Ford September Sales Call Notes

Mark LaNeve

Feeling good about inventory position

We’re pretty well balanced as we have been. We were pretty consistent with our overall viewpoint with inventory and have never felt we were on the high side this year, but actually if you dig into our numbers, we’re pretty consistent with where we we’re in ’15, 2015 where we felt we were actually a touch lean as we were building up stock going the new F-150 back at that time.

So, we feel good about our inventory position. We’re running out of months some days to build vehicles for 2017, but we’ll obviously balance supply to demand, but we would certainly be looking into leaning into giving some more production at this point over the next six-month period and now less just based on our current day supply.

Used vehicle pricing stabilizing

“The used vehicle pricing has been very stable over the last I guess call it 8 to 10 weeks now Colin and in fact taking up slightly depending on the segment very, very stable. We did see some positive uplift down in the hurricane-affected areas that was a little greater the national that will equalize over time.”

Group 1 Automotive 2Q17 Earnings Call Notes

Earl Hesterberg – CEO, President & Executive Director

Poor performance in energy impacted markets

“Although we had another record performance in U.S. FNI per unit retail and a further rebound in Brazilian profitability, these factors were not enough to offset continued weakness in vehicle sales in our U.S. energy price-impacted markets. Combined new and used retail unit sales dropped 7% in Texas and Oklahoma during the quarter. Our largest market, the U.S. energy capital of Houston, had an industry new vehicle sales decline of 10% in the first half of the year and a very weak close to the second quarter with June sales down 24% from June 2016 levels. T”

A lot of high paying jobs were lost in Houston

“I think for us, Rick, the key is when the energy companies start to hire people again. And those — actually markets like Huston have replaced most of the lost jobs. That really is not a net job loss, but the new jobs tend to be in the restaurant, hotel, hospitality industry. The jobs we lost are energy and construction jobs, high paying jobs.

So not only are there fewer customers buying a car, there is a probably a mix issue there too. The new jobs are probably supporting lower mix and more used cars or low end volume brand cars and have probably been hit disproportionately in the midline imports and luxury brands. But I think it’s just a function of hiring again in the energy industry.”

I think the market will continue to head toward electric

“These statements by Volvo by 2025 in the U.K., by 2040, those were just seemed to be statements of strategic intent and very much in tune with the consumer psychology at the moment. It’s driven by all this negative press about diesels. But clearly, things are headed that direction and as there is more offerings from the powerful OEMs, I think it will continue to head toward materiality in our business.”

John Rickel

Opportunity to downsize dealerships

“Well, you’re preaching to the choir on that one, David. No, it doesn’t require much of the brick-and-mortar we have today. We actually have one of the top OEM Executives with us last Saturday who toured all of our different brand dealerships in Houston and we made the point to him that the 2 most important things to us today, and I think OEM dealers, are a service bay and a parking space. Everything else is interesting, but we always need more parking spaces which are very costly when you’re in metro areas where the land is expensive. And a service bay, is valuable and generates gross profit. And showroom size and offices and all those things are interesting, but we can sort those out on our own. So we hope we’ll enter an era soon of more realism in that area. But I can’t say we’re there yet.”

CarMax 1Q18 Earnings Call Notes

Bill Nash – President and CEO

Tom Reedy

Not planning to take more risk in financing

“I don’t think we’re in a position to start talking about taking any more risks on CAF. As we talked about last quarter, we enacted some tightening. But pretty much, what flows to CAF, what flows to Tier 2 and Tier 3 is going to be based on what comes through the door. And as we’ve all talked about, look at Tier 3 business as incremental. Obviously, it’s more — it’s less profitable and more volatile. But on ongoing basis, it would do very little to what CAF is going to be, just maybe it will have an impact on the mix of penetration between the various players.”

We have the best channel for originating used car loans

“Absolutely, I think, we’ve talked about before that we believe we have the best channel for originating used car loans. I don’t think any of our partners would disagree with that. As far as performance in the quarter, we continue to be happy with how they’re performing. Tier 2 lenders, we look at collectively, because all of them see every customer and they’re able to make a competitive offer. As you saw, they’re up about half a point year-over-year in the quarter. So we’re happy with the conversion we’re seeing out of that group. Tier 3, as we mentioned, we saw some tightening in Q1 of last year, but relatively consistent performance. Since then and the way we measure performances, how many sales that we get out of the applications that they see. So, nothing except good things to report on that front.”

