General Motors Company

Operator: Good morning, and welcome to the General Motors Company second quarter 2026 earnings conference call. During the opening remarks, all participants will be in 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 join the queue. To withdraw your question, press star then two. As a reminder, this conference call is being recorded Tuesday, July 21st, 2026. I would now like to turn the conference over to Ashish Kohli, GM's Vice President of Investor Relations. Ashish Kohli: Thanks, Julie, and good morning, everyone. We appreciate you joining us as we review GM's financial results for the second 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 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 this call will be governed by this language. With that, I'm delighted to turn the call over to Mary. Mary Barra: Thanks, Ashish, and good morning, everyone. Today, we reported another solid quarter, driven by the tremendous appeal of our product portfolio, the agility of our team, and disciplined execution across the business. Our employees, our dealers, and our suppliers are all making important contributions that continue to drive our success. Their commitment enables us to win in a dynamic market, and their efforts are leading us to raise our 2026 guidance for the second time this year. The business continues to perform very well. Customer demand in North America remains steady, including for our pickups and SUVs, and pricing is consistent. For example, despite lower than target inventories for most of the year, our share of the U.S. full-size pickup market stands at more than 42% through the first half of the year, which is more than 10 percentage points above our closest competitor, and we grew share year-over-year in both the second quarter and the first half. We also achieved our best quarter and first half ever for the new Super Cruise-equipped vehicles. Strong commercial demand helped us deliver record full-size pickup deliveries in our fleet business, and our U.S. incentive spend has remained well below the industry average for more than three years. GM International, inclusive of our China joint ventures, was also profitable. Our 8.6% EBIT adjusted margin in North America was up two and a half points from a year-ago, and we continue to strengthen our product portfolio, grow software and services revenue, lower our warranty costs, reduce EV losses, increase operating efficiency, and develop new revenue opportunities that drive improved results this year and going forward. This strategy has driven 70 basis points of total company margin expansion over the last three years, while our broader peer set has seen margin reduction by 400 basis points. All of this includes the impact of tariffs. We haven't made excuses. We've just continued to perform. At the same time, our operating discipline has been a key driver of the structural improvement in our adjusted automotive free cash flow generation, which has improved from $3 billion-$5 billion annually on average over the last decade, to consistently above $10 billion since 2022. We expect these trends will continue to strengthen our performance into 2027 and beyond because we have multiple engines of margin expansion and growth while maintaining our capital discipline. We built a strong EBIT foundation with new and redesigned vehicles like the Chevrolet Trax, Equinox, and Traverse, the revitalization of Buick, the success of sub-brands like the Denali and AT4, and icons like the Chevrolet Corvette and the Cadillac Escalade. For example, since 2020, we have increased the EBIT profitability per unit of our crossover portfolio by four times, while our full-size pickup and full-size SUV segments are each up over 25%. Our next major launch, the next generation Chevrolet Silverado and GMC Sierra light-duty pickups, will further separate us from key competitors when they begin arriving in showrooms in December. The truck will deliver improved ride quality, power, durability, and towing capability. We have also significantly elevated the exterior and interior design to increase their presence, refinement, and appeal. We plan to maintain record production volumes year-over-year while launching the trucks at three assembly plants, along with our next generation V8 engines, which are launching at three propulsion plants. We are also increasing capacity for full-size SUVs. Starting next spring and continuing into 2028, we will begin launching the next generation of Cadillac ICE vehicles, including the all-new CT5, XT5, and XT6, which will complement the Escalade and the brand's luxury segment leading EV portfolio, the Escalade IQ, VISTIQ, LYRIQ, and OPTIQ. We are onshoring significant manufacturing starting next year, which will bring our U.S. production capacity to more than 2 million units and further reduce our tariff exposure. At the same time, our high-margin software and services revenues continue to grow rapidly with 1 million new subscriptions expected this year, contributing to more than $3 billion in recognized revenue. Next year, the growth should be even higher because we're making Super Cruise standard on high-end Silverado and Sierra trims and optional on most everything else. We're estimating 160,000 incremental Super Cruise units from this product enhancement strategy. Alongside our core vehicle portfolio and software growth, new businesses initiatives like GM Insurance and GM Defense are reaching critical mass because we offer unique value propositions. For example, when a customer purchases GM Insurance, we create a reoccurring revenue stream from premiums, along with incremental parts and vehicle sales, all while driving customer loyalty and higher satisfaction. The business has scaled from 3 states in early 2024 to 21 states today, making GM Insurance available to over 60% of GM's U.S. sales, and we are on track to reach over 80% in the near term. GM Defense is another compelling growth opportunity that enables us to deliver defense solutions faster with better economics for the U.S. taxpayer. The Chevrolet Colorado-based Infantry Squad Vehicle is case in point. After initial multi-year order of about 1,200 ISVs, the U.S. Army now plans to procure more than 10,000 if the appropriations is passed. We're building momentum with other products and customers, including the U.S. State Department and Secret Service, as well as Canada, Qatar, Brazil, and other allies. We're also supplying battery propulsion technology to Lunar Outpost, which has been awarded $220 million NASA contract to build the next generation lunar terrain vehicle. GM Defense expects 2026 revenue to grow to almost $700 million and is targeting positive results on an EBIT basis for this year, while also building a backlog of future business. We are expecting a top-line revenue CAGR for GM Defense of more than 30% over the next several years with double-digit margins. This includes ISV awards that are