Ladies and gentlemen, thank you for standing by. Welcome to the General Motors Company Fourth Quarter 2014 Earnings Conference Call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. [Operator Instructions] As a reminder, this conference is being recorded, Wednesday, February 4, 2015. I would now like to turn the conference over to 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 the GM financial results for the 2014 fourth quarter and calendar year. Our press release was issued this morning and the conference call materials are available on the Investor Relations website. We are also 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. The content of our call will be governed by this language. This morning, Mary Barra, General Motors’ Chief Executive Officer will provide opening remarks followed by a review of the financial results with Chuck Stevens, Executive Vice President and CFO. After the presentation portion of the call, we’ll open the line for questions from the analyst community. Marry Barra will then conclude the call with some closing remarks. In the room today, we also have Tom Timko, Vice President, Controller and Chief Accounting Officer; and Niharika Ramdev, Vice President, Finance and Treasurer, to assist and answering your questions. Now, I’d like to turn the call over to Mary Barra.

Thanks, Randy, and thanks to everyone joining the call today. Over the last couple of months, we have several opportunities to talk to you in detail about our strategy to create shareholder value, including our operating strategy, the investments we are making in our brand, technology and innovation, as well as our financial targets. At our Global Business Conference in October, we affirmed our mid-decade targets and outlined strategies to deliver 9% to 10% EBIT adjusted margins by early next decade. At the Deutsche Bank Auto Conference last month, we affirmed that we were on track to deliver strong operating results in 2014 and we shared our outlook for 2015. This outlook includes year-over-year improvement in all of our automotive regions with higher EBIT adjusted and stronger margins. Today, we are reporting fourth quarter and full year 2014 results that demonstrate continued strong core operating performance. This is especially true in North America and China where we are busy -- where our business is highly profitable and growing. It’s also true in other regions around the world where we are managing through very difficult market conditions and building a solid foundation for profitable growth. As we execute our plans, we are focused on generating the level of earnings, margin and cash flow that will make us the most valued automaker for our owners. Our strategy is also designed to support a strong and growing dividend and consistent with our strong core operating performance, we intend to increase our second quarter common stock dividend by 20% to $0.36 per share. The decision on the expected dividend increase will be made by our Board as part of the regularly scheduled second quarter dividend declaration procedure. Turning to slide two, let’s take a closer look at our fourth quarter results, which were robust.…

Thanks Mary. On slide six, we provide a summary of our 2014 fourth quarter and calendar year GAAP and non-GAAP results. Starting with Q4 first, our net revenue was $39.6 billion, $900 million or 2% decrease from the prior year. Automotive revenue was down nearly $1.1 billion primarily due to lower wholesales of 73,000 units or an unfavorable $1.4 billion, unfavorable foreign exchange of $1.7 billion partially offset by an increase in price of $1.6 billion. GM financial revenue increased $200 million. Our fourth quarter 2014 GAAP operating income included net $250 million of unfavorable special items as detailed on chart seven. The prior year GAAP operating income performance included significant unfavorable special items of $1.4 billion in the quarter primarily related to the exit of the Chevrolet brand from Europe and impairment charges. Net income to common shareholders was $1.1 billion, up $200 million compared to the prior year period. Earnings per share for the quarter were $0.66 on a diluted basis compared to $0.57 for the same period in the prior year and our automotive net cash from operating activities improved significantly to $3.8 billion. Our EBIT-adjusted was $2.4 billion for the fourth quarter, a $500 million improvement from the prior year. The EBIT-adjusted margin was 6.1%, up 1.4 percentage points from the fourth quarter in 2013. Our adjusted automotive free cash flow was $1.8 billion, including $600 million in recall-related cash payments. This compares to adjusted automotive free cash flow of $1.1 billion in the prior year period. For the full calendar year, net revenue was $156 billion, up $500 million from the prior year. Automotive revenue decreased $1 billion primarily due to lower wholesales of 380,000 units, which was worth an unfavorable $5.6 billion, unfavorable foreign exchange of $3.3 billion, partially offset by favorable pricing of…

[Operator Instructions] And our first question comes from the line of Rod Lache with Deutsche Bank. Please go ahead.

