General Motors Q4 2022 Earnings Report

General Motors EPS Results

• Actual EPS: $2.12
• Consensus EPS: $1.68
• Beat/Miss: Beat by +$0.44
• One Year Ago EPS: $1.35

General Motors Revenue Results

• Actual Revenue: $43.11 billion
• Expected Revenue: $40.62 billion
• Beat/Miss: Beat by +$2.49 billion
• YoY Revenue Growth: +28.40%

General Motors Announcement Details

• Quarter: Q4 2022
• Date: 1/31/2023
• Time: Before Market Opens
• Conference Call Date: Tuesday, January 31, 2023
• Conference Call Time: 8:30AM ET

General Motors (NYSE:GM) (NYSE: GM) is a global automotive company headquartered in Detroit, Michigan. Founded in 1908, GM designs, manufactures and sells cars, trucks and sport utility vehicles through its Chevrolet, Buick, GMC and Cadillac brands.

GM’s product portfolio includes gasoline-powered and electric vehicles, full-size pickup trucks, commercial vehicles and luxury automobiles. The company is developing battery-electric and other advanced vehicle technologies, while also offering connected-vehicle services through its OnStar platform. GM Financial provides automotive lending and leasing services to retail customers and dealers.

GM primarily serves customers in North America and also operates in selected international markets. Its operations include vehicle design, engineering, manufacturing, distribution and after-sales services, supported by a network of dealers and suppliers. The company has also invested in autonomous-driving technology through Cruise and in defense-related mobility solutions through GM Defense.

Mary Barra has served as GM’s chair and chief executive officer since 2014. The company’s common stock trades on the New York Stock Exchange under the symbol GM.

General Motors Q4 2022 Earnings Call Transcript

Key Takeaways

• GM delivered $14.5 billion in adjusted EBIT (9.2% margin) for 2022 and guides to $10.5–$12.5 billion in adjusted EBIT with $6–$7 EPS in 2023.
• GM led the U.S. industry in total sales, gained market share in full-size pickups and SUVs with record average transaction prices, and plans to end 2023 with 50–60 days of dealer inventory.
• GM’s EV lineup expands to nine models in 2023, is on track to produce 400,000 EVs in North America by mid-2024, and secured long-term supply via Ultium plants and a $650 million Lithium Americas investment.
• The company announced a $2 billion automotive cost savings program over two years with no planned layoffs and expects at least $300 million in clean energy tax credit benefits in 2023.
• Cruise achieved nearly 1 million driverless miles, launched public and commercial services in multiple cities, and plans rapid expansion while improving operational efficiency.

Presentation

[Operator]

Good morning, and welcome to the General Motors Company fourth quarter 2022 earnings conference call. During the opening remarks, all participants will be on a listen-only mode. After the opening remarks, we will conduct a question-and-answer session. We are asking analysts to limit their questions to one and a brief follow-up. To ask a question, press star then one on your telephone keypad. To withdraw your question, press star then two. As a reminder, this conference call is being recorded Tuesday, January 31st, 2023. I would now like to turn the conference over to Ashish Kohli, GM's Vice President of Investor Relations.

[Ashish Kohli, VP of Investor Relations at GM]

Thanks, Michelle, good morning, everyone. We appreciate you joining us as we review GM's financial results for the fourth quarter and calendar year 2022. Our conference call materials were issued this morning and are available on GM's investor relations website. We are also broadcasting this call via webcast. Joining us today is Mary Barra, GM's Chair and CEO, Paul Jacobson, GM's Executive Vice President and CFO, and Kyle Vogt, CEO of Cruise. Dan Berce, President and CEO of GM Financial, will also be joining us for the Q&A portion of the call. Before we begin, I'd like to direct your attention to the forward-looking statements disclosure on the first page of our presentation. The contents of our call will be governed by this language. With that, I'm delighted to turn the call over to Mary.

[Mary Barra, Chair and CEO at GM]

Thanks, Ashish, good morning, and thank you all for joining us this morning. I want to begin today's call by recognizing the General Motors team, all of our employees, and including our dealers and suppliers. It takes experience, skill, and teamwork to adjust to external factors like higher interest rates, commodity price increases, and supply chain disruptions, and deliver our commitments year in and year out. Our team rose to meet every challenge thrown at them in 2022, they delivered record EBIT-adjusted in a year of firsts that really sets us apart from our competition. For example, GM led the U.S. industry in total sales and delivered the largest year-over-year increase in market share of any OEM alongside record ATPs. This reflects the strength of our product portfolio, including our clear leadership in full-size pickups and full-size SUVs, great quality, and improved availability.

[Mary Barra, Chair and CEO at GM]

Chevrolet and GMC delivered more than 1.1 million full-size pickups, full-size SUVs, and midsize pickups in the U.S., which is about 350,000 units more than our closest competitor. Our commercial fleet business is another area where we gain considerable profitable market share. The team has earned the business of more than 300 major commercial accounts over the last several years, which led to our best year for commercial delivery since 2006. The inflection point was driven by our investment in mid-size and full-size pickups, including our capacity expansions to build more crew cabs and heavy-duty pickups. Our growing portfolio of EVs will enhance our strong sales and share performance across the board because we're targeting the most popular segments at multiple price points.

[Mary Barra, Chair and CEO at GM]

This year, we will have nine EVs in the market in North America, including the Chevrolet Bolt EV and EUV, which saw record sales. They were the best-selling mainstream EVs in the second half of the year, and we plan to build more than 70,000 this year for North America and other markets. Quality is another area where our team deserves recognition. In the latest J.D. Power U.S. initial quality study, GM improved while the industry went backwards. Not only did we get better, GM and the Buick brand led the industry, Chevrolet had six top-ranked vehicles, and the Corvette was the highest-ranked nameplate in the industry. This commitment to satisfying customers and delivering industry-leading quality helped our eligible U.S. hourly employees earn record profit sharing totaling $500 million, which brings the three-year total to $1.2 billion.

[Mary Barra, Chair and CEO at GM]

Looking ahead, we expect that 2023 will be another strong year for GM. We expect to deliver EBIT-adjusted in the range of $10.5 billion-$12.5 billion, which reflects operating performance similar to 2022 when you include the normalization of GM Financial's results and pension accounting. Our guidance includes a total of $2 billion in cost savings in the automotive business over the next two years. The areas we're focusing on include continuing to reduce complexity in all of our products and reducing corporate overhead expenses across the board. I do want to be clear, though, we're not planning layoffs. We are limiting our hiring to only the most strategically important roles, and we'll use attrition to help manage overall headcount.

[Mary Barra, Chair and CEO at GM]

On the revenue side of the equation, we expect the new products in key segments will continue to support profitable growth. This includes the Chevrolet Corvette E-Ray, our first electric supercar and the quickest production Corvette in history, our new mid-size Chevrolet Colorado and GMC pickups, our new Chevrolet Silverado and GMC Sierra heavy-duty pickups, and the all-new Chevrolet Trax, which is the best entry-level Chevrolet we ever built. We're especially excited about the Trax, and so are our dealers in North America, Korea, and other international markets. The Trax really stands out in a segment where customers are often forced to sacrifice for a low price. But the Trax is stylish, roomy, packed with safety technology, and it's very affordable. Its combined city highway fuel economy is 30 mi per gallon, and it's also more profitable than the model it replaces.

