Ladies and gentlemen, welcome to the General Motors Company Second Quarter 2020 Earnings Conference Call. [Operator Instructions]. As a reminder, this conference is being recorded, Wednesday, July 29, 2020. I would now like to turn the conference over to Rocky Gupta, Treasurer and Vice President of Investor Relations.

Thanks, Tabitha. Good morning and thank you for joining us as we review GM's financial results for the second quarter of 2020. Our press release was issued this morning, and the conference call materials are available on the GM Investor Relations website. We are also broadcasting this call via webcast. I'm joined here today at the GM headquarters by Mary Barra, GM's Chairman and CEO; and Dhivya Suryadevara, GM's Executive Vice President and CFO. Before we begin, I'd like to direct your attention to the forward-looking statements on the first page of the chart set. The content of our call will be governed by this language. I will now turn the call over to Mary. Mary?

Rocky, thanks so much, and good morning, everyone. Thanks for joining. I'll begin with the COVID-19 pandemic, which has made this quarter one of the most challenging in our history. COVID-19 has impacted us everywhere we do business. It has changed the way we work, how we sell our products, how we support our customers and how we care for each other. Many of these changes will influence how we allocate future spending as we move forward. While our years of business transformation actions made the company more resilient, we also took additional proactive steps to help offset these challenges. Dealers stayed connected with customers with our online and contactless Shop-Click-Drive tool that we enhanced. Our customer care and after-sale operations remained open to keep our dealers and our customers supplied with the maintenance and repair parts needed. And our employees proudly rallied to build ventilators and personal protective equipment for first responders. We used our early learnings in China and Korea to safely begin restarting our operations in North America and South America with significant support from our supply chain unions and governments. We continue to collaborate with these stakeholders to ensure the highest levels of confidence in and execution of our extensive safety measures. While we can't predict the trajectory of the virus and its ultimate impact on public health and the economy, we have put all appropriate measures in place to position the company for continued recovery in the third and fourth quarters and beyond. Before I talk about our overall performance, I want to acknowledge another issue, the increasing responsibility of companies like General Motors to take a stand against racial injustice in the U.S. while remaining focused on driving business results. General Motors has a strong track record of diversity by many objective standards, but…

Thanks, Mary, and good morning, everybody. The second quarter was clearly one of the most challenging quarters in recent times with production in North America down 8 out of 13 weeks due to COVID-19. Wholesale is down 62%. However, even under these conditions, we were near breakeven EBIT in North America, demonstrating the resilience and flexibility that we've built into the business over the past few years. We view these results as proof points of the strength of the business, specifically North American breakeven levels of 10 million to 11 million of U.S. SAAR, global free cash flow breakeven levels, excluding managed working capital, of 13 million U.S. SAAR. This quarter's performance also highlights our ability to move quickly to preserve liquidity and the importance of having a strong investment-grade balance sheet. Automotive liquidity continues to be very strong at $30.6 billion at the end of second quarter. Retail sales have recovered from April lows to around 20% below 2019 levels at the end of the second quarter and trending better in July, even amidst a backdrop of limited inventories. We expect inventory levels to steadily recover from current levels, and we remain cautiously optimistic about the continued recovery in U.S. SAAR. Clearly, as you know, it's a fluid situation, and we're watching the infection rates across the country and its impact on auto demand very closely. Let me frame out the quarter's results for you. Q2 results of negative $0.50 in EPS-diluted adjusted includes an $0.08 gain from the PSA revaluation. Adjusted automotive free cash flow in the quarter was negative $9 billion. When you add the benefit of our planned liquidity actions, the total cash burn for the quarter was $7.8 billion, in line with the scenario of the burn of $7 billion to $9 billion that we…

[Operator Instructions]. Your first question comes from the line of Joseph Spak with RBC Capital Markets.

Dhivya, maybe just to clarify that last comment on the back half EBIT, was that -- is that an auto EBIT or a total EBIT? And maybe if you could provide a little bit more color or what the implied North America EBIT would be in the back half.

So Joe, it is total company EBIT. So it includes auto as well as GMF. I don't want to put a specific North America number to it, but it's safe to assume that, with a 600,000-unit dealer inventory position by year-end, I think that gives you enough data points to model North America in specific.

