GENERAL MOTORS CO (GM) Earnings Report: Q1 2016 ?· GENERAL MOTORS CO (GM) Earnings Report: Q1 ... Dhivya…

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<ul><li><p>CompanyName:GeneralMotorsCoCompanyTicker:GMSector:ConsumerGoodsIndustry:Automotive</p><p>EventDescription:Q12016EarningsCallMarketCapasofEventDate:47.20BPriceasofEventDate:32.66</p><p>2014TheStreet,Inc.Al l R ightsReserved Page1of16</p><p>GENERALMOTORSCO(GM)EarningsReport:Q12016ConferenceCallTranscriptThefollowingGENERALMOTORSCOconferencecalltookplaceonApril21,2016,10:00AMET.Thisisatranscriptofthatearningscall:</p><p>CompanyPart icipants</p><p>RandyArickx;GeneralMotors;InvestorRelationsMaryBarra;GeneralMotors;Chairman&amp;CEOChuckStevens;GeneralMotors;CFO</p><p>OtherPart icipants</p><p>JohnMurphy;BoAMerrillLynch;AnalystItayMichaeli;Citi;AnalystJosephSpak;RBC;AnalystPatArchambault;GoldmanSachs;AnalystRodLache;DeutscheBank;AnalystBrianJohnson;BarclaysCapital;AnalystNeelMehta;MorganStanley;AnalystColinLangan;UBS;AnalystRyanBrinkman;JPMorganChase;Analyst</p><p>MANAGEMENTDISCUSSIONSECTION</p><p>Operator :</p><p>WelcometotheGeneralMotorsCompanyfirst-quarterearningsconferencecall.</p><p>(OperatorInstructions)</p><p>Asareminder,today'sconferenceisbeingrecordedThursday,April21,2016.</p><p>IwouldnowliketoturntheconferenceovertoRandyArickx,ExecutiveDirectorofCorporateCommunicationsandInvestorRelations.Pleasegoahead,sir.</p><p>RandyArickx(InvestorRelations):</p><p>Thanks,Operator.GoodmorningandthankyouforjoiningusaswereviewGM'sfinancialresultsforthefirstquarterof2016.</p><p>OurpressreleasewasissuedthismorningandtheconferencecallmaterialsareavailableontheGMinvestorrelationswebsite.WearealsobroadcastingthiscallviawebcastontheInternet.Includedinthechartsetmaterialspublishedthismorning,we'veincludedthekeytakeawaysfromeachchartinthenotespagesinordertoprovidecolorontheresults.</p><p>Thismorning,MaryBarra,GeneralMotors'ChiefExecutiveOfficerandChairman,willprovidesomebriefopeningremarks,followedbyChuckStevens,GM'sExecutiveVPandCFO.Andthenwewillopenthelinesforquestionsfromtheanalystcommunity.</p></li><li><p>CompanyName:GeneralMotorsCoCompanyTicker:GMSector:ConsumerGoodsIndustry:Automotive</p><p>EventDescription:Q12016EarningsCallMarketCapasofEventDate:47.20BPriceasofEventDate:32.66</p><p>2014TheStreet,Inc.Al l R ightsReserved Page2of16</p><p>Beforewebegin,Iwouldliketodirectyourattentiontothelegendregardingforward-lookingstatementsonthefirstpageofthechartset.Thecontentofourcallwillbegovernedbythislanguage.</p><p>Intheroomtoday,wealsohaveTomTimko,VicePresident,ControllerandChiefAccountingOfficerandDhivyaSuryadevara,VicePresident,FinanceandTreasurertoassistinansweringyourquestions.</p><p>NowIwillturnthecallovertoMaryBarra.</p><p>MaryBarra(Chairman&amp;CEO):</p><p>Thanks,Randy.Thanks,everyone,forjoiningthecall.</p><p>I'mextremelypleasedtoreportthatGMdeliveredaverystrongperformanceinthisquarter.Solet'stakealookatthenumbers.Thehighlightsandyear-over-yearimprovementsinclude,first,revenueof$37.3billion,up$1.6billion;Q1recordEBIT-adjustedof$2.8billion,whichisup$0.6billion;Q1recordEBIT-adjustedmarginof7.1%,up1.3percentagepoints;andQ1recordearningspershareadjustedof$1.26,up47%.