General Motors Company

Operator: Good morning, and welcome to the General Motors Company First Quarter 2026 Earnings Conference Call. [Operator Instructions] As a reminder, this call is being recorded on Tuesday, April 28, 2026. I would now turn the call over to Ashish Kohli, GM's Vice President of Investor Relations. Ashish Kohli: Thanks, Denise, and good morning, everyone. We appreciate you joining us as we review GM's financial results for the first quarter of 2026. 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 are Mary Barra, GM's Chair and CEO; along with Paul Jacobson, GM's Executive Vice President and CFO. Susan Sheffield, President and CEO of GM Financial will also be joining us for the Q&A portion. On today's call, management will make forward-looking statements about our expectations. These statements are subject to risks and uncertainties that could cause our actual results to differ materially. These risks and uncertainties include the factors identified in our filings with the SEC. Please review the safe harbor statement on the first page of our presentation as the content of our call will be governed by this language. And with that, I'm delighted to turn the call over to Mary. Mary Barra: Thanks, Ashish, and good morning, everyone. Once again, thanks to our strategic product portfolio and great execution by the GM team, including our dealers and suppliers we delivered an outstanding quarter. I couldn't be more proud of the team's efforts and our results. We are continuing to execute our plan to return to 8% to 10% EBIT-adjusted margins in North America for the full year. In fact, in the first quarter, we achieved an EBIT adjusted margin of 10.1%, including 1.5 points of benefit from the accounting adjustment resulting from the recent Supreme Court tariff decision. This nets to an 8.6% margin. Complementing our performance in GM North America was our sixth consecutive profitable quarter in China and higher year-over-year results in GMI excluding China. We're also building tremendous momentum in digital services. They are playing an increasingly important role in our success, and they will drive even stronger results in the future. If you look deeper at our results, especially in North America, you can see how the depth and breadth of our vehicle portfolio is driving the business. Following a very strong close to the fourth quarter, we began this year with lean inventory in the U.S., and we had planned downtime in North America during the quarter to install tooling for our next-generation full-size pickups. Even with tight inventory, we continue to lead the industry in the U.S. and Canada, and we're #2 in Mexico. We also continue to lead in full-size pickup sales and share with 42% of the U.S. market. In addition, we were #1 in fleet, including commercial deliveries, and we were #2 in EVs. As we exited the quarter, our EV market share in the U.S. was 13% up from about 10% in December 2025, which underscores the appeal of our portfolio as the segment stabilizes. I would also like to highlight the growth of our crossover business, which is an important differentiator for GM. Since we began refreshing our lineup in 2023, crossovers have grown from just over 40% of our sales to more than 46%. We've also gained 2 full points of share in vehicles like the Chevrolet Trax and Equinox, the [indiscernible] and the GMC Terrain and the Chevrolet Traverse and GMC Acadia. have become significant contributors to our profitability. Additionally, we delivered these results with incentives that continue to be [indiscernible] the industry for both ICE and EV. As we look ahead, the SAAR is holding steady, showroom traffic is stable, and we continue to operate with lean inventory. We began the second quarter with about 47 days of supply on dealer lots. All of these winning vehicles are laying the groundwork for higher company level profitability around the world through durable reoccurring digital revenue streams. We are on pace to add more than 1 million OnStar subscribers in 2026 with about 30% of our existing customers choosing a premium plan. Outside of the U.S. and Canada, we have more than 20 revenue-generating markets and regions, including Mexico, Brazil, China, South Korea and the Middle East. Within the OnStar platform, Super Cruise is also scaling quickly. Our customers have now driven 1 billion hands-free miles and our subscription performance is on pace to exceed 850,000 subscribers by the end of the year with strong renewal trends in the 30% to 40% range. You will find that our attach rates, subscription renewals and revenue generation compare favorably to others in the industry. The continued growth of this ecosystem, including the customer base, miles traveled and the insights we're gaining to train our AI models will help pave the way for our eyes off, hands off technology launching in 2028 on the Cadillac Escalade IQ. The escalate IQ is just the start. We are doing something unique in the autonomous space, which is developing a system for personal vehicles that we can deploy on both ICE vehicles and EVs and scale across multiple brands and price points. We're stress testing it in the digital environment capable of simulating roughly 100 years of human driving every single day. We recently took the next step and began supervised on-road testing in California and Michigan. The way we're building this technology is a reflection of how seriously we're embracing AI across the enterprise. Today, nearly 90% of the code written by our autonomy team is generated by AI. Next, let me comment on our updated EBIT adjusted guidance, which we are raising by $500 million to a range of $13.5 billion to $15.5 billion to reflect the flow-through of the tariff adjustment. While our operating performance remained strong as reflected in our excellent first quarter results, the war in Iran has raised our cost and its duration remains uncertain. We are working to offset these cost pressures by reducing spending in other areas and by continuing to find efficiencies across the business, but we believe it's prudent to wait and see how events unfold before we make any further changes to guidance. As we move forward, I'm confident that our portfolio, production, inventory and incentive discipline, balance sheet strength and free cash flow generation will continue to differentiate GM. With that, I'll ask Paul to take you deeper into the quarter, and then we'll move to Q&A. Paul Jacobson: Thank you, Mary, and we appreciate everyone joining us this morning. The GM team delivered another outstanding quarter. Thanks to their hard work and strong execution. Q1 EBIT adjusted was $4.3 billion, surpassing expectations even after excluding the $0.5 billion tariff adjustment. Once again, we