General Motors (GM) Q2 Earnings Call

General Motors (GM) CEO Marry Barra announced record earnings 

“I am extremely pleased to report that GM delivered strong earnings in the quarter that included record EBIT-adjusted and EBIT-adjusted margins in North America, record sales and strong margins in China, profitability in Europe, and records for net revenue, EBIT-adjusted, EBIT-adjusted margins, earnings per share diluted-adjusted and return on invested capital.”

Gains were broad based

“Net income increased over 150% to $2.9 billion as revenue rose 11% to $42.4 billion. EBIT-adjusted was up 37% to $3.9 billion. EBIT-adjusted margin was 9.3%, up from 7.5%. Earnings per share diluted-adjusted was $1.86, up from $1.29. Automotive adjusted free cash flow was $3.2 billion, and we had a record ROIC of 30.5% on a trailing four-quarter basis, and this continues to demonstrate the positive impact of our disciplined capital allocation framework.”

Best light truck sales in nearly a decade

“As I mentioned, our strong quarter was underpinned by outstanding performances in North America, China and Europe, so let me just touch on those briefly. In North America we gained 0.4 percentage points of retail share in the U.S. in the first half of the year. This is the highest of any full line manufacturer and I think it really indicates that our focus on more profitable sales is working. We had the best Q2 light truck retail sales in nine years and the best mid-size retail pickup sales in 11 years.”

European operations are rebounding

“In Europe, the team posted its first profitable quarter since the second quarter of 2011. It was a great team effort across every single aspect of the business. Opel and Vauxhall outperformed the industry with a 7% year-over-year sales increase to 621,000 vehicles in the first half of this year.”

Their South American operations were the weakest region geographically

“as you all know, macroeconomic conditions in South America and many parts of our international operations continue to be challenging. The team continues to work to offset these pressures, and we will continue to take the necessary steps to set up these regions for future success. A proof point is South America. In the first half of 2016, we narrowed losses by $170 million, despite a much more challenging economic environment fundamentally in Brazil.”

General Motors (GM) CFO Chuck Stevens said North American industry wide car sales are up slightly from last year

“And fundamentally supporting our business is the U.S. light vehicle industry that is tracking in the low-to-mid 17 million SAAR range year-to-date, up 1.2% compared to the same period last year.  We continue to believe the industry will remain strong.”

General Motors (GM) CEO Marry Barra on automotive plant capacity expansion and product pricing discipline

“Relative to industry capacity, pricing, and everything else, as you look over the last number of years and just track incentive spend as a percent of transaction prices, it’s inched up a little bit as we look at the trend over the last number of years. Nothing alarming. It appears that, from our perspective, the industry has continued to be rational from that perspective. Our base case is that’s going to continue. As a matter of fact, one of your colleagues just wrote a research report that would indicate that the OEMs are displaying a lot of incentive discipline, and that could ultimately have a bit of a headwind from an overall SAAR perspective going forward. We continue to see overall discipline. We’re certainly going to remain disciplined. We’re certainly going to continue to focus on capacity utilization. Hence, our focus on profitable retail growth versus fleet.”

General Motors (GM) CEO Marry Barra on why they bought technology startup Cruise Automation for $581 million

“Well, from a technology perspective, as we look at autonomous, Cruise Automation is the company that we have been following for a couple of years now. And as we saw the progress, and a very specific technology from a – call it machine learning or artificial intelligence, that coupled with all the work we were doing, we felt it accelerated our ability to be first or among the leaders as we implement fully autonomous technology into vehicles. And so it was very specific. It was something we’d been watching for quite a period of time. And strategically, we thought it was appropriate and we did a complete make/buy analysis but we thought the work that we had observing would integrate very well and accelerate our efforts.”