[Mary Barra, Chair and CEO at GM]

The third-generation Chevrolet Montana pickup that we're launching in South America and Mexico starting next month follows the same formula. The Montana's design is inspired by products like the Blazer and Trailblazer, and it will offer customers more room, the best combination of fuel economy and performance in its segment, and a comprehensive suite of safety features and an innovative reconfigurable bed. Let's talk about our growing EV portfolio. At our November Investor Day, we took you deep into the products and supporting strategies that will help us achieve solid EV profitability in 2025. This is a breakout year for the Ultium platform. Production at our Ultium Cells joint venture in Ohio is on track, and the plant in Spring Hill will open later this year. Ultium Cells started hiring and training launch team members in October, and they began equipment installation in November.

[Mary Barra, Chair and CEO at GM]

These plants will help us meet pent-up demand for the Cadillac LYRIQ, the GMC HUMMER EV pickup, and the BrightDrop Zevo 600. It keeps our other EV launches on track. For example, BrightDrop continues to add new customers, including DHL Canada. They are on track to achieve the goal of $1 billion in revenue for the year. Excuse me. In April, we launched the Silverado EV work truck at Factory ZERO for fleets. We have opened up the order banks to begin converting initial demand for more than 200 customers into firm orders for 2023 production, with the first deliveries in the spring. Interest is so strong that we believe demand will exceed supply in 2023 and into 2024.

[Mary Barra, Chair and CEO at GM]

In the fall, we will begin building the sold-out Silverado RST First Edition, Chevrolet's flagship electric pickup, which will feature trailering-capable Super Cruise, four-wheel steering, and a Multi-Flex Midgate, and up to 400 mi of range. We'll follow with other retail-focused models in 2024, including the Silverado EV Trail Boss. This summer and fall, we'll also see the launches of the Chevrolet Blazer EV and Equinox EV. More than 40% of Blazer's reservation holders are new to EVs. Among the 60% who have owned an EV or hybrid, most are either Tesla customers or are loyal Bolt EV and Volt customers. What's common to everyone is they want an all-electric SUV that's stylish and roomy with enough range and fast-charging capability to make it their daily driver, and they want it from a brand like Chevrolet with a proven record and reputation for quality.

[Mary Barra, Chair and CEO at GM]

The Equinox EV has many of the same attributes in an even more affordable package, which makes it unique and another growth opportunity for GM. More than 1/3 of the customers interested in the Equinox EV say affordability is their key consideration, and the latest data says nearly half live on the East or West Coast or in Texas, which are all growth markets for us. This cadence of cell production and product launches, combined with strong demand for the Bolt EV and EUV, keeps us on track to produce 400,000 EVs in North America from 2022 to mid-2024, with the Ultium platform volumes increasing significantly in the second half of this year. Our team in China is also scaling Ultium. The Cadillac LYRIQ, which was the first to launch in September, our dealers are very excited about it.

[Mary Barra, Chair and CEO at GM]

They delivered around 2,400 units through December, with about 80% of customers coming from other manufacturers. Excitement is also building at Buick, which is now building pre-production units of the Buick Electra 5, an SUV inspired by the Electra-X concept. It will be the first in an all-new portfolio of Buick EVs. All of these launches and initiatives will help us deliver near-term commitments we made at Investor Day. We continue to make bold moves to drive profitable long-term growth. One example is our planned investment of more than $850 million in four U.S. plants to build the sixth generation of our small-block V-8, which will deliver even better fuel economy, about a 5% improvement and double-digit reduction in emissions, and more performance for our truck and SUV customers.

[Mary Barra, Chair and CEO at GM]

We're also building an EV supply chain that is long-term competitive advantage for GM and a major source of new jobs, especially in North America. For example, our first three joint venture cell plants are expected to create 11,000 jobs in the U.S., with about 6,000 in construction and 5,100 in operations. In Quebec, construction of our joint venture cathode active material plant is moving quickly, and the structure should be complete mid-year. In Texas, MP Materials has started construction of its first rare earth metal alloy and magnet manufacturing facility, and they expect to begin delivering product to us late this year. After several months of optimizing engineering and process parameters, Controlled Thermal Resources is now recovering lithium from its geothermal brine resource in California's Imperial County. This is an important step in completing the engineering design to recover lithium from geothermal brine at scale.

[Mary Barra, Chair and CEO at GM]

In Australia, Queensland Pacific Metals has secured all major approvals to begin construction of a new facility that will be an environmentally sustainable center for processing nickel and cobalt. In December, Ultium Cells signed a supply agreement with POSCO Chemical to support source artificial graphite from Korea. Today, we announced the largest ever investment by an automaker in battery raw materials. Specifically, we are making an equity investment of up to $650 million in Lithium Americas to help them develop the largest known lithium resource in the U.S. and the third largest globally. Lithium Americas estimates that the potential output from this project could support annual production of up to 1 million EVs and create 1,000 new jobs in construction and another 500 in operations.

[Mary Barra, Chair and CEO at GM]

Production is scheduled to start in the second half of 2026. After our initial investment, GM will have exclusive access to the lithium offtake in the first phase of the project. It's a landmark transaction. It certainly won't be the last major supply chain announcement for GM. We continue to pursue strategic supply agreements and partnerships to further secure our long-term needs and drive investment in the United States and across North America. As I said, all of these launches and initiatives tie back to the roadmap we shared at Investor Day. We're executing a product strategy in ICE and EV that is designed to support strong pricing and grow our share, especially in EVs, by competing in multiple segments and price points. We're expanding domestic cell production to drive EV growth, and we are turning our EV supply chain into a powerful competitive advantage.

[Mary Barra, Chair and CEO at GM]

We're maintaining strong financial results during a period of high investment, which includes taking a very strategic approach to managing our costs. Next, I would like to dedicate a few minutes to Cruise because 2022 was a very significant year for them as well. Kyle, I'm turning it over to you.

[Kyle Vogt, CEO at Cruise]

Thanks, Mary. Before I share more about the rapid scaling ahead of us for 2023, I'd like to take a minute to highlight what we accomplished in 2022. As you said, last year was the year that fully driverless AVs transitioned from being a moonshot to reality, with the Cruise Robotaxi fleet serving thousands of rides to real customers in a major U.S. market and making its first fully driverless deliveries. We started the year with just a handful of cars on the road and a service that was restricted to employees. In January, though, we welcomed our first public riders, and a few months later, launched our commercial service, the first ever in a major U.S. city.