demonstrated discipline in our approach to both pricing and inventory. In the first quarter, our U.S. incentive spend per vehicle as a percentage of MSRP remained more than 2 points below the industry average. U.S. dealer inventory ended the quarter at 516,000 units, down 6% year-over-year overall and down 9% for full-size pickups, even against the difficult comparison created by outsized pre-tariff March deliveries last year. While we further strengthened our leadership in U.S. full-size pickups this quarter, leaner inventory constrained retail sales. Looking ahead, we are working to increase inventory levels of key products and believe that we can take this higher over the next several quarters while being mindful of the broader demand environment. Let me now provide more details on our strong first quarter results. For the total company, revenue was down year-over-year by approximately $400 million in the first quarter, as expected, driven primarily by lower EV wholesale volumes. ICE wholesales were flat year-over-year, with higher GMI volumes being offset by lower North American volumes, which were constrained by the end of production of certain Cadillac crossovers, lower imported volumes from Korea and full-size pickup downtime. As I mentioned earlier, our Q1 EBIT adjusted came in better than our expectations, driven by solid execution across all of the businesses and good expense management. Year-over-year, Q1 EBIT adjusted was up approximately $750 million, driven by the [ IIFA ] tariff adjustment, lower EV losses and FX benefit, lower warranty expense and emissions-related regulatory savings. These tailwinds were partially offset by a full quarter of tariffs. Let's expand on a couple of these items. In the first quarter, we incurred $200 million of incremental gross tariff costs, including the tariff adjustment compared to minimal tariff costs last year. EV losses were down several hundred million dollars year-over-year in the first quarter, driven by lower volumes, manufacturing efficiencies and lower fixed costs. On warranty, we continue to expect a year-over-year tailwind of $1 billion with first quarter results improving roughly $200 million versus the prior year. Q1 results included $400 million of lower warranty liability reserve adjustments, partially offset by higher warranty rate accruals on new vehicle sales. We continue to pursue a comprehensive multipronged approach to reduce our warranty expenses from product development and current production all the way to repairs at our dealers. Let's turn next to an update on our EV charges. Last year, as you know, we reassessed our EV capacity and manufacturing footprint to better align with softer demand and elimination of U.S. tax incentives. As previously indicated, we are transitioning Orion assembly from EV to ICE production and resolving associated supplier contracts. With the exception of the BrightDrop EV van, we have not recorded impairments to our current EV portfolio. Our focus remains on improving EV profitability and scaling our business as market adoption grows, albeit at a slower expected pace than we had previously seen. In the second half of 2025, GM recorded a total of $7.6 billion in EV related charges. This breaks down into $4.6 billion of estimated cash charges and $3 billion in noncash impairments. In the first quarter, we took an additional $1.1 billion in EV charges, driven mainly by contract cancellations and supplier commercial claims. We expect about $1 billion of this will have a future cash impact. We're moving quickly to finalize claims. To date, we've already recorded around 90% of the expected total supplier commercial claim costs, and we anticipate reaching agreements in principle on most of the remainder during the second quarter. Separately, we continue to work expeditiously through rightsizing our battery supply chain with our joint venture partners. Of the total, $5.6 billion in EV-related cash charges recorded since the second half of 2025, $2.6 billion has been paid as of March 31. In April, we've already paid an additional $600 million, and we continue to expect most of the remaining cash flows to occur in 2026. We remain steadfast in our desire to get these claims resolved quickly and fairly for our business partners and our shareholders. Now let's turn to a regional perspective. In North America, Q1 EBIT adjusted was $3.7 billion with a 10.1% margin, including an approximately 1.5 point benefit from the tariff adjustment, which nets to 8.6%. We're off to a terrific start to deliver a North American margin in the 8% to 10% range for the full year. Excluding the plant sale gain, China equity income was $100 million. This shows ongoing resiliency from our prior restructuring as well as disciplined production and inventory management in the face of softer macroeconomic conditions. GM International, excluding China equity income delivered approximately $40 million in EBIT adjusted despite the Iran conflict disruptions in the latter part of the quarter. We have been and will continue to divert some full-size SUVs and pickups from the Middle East back to North America, helping to alleviate low domestic inventory levels. GM Financial continued its stable performance, delivering EBT adjusted of $700 million for the quarter. Now let's look ahead to 2026 guidance. While the U.S. economy has been resilient, we haven't seen any material changes to demand or mix thus far. There remains considerable uncertainty, and therefore, we want to be prudent as we think about the future. Based on what we know today and assuming the SAAR remains in the low 16 million unit range, we are raising our overall EBIT adjusted guidance to $13.5 billion to $15.5 billion up from $13 billion to $15 billion. Likewise, we are raising our EPS diluted adjusted guidance to $11.50 to $13.50 per share, up from $11 to $13. While our execution and discipline helped drive first quarter outperformance, we now expect incremental commodity and freight costs versus our original guidance. At the same time, our FX outlook has improved from a small headwind to neutral for the full year. As a result of these changes, we are increasing our full year guidance for year-over-year commodity inflation, including logistics and higher DRAM costs to $1.5 billion to $2 billion. The incremental $500 million is expected to be more or less equally weighted across the remaining 3 quarters. In light of that, we're continuing to take proactive steps to ensure that we are efficiently allocating our resources and are ready to quickly adjust as needed. Meanwhile, our gross tariff costs are now expected to be $2.5 billion to $3.5 billion for the year, down from our original guidance of $3 billion to $4 billion because of the tariff adjustment we took in