General Motors Company (GM) Q2 2011 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by, and welcome to the General Motors Company Second Quarter 2011 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded, Thursday, August 4, 2011. I would now like to turn the conference over to the Executive Director of Communications and Investor Relations, Mr. Randy Arickx. Please go ahead, sir.

Thanks, operator. Good morning, and thank you for joining us as we review our second quarter 2011 results. As you know our press release was issued earlier this morning, and the conference call materials are available on the Investor Relations website. We'd also like to highlight that GM is broadcasting this call via the Internet. Before we begin, I would like to direct your attention to the legend regarding forward-looking statements on the first page of the chart set. As always, the content of our call will be governed by this language. This morning, Dan Akerson, General Motors' Chairman and CEO, will provide opening remarks, followed by a more detailed review by Dan Ammann, Senior Vice President and CFO. Dan Akerson will then conclude the remarks portion of our call with some closing comments. After the presentation portion of the call, we'll open the line for questions from the analyst community. I would also like to mention that we also have Nick Cyprus, Vice President Controller and Chief Accounting Officer, as well Chuck Stevens, CFO of North America with us today to assist in answering your questions. With that, I'd like to turn the call over to Dan Akerson.

Thanks, Randy. In summary, we had a solid quarter. Each region posted a profit. Our cash flow was strong and most importantly, our fuel-efficient vehicles continue to perform very well in the marketplace, and we have more coming. Today's results are further evidence that we continue to make steady progress on our plan and on our goal of long-term sustained performance for General Motors, but we have a lot more work to do. Turning to Slide 2, our global deliveries and net revenue were both up year-over-year, reflecting the benefits of our global footprint. Our revenue was up 19% to $39.4 billion, and we were able to outpace the market resulting in global share increasing to roughly 12.2%. We delivered $3 billion in EBIT-adjusted, an increase of $1 billion versus the prior year, reflecting the benefits of improved revenue offsetting higher commodity costs and future product costs. GM North America improved its EBIT-adjusted to $2.2 billion, largely on the strength of stronger sales of fuel-efficient vehicles across the portfolio. And I'm pleased to report that GME, GM Europe, achieved another important milestone of positive EBIT-adjusted of about $100 million for the second quarter. Clearly, more work to do, but Europe continues to meet plans, especially our market share in Germany, which is up 0.9% year-over-year. GMIO, International Operations, reported EBIT-adjusted of $600 million, up $100 million from a year ago. And GM South America recorded EBIT-adjusted of $100 million, down $100 million from the second quarter of 2010. During the quarter, we have also made good progress further strengthening our -- in further strengthening our fortress balance sheet. We generated automotive free cash flow of $3.8 billion and ended the quarter with available automotive liquidity of $39.7 billion. All in all, a good quarter that's another step in our journey of sustained profitable growth. I'll now turn it over to Dan Ammann who will provide additional details.