Okay. And then you talked about the cash flow in the back half. I think in some other comments, you talked about potentially paying back the revolver of $60 million. So -- $16 billion. So if I'm doing the math right, it sort of seems that, if that occurs, you're back to net cash balances almost equal to, let's call it, second quarter of '19 levels or pre-strike, pre-COVID. Am I missing anything there? Or are there any other puts and takes we should be considering?

I think you're directionally correct. If you think about the first half of the year, we burned $10 billion between Q1 and Q2. And based on the scenario that I provided, in the midpoint of the range of the $7 billion to $9 billion, you can see that we're recovering a bulk of the burn in H1 of the year. So as we build the cash balance back towards our target level, Joe, that's when we would expect to pay back the revolver. Obviously, as you know, there's a ton of uncertainty that's out there. So it's important to note that it's based on the backdrop and all the assumptions that I talked about.

Okay. And maybe one for Mary. You talk a lot about your EV and Ultium architecture, and it sounds like you're very comfortable and excited about it. I know you have an agreement with Honda for that as well. But what we're also seeing is a lot more companies, I guess, trying to maybe break into electric vehicles or automating them. I'm wondering if you would ever consider -- or how you would sort of value the risk and opportunities, I guess, of selling kits to some of the would-be competitors.

We think scale does matter, and we are very confident and excited about our Ultium battery platform and our cell technology. We are the only 1 of 2 that are building battery cells in this country from an auto perspective. And we also have a joint development agreement with LG Chem, along with the R&D work that we have. We've stated that as we -- early -- in the early days of launching off of our new Ultium platform, we will be at or below 100. And that's just the start of the cost-down plans that we have from a battery cell technology perspective. So we, as you mentioned, have an arrangement with Honda to provide and leverage not only Ultium cells, but our platform, and we evaluate each one of these opportunities on an individual basis. So we think it's going to be something that's additive and generate shareholder value but doesn't have a negative impact on the core business. We definitely will protect our truck franchise. And other key franchises, we will evaluate. So we remain open as we move forward because we think we have leading technology.

Your next question comes from the line of John Murphy with Bank of America.

Just a first question on the strength in pricing in the quarter. I mean, obviously, with inventory relatively tight, that should have aided that. So I think that, that might be part of it. But just curious how much of that price increase you think is sticky, how much benefit you'll get as the SUVs launch. And then also, if you think about the relatively tight inventory right now and today, you're talking about getting back to 600,000 units, which is still relatively tight through the end of the year, might you consider a leaner inventory level going forward to support pricing?

Yes. John, I'd say on -- in the quarter, it was both carryover as well as our majors that contributed to positive pricing. On the major side, as you know, we're launching our Trailblazer and Encore GX, which have been received really well, and that's helping us from a net price perspective. On the carryover side, it's across the board, but particularly in full-size pickups that we're able to maintain the pricing levels there. And as we go forward, to your point, we will calibrate the right level of inventory to have based on what the SAAR environment is like. As you know, it's a needle that you've got to thread, watching what the competition is doing, our own inventory levels and the appropriate trade-off between market share as well as profitability. And that's something that we manage on a quarter-to-quarter basis, and we'll continue to do that in the second half of the year and beyond.

Okay. That's helpful. And then just a second question, on the $1.5 billion in cost saves in the quarter, I mean, I think in the press release, you're saying that takes you up to $3.8 billion. So you're pretty far along the way getting to the $4 billion to $4.5 billion. So I'm just curious how much of that was somewhat temporary in the quarter and there might be more to go. And I guess it's sort of just a question of semantics and timing. And as you kind of chug down this route of crossing the finish line of $4 billion to $4.5 billion, if there is potentially more down the line. Or are you guys just running so efficiently you're kind of reaching sort of an [indiscernible] limit on how far it can go on cost? I mean it's pretty impressive. It seems like you might be bumping up against limits here at this point.