Good morning, everybody. I was wondering if you can just answer a couple things on North America, first. If you sum up the combination of pricing, mix, and content cost, just to kind of run a proxy for contribution margins, you had a big positive in the first quarter of 2014, like $600 million, then it was positive again in Q2, but little less to negative in Q3 and then reversed, and is $300 million or positive year-over-year in the fourth quarter. It looks like mix now is running more positive than we’ve seen in prior quarters. And I would think that it’s -- your expectations are better than where they were back in October. Can you just give us some high level thoughts on how you think contribution margins overall look for 2015 and extent to which that could be a source of upside?

Yeah, I would certainly suggest that with the recent fuel prices and strength in full-size SUVs, full-size trucks and crossovers that mix will be a tailwind in 2015 and better than what we expected back in October, again given what transpire with fuel prices. I think there is also, as we talked before Rod is we cycled through the first year launch of trucks and SUVs where the year-over-year impact falls into pricing. We are going to see more of that show up in mix in 2015 versus 2014 as well.

Okay. And can you also give us some insight into your expectations for structural costs looking forward? It looks like you didn’t really discuss structural costs this year. There were some items, like D&A, which was down year-over-year in the fourth quarter. I believe you guys are expecting structural costs to be up a bit in 2015. What is the high level expectation there?

Yeah, let me start with 2014 overall, when we look at overhead, fixed costs, structural costs, whatever we want to call it, relatively flat in ‘14 versus ‘13, as we took actions around the world. As we indicated back at the conference in January, we would expect to see overhead costs up on a year-over-year basis and the primary driver of that is incremental engineering and incremental marketing as we head into our very strong launch cadence in the latter part of 2015 and 2016. And I would say that that’s prevalent from a North American and a European perspective primarily.

Okay. And just lastly, can you just touch on your updated views on China. Obviously, there has been quite a bit of discussion about inventory levels there and capacity growth, DMS, and specific strategies to mitigate that, but just from a high level, has there been any change in the competitive environment there?

No significant change from what we discussed in January. We indicated in January that we’re monitoring the situation very closely. We still expect the industry to be up year-over-year somewhere in the range of 5% to 8%, call it 25.5 million to 26 million units. Our inventory position actually is in really good shape right now. Through the month of January and early February, we are down below our target days on hand at a dealer level. So our expectations are still consistent with what we talked before. Industry growth will continue to grow our revenue and we will maintain our net income margins in the 9% to 10% range, resulting in higher equity income.

Great. Thank you.

Our next question comes from the line of John Murphy with Bank of America. Please go ahead.

Good morning, guys.

Hi, John.

A first question on trucks, I mean obviously you’re highlighting there is some potential upside there given what’s going on with your product as well as what’s going on with gas prices. I’m just curious where you’re running on capacity utilization on the K2XX right now, what the potential for upside to that capacity might be in 2015, and how we should think about incremental profitability as you stretch out that capacity maybe?

Yeah. I would say this we are running pretty hard right now from a capacity utilization perspective. We do have opportunities at a system level from a capacity perspective primarily in double cabs. We continue to work very, very hard on a day-to-day basis with the supply base and our manufacturing to increase capacity. On crew cabs, we’ve got capacity on heavy duties as well. So we think, obviously, there is some production upside in the system and again, we’re working to eliminate any bottlenecks. As I think about the overall opportunity John, it’s not just volume, there’s also mix, where customer demand increases for trucks. There’s an opportunity to up-sell from a mix perspective. And ultimately, in the overall supply and demand equation, we’ll be looking at price and that was one of the reasons why back in October and again in January, I said that, we thought that the truck pricing environment was going to moderate in 2015.

Okay. And maybe just some specifics around that, I mean, do you think that you could increase your production or volume on these trucks 10% year-over-year, is that something that is viable given your footprint? I’m just trying to understand the potential upside just on a volume basis?

Yeah. I’ve rather not get into those specific. That’s a bit competitive dynamic there that we like -- I would just suggest that, if the industry segment runs at 12.3% to 12.5% and the industry is in the range that we expected to $16.5 million to $17 million, we will have system-wide capacity to build a deal with that.

