General Motors Company (GM) Q1 2012 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by, and welcome to the General Motors Company First Quarter 2012 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded, Thursday, May 3, 2012. I would now like to turn the conference over to Mr. Randy Arickx, Executive Director of Communications and Investor Relations. Please go ahead, sir.

Thanks, operator. Good morning, and thank you for joining us as we review our first quarter 2012 results. A press release was issued earlier this morning and the conference call materials are available on the Investor Relations website. We would 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 in 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 remarks. After the presentation portion of the call, we will open the line for questions from security analysts. Also, in the room today, we have Nick Cyprus, Vice President, Controller and Chief Accounting Officer; Jim Davlin, Vice President Finance and Treasurer; and Chuck Stevens, CFO North America and South America, to assist in answering your questions. With that, I'd like to turn the call over to Dan Akerson.

Thanks, Randy, and thank you to everyone on the call for joining us. General Motors had another solid quarter. Our EBIT adjusted results are strong. We had product success stories in every region of the world, especially with Chevrolet. Among the 20 largest automotive brands in the world, Chevrolet has been the fastest-growing for the last 2 calendar years. Big marketplace wins like these are happening because we continue to advance the 4 strategies that are the foundation of how we run the business. Simply put, they are to design and build the world's best vehicles, strengthen our brands, grow profitably around the world and maintain our fortress balance sheet. We made good progress on this strategy last year, and we didn't let up in the first quarter of this year either. I'll review each of the highlights through my remarks. But as you hear them, remember this. This management team is not getting ahead of ourselves. We are confident in our plan. We're pleased with the progress in most areas, and we have internal issues we're fixing. We're not immune to the industry issues like recession or overcapacity in Europe or competition that's intensifying everywhere we do business. Every day, we keep our teams focused on these cold hard facts because it instills discipline, and discipline helps deliver better results. It's certainly reflected in our top line growth, which you can see at the top of Slide #2. GM's first quarter global deliveries and net revenue both increased year-over-year, with North America and GMIO more than offsetting the declines in Europe and our flat results in South America. Globally, our deliveries were up 60,000 units, and our net revenue increased 4% to $37.8 billion. Looking at the bottom line, our net income attributable to common shareholders was about $1 billion, which is down from the first quarter of 2011. As you know, we had a net $1.5 billion gain from special items a year ago. In this quarter, we had a special loss in special items of $600 million. Our automotive net cash from operating activities was a much improved $2.3 billion. Looking at EBIT adjusted, we improved $200 million year-over-year to $2.2 billion. Our North American businesses drove these results. Revenue in the region increased 9%, and EBIT adjusted increased $400 million to $1.7 billion. This really speaks to our balanced portfolio of cars, trucks and crossovers and the ongoing success of vehicles, like the Chevy Cruze and the Cadillac SRX, and contributions from new vehicles like the Chevrolet Sonic and Buick Verano. All these vehicles have significantly better design, fuel economy, average transaction prices and resale value than the models they replaced. Europe obviously remains a work in progress. Our EBIT adjusted loss was $256 million compared to a breakeven result last year -- year ago. Net revenue declined about 20%, which reflects our lower sales of vehicles and components, as well as the impact of a stronger dollar relative to the euro and the British pound. These results are disappointing but not unexpected, and we're working hard to identify new revenue and cost reduction opportunities to put the business on a path to sustainable profitability. GMIO, like North America, remained a source of strength for the company. Our EBIT adjusted results of $500 million were down slightly compared with a year ago. Importantly, GM and our JV partners have continued to grow both sales and market share in China. They are first -- we had a record first quarter sales of 745,000 vehicles, thanks to the successful launch of Baojun, the ongoing success of Wuling and Buick and a solid start to the new Chevrolet Malibu. The key for us in China has been to stay in offense, which is why I traveled to Beijing auto show last week and announced that we will add an additional 600 dealers in China this year and add one new Cadillac model to our lineup in China each year through 2016. First car will be the Cadillac XTS luxury sedan, which will go into production at Shanghai GM later this year. We'll follow that up with the Cadillac ELR electric coupe in the near future. These are important strategic moves because half of all luxury purchases in the world, all categories not just cars, are predicted to occur in China by the end of the decade. In South America, our results were essentially flat with the same quarter a year ago. But they are back in the black, and we're starting to see the impact of new product introductions. In Brazil, for example, we launched the Chevy S10 pickup and the Cruze hatchback this quarter. And we're gaining traction with the Cruze notchback and Cobalt, which we launched in the fourth quarter. The new Cobalt increased Chevrolet share in this segment by almost 13 percentage points over the nameplates sold in the second half of last year, and Cruze sales in the quarter ran at more than double the rate of car it replaced. Finally, our automotive free cash flow was a much improved $300 million for the quarter. Before I turn the call over to Dan Ammann, our Chief Financial Officer, I wanted to specifically call out some of the major revenue and cost actions we took in the quarter to improve our margins over time. These are summarized in Slide 3. The most significant is the global alliance with PSA Peugeot Citroën, which we announced in late February. Management and implementation teams are in place. We have more than a dozen work streams underway. And very soon, we will be able to announce the first visible results of the alliance. Also, in the first quarter, sales in China set a record. As I mentioned before, our sales in Russia were up 29%. This helped Chevrolet delivered record global sales of 1.2 million units. Our marketing organization, meanwhile, delivered 2 major cost and complexity reductions this quarter. In January, we consolidated our global media planning and buying services to increase our purchasing power. And in March, we reduced the number of advertising agencies that support our Chevrolet brand from 70 down to essentially one. Also on March, we advanced our strategy to ensure that competitively priced credit is always available to our dealers and customers. We did it by adding Wells Fargo as a partner in our Western U.S. sales region. They will be a great complement to GM Financial and our existing relationships with Ally and U.S. Bank. These are all in addition to the changes we announced in February to further de-risk our U.S. hourly and salary pension plans. Finally, we had a number of major product announcements, the 2 most recent being the unveiling of the 2014 Chevrolet Impala and our new line of bi-fuel pickups that can run compressed natural gas or gasoline. With the launch of the Impala, we will have completely transformed our Chevrolet passenger car showroom from top to bottom, and this great-looking car is going to help us deliver much higher retail sales for Chevrolet in this segment. Bi-fuel pickups, by contrast, are primarily targeted fleet customers who want to use clean-burning, domestically sourced low-cost alternative gasoline -- to gasoline. On future calls, you can expect updates on many of these initiatives and new ones that are designed to make us a stronger, more profitable company. Now I'd like to turn it over to Dan Ammann, who will give you more details on our results, then I'll return to close the call. Thank you.

