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General Motors Corporation (NYSE:GM)

Q4 2008 Global Sales Call Transcript

January 21, 2009 09:02 am ET

Executives

John McDonald – GM Sales & Marketing Communications

Mike DiGiovanni – GM Executive Director for Global Market and Industry Analysis

Jonathan Browning – VP of Global Sales, Service, and Marketing

Analysts

Patrick Archambault – Goldman Sachs

Brad Austin [ph] – P Bank [ph]

Brian Johnson – Barclays Capital

Jeff Green [ph] – Timber [ph]

Chris Morris [ph] – CNN Money

Christine Tierney – Detroit News

Bernard Simon – Financial Times

Armina Ligaya – National Newspaper

Vicky Tolsten [ph] – Automotive News

Nick Bunkley – New York Times

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the Q4 and CY global sales call. During the presentation, all participants will be in a listen-only mode. After which, we’ll conduct a question-and-answer session. (Operator Instructions) As a reminder, this conference call is being recorded, Wednesday, January 21st, 2009. I would now like to turn the conference over to Mr. John McDonald of GM Communications. Please go ahead, sir.

John McDonald

Good morning, everybody. Thank you very much, Juan. I’d like to welcome everybody. Good afternoon, good evening, wherever you’re joining us from on the call. This is John McDonald speaking to you from Detroit. Joining in this morning, Mike DiGiovanni, the GM Executive Director for Global Market and Industry Analysis. Good morning, Mickey.

Mike DiGiovanni

Good morning, John.

John McDonald

And also on the line with us from Europe is Jonathan Browning, Vice President of Global Sales, Service, and Marketing. Welcome, and good afternoon to you, John.

Jonathan Browning

Good afternoon, good morning, and good evening everybody.

John McDonald

Today, we’re going to review GM’s fourth quarter and 2008 annual global sales performance, the press release in the industry that we have seen a few minutes ago, as all the brands and region’s specific data are for your reference. As is customary on the call, we’ll have a brief overview of the global market and macroeconomics practice, and we’ll look at the sales performances for our brands and for our regions.

So after the opening remarks, we’ll open the call up to questions, as is customary, first from the analysts and from the media. And the operator will give us instructions on how to facilitate those questions as soon as we’re done with the opening remarks. So without any further introduction, let me turn it back over to Mike DiGiovanni. Mickey?

Mike DiGiovanni

Thanks, John. Let’s take a look at the global industry for 2008. Obviously, I think you’re all aware the last quarter has seen unprecedented turmoil on the financial markets in many places around the world. As credits become harder to obtain, governments have taken extraordinary steps to intervene in their banks and large businesses. The declines in the last quarter were the most dramatic we’ve seen since the early 1980’s and in some cases before that.

Overall, the fourth quarter global auto market sold about 14.2 million vehicles, and dropped about 3.4 million vehicles compared with Q4 of the year ago or negative 20%. Most of that decline comes from the slump in the US market. Total calendar year of 2008 industry sales of more than 67 million vehicles around the globe declined by more than 5% from calendar year 2007.

Now three of the largest mature markets, Japan, Western Europe, and US alone continue to experience volume declines in Q4 2008 that’s really accounted for almost half of all the decline in global sales. In those three markets combined, Saab sales dropped 2.3 million vehicles in the fourth quarter. Let me restate that. They account for more than half of all global vehicles sales, and they alone accounted for 2.3 million of the total drop that we saw in Q4.

For GM, we continue to benefit from the growth of emerging markets. But there was not nearly enough volume in the fourth quarter to offset weaknesses in North America and Western Europe. In the fourth quarter, GM sold 1.70 million vehicles globally, which was a decline of 26%, compared with the year ago when we sold 2.31 million cars and trucks. As they indicated in Q4, the overall industry dropped 20%. So we dropped 26% for comparison.

For the year, GM sold 8.35 million vehicles. At a year-over-year basis, GM’s total global sales were down 11%, again, reflecting economic pressures especially in North America and Western Europe. Specifically, the US economic recession and the slowdowns in Canada and Mexico pushed North America’s sales in the fourth quarter down 379,000 vehicles or 36%, compared with 2007. In addition, European region also saw a sharp decline in the fourth quarter with GM sales volume down about 21% primarily due to the significant economic downturn in Western Europe.

Sales performance earlier in the year in that region moderated that number to an overall 7% total decline for GM in 2008 in the European region. However, we did have a third consecutive year of more than 2 million vehicles sold, and the second best sales volume ever.

On a positive note, for the year, GM sales outside the US were 5.37 million vehicles, 64% of all sales, compared with 59% last year of 2007. Just as importantly, GM’s calendar year 2008 sales outside of North America, that’s the total Europe region, total AP region, and total LAAM region combined, declined only 1%; approximately the same as the 1% industry sales decline for those same combined three regions in 2008 versus 2007, again, excluding North America.

Hence, GM’s market share in calendar year 2008 for the three regions outside of North America combined, Europe, AP, and Latin America, was flat with calendar year 2007 market share, and 2008 calendar year market share stable at 9.5%.

From the Latin America, Africa, and Middle East region, GM sales were down 22% for the quarter, but up 3% for the year. This is the same as the 3% increase that the industry experienced for the year for the held share with more than 10% growth in Brazil and 4% growth in Argentina.

GM’s sales in the Asia Pacific region also saw decline in the fourth quarter about 11%. But this year GM sales grew 3% was just slightly faster than the industry sales growth of 2%. Again, we gained shares in the Asia Pacific region for the year. As previously mentioned, sales growth of 9% in India and 6% in China fueled this year-over-year increase.