Okay. That’s helpful. And then second question on the CapEx for 2015, you’re talking about $9 billion, which is a pretty big step up? I’m just curious, if there’s any way that you might be able to thrift that through the course of the year and if maybe you can explain why there is this real big step function increase in CapEx?

Yeah. I would say, first of all, on thrifting, we’re always looking at that impact. We’ve got quite a few initiative and driver from a global perspective, so both from a supplier vendor tooling perspective and the capital that goes into our plan. So we review that in great detail and are continuing to work on initiative to take that down. But then when you look at it, I think of it in three buckets. One is new products that are within our existing portfolio and look at in some of the technology that we’re driving into the vehicles for industry leading fuel efficiency, as well as autonomous and connectivity, making sure we’re making the right investments with a customer focus there. And then the third impact or the third bucket I look at is, we believe there is opportunity in segments we’re not in around the globe that we’ll generate the right return and can enhance our brands and enhance our market position. So looking at those three buckets and again it’s an area, I ran in the company at one point in my career, there is an intense focus on that and we’ll seize every opportunity.

Okay. And then just lastly, if we think about GM Financial, your commitment there and to grow, that sounds like it makes a tremendous amount of sense? But it sounds like there is a pretty heavy investment period here that you started in the fourth quarter? I’m just curious how long you think that investment period will last? And then also additionally, what kind of capital might you need to commit to that business overtime to really grow the balance sheet to support it, because it sounds like you are doing mostly on balance sheet financing there? So just trying to understand the capital equipment too?

Yeah. First, the result in the fourth quarter is not run rate. I mean, there was some investment for growth and taking provisions as you bring on new loans have a bit of a tail on it before you started to get the full benefit of the income. So there is some timing there. There is a significant portion of the variance on a year-over-year basis were some nonrecurring items. I go back again to what we talked about in January, we expect GMF profitability as we ramp up our capability to be flat on a year-over-year basis in ‘15 versus ‘14. And then we’ll start to see the incremental benefit of the growth in their portfolio, the growth in their originations in ‘16 and beyond. Relative to any capital calls on the auto company. We certainly don’t anticipate any in this growth plan. We went through that and that’s going to all be self-funded from GMF. We run a number of scenarios including downside risk scenarios and again, minimal to none on a go-forward basis, John.

Great. Thank you very much.

Our next question comes from the line of Brian Johnson with Barclays. Please go ahead.

Yes. Good morning. Just want to ask sort of a housekeeping question on cash flow for next year and then kind of a broader question around the CapEx investments, continuing that line? You booked $2.5 billion of accruals for recalls? You paid out less than that, so it seems like that is a $900 million cash call this upcoming year? You mentioned $500 million of restructuring expense? I guess a question for Chuck is, within your guide of flat year-over-year cash flow, what is, if you will, the bills that you are paying that were accrued in 2014 that cash is going out of the door in 2015 and if you could just mention for -- that for us?

Yeah. Sure. Overall, from a recall perspective, including the Feinberg compensation program, we accrued roughly $3.2 billion that showed up and impacted our P&L in 2014. We made about $1.6 billion of cash payments in 2014 associated with that, which means we have a carry-on into 2015 of a further -- 2015 and beyond $1.6 billion. As we indicated in January, we expect to incur about $1.2 billion of cash costs in 2015 associated with those accruals that we took in 2014 and then the balance would bleed out into 2016. A lot of its dependent on timing of getting the vehicles repaired, et cetera. In addition to that, we highlighted that there was going to be an overflow into 2015 associated with restructuring expense recall. We booked a $1 billion of restructuring expense against the P&L in 2014. We anticipated roughly $300 million of that flowing over into 2015. So between the two, about a $1.5 billion broad strokes Brian rolling over from ‘14 into ‘15.

Okay. And kind of second or related to that before I ask the CapEx question. Does that kind of feed into just getting those cash payments out the door, apparently which is [indiscernible] quoted you on saying there is a possibility for second half we are looking at cash to shareholders, maybe you could elaborate on that.