[Kyle Vogt, CEO at Cruise]

Since then, we're approaching 1 million driverless miles, have completed tens of thousands of driverless rides, and run the largest driverless AV operation in the world, currently peaking at 130 driverless AVs at the same time in our Red Hill fleet. We've scaled responsibly, safely, and transparently, including the release of the most comprehensive safety report in the industry. It outlines the key tenets and processes we put in practice each day that make our products an obvious choice against a backdrop of tragedies on the road caused by human error. We finished the year delivering on our promise, a bold one, to complete our first commercial driverless rides in Austin and Phoenix. In Austin, we went from zero footprint to revenue-generating rides in just a few months. This proves that our technology scales quickly to new regions with minimal modification to our investment.

[Kyle Vogt, CEO at Cruise]

I think at this point, it's fair to say that our focus on complex cities like San Francisco, doing that first has paid off, and we've opened the door to rapid scaling this year and beyond. Looking ahead, this is the year when we really hone in on our key enablers for growth and profitability. Those are amazing experience, low cost, available everywhere. We're gonna expand our service in both existing and new markets, and we'll have more to come on this soon. We're working to ensure that our riders have an experience that is not only better than traditional ride hail, but the best transportation experience possible. The Origin will go into volume production later this year with closed course testing underway right now.

[Kyle Vogt, CEO at Cruise]

I can say after riding an autonomous Origin myself, I can say that it's gonna be hard to go back to a conventional vehicle format for an AV. As part of driving down costs and increasing availability, you'll also see us to continue to improve our operational efficiency and scale. As an example, the most recent 100,000 mi driverless that we did clocked in 8x faster than the first 100,000 mi that we did, and we expect our rapid expansion to continue at similar rates this year and next. Our operational efficiency also extends to how we spend our cash. We continually look for creative ways to reduce expenses, including, more recently, increasing our use of automation, increasing our cloud compute efficiency, and reducing our R&D real estate footprint.

[Kyle Vogt, CEO at Cruise]

Our major investments in lower costs, vehicles and hardware, such as the Cruise Origin, better routing and pricing algorithms, and operational efficiencies are going to drop costs and improve our unit economics as we scale to more cities, drive up revenue, and continue our march toward profitability. We will be thoughtful and focused with our spending, but we do intend to pursue the massive market opportunity in front of us by significantly increasing our commercial footprint and operating scale. It's abundantly clear that we have a massive opportunity ahead of us, and it's fully within our reach. We will continue to go after it with integrity and with urgency. Thanks, Mary. Back to you.

[Mary Barra, Chair and CEO at GM]

Well, thanks, Kyle. Now let me turn the call over to Paul, who's gonna go into a detailed discussion of our results and our outlook.

[Paul Jacobson, EVP and CFO at GM]

Thank you, Mary, and good morning, everyone. Thank you for joining us. I also wanna start my remarks by thanking the entire GM team. They remain focused on execution and consistently meeting our commitments no matter the obstacles, and this is exactly what they achieved in 2022. We generated full year revenue of $156.7 billion, representing strong year-over-year growth of 23%. This improvement was driven by the team overcoming numerous logistics challenges and collaborating with the supply chain to increase parts availability. As a result, we grew wholesale volumes 25% within our objective of 25%-30% for the year. We continue to face some supply chain and logistics issues, but overall things remain trending in the right direction.

[Paul Jacobson, EVP and CFO at GM]

For the full year, we achieved $14.5 billion in EBIT-adjusted, 9.2% EBIT-adjusted margins, and $7.59 in EPS-diluted-adjusted. These results were above the record profits we achieved in 2021 and at the high end of our revised EBIT-adjusted guidance range of $13.5 billion-$14.5 billion as December revenue and FX came in better than expected. They also speak to the robust health of our underlying business, which allowed us to offset $5.5 billion of commodity and logistics headwinds, $2 billion of incremental EV and growth spend, and $1 billion lower GM Financial results.

[Paul Jacobson, EVP and CFO at GM]

We generated adjusted free cash flow of $10.5 billion, which allowed us to both reinvest in growth opportunities and return excess cash to shareholders. In the fourth quarter, we repurchased an additional $1 billion of stock, bringing the 2022 total to $2.5 billion and retiring 65 million shares. We also opportunistically early retired $1 billion of senior unsecured notes in the U.S. and $500 million of unsecured term loans in GM International, both maturing in 2023. Our goal remains to be responsible stewards of your capital. Getting into the fourth quarter results, revenue was $43.1 billion, up 28% year-over-year. We achieved $3.8 billion in EBIT-adjusted, 8.8% EBIT-adjusted margins, and $2.12 in EPS-diluted-adjusted.

[Paul Jacobson, EVP and CFO at GM]

These results were driven by solid unit volume growth of 30% year-over-year during the quarter and robust pricing. North America delivered Q4 EBIT-adjusted of $3.7 billion, up $1.5 billion year-over-year, and EBIT-adjusted margins of 10.3%, primarily driven by higher volume and pricing, partially offset by mix and higher commodity and logistics costs. Production in the second half of 2022 increased with strengthening supply chain and logistics, allowing us to improve dealer inventory for certain vehicles. We ended the year with total dealer inventory, including in-transit vehicles, running around 50 days, with the number of vehicles physically on dealer lots improving gradually, but still approximately 1/3 the level we were at in mid-2019, supporting a favorable supply and demand environment. I'd also like to share our perspective on inventory levels going forward.

[Paul Jacobson, EVP and CFO at GM]

We're committed to actively managing production levels to balance supply with demand and are targeting to end 2023 with 50-60 days of total dealer inventory on a portfolio basis. This is down 20-30 days from mid-2019 and is reliant on a continued improvement in logistical challenges the industry has faced. Within this portfolio target, trucks are expected to run at higher levels, reflecting greater customer-driven variation requirements, and sedans and SUVs are expected to run at this range or lower. Throughout the year, sales seasonality, production schedules, and timing of fleet deliveries may take us out of this range from time to time, but that is the targeted range at which we'll manage. We continue to see strong demand for our EVs, with inventory turning on the Bolt EV and EUV in less than 10 days.

[Paul Jacobson, EVP and CFO at GM]

The GMC HUMMER EV and Chevrolet Silverado EV have generated incredible demand and excitement, leading to over 250,000 combined reservations. We've also seen strong demand for the Cadillac LYRIQ, GMC Sierra EVs as well. Order books for the model year 2023 LYRIQ and Denali Edition 1 Sierra EV were quickly filled, with a wait list that is growing daily. When you add in the interest we've seen for the Equinox EV and the Blazer EV, over 250,000 hand raisers, our EV momentum will only build as we enter the largest segments in the world. GM International delivered Q4 EBIT-adjusted of $300 million, flat year-over-year as the team did an impressive job executing in a volatile environment.