Thanks, Dan. On Slide 3, we'll provide a summary of our second quarter results compared to the prior year. Net revenues were $39.4 billion for the second quarter of 2011, up $6.2 billion versus the prior year. Operating income was $2.5 billion, up $600 million versus the prior year. Net income to common was $2.5 billion, up $1.2 billion versus the prior year and earnings per share were $1.54 on a fully diluted basis, up $0.69 versus the prior year. Both net income to common and fully diluted earnings per share were calculated using the two-class method in the second quarter of 2011, which we'll cover in more detail in a few moments. Moving to the non-GAAP metrics on the bottom of the page, EBIT-adjusted was $3 billion for the second quarter of 2011, up $1 billion versus the prior year. Automotive free cash flow was $3.8 billion, up $1 billion versus the prior year. In summary, the second quarter of 2011 marks another solid quarter for the company and progress against our plan and towards our goal of achieving sustained long-term performance. Turning to Slide 4, we do not have any special items in the second quarter of 2011 or in the prior year, therefore there was no impact to net income to common order earnings per share. On Slide 5, I wanted to provide you with some additional detail on our fully diluted earnings per share calculation in this quarter, which under GAAP guidelines difference from previous quarters due to accounting for our Series B mandatory convertible preferred. In short, there are 2 different approaches to calculating our net income to common and EPS; which one we use is a function of our average stock price in that quarter. Because the stock price for this quarter was outside of the $33 to $39.60 conversion range for the mandatory convertible, we provide [ph] to use the two-class method whereas in the fourth quarter of 2010 and the first quarter of 2011, we used the converted method. To summarize the differences between the 2 methods, net income to common on a reported basis is lower under the two-class method, but a lower share count is used to arrive at fully diluted EPS. Said another way, the dilutive impact of the mandatory convertible shares is reflected in net income to common rather than in the share count. Importantly, the stock prices being in the conversion range in the second quarter of 2011, net income to common would have been $2.8 billion and fully diluted earnings per share would've been approximately $1.57 or $0.03 higher. If you should have any further questions regarding this, the IR team will be happy to provide you with additional detail. On Slide 6, we provide a walk from operating income to EBIT-adjusted. As we previously covered, operating income was $2.5 billion for the second quarter of 2011. Equity income was $400 million, which is primarily our proportion of share of income earned by our JVs in China. Noncontrolling interest represents a non-GM share of consolidated entities earnings, primarily GM Korea. For the second quarter of 2011, this was 0 on a rounded basis. Nonoperating income was $200 million for the second quarter of 2011, up $400 million from the prior year. The improvement was driven primarily by favorable results from hedging activities. This total is to an EBIT of $3 billion for the second quarter of 2011, up $1 billion from the prior year. And finally, there were no adjustments to the quarter, so EBIT and EBIT-adjusted are the same. Turning to Slide 7, we provide the composition of EBIT by region for the second quarter of 2010 and 2011. GMNA's EBIT was $2.2 billion for the second quarter of 2011, up $600 million from the prior year. GME's EBIT was $100 million, up $300 million from the prior year. GMIO posted EBIT to $600 million, up $100 million versus the prior year and GMSA's EBIT was $100 million, down $100 million from the prior year. GM Financial reported pretax results of $100 million and corporate eliminations were $200 million unfavorable for the quarter. This totals to an EBIT and EBIT-adjusted of $3 billion for the second quarter of 2011. On Slide 8, we provide a global deliveries and market share for the last 5 quarters. For the second quarter of 2011, our global deliveries were 2.3 million vehicles, up more than 150,000 vehicles from the prior year. This increase was largely attributable to the success of our global fuel-efficient product offerings. For the second quarter of 2011, our global market share was 12.2%, up 0.6 percentage points versus the prior year. And the global vehicle industry was up approximately 280,000 vehicles from the prior year. Slide 9 provides our consolidated EBIT for the last 5 quarters. For quarters in which there were special items, EBIT-adjusted is represented by a line. As previously covered, we recorded EBIT of $3 billion for the second quarter of 2011, up $1 billion from the prior year. This marks the highest EBIT to date for GM on an adjusted basis. I also wanted to highlight to you that we've added operating income and EBIT-adjusted margins to the bottom of the slide, reflecting our internal focus on these metrics. For the second quarter of 2011, our EBIT-adjusted margin was 7.5%, up 1.4 percentage points from the prior year and marks the highest level we have for the company. While we made good progress in the second quarter showing operating leverage, we still have significant work to do to fully realize our margin opportunities over time. On Slide 10, we provide a year-over-year comparison of our consolidated EBIT. Starting on the left, our consolidated EBIT was $2 billion for the second quarter of 2010. Moving to the middle portion of the slide, we walk the $1 billion improvement in EBIT. Volume and mix was favorable $600 million, this includes $900 million favorable volume, driven by 0.6 percentage point increase in global market share, as well as increased U.S. dealer stock build. Mix was unfavorable $300 million, largely driven by North America. Price was favorable $1 billion, highlighting the value customers see in our vehicles globally. Costs were unfavorable $400 million, including a $300 million increase in engineering, $200 million increase in advertising, partially offset by reduced depreciation and amortization, as well as lower restructuring charges. Also included here is approximately $200 million in increase commodity in freight costs net of supplier performance. Other was unfavorable $200 million. This includes the absence of favorable 2010 Canadian net monetary liability adjustments and favorable lease residual adjustments in 2010 also in GMNA, offset by the consolidation of GM financial, which was not included in 2010 results. This totals for the second quarter of 2011 EBIT-adjusted of $3 billion. Turning to Slide 11, we'll now cover the segment review starting with GM North America. GMNA deliveries was 784,000 units for the second quarter of 2011, up 68,000 units from the prior year. The increase was driven by a 270,000 unit increase in the North American industry, as well as 0.4 percentage point increase in GMNA market share. U.S. market share was 20%, up 0.6 percentage points from the prior year. On Slide 12, we provide what we view as key performance indicators for GM North America. The 2 lines on the top of the slide represents GM's U.S. total and retail share. The bars on the slide represent GM's average U.S. retail incentives on a per unit basis. Now U.S. retail incentives as a percentage of average transaction price and compared to the industry average is noted at the bottom of the slide. For the second quarter of 2011, our U.S. retail share was 17.6%, up 1.3 percentage points versus the prior year and down 0.6 percentage points versus the prior quarter due to the absence of the first quarter sales programs. Our incentive levels on an absolute basis have declined significantly from the prior year as well as sequentially. On a percentage of ATP basis, our incentives were 8.9%, down 2 percentage points versus the prior year. This puts us at approximately 103% of industry average levels for the second quarter of 2011, flat versus the prior year. In terms of incentive levels, our plan continues for us to be at approximately the industry average for the year on a percentage of ATP basis. These results for share and incentive demonstrate the impact of our plan to produce great vehicles the customers are willing to pay for. Turning to Slide 13, we have GMNA's EBIT and EBIT-adjusted for the last 5 quarters. GMNA's EBIT was $2.2 billion for the second quarter of 2011, up $600 million versus the prior year. Revenue was $23.1 billion, up $2.8 billion versus the prior year due to the impact of increased volume of $2 billion and improved pricing of $800 million. GMNA's EBIT adjusted margin was 9.7% for the second quarter, up 1.8 percentage points versus the prior year and substantially improved over the last 2 quarters. U.S. dealer inventory was 605,000 units at the end of the second quarter, consistent with our plans to build in the first half of the year and deplete on the second. At the end of July, we reduced our U.S. dealer stock levels by 67,000 units, down to 538,000. We anticipate that we will end the year with levels slightly above year end 2010 but a comparable day supply. On Slide 14, we provide the year-over-year comparison of GMNA's second quarter EBIT. Starting on the left-hand side, GMNA's EBIT was $1.6 billion for the second quarter of 2010, the middle section of the slide details the $600 million improvement in GMNA EBIT. Volume and mix was favorable $300 million. This includes $600 million improvement related to increased volume due to a 7% increase in industry volume, 1.4 percentage point increase in our market share and approximately 20,000 unit increase in U.S. dealer stock builds. I'd like to mention that starting this quarter, we've included verbal manufacturing expense as part of volume in these walks. Mix was unfavorable $300 million due to increased sales of compact cars and reduced sales of large passenger cars and full-size SUVs. we will cover full-size pick-up inventory in more detail on the following slide, but I wanted to provide you with some insight related to year-over-year comparison. As I mentioned, we increased U.S. dealer inventories approximately 20,000 units more than we did last year. Of this full-size pickups accounted for approximately 37,000 units in the quarter, which would be about the equivalent of $350 million on a volume and mix basis. Price was favorable on a year-over-year basis by $800 million, due to the success of our new fuel-efficient vehicles, prior pricing actions drops in commodity costs, as well as an approximately $600 per unit reduction in U.S. retail incentives. Costs were unfavorable $200 million. This includes $200 million in increased engineering, a $100 million in increased marketing, partially offset by $100 million in lower D&A, as well as $100 million in increase pension income. Also included here was $100 million net increase in commodities and freight. Other was unfavorable $300 million versus the second quarter of 2010. This includes approximately $200 million decline related to the absence of favorable Canadian net monetary liability gain that we experienced in the second quarter of 2010 and $100 million decline due to absence of favorable lease residual adjustments that also occurred in the second quarter of 2010. This total is an EBIT-adjusted of $2.2 billion for the second quarter of 2011. On Slide 15, I wanted to provide you with additional transparency around our full-size pick-up U.S. dealer stock levels. Starting with the box at the top of the page, we're approximately 209,000 units of full-size pickups in U.S. dealer stock at the end of July. This is the equivalent to 115 days supply on a selling day adjusted basis, and it's down from 219,000 units and 122 days supply in June. Our objective is to be at about 200,000 units by year-end, which we'll expect will translate to approximately 90 days supply at that time on a selling-day adjusted basis. This would be an increase of approximately 40,000 units or 20 days supply over year-end 2010 levels. Approximately 10,000 units of this increase are in support of an expected improvement in full-size trucks segment and overall industry sales. The remaining 30,000 unit increase is a planned buffer to support plant downtime to perform facility upgrades ahead of the next-generation full-size truck launch. Referencing the graph on the bottom of the page, we've provided GM's historical U.S. full-size pick-up sales, which is represented by the blue line. Also provided on the graph is U.S. country of sale full-size pick-up capacity on a three-shift basis. As you will note, our sales volume has reduced substantially versus historical levels, and it's just began to recover in 2010 with further improvement expected in 2011. Our three-shift capacity has been reduced as well from 1.3 million units when we have 5 assembly plants to approximately 780,000 units on a three-shift basis today. In 2012, we expect our available capacity to be reduced further to 642,000 units due to planned plant downtime. In order to ensure we have adequate supply in a growing industry, we're building dealer stock of approximately 30,000 units to support this downtime. We have landed all this buffer over the course of the year. However, as a result of the slower selling rates in