expected to exceed $1 billion based on the U.S. Army's procurement objectives. We are also working with Lockheed Martin and other leading companies to expand speed, scale, and resilience in the defense industrial base. We're focusing our efforts on strengthening supply chain management, improving manufacturing readiness, and expanding production capacity in ways that serve the United States and its allies well. Over time, all of this should make GM Defense a more meaningful and diversified contributor to our earnings. With that, I'll turn it over to Paul. Paul Jacobson: Thank you, Mary. I appreciate everyone joining us this morning. I also want to begin by recognizing the entire GM team, whose hard work and consistent execution quarter after quarter underpin the solid results we're reporting today. In the first half of the year, we generated $92 billion in revenue and $8.2 billion of EBIT adjusted. EPS diluted adjusted increased more than 35% year-over-year to $7.27 a share. This was our best first-half EPS diluted adjusted performance ever, more than 25% above the prior high. Put simply, in just 6 months, we delivered an EPS result that was better than 6 of our last 10 full years. A clear reflection of how GM has transformed itself over the past decade by strengthening our product portfolio to drive revenue growth, improving core operating performance, lowering costs, and materially reducing our share count through significant share repurchases. We also maintained our pricing discipline with incentives as a percentage of MSRP running one and a half to two points below the industry average, helping to improve total company margin by 1.8 points year-over-year in the first half alone. In addition, fleet sales have been strong, with our best first half in more than five years, including our highest government sales since 2009 and record full-size pickup sales driven by strong commercial demand. Importantly, the growth in fleet comes without diluting margin. Year-over-year, our market share was down by about 60 basis points versus the first half of 2025, largely reflecting three factors. One, strategic decisions to discontinue certain vehicles in our portfolio, including the Chevrolet Malibu and the Cadillac XT4. Two, a smaller EV market following reductions in consumer incentives. Three, tight dealer inventory early in the year, which was at a low point in January and February. As Mary mentioned, the investments we are making to onshore production, launch key vehicles, and expand full-size SUV capacity will give us more flexibility and position us to grow revenue, gain market share, and improve profitability in 2027. On capital allocation, our strong first half-adjusted automotive free cash flow of $6.3 billion allowed us to continue executing against our share buyback program. In the second quarter, we made $2 billion in open market share repurchases, retiring approximately 25 million shares, which brings our first-half total to $2.8 billion repurchased and 36 million shares retired. This is nearly $1 billion more than the first half of last year, despite our EV restructuring efforts. We ended the second quarter with a diluted share count of 893 million, approximately 8% below where we ended the second quarter of 2025 and 35% below the second quarter of 2023. We have $3.5 billion remaining under our current repurchase authorization and expect to continue to consistently repurchase shares, supported by strong cash flow and our ending Q2 automotive cash balance of $19.7 billion. Let's turn to the second quarter financial results in more detail. Total company revenue of $48 billion was up $900 million year-over-year, driven by higher wholesale volumes, reflecting higher ICE volumes in both North America and South America, partially offset by lower EV volumes. EBIT adjusted of $3.9 billion was up $900 million year-over-year. The improvement was driven primarily by core business performance, supported by stronger pricing and lower costs, including EV, warranty, and emissions-related regulatory tailwinds. Adjusted automotive free cash flow of $5 billion was up $2.2 billion year-over-year. The improvement was driven by higher earnings and timing of both tariff reimbursements and CapEx spending. Let me update you on our EV-related restructuring. In the second quarter, we recorded $2.3 billion in incremental charges. Of that amount, $900 million was supplier-related cash charges, $700 million in cash charges to right size the battery supply chain with our joint venture partners, and $700 million were non-cash write-offs for compliance-related and other asset impairments. In total, we have recorded $10.9 billion of EV-related charges since the second half of 2025, of which approximately $7.2 billion will have a cash impact. Through the end of the second quarter, we paid $4.5 billion of this amount. Our teams have worked tirelessly with our partners and suppliers across the EV value chain to conclude these negotiations quickly. I'm proud to say that we believe these actions substantially complete the material cash charges we expect to incur as we align our EV capacity and manufacturing footprint with the changes in regulatory policy. While circumstances may change in the future, and we may have some true-ups, it's important to get this work behind us. Now let's move to our second quarter regional results. North America delivered EBIT adjusted of $3.4 billion, up a billion or over 40% year-over-year. Margin was 8.6%, an improvement of 2.5 points from a year ago when tariffs were first put into place. Having worked through much of that pressure, we are solidly back within our 8%-10% margin target, a clear marker of the progress this team has made. The improvement was broad-based, driven by strong pricing, lower EV losses from right-sizing our capacity, along with continued warranty and emissions-related regulatory tailwinds. These gains were partially offset by commodity inflation, including logistics and higher DRAM costs, along with manufacturing costs related to onshoring production to the U.S. Total U.S. dealer inventory ended the quarter at 511,000 units, or approximately 55 days of supply. This is right in the middle of our targeted range of 50-60 days. GM International, excluding China equity income, delivered EBIT adjusted of $100 million, driven by strong execution across most of the regions. While Middle East wholesales were significantly impacted by shipping disruptions, strong sales performance in South America partially offset this headwind. China equity income was $100 million. The team deserves a lot of credit for the restructuring work they did to enable us to be profitable despite the very difficult environment. We remain focused on execution, cost efficiencies, and mix optimization to deliver ongoing profitability. GM Financial delivered EBT adjusted of $600 million and paid $250 million in dividends to GM in the quarter, reinforcing our strategic value