Thanks, Dan. Beginning on Slide 4, we provide a summary of our first quarter 2012 GAAP results compared to the prior year. As Dan previously covered, net revenues were $37.8 billion for 2012, up $1.6 billion from 2011. Net [ph] operating income was $1 billion for the quarter. Net income to common stockholders was $1 billion, which rounds to a $2.1 billion decline from the prior year, driven largely by special items. Earnings per share were $0.60 on a fully diluted basis compared to $1.77 for the same period in 2011. And our automotive net cash from operating activities was $2.3 billion for the quarter, up almost $3 billion year-over-year. Moving to the non-GAAP metrics on the bottom of the page, EBIT adjusted was $2.2 billion for 2012, up $200 million versus 2011. The EBIT adjusted margin was 5.8%, an increase of 0.2 percentage points from the prior year. Automotive free cash flow was $300 million, a $2.2 billion improvement from 2011. Turning to Slide 5, we list the special items and adjustments impacting the first quarter 2012 earnings. As I mentioned, our net income to common stock shareholders was $1 billion, and our fully diluted earnings per share was $0.60. Included in both of these metrics is the $600 million special item for the impairment of goodwill, primarily in our GME operations. That equals $0.33 per share on a fully diluted basis. On Slide 6, we provide the composition of EBIT adjusted by region for the first quarters of 2011 and 2012. As Dan previously covered, GMNA's EBIT adjusted was $1.7 billion, up $400 million from the prior year. GME's EBIT adjusted was a loss of $256 million, a $300 million decrease from the breakeven performance a year ago. GMIO had an EBIT adjusted of $500 million, down $100 million versus the prior year. And GMSA's EBIT adjusted was $100 million, equal to its 2011 performance. GM Financial continued to improve earnings with $200 million from the quarter, up from approximately $100 million in the prior year. Corporate and eliminations were breakeven for both periods. This nets to an EBIT adjusted of $2.2 billion for the first quarter of 2012. Slide 7 shows our consolidated EBIT adjusted for the last 5 quarters. Moving to the bottom of the slide, our operating income margin was 2.6% for the quarter, equal to the same period in 2011, although both periods were affected by special items. Our EBIT adjusted margin was 5.8%, a 0.2 percentage point increase from the prior year. This is driven by a stronger performance in GMNA, partially offset with the decline in Europe, which we'll cover in the segment reviews. Our global production numbers are about 4% higher on a year-over-year basis. However, our global market share declined 0.1 percentage points to 11.3% for the first quarter. Turning to Slide 8. We provide a first quarter 2012 comparison with our consolidated EBIT adjusted for the prior year. We recently made a few changes to our EBIT bridge methodology in order to provide some more insight into key trends. Most notably, we previously assigned the net price and cost changes of our new major product programs into the mix category. We have now split these effects out and placed them into the price and cost categories. On the left side of the chart, our consolidated EBIT adjusted was $2 billion for 2011. In the middle portion of the slide, we walk the $200 million improvement for the quarter. Volume was favorable $400 million, largely driven by increased production in North America and IO. Mix was unfavorable $200 million due to increased sales of compact, small and midsize cars in North America, offset with a modest improvement in South America. Price was favorable $800 million for the quarter due to the strength of our new product introductions and other pricing actions we have taken. Total costs were up $900 million. Excluding the $200 million decrease in pension income that we've discussed previously, fixed costs were flat for the quarter. Our material pricing and freight costs were also unchanged. We had $200 million impact of material content for our new product programs, and the remaining cost increases for the quarter were essentially one-off adjustments totaling $300 million, including a $200 million increase in retroactive policy and warranty adjustments and $100 million in restructuring charges. Finally, we had $200 million lower contribution from powertrain and part sales, which is included here in the cost category. Other was $100 million favorable. This totals to a consolidated EBIT adjusted of $2.2 billion for the first quarter of 2012. We'll now move to our segment results with the key performance indicators for GM North America here on Slide 9. The 2 lines on the top of the slide represent 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. Our U.S. retail incentive spending as a percentage of average transaction price and a comparison to the industry average is noted on the bottom of the slide. For the first quarter of 2012, our U.S. retail share was 16%, down 2.2 percentage points versus the prior year. Our incentive levels on an absolute basis decreased $360 per vehicle from the prior year. On a percentage of ATP basis, our incentives were 10.4%, down 1.3 percentage points from the prior year. This puts us at 109% of industry average levels for the first quarter of 2012. For April, our retail market share was 16.2%, and our incentives are estimated to have been 10.3% of the average transaction price. On Slide 10, we show GM North America's EBIT adjusted for the last 5 quarters. For the first quarter of 2012, EBIT adjusted was $1.7 billion, up $400 million versus the prior year. Moving to the bottom of the slide, revenue was $24.2 billion, up $2.1 billion versus 2011, due primarily to increased volume. GM North America's EBIT adjusted margin was 7% for the first quarter, up 1.3 percentage points from the prior year. U.S. dealer inventory was 713,000 units at the end of the first quarter or 86 days supply versus 574,000 units and 75 days supply for the first quarter of 2011. GMNA production was 862,000 units for the quarter, a 76,000 vehicle increase from the prior year, of which 44,000 units were due to full-size trucks and SUVs. As we indicated in the prior quarter, this buildup of full-size trucks is in preparation for the plant downtime that is scheduled through the balance of 2012. GMNA market share was 16.7% for the quarter, 1.6 percentage points lower than the prior year. This decline is due to reduced volumes from our older and discontinued product offerings. Turning to Slide 11. We provide the year-over-year view of GMNA's $400 million improvement in EBIT adjusted. Starting on the left-hand side, EBIT adjusted was $1.3 billion for the first quarter. Volume was favorable $600 million, driven by increased full-size truck and compact and small car production. Mix was unfavorable $300 million due primarily to increased production of compact, small and midsize cars, more than offsetting the impact of the increased truck production. Price was $400 million favorable on a year-over-year basis. Costs were $300 million unfavorable this quarter due to $200 million on an unfavorable U.S. pension income and $100 million expense for a skilled trade Special Attrition Program resulting in 1,400 voluntary retirements. Other was unchanged for the quarter. This totals to an EBIT adjusted of $1.7 billion for the first quarter of 2012. We'll provide you some perspective to the impact of the full-size truck production ebbs and flows on earnings for GM North America later in the presentation. Moving on to Slide 12. GME reported an unfavorable EBIT adjusted of $256 million for the first quarter, a decline of just under $300 million from the prior year. At the bottom of the slide, revenue was $5.5 billion for the quarter, down $1.4 billion from the prior year. This decline was due primarily to $1 billion in lower vehicle volume and $300 million in unfavorable foreign exchange translation. The EBIT adjusted margin in the region was a negative 4.6%. GME's production for the quarter was 292,000 units, down 52,000 from the quarter prior, partially attributable to an industry that had a 6% year-over-year decline. GME's market share in the region was 8.2%, a 0.2 percentage point decline from 2011. Turning to Slide 13, we provide