[Paul Jacobson, EVP and CFO at GM]

This included $200 million of equity income in China, down slightly year-over-year due to lower volume and pricing pressure, partially offset by cost actions. EBIT-adjusted in GM International, excluding China equity income, was $100 million, up slightly year-over-year and profitable in all four quarters. These consistent results were driven by favorable pricing and volume, partially offset by mix and commodity costs. I want to take a moment and recognize the transformation this team has executed over the last few years, achieving over $2 billion of EBIT-adjusted improvements since 2018. This was done by exiting unprofitable markets, strengthening the portfolio, leveraging our strong brands to significantly improve pricing and mix, all while simultaneously driving down costs. They've done amazing work as a team and they should be lauded for that.

[Paul Jacobson, EVP and CFO at GM]

GM Financial delivered strong results with Q4 EBT-adjusted of $800 million, down $400 million year-over-year, primarily due to lower net leased vehicle income and higher cost of funds, partially offset by growth in the retail and commercial loan portfolios. Used vehicle prices have declined but continue to run above the contract residual value with a Q4 off-lease return rate below 10%. Overall, portfolio credit metrics continue to be strong, in part due to a predominantly prime credit mix, with net charge-offs up slightly due to moderation in credit performance but still running below pre-pandemic levels. GM Financial paid dividends of $1.7 billion in 2022, we expect similar dividends in 2023. Corporate expenses were $400 million in the quarter, flat year-over-year as we continued to invest in growth initiatives and drive productivity.

[Paul Jacobson, EVP and CFO at GM]

Cruise expenses were $500 million in the quarter, up $200 million year-over-year, driven mainly by modifications to equity awards, resulting in an accounting change in compensation expense. Our optimism continues to grow based on the great progress Cruise made in 2022 and their plans for rapid scaling and operationalizing of the business will result in a modest increase in cost during 2023. Let's now look towards 2023 for GM overall, which I know is a key focal point for everyone. While the environment remains uncertain, at a high level, I'm pleased to report that when you exclude the impacts of lower pension income and GM Financial contribution, we expect to drive consistently strong core auto operating performance in 2023.

[Paul Jacobson, EVP and CFO at GM]

This continues the trend we saw in 2022 and highlights the strong execution throughout the organization. Our plan is to continue to prioritize growth initiatives such as Cruise and BrightDrop while investing to accelerate our transition to EVs to take advantage of our vertical integration and local sourcing strategies. Assuming a 15 million total industry volume and under current conditions, we expect EBIT-adjusted in the $10.5 billion-$12.5 billion range, EPS-diluted-adjusted in the $6-$7 per share range, and adjusted automotive free cash flow in the $5 billion-$7 billion range. At GM Financial, the strong credit performance and historically high used vehicle prices resulted in extraordinary results over the last two years. For 2023, we expect earnings to normalize in the mid-$2 billion range.

[Paul Jacobson, EVP and CFO at GM]

We expect volume and mix combined to be a slight tailwind, with volumes up 5%-10% year-over-year and mix partially offsetting as we continue to increase production in the sedan, small SUV, and crossover segments, along with GM International volume growth. Regarding North America pricing, while we anticipate incentives will increase from the record low levels we saw in 2022, we expect this headwind to be partially offset by realizing the full year benefit of MSRP increases on many model year 2023 vehicles, particularly full-size SUVs and trucks, as well as pricing we expect to achieve on our new launches in 2023. We're also anticipating pricing actions outside North America primarily to help offset FX headwinds. Overall, we see commodities and logistics costs as a slight tailwind.

[Paul Jacobson, EVP and CFO at GM]

Our longer-term steel and logistics contracts, which help protect us from higher market costs over the last two years, renewed at higher rates in the second half of last year. This, combined with the strategic initiatives to locally source battery raw materials, is expected to largely offset the tailwind we're seeing from lower raw material prices on our spot and indexed exposures. The $1 billion lower pension income impacts our fixed costs. This non-cash item does not impact our core auto operating results, but will be a headwind when comparing year-over-year in 2023. As Mary mentioned, we are very focused on keeping automotive controllable fixed costs in check despite our growth initiatives, which is why we are announcing a cost reduction program to take out $2 billion of costs over the next two years.

[Paul Jacobson, EVP and CFO at GM]

Included in our guidance is the expectation to achieve 30%-50% of that in 2023 and the remainder in 2024. This initiative is the result of several factors and demonstrates our continued commitment to closely manage our operations through this transformation and achieve North American margins in the 8%-10% range through 2025. We expect capital spend to be in the $11 billion-$13 billion range, inclusive of $1 billion invested in our Ultium Cells JV. We continue to shift resources to EVs with around 75% of our product-specific capital dedicated to EVs and AVs. Even with the increase in capital spending, we expect our adjusted free cash flow to remain strong in 2023.

[Paul Jacobson, EVP and CFO at GM]

As we said back in November, we expect that clean energy tax credits will be a material tailwind for GM over time because of the work we've been doing on vertically integrating the supply chain. For 2023, we anticipate at least $300 million in EBIT-adjusted benefit and expect this tailwind to increase significantly over the next few years as our cell production ramps and our North America focused supply chain comes fully into place. We're closely monitoring the dynamic macro environment as well as customer demand to make sure we're appropriately matching supply with demand. We will take quick and decisive actions on both the supply and the cost side to actively manage the business.

[Paul Jacobson, EVP and CFO at GM]

What gives us confidence in our 2023 and long-term objectives is the work we've already done to position ourselves for success, repeatedly executing on our commitments, and our ability to manage through a very challenging and dynamic environment. With a compelling EV and ICE product portfolio, long-term supply chain commitments, extraordinary manufacturing capabilities, a strong balance sheet, and our amazing team, I'm confident we'll continue to enhance the customer experience and deliver compelling growth on both the top and the bottom line. Mary?

[Mary Barra, Chair and CEO at GM]

Okay. With that, I think we're ready to, operator, to start taking your questions.

[Operator]

Thank you. As a reminder to analysts, we are asking that you limit your questions to one and a brief follow-up so that we may get to everyone on the call. Our first question comes from the line of Dan Ives with Wedbush. You may go ahead, sir.

[Dan Ives, Managing Director and Senior Equity Research Analyst at Wedbush]

Yeah, thanks and great quarter. Can you just talk about supply in terms of from a battery and lithium perspective? It just seems like you guys are being much more aggressive, making sure you have that supply through 2025. Just talk about some of those efforts and just giving you more and more confidence on the, you know, sort of EV targets over the coming years? Thanks.

[Paul Jacobson, EVP and CFO at GM]

Yeah. Good morning, Dan. I'm really proud of what the team has done. You know, our collaborative effort across supply chain, finance, business development, have led to what I think is the strongest portfolio of battery raw materials going forward. We've fully secured all of our battery raw materials through 2025. As you can see from the announcement today with the investment in Lithium Americas and the supply that we'll be able to get from the Thacker Pass, we're making rapid improvements and increases in our battery raw materials for 2026 and beyond. That is, you know, core to our strategy, what we've done. We've talked about being creative, because what we're really trying to do is to create a portfolio that is in it for the long-term.

