General Motors' (GM) CEO Mary Barra Presents at Deutsche Bank Global Auto Industry Broker Conference (Transcript)

| About: General Motors (GM)

General Motors Company (NYSE:GM)

Deutsche Bank Global Auto Industry Broker Conference Call

January 13, 2016 08:00 AM ET

Executives

Mary T. Barra - Chairman and CEO

Dan Ammann - President

Chuck Stevens - EVP and CFO

Analysts

Rod Lache - Deutsche Bank

Richard Hilgert - Morningstar

David Whiston - Morningstar

John J. Murphy - Bank of America Merrill Lynch

Brian Johnson - Barclays Capital

Daniel Galves - Credit Suisse Securities

Patrick Archambault - Goldman Sachs

Adam Jonas - Morgan Stanley

Joseph Spak - RBC Capital Markets

Colin Langan - UBS Securities LLC

Rod Lache

Okay, I think ready to kick off our next presentation of the conference, which is General Motors. Five years ago GM emerged as a new company. The company obviously had a new capital structure and a new cost structure. But I think that a lot of people in the investment community wondered whether this was really a new and different company. And the company has achieved many successes over these intervening years, but I think particularly in the last year as this new leadership team took charge. There have been a number of significant developments that have challenged the skeptics.

And just the past year this management team took significant steps to shift the way from lower return segments. And I’d sight the exit from Russia a decision to shift 1 million to 2 million units towards a JV in China, which is not a small move for a company that does about 9 million units a year. And at the same time, the company is focused on higher return segments and opportunities like Cadillac and OnStar and of course GM Financial.

We’ve also seen this management team take a number of steps as a leader towards autonomous driving last week at CES, they put together an innovative plan to develop maps that are going to be needed for autonomous driving by leveraging cameras on literally millions of GM vehicles that are driving around that are connected through OnStar to develop the maps that are going to be required to drive autonomously anywhere. This is really for me the first time that I’ve seen a large company take advantage of their scale and their resources to do something that tech companies frankly can’t do.

And just last month the company announced the strategic investment in partnership with Lyft. Over this period, the company has made a very strong commitment to shareholders through dividends and share repurchases. And the amazing thing is that any of these developments on their own could have been pretty big milestone, but they all have happened actually in the past 12 months.

With that introduction I’d like to offer a very warm welcome to Mary Barra, the Chairman and CEO of General Motors.

Mary T. Barra

Good morning and it’s great to be here today and I’m really excited to be able to highlight the Chevrolet Bolt EV, because I think it represents a lot of what the company is capable of, it’s a great example when we look and leverage our technical capability and our speed and with that we are going to be able to put a vehicle into the marketplace 200 miles of range, which really takes away range anxiety for a lot of customers and their use cases at an affordable price of about $30,000 after government incentive.

We were able to share the Bolt last week at the Consumer Electronic Show and got a great response. In fact we’ve learned that the Chevrolet Bolt won in gadgets Best of the Best Award for CES and it also picked up a lot of awards as it relates in the automotive category. I’ll talk a little bit more about the Bolt EV, but to build on what Rod said I think it represents how we can leverage scale and our speed and our technical capability to move fast in this ever changing environment.

When we were here last year we told you that we would be increasing our EBIT adjusted and EBIT adjusted margin in 2015 and we have done just that, in fact we expect to improve our margins by about 100 basis points in 2015.

Last October, we shared our strategy for the company and our vision of how we are going to lead in the disruption of the industry and the redefinition of personal mobility, and it’s really centered on the customer. At General Motors we are putting the customer at the center of everything we do and with this we are really looking to have a relationship with the customer beyond the car connecting both inside and outside of a vehicle either through OnStar or through the smart device.

And we are moving very quickly in this space to leverage our strength again to redefine personal mobility. It starts with a strong foundation and having the right people on the team and then having the right culture and really creating the culture that is focused on transparency, accountability, speed, candor and a relentless desire to win and that’s what we are infusing into the team every day.

I’d also say we’re making sure we have the right people. With the leadership team that runs the globe my leadership team of about 20 people have, have only been with the company for five or six years or less and then the rest have deep experience within General Motors, of the top 300 that run the globe 20% have only been with the company for five years and to get a really specific example of how we’re looking to say do we have the right talent in every role we have in the company in our Chevrolet U.S. marketing and our central office over the last two years 85% of the people are new that we brought in new talent and in the field over 40% are new.

So we are making sure we have the right people that are going to help us accomplish this vision. And some of the values and behaviors perspective we are driving the behaviors necessary to win and the way I’d like to talk about it is we’ve moved from a best efforts company, we tried hard to a company that is committed to getting results. For the last two years we have delivered on our operating performance financial commitments and I think another great example of the transparency of which we’re leading this company and ensuring we stay focused on the shareholder is with our capital allocation framework.

When you look at the core business and let’s just run through a couple of the accomplishments from last year. North America achieved 10% margins a year ahead of schedule and we also are focusing on the quality of those earnings and grew retail share perspective by four tenth of a point. This was the largest gain in retail share of any OEM in 2015.

Shifting to China, we grew sales by 5% to a record 3.6 million units and delivered another strong year of equity income in excess of $2 billion. And in China I’m really proud of the team, because if you step back and remember what happened last year, China have been on a kind of a rocket ship of steady growth. Early on the China team realized there was going to be more volatility and that growth was slowing. They quickly moved and said how do we leverage revenue, capitalize on the fact we were launching two new SUVs a very important product for the Chinese market, but then also looked across the business and drove efficiencies. And that’s what helped us gain those results.

From a Cadillac perspective we have a disciplined plan to grow Cadillac to be a true luxury brand. And our sales last year were up 7.5% globally and 17% in China. And in North America or U.S. specifically our ATPs at Cadillac were second only to Mercedes. GM Financial continues on its plan and we are growing it to be a full captive. It accounted for 30% of GM’s U.S. retail sales in 2015, which was triple the amount that they were responsible for in 2014. And from a cost efficiencies perspective, from a material cost perspective, we generated $2 billion worth of savings twice the amount that we generated in 2014.

So we are well on our way to our commitment to achieve $5.5 billion in efficiencies by 2018 not only in the material cost logistic sector, but also by leveraging manufacturing efficiencies and efficiencies across all of our staffs. We also as we look to ‘16 have a strong product cadence with the Cadillac CT6 and XT5 full years of the Malibu across the globe and also the Astra, which is an award winning product in Europe and also several launches around the world. So we are well positioned as we look at the strength of portfolio from a core business perspective.

And then game changers and I’d like to touch on connectively, autonomous, sharing and alternative propulsion. In connectivity, I believe in the auto industry we are in the lead with 20 years of experience with OnStar and frankly we're growing that lead. By the end of 2016, we will have 12 million vehicles connected around the world across four continents. And in 2015, we sold seven times more 4G LTE equipped vehicles than the rest of the industry combined. And having that connectivity, we’re just at the beginning of looking at the value that we can create for the customer by having that embedded connectivity in the car and you’ll see us do that through our global connected car activities led by Alicia Boler-Davis.