the major components of GME's $300 million year-over-year decline in EBIT adjusted. Volume was $200 million unfavorable, driven by a decline in the industry and a 0.2 percentage point loss of share. Mix and price were essentially unchanged for the quarter. Cost was essentially flat due to $100 million decline from decreased sales of powertrain's parts and accessories, offset with favorable manufacturing expenses of $100 million. Other was $100 million unfavorable due to foreign exchange. This totals to GME's EBIT adjusted of negative $300 million for the first quarter of 2012. On Slide 14, we show GMIO's EBIT adjusted for the past 5 quarters, including the equity income from our JVs. In the first quarter, GMIO posted EBIT adjusted of $500 million. Moving to the bottom of the slide, GMIO's revenue from our consolidated operations was $6.1 billion, up $900 million from the prior year, due to increased volume of $400 million, favorable vehicle mix of $300 million and favorable pricing of $200 million. GMIO's EBIT adjusted margin from consolidated operations decreased 1 percentage point versus the prior year to 2.1%. Now China JV net income margins decreased 1.8 percentage points from a strong performance in the first quarter of 2011 to 10.2% in the first quarter of 2012. Now GMIO production for the quarter was up 101,000 units from the prior year, with increases in both consolidated operations and our joint ventures. Market share in the region was 9.4% for the first quarter, a year-over-year increase of 0.1 percentage points, driven by an increase in China market share from 13.6% to 15.1%. On Slide 15, we provide the major components of GMIO's $100 million decline in EBIT adjusted. The impact of volume was $100 million favorable due to increased production in our consolidated operations as we previously discussed. Mix was unchanged for the quarter. The effective price was $200 million favorable. Costs were unfavorable $400 million due to $100 million product recall, $100 million increase in manufacturing expense and $100 million increase in material content for major product programs, combined with several other minor items. Other was unchanged for the quarter. This totals to GMIO's first quarter 2012 EBIT adjusted of $500 million. Turning to Slide 16. GMSA's EBIT adjusted was $100 million for the first quarter of 2012, essentially equal to the performance from a year ago. Revenue was $3.9 billion, also unchanged from last year as favorable pricing and mix offset a decline in volume and unfavorable foreign exchange. The EBIT adjusted margin in the region was 2.1%, down 0.2 percentage points from the prior year. GMSA's production was 203,000 units, down 28,000 units from the first quarter of 2011. On Slide 17, we look at the components of the year-over-year performance in South America. Despite the production decrease, the impact of volume rounded to 0. Mix was favorable $100 million due to a shift in Brazil to our higher-margin vehicles such as the recent launched Cruze and S10 pickup. Price is favorable $100 million, largely related to increases in Venezuela and Argentina. Costs were unfavorable $200 million, driven by manufacturing increases of $100 million and several other smaller items. Other rounded to $100 million favorable due primarily to a gain on our purchase of GMAC Venezuela. This totals to an EBIT adjusted of $100 million for the South America region in the first quarter. However, the results for South America indicate that our new products in the market have begun to turn around profitability in the region. We still have key launches remaining for the year, including the Cruze hatchback, the Sonic, the Spin and others that are on track and will contribute to our product renaissance in South America, along with the additional cost actions that we are pursuing. Turning to Slide 18, we provide our walk of automotive free cash flow for the first quarter of 2012, as well as the prior year. After adding back non-controlling interest, preferred dividends and undistributed earnings allocated to Series B preferred and subtracting GM Financial, our automotive income was $1.2 billion for the first quarter of 2012. We had a non-cash special item of $600 million. Depreciation amortization and impairment was a $1.4 billion non-cash expense. Working capital was a $700 million use of cash due primarily to seasonal increases in inventory and accounts receivable, partially offset with an increase in accounts payable. The working capital in 2011 was impacted by a termination of in-transit financing that we've discussed in prior earnings calls. Pension and OPEB cash payments exceeded expense by $200 million in the quarter. Other was negative $100 million due primarily to non-cash P&L items. This totals down to automotive net cash provided by operating activities of $2.3 billion. After deducting capital expenditures of $2 billion in the quarter, our automotive free cash flow is $300 million, a $2.2 billion improvement from the prior year. On Slide 19, we provide a summary of our key automotive balance sheet items. We finished the first quarter with $37.3 billion of total automotive liquidity, consisting of $31.5 billion in cash and marketable securities, $5.9 billion of undrawn credit facilities. At the bottom portion of the slide, our book value of debt and Series A Preferred Stock are $5.4 billion and $5.5 billion, respectively. U.S. qualified pension plans are underfunded by $12.9 billion on our balance sheet. Our non-U.S. pensions are underfunded by $11.6 billion at the end of the first quarter and the OPEB liability is $7.3 billion. Slide 20 provides a summary of key operational metrics related to our financing activities. GM Financial reported their results earlier this morning, and we'll be holding an earnings conference call at noon. Our U.S. subprime financing in the first quarter has increased over the prior year to 8.2% and once again exceeds the industry average. Our U.S. lease penetration of 12.6%, lower than the prior year, due to lower numbers of returning lessees. Lease penetration in Canada is at 8.9%, a full 5 percentage points higher than the prior year. GM new vehicles as a percentage of GM Financial originations is 45%, and GM Financial's percentage of GM's U.S. subprime and leasing is 23%. Both metrics are higher than a year ago, as GM Financial continues to grow its financing business and its importance to GM. GM Financial again saw strong credit performance in its loan portfolio with annualized net credit losses of 2.5% for the quarter, 1.5 percentage points better than the prior year. GM Financial's earnings before tax were $180 million -- $181 million for the first quarter of 2012. Before we move on, I want to mention that GM Financial just launched its commercial lending services business last month. This gives our dealers in the U.S. another option for their floor plan financing and insurance, capital, real estate and construction loans and cash management programs. We will update you on the performance of this piece of the business in the future quarters. Before I turn it back over to Dan, I want to share a few points regarding the 2012 outlook on the next slide. As we stated in our sales call a few days ago, we now expect U.S. light vehicle sales for the year to be in the 14 million to 14.5 million. This is a 0.5 million unit increase from our prior projection. Also, due to the timing of our scheduled full-size truck plants downtime, we expect the financial results for both Q2 and Q3 at GM North America to be in the same range as what we reported for Q1. Specifically, we expect Q2 and Q3 full-size pickup and SUV production to be lower in the second and third quarters than it was in Q1. Finally, we continue to examine the effects of taxes in the many countries in which we operate. We now believe the effective tax rate will be greater than the 10% we've previously discussed. Going forward, we will likely have a rate similar to what we had in Q1, which was 12% to 13%, excluding the effects of special items. We may still experience some tax rate volatility within a specific reporting period due to variations in country-specific profitability and tax liability. With that, I'd like to turn it back over to Dan Akerson for his summary and closing remarks.