[Paul Jacobson, EVP and CFO at GM]

Whether it's a combination of spot price movements, fixed price contracts, across the board, we're looking at ways to creatively manage that and make sure that we're running it as a partnership. We want our partners to be successful too, especially in this space as we're developing new sources of these raw materials, and this is such a great example of that partnership metal mentality coming to fruition.

[Dan Ives, Managing Director and Senior Equity Research Analyst at Wedbush]

Thanks. Then just a quick follow-up. You know, obviously, price cuts that we've seen Tesla, Ford, but doesn't seem like GM is going down that path. Can you just hit on that concept? You know, that's a big focus of investors.

[Mary Barra, Chair and CEO at GM]

Sure. You know, when we look at our strong car product portfolio and the interest that we have at the prices that we've already announced, we feel that we're well-positioned. you know, even going into, you know, the first month of the year, we've seen a very strong customer interest in our products. You know, we think right now we're priced where we need to be. Of course, we're gonna monitor it, and we'll make sure we remain competitive. We really think with the strength of our product portfolio and what we have coming, we're positioned well.

[Dan Ives, Managing Director and Senior Equity Research Analyst at Wedbush]

Thanks. Congrats.

[Mary Barra, Chair and CEO at GM]

Thank you.

[Paul Jacobson, EVP and CFO at GM]

Thank you, Dan.

[Operator]

Thank you. Our next caller is Rod Lache with Wolfe Research. You may go ahead, sir.

[Rod Lache, Managing Director at Wolfe Research]

Good morning, everybody.

[Mary Barra, Chair and CEO at GM]

Morning.

[Rod Lache, Managing Director at Wolfe Research]

Just wanted to maybe just first follow up on Dan's question. Look, I know based on the prices that you've laid out for Equinox, Blazer, LYRIQ, that demand for the near-term is much greater than your ability to supply. At the same time, you're only assuming double or low single-digit EBIT margin for EVs by mid-decade, and one of your peers is already at 20% gross and pretty healthy EBIT, and their costs are still falling. My question is whether there are changes that you're contemplating or that you could make to close in on that benchmark and generate similar margins any faster.

[Paul Jacobson, EVP and CFO at GM]

Hey, Rod, it's Paul. Thanks for the question. Thanks for being on. You know, I think, you know, it's important to note that, as we look across the competitive landscape, you know, that competitor you referenced wasn't there in the beginning either, right? There's a lot of scaling that we're doing across the board. As we're running concurrent operations with ICE and EV, there's obviously some frictional costs on utilization, et cetera, that we expect to be able to scale as we go through this transformation. The ICE portfolio remains really strong, but we're also building the EV factories for the future. Clearly, the production levels that we see now and as we're ramping up, aren't there yet. We expect a tremendous level of operational synergies.

[Paul Jacobson, EVP and CFO at GM]

We're also gonna manage the business aggressively. I think the $2 billion cost reduction program that we're announcing today is a strong testament to that and making sure that we're driving efficiencies as we ramp up those productions. It's not a, I don't think, a direct apples-to-apples comparison, but one that we're obviously aware of. On the pricing front, the demand is really, really strong for all of our vehicle programs going forward. We feel good about where we're going and the trajectory that we're on.

[Rod Lache, Managing Director at Wolfe Research]

Okay. Thank you. Just secondly, you referenced that $2 billion cost savings. What does that mean for structural costs ex pension? Maybe related to that, this 5%-10% volume assumption that you've suggested would seem to imply that you don't see affordability or rates as a major impediment to growth at this point. Am I interpreting that correctly, or are you in fact making more room for pricing with this cost saving assumption?

[Paul Jacobson, EVP and CFO at GM]

I would characterize it a little bit differently, Rod. You know, success is gonna be driven by when we look at our fixed cost lines, you know, being down $2 billion. That's what we're looking for across the board. We can get there, and I think it comes across all areas of the business. What I would say is we're being prudent about what we see out in the macro environment. You know, again, we continue to see strength in demand for our vehicles and strength in pricing. You know, we wanna make sure that we're driving efficiency where we can and felt like this was the right time to be able to do that. We're gonna be measuring in how we do it.

[Paul Jacobson, EVP and CFO at GM]

We're still focused on the growth areas of the portfolio. We recognize that there are ways that we can do things more efficiently, and we expect to be able to drive that into margin performance. We're not doing anything to prepare for a price war, or we're not doing anything in anticipation of a recession. I would say it's prudent cost management and just being aware of what's around us.

[Rod Lache, Managing Director at Wolfe Research]

That number is net, Paul, the $2 billion cost savings, or is that a gross savings objective?

[Paul Jacobson, EVP and CFO at GM]

Net of?

[Rod Lache, Managing Director at Wolfe Research]

Well, in other words, is there are your structural costs expected to decline by $2 billion ex pension, I guess, is a simple way to ask it? Is that are there other things that are increasing to offset that?

[Mary Barra, Chair and CEO at GM]

For our automotive business, we're expecting our structural costs to go down $2 billion. It's net.

[Paul Jacobson, EVP and CFO at GM]

Full stop. Yeah.

[Rod Lache, Managing Director at Wolfe Research]

That's very, very clear. All right. Thank you.

[Paul Jacobson, EVP and CFO at GM]

Thanks.

[Mary Barra, Chair and CEO at GM]

Thanks, Rod.

[Operator]

Thank you. Our next caller is Itay Michaeli from Citi. You may go ahead, sir.

[Itay Michaeli, Equity Research Analyst at Citi]

Great. Thanks. Good morning, everyone, congratulations. Just two questions on the outlook. First, can you maybe share kind of what you're expecting for the company's revenue growth in 2023 to just kind of wanna calibrate that with the 12% CAGR for 2025? Secondly, I was hoping you could also maybe quantify the drag this year from some of the investments like the Ultium ramp and some of the other investments you're making as well. It sounds like, you know, while the guidance is certainly looks robust, there's certainly a lot of investments still flowing through. I was hoping maybe you could quantify that as well. Maybe also just to provide a quick update on the Lordstown ramp as well.

[Mary Barra, Chair and CEO at GM]

So Itay, you're, you were a little garbled, so let us try. I'll take the last one. The ramp at Ultium in Lordstown, Ohio, is on track, going well. You know, the team is really ramping up, really focused on quality and the, you know, the two between LG Energy Solution and General Motors working really well together. I'm very pleased. As I mentioned, Spring Hill is also on track, as is Michigan. Those three plants are really what enables us to achieve the goals that we've set for getting to 2025 and 1 million units in North America. That's all going really, really well. From a...

[Mary Barra, Chair and CEO at GM]

I think the middle question you had was about, you know, with the investments that we're making in Ultium, to quantify. I think we've talked about what those investments are, but they're part of our capital program that we announced, you know, last year, this year and going into next year, so that's part of it.

[Paul Jacobson, EVP and CFO at GM]

The first one was on the revenue growth, Itay, so I'll just jump in and say that, you know, we obviously experienced pretty significant revenue growth in 2022, driven by a 25% increase in wholesales. We're not expecting that similar jump in production in 2023. We're not giving any specific revenue guidance, but I would say that we would expect the growth rate to be below 2022 levels. In line with volume.