To talk about autonomous, we’re very serious about autonomous, we intend to lead from an autonomous perspective. And that’s why by the end of this year, we will have a fleet of 2017 Chevrolet Bolt at our Warren Tech Center campus for those of you who have never had an opportunity to visit the campus, it’s a mile square and has its own road structure and it is the home in the core of our technical development. So imagine the opportunity to have our engineers who are working in the office on autonomous and then being able to walk 20 yards out of their office and be in a car testing what they’re designing. We think this is going to be key for all conditions that autonomous have to work and to be successful in the marketplace.

Moving to sharing, we launched successfully last year Let’s Drive New York City. And really again leveraged OnStar and leverage the opportunity to look and understand the customer we’ve had a lot of pilots and sharing and it all came together with our Let’s Drive New York City where we partnered from a housing complex and look at how do we leverage partnering and sharing within that community. And we plan on growing that and you’ll hear more about that yet this quarter.

And Dan will talk more about the Lyft investment of $500 million, but also the strategic alliance that General Motors has with Lyft. And then as we started the session with the Chevrolet Bolt, again this represents the technical capability and the speed at which General Motors can put new products into the marketplace with industry leading technology. 200 miles range, affordable price but it’s much more than just an electric vehicle. This is a vehicle when you drive there is no compromise as you’re not trading off anything to have 200 miles of range. It has the latest in connectivity with a 10.2 inch screen, which is larger than an Apple Air. It also has CarPlay and Android Auto along with the connectivity elements that we benefit from OnStar and being embedded into the vehicle.

It’s also an upgradable platform so whether we have new OnStar capability, new connectivity capability we will be able to upgrade this vehicle. And it also has fast charging so if you have an hour break in your day you can quickly charge to about 80% in about an hour and be on your way again from an electrification perspective.

So this is why we strongly believe that GM is a compelling investment opportunity. We are confident that we will be in the lead as the future of personnel mobility is redefined and we’re seizing those opportunities that are coming available in the transformation. We are also a company that’s different from a culture perspective again we are not a best efforts company any longer we are a company that will be held accountable to our results. We delivered on the plans in 2014 and in 2015 and we plan to do the exact same thing in 2016 and beyond.

So again thanks for the opportunity to talk to you today and now I’d like to ask our Dan to come up to the stage.

Dan Ammann

Thanks, Mary good morning everybody, tough crowd this morning. I’d like to spend a few minutes with you building on some themes that we’ve talked about over the last year or two particularly as it relates to resource allocation and how we’re approaching that in what is obviously a world that has a decelerating rate of macroeconomic growth and when you are in that kind of environment, when you are in any kind of environment, but particularly when you’re in a world with a decelerating macro-backdrop and a lot of disruption going on the question of how and where we’re allocating our resources become as really-really central to what we’re doing.

So just a quick opening comment on the macro-environment, I think clearly there’s a lot of concern in this room and around the investment community in general, but the automotive cycle is maturing and if you look just simply at the volume numbers coming out of 2009 for the global industry you see exactly that picture where the growth rate was initially pretty rapid, coming out of the trope and has begun to moderate going forward.

Certainly 2015 was modest growth over 2014 and we see the 2016 industry being a pretty similar modest level of upside, modest level of growth relative to 2015. So that’s the volume picture. But I think it’s also quite important to look at the other major macro drivers in the business obviously we’re in a very favorable oil price environment, we’re in a very favorable commodity price environment as it relates to the price of inputs coming into the business and we’ve clearly had tailwinds and expect to continue to have tailwinds from both of those factors as we roll into 2016.

In addition foreign exchange which can be a big driver of the business in some parts of the world we have clearly already absorbed a very significant amount of FX headwind through the last 12 to 18 months and we would think that we’re getting towards more towards the end of having to absorb a lot of that given how much we’ve taken into the results already. And I think we’ve demonstrated a pretty good ability to price and take other actions to offset some of those FX headwinds. So overall volume headline moderating some other favorability from macro-backdrop environment.

If you’d have just from a distance observed what’s happened over the last 10 days between CES and here you could reasonably say that you are a spectator of the world press release championships right there is people are putting out press releases about everything and so on and disruption the key word and everybody is talking about it, but hopefully what you’re all doing is shifting through that and figuring out where the substance is and where the big moves are as to what’s going on.

As it relates to disruption the buzz word at the moment the level of change and we’ve been saying this as a General Motors leadership team for quite some time that we expect to see more change in this business in the next five years than we’ve seen in the last 50, and we fundamentally believe that.

And the actions that we’re taking and the things that we’re doing to set ourselves up so with the Bolt already for example, with the Lyft investment already for example, with the other actions that we’re taking already that we are making this happen and we’re part of driving this change and we’re not watching change or talking about what might happen a few years out in the future, the change is real, the change is now and we are being at the forefront of that with everything that we’re doing and I got to talk more about a couple of these things a little later, but the point is this is not something that might happen, it’s something that is happening in a very real and it’s right now.

So when you get into an environment where it’s becoming arguably more challenging from a macro perspective decelerating growth. You couple that with fundamental change going on in your business, you get back to the central issue of how and where are we allocating our resources. And the usual momentum strategy no longer applies, so we need to bring a fundamentally different wins to the business and how we’re doing this.

And this is not something that has just occurred to us. This is not something that’s just occurred to us. We have been acting on this for quite some time. We have deployed tools in the business to understand where and how we earn returns on our invested capital. We’ve implanted these tools over the last several years and those tools have enabled us to make decisions to drive better returns on invested capital. So this isn’t a new idea, it’s not a new concept this is something we have been doing and we have been acting on. The good news is there is still a lot of opportunity ahead of us which I will be taking you through here in our discussion.

Before we get to the future and the opportunity for additional change, I would like to remind you of the very bold actions that we have taken as towards at our owners’ capital. We have looked across our business by market, by geography, by market segment and have very carefully scrutinized where is it that we can earn a return in the long-term and where is it that we don’t see a path to an acceptable long-term return.

And where we haven’t seen a path to an acceptable long-term return, we have nothing afraid to make the tough decisions to exit or restructure or adjust our business model to put us on a path where we can make a long-term return. These are just a handful of the significant decisions that this leadership team has made over the last couple of years to really strengthen the core of the business by being disciplined about saying you know what we can’t see a path to make a long-term return in this place and therefore we are not going to invest.

The question is, is this the next best use for our next $100 million or $0.5 billion or $1 billion to put it into this market or segment and so on. And if the answer is no, we’re not going to do it and we’re not afraid to make this kind of calls. The results of that -- and again this is not something that just occurred to us to do. The results of those decisions are very evidence in the financial results of the business. We have not been afraid to trade volume for sustainability, volume for quality of earnings.

This industry has a reputation of feeling like it needs to be all things to all people and all places and all time and that is not our belief and it’s not our operating model. In fact our view is quite the opposite and you see that evident in the results. Over the last two years even just from ‘13 to ‘15 the top-line of the business is roughly flat, but the quality of that top-line has significantly improved. We’ve exited businesses that we didn’t see a path to an attractive long-term return. And we have grown in places where we see great long-term returns in the core business and in adjacencies.