</p><p>Ournetincomewas$2billion.Thisisalsoup$1billionandinaddition,ourrecord28.5%ROIConatrailingfour-quarterbasisdemonstratesthepositiveresultsofourdisciplinedcapitalallocationframework.Ifwelook,wereturned$0.9billiontoshareholdersasofMarch31andthisreallyunderscoresourcommitmenttoenhancingshareholdervalueovertime.</p><p>Ithinkit'salsoimportanttotakenotethat,inQ1,wesawimprovedperformanceinallofoursegmentsledbyNorthAmerica,continuedstrengthinChinaandbreakevenresultsinEurope.We'vehadpositivedevelopmentsforChevroletandCadillac,whichareourtwoglobalbrands.</p><p>Tostartwith,intheUnitedStates,Chevroletretailsharewasupafullpointyear-over-yeartoabout11%,Malibu'sbestQ1retailsalessince1980intheUSandinMarch,85%ofMalibusalesweretheall-newmodel.Inaddition,wearelaunchingtheCruzeandveryexcitedaboutthatreceptioninthemarketplace.</p><p>InChina,theMalibuXLflagshipsedanisalsokeytogrowingthebrandinChinafromaChevroletperspectiveandagain,thisvehicleisgettinggoodreception.</p><p>AndfromaCadillacperspective,inthefirstquarter,ourATPswerethehighestinNorthAmericainourhistoryandweareveryexcitedabouttheCadillacCT6andtheXT5thatarenowlaunchinginbothChinaandtheUnitedStates.</p><p>FromaNorthAmericaperspective,USretailsalesareup7%year-over-year,largelyonChevroletandBuickperformances.USretailmarketsharegrewfasterthananyotherautomaker,up1.1percentagepointsto16.6%andourATPsof$34,600exceededtheindustryaveragebyabout$3,500.Andendingtotaldealerinventorywasdown13%year-over-year.</p><p>IfwemovetoChinawithourjointventurepartners,wedeliveredover963,000vehicles,upslightlyfromQ12015thankstothegrowthinSUVandtheluxurysegment.TheBuickEnvisionsalesmorethandoubledandwhenweincludetheBaojun560,totalSUVsalesjumped148%.WearealsoveryexcitedaboutthenewBuickLaCrossesedanthatwasintroducedthatcancontinuetobuildonthestrengthofBuickinChina.AndourCadillacsalescontinuetorise,up6.1%inthequarterontopof17%,whichwasthefull-yearincreaselastyear.</p><p>InEurope,webrokeeveninQ1andweareonplantobreakevenforthecalendaryearandthisisreallydrivenbyOpel'sproductoffensive.Opel/Vauxhallsaleswere[309,000],up8.4%year-over-year,outpacingtheindustryandthisisreallyonthestrengthoftheAstra,whichwasnamedEurope's2016Car</p></li><li><p>CompanyName:GeneralMotorsCoCompanyTicker:GMSector:ConsumerGoodsIndustry:Automotive</p><p>EventDescription:Q12016EarningsCallMarketCapasofEventDate:47.20BPriceasofEventDate:32.66</p><p>2014TheStreet,Inc.Al l R ightsReserved Page3of16</p><p>oftheYear.Marketsharewasupin15ofthe21marketsandtheincreasesareinmostofthemajormarketsacrossEurope.AndwestillhavetwoveryimportantproductlaunchesinEuropethisyear,theAstraSportsterandtheMokkaX.</p><p>InSouthAmerica,operatingperformanceimprovedbecauseofourcontinuedworkandespeciallythefocuslastyearonrightsizingthebusinesswhileprotectingthenewproductpipeline.</p><p>AndifwelookatGMFinancial,GMFinancialgrewitscaptivepresencewithGMcustomersanddealersinallregionswithNorthAmericaincreasingitspenetrationofGoodmorningretailsalesto37%inthequarter.Thisisupfrom21%inthefirstquarterof2015.</p><p>Andacrossthecompany,ouroperationalexcellenceprogram,whichisreallydrivingSixSigmaandcontinuousimprovementineveryaspectofthebusiness,iswellunderwayandit'splayingakeyroleinthe$5.5billioncostefficiencychallengethatwehaveoutlinedandthatweexpecttoachieveby2018.