Yes. So from a $3.8 billion that you alluded to, John, I'd say those are permanent savings in that they were part of what we announced in November of 2018, and we've been making progress getting to the $4 billion to $4.5 billion range that we've talked about. So I would categorize those as more permanent savings. In addition to that, the austerity savings that we put in place in the second quarter given the pandemic and what's going on, that's where -- you got to look at it in two categories. First category, naturally, there will be a normalization of that with the production going back up. So for example, to the extent there are salary deferrals that we have announced recently that we're restoring those to the original levels, those were temporary. So we went back to the original levels there. So with the normalization, you will see a significant majority of that going back. But what we're also working on is, whether it's marketing spend or event expenses and travel, as you can imagine, as the low facilities and other areas, we're looking at every single one of them from a zero-based perspective to do more there. So as I said, it's difficult to put a dollar amount, but it's safe to say you've seen the performance in the quarter from a cost standpoint. If there's cost efficiencies to be had, we will get it.

Okay. And then just lastly, on the OnStar discussion, I mean, moving it towards an app on the phone that's available outside the vehicle, seems like you're taking this more and more in sort of a stand-alone direction. Just curious really what that means, if it's going to be available to folks outside of the GM family. And could this be a precursor to a potential separation at some point down the line?

So John, I think what we're really looking is at leveraging the full power of OnStar and the connectivity we have, the relationship we have with first responders throughout the country, and we think it's a very additive business. There's a lot more that we plan to do, building on OnStar that will be integrated with the vehicle. So we'll look at both paths but have nothing to talk about related to the separation.

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

So bear with me on the first question. The General Motors brand, I think, goes back 111 years. What do you think -- why not just change the name of the company? I mean it's done -- GM is -- the General Motors has done its job, but it -- I'm wondering if it might be out of touch with some of the really interesting directions you're taking the business. Why not call the company Ultium, the entire company? And I have a follow-up.

So Adam, appreciate your input. When I look at a name change -- and we're going to make any changes necessary to drive the shareholder value because I'm so -- strongly believe in the technology and our future product plans as it relates to electrification. So that's something that we evaluate and look at, when is the right time and what are the proof points that everybody looks at it and makes it real. And so we believe strongly in our EV future.

Okay. Appreciate that, Mary. Just a follow-up then. Because as you realize, there's so much investor enthusiasm around the high -- the 20% CAGR business known as EVs and not so much excitement around the negative 5% or so CAGR business. That's the melting ice cube, so to speak. And the valuations of some of the other companies that are going after the higher-growth business are just so sensational. I mean people talk about Rivian worth more than GM and they never made a vehicle. So I'm just thinking, from GM and to a large degree, your peers, because you're not alone, as you look at like today's results, really, really good results under tough circumstances, a decent set of guidance under tough circumstances, the market doesn't seem to care. From your seat, what is the biggest reason for this gap? It's a pretty big gap. Again, I'm not singling you out specifically, but you are the CEO of this company that many investors see as a real opportunity here. And I'm one of that group. What's the biggest reason, in your mind, for the gap? And what does GM need to do to radically change that perception?

And so when I look at all the attention on some of the companies that you mentioned, I think it's a validation of the importance of the electrification strategy. I think as we move forward, people will see all the strengths we bring as it relates to scale manufacturing capability, the technology that we're bringing, leading battery costs. So we've got to keep telling our story. We've got to deliver, and that's exactly what we intend to do. We have the Lyriq announcement next week, which is one of the highest clinic vehicles I've seen in my 40-year career from a customer perspective. We have more to share very shortly on the HUMMER and as I said, the reveal in fourth quarter. The battery plant is raising steel today. So we're just going to keep delivering and demonstrate that we have products people want to buy.

Your next question comes from the line of Itay Michaeli with Citi.

Dhivya, I think you mentioned this in the outlook commentary, but how much roughly of the working capital and accrued do you expect to recover by year-end, even if we go back to last year's strike?

Yes. So we're assuming, Itay, in the outlook of a recovery of about $5 billion from a working capital and sales loans perspective. So we're not all the way back from a recovery of the cash burn that we experienced in first half as it relates to working capital. And that will happen as the industry continues to normalize. So as -- and a way to think about it is at 17 million units, if you're roughly neutral working capital and we saw the burn first half of the year, as it gets closer to 17 million, it's almost like a linear way of thinking about it getting back to the neutral levels. And as you know, it's also based on timing of production and the levels of production as well.

