General Motors' (GM) Management Discusses on 2016 Auto Summit Conference - Transcript

| About: General Motors (GM)

General Motors Company (NYSE:GM)

2016 Auto Summit Conference Call

March 23, 2016 1:20 PM ET

Executives

Alan Batey – Executive Vice President and President-GM North America

Analysts

John Murphy – Bank of America Merrill Lynch

Question-and-Answer Session

Q - John Murphy

Happy to have General Motors. Depending on the year, the first or second largest automaker in the world with a lot going for it, there’s tremendous opportunity in front of GM from a strategic standpoint, although a lot of that is being executed on as we speak. And there is great opportunity on the capital structure which the Company is taking advantage of in buying back a boatload of stock, at least given the authorization and the great 5% dividend yield, roughly 5% dividend yield the stock has on it right now.

Not to mention only, not to only mention there is an unbelievable product cycle in front of the Company. I think we’ll probably hear a little bit about that today. From GM, we are very happy to have Alan Batey, Executive Vice President and President of GM North America. Alan has been with the Company surprisingly since 1979. I really wouldn’t believe it looking at him. Once again these executives are aging very well. I think Alan probably started when he was three.

I will turn the program over to Alan and we’re going to have a short video in a second. But I would just mention what I think you’ll notice from Alan today is a great enthusiasm for the business. And last time I saw Alan was at the Detroit auto show in a Chevrolet Bolt explaining all the features with the doors closed. So I couldn’t actually hear him but I could almost hear him outside the car given his enthusiasm for the vehicle. So I think Alan has got a great enthusiasm for GM, the business and really trying to help everybody understand all of the great products that GM has out there on the market.

And with that I’ll turn it over to you, Alan.

Alan Batey

Yes, thanks, John.

John Murphy

And I think we’re going for a video?

Alan Batey

Yes.

[Video Presentation]

Me too. Good afternoon ladies and gentlemen. Thanks, John, for the invite to be here today and great to get the opportunity to speak to all of you. First of all, everything I’m going to say today and all the charts I’m going to show here today are going to be covered by GM’s forward-looking statements. You have probably seen this slide before when if you’ve seen Chuck Stevens or perhaps Dan Ammann or Mary speak.

It basically is what we believe is our thesis on why General Motors is a very, very compelling investment opportunity. What I’m going to do today is I’m going to focus on North America and I’m going to focus on two of the pillars. Firstly, earnings growth and then secondly, why I believe we have a very robust downtown protection strategy in place.

Okay, so this is a bit of an eye chart. So I’m going to just hold it here a little bit to get you to be able to focus in on a lot of numbers and a lot of things we’re talking about. But bottom line is I believe that we without doubt have been able to demonstrate to you that we do have a strategy in place that has and is delivering results. I’ve got a few charts that are going to follow this that are going into a little bit more detail, but I think the bottom line on this one is that our EBIT margin adjust of the expansion from 7.8% up to 10.3%, clearly shows that our strategy is really working.

We actually gave guidance that we expected to be at 10% plus margins by 2016 and we were able to achieve that more than 12 months in advance. So looking at first of all our U.S. dealer inventory, we are the blue line on all the charts that I’m going to show you here, so I’m going to focus in on the GM line. And what you can see here is that we’ve really been able to have a very disciplined approach around our inventory levels.

We are driving this really from our product development, starts with product development and I want to give you an example of what I mean by that. We’ve been doing a lot of work to make sure that we have the most uncomplicated and de-proliferated model strategy that we possibly can. The new Cruze is actually starting to leave our plants now and starting, it’s on its way to the showroom. So I picked on that model, I thought it was very relevant.

The 2015 model year, in other words the vehicle that’s currently in the market will be replaced. The dealers in the U.S. could order that vehicle and build that vehicle in 266 different ways, 266. The 2016 model year you will be able to build that vehicle in just 22 ways. Why is that significant? It’s significant because obviously it lowers our product development cost, it lowers our manufacturing cost. It will result in increased quality because people will get used to building obviously the same things. But importantly we believe that it will increase our sales and our sales turn rates because we’re going to have the right vehicle in the right place at the right time.

Most of our customers are going online and configuring their own vehicle before they go to the dealership. So you could imagine if there were 266 different ways, you could configure it the chance of arriving at one of our dealerships and finding that exact vehicle or a dealer had been able to swap in that exact vehicle was very difficult. We believe that this strategy will really overcome that.