[Itay Michaeli, Equity Research Analyst at Citi]

Perfect. That's very helpful. Thank you.

[Paul Jacobson, EVP and CFO at GM]

Yep.

[Mary Barra, Chair and CEO at GM]

Thank you.

[Operator]

Our next caller is John Murphy with Bank of America.

[John Murphy, Compensation Consultant at Bank of America]

Good morning, everybody. Just a first question, Mary, on the IRA. I mean, there's a lot going on with the interpretation and the final rules being set here. You know, originally it looked like GM was gonna be relatively advantaged just the way that you were set up on production and your supply chain, but some of the interpretations on the commercial vehicle side and the fact that leased vehicles may fit the bill of being commercial vehicles, it may open the door to Europeans, Chinese, Japanese, South Koreans, anybody, be shipping EVs into the U.S. and still getting that $7,500 credit.

[John Murphy, Compensation Consultant at Bank of America]

Just curious what your thoughts are on that, you know, how you think the rules should be interpreted, and could there be the chance if this, you know, loophole or change, stays in force, that you might ship EVs in from China?

[Mary Barra, Chair and CEO at GM]

Our strategy all along for a very long time has been to build where we sell. I think when you look at the work that we've done with the battery plants in this country and all of the supply investments that we've made, you know, that helps us have, I'll say, supply chain resiliency. More certainly it gives us the opportunity with some of the deals we've made to, I think, have a better cost advantage. Also, you know, also it's good for the country and creates jobs. That's what IRA was meant to do. We're waiting to see what the final rules are going to be from Treasury.

[Mary Barra, Chair and CEO at GM]

I think, regardless of, you know, some of the issues still to be clarified from a lease perspective, General Motors is still, at, you know, gonna benefit greatly. If you look at the production tax credits, from cells and module perspective, and then where we'll be, from a battery component and critical minerals, we think we're well-positioned. Again, the deal that we announced today or the partnership, the equity investment, I think continues to reinforce it. Yeah, we're waiting to see what is going to be, but, you know, our focus is on, having a strong supply chain here. Obviously, when we get the final rules, we'll look, because we do have a global footprint.

[Mary Barra, Chair and CEO at GM]

I think we're focused on supporting North America production primarily from North America and, to a certain extent from Korea. Again, we're waiting to see, but I think you have to go back to what the intent of IRA was.

[John Murphy, Compensation Consultant at Bank of America]

Yeah. I agree with you. Just one follow-up. You know, you mentioned fleet sales as an opportunity. Fleet sales have been very low for the past couple years. I mean, fleets have been very under satiated or not satiated at all on their demand function. Now that, you know, supply is becoming more normal, you know, how big a part of a recovery do you think they could have in the market, just maybe in general? Where, you know, where have they been for GM in 2021, 2022, and where do you think they might be in 2023? You know, how big a part did that play in sort of the development of EVs profitably into fleets in the early stages of the EV ramp?

[Mary Barra, Chair and CEO at GM]

Well, I think it's an important part, and I think when you look at BrightDrop, it's you know, just all growth opportunity for us. I think when you look at the Silverado EV work truck, I think that's gonna be very important as well. you know, we're gonna make sure that as we grow our fleet commercial rental business, it has a appropriate profitability profile, not, you know, from the days 10, 15 years ago, when we really stepped back from that. I think, you know, whether it's what we announced with Hertz and the number of customers that we have interested, you know, every company is working to reduce their carbon footprint.

[Mary Barra, Chair and CEO at GM]

The EVs that, we have just to help support that, I think are gonna be very strong, and I think we're gonna have a good portfolio. I think that allows us to grow, especially in areas where we weren't, involved in the past. EVs is a fresh start there.

[John Murphy, Compensation Consultant at Bank of America]

I'm sorry. If you were to think about that 5%-10% increase in wholesale volumes, would that be dominated by fleet? 'Cause I mean, everybody's obviously very concerned about the retail customer at the moment, but really neglecting that, you know, 1/4 of this market is traditionally fleet and it's, you know, 10%-15% the last couple years. I mean, there's a potential doubling in fleet volume that could come in the market at large and maybe be very supportive of that wholesale increase. I mean, could you give us some numbers or thoughts on how supportive that could be to that 5%-10% wholesale increase?

[Mary Barra, Chair and CEO at GM]

I think, you know, when we talk about a 5%-10% increase, we're talking across the board. When you look at the EV launches that we have, the fact that we have brand-new Chevrolet Silverado and GMC Sierra heavy-duty pickups, the fact that we have the new midsize, which is just an outstanding midsize truck with the Chevrolet Colorado and the GMC Canyon, as well as the Trax. We think from an ICE perspective, we have an opportunity. We think from clearly the EV ramp-up that we're gonna have this year, it's a part of it, and some of that, both of those exciting products will be in the fleet business. I think it's a both answer, John, not a single one or the other.

[John Murphy, Compensation Consultant at Bank of America]

Thank you very much.

[Operator]

Thank you. Our next caller is Ryan Brinkman with JPMorgan.

[Ryan Brinkman, Lead Automotive Equity Research Analyst at JPMorgan]

Hi. Thanks for taking my question. With regard to the $300 million tailwind you are assuming from clean energy tax credits in 2023, I heard you say this could grow substantially over time. I just wanted to check in, try to dimension that potential. Are you assuming a benefit of $35 per kWh or $45? Are you in a position yet to share, or have you resolved internally with your JV partner how these tax benefits are expected to be shared between GM and LG? I'm just trying to dimension if the opportunity is, you know, 1 million vehicles in 2025 times $45 per kWh or $35, to understand whether we need to split that amount 50/50 or if there's some other math we need to take into account.

[Paul Jacobson, EVP and CFO at GM]

Yeah. Ryan, a lot of detail in your question. I'll take it back to what we said at Investor Day, was we expect EV benefits, tax benefits to be $3,500-$5,500 per vehicle. The $300 million in 2023 is obviously a function of our ramp rate of our cell production. We're not gonna go into any details on how that works across the board. It's our best expectation of where we're gonna land is at least $300 million this year and ramping up rapidly as our production increases across our Ultium plants.

[Ryan Brinkman, Lead Automotive Equity Research Analyst at JPMorgan]

Okay, great. Thank you.

[Operator]

Thank you. Our next caller is James Picariello with BNP Paribas. You may go ahead, sir.

[James Picariello, Director and Head of U.S. Autos Research at BNP Paribas]

Hi, everyone. Just on, you know, back to the GM EV pricing, you know, relative to the market in North America, yeah, how would you know, assess GM's, you know, price competitiveness, you know, given the latest moves by competitors? It's, you know, it sounds as though demand in your order books are quite full, but, you know, just given the, you know, the more recent competitive responses by others, would, you know, be curious to get your take, you know, whether, you know, GMC has the opportunity to reposition or, you know, we also have the IRA-defined MSRP caps to, you know, as well to consider. Thanks.