For 2008, GM’s sales in the 26 emerging markets, which is the key growth markets we’re focused on exceeded 3 million vehicles and reflected a nearly 5% volume increase compared with 2007. GM’s total share in these 26 emerging markets was essentially flat at 12% for 2008 calendar year versus 2007 calendar year. And we gained volume in 18 of the 26 emerging markets. And we gained share in 14 of the 26 emerging markets, and held share in 2 of them. So 16 of the 26 we either gained share or held share. This is a remarkable performance considering all the global challenges the industry is facing. And GM, in particular, has been through in the past three or four months. More specifically, GMAC sales volume in the (inaudible) countries and PT industry performance in Russia and India.

In Brazil, GM sales of 549,000 vehicles were up 10%. In Russia, GM sales of 338,000 vehicles were up 30%. In India, GM sales of 56,000 vehicles were up 9%. And in China, GM sales of 1.09 million vehicles were up 30%.

Going forward, we believe market conditions will remain difficult especially in the near term. The global economy has currently slid in the deepest downturns of the early 1980’s. Consumer and business confidence has been severely eroded by the financial shock. However, we do see aggressive government (inaudible) policies coming down the pipeline to be some of a kind of aiding force. In particular, the Obama administration is preparing a fiscal stimulus package of over $800 billion over the next two years.

The Chinese government has also announced the $580 billion fiscal stimulus package. Many countries have also implemented specific measures targeted at boosting vehicle sales. We recently completed an internal analysis in GM with these auto specific stimulus packages are going to booze sales by over 1 million units globally in 2009 and many more. We anticipate that these type of programs will probably come on stream in the future.

So the fiscal stimulant, the auto stimulant, combined with the aggressive easing of monetary policies, and lower energy and commodity prices should be able to buy some support for the global economy and pave the way for gradual recovery. Obviously, we know that 2009 is going to be a very difficult year. And so I want to just lay out here, first of all, for everyone on the line, the fact that in -- we specially see the first quarter to be very challenging in the US market and the Western European markets. Specifically in the US market, we should not be surprised with the seasonally adjusted annual rate in the first month of 2009 namely, January comes in below 10,000 units. So it’s been running about 10.5 million units in the October, November, December period. The reason for this is clearly 100% due to decline in fleet sales. The GM, Chrysler, Ford, to a lesser extent not producing as many vehicles this quarter, which had directly affect fleet sales. Especially the sales from auto car companies, which are pretty much just in time delivered. So there’s going to be a large drop in fleet sales in January.

However, we estimate that the retail run rate, retail seasonally adjusted annual rate for total vehicles in January in the US is going to be about 8.4 million units. So by comparison, October was 8.4 million, November was 8.2 million, December was 8.2 million, and January, we estimate will be 8.4 million retail. So we are clearly seeing stabilization in our retail run rate over the last four years in the US market. Again, because of productions cuts, fleet sales will be down this month, which will make the total numbers seem low. But there’s a good explanation for it as I’ve just taken you through.

So in summary, it’s been a great challenging global market specially in North America and Western Europe. And the financial instability really experienced way around the world in the fourth quarter hit the vehicle market hard everywhere. However, despite these challenges, as I mentioned, the calendar year 2008, GM was extremely successful in maintaining our combined market share in the three regions outside North America, Asia Pacific, Europe, and Latin America.

As Rick Wagoner said at the analyst conference last week, “with these challenges come opportunities”. And we believe GM is very well positioned with a balanced global manufacturing and sales footprint, and a very exciting new product portfolio. Global products such as the mid car Opel Insignia to win car of the year in Europe, the new Chevy Cruze that’s coming, and a new next GM Aveo, which John Browning will talk about are being leveraged in markets where growth opportunities are the brightest. We feel that when you look at our manufacturing footprint, when you look at our well balanced product portfolio, we feel that we are in excellent competitive position in that regard.

So therefore, as we look towards 2009, let me emphasize the GM’s goals to improve the quality of our market share and to make our sales more profitable across all our regions. That is our singular focus. So now, with more on our products and some additional regional highlights, let’s turn the call over to John Browning. John?

Jonathan Browning

Thanks, Mickey. As you’ve mentioned some real challenges in the market place that are globally should balance manufacturing and sales footprints and strong product portfolios will give some opportunities as well. And after that global sales footprint, I think that you are highlighting right at the front that the 2008 year, against global GM leading the industry and that critical group of markets, the group markets ,and also collectively in the 26 emerging markets in total.

Let’s take a look at a few of the highlights in the regions and start with Latin America, Africa, and Middle East. As we’ve done over the recent past, we’ve done consistently well in LAAM. And GM has actually been the vehicle sale leader in that region for 11 consecutive years. In 2008, the LAAM region sales record was 1.28 million vehicles sold, and improved GM’s market share to a total of 17.1%. Specifically within the region, GM has been number one in South America overall for the past eight consecutive years. And GM’s been the leader in Ecuador and Valenzuela for 29 years, Chile for 25 years, and Columbia for 17 years.

Now, interestingly, the country with the highest GM market share globally is Ecuador with around 42% of the market. But when you look to that region and counted, Chevrolet accounted for 90% of all the vehicle sales across the region. And the top selling vehicles in the region are the Chevrolet Forester, the (inaudible) and the Aveo. And those are the three that accounts for about 41% of our sales.