Well, yeah, what I specifically said was, our objective and our focus is to drive shareholder value and shareholder returns, evidenced by the intended increase in the dividend. And then looking beyond the first half of the year, we have a number of open items that we still need to get clarity around related to the recall. Separate from these issues that we just talk about, Brian, this is ongoing litigation and other issues. And to the extent that we get clarity and understand what those issues are and the potential impact from a cash perspective, we could be in a position in the second half of the year, where we would evaluate further returns of capital to shareholders and that’s something we continuously monitor and evaluate.

Okay. And then finally, on CapEx, the $9 billion, which you discussed some of the drivers, Mary, thank you for the increase? To what extent can we expect either as a dollar amount or percent of sales this to continue? And, secondly, particularly for some of the investments in technology and in new product introductions, kind of when is the timing for when those investments ought to get return on investment. Not to sound like a bean counter, but I’m sure you count.

Yeah. Sure. A big portion of the $9 billion is associated with our products that we’re going to be launching at the tailend of ‘15 and into ‘16 and ‘17. And when you look at what we talked about from a margin expansion perspective, North America 10% margins, Europe profitability, we indicated that the next-generation Cruze, next-generation Malibu, the Corsa, the Astra and some of these other products will going to be more profitable than the vehicles that they replace. So the return on a big portion of this capital, which is portfolio related, will start to see roll through in ‘16 and ‘17. And if you add up the guidance we provided for 2016, you quickly get to overall consolidated margins that are much more robust than we are today and that’s really the return for that investment.

Okay. And sort of level of CapEx in ‘16, ‘17, ‘18?

What I said before in our outlook hasn’t changed on that. We would expect on a go-forward basis, as we move through a number of the items that Mary talked about both portfolio, fuel-efficient technologies, advanced proportion and other innovations that our capital spending would be around industry average, call it 5.5% in net sales just to provide some broad guidance on that.

Okay. Thank you.

Yeah.

Our next question comes from the line of Colin Langan from UBS. Please go ahead.

Great. Thanks for taking my questions. Firstly, I noticed there were some headlines that you were taking some price cuts on models in North America, but your comments today indicate that we should think of pricing as relatively flat. So can you explain some of the logic behind the pricing strategy that was recently announced?

I don’t know specifically what you’re referring to, if you’re referring to Cadillac, what they fundamentally did was reposition option packages and content. When I look at carryover pricing in North America, I indicated in the past that we expect it to be flat to slightly a headwind in 2015. As we cycle through the full-size truck and SUV dynamic and actually, we are in the last year of a number of our products that we talked about before Cruze, Malibu and others. So the specific actions from a Cadillac perspective, was really adjusting packaging content and the starting-form price to the entry-level vehicle and not the whole line up of Cadillac products. And we do that quite often, when we look at, trying to make sure that we’ve got the content lined up with what the customers want.

Okay. I think the recent article said that on some of your Chevy models, I think including the Cruze and some SUVs, you were cutting the base price by $1,500 to $2,500. Does that sound accurate?

Probably, it’s the same issue. Adjusting starting-from price, which at the end of day helps from a digital Internet shopping perspective but fundamentally very-very low penetration levels on those models.

Got it. Okay. And any color on the GMIO consolidated fix, I mean, you are targeting, I believe you said that it was going to be a breakeven ex-restructuring next year. It was losing I think around $900 million this year. What are the key drivers to getting that back to profitability -- back to breakeven? And then any color on what you are going to do with the facilities that were supplying the Chevy Europe vehicles?

Yeah. Sure. I’ll answer the first part first. One, one big driver year-over-year is the absence of Chevrolet Europe losses. So, I’m not going to get into the specifics of that, but that’s one of the drivers in the improvement ‘15 versus ‘14. Second, full year of full-size pickups and full-size utilities in the Middle East, and third, just continuing to drive efficiency in the core operations and the rest of consolidated operations. And I think you saw that if you looked at the results during 2014 quarter-in quarter-out, the results got better, still little loss, but the results got better. And we would expect to see that ex-restructuring in 2015 as well. Relative to what happens to the capacity associated with the Chevrolet Europe volume, most of that came out of Korea. And when you look at what we are doing to fill that and the opportunities to fill it, it’s really with other global products like small SUVs the Encore, the Mocha, the Chevrolet Trax and driving efficiency and continue to drive efficiency in Korea. So this is obviously an ongoing set of actions that the international team are executing to.