[Mary Barra, Chair and CEO at GM]

Sure. Well, I think that's the strength of what General Motors is planning to launch this year. Many of the products that we have are gonna be below the caps because we have a full portfolio of EVs at multiple price points. When you think about the Equinox EV, the Blazer EV, and then the Silverado as well as the LYRIQ, I think we're really well-positioned. These are brand-new products into the marketplace that we have really strong interest. You know, that's why both Paul and I feel that right now, based on the interest and the fact that, you know, the pricing that we put out even before the IRA came out was very appropriate. We're, you know, we're going to.

[Mary Barra, Chair and CEO at GM]

Because of the strength of the Ultium platform, that's what enables us to do that, along with the fact that we're, you know, ahead from most of the, I'll say, the traditional OEMs in getting battery cells produced in this country. I think if you look at the strategy we've been executing, we're well-positioned, and the strength of our product portfolio, I think, is what is giving us the confidence to, of where we sit right now, with feeling that we priced appropriately.

[James Picariello, Director and Head of U.S. Autos Research at BNP Paribas]

Understood. Just within the 400,000 cumulative EV production target by the first half of next year, can you just dimension, you know, what portion of that would be, you know, your EV truck platform?

[Mary Barra, Chair and CEO at GM]

You know, we haven't provided that kind of specific analysis, but the fact that, you know, Chevrolet, well, the HUMMER to begin with, and that will ramp significantly this year and even more next year, you know, as we're completely sold out. Then the Silverado that we think we're going to, the Silverado EV, work truck, and then the RST comes at the toward the end of the year. I mean, I think all of those are very significant products that are gonna do very well, but we're not giving specific numbers.

[James Picariello, Director and Head of U.S. Autos Research at BNP Paribas]

Understood. Thanks.

[Operator]

Thank you. Mark Delaney with Goldman Sachs, you may go ahead.

[Mark Delaney, VP at Goldman Sachs]

Yes, good morning, and thank you very much for taking the question. Is GM considering changes to its longer-term battery plans for North America, as there have been media reports recently suggesting both that GM is considering adopting cylindrical cells and also that GM and LG may not partner on a fourth battery plant?

[Mary Barra, Chair and CEO at GM]

First, you know, one of the strong points of the Ultium platform is that it's chemistry agnostic, and it can take pouch, prismatic, or cylindrical cells. We can look to what is gonna be the right battery for the specific vehicle from a performance perspective. We have that complete flexibility. We have very important work going on with LG Energy Solution. They're an incredibly important partner to us, and we're working well together, as we mentioned, with the launch of the Orion, or excuse me, the Lordstown plant, and then Spring Hill, and then the plant in Michigan. We're working well together, and we are gonna need a fourth plant and more plants beyond that. As we have those details to share, we will share them.

[Mary Barra, Chair and CEO at GM]

Right now, there's nothing that's really changed, in our plan to have battery manufacturing capability, here in the U.S. and broadly, in North America as well.

[Mark Delaney, VP at Goldman Sachs]

That's helpful. Thank you. My second question was on Cruise. Congratulations on the expansion into the new geographies last year. As you think about 2023 and how you're planning to expand, could you elaborate a bit more on your expansion targets for Cruise and, you know, any potential changes in San Fran, given the recent feedback from the local government there? Thank you.

[Mary Barra, Chair and CEO at GM]

Kyle, do you want to take that one?

[Kyle Vogt, CEO at Cruise]

Yeah, sure. I can take that. We will be expanding in 2023 to several new cities, but our current focus is on expanding our driverless service in San Francisco as well as in Phoenix and Austin following our initial driverless launches there. The initial deployments in Phoenix and Austin were modest and we want to expand those very quickly. Of course, by doing that, you know, expanding into those new cities, using this repeatable playbook we've developed, you know, across safety and operations and some of the technical features, the barriers to launching in new cities can drive growth in existing markets are much smaller because of that upfront work we've put in to solve those really difficult barriers to scale first.

[Kyle Vogt, CEO at Cruise]

I think, your second question was on the SFMTA comments about our California Public Utilities Commission permit to expand. I just want to say there that, you know, our safety record is publicly reported and includes having driven millions of miles in an extremely complex urban environment with zero life-threatening injuries or fatalities. We're really proud of that record and also that the overwhelming majority of public comments on our permit application, including advocates from the disability community, small businesses and local community groups support expanding our fleet in San Francisco.

[Mark Delaney, VP at Goldman Sachs]

Thank you.

[Operator]

Thank you. Our next caller is Adam Jonas with Morgan Stanley. You may go ahead, sir.

[Adam Jonas, Head of Global Auto and Shared Mobility Research at Morgan Stanley]

Hi. Thanks, everyone. I just want to follow up on Mark's question about Ultium and the form factor. I appreciated there's room for flexibility. You've mentioned in the past, Mary, that the Ultium system was kind of form factor and chemistry agnostic. If you did change to cylindrical or the 4680 form factor as reported in some of these sources, what kind of thing would drive such a change? I'm not saying that you have made that decision, but it seems like it is potential. There is potential to do that. Would it be driven by safety or cost? Kind of how difficult would it be to make that flip?

[Mary Barra, Chair and CEO at GM]

First of all, I'm not going to comment on speculation. Adam, and by the way, hello. We, you know, we're looking really at performance. I mean, one of the things when you look at with the way that you configure the packs within Ultium, the difference of the cells is a lot having to do with performance and how do we get the max benefit. Again, our team has been working and looking at all three cell form factors for a while. In fact, today, from a prismatic perspective, that's what's in the vehicles, the Ultium-based vehicles that we're launching like the LYRIQ and the Buick in China. We all along have been looking at all three form factors.

[Adam Jonas, Head of Global Auto and Shared Mobility Research at Morgan Stanley]

Thanks, Mary. I just have a follow-up for Paul on the pricing. You mentioned higher incentives but offset by the increase in step up in the MSRPs. I just wanna make sure we're interpreting that correctly, that those are kind of a wash that you think one more or less compensates for the other to leave the pricing element more or less stable from 2022-2023. Is that the correct way to think about it broadly? I know it's a volatile environment, but just want as a starting point, is that the message a wash?

[Paul Jacobson, EVP and CFO at GM]

Yeah. I would say order of magnitude, yes. You know, the pricing increases, we're not contemplating big ones this year. Rather the annualization of what we did last year across the board. We have some new launches that will kind of come in. We won't get specific on that. We are assuming that there's going to be, you know, some steady increase normalization of incentives. That's where we said we're trying to plan conservatively. What I'll tell you is January month has come in really, really strong, a continuation of what we saw in December. We're just watching the environment around us. You know, we still feel good about where demand sits.

[Adam Jonas, Head of Global Auto and Shared Mobility Research at Morgan Stanley]

Thanks, Paul. Thanks, Mary.

[Paul Jacobson, EVP and CFO at GM]

Thanks, Adam.