Now, Chevrolet sales have increased year-over-year for the past six consecutive years, and actually more than doubled in the last five years, up 126%. In Brazil, as the largest region and largest market in South America, it is also the largest market outside of the US for Chevrolet, selling at 549,000 vehicles last year. And the Chevrolet that we see -- the product momentum continuing as we launch within the region the Camaro, the Cruze, the Malibu, and the Traverse.

The turnout to Asia Pacific as GM sales in the region grew in 2008 to a record of 1.475 million vehicles, about 3%, and our share was up slightly to a 7% of that total region. We benefited from the rising demand in key the emerging markets of China and India.

China had record sales to GM of 1.09 million vehicles in 2008. That’s an increase of 6% despite a series of natural disasters and the increases in fuel prices compounding the impact of the global economic downturn in China. Chevrolet specifically saw their products grow in volume by 16%, and the Asian sale of the leading brand broke through 600,000, as vehicles at 606,500, and vehicles -- volume increased to 17%. And GM has remained the leader among the global auto makers in China for the fourth straight year. And right at the end of last year, it’s important to note we’ve launched a number of new products into the lineups over the coming months in China with Buick Regal, the Enclave, the Chevrolet Cruze, and Cadillac GTS3.

In India, GM have record sales of 66,000 vehicles, and up about 9%. And in September, we opened a new facility in (inaudible). We just started the production of our popular Chevy Spark mini car in India.

In Korea, GM base of new records for both of complete vehicles and CKD kits, which has supported our status performance around the world.

In Australia, the Holden Commodore remained the company’s best selling passenger car for the thirteenth consecutive year. In December, Holden also announced their plans to build their own small car along side the Commodore Range at our facility in Southern Australia.

In Europe, as Carl-Peter Forster, President in GM Europe, said we had a success in difficult times. And as in the US retail network, Europe really stepped up by maintaining a positive outlook to deliver results in what were very difficult market conditions especially in Western Europe, which we heard from Mickey earlier.

Within Europe, Chevrolet was the fastest growing brand in terms of market share. Then last year, moving from straight under 2%, 2.3% of the market. And we actually broke through a half a million vehicles sold for the first time in Europe. While the industry -- as you’ve heard, the industry volume declined, and Chevrolet was actually increasing 11% volume in that industry with a drop by 5%. Specifically, in the Russian market, Chevrolet was the leading import brand, so a strong specific market performance there.

When you look at sales in Central and Eastern Europe, the volume is up 13%, and across the entire region, also with Australia and (inaudible) have leading products in their respective combined product segments. And really, the year came to a highlight at the close of the year for Opel and Vauxhall Insignia taking the prestigious European Car of the Year award for 2009. And that’s also a very strong start with over 44,000 orders in the system for the Insignia already.

And finally, for North America, I think everyone’s pretty familiar with the challenges that all manufacturers have faced in North America. Particularly, where we’re seeing demand disruption in the last quarter of the year. Specifically December, which was the fourth month in a row with monthly industry sales below 1 million unit vehicles. Despite this, facilities of GM was able to hold US market shares around 23% in 2008. And this was despite several (inaudible) supply disruptions, the strike at American industry, the tight credit market, GMAC’s restrictive and new policies, and the wobbly rising and falling gas prices, as well as our company’s overall structuring.

Another really strong accomplishment, what I think deserves calling at, is the Chevy Malibu. And despite the clearly distressed US market, Malibu sales were up 39% on the year. And it is the highest percentage volume gain of any of the top three vehicles sold in the US.

Now, as part of our restructuring in the US late last year, we focused our resources and as you learned in our call, brands Chevrolet, Cadillac, and the EPG general Buick (inaudible). And we look at options for Hummer, Saab, and Strasbourg.

I don’t have anything new to pass along on this today, but certainly stay tune as we update our restructuring plans in the course of February and March.

So in summary, to challenges and opportunities as we look forward to 2009. So we continue to leverage our balance, sales, and manufacturing footprints, and the excellent strength of the portfolio of new products coming to the market to make sure that we go out of (inaudible). And very importantly, the quality for our sales around the globe.

So with that, we can get on to your questions. And I’ll turn the call back to John McDonald in Detroit.

John McDonald

Thank you so much, John. With those remarks, let’s open the questions from our listeners. So operator, will you please give everyone the instructions. And let’s get started.

Question-and-Answer Session

Operator

Thank you. Ladies and gentlemen, we will now proceed with the analyst portion of the question-and-answer session. (Operator Instructions) One moment please for the first question. And our first question comes from the line of Patrick Archambault of Goldman Sachs. Please proceed with your question.

Patrick Archambault – Goldman Sachs

Hi. In the US, clearly, luxury car sales have been taking a pretty big hit in line with the overall economic outlook, I guess. Can you just maybe give us an overview of mixed trends throughout the year, how you saw them develop in the various regions? And then, if you could layer on top of that, maybe how you’re positioned in terms of lux, non-lux, in those various regions, that would be helpful as well.

Mike DiGiovanni

Well, I would say that, clearly, the luxury market, to some extent, experienced a bubble just like the housing market did. We saw that as housing pressures peak, the stock market was peaking. And there was a lot of deals after 9/11 on vehicles, especially on luxury cars in terms of low cost leases, and so on and so forth. And then on the leases we saw, what I would call, a bubble in the luxury market. So that answered your first question.

We think we’re seeing a return to more normalcy in the luxury market worldwide. We think, going forward, that manufacturers, to protect their brands, are going to be more careful to their line production with demand going probably -- be more respectful of more strength at leasing standards, credit standards, and so on and so forth. In the US, we were hurt more in the west and northeast because of their higher leasing areas.