General Motors at Citi Conference Notes

Michael Abelson – VP, Global Strategy

Winning in autonomous is going to take scale

“Then the last piece that we’re working on is clearly autonomous. And when we looked at autonomous, we decided that we wanted to supplement our internal resources. So about a year ago we acquired Cruise Automation, a Silicon Valley startup that had been working on autonomous vehicles, and that has gone really well. The Silicon Valley guys bring a set of skills around software and development speed that’s very different from our traditional approach in Detroit. At the same time, we in the core company, we bring to bear our hardware expertise, our engineering expertise, and very importantly, our manufacturing expertise and how do we scale this, because importantly everybody talks about autonomous demo projects, but winning in this space really is getting to scale. It’s not doing demo projects. And so it’s a very big step to go from a demo project to really producing vehicles at scale.”

You’ve got to have the manufacturing know how

“So yes. As we think about it, you’ve got to bring several capabilities to be able to put an autonomous ride sharing vehicle in the field. Certainly one of them is just the basic autonomous technology. You’ve got to be able to develop the system, have it drive safely. You’ve got to then understand what does it mean to deploy these vehicles into a sharing economy? And I would argue between the work we’ve done internally on Maven, as well as the conversations we’ve had with Lyft, we feel like we’re in a good position there. But then I go back to something that sometimes I think people underestimate. You’ve got to be able to make these vehicles at scale and you’ve got to have the manufacturing know how to put thousands and tens of thousands of vehicles out in the field.”

Tesla (TSLA) Q1 2017

Elon Reeve Musk – Tesla Motors, Inc.

On production targets for Model 3

“The trick is that when you got a whole new product and a whole new factory, trying to predict exactly what that initial S-curve, the initial portion of the S-curve looks like is extremely difficult. Inevitably, the production starts off slowly and then you gradually eliminate the constraints and eventually it starts taking off exponentially. But because of that, sort of initial slow ramp that then grows exponentially, a small change in where that lands in the quarter can have quite a big impact on total volume. It’s a lot easier to predict where the upper flat portion of the S-curve is likely to be, but predicting the rapidly changing portions of the S-curve is I think not within the ability of anyone to predict with accuracy. ”

It´s not all about production and supply chain

“We continue to be surprised by how sort of frankly naïve people are – a lot of people are about production and supply chain. It’s as though there is some like easy way to increase production. It’s truly not. Any given production system, you design it for optimal output and then you aim to improve efficiency, reliability, quality, and so forth at that output. But the Model S and Model X system as we said last year, was designed for 100,000 units, and now initially to get to that rate, we have to use a lot of overtime, a lot of expediting, and that affected our gross margin on the car. And now we’re sort of at steady state with kind of the top part of that S-curve that we’re targeting.”‘

Lower prices result in higher demand

“The demand actually increases really exponentially as price drops. (58:52) when we looked at it, I think we are looking at the right numbers, but the demand at the Model 3 price point appeared to be somewhere between 30 times and 70 times higher than at the Model S price point.”

Trying to replicate success in sedans

“Consider 17 million cars and trucks sold in the U.S. per year, of which only 100,000 are premium sedans and we have a one-third market share. If we can replicate that in other segments, the results are obvious.”

High demand for model 3 

“If you come into our stores and you want to buy a Model 3, you could buy a Model S or Model X instead. We antisell the Model 3. But our net reservations continue to climb week after week. No advertising, antiselling, nothing to test drive, still grows every week.”

Tesla does not need the incentives to survive

“it’s almost like over the years there’s been all these sort of irritating articles like Tesla survives because of government subsidies and tax credits. It drives me crazy. Here’s what those fools don’t realize. If Tesla is not alone in the car industry, but all those things would be material if we were the only car company in existence. We are not. There are many car companies. What matters is whether we have a relative advantage in the market. And in fact the incentives give us a relative disadvantage. Tesla has succeeded in spite of the incentives not because of them. But these incentives have limited lifetime and limited scale.”

On the tax credits in Nevada

“I hope somebody doesn’t mention those Nevada tax credits, which for the Gigafactory, it makes it sound like we got a $1.3 billion check from the State of Nevada. We did not. Those tax credits are made up – the vast majority is just sales and use tax abatement on equipment in the Gigafactory. Taxes that otherwise wouldn’t have been there because there was just a bunch of rocks there before. And you don’t get a lot of taxes from rocks. So that’s why it’s essentially a no-lose proposition for the state. And in order for us to actually earn $1.3 billion in tax credits for the Gigafactory, we have to generate over the course of 20 years about $100 billion in output from the Gigafactory. So it’s worth about like 1%. Don’t look a gift horse in the mouth and we appreciate it, and that’s nice. But this is obviously 1% is not the difference between success and failure output of the factory. But a lot of articles provided it in the past tense. Tesla received $1.3 billion. No, we haven’t. We did not receive that. If somebody wants to send us that, great we’ll take it. But looking at the bank now I don’t see it there.”