</p><p>Thesuccessofthecorebusinesshasenabledustomakesmartinvestmentsinshapingthefutureofpersonalmobility.Ontheautonomousfront,weannouncedourintenttoacquireCruiseAutomationtofurtheracceleratethedevelopmentofautonomousvehicletechnologyandpositionGeneralMotorsinaleadershiprole.</p><p>Incarsharing,weintroducedMaven,whichcombinesandexpandsourmultiplecarsharingprogramunderasinglebrand,whichincludesMavenCityandMaven+.MavenCityofferscarsondemandinkeycitiesdrivenbyOnStar-poweredsmartphoneconnectivitythatreallyprovidesthecustomersanownership-likeexperienceandMaven+isacompletelydedicatedprivatefleetforresidentialcommunities.</p><p>WestartedthisinNewYorkCity,asI'vetalkedaboutinthepast.WearegoingtosoonbeaddingChicagoandthiswillgiveusthepotentialtoreachmorethan5,000residents.</p><p>Onride-sharing,asyouknow,wealsoannouncedthestrategicpartnershipwithLyftandit'safourdimensionalapproachthatenablesusfirsttodevelopanintegratednetworkofon-demandautonomouscarsandwealsointroducedExpressDrive,andthisisashort-termrentalprogramontheLyftplatformthatmakesGeneralMotorscarsavailabletoLyftdriversataffordablerates.Italsoexposesbothpassengersanddriverstoourproductsandgetsmoreseatsinseats.Wehavethefirstlaunch,whichisinChicago,anddemandis8timesthesupply.WeplantoaddhubsinBostonandBaltimoreandWashingtoninthenearfuture.</p><p>AnotheraspectoftheallianceandthepartnershipthatwehavewithLyftisbeingabletocombinetheLyftexperiencewithourvehicleconnectivityleadershipandthisreallyprovidesabetterexperienceforthecustomer.Andwealsoseemanyopportunitiestojointlyexpandbothofourbusinessandpresentcross-marketingopportunities,andyouwillseeustakingadvantageofthoseaswemoveforward.</p><p>Fromanalternativepropulsionperspective,wealsorevealedthe2017ChevroletBoltEVattheConsumerElectronicsshow.It'sgoingtoachievemorethan200milesperchargeofallEVrangeandwillcostabout$30,000aftergovernmentincentives.Productionwillbeginlaterthisyear.</p><p>Soinsummary,ourstrongfirstquartergivesasevenmoreconfidencethatwewilldelivertheearningsgrowthweoutlinedinJanuary.WedeliveredQ1recordEBIT-adjusted,EBIT-adjustedmarginsandEPS-adjusted,alongwitharecordreturnoninvestedcapital.Ouraggressiveproductlaunchcadenceandcontinuedcostdisciplinewillhelpusdeliveronourcommitmentsfortheyearandcontinuetodriveshareholdervalue.</p><p>Withthat,IwillturnitovertoChuck.</p></li><li><p>CompanyName:GeneralMotorsCoCompanyTicker:GMSector:ConsumerGoodsIndustry:Automotive</p><p>EventDescription:Q12016EarningsCallMarketCapasofEventDate:47.20BPriceasofEventDate:32.66</p><p>2014TheStreet,Inc.Al l R ightsReserved Page4of16</p><p>ChuckStevens (CFO):</p><p>Thanks,Mary.</p><p>Ijustwantedtotakeacoupleofminutestoprovidesomeperspectiveonthequarter.AsMarysaid,allreportingsegmentspostedimprovedresultsfromayearago,includingabout$500millionofimprovementoutsideNorthAmerica.Clearly,weareontrackforanotherrecordyearin2016,verymuchinlinewiththeoverviewweprovidedbackinJanuary.</p><p>Justafewcommentsonourresultsbyregion.First,letmestartwithNorthAmerica.NorthAmericacontinuestoputupimpressivenumbers.Wecontinuetoseesteady,moderateindustrygrowthintheUSofapproximately3%andweexpectthattrendtocontinuethroughouttherestoftheyear.