Your second question in on, again, in terms of trends across the world. Clearly, the segment that is growing the fastest belongs to -- the sweet spot, if you will, in the global segmentation is vehicles the size of our new Chevy Cruze, which is coming in the stream shortly in 2010, which we’re already -- is going to be in Europe before then and in some of the markets. And everything we’ve done -- so that’s becoming the sweet spot. And the reason for that is that, emerging markets, people want to move up to somewhat larger vehicles. Okay. So they’re moving into the Cruze-size vehicles.

On the other hand, with the slowdown in some of our recent energy price increases we had, we are also seeing a growth in that segment in more mature markets as well, as people are more careful about affordability. So we think that -- we think the Chevy Cruze is going to hit the sweet spot because it’s a roomy vehicle. It is much more roomier, larger trunk capacity. It has a much better fuel economy than the Cobalt for GM in the US that’s replaced them in 2010. We think that’s what -- we think that’s going to be a very strong growth market. It’s also the -- one of the reasons we picked the E-Flex Volt to be a compact sized vehicle.

I don’t know if I’m totally answering your question. It’s a pretty broad question.

Jonathan Browning

Mickey, I wanted to comment on that. I think definitely that compact, small, compact segment around the world is seeing a lot of momentum. Chevrolet and the Cruze, specifically well-positioned, but also as (inaudible) close to high (inaudible) for both the Spark and for those markets where just slightly smaller vehicles below the Cruze is also strong. So really, close to strength around the world in the Chevrolet and other building brands in the regional market.

Patrick Archambault – Goldman Sachs

So I guess if I were just to summarize then, the developed world, obviously, is seeing what has been and then emerging markets despite the fact that economies are also slowing (inaudible) seeing more positive mix?

Mike DiGiovanni

I’m sorry. Say that again. Your remarks were cut off at the end. I’m sorry, I couldn’t hear.

Patrick Archambault – Goldman Sachs

Oh, okay. I apologize. No, I just wanted -- in summary then, it sounds like, clearly, the mix impact is negative in places like Europe and North America where we would expect it to be. But you are still seeing, despite some of the economic headwinds, a sort of shift upwards in terms of mix in places like the British, for instance.

Mike DiGiovanni

Yes, that is well said. I would say what we have learned -- this is really -- a really deep point that we have tried to stress. And we learned in space with the (inaudible), as you remember (inaudible) struck, and oil hit $147.00 a barrel. Then second struck, when it hit $38.00 a barrel, up and down. You really have to have a balanced portfolio across all your product line. You can’t stress that enough. It’s what

We’ve been trying to hammer home in all our communications because we really don’t know where energy prices are going to go. We really aren’t planning for complete volatility with energy prices. When the global economy is recovered, we fully expect that oil prices will start to rise again as global demand increases.

With that said, there has been enough volatility that you can’t be sure it is going to -- if there’ll be some other factors that we can’t foresee in terms of additional supply coming on stream or some -- (inaudible) in terms of alternative fuels with the new administration, that would mitigate the demand problem somewhat and bring on more supply of alternative fuels. It’s just really hard to predict. So you really got to be prepared with a balanced portfolio, which as John said, we think we are with the new Chevy Spark, the new Cruze, the new Malibu, the Insignia, the new (inaudible), the new Traverse Crossover we got in contract for us, where GMC has got a new contract for us over the next year, the new Chevy Equinox compact. The Traverse is mid size, I’m sorry. And then, the new Cadillac SRX luxury, mid lux crossover. In addition to our trucks, where we maintain truck leadership in the US, for example in full sized trucks and RG. You’ve got to be a player across the board in all segments because you just don’t know when oil prices are going to go over and go.

With that said, you’re absolutely right. We think that where things are right now, the sweet spot is the C-segment or the Cruze size. And we think that luxury buyers will probably tend to be more resilient in the emerging market crisis because of the -- obviously, they have more income.

(inaudible), the BRICK markets are not -- I don’t want to imply that the BRICK markets are in an economic crisis. They’re not. They’re softening, but they are still growing. And that is a really an important distinction. So they’re still a good market there. Thanks.

Patrick Archambault – Goldman Sachs

Thank you.

Operator

Our next question comes from the line of Brad Austin [ph] of P Bank [ph]. Please proceed with your question.

Brad Austin – P Bank

Good morning, or good afternoon. Good evening.

Mike DiGiovanni

Good morning, Brad.

Brad Austin – P Bank

I was hoping you could give us a little bit of a flavor for -- uniform outlooks for Europe and Asia. And then secondly, additionally some short term signs of either strengthening or weakening. And in particular, I was hoping you might be able to give us a little bit more detail on what some of the governments are doing from an automotive specific stimulus around the world.

Mike DiGiovanni

Yes. First of all, in China, for example, they’re going to continue to grow, but we think about half the industry is going to grow at probably about half its growth rate in ’09 that it had in ‘08. China is putting a tremendous stimulus package in place. As I mentioned, almost $600 billion. China has committed to wanting in its form of government to produce ten million units next year. That is their target. That is their goal. And they’re very good at delivering on that, of which a small amount of that will be export. But we feel pretty confident they will deliver on that goal, which will increase sales overall states.

We are seeing -- as we looked at these stimulus packages across the world, as I mentioned, and just about every mature market in western Europe, Brazil, Argentina, obviously, the US is contemplating it under Obama. We didn’t – - we haven’t found out that one yet. We got some stimulus packages in some of the Asia Pacific markets as well. We think just specific other stimulus packages are going to boost worldwide sales about a million units. And as I said, others are coming on stream, like the US one. One of the things that makes (inaudible) is the (inaudible) program somewhere in Europe.