Thanks, Dan. I'll keep my closing comments very brief because I think the highlights speak for themselves. Sales increased, so did our pricing power. EBIT adjusted and EBIT adjusted margins both improved, and so did our cash flow. Going forward, our plan is to deliver results like this but with a bit more balanced scorecard. That means all 4 regions must become solidly and reliably profitable. I believe we'll get there. It's going to be purely a function of execution, execution on process improvement and complexity reduction and flawlessly executed vehicle launches. All told, we have more than 20 major product launches in 2012. The Cadillac ATS and XTS in the North America will be entering segments where we don't compete today, and the ATS represents a serious challenge to the hegemony of the BMW 3 Series in the compact luxury segment. In Europe, we're introducing the Opel Mokka, a small crossover, which will feature 2 small gasoline engines and diesel engines, equipped with stop-start technology and will be available with state-of-the-art comfort and safety features. At IO -- GMIO, one of the major launches is the Chevrolet Sail in India. The Sail is the first passenger car developed by Shanghai GM and the Pan Asia Technical Automotive Center. Major global launch is the new Chevrolet Colorado, which based -- which is based on an all-new midsize truck architecture developed by GM Brazil. Eventually, it will be on sale in 60 markets around the world, including the United States. All this product activity should lead to growth. And with our new business model and significantly lower risk profile, it will improve our profits and our cash flow generation as well. Thank you, and now we'll open the line for questions.