Great. That's helpful. And then just -- you mentioned the COVID situation and the rising cases. I'm just curious if you're seeing any signs, whether it's globally, nationally or even by region, of any recent signs of retail demand weakness just in light of the recent events?

No, not really, Itay. We're cautiously optimistic as we see month-over-month improvement in China, as we see continued improvement in the United States and North America, and we expect a bit slower recovery due to the severity of COVID in South America.

Okay. And then just lastly, Mary, I know in the past, we spoke about and you've spoken about the opportunity for EVs to deploy them on rideshare networks. And wondering if there's any updated views on that, particularly with one of the rideshare companies in the past few months committing to an all-EV fleet by 2030. Just curious if there's any other updated thoughts around how you might look to deploy EVs on rideshare networks?

I think that's an opportunity for us. And I don't have anything specifically to announce today, but very much an opportunity.

Your next question comes from the line of Ryan Brinkman with JPMorgan.

Question, the performance in North America really stands out as very impressive. Just looking at the year-over-year change in EBIT divided by the year-over-year change in revenue, it would seem that decremental margin tracked somewhere in the order of 19%, $3.1 billion declining EBIT on $16.7 billion in revenue versus -- in most other quarters, I think operating leverage has been quite a bit higher. So clearly, this seems a result of the $1.4 billion of cost or $1.3 billion of performance there in the quarter. Are you able to sort of break down that cost improvement for us to help us maybe better understand how much of that cost cutting represents expenses that you have found maybe don't need to be added back as volume returns versus, I don't know, other cuts, which are maybe less sustainable?

Yes. It's difficult, Ryan, to put a dollar amount on this, but a portion of the cost in the bridge, I would say, is timing, call it, about $500 million or so, which will get retimed into a different time period, maybe H2 or into next year. And I think as you think about margins though, what you're seeing really in North America is quickly being able to flex our cost structure but also the product trend as well that we're seeing. As you think about future margins for North America, we're going to have the launch downtime behind us from both an SUV and heavy-duty perspective. Last 3 years, if you think about it, we've been taking downtime to change over the entire portfolio. So as you go forward here, you think about lack of downtime, whatever sticks from a cost perspective on efficiencies and continued execution of the transformational cost savings. So you see some tailwinds here, and this quarter certainly demonstrates that you're seeing what the earnings power of North America can be.

Okay. Great. And then if you would just sort of add it all together, when you take the, I don't know, learning to be leaner and then the costs that do need to come back and maybe considering also any sort of post-COVID costs such as PPE for your employees or supply chain compression, would you say that your outlook today for long-term GM North America margin of 10% plus is lower, higher or unchanged relative to prior to coronavirus?

I would say it's unchanged. I think the -- we obviously are focused on safety and providing the right equipment, but I think we've been able to do that very efficiently along with other COVID costs and I see more cost opportunity as we move forward.

Your next question comes from the line of Emmanuel Rosner with Deutsche Bank.

So Mary, when you look at the high market valuations and cheap access to capital of some of these electric vehicle companies we spoke about earlier, some established ones, but also many unproven start-ups, can that make you consider spinning off GM's electric vehicle operations and capability into a separate stand-alone entity? There seems to be large investor appetite for such assets as we discussed before. But this cheap access to capital has frankly also become a strong competitive advantage for some of these companies.

Emmanuel, we are evaluating and always evaluate many different scenarios, so I don't have anything further to say other than we are open to looking at and evaluate anything that we think is going to drive long-term shareholder value. So I would say nothing is off the table.

Okay. I guess are there any technology or other sort of impediments or the way sort of like things are integrated together, makes it complicated? Can you just talk a little bit about sort of like the factors that come into consideration?

I'm not sure I -- your question -- it was hard to hear you, but I think you asked, is there -- what are any potential impediments. And I don't look at things as impediments. I look at what is going to be the way to maximize the value creation. So I think there's many different costs that we are looking at that we could take. It all starts, though, with strong execution and building on the technical capability we have as well as our supply chains and our manufacturing capabilities. So I don't really see any specific impediment.