April and May, we had built more quickly and subsequently reduced second half production schedules accordingly. In the event our sales don't meet our expectations, we intend to manage inventories with production cuts while maintaining competitive incentive levels. Turning to Slide 16, I wanted to provide you with some additional transparency into GMNA's results on a sequential basis. This is not a slide that we plan to share with you every quarter. However, we thought it might help aid you understanding of current trends in the business. In terms of the information displayed on the slide, we have the sequential EBIT-adjusted walks for the last 4 quarters totaling down to the year-over-year comparison that we reviewed on a prior slide. We've already shared with you some of the sequential EBIT walks displayed of this slide in prior quarters, so I will not be covering them all here. What I would like to do is direct your attention to the fourth row to provide the sequential walk of GMNA EBIT-adjusted from the first quarter of 2011 to the second quarter of 2011. As you recall, GMNA reported an EBIT-adjusted of $1.3 billion in the first quarter of this year. The impact of volume was flat quarter-over-quarter. This includes the impact of a 10% increase in North American industry volume, 0.8% increase in market share, offset by lower dealer stock builds of 33,000 units in the U.S. and in Canada, as well as a 35,000 unit increase in daily rental volume, in which the P&L impact is deferred. Mix was favorable $200 million due primarily to increased full-size pick-up volume and reduced passenger car and compact SUV volume. Price was favorable $600 million due to the vehicle price increases and the reduction of sales incentives in the second quarter. On average, our retail incentives were approximately $800 per unit lower in the second quarter. Costs reflect versus the first quarter but include decreased engineering expense, offset by approximately $200 million increase in policy and warranty reserves. In the second quarter of 2011, we took a $300 million charge related to our prior period policy and warranty related expense. In the first quarter, we incurred a $200 million charge related to our Canadian dollar net liability position that did not repeat in the second quarter, driving a $200 million improvement. Other was unfavorable $100 million, includes a number of small items. This totals to an EBIT-adjusted of $2.2 billion for the second quarter of 2011. On Slide 17, GME deliveries totaled 483,000 units in the second quarter of 2011, up 40,000 units versus the prior year. Increase in deliveries is attributable to increased sales of new generation Opel Meriva, new generation Opel Astra as well as higher sales in Germany. Price was flat on a year-over-year basis. Costs were favorable $200 million including approximately $200 million in lower restructuring charges, $100 million reduction in manufacturing, partially offset by $100 million in increased engineering. Other was unfavorable $100 million, which is mostly [indiscernible] of various foreign exchange related items. This totals to GME's EBIT-adjusted of $100 million for the second quarter of 2011. As seen on Slide 20, GMIO deliveries totaled 780,000 units in the second quarter of 2011, up 9,000 units versus the prior year despite 0.5 million reduction in industry volume, driven by the Japan crisis. GMIO market share benefited from gains made in key markets. In China, stronger Chevrolet and Buick sales reported GM growth in a declining industry for the quarter, which led to a share increase of 0.2 percentage points from the prior year to 13.3%. In total, we expect the China industry to be up modestly for the year versus 2010. The second quarter of 2011 was also an important milestone for GM in South Korea as we phased out the Daewoo brand and successfully launched the Chevrolet brand. The successful launch of the Chevy Aveo, Orlando and Captiva lead to our second quarter market share of 9.8%, up 1.6 percentage points from the prior year. Regarding India, our market share was negatively impacted by our lack of a mini-diesel entry in the largest segment of the market, while fuel price changes further improved the value of diesel powered vehicles. However, we expect that our July launch of the Chevy Buick diesel will allow us to take advantage of the current market conditions and lead to additional growth in the second half of the year. Turning to Slide 21, GMIO EBIT posted EBIT of $600 million, up $100 million versus the prior year. Equity income from joint ventures in China was $400 million, flat versus the prior year. GMIO's revenue was $6.6 billion, up $1.3 billion from the prior year due to increased volume of $600 million, favorable foreign currency exchange of $400 million, improved vehicle mix of $200 million and favorable pricing of $100 million. Noted, the lower revenue was GMIO EBIT margins from consolidated operations, i.e., excluding equity income and noncontrolling interest, as well as total net income margins for our China JVs. As you can see, GMIO's EBIT margin from consolidated operations decreased slightly versus the prior year to 3.4% and total China JV net income margins also declined slightly. On Slide 22, we provide the major components of GMIO's $100 million improvement in EBIT-adjusted. GMIO's EBIT was $500 million in the second quarter of 2010. The impact of volume and mix was favorable $100 million. Price was favorable $100 million, driven primarily by increases at GM Korea in Holden. Costs were unfavorable $200 million, including $100 million in increased commodity cost and $100 million in increased engineering expense. Other was positive $100 million, primarily driven by favorable foreign currency derivatives in Korea. This totals to GMIO's second quarter 2011 EBIT-adjusted of $600 million. As seen on Slide 23, GM South America deliveries totaled 273,000 units for the second quarter of 2011, up 42,000 units versus the prior year. Increase was driven by 234,000 unit increase in South America industry volume, partially offset by a 0.3 percentage point decrease in GMSA market share. The decline in GMSA market share was attributable primarily to a 0.8 percentage decline in Brazil share due to competitive pressures and the age of our portfolio there. However, our share in Brazil improved 0.3 points sequentially versus the first quarter of 2011. Turning to Slide 24, GMSA's EBIT was $100 million for the second quarter of 2011, down $100 million versus the prior year. Revenue was $4.4 billion, up $800 million, due to increased volume of $300 million, favorable impact of foreign currency of $300 million, as well as favorable pricing of $100 million. GMSA EBIT-adjusted margins declined 4.1 percentage points to 1.3%. As we discussed during the first quarter call, our South America operations are in the midst of an aggressive product portfolio overall. By the end of 2012, we plan to introduce 9 new products in Brazil alone. I'll take you [ph] across to South America region, we're planning to introduce 40 new products by the end of 2012. On Slide 25, we provide the major components of GM South America's $100 million reduction in EBIT versus the prior year. The impact of volume and mix was flat versus the prior year. This includes approximately $100 million in improved volume, offset by $100 million in unfavorable mix. Price was favorable approximately $100 million, largely related to increases in Venezuela and Argentina, driven by inflationary pressures. Cost were unfavorable $200 million, including $100 million of commodity and local material cost increases, as well as $100 million unfavorable labor economics. Other was flat. This totals to GMSA's second quarter 2011 EBIT-adjusted of $100 million. Turning to Slide 26, we provide our walk of automotive free cash flow for the second quarter of 2011, as well as the prior year. After adding back noncontrolling interest, preferred dividends and undistributed earnings allocated to Series B and subtracting GM financial, our automotive net income was $2.9 billion for the second quarter of 2011. Depreciation and amortization was $1.6 billion noncash expense, $100 million improvement over the prior year and flat with the first quarter of 2011. Working capital is $100 million sourcing cash, primarily due to one less supplier payment, offset by the impact of seasonally lower accounts payable balance versus the first quarter. Pension and other paid cash payments exceeded expense by $400 million, and other was a source of $700 million in cash and largely can be explained by the impact of the dividends received from our China JVs netted against the reversal of a noncash equity income. This totals down to automotive net cash provided by operating activities of $5 billion, or $1.2 billion improvement over the prior year. After deducting capital expenditures of $1.2 billion, our automotive free cash flow was $3.8 million, which is $1 billion increase over the prior year. In terms of capital expenditures, we expect the run rate to accelerate during the second half and total approximately $7 billion for the year. In the second quarter of 2011, capital accruals exceeded cash outflows by $700 million, which we expect to reverse out. In addition, we expect increased spending in support of near term product launches including the Chevy Sonic, Buick Verano and new Chevy Malibu. On Slide 27, we provide a summary of our key automotive balance sheet items. Strong operating performance during the second quarter of 2011 resulted in further enhancement to our already strong liquidity levels. We finished the second quarter with $39.7 billion of total liquidity, consisting of $33.8 billion in cash and marketable securities and $5.9 billion of undrawn credit facilities. On the bottom of the slide, our debt and book value of Series A preferred stock was $4.7 billion and $5.5 billion, respectively, which is a significant reduction from levels a year ago. U.S. qualified pension plans were underfunded by approximately $11 billion. This does not reflect the impact of the approximate $2 billion stock contribution completed in January, which became a plan asset starting in July. Furthermore, we continue to make progress toward our de-risking objectives despite recent market conditions. Obviously, the company has made a good progress on the balance sheet. Our strong cash position, minimal debt and improved pension fund status are all part of our fortress balance sheet strategy. This will allow us to invest in our product development consistently throughout the cycle, absorb external shocks and ultimately return cash to shareholders. Slide 28 provides a summary of key operational metrics to GM financial. GM Financial reported their results earlier this morning, and we'll be holding an earnings conference call at noon. As I discussed during the first quarter call, the 2 primary objectives of our order financing strategy is to provide certainty of availability of financing throughout the business cycle and increase competition and transparency among lenders. As noted under the GM sales penetrations portion of the slide, our U.S. sub-prime financing has increased over the prior year 6.8% and is well above the industry average. Our U.S. leasing penetration of 13.3% has also increased over the prior year, but was down versus the first quarter due to reduced incentive levels and still trails the industry average. GM financial has expanded its lease offerings into Canada with the acquisition of FinanciaLinx. Our leasing penetrations have increased over 5 percentage points over the prior year to 8.4%, but are still below the industry average. GM new vehicles as a percentage of GM financial originations and GM financials percentage of GM's U.S. sub-prime financing and leasing volume have both increased significantly since the second quarter of 2010 when GMF was an independent entity. GM financial continues to maintain prudent credit underwriting, posting very strong credit performance in the second quarter with an annualized net credit loss of 2.4% in its loan portfolio. EBT was $144 million for the second quarter. Turning to Slide 29. In summary, the second quarter of 2011 marks another solid quarter for the company and progress towards our goal of achieving sustained long-term performance. Our portfolio of fuel-efficient vehicles continues to perform well in the marketplace, helping drive a 0.6 percentage point increase in global share. We delivered $3 billion in EBIT with all regions profitable, and $3.8 billion of automotive free cash flow for the quarter. Importantly, our EBIT-adjusted margins were improving both globally and in GM North America. We continue to make progress restructuring our Europe operations. However, we still have more to do. In the near term, we must focus on flawless execution of our global product launches, including our Buick Verano and Chevy Sonic in the second half of 2011. We must continue to control our costs and importantly, leverage global growth. Finally, we must continue to strive toward sustained long-term performance. Based on our current industry outlook, the company expects that EBIT-adjusted in the second half of 2011 will be modestly lower than in the first half, and that full year 2011 EBIT adjusted will show solid improvement over 2010. Now, I'd like to turn the call back over to Dan Akerson.