So in terms of the economies, western Europe is -- to your question, western Europe is clearly slowing. And they are probably about three or four months behind the US in their downturn. I would say -- and that really reflects their movement on lowering interest rates, just like in US, by about three or four months. So we think it will be a -- Europe’s going to have a tough year as well.

Again, we think that the growth in Asia Pacific, that the growth in Latin America, they’re slowing, but not -- not in a crisis situation. We are pursuing North America and Western Europe, in particular.

Brad Austin – P Bank

Great. Thank you very much.

Mike DiGiovanni

You’re welcome.

Operator

(Operator Instructions) And our next question comes from the line of Andrew Bartram of Barclays Capital . Please proceed with your question.

Brian Johnson – Barclays Capital

Hi, this is actually Brian Johnson. Could you walk through the non-US markets, particularly Europe and Latin America, and give us a sense of how your credits -- the retail credit environments in those markets? How is GMAC holding its horns that affected you and how -- what were your chief sources of financing or where you backed into that? And where those various sources financing have gone in the fourth quarter and do you expect them to go in ‘09?

Mark DiGiovanni

I would say that -- we could go to Latin America first. Clearly, the fourth quarter saw the end of the credit boom in Latin America. There’s clearly tightened credit conditions in that region, which are the main driver behind sales that have been slowing, especially in Brazil, Chile, South Africa, and the Middle East. We would say that 70% of the slowdown, for example in Brazil, is due to this credit tightening. I would say that if you were to look at General Motors, we have also been affected by that. I do not really point harder on that.

In Western Europe, credit overall really is not a big issue. I mean, there it’s a lot easier. It is more of a traditional economic downturn. They had a housing crisis, for example, especially in Spain, UK, very similar with what we went through in the US that triggered a lot of the same problems that we are seeing with financial meltdown that we are seeing in the US and Europe. I wouldn’t say it per se it’s the credit crisis. I would say, in some of the Asia Pacific markets, GM has highly been affected in India, Korea has been a tough one, and Australia.

So I mean it varies around the world. It is pretty much a thumb stretch that -- China, we’re really not that affected. So I don’t know if that helps or--

Brian Johnson – Barclays Capital

Has there been any change in the world with GMAC in the fourth quarter in any of those markets?

Jonathan Browning

For this quarter was GMAC in those various markets, historically. There hasn’t been any change in that.

Mike DiGiovanni

Well, let me go through some notes here. Really, it varies tremendously by region. GMAC, for example, has pulled out of India. I think, in the case of GMAC, it’s pretty tough for us to -- it’s obviously affected us. I’m not trying to not answer the question. But GMAC, new status is a holding bank. It’s really unfolding before us. And we don’t -- as we speak, we’re seeing the positive benefits from that, which aren’t fully apparent yet in the marketplace. But GMAC is now being able to take the -- I mean the excess, the type of funds, getting some injection of the quality from the Treasury Department.

We think, going forward is going to become stronger and stronger. It’s kind of a slow process. The first things that you’ll probably see are -- well it’ll be our financing that we’ll be able to view towards GMAC. And then, as time goes on, you’ll probably see GMAC get back a little bit more into leasing.

But what we learned from the whole thing, as we are really were able to look at other financing alternatives using outside banks, and it really -- it’s tough for me to sit here and quantify exactly what percent of the GM sales, or GMAC, what percent of the economic downturn. And it’s a tough question to answer.

Jonathan Browning

On a reinforce, (inaudible) in a very market specific conditions. I think we can characterize the trend in terms -- in terms most significant change for Australia and US. Actually, you would call out. I think also one of the factors from vehicle envelope was the mix of businesses and the non-leasing, which I estimate (inaudible) financing, especially stations that set up. And they are as part of the bigger shipped that went through the year, and some of the mix that went through in the US. Less critical in the other markets is the US to switch other forms of rate support, rate finance offers, and it is easier to lease to other banks.

So I think, yes, especially (inaudible) call out the changing mix in terms of what we see in the US was perhaps one of the most significant trends that GM has shown through the-- and as the floor plan -- how’s the floor plans -- with Ford standing in the various regions, and our banks showing many -- shying away from floor plans and dealers.

You kind of talk about it on a local by local basis. And that’s not a lovely detail that I really want to get into.

Brian Johnson – Barclays Capital

Okay. Thanks.

Operator

We will now proceed with the media portion of the question-and-answer session. (Operator instructions) And our first question comes from the line of Jeff Green [ph] of Timber [ph]. Please proceed with your question.

Jeff Green – Timber

Good morning, guys.

Mike DiGiovanni

Hi Jeff, how are you?

Jeff Green – Timber

Good. So can you say anything about where you see sales growing this year? And should we expect the decline based on 10 million units on January and maybe an over coverage for the second half?

Mike DiGiovanni

Tapping specifically the US market?

Jeff Green – Timber

Or globally, and GM specifically, whatever you do for the company?

Mike DiGiovanni

Yes, well Fritz Henderson at the analyst -- the conference last week, this rated out pretty well for us. I mean I think even our liability plan, the second stages that we’re submitting to the government on February 17th, GM’s taking a very conservative approach to the outlooks of the market in the US and globally. And we’re doing math so that we can further drive down our breakeven point. And there’s a specific region for it.

And so, to answer your question, Jeff, we do see that with the stimulus packages coming in from the Obama administration reflecting -- as he takes office. Then with the second phase of the start package, we’re very much pleased to hear as a lot of it is going to be focused on stemming foreclosures, which really, to me, is achieved. Along with some ideas that administration has requested on stimulus packages for the auto industry similar to what other countries have done for their auto industry. For example, with (inaudible) program that could really help this.