Okay. That’s very helpful. And just last question. Any color on your relative risk to the volatility in currency? I imagine in Europe that actually does help translate some of the losses back to a lesser degree. What about the other inter-regional currency issues that you face? Is that a rising concern, or is it net neutral to your global business?

Yeah. Clearly, as you saw from the calendar year results, it was a significant headwind in 2014. We are largely able to offset that through pricing and other actions, as we started this year, further weakening of these currencies will again be a challenge. But when I look at it across the globe, I generally -- the transaction impact is offsetting with the exception of the Russian ruble that’s the biggest concern that we have thus far. And the team continues to take actions to offset that. So as I think about it from a big picture perspective, I think we’re in a pretty good position to manage the FX exposure without changing our view of the year. And again, the proof-of-point is we’re able to do that last year and get after it and we’ll do the same thing in 2015.

Okay. All right. Thank you very much.

Yeah.

Our next question comes from the line of Emmanuel Rosner with CLSA. Please go ahead.

Hi. Good morning, everybody.

Good Morning.

Hello.

Wanted to ask you first about your mid-term target margin for North Americas, 10% by 2016. It looks like this quarter, a lot of things from execution as well as environment were going very well and you achieved obviously a strong margin in what is seasonally a weak quarter. But it’s still only about 8.7% or so. Can you please remind us the bridge from current levels to 10% by 2016, what are the main buckets there?

Yes. Sure. Number one, significant improvement from product and when I talk about product, two different buckets. Product refreshes, so replacement of current models like the Cruze, Malibu, Equinox, Terrain. We indicated back in October that each of those vehicles would be more than a $1,000 per unit more profitable than the vehicles they’re replacing. Next between cost efficiencies, as well as price and then new entries like the mid-sized truck for instance and Cadillac entries that we’ll be adding to the portfolio, which are accretive to volume share and profitability. So that’s the product portfolio piece of it. And then of what we call adjacencies or business model leverage, we think there’s significant opportunity going forward between now and ‘16 and beyond for customer care and after sales expanding our reach in the value chain in the F&I area, OnStar with monetizing 4G LTE. So those are the big drivers of going from -- think about it 2014 kind of ex recalls 9% to 10% in 2016. Those are the big drivers to pickup that net 100 basis point improvement. Clearly, the first two will be more than 100 basis points because we are going to have is we’ve talked about before some overhead headwinds associated with engineering and marketing, but net those out and that’s how you go from 9% to 10%.

Okay. Very helpful. And then just another margin question, but on China this time. Obviously, you are running pretty close to your targeted levels and these are obviously very impressive margins in absolute terms. Yet, I cannot notice that just the ongoing trend I guess over the past four quarters or so is just a sequential decline. And I’m sure there is some seasonality in that as well. But can you just go over again these sort of competitive dynamics and why you wouldn’t expect this to sort of like continue to decline as it has for the past few quarters sequentially?

Yeah. I think it’s important there is seasonality in that. If you look at the fourth quarter net income margins this year versus last year, they are up 110 basis points. So 8.7% versus 7.6% from a China net income margin perspective. For the year, we are at 9.8% which is up three times of a percent year-over-year. And as we talked about the dynamics in the China market before and how we are going to maintain 9% to 10% EBIT margins. We indicated that volume and mix would be favorable material performance with partially offset price and we expected kind of fixed cost to increase as we continue to invest. The biggest driver if I net it all that out is really mix and that’s going to be driven in maintaining margins. And that’s going to be driven by nine new SUVs that we are launching and in a process of launching including the Chevrolet Trax, which is doing very well, the Buick Envision, which is doing very well as well as filling out and growing Cadillac. So that’s how we are going to attack and maintain those 9% to 10% margins.

Perfect. Thanks a lot.

[Operator Instructions] Our next question comes from the line of Ryan Brinkman with JP Morgan. Please go ahead.

Hi. Thanks for taking my questions. First I see on slide nine that you call out $0.1 billion of recall-related costs, but I didn’t see that in the press release or in any of your regional year-over-year EBIT bridge slides, maybe because it rounds to less than $0.1 billion in any region. So I’m just curious what that is, whether it might relate to North America, suggesting that your underlying margin there was even higher?