within the enterprise. Since 2019, GMF has grown its balance sheet by more than 25%, while outperforming other captive finance companies on profitability and growth. This performance reflects disciplined execution and the ability to generate consistent, risk-appropriate returns, and is further supported by GM Financial maintaining its leadership position in manufacturer loyalty for 10 consecutive years. The business remains within its full-year EBT adjusted guidance of $2.5 billion-$3 billion and is on track to pay full-year dividends to GM similar to last year. Based on our strong operating performance, including improved pricing and warranty assumptions, as well as a slightly better commodity outlook, we are raising our full-year guidance across all of our key metrics. We now expect EBIT adjusted of $14 billion-$16 billion, up from $13.5 billion-$15.5 billion. EPS diluted adjusted of $12-$14, up from $11.50-$13.50 per share, and adjusted automotive free cash flow of $9.5 billion-$11.5 billion, up from $9 billion-$11 billion previously. Before I address the key assumptions underlying our updated full-year guidance, I want to note that it assumes no material escalation in the Middle East and no significant increase in commodity or other inflationary pressures from current levels. Starting with the industry backdrop, we continue to assume U.S. total SAAR in the low 16-million-unit range for the full year, consistent with where it is run year-to-date. North America ICE wholesales were up approximately 1% in the first half. We expect second half year-over-year volumes to be up in a similar range. We continue to be constrained by full-size truck production, including the impact of the new truck launch and the planned discontinuation of certain vehicles we referenced earlier. Turning to EVs, we continue to expect losses to improve by $1 billion-$1.5 billion for the full year, driven by right-sizing our EV capacity and significantly lower volume. In the first half, we realized approximately $500 million of this benefit. We expect EV wholesale volumes to be up slightly in the second half, as we resume building to demand. Warranty is tracking to a $1 billion-$1.5 billion improvement year-over-year for the full year, above our previous assumption of up $1 billion. We realized $500 million in the first half and expect most of the remaining benefit flow through in the third quarter. Emissions-related regulatory savings remain on track as well. We continue to expect a full-year benefit of $500 million-$750 million, primarily from lower regulatory credit amortization. We recognized approximately $400 million in the first half and expect a smaller benefit in the second half as we begin to lap the savings that started in the second half of 2025. On pricing, we recognized a $600 million year-over-year benefit in the first half and now expect full-year North America pricing to be up around half a percent, which is at the high end of our prior guidance. The pricing benefit is expected to be smaller in the second half as we lap last year's 2026 model year price increases. We continue to expect gross tariff costs of $2.5 billion-$3.5 billion for the full year, which is largely flat year-over-year. Through the first half, we incurred approximately $1.3 billion net of the $500 million IEPA benefit recognized in the first quarter. We expect the gross tariff impact in each of the third and fourth quarters to be similar to the impact of the second, which was around $900 million. Let's now turn to the headwinds. We continue to expect commodity inflation, logistics, and higher DRAM costs to be a headwind of $1.5 billion-$2 billion for the full year. We realized approximately $600 million in commodity costs in the first half and expect that headwind to increase in the second half, largely because it reflects two quarters of higher costs rather than just one. In addition, spot rates continued to rise after our first quarter earnings call. While they have eased somewhat recently, several commodities remain above those levels. Given the lag in how these costs flow through our results, the recent improvements should begin to benefit us in the fourth quarter and into early 2027. On DRAM specifically, our expanded collaboration with Micron strengthens access to critical memory technologies and deepens integration across our vehicle platforms, reinforcing supply availability for the long term. Separately, we are also investing approximately $1 billion-$1.5 billion this year to onshore production to the U.S., strengthen our supply chain, and expand our software capabilities. We incurred approximately $400 million in the first half. We expect these costs to ramp further in the second half as we approach production in 2027. Finally, turning to our international operations, we continue to expect some softness in GM International ex China, reflecting the dynamic environment in the Middle East. From a cadence perspective, we expect the fourth quarter to be somewhat weaker than typical seasonal patterns would imply, primarily due to the launch of our new full-size trucks, including higher launch-related costs and anticipated year-over-year volume headwind of approximately 35,000 units. We also expect onshoring costs to build as the year progresses, with the fourth quarter having the largest impact as we prepare to transfer Escalade production to Orion Assembly. Before I close, I want to take a moment to underscore the strength of our core business. In North America, margins have returned to our 8%-10% target range, and we are winning in the segments that matter most, including full-size trucks and SUVs, while maintaining disciplined pricing and inventory levels. That strength provides the foundation for everything else we are building. Our OnStar digital business, including Super Cruise, remains a growing margin accretive asset. Subscriber growth drove deferred revenue to $6.3 billion, up almost 50% from a year ago, while second quarter recognized revenue was $800 million, up 20% year-over-year and well on pace to hit our full-year growth target of $400 million. This momentum carries into 2027, where amortization of our existing deferred and subscriber growth is expected to drive double-digit growth in realized revenue, building on our estimated full-year 2026 realized revenue of more than $3 billion. We are also building a select number of adjacent higher-margin businesses, including GM Defense and GM Insurance, in a capital-efficient manner that leverages our capabilities. These businesses are modest contributors today. We are optimistic about the long-term opportunities they present and will continue to share progress as they scale. While our primary focus is to deliver on our 2026 commitments, we are already looking ahead to 2027. As Mary mentioned, based on what we know today, we believe we can grow revenue, margins, EBIT, and free cash flow next year. Several drivers support this view, including continued improvement in EV profitability, growth in OnStar digital revenue, incremental warranty improvements, fixed cost efficiencies, a full year of our all-new Chevy Silverado and GMC Sierra pickups, and increased full-size SUV supply to meet demand in the U.S. and in markets around the world. Additionally, as we also continue to repurchase shares, we can expect even further EPS growth. With a broad portfolio of EV and ICE vehicles, we are well-positioned to capture demand across segments and continue delivering ongoing value for both our customers and our shareholders. With that, we'll move to the Q&A portion of the call. 