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

Just want to get in 2 questions, Europe and then just a bit -- we've heard a lot in the sales calls about fleet strategy. I would like to hear it from the leadership. First of all, in Europe, it looks like pricing was maybe a little bit better. Can you give us a sense of where you are on dealer and company-owned inventories? Are those getting in better shape? And then before we get any hopeful labor cost and capacity and other restructuring, should we be thinking about this level for Europe or can it improve from here or was this somehow unusually better?

On the inventory question, I'd say that we ended the first quarter still with more inventory than we'd like to have, and we will be working that down over the balance of the year. But our objective is to work a good chunk of that down through the second quarter. And as it relates to some of the cost actions and so on, we're making progress, I would say, sort of week to week on the cost front. Not everything will come with some big announcement, but there's a lot of activity and progress going on in the background. There's year-over-year cost improvement. There's quarter-to-quarter cost improvement, but there's still more work to do on that front.

And on North America, you ran about 26% fleet mix. One competitor who disclosed it was more like 37% but would actually talk about their execution on the commercial side. Is fleet about where you want it? Do you see an opportunity to penetrate segments there or you're deliberately holding back? And in addition, if we kind of look at the gap between very strong retail pricing levels and maybe less overall in price when you get to the segment results, is there pricing pressure at all that's emerging in the fleet segment due to some competitor actions?

Yes, let's talk about overall in general. I think that on a go-forward basis, we'll see our fleet penetration continue to come down marginally from 26%, down into the low 20% to 23% ranges. We launched new products that have traditionally been daily rental fleet products, like the new Impala that was mentioned earlier, which is a pretty high penetrating fleet. At the same time, we're trying to improve our mix between daily rental and commercial, government fleet. And that competitor that you mentioned has been very, very aggressive, obviously, in that segment of the fleet business. And that is putting a bit of price pressure specifically on the commercial and government fleet business but, obviously, that's something we're going to continue to work to grow and supplant some of the daily rental. With that said, unlike past years, the overall fleet business is reasonably profitable. Obviously, the mix is not as rich as retail, but it certainly isn't a loss making part of the business as it was in the past.

Maybe the only thing I'd add to that is in the -- what you're seeing, to some of the extent, is the effect of the daily rental caps that we put on our new vehicles that we're introducing to preserve the residual values. And as the old Impala rolls off and the new one rolls on or same for Malibu, same for some of the Cadillac product, you're going to see those caps kick in and we're going to be very disciplined about what goes into the daily rental business. And that's part of what you're seeing.

Our next question comes from the line of Peter Nesvold, Jefferies. H. Peter Nesvold - Jefferies & Company, Inc., Research Division: Maybe one quick question on the quarter and then maybe a bigger picture question. So on the quarter, when I look across all the different segments' costs year-over-year, it seemed to be going up or it seemed to be a headwind, volume mix pricing generally working in your favor. Dan, you kind of addressed them individually in the segments as we went through, but is there something bigger picture that's happening, whether it's materials inflation, whether it's labor inflation that's sort of the common thread there?

No, I'd say, I'd characterize it as follows, which is for the whole company for the first quarter, fixed cost were basically flat year-over-year, excluding the $200 million of pension income headwind we have in North America. So as we described on the earlier call, last quarter call, we're going to have an $800 million headwind this year as a result of lower pension income. So you got to take that into account, number one. Number two, I'd say material pricing as a general matter is essentially flat year-over-year, and that's generally across the board. We have additional material content coming in as a result of richer content on new vehicles. That was about $200 million for the whole company. And then we did have a handful of sort of more onetime type items. We had over $200 million of retroactive policy and warranty adjustments here in North America, and we had about $100 million associated with the product recall in IO. So there were some items along those lines that are less recurring in nature, if you like. Then there's $100 million restructuring charge here in North America associated with the special trades SAP program. So you've got to break it down into those items to understand it. In IO and in South America, there has been some inflation from a manufacturing cost point of view. So those would be the main elements. H. Peter Nesvold - Jefferies & Company, Inc., Research Division: And then one quick strategy question. The JV strategy, so your news release is out, a possible tie-up with Isuzu. And certainly, I don't expect you to comment specifically on that situation. But coming off the heels of the Peugeot tie-up recently, it seems like there's been some kind up of change in strategy here to go back to strategic alliances globally. And I'm hoping you could just talk bigger picture about what GM hopes to accomplish with further tie-ups. Are you not big enough on your own to accomplish a lot of the objectives that you're seeking with some of these?

Let me talk about that. Yes, we are big enough to handle it on our own. Second point, don't always believe what you read. H. Peter Nesvold - Jefferies & Company, Inc., Research Division: Understood on Isuzu. But -- okay, I mean, I'll just leave it at that.

The only thing I'd add, third point would be we have a lot of work to do on the PSA alliance. We have a lot of people working on that. We're making good progress. The teams are working well together, and that's where we're focused right now.

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

I'm glad I don't have to ask the Isuzu question then. Question about 4Q seasonality in North America. I mean, last couple of years, it seems to show this kind of big dip in the fourth quarter. It's been kind of new to the industry. But given the pace of the shutdowns and the disruptions in the middle part of the year, can you help us provide us a little bit of a hint on what the year end might look like relative to this ballpark $1.7 billion North America run rate for the middle of the year? That's my first question. I just have one follow-up.