So we’ve been prepared to say we’re happy to be a slightly smaller, but much better company. And I think that’s a different approach, but we have now demonstrated that in action and in results. And the results are there to see, revenue roughly flat over this period, margins up by more than a quarter from 5.5% to 7% in just two years, and return on invested capital up by more than a third. And you can’t generate those results and that kind of improvement and performance if you’re not making the tough decisions in allocating your resources wisely. So here is very tangible evidence of the progress that we have already made by bringing this kind of discipline to the business. This is what discipline looks like.

Let’s talk about the future and the opportunity that still remains ahead of us. We are a company of significant global scale, significant global scale and we are still in the middle stages of realizing the full benefits of that global scale. We have been spending a lot of time on optimizing the capital efficiency of this business as we look out to the medium to longer term horizon because we believe that we need to drive not just what we’ve done so far that I already showed you, but the mixed level of capital efficiency through the core business over the next few years.

So if you think about where General Motors is and its architecture strategy, and its product portfolio strategy, and its footprint strategy we’ve made good strides, but we still have a lot of unrealized opportunity ahead of us. If you start at the top of this schematic year we still have an opportunity to become much more common from a global vehicle perspective and to really get the scale on our global architecture strategy.

The vehicles that we’re launching right now last year, this year and over the next few years, those architectures will form the foundation of our business for the next decade plus. And because those architectures and the powertrains associated with them have been engineered to take so much mass out of the vehicle and to create so much inherent efficiency in those vehicles we will be able to run those assets for a long time and we have to run those assets for a long time and by doing that we create significant capital efficiency by getting used and reuse and reuse again. So we are at the front end of realizing that benefit.

By having more common global vehicles it gives us an opportunity to lean out our manufacturing footprint on a global basis and to get a lot more efficiency on that. So you get more flex between plants, where we build the same vehicle around the world. And it gives us a chance to really tighten down the amount of capacity we install both from a vehicle and a powertrain perspective which has another follow on consequence of obviously, because we have more flex we can ratchet down the amount of capacity we need to still meet the demands of the marketplace for the same volume. So there is inherent efficiency gain by getting much more common globally.

We have realized significant efficiencies and expect to realize a lot more by really bringing our China business to be a much more integrated part of the company on a global basis. We announced in the middle of last year that we were going to replace all of our existing vehicles in developing markets with a common family of vehicles developed for the developing and emerging markets around the world and that will result in a massive simplification of our product portfolio, great flexibility on a manufacturing basis and huge engineering efficiency as we do the program once for more than 2 million units of global volume between China, Brazil, India, Mexico and other developing markets around the world. That kind of scale, that’s still in front of us, the opportunities that coming from that still in front of us.

So as we pursue these capital efficiency plans these are all enabled by the fact that the architectures that we’re bringing to market today and over the next couple of years are so efficient and the powertrains that we are bringing are so efficient that they will carry us far into the future and allow very significant capital reuse as we roll through the years to come. Fully compliant regulation fuel economy everything else.

So the consequence of that is we are in an investment phase over the next two to three years in the core business as we deploy and launch the vehicles that are launching right now so think about Cruze Astra, think about Malibu, think about everything that’s launching for Cadillac coming through here.

But once we have those architectural foundations in place and once we have those powertrain installations completed we will be in great shape for an extended period of time. And that will put us in a position where we can begin to really realize the inherent efficiency of the scale that we have globally and as a result of that we see capital expenditures coming down, coming down in the core business once we get a few years out and that is not the conventional wisdom that I suspect just here in this room.

And what I’m really trying to illustrate here is that we are still at the front end of the capital efficiency opportunities that we have in this company. Made a lot of strides through the discipline around where, which markets we are competing in and so on, but we are yet to really happen through and realize this opportunity here.

So at the same time as we’re being very disciplined about the capital efficiency opportunities and where it is we’re going play or not play. Let’s also remember and you’ve seen this a couple of times already that we have a very attractive portfolio of growth opportunities in front of us as a company and a lot of those are in the core business and a lot of them are in adjacencies around the core business and a lot of them are bringing technology into what we are already doing and some its branching out into new areas.

I mentioned the emerging market family of vehicles and the scale and benefit that that’s going to bring in the later part of this decade. We’ll talk more in a minute about the whole urban mobility picture and how we see that unfolding, connectivity is a huge competitive advantage for us. Others are talking about having a certain number of connective vehicles out on the road by date X, we have millions on the road right now and that is a huge benefit Rod alluded to in his opening comments.

So GM Financial we’ve talked at length about growing the full captive capability there and that success story continues to grow from strength to strength very happy with that. China we still see growth opportunity in the future after sales a huge profits center for us. Our car park has now stopped shrinking and started to grow again, so that will be a -- that’s a strong underlying driver of additional after sales opportunity and so on and so forth.

So the message here as we have a really significant portfolio of growth opportunities that have the ability to drive the top-line and even more significantly the bottom-line even in a decelerating macro growth environment. So let me spend a minute and expand a bit on Lyft, why Lyft and what’s the underlying dynamic that we see that takes us in this direction.

We see fundamental change in the urban mobility landscape, this isn’t a forecast of the future it’s an observation of what’s happening right now. In the past there was essentially two models for car-based urban mobility, you either have got a taxi some sort of car service or you had your own car and you drive it around. The issue with car ownership and the inherent and fundamental dis-economics of that in an urban environment are very significant and very real and if you are having a very expensive asset that spends 95% of its time not being utilized and instead you’re paying money for it to sit somewhere and depreciate, all of you who live in New York City will know exactly what we’re talking about there.

So you spend a lot of money to buy an expensive asset that you use small percentage of the time and the rest of the time its sitting there depreciating that is not a model that is sustainable in scale for the long-term and that is a model that will change. When we see what our customers are doing we talk a lot about putting our customers at the center of everything we do, we see that change in behavior, it’s not something we’re projecting that might happen it’s real and it’s happening today, so we need to get in front of that and be part of driving that change.

We see that change happening in a couple of dimensions in the middle column today, is the right share of business which we call sort of be driven have someone drive you and then the car share business which is drive yourself in a car that you’re utilizing out of a fleet somewhere or somebody else’s car.

We see both of those as very real opportunities and we’re engaged in both of those areas clearly right share is demonstrating very significant and explosive growth and notwithstanding the growth that’s already happened we think we’re still very much at the front end of that. But where it gets really interesting is if you roll the clock forward into the future and we see some of these dimensions re-converging again. And we think that fundamentally ride share in particular is the pathway that we’re on from where we are today into ultimately the autonomous on-demand network.

And as we engaged with people around the industry and in particular as we engaged with the team from Lyft we found we had this very common view that the first scale deployment of autonomous vehicles will not be selling them to individual consumers, but it will be into this ride share business model and there’s lots of reasons why that’s the case from safety and regulatory to the fundamental economics of taking an expensive new technology and deploying it into a high utilization model into the technical constraints in the early stages of this, which will lend themselves much more to an owned fleet in a controlled operating environment.

