> 00:05:51,880 Speaker 2: There are you facing pushback from consumers when you try 117 00:05:51,880 --> 00:05:52,640 Speaker 2: and raise prices. 118 00:05:52,920 --> 00:05:55,920 Speaker 1: Well, you know, our portfolio has performed really, really well, 119 00:05:55,960 --> 00:05:59,000 Speaker 1: and we've adopted a strategy of being very disciplined in 120 00:05:59,040 --> 00:06:02,640 Speaker 1: our production, not overproducing like some of the challenges of 121 00:06:02,680 --> 00:06:04,960 Speaker 1: the past, and that's a strategy that's worked for us. 122 00:06:05,040 --> 00:06:07,800 Speaker 1: We announced on our earnings call about six weeks ago 123 00:06:07,880 --> 00:06:10,160 Speaker 1: that we don't need to take any price to help 124 00:06:10,240 --> 00:06:13,760 Speaker 1: with the offset initiatives that we've targeted going forward, because 125 00:06:13,760 --> 00:06:15,839 Speaker 1: we want to be in the position where we're responding 126 00:06:15,880 --> 00:06:18,800 Speaker 1: to demand from our customers and being more stable. We 127 00:06:18,839 --> 00:06:21,480 Speaker 1: don't want to raise prices because of tariffs and then 128 00:06:21,560 --> 00:06:24,400 Speaker 1: when tariffs come down, expect that prices are going to 129 00:06:24,400 --> 00:06:26,400 Speaker 1: come back down. We want to be more consistent with 130 00:06:26,440 --> 00:06:28,680 Speaker 1: our customer base and that's a strategy that's worked really 131 00:06:28,720 --> 00:06:29,320 Speaker 1: well for us. 132 00:06:30,160 --> 00:06:32,159 Speaker 2: Can you do it in other ways through MSRP? I 133 00:06:32,160 --> 00:06:36,040 Speaker 2: mean some manufacturers are raising maybe delivery price, you can 134 00:06:36,080 --> 00:06:38,880 Speaker 2: also raise the price of options packages and still keep 135 00:06:39,400 --> 00:06:40,720 Speaker 2: MSRP level. Well. 136 00:06:40,760 --> 00:06:44,360 Speaker 1: Again, we haven't done anything specific to respond to tariffs. 137 00:06:44,640 --> 00:06:48,400 Speaker 1: We've looked at where packages are for options, where our 138 00:06:48,560 --> 00:06:52,280 Speaker 1: logistics costs are, etc. And we try to price what 139 00:06:52,360 --> 00:06:55,640 Speaker 1: we can. But that's irrespective of tariffs, and it's something 140 00:06:55,640 --> 00:06:57,920 Speaker 1: that we've done. I think when you look at our 141 00:06:57,920 --> 00:07:00,280 Speaker 1: pricing model over the last few years, it's been more 142 00:07:00,320 --> 00:07:04,720 Speaker 1: consistent than many of our competitors, with less volatility and discounting, 143 00:07:04,760 --> 00:07:06,720 Speaker 1: and that's good for our customers as well. So we're 144 00:07:06,720 --> 00:07:10,280 Speaker 1: going to continue to do that across the board where 145 00:07:10,320 --> 00:07:12,440 Speaker 1: we can and make sure that we're delivering value for 146 00:07:12,480 --> 00:07:13,120 Speaker 1: our customers. 147 00:07:13,400 --> 00:07:16,040 Speaker 2: The being counters at Bloomberg Intelligence, So I want me 148 00:07:16,080 --> 00:07:18,560 Speaker 2: to ask questions about cash flow here and how that 149 00:07:18,600 --> 00:07:22,840 Speaker 2: looks right now with the tariff effect. You've had obviously 150 00:07:23,440 --> 00:07:26,440 Speaker 2: great sales, as I guess some demand is pulled forward. 