We think that when you look at all these factors combined -- we look to the latter half of the year where the key thing -- the housing crisis to kind of finally be stabilizing behind. That’s what we want to use. And that’s going to -- once that happens, you’re going to start to see moderate growth in the economy again and in the sales. Yes, we do try to -- the second half of the year is going to be stronger. The first half of the year is probably going to be tough. In January, in particular, is tough because of fleet sales being down. And the first quarter is going to be affected by fleet sales. But retail is growing. For four straight months, retail started growing around $8.3 million, $8.4 million. So that’s a good sign.

Jeff Green – Timber

Can you say explicitly about what you think will happen to GM sales in the US and globally? You think you’ll trend down with where the market is going? And also, can you explain, when you say fleet sales, do you mean rental car? Do you mean business customers? Can you be more specific--?

Mike DiGiovanni

Yes, well, I’m sorry. When I state fleet sales, I’m talking -- I’ve been referring primarily to rental that’s going to be affected here in January. Commercial and government sales are more longer term commitments. But rental sales tend to be just in time. Well, there are orders put in for specific vehicles that one type of companies want. They want them delivered that month, and so on and so forth. So that tends to be affected real time, not so much commercial and government.

To answer your question, yes, we do think GM sales -- we think GM’s -- our projection is to target the whole market share this year. Last year, we finished the year in a really -- Jonathan mentioned tough year. We had the American Axle strike. We had supply disruptions in our Malibu plant, one of our key products. We had labor disruptions -- I should say we a labor disruption in our Lambda plant, including the change in outlook. We had the GMAC crisis, if you will, where we really -- GMAC was literally out of the game in terms of financing. And of course, we had the true energy shock in a global economic meltdown. And, despite all of that, everything we went through -- and we had talk, negative talk that followed us everywhere about the viability of the company probably, probably most importantly in the last quarter. Despite everything we went through, we finished the year at 22.1% market share, which I think is pretty remarkable.

And we’re playing with two hands tied behind his back, really. So we’re looking at 2009 and we think that now that GMAC is gradually going to get stronger and stronger, we’re very optimistic about the viability plan we’re submitting to Congress. We think it’s going to make us a stronger, healthier company for the long term. It’s doing a greatly streamlined -- everything we do. We’re going to focus on our brands. We’re going to really -- it’s going to give us a tremendous boost, we think. We’re very optimistic moving forward. And most importantly, we went through all the -- we’ve got a big year for product launches with the -- across the key segments on both of ’09 and ’10. I went through all those -- I won’t repeat some of them, but we feel we’re -- we’ve weathered one hell of a storm. And we’re cautiously optimistic as we move into ’09, if we can stabilize and grow again, not just in the US, but worldwide.

At this point, it seems to get lost on everybody, but there are 26 emerging markets. And when you look at us versus Toyota in those 26 emerging markets, we beat Toyota in 17 of the 19 -- I’m sorry, 17 of the 26 markets. We beat Toyota in the four BRICK countries, Brazil, Russia, India and China, in market share sales. But we are really well positioned in the emerging markets. And they said we have stabilized share there. We stabilized share outside of North America in ’08. As I’ve mentioned, in the three regions combined outside of North America. But we think we have an excellent footprint across the world impressed better than any other manufacturer. This is going to help us in our -- in ’09 because where some parts of the world are going to be soft, like in the United States and western Europe, other parts, well, slowly are still growing. Namely, a lot of these emerging markets in the BRICK countries. They are still growing. So to answer your question, yes, it’s our goal -- it’s the whole market share. And as we move forward in the future, hopefully grow market share across the globe.

Operator

Our next question comes from the line of Chris Morris [ph] of CNN Money. Please proceed with your question.

Mike DiGiovanni

Hi Chris.

Chris Morris – CNN Money

Thanks, Mike. Do you think the position that you have in those emerging markets would allow you to transfer once again, or do you concede that at this point Toyota will have their -- the number one title that they have for 2008 or the foreseeable future?

Mike DiGiovanni

I think, personally, I think that story is yet to be written. Nobody really knows the answer to it. When we see the fact that the US market and the Western European market, which combined, total sales of those two markets is huge. That’s a huge chunk of global automotive sales. Those are markets where we’re stronger, and for example than Toyota, and they are the markets most affected along with Japan with the economic downturn. And we’re not really a player in Japan for various reasons I won’t discuss. But when you look at Western Europe and US being the two regions of the world most affected right now by the global economic crisis, that’s why our sales -- that’s why we were -- that affected our sales in 2008 versus Toyota.

Now, when you go forward in the future and those markets recover and with a strong platform and footprint that we’re building in the emerging markets in the BRICK countries, that story is yet to be told. Our goal is to fight for every profitable unit of sale. That’s where we’re really focused on, being a healthy, profitable company. And if we do that with excellent products that we think we have demonstrated, with the Lambdas, the Malibu, the CTS, and the products that you got coming, I think that we’ll continue and we expect to roll out strong products like that. And with our footprint being really well balanced across the world, the sales story will write itself, and we’ll see. We’ll see how that story unfolds.

Chris Morris – CNN Money

Is it too much to say that you are not terribly concerned about the number one sales title?