Thanks, Dan. Turning to Slide 30, I wanted to take a few minutes and reassess where the company is relative to the IPO investment pieces that we reviewed with you about 6 months ago. We continue to review our status versus these strategic objectives internally, so I thought it would make sense to review our assessment with you as well. As you will recall, we indicated during the IPO road show that there were 3 key elements to long-term sustained performance by General Motors. First, a new business model that is built around the vision to design, build and sell the world's best vehicles. Second, to leverage GM's leading position in growth, key growth markets and to sustainable, profitable growth. And third, reduce the company's risk profile so that we are in a position to invest in new products during good and bad times, smoothing the workload in the product development factory, reducing churn and, most importantly, consistently launching great products in key growth markets around the world. Turning to Slide 31. At GM, everything starts with great products. Nothing else matters if we don't deliver products to our customers that they believe are great and are willing to pay for. On this slide, I show 3 examples of recent U.S. product launches. The Chevrolet Equinox, the Buick LaCrosse and the Chevy Cruze. The slide shows the changes in segment, retail market share, ATP, average transaction price and 36 months residual value of the current product versus the product it replaced. During the IPO, we provided early data on the Equinox and LaCrosse, and here you can see both products continue to perform very well. In fact, both the Equinox and LaCrosse have improved their segment retail market share by approximately 10 market share points, while at the same time delivering $3,800 and $7,000 increases in average transaction prices, respectively. The one data point that is not on the chart is that more than 40% of the buyers for Buick LaCrosse are coming from non-GM brands. We have also highlighted the Chevrolet Cruze versus the Chevrolet Cobalt, which have seen an increase in segment retail market share from 6.2% to 12.5%, while at the same time, increasing the average transaction price by approximately $4,000 and commanding a 7 percentage point increase in residual value. Globally, we have sold approximately 330,000 Cruzes this year through June and 64,000 in June alone. I would be remiss if I didn't remind you that the Chevrolet Cruze was the best-selling passenger car in the United States in June. During the IPO road show, we discussed the importance of designing, building and selling the world's best vehicles. That continues to be a work in progress, but Slide 32 shows an important metric to judge the company's progress in that area. This slide shows GM's total global and U.S. share going back to the year 2005. For the first time in a long time, we have stabilized U.S. market share, helping the erosion of U.S. market share that occurred over an extended period of time. Our U.S. launch product cadence in the next couple of years is further reason for optimism that we can continue to stabilize, if not grow, our U.S. market share. Soon-to-be launched new products like the Buick Verano, Chevy Sonic and the Malibu and the Buick Regal and LaCrosse with ESS [ph] are the right fuel-efficient products at the right time. We are moving into a period with robust product cadence. And globally, we are well-positioned to increase our share based on our footprint in key growth markets around the world. We have further important launches this year such as the Opel/Vauxhall Zafira, MPV in Europe and the Baojun 630 in China. The key message we delivered during the IPO, and as previously mentioned, is GM's strength in those markets around the world that are expected to grow the most in the next 5 years. Slide 33 provides you an update on how we are planning, how we are performing in the most important growth markets. The first column shows 2010 industry volume by regions of the world totaling 72 million units. The second column shows the number of units in the industry is expected to grow from the end of 2010 through 2015. By region of the world is estimated by IHS Global Insight. As you can see, the global industry is expected to grow approximately 24 million units or 33% over 5 years. It's not surprising the larger growth area will be the countries of Brazil, Russia, India and China, accounting for about half the growth. GM is the collective market leader in these countries, with a 12% share in the BRIC countries and more than 13% share in China alone. The fastest-growing market in the world is expected to be North America, the second fastest, I'm sure -- sorry -- with growth of about 6 million units or 25% of the total growth in the global industry. GM again holds the leadership position with approximately 19% market share in the first half of 2011. In Western Europe, where growth is expected to be approximately 1.5 million units, we hold the #5 market position. And in the rest of the world where growth is expected to be more than 4 million units, we hold the #3 market position with market share of approximately 8%. In summary, GM is better positioned today than it was -- than any other automotive manufacturer in the world to take advantage of the expected growth in the industry. Our job is to grow that position with initiatives like launching 60 new models or major upgrades in China in the next 5 years, including the launch of the Baojun brand. In addition, the entire company is focused on designing, building and selling the world's best vehicles to ensure we preserve our leading global position in key markets. Turning to Slide 34, the third and final strategic initiative we discussed during the IPO was for GM to have a significantly lower risk profile. Two key elements to this were breakeven near the bottom of the cycle and having a fortress balance sheet with sufficient liquidity to withstand a shock. We have a very good start to improving the company's breakeven with all regions possible in the second quarter. With regard to breakeven in North America, despite a U.S. SAAR of a pretty mediocre 12.8 million units through the first half of the year, GMNA has delivered EBIT-adjusted of $3.5 billion. Well, there's always more work to do. We are pleased with our breakeven EBIT-adjusted before restructuring for the year. Through the first half of the year, GME has accumulated EBIT-adjusted of approximately $100 million, including restructuring charges of $100 million. Although not satisfied with breakeven performance, we have reduced the risk profile of the company by lowering the breakeven in Europe as well. The last pillar of reducing risk profile of the company is to have a fortress balance sheet. We define this as minimal debt, a fully funded and de-risked pension plan and prudent liquidity reserves. A fortress balance sheet will be important as we continue to make strides to achieve an investment grade credit rating. I cannot stress enough the power of reducing the risk profile of the company. The combination of a lower breakeven, a fortress balance sheet will allow us to invest in engineering, marketing and capital expenditures through the peaks and troughs of the cycle and will yield important synergies and returns that we are just beginning to understand. So turning to Slide 35. In summary, we continue to believe the combination of, one, a new business model focused on building great products that drive higher share and that we can sell at higher prices; two, being the best positioned automotive manufacturer to take advantage of anticipated global industry growth; and three, a lower risk profile made possible by a fortress balance sheet positions us well to deliver long-term sustained growth for General Motors. Thank you. And now, operator, we can open it up for questions.