151 00:07:27,280 --> 00:07:29,200 Speaker 2: Do you have to divert some cash though to deal 152 00:07:29,240 --> 00:07:30,360 Speaker 2: with teriffs from anything else? 153 00:07:30,560 --> 00:07:33,200 Speaker 1: Well, I mean, clearly, in the short and intermediate term, 154 00:07:33,680 --> 00:07:36,040 Speaker 1: tariffs are going to be a drain on our cash flow. 155 00:07:36,040 --> 00:07:39,200 Speaker 1: We announced about four to five billion dollars of impact 156 00:07:39,280 --> 00:07:41,320 Speaker 1: this year, and we think we can offset about thirty 157 00:07:41,320 --> 00:07:43,680 Speaker 1: percent of it going forward, but that is going to 158 00:07:43,680 --> 00:07:45,240 Speaker 1: be a cash hit. Now, when you look at the 159 00:07:45,240 --> 00:07:48,360 Speaker 1: performance of the company, our cash flow generation has been 160 00:07:48,400 --> 00:07:52,160 Speaker 1: really strong. It'll continue to be really strong even after 161 00:07:52,240 --> 00:07:54,040 Speaker 1: the tariffs, and we're going to work to continue to 162 00:07:54,120 --> 00:07:57,280 Speaker 1: drive that efficiency. But we've got to create that stable 163 00:07:57,360 --> 00:07:59,400 Speaker 1: cash flow across the board because this is still a 164 00:07:59,440 --> 00:08:02,520 Speaker 1: cyclical industry and we need to be able to absorb 165 00:08:02,560 --> 00:08:04,360 Speaker 1: these shocks. And I think the team's done a really 166 00:08:04,400 --> 00:08:07,360 Speaker 1: good job of managing and being disciplined in order to 167 00:08:07,360 --> 00:08:09,840 Speaker 1: continue to drive strong cash flow even in the face 168 00:08:09,880 --> 00:08:12,320 Speaker 1: of some of these short intermediate term hits. 169 00:08:12,400 --> 00:08:15,880 Speaker 2: What are you expecting in terms of SAR because we've 170 00:08:15,920 --> 00:08:19,520 Speaker 2: had pretty strong sales numbers over the past couple of months, 171 00:08:19,560 --> 00:08:22,760 Speaker 2: I think upwards of seventeen point three million. Does that 172 00:08:22,800 --> 00:08:24,080 Speaker 2: continue through the rest of the year. 173 00:08:24,280 --> 00:08:26,760 Speaker 1: No, we don't expect it to. We would love to 174 00:08:26,760 --> 00:08:30,440 Speaker 1: see that happen, But what we said about six weeks 175 00:08:30,480 --> 00:08:32,640 Speaker 1: ago is we're planning for a year of about sixteen 176 00:08:32,679 --> 00:08:35,880 Speaker 1: million units, which is similar to last year. In April 177 00:08:35,920 --> 00:08:37,920 Speaker 1: and the first half of May, we were trending much 178 00:08:37,960 --> 00:08:40,560 Speaker 1: closer to eighteen million as we saw a lot of 179 00:08:40,559 --> 00:08:43,480 Speaker 1: customers trying to get ahead of what they expected to 180 00:08:43,480 --> 00:08:46,040 Speaker 1: be price increases. We've seen that come out over the 181 00:08:46,120 --> 00:08:48,600 Speaker 1: last couple of weeks, but it's really retreated back to 182 00:08:48,640 --> 00:08:51,680 Speaker 1: where it was before that pull ahead demand. So we're 183 00:08:51,760 --> 00:08:56,400 Speaker 1: encouraged by the fact that that consistent demand is still there, 184 00:08:56,600 --> 00:08:58,560 Speaker 1: and that's going to be important for us as we 185 00:08:58,600 --> 00:09:01,560 Speaker 1: continue to push forward. If we see a slow down, 186 00:09:01,600 --> 00:09:03,320 Speaker 1: we'll have to adjust to it and make sure that 187 00:09:03,360 --> 00:09:06,800 Speaker 1: we create that agility that we have really come to 188 00:09:06,800 --> 00:09:09,120 Speaker 1: be known for over the last few years. But right now, 189 00:09:09,320 --> 00:09:12,160 Speaker 1: the customer seeds pretty stable. Even though we've seen that 190 00:09:12,200 --> 00:09:13,239 Speaker 1: pool ahead demand. 