Okay, moving to our retail transaction prices, as you can see here, great expansion. What’s driving that? Bottom line, great demand. What’s driving that transaction price is that we have great demand from a retail perspective on our products across the board, particularly driven without doubt by our truck business and our crossover and utility business. But you can see the results and basically they speak for themselves. The question I get asked is do I believe that it can get better than this?

And the answer to that is I really believe it can. Why, because we’ve actually got one of the oldest crossover portfolios in the industry today. If you look at our crossover portfolio, take the Enclave as an example, the vehicle is actually doing very, very well but its eight years old, nearly nine years old in its lifecycle. These vehicles are all in the not too distant future going to be replaced. And I believe that really will drive, continue to drive our transaction prices and our business.

Switching to incentive spend, what you can see here is that we’ve been really controlling our incented spend. Why, because of the demand that we’ve been able to create. You will see there’s been a little bit of an uptick this year. I believe that’s going to come down. When you look at our calendar year performance you are going to see that’s going to come down. Why is it up a little bit? Frankly because we have five of our core models that are actually being run out right now and they are going to be replaced in the coming weeks and months. And I’m going to touch a little bit on those new models and when they are coming to market.

The next chart is a chart that I’m really, really passionate about and that is our loyalty rate. When you look where we’ve been and where we are now, we actually achieved and were honored to receive the IHS 2015 model year automotive loyalty award winner. This is the first time that we’ve actually achieved that award since actually 2008. How are we doing this? It’s basically through very deliberate actions. Our dealers went through over $3 billion worth of renovations. I would arguably say that we went from being the worst in the industry to arguably having the best facilities in the industry. We have completely revamped the way that we think about our training, we joined forces with Disney some four years ago to really get an outside of industry perspective of how you really give exceptional customer care. That has resulted J.D. Power actually last week announced their service satisfaction awards.

In the mass brands, actually the winner was MINI, I'm not quite sure how they qualify for mass brand. But they were then followed by Buick, GMC and Chevrolet and if you look at that full report, every manufacturer is represented, you'll see the great improvements that we've made.

On the luxury side Cadillac was actually in the number three position. So this has been a massive focus for us over the last few years and that passion will not stop. We link a lot of our dealer remuneration to performance and driven by this real passion to give the best level of customer care that we possibly can. This is also very important as we think about our business I'm going to talk a little bit about we are in a cyclical business make no mistake about it.

But the higher your loyalty clearly the better advantage you have in a very cyclical business. Just to put it into perspective, one point of loyalty is worth $700 million in revenue. So it is very, very significant.

Looking at our daily rental business, what you can see here is a dramatic decline in our rental sales. Why? Number one because we have so much retail demand which is driving the ATPs and the profitability of our business as you've seen. Number two, we really want to build our residual values. And by building our residual values it gives us the best possible proposition in the market. And leasing is an important part, we've been very disciplined around leasing, but the better your residual values, obviously the better you perform.

Go back five or six years, some of our car lines had a 10 point gap, a 10 point gap to some of the Japanese major competitors. We have reduced that almost to zero. In some cases we are better, in some cases they are better by a point or two but this has been a very, very conscious effort. So as we look forward you can continue to see us being very, very disciplined. And frankly we do not need – some of our competitors may, but we do not need to use daily rental to fill our factories. We have got retail demand and that's where our focus will truly be.

Okay, I want to talk a little bit about adjacencies because this is extremely important again as we think about a cyclical business. I want to start on a couple that are core to our business and the first one GM Cat Financial. I want to take you back in time because in fact we had no, when we formed the new GM Company we had no captive capability whatsoever.

We actually made a purchase of AmeriCredit and AmeriCredit was a company, if you’re not familiar. That specializes in subprime business. We made that purchase actually in October 2010. But we actually built the capability, but did not pursue our captive strategy until early in 2014. So in 2011 we basically had nothing, zero. By 2015 we’ve actually been able to grow our captive financing, we now do nearly 47% to be precise by December, our penetration had grown to, so nearly 50% and you’ll see in the coming years this will continue to grow.

It’s obviously important because we can make good money from our financing, but more importantly for me is, we know that captive financing drives customer retention. There is a significant lift in customer retention when you’re able to put that business within a captive finance company that is absolutely focused 24/7 only on leasing and financing your products. And that’s what we’ve been building out. So it’s very, very significant. The second one is what I call, perhaps the unsexy side of the business, we don’t spend enough time on this, but it is a huge profit driver and that is our customer care and after sales.