So for all of those reasons we see a very clear convergence between autonomous on the one hand and ride share on the other and that’s what’s total unique about the partnership and alliance that we have put together with Lyft is the first time we have a major scale ride share platform combining with a scale car making platform and all of the technical capability in and around that from an autonomous perspective. So that was a foundational thing that we arrived at that underpins the alliance and the investment that we made.

These is four dimensions to the alliance we’ve talked a lot about two of them, the first one and really the most significant and important strategic foundation is this view that I was just describing on the previous chart of this autonomous on-demand network and that by bringing the full set of capabilities together in one alliance that will allow that to happen. So we have what we need to go ahead and pursue that and we are already well underway.

The second dimension much newer term in terms of tangible result is the vehicle access, the rental hubs as we’ve described them, where we will make vehicles available to Lyft drivers so that they can -- there’s thousands of people that want to drive for Lyft, but can’t because they don’t have the right vehicle or don’t have access to any vehicle and we will provide the ability for people to come and pick up a car for a day or week, drive, get paid and drop it back off again, we think that’s unique proposition that together will be able to provide a really different experience on that front also significantly enabled by OnStar and the connectivity around that.

Between both companies third dimension there’s a lot of data, they’ve a lot of data, we have a lot of data and we see a real opportunity to bring that together and to solve problems that each of us wouldn’t be able to solve on our own enabled by huge amounts of very interesting data. And then finally we both have very significant customer base as is obviously a significant opportunity for co-marketing across those as a result.

So lots to do right now, lots to do further out in the future, but we believe are very unique proposition, the first and only example we have of bringing a major ride share platform together with a major auto maker to really redefine this future of urban mobility out on the horizon.

Another thing I’d like to talk about we just announced this morning is what we are calling our factory pre-owned collection and what this is, is another example of us disrupting something that's much closer to our core business today. So the used car market has a lot going on also right now, and we are a major remarketer of used cars, of lease, of rental, of company car hundreds of thousands of units a year and growing quite quickly as our lease penetration has ramped again of used cars going out there.

So our perspective on this is the whole used car experience is not particularly satisfying. We have this huge asset, existing assets of cars going through a remarketing channel. And given the success we’ve had with Shop Click Drive our online purchasing platform and the customer response we’ve had to that, if the team looked at this and say we have an opportunity to open up our remarketing channel to the consumer and to create a huge online marketplace of used cars where in partnership with our dealers and we can give them much more used car inventory for them to discuss with their customers and show their customers. And we can it open up online enabled by connectivity to anyone to come in and buy the car out of our remarketing channel.

And the unique advantage we have in this area is that these are factory pre-owned cars and they will come with a factory warranty. And that puts -- that’s a totally unique proposition and a level of trust that the used car buyer can take from this channel that is not offered anywhere else. So we think a very unique proposition where we can again open up and fundamentally redefine a big chunk of the used car market by allowing consumer access into our remarketing channel in partnership with our dealers and offer a really unique experience and create a business opportunity for ourselves and sort of re-disrupt if you like the used car business here.

So putting all that back together, the things I’d like you to take away from this discussion is we have a very strict focus on resource allocation and capital efficiency. And while we have realized significant gains and results that are already showing up from the decisions we’ve taken and the actions we’ve implemented there is still a significant opportunity ahead of us. We have not yet fully realized the scale potential of this company and that opportunity continues to be right in front of us.

We have significant profit and growth opportunities in and around the core business and we have significant profit and growth opportunity in adjacencies to our core business where there is GMF or after sales or the factory pre-owned collection that I’ve just described. There is all sorts of ways we can bring technology and sort of keep re-disrupting ourselves and creating business opportunities in and around the core business. And to use the most overused word of week of disruption the change is real, it’s happening right now we’re not waiting for it, we’re not speculating about it. We’re in front of it, we’re acting, we’re taking decisions, we’re making investments, we’re taking actions. We're bringing things to market right now that are prepared to take that on. And we intend to absolutely lead that as we go forward.

Thank you very much for your time. And I’ll be handing it over to Chuck.

Chuck Stevens

Thanks Dan, good morning everybody. I’ve got a lot to cover today, but before I get into my material, just like to remind everybody, as always the content of my presentation as well as the material covered by Mary and Dan is covered by the forward-looking statements on this chart.

So with that let’s get into the material. What I want to share today is fundamentally very much in line with what we reviewed back at our Investor Day in October. In other words, we are delivering to our commitments. Specifically we’re building a track record for delivering promise performance. We did it in 2014 and we’re going to do it again in 2015. We are going to drive double-digit EBIT adjusted EBIT adjusted margin growth in 2015 versus 2014. We’re going to deliver double-digit earnings per share adjusted growth in 2015 versus 2014.

And as Mary mentioned, we are going to deliver 10% margins in North America one year ahead of plan. And when you look at these results from a company perspective and think back just six months ago, the middle of 2015, significant skepticism about delivering 10% margins in North America, significant concerns around our ability to maintain our margins and drive profitability in China, significant concerns around our overall guidance. Despite that we delivered as committed and we remained committed to our longstanding target for 2016 as well. We will sustain strong margins in North America, we will sustain our margins in China and we will drive the company to break even in Europe.

Just stepping back a bit and looking at the big picture for 2016, obviously a number of tailwinds, we mentioned a few of them that we are going to continue to focus on and leverage and a number of headwinds that we are going to have to navigate once again. That’s the nature of a global complex company and the environment that we operate in.

From a tailwind perspective we’ve been talking about this over the past number of months. We are entering the heart of our product launch cycle and if you look at our most recently launched products and the cadence that we’ll be entering into in 2016 with the full year of the Astra, full year of the Malibu, the Cruze launch important Cadillac products. We have a demonstrated track record when we launch new products they are more profitable than the vehicles that they replace and we expect that to continue with our launch cadence in ‘16 and beyond.

Mary mentioned and talked a bit about cost efficiencies. In 2015 we delivered more than $2 billion in material cost performance and logistic savings ahead of our commitment. We also drove the efficiencies in selling, general and administrative expense as we continue to roll out and take advantage of our global business service initiative and IT transformation and I would say more of the same in 2016. We would expect another year of commercial performance from a material and logistics standpoint in the range of $2 billion.

These savings will more than offset the incremental investments that we are making in marketing and engineering as we launch our new products in 2016 and beyond and Dan mentioned a bit the adjacencies. We’ve been taking advantage of that over the past couple of years and we’ll continue to do that in 2016. I’ve talked before about the opportunities with OnStar $400 million of profit improvement by 2018 and that will start to accrue in 2016.

After sales hugely profitable and when you think about the opportunity to grow that revenue at 30% to 40% margins it’s going to be a big benefit from our earnings perspective and GM Financial not only from a captive finance company perspective, but the benefits that we’ll accrue to the car company as well. Obviously headwinds, the macro situation in South America is not getting better from a planning perspective we are actually expecting a bit more tougher dynamic in 2016 versus ‘15 above from a specific GM standpoint, the very aggressive actions that we took in 2015 to take cost out, to take structure out, to optimize mix and optimize revenue should help mitigate that in 2016.