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. To ask a question, press star then one on your telephone keypad to join the queue. To withdraw your question, press star then two. Our first question comes from the line of Joe Spak with UBS. Your line is open. Joe Spak: Thanks. Good morning, everyone. Paul, I actually wanted to start with some of the commentary you just made on Super Cruise. Mary, you mentioned the +160K Super Cruise-enabled pickup, standard on the high-end trims and optional on everything else. It's good to see that scaling. Right now, I think it's really only available on the High Country, on the Silverado. That's like a $6,000, $7,000 package. Maybe there's some discounts from time. Even if we look across other vehicles, it looks like it's at least a $4,000 upfront option. That seems like it could be a pretty big potential tail into pricing in 2027, I know you alluded to tech as a pricing tail for 2027. I guess what I'm really curious about here is, 1, should we also expect Super Cruise to scale, at least from an availability perspective, across other vehicles? Then 2, are you changing the pricing structure of Super Cruise at all as you democratize the solution either to the upfront cost or the eventual monthly charge? Mary Barra: Hey, Joe. We continually evaluate based on customer reception of Super Cruise, of how we expand it, are also looking at pricing. I don't have anything specific to announce today, we do see the opportunity for the growth that we're going to see with the full size truck launch, the light duties. Also we're expanding in three regions and continuing to add more miles. We think it's an option that customers like. We have a very high attach rate when they go out of the period that is included in the price of the vehicle. We're pretty optimistic that we're going to continue to grow that business. Did I miss anything there? Paul Jacobson: Yeah. I'd just add, Joe, that this is pretty consistent with what we've been saying for the last few years. The vehicles that are coming up on the end of the three years were produced at the tail end of the chip crisis, and we know Super Cruise was one of the more impacted ones. Starting to see this scale, but I think it's not just 2027, it's beyond that. That's why we keep leaning into the digital revenue story with $6.3 billion of deferred revenue on the balance sheet already. That's approaching seven and a half by the end of the year. As Mary mentioned, the million additional subscriptions this year across the digital portfolio. Super Cruise is a piece of that. We're seeing really encouraging attachment rates in the 30%-40% range, as Mary mentioned. Now the next strategy is how do you proliferate it and how do you expand it to make it more available? That's possible as we get costs down and as the product continues to evolve. It's not just about 2027. We think it goes even beyond that and why we've spent a good bit of time talking about what the future looks like across the entirety of a GM car park that's got software-enabled features. Joe Spak: Thank you. Second one is just on warranty, which seems like it's sort of coming in more favorable. Was wondering if you could maybe quantify how much warranty helped on a year-over-year basis in the quarter. Then if I recall, I think it's the third quarter where you typically have this reevaluation and potential reset of accrual rates. With respect to your full year commentary on warranty, I just want to make sure that really that's just sort of the better experience you've seen to date, and then there's maybe some potential for a reset to lower accruals later this year as well. Is that correct? Paul Jacobson: Yeah. As we said in the prepared remarks, Joe, it's about $500 million of benefit in the first half of the year. We increased from a billion-dollar year-over-year tailwind to a billion to a billion and a half. That's really as we're starting to look at what the September quarter Q3 adjustment will be, and as we go forward. We continue to see some good trends. It's not without some new challenges that pop up from time to time. I think the team overall is executing well. We think that this is part of the multi-year tailwind. Ideally, as we've talked about before, the monthly cash outflows plateau and then start to come down as we get through some of these historic quality spills, et cetera. That's where we can see benefit into 2027 and 2028 beyond what we're seeing in 2026. Mary Barra: I would also say we're using a lot of additional tools, simulation, artificial intelligence to find problems earlier or make sure we validate more, which is going to be evident in the truck that we're launching. There's a lot going on to make sure the products are of higher quality and even looking at the longer term durability as well. Joe Spak: Thank you very much. Paul Jacobson: Thanks, Joe. Operator: Thank you. The next question comes from Dan Levy with Barclays. Your line is open. Dan Levy: Hi. Good morning. Thank you for taking the questions. Just wanted to start with a question on the 2026 guidance. I think when we add up some of the pieces here between better pricing, better warranty, looks like your wholesales are slightly better, and you're talking about slightly better commodities. It seems to add up to somewhat more than the guidance raise that you issued. I know there is a range and whatnot, maybe you could just talk to what potential offsets there are versus all of those positives. Paul Jacobson: Hey, Dan. Good morning. Thanks for the question. On the commodity piece, I want to make sure that we're really clear. I don't think we're projecting lower commodity prices for the second half than the first half. What we saw when we raised the cost guidance in Q1, we continued to see prices increase after that first quarter earnings date. While we've seen a little bit of coming off of it's still right in line with where our cost guidance and commodity guidance has been. The reason for the guidance raise is, okay, if we believe that it's plateaued here, we can bank what we've sort of earned ahead of expectations in the first half of the year. That's why we wanted to be cautious and say it doesn't assume that we have significantly more inflation, a flare-up of conflict, et cetera. I just want to make sure that