It’s primarily legal related expense and that falls into the corporate sector. So for the year and we’ve talked about this before, we expected and actually incurred about $300 million in year-over-year increase in legal expense and that’s one other things that we expect to continue into 2015 as well.

Okay. That’s helpful. And then I’m curious on what you are seeing in terms of the impact of lower commodity prices in 2015. Not just in terms of the raw materials that I guess that go into your cars, but also maybe from the perspective of lower diesel prices impacting freight and logistics. How material could that potentially be?

Certainly versus our original expectations, it would have -- it would be a tailwind both commodity prices and fuel prices. And when you think about the magnitude assuming that fuel prices to stay with -- for the rest of the year, we are talking $200 million to $300 million at the top end of the opportunity range there

Okay. Great. And then last question, we saw some headlines the other day about suspending production in Russia, I guess to avoid that ruble to euro transaction headwind that you talked about earlier. So how should we think about -- what that means going forward? And other firms have sometimes talked about like what their unavoidable fixed costs in a country are like in Venezuela, for example. They try to draw the line for the investment community in terms of how bad could it get if there were no corresponding revenue. Anything you can do to kind of frame the situation for us?

Sure. If you look at 2014 versus 2013, the net headwind from a Russian perspective and European results was about $200 million on a year-over-year basis. As I think about 2015 the kind of the local fix costs left unattended are about $250 million. So if we produce zero vehicles and generated zero variable profit and took no action, there could be a $200 million to $250 million headwind from a local fixed cost perspective. Obviously, our objective is to offset that to the extent possible with cost reductions, which we continue to do hence the suspension of manufacturing and the 1000 people that we’ve taken out of St. Petersburg but as well as pricing. But just sizing up the kind of potential exposure on a year-over-year basis, Ryan, I would call it $200 million or less.

Okay. That’s helpful. Thanks.

Our next question comes from the line of Joe Spak with RBC. Please go ahead.

Thanks for taking the question. Going back to China first, I know you mentioned the better year-over-year margin. Obviously, we see the whole sales were up as well. Was there any benefit from mix or can you give some color on that on a year-over-year basis?

Yeah. The mix was favorable in 2014 versus 2013. Again headline we grew share and profit margins. And one of the reasons we grew share was we introduced a number of new products, especially in the SUV’s segment, where we had to had some gaps from a portfolio on the competitive perspective. And again the same dynamics in 2015 were present in 2014. Volume mix were favorables. The net pricing dynamic in China is and has been a headwind and will continue to be a headwind. Material performance and carryover products partially offsets the net price and generally our fixed costs have been going up as we’ve been expanding in an increasing capacity. But the volume mix impact fundamentally offsetting price and fixed cost.

Okay. In South America, you guys have done a really good job offsetting FX with price. And it sounds like you are going to be able to -- you expect to be able to continue to do that in 2015, I just want to confirm that. And then also related to South America, I was wondering if you had given any thought to -- you mentioned in the media some comments about Venezuela. I was wondering if you gave any thought to deconsolidating those activities such as Ford did?

Yeah. Let me talk about the general dynamic in South Africa first. Not only, have we been working hard to offset the impact of FX in economics with pricing but we continue to drive efficiencies throughout the business from a cost perspective as well. I would suggest that generally from a Venezuelan and Argentinian perspective, we can recover any FX movement and any economic impact inflation. And we demonstrated the ability to do that over the past number of years. Brazil is a little bit different dynamic. So I’m keeping a very close eye on what’s happening with the real and our ability to recover that completely. Historically, we haven’t been able to get it completely offset that headwind with pricing. And that’s something we’re going to have to monitor. Obviously, it’s weaker than what we expected thus far. From a Venezuela standpoint, our facts and circumstances would dictate that currently we control our operations. We have some control over operations. We were able to take advantage of currency releases and participate in the currency markets in 2014 to secure hard currency to order product. We settled and got a labor agreement. And in the fourth quarter, we’ve been producing vehicles, producing and selling. And until those facts and circumstances change, we’re in a position where we’re actually controlling the business. But that’s something that we monitor very, very closely. And if those things change, further volatility, unavailability of currency, or otherwise, that’s something we will have to revaluate.