Mike DiGiovanni

I would say that right now we’re focused on being profitable. And we want to -- our whole intent right now and our whole singular focus in the company is the submission of this viability plan to Congress. This gives us an opportunity that we’ve never had before in terms of all our partners, our dealers, our UAW, the government to work together to really restructure the auto industry to be a very profitable industry going forward, and make General Motors, in particular I should say, a very profitable company going forward. That’s what our singular focus is right now, to be honest with you. That’s all we’re pretty much thinking about is getting past this economic crisis, learn, and becoming a stronger company for the future. That consumes just 100% of the time right now.

Chris Morris – CNN Money

Thanks a lot.

Mike DiGiovanni

You’re welcome.

Operator

Our next question comes from the line of Christine Tierney of Detroit News. Please proceed with your question. Hello, Ms. Tierney. Your line is now open. Please proceed with your question.

Christine Tierney – Detroit News

Hello. You said there was no news about the brands that were being possibly sold, like Hummer. Could you talk at all about whether there are any discussions, what the level of interest is, whether this is just sort of an abeyance because of the credit crisis?

Mike DiGiovanni

I really can’t comment on that. All I can say is that we’ve publicly said -- we’ve said that a decision will be forthcoming shortly on Hummer in terms of what we are going to do. And we’ve done a strategic review now of stock. And Saturn, we’re in discussions with their franchise operation team, which is a fairly unique structure in the automobile industry in terms of that arrangement that gives us, perhaps, some options we normally wouldn’t have. That’s all we’re really going to comment on.

Christine Tierney – Detroit News

Thank you.

Mike DiGiovanni

Welcome.

Operator

Our next question comes from the line of Bernard Simon of The Financial Times. Please proceed with your question.

Bernard Simon – Financial Times

Good morning. Could I ask you about fleet sales? You say that’s the reason for the big drop in the US. And I’m wondering is that because GM is still trying to wean itself from fleet sales or is it more coming from the customers who are -- who don’t want to order? I mean, in other words, would you like to push up fleet sales at this point or not?

Mike DiGiovanni

Well to answer your question, it’s kind of complicated. But first of all, we’ve already weaned ourselves off rental sales. We’ve gotten it down to a level what we’re very comfortable with. It’s actually a profitable business for us. By that I mean rental fleet sales. Commercial and government have always been profitable for us. Those are good sales. So we now have fleet where we want it. What’s really happening now is we -- as we move into the first quarter, particularly January, we’re being hurt because we’ve decided as part of our restructuring plan to really get our inventories down. And so we’ve had to close plants. And, because of that, orders can’t be filled.

Rental companies come to us to fill orders real time, as I mentioned, because they want them delivered for that particular month. And so when the plants our down, you can’t fill the orders themselves. That’s what’s hurting us specifically in January. So as we get past this closure of our plants to readjust inventories, and we move on. In the course of the year, we’ll pick up again with rental sales. Again, doing it in a very responsible manner. We don’t want to get into a situation where we’re approaching 800,000 rental sales about three years ago. We’ve slowly gotten ourselves down to about 400,000, which is about where we wanted to be in ’08. That’s not a bad number to be at.

Also, the comment, yes, rental companies right now are buying a bit less because of the economy. They are affected too. So there are a number of factors going on here. And as the economy starts to recover, hopefully in the second half of the year, they will start to order more. So there’s a -- there are a whole bunch of different forces that work here.

Bernard Simon – Financial Times

Great. Thanks a lot.

Mike DiGiovanni

You’re welcome. I would just comment on that last, Bernard, question too. These trucks in production aren’t just us. A lot of the manufacturers are cutting back in production right now because of the slowing economy.

Operator

Our next question comes from the line of Armina Ligaya of National Newspaper. Please proceed with your question.

Armina Ligaya – National Newspaper

Hello. I’m calling from the National Newspaper, which is in Abu Dhabi, UAE. What I’m asking is how do you see yourself during the next year in the Middle East? Is the Middle East one of those markets that you said you’re well positioned in? And if you have any information about how you fared in the past year in the Middle East and UAE specifically?

Mike DiGiovanni

Yes. I would say, when you look at the Middle East, first, we’re projecting -- there’s some risk, obviously, in the Middle East because of--

Armina Ligaya – National Newspaper

Could you repeat that? I actually can’t hear you. Hello?

Mike DiGiovanni

Yes. Can you hear me now?

Armina Ligaya – National Newspaper

Yes. You’re back. The line keeps fixing out. I apologize. Hello?

Mike DiGiovanni

Yes, just a second. I’m looking at -- I’m getting some information so I can better answer your question.

Armina Ligaya – National Newspaper

Okay.

Mike DiGiovanni

First of all, the Middle East, if you look at -- first of all, GM did very well when you look at 2008. I’m looking at the information right now. We had a -- actually, a record GM sales volume in the Middle East for 2008. Going forward, Middle East has been affected somewhat by the economic crisis as well. Several parts of the Middle East have had a bubble on real estate that’s been affected. But we think that the industry is growing for 2009 in that region will probably seem to be roughly flat. We don’t see that as being in decline or growth. It’s kind of, I’d say, holding its own for ’09.

Armina Ligaya – National Newspaper

Do you know which region or how you think you would fare in the UAE specifically?

Mike DiGiovanni

I really don’t have that broken out. I apologize.

Armina Ligaya – National Newspaper

This is just a general comment. Obviously, Toyota has outsold you for 2008. I was just wondering what your thoughts were on that. How does it feel to be number two?

Mike DiGiovanni

Well, as I’ve said with the previous gentleman, we’re going to -- our goal really is -- our singular focus right now is on our restructuring plan with the US government. And we really are focused -- with the excellent products we have coming on improving the quality of our market share, and making -- and really focused on profitable sales across all regions. The sales is largely a function, as I indicated in the previous caller, of the economic downturns that are stronger in the United States, North America, and in Western Europe where we have more of our sales focused, than say, Toyota.