Okay. And then for Dhivya, I was hoping to put your second half scenario, EBIT scenario in historical context. Obviously, it's a very strong outlook under that scenario. But at the same time, historically, there's been many half years where GM has done as well or better, first half of 2019, first half of '18, second half of '18. But since then, you've taken out a tremendous amount of cost. And yes, the market is much lower, but your truck production is expected to be running all out. The pricing is great for the product that really matter for GM. It feels like there's a lot of upside versus back then. So can you maybe just put into context with puts and takes?

Yes, sure. So you will still have in the second half of the year a couple of headwinds as it relates to -- wholesales will be down relative to what might have been a kind of adjusted second half of last year, a normal type environment. So depending on where the industry lands and our ability to fully recoup production, it depends on that. Secondly, GMF is projecting a 6% to 8% decline in used vehicle prices and a higher consumer loss number. And to the extent that, that comes in at the better end of the range, there could be some GMF opportunity there. So even though production is running all out, it is not quite back at the levels, that pre-COVID ability to run all out and especially in some of the international markets that Mary is talking about. We might still have some production levels that are lower than pre-COVID. So GMF, production levels, and I think it's safe to say that a normal second half would be, if you don't have downtime, production is back at the normal levels and the credit losses and huge vehicle prices normalize.

Your next question comes from the line of Mark Delaney with Goldman Sachs.

So maybe you could talk about the margin implications for the company as the mix shifts towards EVs in the near and intermediate term. And are there any milestones investors should be monitoring in order to gauge when the shift to EVs will be neutral to your margins? Some milestones in terms of where battery costs may need to be -- or certain volume of EVs that the company may need to ship?

Well, as I've mentioned, we start rolling out off of our Ultium platform and cell system next year with the HUMMER EV and then continue. And early in that life, we think we're going to get to 100 and below, and then we have a fairly rapid plan to continue to take cost out. So I think it will happen over the life of that program that we'll be able to see the costs and depending on the ICE powertrain, get to a parity point through that generation.

That's helpful. And my follow-up question was around this down 6% to 8% used vehicle pricing that, Dhivya, you had mentioned. Can you talk a little bit more about how GM is coming up with that? I think some of the investors observed used pricing coming in stronger than that more recently. So just some context to how you're thinking about used pricing within that number that you quoted would be helpful.

Yes. That is a very good point. We are seeing strong recovery after the low point in April. And we are looking to be more on the conservative side. A few reasons. Clearly, the macro backdrop is a question mark at this point. And there's always seasonality in the second half of the year. There's increased off-lease supply coming from the lease extensions that we have seen in the first half of the year. Rental car companies are defleeting. There's also -- new vehicle inventories are starting to increase, as we just talked about. So when you put all that together, we just think it's appropriate to be conservative. And clearly, if you're going to see a continued strength in the used vehicle prices as we have seen in the last few months, that represents an upside over what I talked about.

Your next question comes from the line of Rod Lache with Wolfe Research.

Dhivya, I was hoping you can just clarify a couple of points here on the -- not guidance, but scenario that you laid out for the back half. You said $4 billion to $5 billion of EBIT in the back half. I think the sum of GM International, GMF, Cruise and Corp, it's probably around $1 billion negative. So that would imply $5 billion to $6 billion from North America with some inventory and the cost structure that, I assume, eliminates some of the temporary stuff. Is that what you're saying? And it seems like that would include about $1.4 billion, $1.5 billion of inventory building. So maybe $3.5 billion, $4.5 billion at a 14 billion -- 14 million unit market. Is that kind of a reasonable interpretation?