Q1. We expect 2025 self-help offsets to continue in 2026 and are pursuing additional opportunities to further mitigate these costs. Relative to our international regions, we expect China to remain profitable and to deliver results consistent with 2025. However, we anticipate some softness in our international operations outside of China due to the impact of the conflict and around on Middle East wholesales in particular. There is no change to our other 2026 key guidance assumptions. On price, we continue to expect to be flat, up 0.5%, benefiting from model year 2026 price increases. ICE volumes are expected to be flat to modestly up though production is constrained due to the major refresh on full-size pickups as well as the end of production of the Cadillac XT6. For EVs, we expect volumes to be lower as the market shows early signs of stabilizing around 6% of U.S. industry sales. We continue to expect a benefit of $1 billion to $1.5 billion for the calendar year as we rightsize our EV capacity and run at substantially lower EV wholesale volumes. The production pause at Ultium Cells means lower benefits from production tax credits flowing through material costs, but this is largely offset by positive inventory adjustments from lower cell inventory levels. On regulatory costs, we continue to expect $500 million to $750 million tailwind year-over-year. The endangerment finding repeal in February was already assumed in our plan. GM Financial continues to expect EBT adjusted in the $2.5 billion to $3 billion range, including accelerated depreciation on its EV lease portfolio. As part of our disciplined risk management, GM Financial regularly evaluates the estimated residual values and proactively adjust depreciation accordingly. We are maintaining our adjusted auto free cash flow guide of $9 billion to $11 billion with a heavier weighting to the second half. Note that this guidance excludes the EPA tariff refund given uncertainty around payment timing. Our capital allocation policy remains unchanged. We are committed to investing in the business, maintaining a robust balance sheet and returning the remainder to shareholders. We believe that repurchasing GM stock at the current valuation remains one of the most effective ways to deploy capital and create long-term value for our shareholders. In Q1, in addition to distributing $164 million in dividends, we made $800 million in open market stock repurchases, retiring approximately 11 million additional shares at an average price of $75.02 per share. We ended Q1 with $19 billion of cash and $5.5 billion remaining on our share repurchase authorization. Before I open the call for Q&A, I want to highlight our OnStar digital service business. This includes Super Cruise, but also a broader suite of connected services that we highlighted earlier in the quarter. It's an underappreciated asset that is growing and margin accretive. In Q1, we saw recognized revenue of over $750 million, up over 20% year-over-year. For the calendar year, we expect $3.1 billion of recognized revenue, up 15% year-over-year. We are on track to reach 13 million subscribers by the end of 2026, up by $1 million year-over-year with a monthly average revenue per subscriber of around $20. Those subscribers are driving ongoing deferred revenue growth as well. In Q1, the deferred revenue balance ended at $5.8 billion, up $2 billion or over 50% year-over-year. For the calendar year, we expect deferred revenue to approach $7.5 billion, up more than 35% year-over-year. In conclusion, I have tremendous confidence in the GM team's ability to successfully navigate the evolving geopolitical landscape. Our broad ICE and EV portfolios remain key competitive advantages versus our peers and our disciplined approach to inventory and incentives keep us agile. Just like we've done with other macro headwinds, we are proactively planning for a range of potential outcomes. We are working to identify additional profit improvement opportunities and have begun taking initial no-regret steps to moderate spending. As events continue to unfold, we will remain flexible and execute the right playbook to optimize profitability, maximize free cash flow and continue to deliver strong returns for our shareholders. Thank you for your continued support. And with that, we now begin our Q&A portion of the call. Operator: [Operator Instructions] Our first question comes from Itay Michaeli with TD Cowen. Itay Michaeli: Maybe just to start, Paul, just a clarification on the guidance. Can you talk about the offsets from a cost perspective or otherwise to the higher commodity inflation that's leveling to kind of raise the guidance outside of the AEPA, of course. Paul Jacobson: Thanks for kicking us off today. So I think when you look at the inflation, the pressures that we're seeing, the offset come in a couple of different forms. Number one, we've put a little bit in the bank in Q1 from our outperformance from what we've seen. Some of that was timing, but there was some good core movement on many of the staples that we've talked about, whether it's warranty or EV profitability, regulatory costs, et cetera. But then there is also the playbook that we referenced in our comments, which similar to what we've done, whether it was tariffs or chip shortage or COVID, et cetera, that's worked really well for us. So we're looking at doing that. What we don't want to do, we don't want to rush and do a lot of things that are going to jeopardize or otherwise put at risk longer-term strategic initiatives by overreacting to what's going around us. So we have sort of degrees of freedom in terms of what we're going to do, starting with relative low hanging fruit, maybe deferring some hiring or things like that. But overall, I think we're going to be measured about it. So while we have this uncertainty, I think holding our numbers consistent net of [ AEPA ], I think is the prudent thing to do with all this uncertainty. And if things abate, then we could potentially see upside in the future. Itay Michaeli: That's very helpful. And then a bigger picture question, quite to say the progress on software and services. And how level -- how should we think about the ARPU opportunity for the company on the upcoming SDV platform in 2028? As the sort of opportunity continues to grow from here? Paul Jacobson: Well, I think, Itay, you look at the momentum we have, and I appreciate you pointing it out. We've started to lean more into disclosing a lot of what's going on here. And I think what we're really focused on right now is the attachment rates and delivering value to the customer. As we roll out SDV 2.0, the number of opportunities out there start to magnify pretty significantly in terms of what the digital offerings that we can put out