we're not confusing that with a tailwind from where we were just a few months ago. It really has stabilized a bit at those estimated levels. When you think about the year, we know that some of the cost pressures that we talked about as we ramp up Orion and make the investments and some of the DRAM inflation was backloaded. What we're saying is the initiatives that we've undertaken, the benefits that we're seeing in pricing and warranty, are helping to overcome that and give us more confidence about the full year, given our first half outperformance. Sorry, that was a long answer. Dan Levy: Great. Thank you. As a second question, I wanted to double-click on the new truck launch and your materials point to opportunity on the pricing side. I think anyone that's just looking at the third party data sees just how well the trucks are doing, just very dominant share. Imagine that that's somewhat contributing to your pricing strength as well. Help us understand from this position of strength that you're in, how much incremental benefit there is, maybe you could talk about what specifically is driving that upside on pricing, and maybe you could put this in context of, and I know this is a question that keeps on coming up, the competitive environment where there's one of your competitors that seems to be in a position, where they have to catch up quite a bit. Put that in context of the broader environment where you are already in a very strong position, you are saying things can get even better from here. Paul Jacobson: Yeah. I think, we are incredibly pleased with the current generation of trucks and how they have held up, in terms of pricing. We have not seen the typical heavy discounting at the end of the cycle that I think has permeated the historical models. As you look at every new model year, every new launch like this, we are adding new features, we are adding new functionality across the board, and we will see an opportunity where we can to potentially take price across the board. We expect really strong demand. As always, there is a little bit of a richer trim mix as you are starting to ramp up production as well. I think all of those contribute, when you look at the strength of the vehicles, the way they have held up, the market share strength that we have had, it looks really promising, and we are excited about the next generation of trucks. Dan Levy: Is the pricing piece partially just a trim comment or just? Paul Jacobson: We have not made any public comments about how that is going to price. We are going to continue to look at the market. I would say that we are optimistic as we are with most new vehicle launches. Mary Barra: Right now, the reception has been really strong on the truck. Remember, we're at record levels of production this year. I stated that we're going to maintain those next year as we're launching, as well as new engines. There is upside opportunity really as we get into the end of 2027, 2028, because we've got all the launches going through the year. We're going to build on a really strong year with what we think is a truck customers are going to love from a performance perspective and design performance technology. I think it's going to just continue the momentum we have in the truck market of leading from an overall share perspective. Dan Levy: Great. Thank you. Paul Jacobson: Thanks, Dan. Operator: Thank you. The next question comes from Andrew Percoco with Morgan Stanley. Your line is open. Andrew Percoco: Great. Thanks so much for taking the questions this morning. I wanted to start off, Mary, you mentioned in your prepared remarks everything that you're doing on GM Defense and how that's helping diversify the business. I did want to double-click on the investments that you guys have made in sodium ion battery storage with Peak Energy and just get a better understanding of what your strategy is and why you chose to go down that path and what that might look like for your business over the next, call it, 18 to 24 months. Just trying to get a better understanding of how you're going to essentially leverage your manufacturing scale, your supply chains to be relevant in the energy storage market. We're obviously seeing some of your competitors do this as well. Just curious to get a better understanding of your thought process around sodium ion and what you see as the commercialization timeline there. Mary Barra: Sure. Well, first of all, we think sodium ion batteries are an emerging battery chemistry that is going to be attractive and have advantages over other chemistries from a stationary storage perspective. We think that sodium offer could offer lower cost over time than LFP. As we know, there's an abundance of sodium. There's also a potential for simpler system designs. We think it's really well suited for grid storage. Also, it has strong performance across a wide range of temperatures. There is potentially lower cooling and maintenance requirements. Again, we think this technology is very promising. We're working with Peak because we think it's going to be the next generation. When you say year to 18 months, it's a little further out, but there's real work going on with development milestones and a plan to how we would commercialize, that we'll share more about over time. We think Peak is a real opportunity with this technology, and we're going to continue to develop it because Again, there's going to be more and more need, and ultimately, if the technology is promising, it could even find its way into vehicles, which we've got rights to that. I don't know, Paul, if you have anything you want to add. Paul Jacobson: Yeah. Andrew, I think this has been obviously a topic across the industry. We've tried to approach it from, first of all, capital discipline as we look at the restructuring that we've done and so on. The idea, we turned down opportunities to put $billions of capital into plants to tool up for what is already a highly competitive business based on potential extension of government credits and tax credits, et cetera. I think really what we're looking at here is how do we partner with technology that has synergies to the overall business, do it in a capital efficient manner, what we found in Peak Energy was the promise of a lot of technology, the ability to scale in something that we think is going to be cost effective, while at the same time we don't have to invest $billions in capital to do it. We have a lot of optionality to participate as we choose. We're optimistic and in conversations with them, we think that there's a really good growth platform. We're going to be cautious rather than going all in into a hyper-competitive business. Mary Barra: I'll just add from a timing perspective, we believe that we'll be building production validated cells on campus in our battery cell development center in the 2027, 2028 timeframe. We hope to be in production before the end of the decade, which isn't that far away, with