So Rod, it's difficult to look at this on a regional basis. There's so much puts and takes across regions as well. But I think what you're trying to get to is what might a normalized underlying free cash flow potential of the company might be. And if assuming that's what you're trying to get to from the second half scenario that I provided, a simple way to think about it is we -- at the beginning of this year, when we were expecting a 17 million SAAR environment, we guided to $7 billion of free cash flow. And we also said last quarter that if you had a 13 million U.S. SAAR, that's the point at which we would break even from a free cash flow perspective globally. So that gives you sort of like the boundaries from a free cash flow standpoint. And depending on whatever demand environment you can come up with, you can interpolate between those points. The key takeaway I'm trying to communicate here is the underlying cash generation potential of the business remains intact with the pre-COVID levels. And that's how to think about it. And obviously, you're going to see on a quarter-to-quarter some volatility associated with their production or working capital assumption or sales allowances and so on. But if you take a giant step back and think about what's changed since pre-COVID, we would say the business is strong, the important product launches are behind us and they're performing really well. Austerity, if anything, to Mary's point, is going to add to some level of bottom line. And importantly, we've been talking about cash conversion for a couple of years now. And we're continuing to execute on those cash conversion measures and taking more dividends from GMF and so on. So we are -- I'd say that the business is intact, and that's how you should read into the numbers that I provided from a scenario standpoint.

Okay. Yes, and it's pretty clear. You explained -- it sounds like $2 billion to $4 billion in the back half ex working capital but with some inventory build. How should we be thinking about -- obviously, macro is going to be the biggest driver of the variance from this year to next year. But the things that are within your control, Thailand and Australia, I think you've quantified, is about $400 million. You suggested on the call that you can get South America closer to breakeven. How should we be thinking about some of those items as we look out to next year?

Yes. I'd say, macro aside, the key tailwind will be the product downtime that I mentioned earlier. You saw that in each of the last few years, and we're not going to have that. We're going to have a full year of COVID sales. Adjacencies have been growing, as you've seen, both from an OnStar as well as an aftersales perspective. That's going to continue into 2021. And the GMI restructuring is on track with the actions we've already announced. South America, as I mentioned, we've been inching towards both the breakeven with both the revenue side as well as the cost side. Again, I won't put a time line on it, but it's all hands on deck from a South America perspective. So from a controllable standpoint, I would say we are on the right side of all of those initiatives in all the regions. And as we look into 2021, from a cash flow standpoint, I think all of those will serve us as our stronghold for next year.

Okay. Great. And just lastly, was hoping maybe you could just address, Mary, that -- just the status of the China business right now. You mentioned in your prepared remarks that, especially luxury, seems to be coming back. But seems like Cadillac was still underperforming the market a bit as we looked at the last quarter. What do you see in that market at the moment? And what's your view on the prospects from here?

I think we see an opportunity to continue to improve that business. Clearly, there continues to be ongoing pricing pressures, but we do have a strong cadence of new launches that -- I mentioned a few of them. We also addressed the issue and added the 4-cylinder engine options that I think inhibited some of our progress at the end of last year. So very important that we add the four cylinders. And then, obviously, the region stays very disciplined on cost. So as I look at the strength of Buick, we have seen progress in Cadillac. I agree with you that we can and we will do more. So I see an opportunity. For this year, we kind of said that assuming kind of the trajectory that we're on, we'll continue to maintain the roughly $200 million per quarter, but I see upside opportunity as we move forward. And as you go even further, when you look at the recovery of that market and the ability of the market to get to a 30 million type unit and our planned portfolio for NEVs, I think, in the medium term, there's even more opportunity for growth and profitability.

Your next question comes from the line of Brian Johnson with Barclays.

Yes. A couple of questions. So if we think of a chart you used to put out sort of in the 2012, 2013 period, you showed North America, fixed cost base. If I just do the math of subtracting about $10,000 per vehicle of variable contribution from your $11 billion of revenue, I get to sort of $8 billion of cost times 4 is $32 billion. Can you update us on a couple of things? A, is that in the ballpark for your new fixed cost bases in North America? Two, of the cost reduction, how much was the fixed cost and how much was things like supplier price concessions or redesigning bill of materials and so forth?

Yes. I'd say, Brian, the number that you came up with is probably on the higher side. I'd say it's lower than that. And part of it is actions we've taken with the transformational cost savings. If you think about it from the 2012, 2013 time frame that you're alluding to, we have been consistently taking fixed cost out of the system so the -- I think you can reduce your number by -- at least the transformational cost savings is not higher to get to a lower number. And the second question, a lot of the austerity actions were on the fixed cost side. So I'll give you a few examples. Marketing spend typically goes into this bucket of fixed cost that you're talking about, that was lower. A lot of the salary deferrals as well as pay-related items typically fall into fixed costs as well. That was lower travel and sundry expenses, typically fixed costs. So it's less about extracting more variable concessions out of the system and more about these kinds of austerity actions that I talked about. Hopefully, that's helpful.