there. You'll hear more information about that over the coming months. as we lean into when SDV 2.0 comes. But clearly, when you look at -- we might have a lower average revenue per unit than, say, Tesla does, but we already have significantly higher volumes deferred revenue, more realized revenue. And that's where the real scale benefit comes across the portfolio. So we think that this is a growing and soon to be really influential piece of the business going forward. Operator: Our next question comes from Joe Spak with UBS. Joseph Spak: Paul, I know you're on TV this morning, and I think you mentioned some industry discounting. I was just wondering if you could expand on that a little bit because it doesn't really sound like you changed your own sort of volume or pricing assumption. So is what you're seeing sort of in line with what you expected, call it, 90 days ago? And then just given some of these cost pressures, if there -- if competitors do start to maybe try to price for some of these cost pressures, does that -- do you feel like gives you a little bit of leeway to do the same to cover some of those higher costs you mentioned? Paul Jacobson: Yes. Thanks, Joe. I would say it's largely in line with what our expectations have been. There have been some really unique things that I think have played out this year among the competitive set that we haven't seen historically. But we continue to, I think, be very disciplined in our approach. I think a lot of the share data that people saw during the quarter was probably more a result of some of the challenges we had with inventory on lots. We came into the quarter light on our targeted inventory levels primarily because we've had such a really strong December, for example. And then with the storm and some other challenges that we had, we weren't really able to catch up. Wholesales call up towards the end of the quarter, but that really didn't show up in showroom we're optimistic that as we get more product out to the dealers in Q2 that we can help to reverse some of the share losses that we saw without getting into heavy discounting across the board. So I think nothing has changed in our playbook. We're going to continue to be tactical and we're going to continue to be disciplined. Joseph Spak: Makes sense. And maybe just one on the cost side then, obviously, some good management here in the quarter. And I think you sort of mentioned maybe some cost timing or phasing, I guess the one I'm asked -- I'm curious about is, I think you mentioned, call it $1 billion to $1.5 billion in onshoring and software costs. Like how is that tracking? And is that something that really started to come in this quarter? Or is that sort of more weighted to the remainder of the year? And then one clarification on [ AIBA ]. This is just the receivable for your overpayment, right? Like you're not assuming that you're not paying this in -- or I guess the 122 replacements, like those stay in place. It's not that there's like a benefit assuming your guidance that you do not paying that in the back half, correct? Paul Jacobson: Yes. So let me cover the tariff question first. So all we've done here is taken the [ IEFA ] direct tariff that we paid last year. that was subject to the Supreme Court decision and credited that back as a receivable. And as we said, we haven't changed our free cash flow guidance because we don't know what the -- when the refunds are going to be received, how that window might work. going forward. But that's all we've assumed. Now keep in mind, most of our tariff burden comes from 232. So EPA versus our size is relatively small. But because of that entry, that's why we took the guidance down. We're not projecting any other change. We're not projecting any other changes to our tariff bill. When I said guidance down, I went to tariff bill guidance. And then on the cost side, I think it's a couple of things. FX was obviously a benefit for us, primarily the Canadian dollar and then also Korea and some of our imports getting better treatment there. We think that will hold. When you look at other cost items, we can -- we make progress on warranty, a couple of hundred million dollars of warranty in line with what we said we're going to do for the year. EV profitability improved largely as a result of better, more efficient use of the capacity as the whole -- as the write-offs that we took hold. And then also on the regulatory side around GHD. So I think many of those are going to hold on when you look at the cost pressures as we've talked about, pretty much the onshoring costs are going to be really heavily weighted towards the back half of the year, as expected, and we start to hire people to get the plants running in early '27. Operator: The next question comes from Emmanuel Rosner with Wolfe Research. Emmanuel Rosner: So quite an uncertain environment as you certainly indicated. I was curious in terms of the factors you're monitoring, you indicated you'd want a little bit more clarity on some of those before making any additional changes to the outlook. In terms of things that could move the needle for this year that you're monitoring? Is it more on the demand side, vehicle mix, input cost, I'm curious which are the ones that could still move up or down the most and impact you? Mary Barra: Emmanuel, I think the #1 thing that we're watching is what happens from -- with the Iranian conflict because obviously, with oil prices affect a lot more we're seeing from not only logistics, but also other commodity costs. So if the conflict ends in a shorter period of time, I think we'll see a return back to normal levels. If it stays on longer tell me how high oil prices go before we'll start talking about what demand is. But I also want to remind you that we're -- although we have an incredibly strong truck franchise and I'm very excited about the new truck that we have coming out at the end of the year, we also have a very strong midsize crossover portfolio and small crossover portfolio as well as a strong midsize truck. So I think we're well prepared with portfolio I'd stand against anyone when we look at how consumer behavior might shift depending on how long the war lasts, but we just don't know. So I think those are the primary things that we're watching. And as Paul said, we looked at the years, seen that uncertainty, especially as the conflict began, and that's why we started to really work on cost management. There's other areas that we're working on to continue to do that. But I think the biggest variable that we're looking at is how long does the conflict last and what does it cause from a cost perspective across logistics supply chain. And if it ends up having anything -- any impact on a shift in mix. But to date, we really haven't