all new technology. Andrew Percoco: Appreciate that. That's great context. Then maybe my second question, just as it relates to, I know there's obviously a lot of attention on affordability. Doesn't seem to have really had an impact yet on demand for trucks. I know sometimes it takes a while for that to flow through. I'm just curious, as you think about your guidance for the remainder of the year, as obviously you made some comments about 2027, are you anticipating a mix shift more towards crossovers, understanding they're more profitable today than they maybe were two years ago? Just curious if you've made any underlying assumptions for that mix shift into maybe smaller, more fuel efficient vehicles in the back half of the year and into 2027. Mary Barra: Well, Andrew, that's been predicted for several months now, and it's just not happening. We're seeing really strong full-size truck demand and full-size utility for that matter. We're building everything that we can sell. To your point, we're going to be guided by the consumer, and I mentioned how we've improved the profitability of our SUVs across the board. I think we're extremely well positioned from an affordability perspective to meet the customer where we are, but we're just not seeing it. I think something would have to happen for a long period of time before people would make potentially a different decision. We're seeing strength even though it's been predicted now for probably about three or four months. Andrew Percoco: Great. Thank you so much. Operator: Thank you. The next question comes from the line of Itay Michaeli with TD Cowen. Your line is open. Itay Michaeli: Great. Thanks. Good morning, everybody. Just as a first question, just on the updated GMNA pricing environment for the year. Great to see the strength in the first half of the year. I do think the second half implied pricing does kind of moderate off the first half, and I'm curious whether that's kind of reflecting anything you're seeing thus far, like in July, or just kind of maybe more of a standard assumption and perhaps a bit of conservatism. Paul Jacobson: Hey, Itay, thanks for the question. I would classify it more as just kind of lapping the prior year pricing actions from where we were. As we said, going into the year, model year 2026, we took some pricing actions that's got the tailwind. Those have held up strong. The incentive environment has remained fairly consistent. We're not projecting any change to that. It's just the calendar. Itay Michaeli: Got it. That's helpful. Then the second question, kind of going back to the new trucks into next year, I appreciate the update on that. You've been asked before on pricing, but I'm curious whether there's also some potential variable cost tailwind you could enjoy, just given the easing emissions standards that maybe allows you to reinvest that back into new content to drive pricing and maybe share at higher trims or even kind of flow that to the bottom line. Maybe if you can comment maybe overall on kind of how to think about the VP per unit roughly of the new trucks versus the outgoing trucks. Thank you. Paul Jacobson: Yeah, Itay, when you look at the sort of current trucks that are being produced, they're already receiving that benefit, there's not really anything incremental. We're actually driving even more efficiency in the Gen 6 as well. On a variable profit, it'll normalize and we expect better particularly if we're able to take additional pricing. It's going to take a little bit of time because as you know, with the ramp up in the transition, there's some costs that we incur over that time period. That's why we've classified this as potentially more of a 2027 and beyond tailwind than anything material this year, even though the trucks will start to hit the showrooms at the end of the year. Itay Michaeli: That's very helpful. Great. Thank you. Paul Jacobson: Yeah, thanks, Itay. Operator: Thank you. The next question comes from Mike Ward with Citigroup. Your line is open. Mike Ward: Thanks very much. Good morning, everyone. Paul Jacobson: Good morning. Mary Barra: Morning. Mike Ward: I want to make sure I'm thinking about this the right way. If you're talking about digital services, defense, insurance, and even putting energy out there as we look out over the next five years, if I'm doing the math right, the financial contribution is going to probably be at or above that you're currently getting from GM Financial. Is that the right ballpark? Paul Jacobson: Yeah. It's certainly not going to give anything specific going forward, we see the growth trajectory that we're on and where we are, that's why it's so important that we're disclosing the deferred revenue piece, because it does come in over a three- to eight-year time period, depending on where the subscriptions are. That revenue base is already over $3 billion and, as we've said, software-like margins. We've historically disclosed margins on OnStar around 70%. We're seeing really good traction there. We expect that to continue to grow. Mary Barra: Yeah, Mike, I'm really glad you asked the question because what we're trying to convey is we do think we have tremendous levers, multiple levers of growth, whether it's our software business, whether it's GM Defense, GM Insurance. They're small now, but when you ask a question over a five-year horizon, we definitely think there's a lot of opportunity at GM to grow, improve margins, and become less cyclical. Thanks for that question. Mike Ward: Especially on the margin in the cash side on a relative basis to auto, just the revenue's not, it's hard to make a dent in it, but it's bigger. I think, Paul, you kind of alluded to your software-enabled vehicles, and I think a number I've heard is 30 million-40 million vehicles that have basically OnStar within them. First of all, is that the right number? Second of all, how hard is it, if you have a compelling product, how hard is it to turn them on if they wanted to join the subscription to get global Wi-Fi service? How hard is it to do that? Paul Jacobson: You want to take it, Mary? Mary Barra: I was going to say, it depends on the generation, because there's several generations of technology. I think from a current point, we have about 22 million that just got, for instance, an OTA update for Gemini. There is an opportunity of in the multiple millions for us to continue to update depending on what the feature is and what we're doing, what the hardware is in the vehicle. It's pretty substantial to your point. Mike Ward: Did I understand it right, you said that new trucks would have Super Cruise? Mary Barra: More models. Virtually all the models have it. I think there's just an exception of a work truck, et cetera. We're. Mike Ward: Right. Mary Barra: We believe in the technology. We're seeing the customer interest. Remember, there was a conversation earlier about the overall cost, but usually that's in a trim package. When