00:00You've got real experience navigating volatile industries, experience in the airline business and experience in the automaker business, too.
00:08You took over as CFO in the pandemic.
00:10Can you talk to us about this year, Paul, just how agile have you and the team needed to be and how volatile have things been, too?
00:18Well, Jonathan, first of all, thank you very much for having us.
00:20It's a great day to be a GM and celebrate the success of all of our employees and partners worldwide.
00:26So really appreciate you being here today, having me today.
00:30So, you know, at the end of the day, it's it's it's just another change.
00:34I mean, since coming to GM in 2020, we we've gone through COVID.
00:38We've gone through chip shortage. We've gone through tariffs.
00:41We've gone through EV pivots and so on.
00:44But what we've really tried to do is create a model that is resilient.
00:47And when you look at our balance sheet, you look at our inventory discipline and the way we've gone to market.
00:52There's a lot of things that have changed that allow us to be able to react to the world around us faster.
00:58And I think that's that's paved the way for us to have a another really strong year in the face of a lot of macro changes.
01:04Paul, in order to increase resilience and maybe agility, do you have to sacrifice long term planning?
01:10Is that something that becomes harder?
01:11Well, you know, I think what we what we've really done well as a team, I think, is we've kept focus on that long term vision.
01:19So, you know, for example, while we've taken a charge on reducing some of our EV capacity, reflecting the demand that's out there, we still believe that EVs are the future.
01:28And we think that there's an opportunity for us to take a little bit of a pause in demand growth that we've seen over the last few years, structurally improve it, right size our capacity and make sure that we can be successful as more and more customers adopt it.
01:42So it's just an example of how we make sure that we're managing the short term within the face of that longer term vision.
01:50So what are the big steps, Paul, that you've taken in order to remain agile, particularly with supply chains and removing any kind of direct input from China in particular?
02:01How much have you rejiggered where you get your goods?
02:05Well, I think we learned a lot in industry from COVID and a focused supply chain that was really susceptible to individualized shocks.
02:13And I think we've taken the effort to try to make sure that we diversify our our supply chain base.
02:20We've made a number of investments, for example, in battery raw materials and and other materials in the U.S., in addition to the four billion dollars that we've announced this year to increase our U.S. manufacturing capacity.
02:33So I think it's been a case of making sure that that's balanced.
02:35And then when we went through the chip crisis of 2021, there were some more challenges about making sure that we expand the places where some of our chips are fabricated and our supply base that we use.
02:47So this has just been part of it.
02:49I think we've learned a lot of lessons over the last five years that have helped us and positioned us well to be able to thrive in ever changing circumstances like we see right now.
02:58All of this costs a lot of money.
02:59And I'm just trying to get my head around.
03:01We've all been trying to get our head around where it comes from, these extra costs in order to rejigger supply chains, to offset any kind of increased costs that might come along the way.
03:10How much is coming from whether it's freezing labor forces or trimming around the edges?
03:16How much is coming from higher prices on consumer vehicles?
03:20Well, I think if you look at what GM has done, we've saved a lot of money by rationalizing our inventory balances.
03:27So we used to keep probably about 40 percent more inventory on the ground at our dealerships around the country.
03:35And we've we've cut that down.
03:37That's frees up a lot of working capital to be able to invest and redeploy back into the business.
03:41But it also makes sure that we can change much more quickly to changing demand around us.
03:48So our pricing has been stabilized.
03:50And I think that's given us a little bit more comfort to invest a little bit more than what we have historically,
03:56but still making sure that we're very disciplined with our capital allocation because we still have opportunities to pay down debt and also return capital to shareholders.
04:05So it's that balanced approach that I think has really paved the way for our success.
04:09Paul, you and your colleagues in the industry recently had a big win in Washington,
04:13a little bit of reprieve when it comes to the arrangement on the timeline for the tariff costs for imported auto parts.
04:21What else are you asking in terms of tariff relief from Washington?
04:26Well, you know, I think I want to praise the administration for really listening to the to the concerns of the industry
04:32and making sure that they're helping us to be positioned to be really successful as one of the largest U.S.
04:38industrial producers that are out there. And the announcements that were made Friday essentially take what had already been done by the administration in the spring
04:47and expands it a little bit to be able to use those MSRP offsets on a wider variety of parts that we're bringing into the country.
04:55And as a result of that, we were able to lower our total tariff forecast for the year by about half a billion dollars from where we started the year.
05:03And I think it's that proactive partnership in terms of really making sure that we can remain competitive and help to drive more investment into the U.S., which we've done.
05:13So do you expect more reprieves, especially as the U.S. goes into negotiations next year with Mexico and Canada?
05:20Well, I think what we're looking for is a little bit of stability. Obviously, this year has been a bit of a transition year.
05:26You know, for us, the handshake deal that we have with Korea, we're really eager to get that finalized.
05:33We do have some production of some of our lower cost models in Korea that help with some of the affordability concerns of our consumers here in the U.S.
05:42But also, obviously, Mexico and Canada are going to be really important to us.
05:45But as we look at those deals being finalized and we start to look into 2026, we think that there's actually an opportunity for us to do better in 2026 than we've done in 2025 and start to work our way back up to those 8% to 10% targeted margins that we set for ourselves before the tariffs were put in place.
06:04Paul, just finally, can we stay in Asia and finish on China?
06:07Paul, for a long time, we've said on this program, this must be the most competitive market on the planet in any industry.
06:14How difficult is it to operate in that country right now and how much harder is it going to get in the future for U.S. automakers like yourself?
06:22You know, about a year ago, Jonathan, we undertook a pretty ambitious restructuring program in China with the realization that, you know,
06:30we were probably not going to be as big in China as we have been historically going forward with the amount of just tremendous competition that's in the country going forward.
06:39But, you know, together with our partners, we were able to restructure that business and we've been profitable every quarter this year and look to be able to sustain that.
06:48So it's really about making sure that we're right sized for where we are.
06:52We've got great products over there.
06:54We've got a long legacy and we've got a good partnership that I think has really paved the way.
06:59And with that work that the team did in China, really proud of what they accomplished and think we can be sustainable there.
Be the first to comment