seen that. Emmanuel Rosner: That's very fair and great color. And I guess just -- as a follow-up on this then in terms of the input cost inflation and commodities, can you tell us what you have assumed in this updated guidance, which has been -- the inflation cost has been increased by another $0.5 billion. What are you assuming for commodities in the back half or for how long they stay high as a base case scenario? Paul Jacobson: Yes. Emmanuel, what we've done is essentially taken the kind of the curve where it sits today, net of our hedges, and remember, we -- it's not all direct and linear because we've got, for example, steel contracts. If you'll recall, we have about 1/3, 1/3, 1/3, of spot, 1/3 expiring within a year and a third kind of over 2 years. So that's helped us quite a bit. During times when prices go down, we pay a little bit more, but we pay a little bit less when prices go up. So we're really looking at the current environment kind of persisting for the year. And to Mary's point, conflict end and commodity prices and oil prices returning back down to pre-conflict levels, then we could potentially see upside in that scenario. Operator: The next question is from Mark Delaney with Goldman Sachs. Mark Delaney: You mentioned the downtime that GM had for tooling in the first quarter related to the next-gen full-size pickups. I'm hoping to better understand if investors should expect more downtime for the upcoming full-size pickup launch? And that's a potential incremental headwind? Or is that now behind and higher full-size pickup truck production should be a tailwind for the volume and share plans that you articulated in your prepared remarks. Paul Jacobson: Yes. Mark, thanks for that. We had some significant downtime in the quarter primarily related to heavy-duty trucks. I think a lot of that is behind us. There may be some selective downtime, but I think a lot of it can be done during shutdown, et cetera. So we're not anticipating any material downtime at this point. But that's what we're going to need to lean into a little bit to try to get our inventory levels back into the targeted range from where they've been because even when we ended the quarter, we were still down below our target levels. So we're hoping that we can get that back. And the team has done a really, really good job of managing through all of the logistical challenges. Mark Delaney: My other question was on Super Cruise and the digital services. For the strong growth that GM has been seeing in Super Cruise and the willingness for consumers to subscribe after the prepaid subscriptions last, can you speak a bit more on the breadth of that consumer demand? And is it concentrated in the higher end parts of the portfolio like Cadillac or is GM seen consumer demand for those solutions more broadly? Paul Jacobson: So what I would say, Mark, we're continuing to trend at about that 40% attachment rate after the subscription period and we do it differently, right? Other competitors that put the hardware on every vehicle, and they're bearing that cost for us, it's consumers who have purchased Super Cruise, they prepaid for a 3-year period, and we see that in terms of the hardware cost. So we have the deferred revenue that comes with the vehicle and then we have the subscription afterwards we're starting to see escalation in terms of the number of vehicles that are coming off of that 3-year prepaid period, and we're still holding attachment rates in that 40% range. So we're very optimistic about what that means. And I think that's what I was adhering to in the earlier question of when you look at the ARPU, you've got to really take into account the scale advantage we have, especially as we start growing into SDV 2.0 and expanding that across the -- but Super Cruise is a really strong leading indicator, and we're continuing to invest in delivering more value to customers that we think are going to make that even more attractive in the future. Operator: The next question comes from James Picariello with BNP Paribas. James Picariello: My first question, just about -- just as we think about adjusted auto free cash flow, how should we be thinking about the GMF? The GM Financial dividends? That was a pretty notable step up at $650 million for the first quarter. And then just to clarify, regarding the EV cash restructuring, of $4 billion or so for the full year. The majority, the remainder of that gets achieved in the second quarter. Is that right? Paul Jacobson: Yes, James, a couple of things. First, on GMF, we saw an opportunity in the first quarter largely as a result of GMF cash position to step up the dividend from our traditional level. We're not changing the full year expectation of the dividend, so pretty consistent there for the full year. But from a timing perspective, we saw that opportunity and we took it. On the EV cash charges, as we've laid out, we're going hard and aggressively at the sort of commercial relationships where approximately 90% with those. And we expect to have substantially all of that cash paid out before the end of this quarter -- this quarter being the second quarter. We still have a couple of battery raw material negotiations that we're working through. They're obviously more complex. But those will come in over time as well as we continue to work with our partners. But our goal here is to try to put as much of this behind us as quickly as we can so that we can be focused with our supply chain partners on tomorrow and stop having conversations about yesterday, which I think is way ahead of the expectations that many of our competitors have placed. So we're focused on that. We also don't want it to be an overhang for cash flow. Despite that, a significant cash outflow that we've seen as a result of those restructuring charges, we were still able to repurchase $800 million of shares in the quarter, and we remain committed to our capital allocation going forward. So I think the team has done a really good job of managing through those challenges and through those conflicts. James Picariello: Very helpful. And then just on the GMI downside within the guide now, just how should we be thinking about -- I mean, is that order of magnitude, like $300 million of incremental downside? And just how to think about volumes for GMI, the remainder of the year relative to the first quarter? And to that thought, just high-level cadence for adjusted EBIT for the year? Typically, the second and third quarters are the strongest for GM? Paul Jacobson: Yes. I would say that a lot of that is -- the impact is really being driven by the Middle East. In the quarter, we actually reallocated about 7,500 full-size SUVs that were originally slated to deliver to the Middle East operation under GMI. We reallocated