And clearly pricing pressure in Europe and China are not going to abate, that’s just a reality of doing business there and we will continue to drive efficiencies in other parts of the business. I think the key takeaway is similar to ‘14 and similar to ‘15. We are driving improvement in the areas we control and we will continue to mitigate the industry and macro challenges. Again just as we did in 2014 and 2015.

Talking about 2015, as we started the year and provided guidance at this point last year. Nobody expected a slowdown in China like we had; nobody expected the macro situation that developed in South America. Despite that we deliver to our commitment and that’s our plan for 2016. Some of these drivers may develop differently than we anticipate and likely they will, but our commitment is to deliver our underlying objectives in 2016.

Just to recap 2015 once again we expect double-digit growth in EBIT adjusted and 7% margins. We will deliver more than $10 billion in EBIT adjusted in 2015 and grow our margins by 100 basis points versus 2014. And again based on our plan we will deliver continued profit growth in 2016 and that’s going to be on top of the 20% improvement that we’ve driven in profitability between 2013 and 2015.

We also expect to deliver significant growth in earnings per share again in 2016 and that’s going to be supported by both profit growth and continued share buybacks as part of our capital allocation framework. This is the one significant change from our October 1 Investor Day. We have increased our outlook for EPS to $5.25 to $5.75 a range of $5.25 to $5.75 from the $5 to $5.50 range back in October.

And that is fundamentally premised on the strong results that we delivered in 2015 and our confidence that we can deliver again in 2016. And with that improvement expected improvement in 2016 we will continue the trend of driving improved earnings per share, which is totaled more than 50% over the last two years.

Turning to cash flow, although we have generated very strong cash flow over the past several years on average about $4 billion a year, we expect an acceleration in free cash flow going forward, which will translate importantly into additional return of capital for our owners. The improvement is going to be driven by stronger profit performance as well as cycling pass the number of unusual calls on cash related to the ignition switch recall. Again, consistent with last October, we expect free cash flow generation in the ‘16 to ‘18 timeframe to average around $6 billion to $7 billion a year. Specific to 2016, we would expect free cash flow of about $6 billion.

Let me step back a second and remind everyone of the capital allocation framework that we rolled out in 2015, a transparent and disciplined capital allocation framework. And I think this is another proof point of the GM management team doing what we say we’re going to do. We have invested in the business and made the tough trade out decisions that Dan talked about in order to drive better than 20% return on invested capital. In fact, as he showed in 2015 we expect our return on invested capital to be 27%.

We have worked our cash balance down to a target of $20 billion and I would expect to end 2015 very close to that number. And we have maintained an investment grade balance sheet in fact we got an upgrade last year from Fetch. Most importantly, we have returned all available free cash flow to our owners per our commitment. This framework is driving discipline and focus in our organization, its driving shareholder value and will continue to do so in the future.

Here is a few proof points that our capital allocation framework is generating results. One and we talked about it we’ve posted strong financial results over the past couple of years and expect to see that continue in 2016. We have industry leading return on invested capital. We’re very, very focused on capital efficiency again as evidenced by the tough decisions that we’ve taken over the past couple of years which saved $1.5 billion in capital that we would have otherwise deployed to those markets.

In addition the new measures and approach that Dan has talked about will drive further efficiency going forward. Most importantly, we are increasing our returns to shareholders. We returned about $6 billion to shareholders in 2015 including $3.5 billion in share buybacks. We completed 70% of our initial buyback a two year program in the first year.

And today, we’re announcing a dividend increase of 6% and an increase in our share buyback program to $9 billion through the end of 2017. Again demonstrating the confidence that the board of the directors and the management team has that we’re going to deliver our plan and the deliver the cash flow, which enabled this return of capital to our shareholders. The key message is we are committed to enhancing shareholder value day in and day out in how we run the business.

And for our capital allocation framework, all available free cash flow will come back to our owners. And if you look at the timeframe 2012 to 2017 based on our expectations, we will return $23 billion of cash to our owners, which is virtually the entire free cash flow we’ll generate in that timeframe and about half of our market cap. We also remain very focused on downside protection. We recognized we are in a cyclical industry and it’s very critical that we remain focused on protecting on the downside.

One to ensure that we can invest through the cycle and our can ensure that we’re launching fresh products and maintaining our launch cadence as we go into the future. Two and most importantly to support our objective to generate industry leading financial return peak to trope and finally to support our objective to improve our credit rating as we go forward.

We are a much different company today than we were prior to the last downturn. We have lower debt and lower legacy obligations in total about $60 billion and I’ve said before the fixed obligation, the fixed cash obligations associated with those used to cost the company $5 billion year prior to the last downturn. It’s significantly less than that today, significantly less than a billion dollars.

We also have much lower breakeven points in the U.S. and globally. Our U.S. breakeven point one of the key commitments we made back in 2010 were to maintain our U.S. breakeven point at a U.S. industry between 10 million and 11 million units and we’ve done just that. In addition we’ve reduced our global breakeven point by more than 30% during that same timeframe.

Another data point our U.S. dealer inventory is in much better shape today than it was prior to the last downturn. It’s down about 200,000 units on a day supply basis, 20 to 30 days as we continue to execute a very disciplined go-to-market strategy that aligns supply and demand. In other words, we are not going to make the same mistakes we made in the past.

To sum it up, GM is a compelling investment opportunity, our earnings growth has been and will continue to grow going forward. We delivered our commitments in ‘14, ‘15 and we’ll do the same in ‘16. We have the best in the industry capital allocation framework underpinned by transparency, disciplined capital spending and our commitment to return all excess free cash flow to our owners and as I just covered we are a much different company today than prior to the last downturn, which is going to enable sustained performance through the cycle.

The last point, this GM management team is committed to delivering results. We’ve met the commitments we laid down in ‘14 and ‘15 and again we expect more of the same in 2016. So thanks for your time today. I’d like to invite my colleagues up for Q&A.

Question-and-Answer Session

Q - Rod Lache

I will take the first two questions. First was hoping kind of on a short-term basis looking at 2016 Chuck if you can give us a little bit of colour on what you’re seeing in terms of the earnings bridge of getting Europe to breakeven, what are the components of that? And secondly the China business stating margins and what your expectations there?

And then my second question is either to Mary or to Dan the investment in Lyft is obviously very interesting, could you talk a little bit more about how that concept evolves? Where is this concept of initially drivered vehicles going to apply, what’s those magnitude of the effect that you expect in the longer-term and related to that there is this consistent question about how do auto-makers not become commoditized by that service because once we click on that button we don’t really focus on whether it’s a GM vehicle or a Toyota or whatever it is we care about the service, so how is GM looking at that risk and potentially averting that?

Chuck Stevens

I’ll take the easy question first. Europe EBIT bridge very consistent with what we talked about before number one, underpinned by product launches, the Corsa in 2015 will have obviously the full year benefit of that as well as the Astra those two products account for half of Europe’s volume and as we’ve said before and have demonstrated with the Corsa and expect to do so with the Astra they are more profitable than the vehicles that they replace. So that’s the fundamental biggest driver.