</p><p>EBIT-adjustedof$2.3billionwasafirst-quarterrecord,upover$100millionfromayearagodespiteover$200millioninrestructuringexpenseandtheincreasedlaunch-relatedcosts.ThesuccessofourimportantlaunchesliketheChevroletMalibuandCruze,aswellasmaterialandcostefficiencieswillhelpmorethanoffsethigherD&amp;Amarketingandengineering-relatedcoststhroughouttheyearaswecontinuetoinvestinourportfolioandbrands.</p><p>Aswe'vesaidbefore,weexpecttomaintain10%plusmarginsforthecalendaryearwhiledeliveringimprovedEBIT-adjustedperformancecomparedto2015.</p><p>ShiftingtoEurope,weareverypleasedwiththebreakevenresultsinEurope.Morethana$200millionimprovementyear-over-yearandweremainverymuchontracktodeliverbreakevenresultsforthefullyear.WecontinuetoseemoderategrowthinEuropewhereindustryvolumeswereupabout5%year-over-yearinthefirstquarterandasMaryindicatedearlier,Opel/Vauxhallsalesoutpacedtheindustrybygrowingover8%comparedtoayearago.</p><p>ThesuccessofOpel/Vauxhall'srecentlaunches,suchastheAstraandtheCorsa,havecontributedtoincreasedwholesalesandrelatedtop-linegrowthintheregion.Wearealsoveryfocusedoncostswhereweareutilizingtoolssuchasoperationalexcellencethroughouttheregioninyouareseeingsomeoftheresults.</p><p>Inregardstoearningcadencefortheyear,weexpectnormalseasonalitythroughouttheyearwhilewecontinuetomanageFXchallengesintheregion.</p><p>MovingontoChina,anothersolidquarterwithstrongequityincomeof$518million,aboutequaltoayearago.Whiletheindustrygrewroughly6%inthequarter,ourretailsaleswereroughlyflatyear-over-year.Thequarterwasimpactedbymodelchangeovers.However,asourlaunchesrampup,weexpectvolumesandmarketsharetoimprove.</p><p>Ourpreviousguidance,industrygrowthinthemid-singledigitrangeandourabilitytosustainourstrongmarginperformancehasnotchangedandweareverymuchontrack.WealsocontinuetocapitalizeonimprovingmixwithourstrongSUVandNPVsales,aswellasproductsliketheCadillacCT6andXT5whileremainingfocusedoncostefficienciesanddrivingmaterialcostperformance.</p><p>TurningtoSouthAmerica,EBIT-adjustedimprovedthisquarterversusayearagobyapproximately$150millioninamuchmorechallengingeconomicenvironment.Asyouareaware,macroeconomicconditionsremainchallengingwithnonear-termrecoveryinsight.</p><p>WhilewearepleasedwiththedevelopmentsinArgentinaandareseeingpositivemarketsignsthere,politicaluncertaintycontinuesinBrazilwhereindustryvolumesweredown29%inthefirstquarter.However,theresultsofourrestructuringactionsoverthepastyearcontributedtoimprovedresultsthisquarterversusayearago.Wewillcontinuetotakeactionstohelpmitigatethenegativeheadwindsthat</p></li><li><p>CompanyName:GeneralMotorsCoCompanyTicker:GMSector:ConsumerGoodsIndustry:Automotive</p><p>EventDescription:Q12016EarningsCallMarketCapasofEventDate:47.20BPriceasofEventDate:32.66</p><p>2014TheStreet,Inc.Al l R ightsReserved Page5of16</p><p>areimpactingtheindustryandGM'sresultsinthatregionasappropriateandwearewell-positionedtotakeadvantageoftheeconomicrecoverywhenitmaterializes.