them to North America, partly because of the conflict and the logistical challenges of getting them to market, but also partly to help bolster some of our lower inventory levels here in the U.S. So I think from an enterprise perspective, we're largely mitigating that impact, as we've said. But depending on how long the conflict goes and how long we see challenges in the Middle East, that's what's going to really ultimately determine the pressure on GMI. Operator: The next question comes from Michael Ward with Citigroup. Michael Ward: Just a follow-up on the truck changeover. So you planned downtime for the tooling and the actual change takes place in the second half, 4Q, specifically. Is that right? And does -- is there an impact on the volume in 4Q? Or is that all largely behind you? Mary Barra: Well, I would say as we look at that ramp will start in the third quarter and then we'll accelerate. So depending on how successful we accelerate, there's a tremendous amount of work going on. I'm really pleased with what the truck is from a quality perspective right now. But there may be a small impact, especially since we're running so lean from the current year. It's a good thing, though, that there's still such strong demand for our current generation trucks. So we think it's going to be a pretty smooth changeover, but there could be a small amount of impact as we get into the latter part of the year. Michael Ward: And then just going back to the digital services. I think you said that you expect margins to be in line with other software companies. When will we see those types of margins? I don't know if we're there yet now or not or if they're upfront costs you take. How does that cost/revenue curve look out over the next 2 to 3 years? Paul Jacobson: Yes. So Mike, this gets a little bit technical. I'll try to summarize it as best I can. But when we sell a vehicle with Super Cruise, all the hardware gets expensed right away. And then the revenue associated with that gets deferred over the 3-year trial period. So that's coming on at a very, very sizable margin because we've already recognized the cost in that going forward. And then when you look at the other digital services and OnStar, there are some hardware costs, et cetera, that are expensed with the vehicle. There are some service costs that go in. So the margins aren't quite as robust as if you expense everything because there are service costs associated with it, but they're still pretty sizable. So as we ramp up that deferred revenue base and it starts to amortize the P&L at increasing rates, that's where you start to see the impact. And what we talked about, if you go back to Investor Day several years ago. We talked about that having an impact and growing to a point where it has an impact on the overall margins of the company, we're starting to see that take hold, and we see -- we've got a lot of about the potential of what SDV 2.0 and the future improvements to Super Cruise and ultimately, autonomy can do for us when you look at it across scale. Operator: The next question comes from Andrew Percoco with Morgan Stanley. Andrew Percoco: I want to start on the digital services. I appreciate the added disclosure you guys have started to give here. But if I look at the 13 million or so subscribers that you're targeting by year-end. You've also got, I think, 45 million to 50 million vehicles on road. So I'm just curious, like how do you tap into that 35 million to 40 million other vehicles that don't currently have any subscription these digital services? Is there a hardware limitation? I know there might be some limitations around supervision, but outside of supervision, what's the opportunity to get some of those customers into some of these higher-value digital services? Paul Jacobson: Yes. Thanks, Andrew. I appreciate that. So I think when we talk about the car park that's out there in the universe of GM vehicles that really is meant to signal the opportunity that exists going forward. So as we continue to put SDV 2.0 and other capabilities, many of the vehicles that are out there don't have the hardware capabilities to be able to deliver that. So we're looking at that growth potential and really sizing the box for the future as we continue to expand that. So we do have, like I said before, in response to the other question, with Super Cruise, it really is a case where the hardware is on there for people that buy it. As we continue to get the cost down, we can look to potentially approach the market differently on that. But we see a ton of potential here because we're already driving approximately $7.5 billion of deferred revenue by the end of this year with what we have. So it really speaks to the opportunity that's ahead of us. Andrew Percoco: Got it. That makes sense, and that's super helpful. And I guess, as a follow-up question to that, I think super cruise is available on, I think, 750,000 miles of roads in the U.S. What's some of the gating factors in expanding that? Is it regulatory? Is it your own kind of risk appetite? Just help us think through what some of the kind of gating factors are there. Mary Barra: It really is as the company looks, it's both from -- in many cases, we have LIDAR map with the current system. But -- and it's also -- we've really focused on highway and major roads. And so it's a focus that we continue to look at how we expand. And we -- as you've seen from when we first launched Super Cruise and it started on a certain amount of roads, we continue to expand that over time. So we are now on additional roads, not just highways, and we'll continue to look at the opportunities to do that and making sure we do the technology correctly because one of the things we're most proud of from a Super Cruise perspective is it's viewed as extremely safe and the customers, we're building a lot of trust with Super Cruise as we do that, which I think will also play well as we launch our next generation with the Escalate IQ with the ISO hands-up. Operator: The next question comes from Dan Levy with Barclays. Dan Levy: Paul, you mentioned earlier that some of these commodity costs are staggered and they hit on the lag. So presumably, if cost hold, you'll be facing somewhat of an incremental headwind in '27. I know you're probably not prepared to outline what that -- what the magnitude of that headwind might be to be curious to know. But I'm just wondering, how much do you have in your back pocket on cost mitigation that even if the inflation on these commodities continues to rise into '27 that, that can be neutralized? Paul Jacobson: Yes, Dan, you're right. It is way too early to speculate on 2027. As we talked about that the pressure that we're seeing right now is a function of the forward curve, that