[Operator Instructions] Our first question comes from the line of Brian Johnson with Barclays Capital.

I want to drill down on the cost progression in GMNA, because it actually stood out in contrast to some of your competitors even putting back in some of the manufacturing. Well, I guess, question #1 is kind of how much were the variable manufacturing cost that are now in the volume? And then question #2 is, did you take any actions during the quarter to better control costs in North America? Where are we seeing the benefit of maybe some global part sharing or manufacturing or other programs? And do expect this kind of cost restraint in a period where others have been seeing commodity costs, mature cost pressures developing to be able to continue?

I'll let Chuck answer the variable manufacturing question, but what we're trying to do here, as we've signaled previously I think, is we're trying to hold structural cost essentially flat year-over-year. I think we gave you a sense on the last call that we would expect to have some improvement in the second quarter relative to the first quarter. You recall that we had in the fourth quarter of last year costs ramp up around Cruze and Volt launch; some of that carried over into Q1. We've seen some roll off with that into Q2 and expect it to flatten out in the balance over the year. So this is really consistent with us delivering what we had indicated previously, which is essentially flat structural cost year-over-year.

And relative to the variable manufacturing expense, when you look at the implications of direct labor as well as indirect material, we estimate the variable manufacturing expense at roughly $1,400 to $1,500 a unit and use of that in our analysis of the impact of volume.

I just have one thing on the end which is to your point, we're continually focused on cost opportunities here. I think we continue to see opportunities to do more with less and to do things more efficiently all around the company, and that's a big focus for us. But it's a continuous focus not the focus on any one particular quarter.

So do you think there's further cost opportunities as you absorb further commodity cost, or is there not further commodity cost to absorb?

Well, commodity cost will do what they're going to do. Obviously, that's outside of our control ultimately. But as we said previously, we're looking to offset our commodity price increases with our own price increases for our products, as well as supplier performance. And we're continuing to focus aggressively on costs across the company and continue to see opportunity there.