Okay. And then just real quickly, the recall-related legal expense, should that continue -- of $100 million, should that continue for another couple quarters?

As I indicated, we incurred roughly $300 million of recall-related legal expenses in 2014. And we would expect that kind of pace plus or minus to continue in 2015.

Okay. Thanks a lot.

Yes.

Our next question comes from the line of Itay Michaeli with Citi. Please go ahead.

Great. Thanks. Good morning, everyone. And congratulations.

Thanks, Itay.

Just a couple of housekeeping, Chuck, the $700 million of restructuring expense this year, can you give us a rough breakout of where that’s going to be by region?

I’ll give you a general breakdown of that. About something less than $100 million in South America, a range of $100 million to $200 million potentially in North America, and then the vast majority will be in international operations, primarily related to Holden and the previously announced action to cease manufacturing operations and some restructuring activities in Korea associated with alining capacity with demand around the world, somewhat related to the Chevrolet Europe wind down.

That’s very helpful. And then you mentioned earlier some of the cadence issues for cash flow, how about EBIT-adjusted, anything special to think about this year? You do have some product launching late in the year. Any tips in terms of modeling the cadence this year?

If I was going to model the cadence, I would look at the last two or three years earnings cadence and look at that and Q1 will be generally the weakest quarter of the year. Just based on from a seasonal perspective, Q2 will be the strongest and Q3 and Q4 will be about average.

Great. Just lastly, on the free cash flow guidance, just to clarify, are you still looking for about $1 billion of cash restructuring in 2015? I know you mentioned the recalls. I just want to check on the restructuring as well.

That’s correct. The $700 million assuming that we execute all these restructurings and actually make the payments in 2015, that’s the assumption, plus the $300 million overhang from 2014.

Great. That’s all very helpful. Thanks so much, guys.

Yes. Thank you.

Our next comes from the line of Adam Jonas with Morgan Stanley. Please go ahead.

Thanks, everybody. Just a couple questions about GM Financial and the strategy, the decision to pull the subvented leasing business for Buick, GMC, and Cadillac back 100% captive and away from Ally. Ally has been pretty critical of the move. I’m sure you’ve seen some of the quotes from their former CEO. I just wanted you to explain again the logic for not giving Ally any chance at all as a subvented leasing alternative, why the exclusives?

Yes. Number one, first and foremost, is owning the customer. This is all about customer relationship and driving improves the loyalty. And what we’ve found and I’m not saying it’s specific to Ally, but in other lease providers, at the conclusion of lease their objectives may not be the same as ours. Our objective is to get that person another General Motors vehicle and maintain that relationship and own that customer. So this is 100% around loyalty and customer ownership.

Okay. That’s clear. And just a second just follow-up, you have been growing your captive finance business very aggressively, both through organic and non-organic means. And some of the non-organic stuff you have done has been acquisitions of some of the former Ally International businesses most recently in China, the JV side of it there. Can you categorically rule out considering adding some of the domestic Ally portfolio if it was offered at the right price? And I say that seeing Ally trading at around 0.7 times tangible book. Thanks.

Yeah. I really, I’m not going to comment on that at all. I’m one way or the other, Adam.

Okay. So that’s not a categorical to rule out. Thank you.

No comment.

I respect that. Thank you.

Miss Barra, there are no further questions at this time. I will now turn the conference back to you.

Thank you very much, Operator. And thanks everybody for participating on the call and for your questions. As we move forward, you can expect us to keep the same intense focus on results that we demonstrated through 2014. And with this focus, we expect to deliver improved performance in all of our automotive regions this year. It’s key to meeting our 2016 objectives, including the 10% EBIT-adjusted margins in North America, profitability in Europe and continued strong margins in China. And it will also keep us on track to deliver EBIT-adjusted margins in the 9% to 10% range early next decade. Our intention is to increase second quarter -- our intention to increase second quarter dividend is the first step in our goal to maximize long-term shareholder value through both return of capital and stock price appreciation. So now I would close by saying thanks again for your participation. I appreciate your time, and hope everyone has a good day.