forward curve is going to change 200x between now and 2027. So it's way too early. But if you think about where we are, and we started to outline this in prior presentations that the momentum we have in '26 and what we're starting with warranty improvement, EV profitability improvement regulatory cost improvement should all continue to be tailwinds in 2027 for us as well. And in addition, we've talked about we basically have stopped production at many of our cell plants to work down our inventory levels, which means we're not capturing the production tax credits that we have in prior years. That when we get battery cell inventory to a normal level, that will get us to a point where we can start to collect those going forward as well as the improved profitability of EVs. And then you look at the product portfolio with the new pickups coming in 2027, end of this year and into 2027, you start to see some momentum, but way too early to speculate. We just -- at the end of the day, we're executing on what we see and planning for future contingencies should we need to do that. Dan Levy: Great. I have a follow-up. I wanted to double click on some of the competitive dynamics within large pickups because I think there's been some attention on one of your competitors that's trying to pick up shares. So I'm wondering if you can help just to double-click within the share dynamics. We know that there is a large skew in the profitability within some of the subsegments within large pickups. Maybe you could just tell us, we see the overall data, but within some of the more profitable areas within large pickups, are you still holding your share? And is that some of those share gains from your competitor are coming at the less profitable areas, and that doesn't matter as much to you? Mary Barra: Well, I think we -- because of some of the issues of ending the year so strong that we were low in inventory and then with the planned downtime we expect, we still had very strong demand for our trucks. And we're not seeing -- I mean we are seeing strong demand across the board in the upside. But we want to welcome every truck customer. I think because of our lean inventories and if you look at some of the incentive rates of some of the competitors. You can see how disciplined we are and still selling every truck that we can. And so I think that's the formula and the recipe that we're going to continue to do is work to earn every truck every truck buyer in a disciplined way because of the strength of our products. So it's across the board. Operator: The next question is from Alex Perry with Bank of America. Alexander Perry: I just wanted to follow up a bit on the input cost inflation that you guys are seeing. I guess what commodities in particular, can you remind us where you're hedged? And then are you starting to see any shortages in any raw materials? Or are you concerned at all of shortages if the war sort of persist here? Paul Jacobson: Yes. Thanks for the question. We vary our hedge levels based on commodities. We're kind of seeing pressure a little bit across the board, as you would expect, primarily driven by higher energy prices et cetera. We're not projecting or worried about any shortages right now. And I think the supply chain team has continued to prove their results through yet another challenge as we've seen them do in years past. So no shortages. On the commodity side, it depends 25% to 50% hedged. That certainly helped us in the aluminum space this year. But overall, I think it's pretty manageable from that standpoint. We're just going to continue to watch it. I think the hedges and the staggered steel contracts buys a little bit of time to adjust the business, which is why we do it that way. But overall, no real concerns right now. Alexander Perry: Perfect. And then could you just remind us on the cadence of the wholesale volumes for the year with the refresh company? Any change to seasonality? And I guess as a follow-up to the inventory question, is the expectation that you'll be able to rebuild some of the depleted truck inventory? And then just on pricing, are you sort of holding that flat to up 50 bps pricing guide for the year? Paul Jacobson: Yes. No change to our pricing guide. I would say no change to the regular cadence on wholesale across the board. We do have the opportunity, I think, to get a little bit of [indiscernible] deficit on the inventory shortfalls that we've had. We saw some of that come in late in the quarter. that are making their way into showrooms or have made their way into showrooms this month. But we're going to continue to work and try to manage it in that 50- to 60-day range. And the team has done a really good job of trying to make that up. Operator: The next question comes from Chris McNally with Evercore. Chris McNally: I guess as hitting the end of the call, I wanted to think a little bit further out. One of the discussions -- for the first time in a decade, GM is going to have the ability to have more capacity in pickups and SUVs, given -- I think you guys saw it much earlier than everyone else about reshoring. So you'll have both Orion plus Mexico that will still have capacity, not numbers, but more strategic, where do you think GM could theoretically sell more of these higher value-add vehicles? Is it the upper end of the market, lower end of the market, if it not, North America, where you can sell in Mexico and Latin America. But just a little bit about the strategy, '27, '28, '29 at the Orion is done, where could you sort of increase the absolute number of pickups in SUVs that you could sell? Mary Barra: Well, I think we look -- and Paul already mentioned that we shifted some production from the Middle East. Usually, that's a very strong market. So after this conflict in, there's -- I think there's upside there. There's upside in many other markets, not only in full-size trucks, but also in full-size SUVs, both in the U.S. as well as globally, and those tend to run on the higher contented vehicles. So I'm extremely excited about the upside opportunity when we have more full-size SUVs and more trucks to really serve the globe as well as demand in the United States. So it's a huge opportunity for us as that plant comes online. Chris McNally: And I guess the follow-on is around USMCA. I mean I imagine the determination of how much capacity you would want to keep in Mexico even after Orion is done is somewhat dependent upon sort of this next level of USMCA, where I think everyone believe at some point, we'll have some logic where we get back from 25% to something closer to the global import average of 15%. Is that fair to say that some of the stuff is going to have to be live to see where USMCA final negotiations dollar, which is most likely second half, if