This again has by design been a major focus area for us. This massive renovation of facilities provided us with an incredible opportunity. To put it into perspective, I’ll give you just one step that makes my point. I mean, December 2010, our service retention was 48%. Our service retention by the end of February 2016, so this February had grown to 65%. So we’ve gone from 48% to 65%. What does it tell you? It tells you that it is really – our strategy is really working. But more importantly, we’ve made massive improvement. But we’ve still got a huge opportunity in front of us. And frankly, we will drive this extremely hard.

Accessories, we live in a world of personalization today, it doesn’t matter whether it’s a vehicle whatever it is everyone wants to personalize. We are now building our accessory business as part of our product development business. So we design our accessories up front and we sell them as part of the sale of the vehicle and we finance them through our finance company as part of the sale and as part of the purchase. Again to put this into perspective, our accessory revenue – I’m sorry – has actually grown since 2013 by 50%. And I expect to continue to get double-digit growth as we look forward.

OnStar, again, you know about this. We have actually got 20 years of experience now in vehicle connectivity and in 2015, we 4G enabled seven times more vehicles in the U.S. than the whole of the rest of the industry combined. Seven times more than the whole industry combined. And so this is an area of real competitive strength and we're now going to really leverage that.

Investing in the future a critically important part of our strategy, because our core business is so strong. We're generating great returns. We do have an opportunity to invest and lead into the future. Probably a great example of that is Lyft. Lyft in the U.S. is the fastest growing U.S. ride share company in the market.

And in fact, we’ve just announced that we've actually now, because they've got so much demand and they need more drivers we've actually opened up rental hubs for them that will give us the ability to rent vehicles to Lyft drivers to provide Lyft opportunities for our customers. Seats in seats is really at the core of everything that we want to drive across all of our product lines and of course all of our brands.

And the finally Maven, Maven will be a mobility platform of the future. Our vision is very clear we want to provide our customers directly with every requirement and service that they have which will include obviously vehicles on demand. So we have many different pilots going on right now actually one here in New York City another one in Chicago, and another one in Ann Arbor. And we're developing lots of capability again having OnStar and 4G into the car provides you real-time data and the ability to really move fast in this dynamic marketplace.

So more to come on that in weeks to come but it is a major strategy. Okay, let’s flick to the most important part of that business obviously in that product. Make no mistake about it we're in the product business. And this is where we’ve really made incredible inroads over the last few years.

I showed you the launch ad just now of the Chevrolet Malibu, the whole advertising campaign for Chevrolet is around real people not actors they really are really are real people. We just gather their real reactions. And the reason for that is we know that we've got a perception problem. And we know that when we can get seats in seats and we can get people to consider us, great things happen.

The Chevrolet Malibu you can see here really shows our prowess. This is a larger vehicle than the vehicle it replaces. But it's 300 pounds lighter than the vehicle that it replaces. So you can imagine what that does for a fuel economy. It's packed with safety features and obviously the advanced technology and OnStar and 4G that we've just spoken about. We also offer features such as Apple Car Play and Android Auto. This segment, a lot of people say this segment is worth two million vehicles just in the U.S. alone. So it is a huge segment and a huge opportunity for us. The vehicle has just been launched but we’re extremely encouraged, particularly when I tell you that we outsold Fusion in January and February in retail sales here in the U.S. with the new Malibu.

The Chevrolet Cruze, another great vehicle, follows the same formula. It’s larger, it’s longer than the vehicle it replaces but this one is actually 250 than the vehicle that it replaces. 42 miles per gallon on the highway and again packed, absolutely packed with the most advanced safety features and all the connectivity that I’ve previously spoken about. We’re also going to have, as of 2017 model year we’re going to introduce a hatchback to the Cruze lineup for the first time. That will be added for the 2017 model year.

Switching brands and moving to the Acadia, I mentioned the fact that we do have an all, midsize and compact crossover lineup. This is one of our first introductions into the market. Again same formula, 700 pounds lighter than the vehicle that it replaces, seating configurations for five people, six people, seven people and as you can see absolutely drop-dead gorgeous. The Denali nameplate is doing extremely well. It is beating many brands on itself, never mind GMC just the Denali brand is outselling some very powerful competition. This vehicle is going to be available in the summertime.