And just similar in Europe, is there further cost reduction as we go through the year as you get the benefits, some of the plant closures and additional discussions with the labor force?

I'd say a lot of the cost restructuring, or cost benefits from the restructuring, have pivot [ph] in there at this point in time; we'll see some incremental opportunities, but the majority of that is in the results at this point.

Our next question comes from the line of Adam Jonas with Morgan Stanley.

First, on China. There were some discussion in the media that you -- and I think even in your own comments, that you are looking into potentially negotiating to recapture that lost 1% with the JV. I just want to know where you stand on that. And second question, have you communicated or can you today communicate a level of U.S. Treasury ownership that would eliminate TARP compensation limitations, because I don't believe you've communicated that? That would have to be a doughnut, or can it be a level above 0?

Well, let me first talk about China. We have the right to the option to purchase back that 1%, and we've expressed that. Understand, we have strong ties, relationships with SAIC. And as you probably know, they're restructuring their own company as we speak. So once that kind of settles down, then I think you'll see the transaction take place. We disclose that I think in our K and Q, so nothing more to report on that. There are 2 levels of TARP oversight. One is for what I'll call ordinary TARP companies, and then I think there were 7 companies that got extraordinary status. And we are extraordinary. No more comment on that. And as a result, there were U.S. team [ph] regulations written on top of the TARP legislation that are more stringent. And it is a doughnut, that's the answer to your question. In other words, until technically -- unless there's some change in the regulations, and I have no reason to expect there will be, they have the right, the U.S. Government has the right to oversee compensation for our top 25 people and top 100 at various levels of involvement until they've exited their investments.

Our next question comes from the line of Rod Lache with Deutsche Bank.

A couple of questions. First, I'm wondering, do you still expect breakeven x restructuring in Europe this year?

Yes, EBIT-adjusteds are excluding the goodwill impairment last quarter.

Okay. So then on a reported basis after restructuring the number in the back half would be closer to like $400 million negative versus the $100 million positive in the first half, is that fair?

I'm not sure I followed your math.

Well, I think there's $200 million of restructuring in the back half, right, that you were planning in Europe, is that right?

Directionally, that's right.

So I guess, it looks like Europe will be down back half versus the first half, I guess my real question is, you made this comment on EBIT being slightly lower in the back half versus the first half. Does that apply to North America, or is that something that is driven more by some of the other regions?

It applies to those -- the comment specifically applies to the whole company, but I would apply it to North America as well as Europe.

Okay. And I think Nick Reilly was in the news talking about a more positive outlook for Europe next year. Could you just give us a few of the key bullet points and what you expect to drive the significant profitability outlook for next year, if that's the case?

I'll try to handle that. I don't know precisely what Nick said. I read everything. I saw some, but maybe you saw something else. But I do think 2012, of course, depending on macroeconomic drivers. But we've stabilized share and started to grow slightly in Germany where we lost most of our share. The Vauxhall brand has been reasonably consistent in the U.K. We had some progress on our cost structure, particularly in one plant with regard to further restructuring, which will show sustained better cost performance in 2012. And that's why we're going to see additional restructuring charges in the second half of this year. And the product cadence in Europe is not dissimilar to what we're seeing in some of our other regions. Certainly, not what we're seeing -- we're going to see in South America. But they're a number of new product introductions in Europe. So I think the management team in Europe, which has done a very, very good job, there's a fair degree of cautious optimism that with a slightly better cost structure and a slightly better improvement in terms of product and market stabilization and possibly some growth, that we'll have a better '12 than we did '11.

Okay. And just hopefully, 3 very quick ones, could you just talk about what's driving the margin decline? In the China business, it seems that there's been some positive mix here with SGM up and Wuling down. Secondly, can you just give us the incentive stock adjustment in the pricing in North America? And then lastly, has anything changed on the level of cash that you want have in the business, just in the long run?

So on the China margin, it's really a handful of puts and takes in there. There's some tax related items. Remember, that's a net income margin, so it's after taxes and so on. So nothing significant that you'll need to extrapolate or do anything else with there. On the cash level, I'll let Chuck answer the stock adjustment question. On the cash level, there's no change to our perspective there. We've been very clear from the outset about the fortress balance sheet, the benefits of it. As Dan alluded to in his comments, we expect to get some significant benefits out of the business by bringing much more stability to the product development organization, much more consistency to the way that we're investing in that, so we opportunity there, which is a function of the strategy that we have. But there's no real change to the overall liquidity requirement picture.

Hey, Rod, which clarity [ph] are you looking for the stock adjustment for [indiscernible]?

In the second quarter, my recollection was that there were some incentive changes that happened around April 2. So you would've had to make some adjustments to what was out in dealer stocks in the period.

Yes, let me give you the sequential improvement. As Dan indicated, net price was favorable $600 million. Of that, about $100 million was related to base vehicle pricing, some of the actions that we took to mitigate the material and freight increases. Economic sales allowances primarily reduced retail incentives in the U.S. was worth about $400 million and the stock adjustment about $100 million quarter-to-quarter.

Our next question comes from the line of John Murphy, Bank of America Merrill Lynch.

Just a follow-up on those comments on pricing. Obviously, it was very strong in the quarter, a little bit weaker in the first quarter, just trying to understand in your guidance what you're really expecting in the second half of the year for pricing actions, in particular given the fact that some of your competition may really be ramping up their incentive activity?

Yes. When I think about the second half versus the first half, obviously, the vehicle pricing that we put in place along with the model year '12 increase, which was just about 1%, will drive some improved top line pricing, again, primarily to offset material and commodity headwinds. The incentive piece is a little bit more uncertain. And right now, we're looking at kind of flat incentive spending H2 versus H1, primarily because of the uncertainty around what the Japanese might do once their stock levels up back up to reasonable levels and then what the competition might do relative to following or not. So I think there's a bit of look and see around what might happen with incentives, but the base vehicle pricing will be improved in the second half of the year.

Right. But do you think there would be a competitive response if Toyota came out with aggressive incentives?

I think there's some uncertainty there. Last year in March, after the challenges they had, they came out very, very aggressively in the latter part of March, April timeframe, and the competition didn't necessarily follow. We didn't follow, for sure. It depends on what happens.

Yes, John, I'll just add, it's very much wait and see and see how it unfolds. You can -- I've heard credible arguments or credible cases for all sorts of different scenarios, and so I think it's just too early to predict at this point.