</p><p>Finally,GMF.Wecontinuetoexecuteourcaptivestrategyandareseeingtheresults.AsMarymentioned,penetrationintheUSincreasedto37%inthefirstquarter,upfrom21%lastyear.Revenuegrewby$700millionto$2.1billioninthefirstquarter,arecordandweearned$225millioninearningsbeforetaxesinthefirstquarter,anotherrecord.</p><p>Shiftingtoourcapitalallocationframework,wecontinuetofocusondrivingshareholdervalue.Inthefirstquarter,wereturned$900milliontoshareholders,including$600millionindividendsand$300millioninsharerepurchases.Wealsoremainfocusedoninvestinginthebusiness.AndasMarydiscussedearlier,ourstrategicinvestmentsinLyftandCruiseAutomationwillhelpusbuildthefoundationfordrivingfurthershareholdervalueinthefuture.</p><p>Andasweindicatedearlierthisyear,wealsotookstepstofurtherderiskthebalancesheetbycontributing$1.5billiontoourUShourlypensionplanduringthequarterandjustrecentlyfinalizedanother$500millioncontributioninApril.Asyouknow,the$2billioncontributionwasfundedwithdebtprovidingtheCompanygreaterflexibilitybypushingoutanyrequiredpensioncontributionsfurtherintothefuture.</p><p>Asexpectedandinlinewithnormalseasonality,Q1-adjustedautomotivefreecashflowwasanoutflowof$1.5billionforthequarter,whichwasa$200millionimprovementversusayearago.</p><p>WithregardtoourtotalCompanyoutlookfortheyear,weareverymuchonplanforimprovedfull-yearprofitandmargingrowthversus2015,whichwouldbeanotherrecordyearfortheCompany.AndwehaveevenmoreconfidencethatwewillachieveourEPS-adjustedguidanceof$5.25to$5.75forthefullyearandwecontinuetoexpectgrowthinadjustedautomotivefreecashflowtonearly$6billionin2016.</p><p>Thatconcludesouropeningcomments.Wewillnowmovetothequestion-and-answerportionofthecall.</p><p>QUESTIONS&amp;ANSWERS</p><p>Operator :</p><p>(OperatorInstructions)</p><p>JohnMurphy,BankofAmerica.</p><p>JohnMurphy(Analyst-BoAMerrillLynch):</p><p>Goodmorning,guys.Afirstquestionjustonthepaceofbuybacksinthequarter.Itseemedlikeitwasalittlebitlight.Obviously,it'satoughworkingcapitalquarter,aseasonalquarterforyouoncashflow.</p><p>I'mjustcuriousasweseecashflowrampupthroughthecourseoftheyearifyoucontinuetoseethebuybacksasasignificantopportunityhere?</p><p>ChuckStevens (CFO):</p><p>Sure.Andataminimum,whatwewanttodoiscompletethecommittedsharebuybackprogramthatweannouncedinthefirstquarterlastyear,whichwas$5billionthroughtheendof2016andperourcapitalallocationframework,aswegeneratefreecashflow,wearegoingtobuybacksharesasexpeditiouslyaspossible.</p><p>But,asIsaid,John,ataminimum,wewanttocompletethatfirst$5billiononourpathtothe$9billionupsizethatwasapprovedbytheBoardearlierthisyear.</p></li><li><p>CompanyName:GeneralMotorsCoCompanyTicker:GMSector:ConsumerGoodsIndustry:Automotive</p><p>EventDescription:Q12016EarningsCallMarketCapasofEventDate:47.20BPriceasofEventDate:32.66</p><p>2014TheStreet,Inc.Al l R ightsReserved Page6of16</p><p>JohnMurphy(Analyst-BoAMerrillLynch):</p><p>Okay,great.That'shelpful.Andthenjustasecondquestionaswethinkofthefreecashflowyouareshowingonslide23here.There'sa$500millionbenefitfromequipmentonoperatingleasesandI'massumingthat'sthegainonvehiclescomingbackoffleaseandtheresidualsperformingbetterthanexpected.I'mjustcuriousifthatiscorrectandifthat'ssomethingyouthinkwillcontinuethroughthecourseofthisyear.</p><p>Andwhatisdrivingthat?Isthatjustbettermarketconditions,oristhatb...</p></li></ul>