And as we kind of go into '21, assuming things somewhat normalize in the world, how much of those fixed costs come back?

That's the challenge, I'd say. The transformational cost savings assume that those are permanent, and we will continue to move towards the $4 billion to $4.5 billion. So that's a -- if anything, it will be on the high end of that range. And from a regular austerity perspective, whether it's salaried or the hourly pay and so on, clearly, as we're restoring activity, that's going to come back. And the rest of the fixed cost, to see what we can do to make it stick, obviously, when we give 2021 guidance and more color at that time, we'll be able to talk more about the cost environment. But really, from a number standpoint, it's just too soon.

Okay. And then just final question. Over on GM Financial, delinquencies were in good shape, but throughout the consumer finance industry, there are forbearance agreements with customers. Can you update us on where GM Financial closes forbearance and as opposed to risk to delinquencies as we move into -- further into the fall?

Yes. It's actually been very much on track. We've seen a slight pickup in -- earlier in the quarter towards the April time frame. And actually, in the second half of the quarter, the numbers were starting to trend back down again. So we've been watching all of these numbers closely. We've looked at late fees and all the payment deferrals. And we've seen that, across the board, all these metrics are decreasing from the peak we saw in April and were returning closer to the normal levels by July. And obviously, we're being conservative about it.

Your next question comes from the line of Dan Levy with Crédit Suisse.

So first, just wanted to ask a question on inventory levels. I know you're saying a target of 600,000 by year-end. But if I look at the 2018, 2019 period, your typical month-end inventory was typically around like 800,000 units. And I know we're not in a 17 million SAAR. But what's a fair rebuild to assume over time beyond year-end? I assume that the 600,000 does reflect production constraints and isn't a target inventory per se.

Yes. So 600,000, to your point, is based on a second half environment of closer to 14 million light vehicle SAAR that I alluded to. So we will calibrate this based on the demand level that we see. And to the extent that the industry is trending stronger, we will look to get back to the levels that are in the range, I would say, of what you just alluded to. Clearly, from a truck standpoint, we will be limited by production capabilities as well since we're already running all out. And we are taking all the measures we can to increase or add to production levels on trucks as much as possible. And I think if we calibrate it to an appropriate industry level, you will see that 600,000 number start to go back up again.

Okay. Great. And just as a follow-up, you've talked about -- I know you reaffirmed today the North America EBIT breakeven and SAAR of 10 million to 11 million. You just did total company breakeven with your North America volume down 60%. SAAR down 60% is 7 million, a lot better than 10 million to 11 million. So why isn't your breakeven better than the 10 million to 11 million you've highlighted? And given the resiliency of mix, is there potential to see a 10% margin in a SAAR environment below 17 million? Or is there something that we're missing? Is it just about EV development expenses coming online? What's -- what are we missing there?

Yes. So if you just take this quarter's results and look at wholesale inside SAAR, if you will, wholesales were down 62%. That would imply a SAAR of about 7 million units. And the reason it is so much better than the 10 million to 11 million units is we were able to take a very significant, almost extreme, austerity actions given that our production basically ground to a standstill. And you can ask yourself the question, if it's more of a, call it, normal downturn and everything is continuing, but demand is lower, how much of those levers will you be able to pull. I think -- we think some of them would be difficult to pull when production is actually ongoing. So austerity will be dependent on the nature of the downturn. And secondly, you saw what pricing did this quarter. Inventories were low. And the -- both the carryover pricing as well as the new vehicle pricing held up very well in this environment. And you're going to have to tell me what assumptions you make during a normal downturn to see if pricing levels would hold up at that level or not. So look, we are going to continue to drive the breakeven level down. And we're not settling comfortably at 10 million to 11 million. We're going to push that down as much as possible. What we're not doing is using this particular unusual circumstance to revise a formal breakeven point to a different level. Having said that, we will work through to do that as much as we can.

Okay. If I could just squeeze in one more on the product side. Can you just talk about your presence in off-road? We're obviously seeing a lot of excitement given the product actions of some of your competitors. So how much of a priority is off-road for you? And what are your plans with AT4? Would you expand AT4 beyond GMC to the Chevy brand?