So as those markets recover and with the excellent global footprint we have in the BRICK regions and the emerging markets, as I said, we need a -- we gained a share or held share, 16 of the 26 emerging markets. We beat Toyota in 17 of the 26 emerging markets, beat them in all four of the BRICK countries. I think we’re pretty well positioned whether the US, North America, and Western Europe recover. We are going to be in a great position to grow globally in all regions. We’ll let the sales numbers fall where they may.

Armina Ligaya – National Newspaper

Great. Thank you very much.

Operator

Our next question comes from the line of Vicky Tolsten [ph] of Automotive News. Please proceed with your question.

Vicky Tolsten – Automotive News

Hi, guys. As I’m looking at your Web site right now, we still have something that’s for the period have been the annual global sales leader for 77 years. My question is, how are we going to change some of the marketing because of the recognized change -- number between you and Toyota? And will that send a message to the American consumer as we look at profitability maybe, I think, on the downturn still?

Mike DiGiovanni

I don’t think being number one in global sales means much at all to the average consumer. I think it’s an internal benchmark of our industry. But it really doesn’t mean anything to the consumer. I think what matters most to the consumer is strong brand and strong product. And the key thing right now with what the industry is going through is that everybody needs to be focused on viability and profitability, and really sales -- who’s number one in sales, or number five in sales, or number four in sales. In this particular economic global crisis, it is not really that important because, right now, most companies, even in fact I can say all companies, are really facing the greatest risks and challenges that we’ve faced since the Great Depression globally.

For example, Toyota is number one in sales, but they are also going to report they’re number one first operating loss in history. So the most important thing is to be profitable, to be viable, so you could fund and support strong products going forward and have a global footprint because of the volatility of the markets worldwide. You have got to really be across the world with your manufacturing footprint and with your sales staff and marketing. And you have really got to have a strong portfolio that’s well balanced, as I indicated earlier, because of the volatility of the energy crisis. We’re really seeing abnormal behavior right now because of the energy crisis.

So we’re really seeing abnormal behavior right now because of this global financial crisis from all OEMs. We’re seeing everybody having higher incentive, everybody having higher fleet sales, things we’ve never seen before even from the Japanese. Right now I think everybody is focused on being profitable, and I’m sure that’s what Toyota’s focus is having reported their first operating loss. I’m sure their main focus right now is getting profitable. That and sales.

Vicky Tolsten – Automotive News

Great. Can you tell me, though, are you going to change that on the Web site do you think? It’s a moot point, but--?

Mike DiGiovanni

I would have said that -- I’m not sure which -- I’m not looking at what you’re looking at so it’s hard for me to comment. But I do -- I would just say we’re probably going to be stressing the fact that as part of the restructuring plan with Congress, promoting our brands, promoting our products, and I would think that would be the shift and the emphasis going forward.

Vicky Tolsten – Automotive News

Great. Thanks.

Mike DiGiovanni

You’re welcome.

Operator

And our last question comes from the line of Nick Bunkley of New York Times. Please proceed with your question.

Nick Bunkley – New York Times

Hi, good morning.

Mike DiGiovanni

Good morning.

Nick Bunkley – New York Times

Hi. When you talk about how difficult the first part of this year is going to be for everybody, of course, can you just comment on what kind of strain that’s going to put on your cash position given that you’re relying on these loans from the government to get you through these the next part of the year.

Mike DiGiovanni

I would just refer back to what Fritz Henderson reported at the very onset of the analysts’ conference last week. We have taken a very, very conservative approach. I’m not going to get into sales forecasts. You can look up the transcript from that meeting last week. But we have the lowest forecast for the US, I’m telling you, out of everybody out there that we’re aware of and probably the lowest global forecast. And the reason we’re doing that, Nick, is to -- we really want to drive our breakeven point down, as low as we can get it. We want to use this crisis as an opportunity to really get incredibly lean and do the things that we finally have an opportunity to do with our partners. UAW, the dealers, the government all working together. It’s a great opportunity for us to really get the business right. And so we want to do that by planning, if you will, extremely conservatively and taking the lower end of the range for our forecasts so we can accomplish that. And that’s really been what Fritz Henderson as the Chief Operating Officer has tried to do, arrange a good strategy. And we intend to do that in such a way that it will get us healthy quicker and sooner. And our goals to, as we said publicly, is to use the loans that we’re given to restructure the business and pay them back quickly as we can.

Operator

And there are no further questions at this time.

John McDonald

Thanks very much. Appreciate it. While this is John McDonald, I’d like to thank everybody for taking time. Just one quick follow up to Christie’s question on the Web site, we’ve updated the, what we call the boiler plate on the news release, which you all received. So you’ll see that. And obviously, we’ll be updating our other communications materials as well since this really is new news within the last hour. So it does take a little bit of time to get your materials. We’ll be doing that update to the Web site. So again, if you have any additional follow up questions, my name and contact information is on today’s press release.

John, thanks for joining us from Europe. We appreciate it. Mickey, thanks for your time and effort. And we’ll be chatting with everybody in April as we work towards the first quarter 2009 sales results. Until then ,everybody have a great day and stay warm. Thanks, operator.

Mike DiGiovanni

Thanks also.

Operator

Thank you. Ladies and gentlemen, that concludes the conference call for today. We thank you for your participation, and ask that you please disconnect your line.

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Source: General Motors Corporation Q4 2008 Global Sales Call Transcript
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