Moving to Cadillac, the XT5, extremely important market for us. This is actually the largest lux SUV segment in the marketplace. It’s the compact luxury SUV segment. Been dominated as you know by the Lexus RX and the Audi Q5. This vehicle is actually in production as we speak and will start to arrive at our showrooms across the country next month. So we’ve had a great reception to this vehicle.

And then finally the Chevrolet Bolt EV. This is a vehicle that we showed as a concept just two years ago. John mentioned my enthusiasm for this vehicle at the Detroit show. We took this to CES because we really felt that this is where this vehicle should be launched into the world. Incredible reaction. It’s going to have a 200 mile range. The price after federal incentives will be about $30,000 and we really think we’ve hit the sweet spot here.

The average transaction price here in the U.S. is about $33,000, so we really believe that we’re on to create a lot of demand. And we’re extremely excited about having this vehicle. We’ve actually committed and I can confirm today that we will actually have this in production by the end of the year. So in summary, we are managing the cycle. We’re not managing the cycle because we’re just looking outside. We know we’re in a cyclical industry.

Now we do believe passionately that we believe that 2016, let me start there, is going to be another very, very strong industry. We’ve guided 17.5 to 18. I’ve got to tell you everything that I’m seeing today is more towards the 18 and we’ll see but this could be another all-time record. Beyond that we don’t see – this has been a very, very gradual recovery. And typically when you look at previous recoveries they are being driven by two things which is automotive and house starts. House starts actually did not fuel up and in fact it’s really about 50% of the sort of recovery levels that you would typically see. So it’s been a very, very gradual recovery. The reason automobiles have been so robust is the average age of a vehicle here in the U.S. today is a touch over 11.5 years old. So there’s great demand and we believe that the market is going to somewhat plateau across.

Having said that and I touched on this we are really focused on what we can control. And our business is improving, dramatically improving in an upmarket but it’s not being driven just by the size of the industry. It’s being driven by all the things that I put on this chart. Our brand health is improving. How is that evidenced? Through our ATPs and our discipline on incentives and our disciplined approach to reduce rental car sales. Our residual values have dramatically improved allowing us to obviously lease a lot more efficiently and effective than ever before.

We’ve maintained our breakeven point. We talked about this many times but we’ve got a breakeven point of 10 million to 11 million units. We’ve had a very disciplined capital deployment and cost efficiency strategy which is obviously ongoing. And we’ve really, really focused on profitable growth. We’re really focused on retail business and ensuring that we build those customer relationships.

We built that service retention. We build that OnStar retention. We sell these accessories and we’re well-positioned because of how we’re able to react to these new emerging opportunities wherever they go, whether that’s a Maven opportunities or whether that’s within our own shop with some of the strategies that we have. But the bottom line is we don’t expect a downturn anytime soon. And we believe that even when we do we’ve got a stronger base than ever before to capitalize and to continue to grow our business.

So in summary, I really believe that we do have a very compelling investment opportunity. It’s built around actions and results. That’s why it was important for me to show you that we have continued to grow our business and we continue to show you the same metrics to gauge us against. We have shown our ability to grow our earnings. We are disciplined. And then finally we do have a robust downside protection strategy in place. Why? Because of the actions and the results that we are driving in our business.

So with that, John, maybe I'll pass it back and take a couple of questions.

John Murphy

Sounds great. I will kick off with the first question. When we look at all the product launches they seem like they're fantastic. I think on the car side you guys have talked about the newer cars, the Cruze and the Malibu, having $1,500 more in variable profit combined between pricing and cost. But we haven't heard as much on the crossover side and the crossover segment is as hot as hell right now. Your vehicles, your crossovers are on the old side but still competing fairly well and now we're about to see this whole wave of new crossovers this year and next year as far as our estimates, anyway, I know you haven't confirmed next year. But how should we think about the impact that they can have on sales and pricing and cost and variable margin? Because it sounds like that's a really big part of the story going forward, particularly because the segment is so hot.