I think we look at each brand and are continuing to build on our off-road offerings in GMC as well as Chevrolet. And then I think when you look to HUMMER, you'll see a true capability there as well. So we think it's very important. It's important to customers and we'll continue to expand our offerings.

Our last question will come from the line of Chris McNally with Evercore.

Fantastic results, guys, and thanks for the second half framework. So real quick, one strategic and one on the numbers. So sort of in the spirit of some of the other EV questions, you have 12 upcoming models, but I think many industry participants believe that this may only be incremental progress and not really big leaps in -- particularly in design. And we even have trouble pointing to one of those vehicles, which could be sort of 100,000 plus. So my question, would you mind just sharing what you think is GM's chance of -- or the best chance of a high-unit EV program versus, let's say, a new product, which is more of a wide portfolio approach to EV?

Well, I think if you step back and you look at what we've shared at our EV Day in March is we have -- with the new Ultium cell and platform technology, we have the BET, the -- our battery electric truck offerings; and then our BEV, which, I'll say, kind of mainstream and then our BEV plus that allow us to do expressive vehicles. There's huge sharing between those three platforms that are foundational for the portfolio that we have coming forward. We do have a full portfolio plan to cover high-volume segments. I think when you see -- to start with the Cadillac Lyriq and then the truck portfolio we have planned, you'll see that we plan on participating in a very significant way. And I think you'll see design and technology back it up to truly be tapping into what the customer wants, expects and the excitement that it will bring.

But Mary, is it fair to say that it's more of a portfolio approach that really no one vehicle is going to lead the charge in terms of a high number of units?

No, I don't think that's correct. I think that we have some entries that are in the sweet spot of key segments that are large segments, and we intend to get our fair share plus more. So it won't be on the fringes. It will be mainstream.

Okay. Great. And then just one real quick one on the second half numbers. Is it fair to assume that the mix component should turn positive again in Q3 and Q4, even despite you have the tough comp of the HD launch last year, but obviously, you have the new SUV launch this year? So can we see mix turn positive as well as volumes in second half?

Yes. I think there's a few mix components. Obviously, truck and full-size SUV production, it is going to drive favorability from a mix standpoint. And I wasn't sure whether you're talking about '19 numbers adjusted or unadjusted for the labor disruption or not. But in terms of volume, we're going to see full-size SUV ramp back up and that's generally favorable to mix. And the other aspect is trim mix. And we're seeing, as I mentioned, AT4, Denali and LTZ and High Country mix trending very high. And typically, when those are strong -- these are more profitable vehicles, and those tend to be a tailwind as well from a mix standpoint. So both vehicle mix as well as trim mix driven by full-size trucks as well as full-size SUVs more specifically should generally be favorable to mix as we go forward in the next few quarters.

I'd now like to turn the call over to Mary Barra for her closing comments.

Again, thanks, everybody, for joining today. We recognize that we're at a critical point for General Motors, our company. We know from an industry perspective and frankly, the world, as you look at the virus. We are committed to leading through the current challenges and into the future to provide a very strong future. We are determined to run the business in a way that creates the value our shareholders deserve and with outstanding vehicles. For those who attended our EV Day, the comments we had on the design and technology coming was very, very strong. We need to continue to share that much more broadly, and we will. And we also are very focused on technology and having customer-centered innovations like Super Cruise, which is an important step as we bring self-driving vehicles to market. I hope you understand we are very focused on our work from an EV and an AV perspective and believe that will deliver not only growth, but profitable growth, and ultimately help us achieve our vision of creating a world with zero crashes, zero emissions and zero congestion. And I know many of you are eagerly awaiting to see more of our EV plan. So in addition to the launch that we have next week on the Lyriq, at 11:00 a.m. today, we are posting a video to our IR and media websites spotlighting the upcoming GMC HUMMER EV. It's not a complete reveal, but it's more information, and we believe it is truly the world's first super truck. So we hope you'll take some time to take a look. And thank you again for your time.

Ladies and gentlemen, that concludes the conference call for today. Thank you for joining.