not even maybe early next year. So we're going to have to wait and see on some of those numbers? Mary Barra: We think -- we understand, and it's a part of the USMCA process that it is updated periodically. We're in that review right now to see how it changes. We think having the appropriate levels around USMCA is very important for the U.S. automakers to compete with the rest of the globe that leverages whether it's other countries in Asia or Eastern Europe, et cetera. From a cost perspective, we've moved several peoples and have the opportunity to build them in the U.S. And we think we've looked at the footprint extremely strategically with the moves we've decided to make. So I think we're going to be well positioned to respond to not only U.S. demand but global demand. So I think our look at USMCA is not so much of a footprint issue. It's more of making sure it's done in such a way that we can compete with those even though -- and have a level playing field not only with the vehicles -- the tariff on the vehicle, but the tariff on the parts and the underlying cost of those parts. And so that's the work that we're doing now to make sure that the administration and those involved in the USMCA negotiations understand. And I have to say that I think the administration has been very good at having a deep understanding and want to understand what unintended consequences could be. So they further strengthen American manufacturing, not the reverse. So we're going to provide -- continue to provide our input, and we look forward to having USMCA revised in a way that is appropriate to achieve the administration's goals as well as strength in the U.S. manufacturing. Operator: And our last question comes from Ryan Brinkman with JPMorgan. Ryan Brinkman: Could you maybe comment on your operations in China? How far along you might be with regard to some of the product portfolio refresh initiatives? You've talked about on some of these earlier calls, including the NAV push. And then also with regard to some of those operational restructuring initiatives you've talked about and taking charges for in the past. Just trying to look at like the equity income that we see for the quarter, $165 million ability to annualize that? Is that sort of the run rate of profitability your operations are at once they're done with these improvement initiatives? Or where could they get to if you complete that part? Mary Barra: Well, I'm very pleased with the restructuring work that we've done in China. And I think we continue to be one of the -- the only, if not one of the only Western OEMs that is profitable in growing share. in the market. I think over the last few years, we've launched some very important products, including our luxury band that's premium segment, a premium product in the market. So I think we're continuing to work on having the right portfolio, but I also say the software and the services aspects the vehicle as we've launched and the new system that we're launching out across the portfolio, is rated higher than many of the Chinese OEMs when you look at it from a -- if this is an external rating from usage perspective. So I think you can see us moving to have the right product portfolio with the right software and services to be able to continue to grow share. Having said that, the China market is seeing some weakness. And so we're going to continue to monitor that side. I'm not in a position that I'm going to project what our equity income goals are. We want to see those continue to grow, but it's going to be having the right product portfolio and competing effectively, which I'm proud of the team because that's exactly what they're doing. And as related to additional restructuring costs, Paul, I don't have any comments specifically on that. I don't know if there's any comment you want to make. Paul Jacobson: No. I think the team has done a really good job from that standpoint. There's still some final ticking and time going on some of the actions that we've taken, but nothing material that we expect. Ryan Brinkman: Okay. That's helpful. And just as a follow-up, given some of the intent that you alluded to Mary and some of the other unhealthy aspects of the China market with the operate capacity, et cetera, I think exports have been attractive release valve. And just curious if you can comment on your export business from China with regard to ruling? Or what progress have you made there? Are those -- is that a more profitable part of your business in China? And how do you see that potential evolving? Mary Barra: Well, in the markets outside of the U.S., we're -- there already a significant Chinese participation. We have both, I'll say, products from -- that were designed and developed in the United States as well as those from China and especially at some of the price points to meet some of the more price-sensitive developing markets. I think we've seen success of what the right recipe is to have a strong product at the right price point to participate in those markets. So we'll continue to look at those opportunities and continue to refresh the portfolio, again, with products sourced from multiple locations. But I think that is a strength for us. Operator: I'd now like to turn the call over to Mary Barra for her closing comments. Mary Barra: Well, thank you, and thanks to everybody for your questions. I hope you see that we're clearly operating in a very dynamic environment, but that's not unusual for the industry, and that's why we have a multiyear focus to ensure we have the right products the right team and a strong balance sheet supported by healthy cash flows to achieve our long-term goals and execute on our capital allocation strategy, regardless of the short-term volatility or longer-term cyclicality. To sum it up, we're executing well against our plan, and we've shown quarter after quarter that we have durable earnings, we're growing our software revenue. We're disciplined with our capital allocation, and we have multiple paths to profitable growth. We have strong momentum in the core business, thanks to our broad and deep portfolio of vehicles. We remain focused on delivering 8% to 10% North American margins this year. Our OnStar Digital business, which includes Super Cruise is contributing to high-margin revenue growth. And I'll remind everyone that it's not cyclical. And we're advancing automated driving technology in a way that separates GM from other companies. Finally, we're addressing the near-term cost impacts of higher costs, and we're prepared to respond quickly and strategically as the market continues to develop. So once again, thank you for joining us, and I hope everyone has a good day. Operator: That concludes the conference call for today. Thank you for joining.