Obviously we expect to see favorable pricing on the Astra and that’s going to more than offset kind of the carry-over pricing headwind that we see in Europe and some industry recovery. We continue to see slow industry recovery there. So those are the big drivers. China you know the market ended up just over 25 million units in 2015 up about 4% we’re kind of feeling that that’s going to be the range of growth. So one driver of kind of sustained performance in China will be industry growth we’ll continue to take advance of mix, as we continue to launch [indiscernible] products and more SUVs into the channel. We expect to see material performance and when I think about Rod broadly speaking mix improvement, material performance will more than offset kind of the pricing dynamic. Pricing we expect more of the same very, very challenging environment there in the range of 4% to 5% kind of negative pricing headwind on carryover products.

Dan Ammann

So to your second question Rod, we’re actually in a pretty interesting position because the core of our profitability and the areas of greatest strength of our franchise are frankly outside of urban centers and launch product. And we see the change in customer behavior, the growth of [indiscernible], the explosive growth of that kind of business model is beginning first and foremost in urban centers. So as we look at where our business is today and to this question I think underlying your question is just an opportunity or threat from where we sit right now with our business as we have it today this is very much a net opportunity for us.

We see the change happening in the urban centers as I said the fundamental drivers of why that change is happening and will continue to happen of congestion that this economics of low utilization car ownership, safety all of those things will drive the kind of change that we’re seeing it will be most intensive and certainly begin to happen as it is in urban centers and again for us that’s the place where we have an opportunity to be at the forefront at that change in disruption as oppose to where our core business and where our profits are really coming from today.

Richard Hilgert

Thanks, good morning. It’s Richard Hilgert from Morningstar. I wanted to ask about the powertrain strategy going forward given the increasing clean air legislation in the United States and in Europe. Diesel has its controversies here with the last couple of months with Volkswagen. GM hasn’t had much diesel here in the United States; diesel is a much bigger part of the overall portfolio in Europe. Hybrids are a more expensive option than diesel engines are. Could you comment more on where the product portfolio is today in these major regions and where you see it going in order to meet the clean air legislation and how much is this going to wind up cost in General Motors?

Mary T. Barra

So when you look at the powertrain strategy as Dan mentioned, we’ve put a lot of effort not only into the vehicle architectures, but the powertrains to make sure they are as efficient as possible from a base starting with a traditional internal combustion engine. So driving efficiencies which we will continue to do along with the right electrification. And we believe when you look at the Volt and then bringing on the Bolt, we’ve got the most efficient sell cost in the industry around and we’ll continue to improve that as we rollout the Bolt.

Along with the product like the Malibu hybrid again from -- so we’ve got that technology across the board. So it will an improved internal combustion engine, it will be in broader application of the right electrification where there extended range of electric vehicle or hybrid. And then the right implication of diesel we still we rolled out the Chevrolet Colorado diesel it’s very capable vehicle itself, so the right diesel.

So we see kind of a portfolio of solutions to meet the requirements of not only in United States and Europe, but also in China where they’re fairly stringent as well. And electrification plays a role as well as improvements in the internal combustion engine. And then when you look at the cost perspective and that’s where we’re leveraging our scale and maybe we’re in a bit of a different position than some of the other OEMs in that we still have material cost opportunities.

Chuck and I both mentioned we’ve seen about $2 billion in material costs and logistics saving, but we have more work to do as we leverage our scale, put long-term partnerships with our suppliers, with the other efficiencies we’re driving across the business we believe that we can offset because there is indeed more cost to that technology. But again leveraging our scale and the opportunities we have we believe we can offset it.

David Whiston

Thanks, Davis Whiston also from Morningstar in Chicago. My question is on autonomous vehicles and V2V, there was obviously a lot of existing players such as the incoming auto makers and then new entrance such as Uber and Tesla and then even at the regulatory side of this. So are you guys having discussions with all these players to kind of come up some sort of common way this can all be done or is that right now just a giant free for all in the industry?

Mary T. Barra

I think there is a lot of moving piece, I think when you look at the V2V or vehicle the infrastructure, their standards work going on in that area. I think you’ll see the department of transportation and it play a helpful and supportive role in advance you’ve seen some of that in California already, but I think it will evolve as the technology is evolving and we’re having regular dialogue with all those players as well as with the regulators to make sure they understand what we are doing, how we are looking at it and this is where I think General Motors brings great experience from a functional safety perspective of knowing how to validate and bring these systems and across a wide range of activity and driving conditions.

But I think it’s going to come together. So there is a lot going on right now, but I think there is good mechanisms in place that will get to the right level of standardization and probably more important safety as we put these systems out.

John J. Murphy

Thanks, John Murphy from BofA. Good morning. Just a first question on the buyback for you Chuck. Do you guys have a 10B5 program in place so that you can buy through sort of traditional black out period just given the pressure on the stock it seems like a very opportunity time to be buying back the stock right now?

Chuck Stevens

That was our approach in 2015 and that will be the approach in 2016 when we are deploying our buyback. Yes.

John J. Murphy

That’s helpful. And then just a second question, as we think as after sales being a huge opportunity the growth on OnStar and then also particularly the growth in the fleet in China. Where you sit in after sales in China? How much of an opportunity is that to support what might be a sort of a weakening sort of macro environment over there and how much can OnStar really support the after sales growth? I mean it seems like this is sort of a new tech opportunity, it’s very real in the short term to drive after sales on OnStar together.

Dan Ammann

Absolutely, I think on the China point the overall China market is going through this classic maturation that’s the word. So you see increased people coming back to buy the second, third, fourth car. You see richening of the mix, you see increased financing penetration and you see your growth in the after sales as the car park begins to really grow.

So the underlying fundamental drivers of after sales opportunity particularly in China are favorable. You’ve got those dynamic going on from a closed loop system to the open loop system. So that’s a sort of change in how the business works there. But we see the net of all of that is a very sizable opportunity from an after sales perspective.

And then to your point of the connectivity in OnStar and driving service retention of the dealerships a very tangible evidence and results of that happening already over the last several years of getting that maintenance notification that says, it’s time for tire rotation or oil change or whatever it is, in your email the notice going to the dealer, the dealer and the customer connected driving that service retention back into the dealership creating sales and loyalty opportunities, creating after sales and service opportunities it’s all part of owning the customer relationship well beyond the initial sale of the vehicle. And so that’s real happening in place right now.

John J. Murphy

And then just one last question on the Bolt. I mean how important is the China market and any of the policies over there to Bolt’s ultimate success and really getting some scale globally on volume or is it purely something that’s focused on the U.S. market right now?

Mary T. Barra

It’s on Bolt EV. So right now we haven’t announced anything outside of the United States. But as you look at the requirements from a fuel efficiency perspective in China electrification will definitely be a part of that and that’s again in our portfolio so we can leverage the electrification technology that we have to meet the requirements in China.