Alan Batey

Yes, I think we've got a couple of examples where we have – well, we've got a couple of examples, one is where we reinvented a segment which was midsize pickup trucks with our Colorado and Canyon. We have the highest ATPs today. We have 35% segment share and we were at three shifts and sold out. So there's a good example where we saw an opportunity, went in. Small SUVs, the best-selling small SUV in the market today is the Buick Encore closely followed by the Chevrolet Trax. And so we've seen just this expansion John. But to your point, we do have a portfolio of compact and mid. Compact is the biggest segment, compact SUV is the biggest segment in the U.S. It's the biggest segment. That and mid-is huge opportunity for us. So you're going to see that we're going to refresh our portfolio and that will drive an expansion I think in our earnings potential as well as our ATPs and our ability to continue to grow at a rapid rate

Chevrolet last year gained more retail market share than any brand in the U.S. In January and February we're up another 1 full point in retail share. So this momentum continues being driven by incredible product. But on the car side of our business people say sometimes say there is no car business. Cruze and Malibu compete in a segment combined that's worth 4 million vehicles and we've got two new entries which I believe are going to lead the way. So we're pretty excited about where we're at and we see a lot of opportunity.

John Murphy

And then also on the product side what we're hearing from Delphi and we hear from you guys on the technology front and we hear from a lot of companies is there's more and more technology coming into the vehicle that can actually be replaced and updated on a much faster cycle time than sort of our standard four, six year assumption on vehicles. How do you think about that going forward as far as the refresh rate and how do you think about it as far as an update a software update or a hardware update on all this electronics? And really can that spur demand and pricing and really just create the whole faster product cycle that we're all looking for.

Alan Batey

Yes, absolutely. I think that we talk about MCMs, basically you guys would understand that almost as a refresh facelift. We probably got two great examples of how we've been really successful. The 2016 Silverado came with an MCM that people did not expect that they love it. So it's very, very visual and it's worked really well. The new Trax MCM that we showed at a Chicago motor show I've had people tell me, some of the auto journalists, this is one of the most impressive MCMs they've ever seen. And so what I think, John, you are going to see in the future is we are using our scale to give the customer technology that they would not have expected. So 4G LTE, we didn't just do that for Cadillac. We pulled up that right down into the Chevrolet Spark. And so the ability to provide the customers with the technology they need then provides us a lot of downstream opportunity.

So we're able to predict, we're able to do predictive maintenance now on our vehicles so that they don't fail when we have to pick them up and take them to a dealership. We can actually predict if something may fail, tell the customer so we can actually make sure they never get work on failure. So there's so many knock on effects that you get and having 4G is so embedded now into our strategy I think is a huge plus.

John Murphy

I've got a bunch more questions. But any other questions in the audience before we use up all the time?

Unidentified Analyst

Just wondering if you could spend a few minutes on the Cruze automation acquisition, what that product is and what you envision the future of the partnership with Cruze and GM to look like in the future?

Alan Batey

Sure. So obviously for us it's giving us, enabling us and giving us the software requirement we need to go to the next level with regards to autonomous. We're really excited about the purchase. I can't give you the details of that right now. That will become available obviously once we've closed the deal and then obviously as we give our financial statements and guidance. But I can tell you that we believe that we can be a leader when it comes to autonomous vehicles and that's our strategy and that's where we decided we want to be from day one. And so an important purchase for us, an exciting one and I think it positions us perfectly now to be able to make sure that we really are a leader in this space.

John Murphy

And maybe just a follow on to that when we look at OnStar I think the graphical you showed with a different downstream opportunities at GM Financial and the accessories. But then you have OnStar, Lyft and Maven. As you look at those OnStar is obviously well-developed, Lyft is in the early days and Maven is in the relatively early days. As you're exploring these opportunities on these different models and then how the cars are working differently or owned differently, what do you see the real opportunity there? Is this something that's going to become core to GM? Is this something that is being explored to understand how the ownership model will change and maybe then you monetize it down the line? Or is it just really too early to call exactly where all this stuff is going to go?

Alan Batey

Right. So you need to put it into perspective. The stats will tell you that it's about 1/10 of 1% of miles traveled in the U.S. are actually in a rideshare mode. So it's super, super small right now. But it clearly is something that is growing extremely quickly. It is in urban areas. If you look at our business, our biggest weakness is urban areas. So this is a perfect fit for us and gives us the ability to get the seats in seats, John, that we really want.

So as we go forward, we believe that we can really capitalize on this opportunity. We think that our core business we are coming off a record high market will continue to be extremely strong but we think that we're better placed than any of our competition when it comes to, number one, the 20 years of experience we have and then secondly, our ability to make sure that mobility needs to be driven by customer demand and customers will decide which mobile technology is right for their use, which is why we've got so many different pilots going on right now because we're learning a lot.