Yes, given there's not enough inventory, it would be odd that there will be a higher incentives. But on free cash flow in the second half of the year, I'm just wondering if there are any big swing factors other than just the slight fading EBIT that you've outlined for us. Is there anything on working capital or pension contributions or anything else? I recognize CapEx will be up, but is there ever any other factors that would hamper cash flow or aid cash flow in the second half of the year?

As I pointed out, one of the big benefits in the second quarter were the dividends out of China. They come in, in the second quarter each year. So that's a once a year item. We took you through -- effectively, the first quarter was $600 million, after adjusting for the [indiscernible] $3.8 billion in the second. CapEx will be up fairly meaningfully in the second half of the year, but beyond that, there are no other sort of significant unusual items.

Okay. And then just lastly on capital allocation, Dan, with the stock down where it is right now, and given the cash balance that you have and the potential overhang for stock coming, is there any reason that you wouldn't maybe be a buyer just in the open market on the stock right now given how ridiculously cheap it is at these levels?

Yes. I mean, we're obviously looking at capital allocation. But again, I go back to our fundamental strategy here, which is, we want to keep the fortress balance sheet, we want our best [ph] #1 on the product portfolio and so on. And we're doing that, we obviously have ample liquidity to go ahead and do that. We're keeping a close eye on, obviously, the pension situation. As I've indicated previously, we're going to watch that through the end of the year and decide what additional actions if any might need to be taken around that. We're obviously in a very volatile asset environment and a very volatile liability environment right now for the pension plan. Interest rates are all over the map. They're down dramatically. And as you know, that increases the liability. On the other hand, we are more fixed-income-centric than some other pension plans. So we really want to keep a close eye on that. It is $100 billion plan, as you know. We want to see what happens with that through the end of the year. And then beyond that, obviously, we have an objective to ultimately return cash to shareholders. But when and how and in what form that happens, no decisions have been taken on that.

And I promise, I'll ask you the last question. You guys ran 103% cap in North America in the quarter, just wondering how high that cap you can go before there become any sort of diminishing returns. I mean, can you get up to 120%, 130% before diminishing returns? Just trying to understand where that can go. It's pretty impressive in the quarter.

Yes. When you look at the capacity utilization across our facilities, the average is 103%, but we've got a number of facilities that are running North of 120%, including our full-sized pick-up facilities right now. So I think we can sustain 120% to 130% level, and that was kind of the plan when we were looking at and going through the IPO about not having to add brick-and-mortar on a go-forward basis. It was to more fully utilize the plants on three-shifts.

Our next question comes from the line of Chris Ceraso with Credit Suisse. Christopher Ceraso - Crédit Suisse AG: Just a couple of items. I appreciated the walk through on the truck inventory; that was very helpful. But if I look at the size of the industry, the penetration of pick-up trucks in the market and your market share, it would seem that we would need a significant increase in each of those or some of those in order for you to tap out the 640,000 units of sort of restrained capacity that you have next year. So could you give us some color on where do you see pick-up trucks as a percent of industry? Where do you think the industry saw [ph] would be or your pick-up truck share? What combination of those items would require you to need more units beyond the 640,000?

Well, we're seeing pick-ups run at about 11.5% in the last month or 2, which is a more typical level as we look at it. So that's what we'd be thinking about there. Our share of the pick-up truck segment has run pretty consistently in the high 30s. And so we're not looking for -- we're not making any heroic assumptions on that. So it really comes down to what's the SAAR going to do. We're obviously sitting here today looking out at a fairly uncertain and, in the view of a lot of people, fairly bleak economic picture. That's changed in the last few months. It can change again, and so you don't need to see the SAAR pick up too significantly from here before you get into the kind of numbers that we're talking about. And what we don't want to do is get into a situation where we end up being meaningfully constrained either. So it's a balance. We've given the lead times and so on. We have to take a view. We've taken the view that we described here. Obviously, if the environment doesn't improve well into next year or even along the way, we'll be modulating production as we go. Christopher Ceraso - Crédit Suisse AG: Okay. And then you're doing preparation in '12, but the launch is still in '13, correct?

We're not going to comment on specific launch timing, but the preparation work's in '12. Christopher Ceraso - Crédit Suisse AG: Okay. And then again, on the pick-ups, some of your competitors have done well with some smaller displacement turbos; is that something you think you'll have as an option when the next generation launches?

Our plan going into the K2xx [ph] is, we haven't announced specific powertrain lineups, but we're certainly going to have a competitive lineup of powertrains. Christopher Ceraso - Crédit Suisse AG: And then just last one, Dan, on the taxes. I know this is difficult, but what should we assume here on a go-forward basis, either in dollars or percent for tax on a book basis.

Yes. So this quarter was a little unusual because we had the release of some provisions, which is why you saw our tax benefit rather than tax expense. But going forward, absent other tax events, you should assume what we indicated previously, which is round numbers of 10% effective tax rate.

Our next question comes from the line of Himanshu Patel with JPMorgan. Himanshu Patel - JP Morgan Chase & Co: Couple of questions. Just when you think about the cost structure for GM North America in 2012, when you look at the controllable costs like engineering or what you'd broadly define as structural, just can you give us some directional color on what happens to that bucket next year?

Yes. On an overall basis, I would say relatively flat year-over-year with productivity improvements offsetting variable manufacturing, engineering being relatively flat. We're looking at reasonably flat levels of marketing. So in those pretty big 3 buckets, I think, from a planning perspective, they're flat year-over-year. Himanshu Patel - JP Morgan Chase & Co: Okay. And on Slide 12, the ratio that you guys calculated on average incentive relative to ATP and that ratio, I guess, compared to industry average, I think, Dan, you had mentioned that in Q2, the ratio was about 103%. Q1 looks like it was about -- looks like -- sort of for the first half, it was about 109%, and I think you're indicating that it would be sort of one-to-one for the full year, which kind of implies it's got to be at sort of a 90%, 91% rate for the back half. Just given -- I'm just trying to understand like where -- what are the puts and takes there? Is it your anticipation simply that competitors raise their incentives as the Japanese quake impact fades and GM just not follow, or is there sort of a sequential decline in GM's incentive spending in absolute terms that you guys are anticipating?