Brian Johnson

Good morning. Brian Johnson. Two questions, one around margins and the other around kind of longer term big data. On the margins at the Investor Day you talked about 10% margins for North America. Sounds like you are reaffirming that, can you maybe just clarify few things kind of where do NA margins fit into this guide you talked about to you talked about 10% cross cycle margins perhaps and I'm just trying interpret that because obviously if you have breakeven at $10 million at full you’re not going to be at the 10% at the bottom of the down cycle. And three, as we kind of think of the waterfall we’ll eventually see for 2016 for North America, what are the kind of negative and the positives vis-à-vis commodities pricing mix and so forth?

Chuck Stevens

Yeah well as we indicated 10% margins in North America in ‘15 sustain that in ‘16 which means 10% margins for North America in ‘16 in the context of the overall results that we talked about that that’s kind of what’s inherent to the outlook that we’ve provided. Obviously we will look to improve that.

Originally when we rolled out the 10% margin objective for North America back in 2012 at least my perspective in my old role was that that should be an objective where we were achieving 10% kind of mid-cycle $15 million to $16 million kind of level of the industry at that point in time. Fundamentally because some of our competition was doing it. And I think that that would still be the objective for the team and for our organization. And I do believe that we’ve got a number of levers to continue to pull on a cost efficiency adjacency perspective to ultimately drive the business to that level.

The overall kind of bridge year-over-year, we see slight volume improvement year-over-year, significant pricing opportunity around the launch cadence which will more than offset the content and the cost that go with that. Mix is going to be relatively flat and I would say net-net cost is going to be relatively flat. So it’s really year-over-year above the launch cadence. And that’s what’s going to drive the improved aggregate earnings in North America again in the context of maintaining those 10% margins.

Brian Johnson

Thanks and for the more strategic question. Could one of you or all of you if maybe expand on the MobileI partnership a route experience mapping really from a couple of angles. First, how is this going to help with semi-autonomous driving? Second, how does it fit in if at all to the Lyft relationship that ultimate goal of autonomous transportation network fleets? And then third, and this gets to the $400 million Chuck talked about, doesn’t matter if this is in it or not in it. But just what are the other opportunities that kind of got move the bottom-line from the big data you have as one of the still top three makers with all that connectivity you’ve been talking about over the years.

Mary T. Barra

So if you just look at the crowdsourcing work that we’re going to be doing with MobileI, I think it really leverages the fact that we’ve got all these vehicles that have OnStar. So we’ve got the connectivity because as we all know when you look at autonomous, one of the key is having accurate road information and surrounding information and it’s ever changing. So it’s not just get everything mapped once you got to constantly be updated. So when you think about our fleet in our car park that’s got OnStar that has the ability to upload that information for it to be processed working with MobileI I think that is a huge opportunity that our scale and our existing car park with the embedded connectivity that we’ve had for quite some time enables.

So clearly from your second part of the question, that is one of the enablers for us to move quickly and have autonomous capability to be able to put into a ride sharing fleet and be able to leverage that the benefits of Lyft and what they bring to the table with the autonomous. So it clearly accelerates our ability to deliver on autonomous.

And then from a third from a data perspective, there is a lot that we can do separate from autonomous leveraging the data in the vehicle to create value for the customer. One example is being able to notify you if something is wearing out or if there is an issue that’s going and be able to schedule service using your mobile app and have it taken care of before it even becomes an issue, and that’s just one example.

So I think we’re just in the early, early phases of being able to leverage all of the data that we have access to in the vehicle. And by the way, it’s the customers’ data, we have a very good process that they sign up and 99% of our customers give us permission to use the data from an anonymized perspective and that’s where the real value is anyway. So along within the customized way that we give to the customer to be able to make sure that we enhance their driving experience.

Unidentified Company Representative

Question right there please? Yeah, thank you.

Daniel Galves

Okay, thanks, it’s Dan Galves from Credit Suisse. First question is basically a yes or no, are you saying that fuel economy cost on internal combustion vehicles in order to kind of meet standards you can fully offset that with cost savings on other parts of the vehicle?

Mary T. Barra

Either efficiencies that we’re driving within the material cost of the vehicle or other efficiencies that we’re driving.

Daniel Galves

Okay, got it. And then thanks for the data points on downside cases, but I wanted to ask about working capital it looks like you guys haven’t really grown built up any negative working capital at this point how should we think about if there would be a working capital unwind if U.S. volumes were to go down?

Chuck Stevens

Yeah and we talked about that when we rolled out the capital allocation framework and one of the fundamental drivers of maintaining $20 billion in target cash is the fact that in the downturn there will be a managed working capital unwind and as we estimated that’s been on a 25% kind of typical U.S. downturn it would be a $5 billion to $6 billion temporary unwind of working capital. So that’s one of the drivers around the target of $20 billion cash.

Daniel Galves

Okay, got it. And just the last one some longer-term there seems to be a lot of things building up that could hurt the dealers like over their upgrades and less maintenance on EV you guys look like you’re getting a little bit closer to the consumer on the remarketing side. How do you maintain strong dealer relations and is there anything that the dealers can do to prevent you from kind of undertaking some of these initiatives that you’ve talked about?

Dan Ammann

Well the first and most significant decision we’ve made is that we view our dealer network and our dealer partners as an asset and it’s a very important part of the total customer experience that we’re delivering. If you think about the factory pre-owned collection that we talked about here that’s something that we were doing in constant with our dealers it creates opportunity for the dealers, it creates opportunity for us.

I think about the connectivity of OnStar to the earlier question the ability to drive service retention and service business back into the dealership creates opportunities not just around the service piece of that business, but around all of the retention loyalty and on sell opportunity around that.

I think about the strategy that we’re pursuing with GM Financial we expect and already seen the benefit of customer retention through the dealership and the ability to retain and maximize loyalty and create that tool is an opportunity for our dealers. So we have a very clear strategic view of the dealer network as an asset and an asset that can allow us to be successful and really you need time to wave put together with connectivity and everything else that we’re doing.

Patrick Archambault

Yeah thanks, Pat Archambault from Goldman Sachs. Just a question on Latin America, obviously the challenges there are considerable Argentina devaluation everything that’s going on in Brazil, can you just outline some of the steps you’ve taken so far and additional steps you’re taking to mitigate that? And then maybe if we could dimension what you mean order of magnitude by the headwind there? Thanks.

Chuck Stevens

Sure the situation in South America again going back to a theme that Dan talked about in his material, this isn’t new, this isn’t something that we haven’t been address and we started the business structure and optimizing the business structure down there back at the tail-end of 2011 and 2012 and it fundamentally it is around making sure that we are as efficient as possible from a cost perspective both kind of fixed cost as well as our material footprint.

It’s about optimizing mix and the products and revenue that we’re selling there and the actions that we specifically have taken over the last number of years we’ve taken the workforce down by 30%. We’ve closed facilities in high cost locations like Sao Paolo and shifted production to low cost places like Gravatai. We’ve cut our SG&A kind of expense and headcount by 25%, we’ve looked at the legacy products that we had there and fundamentally have significantly reduced or taken the amount of the portfolio and focused on newly launched products.

All of those have enabled us to perform relatively well in a pretty tough dynamic and I’ve talked before about the run rate savings associated with the actions that we took in 2015 we about 4,000 people taken out of the system in total amongst the other things would be $200 million a year.