191 00:09:12,960 --> 00:09:16,319 Speaker 2: Come out, You've had the best margins of the big 192 00:09:16,360 --> 00:09:19,480 Speaker 2: three enjoyed I think eight and a half percent margins 193 00:09:19,520 --> 00:09:22,520 Speaker 2: are thereabouts. Does it hang at that level through twenty 194 00:09:22,640 --> 00:09:23,160 Speaker 2: twenty five. 195 00:09:23,400 --> 00:09:25,600 Speaker 1: Well, obviously the tariffs are going to be an operating 196 00:09:25,679 --> 00:09:29,200 Speaker 1: hit to us going forward, which is why we're focused 197 00:09:29,240 --> 00:09:31,839 Speaker 1: on making sure we take actions quickly. There were a 198 00:09:31,920 --> 00:09:35,120 Speaker 1: number of actions that we already took, we called them 199 00:09:35,120 --> 00:09:38,760 Speaker 1: no regrets actions where we increased the line rate in 200 00:09:38,840 --> 00:09:42,360 Speaker 1: Fort Wayne, to build more trucks in the US, etc. Here, 201 00:09:42,400 --> 00:09:46,440 Speaker 1: we're taking the next step of deploying capital to increase 202 00:09:46,480 --> 00:09:49,560 Speaker 1: that production. These are steps that we think are necessary 203 00:09:49,600 --> 00:09:51,319 Speaker 1: for us for the long term to be able to 204 00:09:51,400 --> 00:09:54,000 Speaker 1: drive that type of consistent margin performance that we want 205 00:09:54,000 --> 00:09:54,520 Speaker 1: to be known for. 206 00:09:54,960 --> 00:09:57,280 Speaker 2: I want to ask about the shares as well as 207 00:09:57,320 --> 00:10:00,880 Speaker 2: your free float. It's gotten pretty small. How much further 208 00:10:00,920 --> 00:10:02,400 Speaker 2: can you go with buybacks? 209 00:10:02,640 --> 00:10:05,079 Speaker 1: Well, I mean, we're going to continue to follow our 210 00:10:05,080 --> 00:10:08,040 Speaker 1: discipline capital allocation policy. The first thing we do is 211 00:10:08,080 --> 00:10:11,040 Speaker 1: reinvest in the business. That's a capital budget of about 212 00:10:11,040 --> 00:10:13,800 Speaker 1: ten to eleven billion dollars. We just announced last night 213 00:10:14,080 --> 00:10:16,400 Speaker 1: that that'll be ten to twelve billion dollars for twenty 214 00:10:16,440 --> 00:10:19,400 Speaker 1: six and twenty seven, reflecting a little bit of additional 215 00:10:19,440 --> 00:10:22,400 Speaker 1: spend for what we're doing. The second is we prioritize 216 00:10:22,440 --> 00:10:24,440 Speaker 1: the balance sheet. The balance sheet's been as strong as 217 00:10:24,480 --> 00:10:28,800 Speaker 1: it's been in decades with a pension fund that's nearly 218 00:10:28,800 --> 00:10:31,880 Speaker 1: fully funded, and debt that's very manageable. And then the 219 00:10:31,920 --> 00:10:34,600 Speaker 1: third leg of that still was returning cash to shareholders. 220 00:10:34,600 --> 00:10:37,000 Speaker 1: So we reinstated the dividend a couple of years ago, 221 00:10:37,320 --> 00:10:40,080 Speaker 1: and we've been deploying that cash to return to our 222 00:10:40,120 --> 00:10:43,640 Speaker 1: shareholders to make sure that all the constituencies benefit from 223 00:10:43,720 --> 00:10:46,959 Speaker 1: the success that we've been having, our employees, our customers, 224 00:10:47,480 --> 00:10:48,440 Speaker 1: and our shareholders.