Well, what I've said, we're saying approximately, right? And part of the reason we're saying approximately is it's not exactly clear, to the earlier discussion, how things are going to unfold with the Japanese with the supply/demand equation. The key message is that for all of last year, for the second quarter of this year, we were clearly at or around, I think last year, we were slightly below. This year -- well, this quarter, we're right on. That's the way that we're conducting the business. That's the way that we're going to run it going forward. Exactly where the year comes out, given the Q1 and sort of unknowns that could happen this year, we think it'll be approximately around the industry average, but we can't be that precise at this point. Himanshu Patel - JP Morgan Chase & Co: Okay. And on South America, I think you guys have mentioned for a couple of quarters that there's some product cycle issues there that are leading to the anemic margins. I'm just trying to understand, is there anything else structural going on in that market in terms of new competition? I think Volkswagen recently made some comments as well that indicated their South American margins would start fading in the next couple of years. I'm just trying to understand, could that business revert back to historical margins, or should we not really use that as beuview [ph] anymore?

Well, I think we've identified 2 things. One is we're having a very radical product overhaul as I've talked about at some length that's going on, and you all well understand the costs associated with that. But I would say that there has been some change in the market dynamic down there. The Koreans have shown up very aggressively in the market and have been pricing aggressively and competing aggressively. So whereas you had a market that was really pretty stable in terms of the top 3 between ourselves, Volkswagen, Fiat, there is a new entrant, and they're been pushing fairly hard. So how all that shakes out in terms of once we get the portfolio overhauled and so on, we don't precisely know, obviously. And that was the other point I'd make is that it is a little bit of a story of 2 markets down there. It's sort of Brazil versus all the other markets, and we continue to perform from a margin point of view pretty strongly in most of the other markets outside of Brazil. Obviously, Brazil is the biggest market, and that's where we have the biggest product aging issues, if you like. So there are a number of variables in there, but there is more to it than simply our product overhaul. Himanshu Patel - JP Morgan Chase & Co: And, Dan, do you anticipate -- I guess, not to beat a dead horse, but just to comment on returning cash to shareholders, just relative to your thinking versus, let's say, start of year or maybe 6 months ago, it just sounds like maybe you guys are expressing a little bit more uncertainty on the outlook. What sort of changed for you, is it more just macro concerns about the SAAR next year or is it your view that maybe pension contributions next year need to be higher than what you were thinking before? I'm just wondering what -- if you could shed some color on that.

I don't think there's been any real change. I think what we indicated previously is we certainly want to see how the rest of this year shakes out, see where we end up the year with pension and anything else and contract negotiations and credit ratings. There's a lot of variables in the equation here. So there's no fundamental change to the way that we're thinking about capital allocation and the time line in which we're thinking about it.

Our next question comes from the line of Itay Michaeli with Citigroup.

Dan, I just want to clarify, do you still expect North America structural cost to be flattish '11 versus '10? And then, I think with the change in the reporting of the variable expenses and the volume, can you just remind us what the structural costs year-over-year have done first half of '11 versus first half of '10?

Yes, sure. The short answer to your first question is yes, we expect it to be down slightly year-over-year, and then, Chuck, on the first half of the first half would be slightly...

Yes, we're up slightly first half 2011 versus first half 2010. We expect to be down slightly H2 to H2 and relatively flat year-over-year.

Great. And then on the pick-up truck launch, I know you're not sharing the actual launch date, but was there any pull forward internally of the launch, and even a minor one at GM? And if there was, is there any impact at all to how you thought structural cost might fare in 2012 versus your original plans?

We're not commenting anymore on the truck launch date than we have. And I don't -- Chuck gave an answer earlier on the structural cost for 2012 versus '11 for North America. We see that being roughly flat as well.

Excellent. And just lastly with the recent macro concerns out there, Dan, can you just remind us -- I know you did us a quarterly assessment of the U.S. breakeven point, where you see that today and just in light of what's changed in terms of commodity cost and mix and other things in the industry.

Yes, no real change in that.

Our last question comes from the line of Patrick Archambault with Goldman Sachs.

I just wanted to tie maybe a couple of comments that have been made together with Slide 16. As we move from first half to second half and just get a sense of where some of these factors are going to trend, I think if I can summarize what's said so far, I think price might actually increase a little bit modestly. I think mix seems like it would be a headwind. Volume, one would expect that seasonally, it would be down. And then I guess from Itay's question, it sounded like, I thought you said structural cost might actually be down sequentially, although if I remember well, right, there's a pretty big seasonal increase usually, at least in the fourth quarter, just because of launches. So is that sort of the right way to think about those pieces moving from first half to second half?

I think that's all fair. The only slight adjustment I'd make is that structural cost second half to first half is probably roughly flat as well.

Okay, that's very helpful.

Volume is obviously -- volume will be what it's going to be. As the market unfolds, we'll see how that transpires.

Sure, but I guess, maybe if I were to just refine that just from a seasonal perspective, you probably have a schedule earmarked for Q3 that's probably lower, right?

Yes, clearly. We have more seasonal shutdown in second half than first half.

Okay. Another question again just on the pension. I know you've had a couple of questions on this, and it's clear that you haven't made up your mind about capital structure actions yet. But is there a possibility or an ability to actually kind of combine buybacks, which people have asked about, and contributing that stock to the pension fund? I know that there are obviously -- in the time of the IPO, there was a contribution made of stock, but on the flip side, it sounds like you've talked about defeasing the liability in the future, which may not be possible if you put a lot of equity into it, but just wanted the thoughts on the possibility of that?

Yes, again, no decisions are being made. But I take your point and I'd agree with it that putting more stock into a pension plan would be at odds with the de-risking strategy that we're following. So I think that's less likely.

Okay. And then last one, can you just comment on the tone of upcoming UAW negotiations? I mean, obviously, there's a lot that has to be discussed I'm sure in coming months. But how confident are you in the ability to prevent that contract, that new contract, from increasing your structural costs?

This is Dan Akerson. Let me take that one. It is a stated goal between ourselves and the UAW. That structural costs are critical. We're looking at other options and alternatives to throw it into the category of a variable cost contingent upon results, not unlike our bonus plan for most of our management. I would characterize the relationship and the dialogue as being constructive. I think both parties understand the need for the company to prosper for anybody to have any sort of future prospects of a company that goes back to the old cost structure would not bode well for General Motors or the industry, quite candidly. So there's a kind of sober recognition that we are partners joined at the hip; one can't prosper without the other doing well too. And so I think we're off to a good start. But as you note, they're going to be areas we don't agree on, and they're going to -- we're going have to find common ground, and we will. But I think you can rest assured that both sides of the table understand the issues surrounding structural cost and the ability for the company to continue to do well in the future.

Mr. Arickx, I will now turn the call back to you. Please continue with your presentation or closing remarks.

Okay, thanks, operator. Thanks, everybody, for your time this morning. I Look forward to talking to you soon.