In total I would expect to see some improvement in South America in 2016, despite a slightly worse economic environment. But that’s something that we just going to have to manage through similar to what we did in 2015.

Dan Ammann

I could add just one point to that. Remember that we have the number one franchise in South America. We have a very strong brand, we have a very strong dealer network. And that’s a franchise that we believe recognize here in volatility and cyclicality of that market that can be sustainably profitable over the long-term and the history certainly suggest that.

Adam Jonas

Hi, Adam Jonas. First one for Chuck and one for Mary. Chuck, the breakeven chart of 10 million to 11 million units, can you tell us what your pricing assumptions were embedded in that?

Chuck Stevens

Well sure. It’s a pretty straightforward calculation, its fixed cost divided by variable profit, right. And clearly when we look at the breakeven assumptions based on today’s environment, we’re looking at our current kind of fixed cost over our current variable profit. Clearly in a downturn scenario there will be a pricing headwind associated with that, but there will also be opportunities to take fixed cost out because you would reduce your CIB et cetera, et cetera. So that’s the technical answer to the question it’s based on today’s profitability.

Adam Jonas

But the expectation as you can take cost out faster or as fast, if pricing could degrade. So you really believe that’s an accurate representation of a real world economic breakeven attached?

Chuck Stevens

If it wasn’t we wouldn’t have been talking rather than showing it.

Adam Jonas

Great. And then Mary, you’re the only, the major auto maker in the world that doesn’t have a backing of family or let’s say some former protective government okay. So like Daimler may not have a family, but it’s a German company and people no one is messing with Daimler let’s say for short-term expectation. Many of the changes you’re talking about in this presentation I think they’re really excellent may require. And to quote that Mr. M and I mean these are really disruptive time and you express your recognition.

But to adapt to that could require upfront sacrifice to short-term results. I just want to -- trying to get a sense from you with whether you’re willing to make that sacrifice if necessary to make the franchise stronger over longer-term? And would you be better off as maybe a private company or having an anchor shareholder to make some of those sacrifices if necessary without having to deal with some of the confusion in demands or short-term speculation in the market that you might have to deal with?

Mary T. Barra

From a shareholder perspective we’re always going to look to drive shareholder value and take a long-term view. But I think when you look at the disruption that’s happening I think Dan talked about it. And as I looked at -- as I covered our strategy there is significant strength that we’re generating from the core business. And as we drive those efficiencies that allows us to fund the future. So when I see it as an or, I see it as an and I think we’re actually uniquely positioned to some of the other challenges in the space because we can drive and drive the efficiencies and still because it’s going to be a long transition and when you go back to what Dan said about the fact that with sharing, it’s an opportunity for us because it’s where our strength is in trucks and I’ll say some of the non-middle America just to use U.S. as example. So I see a clear ability for us to drive a strong core business that generates results in the short-term allows us to invest appropriately and with the right long-term view when driving value for the shareholder.

Joseph Spak

Hi, it’s Joe Spak from RBC. First question is I was wondered if you could talk a little bit about the factory pre-owned collection as it relates to residual value risk and whether that helps you perhaps manage that risk a little bit better? And then the second one would just be housekeeping in revised EPS guidance is the upsize buyback considered in that? I’m sorry if I missed that.

Dan Ammann

So on the first piece, the factory pre-owned collection is a residual value opportunity for sure. Our volume of vehicles going through that remarketing channel is going to ramp up pretty significantly over the next few years. And anytime we introduce the new source of demand into that obviously it’s a good thing. So we see that as a -- it's a real opportunity it’s a win for the customers, it’s a win for the dealers, it’s a win for residual value point of view. So I think it’s a good thing all around.

Chuck Stevens

And to your second question, I mean the upside share buyback program just to remind everybody was through 2017 and our original share buyback program $5 billion through 2016 we completed $3.5 billion. So do your own math relative to the assumptions on share buyback in 2016. But within our guidance is a level of share buyback of course.

Colin Langan

Colin Langan, UBS. I just had a couple of quick questions. One you commented on China and European pricing, there has been a lot of concern very recently from some dealers around U.S. pricing. What are your thoughts there for you in the industry? Two, any thoughts on commodity cost in terms of what kind of tailwind that might be, it seems like they are down a lot, is that going to be a big help into this year and is that a help in your numbers? And three the Bolt seems to have got a very good initial reviews any color on the profitability there it’s pretty well known that a lot of EVs aren’t that profitable or given your cost structure do you think this is going to be sort of inline with your other products today?

Chuck Stevens

Yes, starting on pricing, pricing in the U.S. continues to be reasonably rational and you guys have access to the same data we do. Incentive spend as a percentage of transaction price went up a bit in 2015, but still overall very, very rational and we would expect that to continue. With that said one other reason we’re still focused on driving cost efficiency is we control cost, we don’t always control what happens in the market and again we would as a baseline assumption would expect continued rationality in the market at least in 2016.

Commodities I’ve talked before about 2015 as a developed it was a several hundred million dollar tailwind force in ‘15 versus ‘14. I would expect kind of more of the same in ‘16 versus ‘15, it’s not $1 billion or $1.5 billion, but certainly several hundred million dollars of tailwinds at least not as things are developing right now and that’s factored into our outlook for sure.

Mary T. Barra

And on the Bolt EV question, we don’t comment on individual product line profitability. But as I mentioned before we think we have leading cost position as it relates to the sell cost and putting that into the vehicle. And I would also comment that having a great zero emission vehicle is very important for the number of states in just in United States alone that you have to meet a certain requirement to be able to sell your complete portfolio.

Unidentified Analyst

Hi, it's Jim Ervin [ph], [indiscernible] Capital. I want to go back Dan to your point about the global resources that you are leveraging in China. I just want to make sure I’m up-to-date on how integrated your phenomenal China business is going to be from the engineering R&D given the JV structure and if that operation is going to really be brought into 100% connection to all the R&D and development work that you are doing globally given that it is a holding company 50-50 structure. I’m just not quite sure how that how... there is any 1%, 5% that you guys hold back a little bit given some of that dynamic of the ownership structure that JV?

Dan Ammann

I guess the way I characterize it is that the -- our engineering capability in China and developing that has been a foundational part of our presence in partnership was like really from the outset going back to the 1990s and a point of differentiation that we’ve had relative to that Chuck actually negotiated that agreement in 1990 or whatever. So the way I’d characterize how we’re operating that today is that if you take the program for developing markets for those new family of vehicles that we’ve talked about, that’s a natural thing to have significant involvement from the China engineering center involved as part of that because we’re taking advantage of China supply base. Obviously China will be the largest market for that vehicle family. But it’s integrated back into the rest of the world as it relates to that program. So it’s really more of a sort of major program-by-program discussion in terms of how we are doing that at the moment.

Mary T. Barra

And just that I would add that there are certain elements of vehicle architecture design, powertrain design that is intellectual property that is very important to General Motors and that’s managed are very carefully.

Unidentified Analyst

Okay, thank you.

Rod Lache

Terrific, thank you very much for your time today.

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