Okay. So we're not providing any specific commentary on the fourth quarter at this point other than, I'd say, that the seasonality that we've seen in the last couple of years is getting a bit disruptive this year, quite obviously, as a result of the truck plant downtimes. So I think, while it's too soon to tell what's going to happen in Q4 because it's going to be a function of the industry and everything else, the cadence that we've seen for the middle 2 quarters of the year is going to be a little different this year.

Great. And then just a quick follow-up on China. Can you update us on your progress of getting back to 50-50 with SAIC?

Yes, it's complicated by -- you have both the city and the provincial government review, which is through. And then you have the national policy review, their equivalent of the SEC, is where I understand it resides today. So both boards have reviewed it and passed it to the provincial/city review, and now it's at federal. So we've had both, I would describe as productive and cordial discussions dialogue. And just like in our own country, you wait for the government to -- and they're not on the same clock we are. That's kind of the way I put it. So we expect some action here in the near term, and we'll let you know as soon as we have any further developments.

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

Dan, appreciate the detail walk on North America, but one item that you guys put out in your release is the capacity utilization number. And for North America, it was 103%. I was just curious if there were any inefficiencies of running over 100% or any impact in your cost that maybe if you were to build a little bit more capacity, you can get that closer to the mid-90s or back to 100%, that would be better? I'm just trying to understand if there was any penalty in the quarter for premium freight or overtime or anything that would have depressed the quarter?

No, I think we're quite comfortable running at that level of capacity utilization and even higher. If I was looking at the -- and Chuck can chime in here as well, but if I was looking at the Q1 North America result relative to last year, you obviously have the $1.7 billion versus the $1.3 billion. But you got to take into account the $100 million restructuring item, the $200 million policy and warranty retroactive adjustment and the $200 million of pension income headwind when you’re looking at that comparison.

Got it. And if we were to think about this and to follow-up on the earlier question. I mean, you guys have given us sort of the pressure you're going to see from the changeover from the GMT 900 in the second and third quarter, which, I guess, is helpful, but it's kind of giving us the punitive guidance for the next couple of quarters. I mean, obviously, launching new products usually creates some really good upside in revenue and profits. I mean, is there no way you can give us some directional guidance as to looking at the fourth quarter as maybe saying it will be similar to what we saw in the first quarter x those items you just mentioned? It seems like you're giving us the negative without the positive.

We're not going to give further perspective at this point in terms of Q4 specifically. But I'd make a more general comment which is, we are clearly on the -- the vehicles that we've recently launched, think about the Sonic, the Verano, the Malibu Eco that's just kicked off here, we're doing really well. And we're really pleased with how those are performing. Where we've had a little bit of drag has been more on some of the products that are getting longer in their life cycles. And we have a very significant turnover of product coming here in North America, I think 70% of the total portfolio over the next -- this year and next year and, obviously, a lot of that is in our very profitable segments as well. So we have the refreshed larger SUVs, the Lambdas, obviously, everything going on, on the truck front 2 critical new entries with the XTS and the ATS into the Cadillac portfolio, into really high-volume lucrative segments for us there. So there's a lot of good activity coming on the launch side. Too early to put definitive perspective around that from a quantitative point of view, but a lot of good things to come over the next 12 to 24 months.

Qualitatively, I would add though that this discipline you're seeing with respect to pricing incentives and whatnot and what it does for our residuals in terms of how we're handling our fleet is it bodes well. When you look at Sonic, it's got -- bring in about $1,000 more per car in that segment. And I think within 2, 3 months of introduction, we were second in the segment. Same thing is happening with Verano. So these new products that are rolling out that are a bit up-contented, we are able to hold price and get a premium. And so when you look into these new product launches, there is a reason for the discipline that you're seeing that sometimes it's difficult to remain as disciplined as we have been when you look at some of the activity of our competitors.

That's very helpful. And then just lastly, on Europe, I mean, just thinking about the restructuring there in the context of what's happened in North America. I mean, the big driver of the change in North America was really headcount reduction and the retiree health care deal. A lot of that because you had a very old workforce in North America, and you were able to take advantage of the attrition curve. As we think about the workforce in Europe, what sort of -- what is the age parameters or the population demographics over there? And would it be possible over the next couple of years, and it's probably going to take time, to run through that attrition curve similar to what you did in North America and maybe run special buyouts or Special Attrition Programs over in Europe to really fix that part of the business structurally going forward?

You're going to see headcount coming out on a continual basis along the general approach that you described. I mean, we're -- there's a fixation on plant closings and so on, but those take time and are challenging as demonstrated across the industry. But at the same time, we're continuing to focus very much on matching our manned capacity to demand and adjusting headcount within the parameters along the lines of what you identified to get there as soon as we can.

I think the demographics are quite similar to what we saw in North America. That being said, we still have not matched production to demand. And I think in the -- before the next quarter's report, you'll see some more information coming out from the company. We're not in a position to comment further today, but I will say what we said in the past, we have engaged all parties at specific levels and are in dialogue all the time.

And not to get into the details on that though, if we look at the attrition curve in the U.S., it was really sort of in the 5% to 7% range naturally, if we went back to the mid-2000s. Would we think about the same kind of thing in Europe, and then maybe as you did in North America get that up to something that could be closer to 10% over time?