[Mary Barra, Chair and CEO at GM]

Thanks.

[Operator]

Our next caller is Chris McNally with Evercore.

[Chris McNally, Senior Managing Director at Evercore]

Thanks so much. I just wanted to revisit Ryan's question on the IRA $300 million. Thanks so much for giving that number. Our math is that that would be something like 10 GW-12 GW from the two facilities in Ohio and Tennessee. Without confirming the explicit math, can we just talk about maybe how long it may take to ramp Ohio? Then obviously Tennessee is only starting at the end of this year. I think they're about 40 GW each. It seems like there's a material amount to grow at that capacity growth. Anything you could talk about the timeline on Ohio and Tennessee giga.

[Mary Barra, Chair and CEO at GM]

Yeah. You know, the plan was we started in fourth quarter and we said a couple earnings calls ago that Ohio would add 20% more capacity every quarter. To be fully up and running by the end of the year. That plan is still on track. I think you'll see us follow a similar but maybe a little faster in Spring Hill because we already have all the experience and we actually have people from Spring Hill at the Ohio facility right now to make sure we have a smooth start up there. You know, we've talked about the plan is roughly, you know, around 37, 40. I think you're in the right ballpark, but that's how those plans will ramp up.

[Chris McNally, Senior Managing Director at Evercore]

Perfect. That's super helpful. Just the follow on, just from a modeling perspective, should we assume the 300 flows through EBIT or is there any benefit that also is going to start to benefit taxes as well. Just it's more where we're going to see the benefit of IRA, if it's only in EBIT or if there is actually some tax component as well.

[Paul Jacobson, EVP and CFO at GM]

You know, we think that there will be some that kind of flows through both. You know, our deck has a guide on a lower tax rate of 16%-18% for 2023. That's largely driven by R&D credits and some IRA. We're not getting any specifics into the breakout between them until we see the regs written, and we get more definition around it. We do expect that there are likely going to be components in both areas.

[Chris McNally, Senior Managing Director at Evercore]

Okay. Thanks so much, Paul.

[Operator]

Thank you. Our last question comes from the line of Emmanuel Rosner with Deutsche Bank.

[Emmanuel Rosner, Lead Autos and Auto Technology Analyst at Deutsche Bank]

Oh, thank you so much. Two fairly quick ones. First one is back on pricing. I think you said you're trying to be conservative in your assumptions. Was just hoping you could be a little bit more specific or explicit around what sort of incentive environment you're assuming? I understand the MSRP, going up, just not super clear from the outside, you know, what sort of macro and/or industry environment you're assuming and the impact on the, on the overall industry incentives.

[Paul Jacobson, EVP and CFO at GM]

Hey, Emmanuel. Nothing specific to guide on in terms of our forward incentives beyond, you know, we, we do expect over time, for incentives to, you know, increase from the sort of record low levels that we've seen. We've seen slight upticks, but I would say that's largely more of a function of interest rates than it is waning demand, or inventories. Inventories still remain very tight. We expect that to be the case, especially grounded inventory at dealers, through 2023. While we see some normalizing of incentives, nothing more specific than that we'll guide to.

[Emmanuel Rosner, Lead Autos and Auto Technology Analyst at Deutsche Bank]

Okay. Then just affirming it on, in terms of macro environment, if that's okay. Are you assuming some sort of recession in the second half, impact on sort of like consumer demand for vehicles? Or are you assuming sort of, you know, current conditions continuing? I just have a follow-up on free cash flow.

[Mary Barra, Chair and CEO at GM]

Yeah. Again, you know, this is a situation we're watching carefully, but what we see from a new vehicle consumer is a consumer, as Paul said, you know, even in the month of January, we've seen it to be very strong. We're going to continue to monitor that and take the necessary steps. We're gonna watch and learn as we go through the year. We told you at Investor Day, we are gonna be conservative as we plan this year, but also position ourselves to take advantage of whatever the market ends up being, and we're still on that plan executing. Again, from an early read in January, it's pretty positive.

[Emmanuel Rosner, Lead Autos and Auto Technology Analyst at Deutsche Bank]

Okay, thanks for that. Then just quickly on, free cash flow. Can you just provide a high-level walk between, you know, the 2022 strong performance and the 2023? 'Cause obviously the two sort of, elements you would exclude, you know, to make them comparable, the pension income, this is non-cash, right? So, yeah, walk between 2022 and 2023 would be helpful.

[Paul Jacobson, EVP and CFO at GM]

Yeah, just really high level. You know, $10.5 billion in 2022. At the midpoint, we've got a couple billion dollars more of CapEx, going forward and, you know, probably not as much of a working capital build as we saw in 2022. That's high level, how you get to the $5 billion-$7 billion.

[Emmanuel Rosner, Lead Autos and Auto Technology Analyst at Deutsche Bank]

Great. Thank you so much.

[Mary Barra, Chair and CEO at GM]

Thank you.

[Paul Jacobson, EVP and CFO at GM]

Absolutely.

[Operator]

Thank you. I'd now like to turn the call over to Mary Barra for her closing remarks.

[Mary Barra, Chair and CEO at GM]

Great. Well, thank you, Michelle. Thanks to everyone for your questions. You know, we at General Motors are really excited about the opportunities ahead of us in 2023, especially with all the new vehicles that we're launching. Chevrolet and GMC will build on their leadership in pickup trucks. Chevrolet is giving customers around the world compelling entry-level products too. This is the breakout year for the Ultium platform. When you look at the products we'll have by the end of this year, again, they're all outstanding. We expect another year of strong financial results. Our confidence reflects the determination of the GM team, the strength of our vehicles we're delivering, and the valuable relationships we've developed with our dealers, our suppliers, and our other partners.

[Mary Barra, Chair and CEO at GM]

I hope you see, with what we did in 2022 and what we're indicating we're gonna be able to achieve in 2023, that we continue to have your confidence, and we look forward to continuing to tell you more about this year as we go forward. I hope everyone has a great rest of day.

[Operator]

That concludes today's conference call. Thank you for joining.

Participants

Executives

• Mary Barra, Chair and CEO
• Paul Jacobson, EVP and CFO

Analysts

• Adam Jonas, Head of Global Auto and Shared Mobility Research at Morgan Stanley
• Ashish Kohli, VP of Investor Relations at GM
• Chris McNally, Senior Managing Director at Evercore
• Dan Ives, Managing Director and Senior Equity Research Analyst at Wedbush
• Emmanuel Rosner, Lead Autos and Auto Technology Analyst at Deutsche Bank
• Itay Michaeli, Equity Research Analyst at Citi
• James Picariello, Director and Head of U.S. Autos Research at BNP Paribas
• John Murphy, Compensation Consultant at Bank of America
• Kyle Vogt, CEO at Cruise
• Mark Delaney, VP at Goldman Sachs
• Rod Lache, Managing Director at Wolfe Research
• Ryan Brinkman, Lead Automotive Equity Research Analyst at JPMorgan