people buy that, they're getting multiple years of service, depending on which feature. We think it's actually providing a lot of value to the customers. The attach rate is good afterward. Yes, it will be on more of the full-size light-duty pickups as we launch. Mike Ward: Thank you very much. Really appreciate it. Paul Jacobson: Thanks, Mike. Operator: Thank you. The next question comes from Emmanuel Rosner with Wolfe Research. Your line is open. Emmanuel Rosner: Great. Thank you so much. Was hoping to follow up on the earnings opportunity for the new truck. I understand you flagged the strength in pricing power. Is there also a volume opportunity as you move into 2027 reflecting the fact that you have fairly lean inventories now, you're going to be lapping some of the changeover impact and downtime that you flagged during the fourth quarter, some limited also in the first quarter. Just how to think about volume in the second half and into next year. Mary Barra: Emmanuel, the way you need to think about it is, we start the launch at the very end of this year, and it goes into next year. We also have three engine plants launching as well with new engines that support this truck and provide a lot of benefit from a customer perspective. We're going to sell this year, we're going to be at record levels, from a sales perspective, and we're saying we're going to carry that over to next year. The real volume opportunity comes in the very late 2027 or more in the 2028 timeframe, when all of the engine plants are launched, and then we have Orion capability as well. That's where the growth from a volume perspective, it's really in 2028. Emmanuel Rosner: Okay, that's very clear. I appreciate all the good color around initial thoughts on 2027. Now a lot of the key drivers that you highlighted, actually all of them are tailwinds, all positive. Would you be willing also to speak about more broadly sort of like puts and takes? Are there any headwinds we should consider, such as commodities or further DRAM inflation, just for a more holistic view of the 2027 picture? Paul Jacobson: Emmanuel, we haven't obviously quantified any of that, we're going to see some inflationary pressures in the business. I think that's just to be expected across the board. What we're really trying to do now is essentially say that many of the things that are allowing us to expand our margins in 2026 are multi-year trajectories, whether it be warranty, EV profitability, digital revenue growth. It's not just about 2027, as we've said in a few public presentations across the board. That momentum's there. I think the question is how much of that incremental tailwind can we capture based on what's out there in the macro. What we're trying to really project is we're continuing to drive this execution across the board. We're preparing in advance for where the headwinds have, we still believe that we've got a good trajectory of continued margin expansion and continued EBIT growth and share buybacks into the future. Emmanuel Rosner: Understood. Thank you. Operator: Thank you. Our next question comes from Tom Narayan with RBC. Your line is open. Tom Narayan: Hi, thanks for taking the questions. I appreciate the commentary on the U.S. onshoring. Just curious how that would do with the current proposal that we're seeing out there on the 50% U.S. contenting as it relates to either USMCA or a bilateral deal that may happen. Is the onshoring that you guys have already underway enough to comply with something like that, with the 50% U.S. contenting, or would that require some additional onshoring beyond what you're contemplating? Mary Barra: Well, we've already done quite a bit of work. I would say that's something we started after the semiconductor shortage and COVID, recognizing that the global supply chain needed to be much more resilient. I would say General Motors has done a fair amount of this, and we're also working with our suppliers and have been, now that we're in the tariff environment. I think when you look at the different rates, there's productive conversations going on between the U.S. and Mexico. I'm hoping for we can get through some of the back and forth that's happening between the U.S. and Canada. I do feel that there's a commitment, both from the administration and from a congressional perspective, that we want to make sure we have a strong manufacturing base, which is making sure that the U.S. automakers are going to be able to compete and win, when we look at what the tariff rates are for Europeans, the Japanese, and the Koreans. I think there's a good understanding of that. We're providing a lot of input to make sure that they understand the consequences, and we need a strong North America, as Paul had said earlier in the day. We need all the countries to work together, and we need an overall rate that allows us to be competitive, so we can win and continue to invest in U.S. manufacturing. Tom Narayan: Okay. A follow-up to the commentary on Super Cruise. It seems like the pricing is coming in, especially in North America. We're seeing that from other automakers with autonomy offerings, level 2 plus plus. You look at China, and it's a completely different story. Just curious how you think about long-term autonomy pricing. It seems to be deflationary in China. Maybe it's a completely different consumer dynamic in the U.S., but I know this is a very high-level question, but just curious how you think about how autonomy pricing for private mobility could develop. Thanks. Mary Barra: Well, I think, first of all, you got to look at China. There's intense pricing competition that frankly, is unsustainable in China in country solutions for the vehicles. We have momentum on our vehicles. I think we're in a leadership position or among the leaders with the technology that we're providing, and we're going to continue to do that. I think you've got to look at what's really sustainable with the overall what's happening in that market right now, as there's so many competitors. There's a lot of sorting that's going to need to happen for long-term viability. I think from this country, we believe that autonomy is going to be extremely important on our vehicles, and I do believe there'll be pricing power, and we'll also continue to work to get the cost down. Super Cruise is a great example of where that product started versus what it is now, why we're able to offer it and continuing to offer it on more and more vehicles. Paul talked about the fact as we continue to drive cost efficiencies in the technology, it just enables us to provide it to more consumers. I do think customers recognize the value of it, and they are willing to pay. I think before this becomes something that is just standard on every vehicle, there's a long time between now and then because we still have a long way to go from full autonomy where a vehicle can go anywhere at any time. A lot of what we're seeing now, and there's been great