Yes, I don't have the specific numbers in front of me. But I'd say it may not be quite as advanced as what it was here but same general direction.

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

There was a question earlier about whether you can sustain this run rate for Europe or whether the destocking that you commented on implies further deterioration. I was hoping you can maybe just comment on that. And Latin America, just separately, it sounds like you believe that you've turned the corner. And just wondering if you think that you can maintain profitability at this point going forward or whether some of these launches are large enough that there should be -- there would be some volatility in terms of the earnings that we should be expecting?

Yes, as it relates to Europe, there's obviously a different impact between company-owned inventory and dealer inventory. I'd say it's the company-owned inventory that we'll be most significantly working down over the next quarter or two. So obviously, the other piece of the equation is what's happening from a sales perspective and we'll obviously see how the market unfolds there. And then on South America, I'll ask Chuck to comment on that.

Yes, right. I would say, encouraging Q1 results, I mean, from an operating perspective, we were slightly above breakeven. So as mentioned, we started to get some traction. But I would say going through the year, there's a lot of challenges we still need to manage through, and I would suggest some volatility from a quarter-to-quarter perspective in earnings. We've got some restructuring activities to take care of. As we head through the summer, we've got a number of product launches that are cadenced out through the rest of the year. FX recently has, in Brazil, specifically, has turned into a bit of headwind that we're going to have to manage through. And then continued demand on legacy products, as we roll over into the new portfolio, is going to be a challenge that we're going to have to manage through. The good thing on the new launched products, good market acceptance, good profitability, better than the vehicles that they replaced. We're kind of working our way through that transition right now. We're about 30% to 40% of the portfolio. Our new products, by the end of the year, will be in much better position. So I think volatility this year but kind of the core underlying performance of the new products is going to put us on a decent glide path by the end of the year.

We expect to leave the year in -- at a relatively good run rate.

We've launched 4 of the 9, and all 4 of those have gotten good acceptance, good traction. So I agree, foreign currency is a bit of headwind, and you do have just the transition and the launches. So there's a lot of moving parts in South America, but it's a lot better place than it was 6 months ago.

Okay. And Dan Akerson, you just came back from China, it sounds like. And there's been a lot of talk in the market about pricing deterioration in that region. I was hoping maybe you can just comment on what you guys are seeing. Is that a factor behind that net margin deterioration that we see on that slide on the China business or was that something else?

Well, I think we -- just to give you a slice. If you look at the end of year and through first quarter, first quarter, overall market was down about 2%. We were up, I think, 8.5%, 8.7%, almost 9% -- call it 8.5%. And we actually gained market share in China at just over 15%. That's through the quarter, which was up almost 2-plus percent. So there is pricing pressure. But the thing that we find really good is the products are selling, and we've got new ones coming out. As I mentioned, Baojun is out -- in the first quarter. I do think there was a bit of anomaly. I don't know if I would say we've got kind of true run rate gain of a couple of market share points. But because the first quarter is traditionally stronger for light commercial vehicles, and Wuling had a very strong first quarter. That being said, so did Chevrolet and so did Buick. We hit an all-time sales record for the quarter. Price is a factor, but I just think our products are being very well-received. If you step back from it, our biggest challenge, I think, is to continue to play offense. That's how we're going to hit this. We want to hit a 5 million unit run rate coming out of '15 going into '16. And that was an ambitious goal we put out last year. But if you look at where we are, where we were, where we are today, that is achievable, not for certain, but it is achievable. So there are many variables in here, mix, volume, price, but I would say China is off to a pretty good start this year.

Our next question comes from the line of Tim Denoyer, Wolfe Trahan. Timothy J. Denoyer - Wolfe Trahan & Co.: Quick question on the 1,400 skilled trade buyouts that you had in the quarter. Can you give a sense of what the payback period might be on that?

Yes, the run rate savings associated with that, net of moving some people around, will be roughly $60 million to $70 million a year. So the payback is going to be a little over a year. Timothy J. Denoyer - Wolfe Trahan & Co.: Okay. And then a quick follow-up on China in terms of the sequential or the year-over-year margin decline that you saw, of about 200 basis points. Can you give us a sense of how much of that was just sort of mixed with the new Baojun brand and how much was pricing?

The first quarter of last year was an unusually strong quarter as well, so it's a little bit of a difficult comparison year-over-year. But I'd say, overall, there's been a couple of trends that have been underlying the China margins over the last few periods. One is the mix impact of bringing in Baojun, some of the costs associated with that launch, and the ongoing mix change associated with it. Secondly, there has been some element of pricing pressure at different points in the market. And then thirdly, the margins we're reporting here are net income margins and are, therefore, after-tax and have been impacted by some tax increases. So each of those plays some part. Timothy J. Denoyer - Wolfe Trahan & Co.: Can you give us sort of the change in tax rate?

It's a whole bunch of different components of taxes in different ways. I don't have a number off the top of my head, but it's a reasonable portion of what you're seeing.

As an adjunct, Cadillac was up 79% year-over-year. That's good. But it's only 30,000. It's on a small base, but 30,000 units is a lot. And we're importing a fair number of those, exporting into China. We’re also building a fair number. But if Cadillac starts to build there, we'll have better margins than we do today. Timothy J. Denoyer - Wolfe Trahan & Co.: Are there any specific sales targets for Cadillac there?

Yes. Timothy J. Denoyer - Wolfe Trahan & Co.: Can you say them?