Unidentified Analyst

Two quick questions.

Alan Batey

Yes.

Unidentified Analyst

One is on pricing. I've lived through a couple of cycles and it seems like when the SAAR goes down there's price wars. Maybe we're going to have to enter a different scenario given the breakeven is $10 million or $11 million. What's your vision on pricing if we do head into a downturn in the next few years?

Alan Batey

At the end of the day you could see it today in a very strong market there are those competitors that have got incentive levels at all time highs. Why? Because people don't see the value in their product and they are not buying it. There's a couple of Japanese manufacturers and a couple of Koreans I probably could have put on this chart but the scale wouldn't have gone high enough.

And so for us we need to focus on building the value proposition, we need to focus on delivering an incredible ownership experience and we need to drive this loyalty the way I showed we've been doing. And there's so much more upside for us to be able to capitalize on. So without doubt the winners in the market, the people with the best resale values, the people with the best transaction prices, the people with the most disciplined incentives are those that create the most demand. And that's where our focus is.

And I'm not kidding you that we are at the moment the best of the best. But I've got to tell you we've come a long way and I don't believe it's going to stop with the arsenal of new products we've got.

Unidentified Analyst

I know it you're a product guy so I don't want to offsides on, I'm a bond analyst so we look at the balance sheet a lot. What's your feeling personally going that you've been at the company for a long time of where do you think the balance sheet is, where do you want it to head over the next few years as far as ratings and leverage which would be a competitive advantage if it gets better.

Alan Batey

Yes, at the end of the day the better results we get, the better options we create for ourselves. The reason that we're able to make a significant investment for example in Lyft and the reason that we were able to do the acquisition of Cruze was because our core business is so strong and because we are deploying the right levels of capital into new product development. This is a product business and it's also a services business. And it's funny, I said at the Consumer Electronics Show and said I'm actually in the consumer electronics business because we are.

And so I think that the bottom line is this business will be driven by the same fundamentals. If we're successful and we drive the right returns and the right margins, right returns to our investors, right margins in our business, right level of customer care and retention to our customers everything is going to be very, very well taken care of.

The other thing I would say is that we've got a leadership team in GM that I'm proud to be a part of. It's a very diverse team. It's a lot of experience and we've got people that have been senior executives in other OEMs. We've got people like Dan Ammann that came from Wall Street and we've got old veterans like me that have been around the company and know how to get things to work. I think that combination together and just this incredible humble spirit to win is what's going to drive the business.

John Murphy

And if I can sneak in just one last one as we run out of time here, as we think about the customer care and accessories business they would presumably be a lot less cyclical and very profitable.

Alan Batey

Absolutely.

John Murphy

Would you care to share the profitability numbers which probably have the answer of but as you think about that and the growth in GM Financial and the part of the business or the earnings and cash flow stream that is becoming less cyclical, I mean can you push that further? And how much more comfortable are you heading into what may be I think a peak in the next few years and ultimately a trough in 5 years to 10 years?

Alan Batey

I can't – I won't give you the numbers but I can tell you that's significant and in every category these are double-digit very significant numbers. And this isn't very sexy but it's real, people who are satisfied and love their product sell them for us to their friends and family. It's that simple. And those people that don't will tell of a lot of people why not to buy it. And I've lived the other side of this, John. I'm being really honest. I've lived and I wasn't in the U.S. but I've lived some of the products that were on the wrong side of this. And I can tell you it becomes very transactional. And the question that was asked about some of our competitors and their incentives levels, that's being driven by the fact they haven't been able to create demand.

And so from my perspective as I think about our business it is these basic fundamentals that will drive our long-term success. And that's how Toyota built their business. And we are showing that we are a different company, that the fundamentals of our business are strong. But the most important thing is, and that's why I believe that we are in a cyclical business we think it's going to plateau somewhat, we don't think it's going to fall away, but we are not just living on the crest of a business that's going sideways. We are improving every day our fundamentals. And so the strength of those fundamentals will make sure that when we do hit a downturn we are going to be in a better place than ever before.

John Murphy

Great. I think on that note to stay on time we will have to thank you for your time and appreciate you coming here, Alan.

Alan Batey

Thank you. Thanks a lot.

John Murphy

Thank you so much. We really appreciate it.

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