progress made, although it's taken longer, is you still are in certain regions, geo-fenced, et cetera. I think this is an incredibly important technology that we have on our vehicles. I think there's an opportunity to derive value for a long period of time, and we'll see how the market plays out. Tom Narayan: Great. Thanks a lot. Operator: Thank you. Our next question comes from Mark Delaney with Goldman Sachs. Your line is open. Mark Delaney: Yes, good morning. Thank you very much for taking the questions. Is there more color you can share on the memory supply agreement and what that means for cost and availability going forward, including to what extent it gives GM a clear view on what memory costs are going to be in 2027? Mary Barra: Well, we're very pleased that we have a strong relationship with Micron, and we also have one with Samsung as well. These are strategic engagements and long-term engagements that go back to 2022. As I mentioned, as we went through the semiconductor shortage and the chip shortage, we really worked to make sure that we've got direct relationships and stable supply. I think the relationships we've built are providing value to us for sure, as we move forward. We haven't disclosed specific pricing, but I think we've got a good relationship with both suppliers and we're going to continue to work with them and align on next generation memory technology so we can have jointly developed technology roadmaps that I think will enable us to not only enable future product innovation, but also performance improvements as we go forward. I think we've got the right line of sight with the strategic partnerships we have, and we're going to continue to build on those. Mark Delaney: That's helpful. Thanks. My other question was on fleet. It's been very strong, as you mentioned in the prepared remarks. Why does GM think the fleet business has been so strong, and what's your view on the ability to sustain that? Thank you. Paul Jacobson: I think the team's done a really good job here, Mark, it really goes to the quality of the portfolio and the services that we can offer across the board. When we look at the relations that we have with our fleet customers, and that's across the board, whether it's rental or it's government or it's commercial, I think those go a long way, and they really respond to the products that we have. I think the difference is, fleets historically, I think was an outlet for excess capacity. That's really changed today. We very consciously allocate between retail and fleet and where we can, but we don't sacrifice value when we're doing that. We're looking to balance the enterprise as a whole, rather than historically where we would just offer pretty significant discounts on the fleet side. That's not the way it's working anymore, and it really depends on those relationships. Mark Delaney: Thank you. Operator: Thank you. The last question comes from the line of Rajat Gupta with JPMorgan. Your line is open. Rajat Gupta: Oh, great. Thanks for taking the question. Just wanted to get an update on autonomy and the 2028 eyes-off, hands-off launch. Any update on the progress there? Maybe any change in how you're approaching it on the tech side, architecture side would be helpful, and have a quick follow-up. Mary Barra: No, there's no change. I would say the program overall is on track. It's got an aggressive execution plan, but they're largely meeting their milestones. I'm very excited about it. I think I mentioned in last quarter earnings, I had a chance to be in the vehicle, and they're making great progress. Excited about what's coming, and we're going to continue to move forward aggressively to make sure we deliver a system that not only provides the autonomy, but also lives up to the standard of safety that General Motors has held ourselves to across our vehicle portfolio and also when you look at what we've been able to do with Super Cruise. Rajat Gupta: Understood, that's helpful. Just to follow up on Emmanuel's question around the 2027 bridge. The $1 billion-$1.5 billion onshoring investments this year, should we think about that as like in the base? Are there any one-time items from that maybe do not repeat next year that we should consider? Maybe, in terms of additional investments, are there any other investments we should consider with respect to maybe autonomy, related to R&D, capacity, cloud capacity, et cetera? Thanks. Paul Jacobson: Yeah. I would say that the bulk of the setup costs are recurring and ongoing costs. We're hiring and training individuals. The biggest drag is probably as we hire them before we get production in place. That's where you'seeing a little bit of the margin friction. As far as the cost line goes, you'll have a lapping of the additional heads in 2027, but that will be offset by actual production as we start to normalize and ramp up where we are. Overall, I would say it's a little bit balanced into 2027. As we continue to see how we ramp up production, that'll affect the ultimate magnitude. Rajat Gupta: Understood. Just to clarify, there's no additional expense or investment related to autonomy or R&D that we should anticipate next year, correct? Paul Jacobson: No, I think we've seen that inflation. It'll baseline. Again, we've got some of that second half loaded, so there'll be a lapping effect in 2027. We're not expecting significant additional investment. Rajat Gupta: Understood. Thanks for all the color, and good luck. Paul Jacobson: Yeah. Thank you. Operator: Thank you. I'd like to turn the call over to Mary Barra for her closing comments. Mary Barra: Well, thanks, everybody. I really appreciate all the questions today, and I know we've covered a lot of ground. If we just step back, we want to leave you with the fact that our vehicle portfolio continues to get stronger. I'm very excited about the full-size truck launch that we have coming. We also are efficiently onshoring significant manufacturing, which will reduce our tariff expense. Our software and services ecosystem is expanding, and that's not just for one year, but that's going to continue to expand over the next few years and beyond. We have growth businesses like GM Defense and GM Insurance that are creating additional avenues for value creation, and are not in the traditional cyclicality of the auto industry. All of this supports our commitment to ongoing margin expansion. I'm personally very excited about the growth opportunities that we have and the margin expansion opportunities that we have. We know there is more work ahead, but I believe we're building from a position of strength with a proven track record of execution. With all of our momentum, we're confident in 2026, and have said it will be stronger than 2025. More importantly, that 2027 and the years beyond will be stronger still. Thank you very much for your time, and have a great day. Operator: That concludes the conference call for today. Thank you for joining.