It's our goal over a 3- to 5-year period, and I would say on the longer end of that, to produce as many Cadillacs on the same order, I won't say the same number. So we produce about 180,000 here in the U.S. a year, and we'd like to be in the 150,000 to 180,000 range within the next 3 to 5 years. So I don't have a specific goal for next year, but we're not -- we're serious about this. And we think we'll have the right products for that market as well.

Our next question comes from the line of Chris Ceraso, Credit Suisse. Christopher J. Ceraso - Crédit Suisse AG, Research Division: I wanted to dig in a little bit in North America on Slide 11, where you show volume plus $600 million, mix minus $300 million. If I put those together, volume and mix, it adds $300 million. Relative to the 76,000 or so increase in units, that seems like a pretty small contribution. So I'm wondering what that is, and I'm guessing there's a few things here. Could wholesales have been lower than production? Maybe there's some issues with the mix, within the mix. Maybe it's the aftermarket thing you mentioned. Is it rental accounting? Why does the contribution level seem thin relative to the pretty meaningful increase in volume?

Yes, talking specifically about volume, to start with, obviously, the biggest driver of the volume increase was full-size pickups and full-size utilities. That drove a fairly significant number. On the mix side, as previously mentioned, quarter-to-quarter, full-size pickups and full-size utilities were up a bit 30,000 units or so year-over-year, but more significantly was the increase in Sonic, Cruze and midsize vehicles, which drove the mix deterioration. Christopher J. Ceraso - Crédit Suisse AG, Research Division: Those have a positive dollar contribution?

Yes, they do. Christopher J. Ceraso - Crédit Suisse AG, Research Division: Okay. Was there anything with regard to maybe wholesales being lower than the change in production or any of the other rental accounting or anything else like that?

No, on a Q1-to-Q1 basis, there was very little factory unit sales adjustment related to daily rental accounting. Christopher J. Ceraso - Crédit Suisse AG, Research Division: Okay. And I have a follow-up on the cash flow. I thought that as you guys built inventory and production was rising that you would generate cash from working capital. Here in the quarter, you had a use of cash and working capital. So I'm wondering about that, and then just what to expect on a go-forward basis if you're talking about North America profits being flat from quarter-to-quarter. Is cash flow flat or is there some way that cash flow gets better than what you did here in Q1?

I'd say the way to think of our cash flow or the way to think about the working capital piece of it specifically is there's fair amount of seasonal move in working capital. Q1 is typically a cash -- a working capital cash outflow coming out of the holiday shutdown and building inventory and production into the first quarter. So Q1 tends to be an outflow. Q2 and Q3, you tend to recapture that, and then Q4 tends to be roughly neutral. And again, that's just a general perspective. I would say that we have been working recently on working capital as a specific focus. I think we have opportunity within working capital, and we are going after that on a pretty specific basis. So that's a more general comment. But in terms of the quarterly cadence, think about Q1 as an outflow, 2 and 3 to recapture it and 4 tends to be flat. Christopher J. Ceraso - Crédit Suisse AG, Research Division: And is CapEx a little bit high relative to what you're going to do on a full year basis?

No, CapEx, we've indicated around in the range of $8 billion for the year, and we ran $2 billion in Q1.

Our last question comes from the line of Itay Michaeli of Citi.

Last quarter, you provided an outlook slide with the different arrows for metrics. I was hoping you can update us on some of those, particularly costs, excluding the pension. I think you've reclassified some of the cost components, as well as just the price versus mix on a full year basis and market share globally.

Yes, sure. So I'd say industry outlook, no real change there. Market share -- global market share, we were down from 11.4% to 11.3% in the first quarter. We'd indicated flat for the year. I'd say there's the one element on here where we think there's probably some potential pressure, driven by North America what we've seen in Q1 here. So a little risk around that. Volume, we continue to see favorable for the year. Price, we continue to see favorable, and I think demonstrating that through Q1 here. On the mix side, no real change in perspective there. On costs and, again, this was excluding the pension income, through Q1, as I said, we have basically flat fixed costs, basically flat material and freight -- material pricing and freight. We expect on a general basis to be in and around that for the year. There will be some variability on the fixed cost side as we move through some of the plant changeovers and things like that. There will be some cost incurred there, but I wouldn't say there's a fundamental change on that front. And then CapEx, as we've indicated, will be up. The thing that we've changed in terms of classification versus what we showed you in Q1 is moving the material cost increases associated with new product programs and the price increases associated with those new product programs. What we've done previously was net those 2 together, and that would show up in mix, taken it out of mix and put it into price and cost from a material perspective. And so the net of those, we expect to be positive for the year. So we're getting more price than we're adding material cost, which is obviously good. That's why the reason we've broken that out that way is to keep track of that. So as a result of that, you may get a little bit more negative on the mix side than you might have been thinking about just from a reclassification perspective.

Appreciate all that detail, Dan. And a quick follow-up, and I apologize if I missed this earlier. But the sequential improvement in the European losses, can you give us a rough walk on how you got there? Was it some of the inventory build or there's cost, may be a combination? Just a little color there would be great.

Sure. Some of it was some restructuring. And so about 1/2 of that -- about $150-odd million of restructuring, I think from memory. And there was some cost improvement sequentially. And some of it was the production versus sales component in inventory, so some of each of those.

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

Thanks, operator. Thank you, everyone, for your time this morning. We'll be talking to you soon.

Ladies and gentlemen, that does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your lines. Have a great day, everyone.