 

General Motors 1Q17 Earnings Call Notes

Mary Teresa Barra – General Motors Co.

Cruise gives us access to world class talent

“We are running our autonomous vehicle program like a startup to give us the speed that we need to stay focused at the forefront of these technologies and the market applications. As autonomous car technology matures, our talent needs will increase, and Cruise’s presence in the Bay Area gives us access to a world-class talent pool. These are men and women who want to be part of a fast-moving technology company that can also manufacture autonomous vehicles in scale.”

Chuck Stevens

Inventory remains heavy

“Shifting to inventory, as I said during the January DB conference and in our recent Office Hours webcast, we expect to build inventory in the first half of the year, which will then decline in the second half, very much driven by product launch cadence and scheduled K2XX downtime. And through the first trimester of the year, we are very much on plan.

Admittedly, passenger car inventory remains heavy and we have been working to bring that down to more appropriate levels by cutting production, and we remain committed to match supply and demand. We expect to end 2017 with inventory in line with 2016 at about 70 days’ supply, with significantly reduced passenger car levels.”

CarMax FY 4Q17 Earnings Call Notes

Bill Nash – CEO

SEO vs. SEM

“remember, what we’re talking about is SEO, search engine optimization versus search engine marketing. Search engine marketing is what you pay for the ads. Search engine optimization, the way you — it’s not necessary that you’re paying for ads. The way we do it is, through this year, we’ve done a couple different things. One, it started with the website. Since the new website, we’ve also redesigned how the search engines crawl our website and make it so it’s more efficient for them to crawl. We focus on keywords, again keywords that aren’t related to CarMax, and building up pages and so that when the search engines search your website, they see keywords and like, okay, CarMax must be an expert on that, so we’re going to bring them into the organic search. Content, that’s another way we’ve increased our SEO, building relevant content that again when the search engines look at your website, it’s relevant to the questions that people are asking. So those are the levers that we pulled in and we will continue to pull to get the SEO or the organic search going for our customers.”

Tom Reedy

There’s not that much precision around recovery estimates

Yeah, let me answer your second question first, and that is, there’s not nearly that much precision around recoveries. As I mentioned I think a couple questions ago, we originate loans based on the knowledge that in the future we won’t know what recoveries are and we have a range of recoveries that we’ve experienced over time. And so we go into the equation contemplating a range of recoveries and hopefully it falls within that range. So there is really not much to be specific on that front.

GM at Deutsche Bank Conference Notes

Mary Barra – Chairman and CEO

80% of our total vehicles are produced in the US

“Well, first off I think what we want to do is make sure as all the different policy changes are being contemplated. People really understand the auto industry, understand that we are long lead, decisions of products that we are launching right now were made two, three, four years ago. Also that it’s a very capital intensive business. And we think as people understand that but also understand right now in General Motors we have over 40 manufacturing facilities in the United States. We provide 100,000 jobs. Over the last two years we’ve invested $11 billion in the United States. We’ve also which is either preserved jobs or increased jobs from a IT perspective over the last few years we’ve increased 11 or broaden 11,000 IT jobs into this country, many of which brought into the company many of which were brought into the country as we made that move, as well as we made some shifts in our engineering foot print. So we want to make sure people understand the industry and General Motors specifically as we look at that. When you also then look at where we produce, we produce upwards of — over three quarters almost 80% of the total vehicles produced in the US when you look at it against sales. So we are providing very strong job. And when you look at for instance some of the products that we talked about, there comes a point where if you have to look at how officially how many vehicles are you going to sell to make the investment worthwhile, that’s when some cases products are in Mexico because of the bilateral trade agreements. So that’s another important point that we want to make as we look at what are the difference that are going to be made in trade.”

Chuck Stevens

See another strong year but a plateau

“Relative to the growth rate now Dan or Mary can way in, we expect to see another strong year in 2017 from a US industry perspective. We had another record year in 2016. We think we are going to plateau at these kinds of strong levels. I think the fundamental drivers of what’s been driving the industry may change a little bit from a kind of credit driven tailwind into more of economic growth GDP type growth tailwind over the next number of years. Is there upside to the industry? Perhaps but we try to manage the business from a conservative perspective from a revenue standpoint then see if we can take advantage of those opportunities as they present themselves.”

Ford November Sales Call Notes

Ford Motor (F) November 2016 U.S. Sales Conference Call

Expecting 18m vehicles

“Our early read is a total sales including medium and heavy trucks came in at approximately 1.41 million vehicles last month. This will correspond to a total industry SAAR of about 18.3 million vehicles, providing the overall industry with an approximate 5% increase versus a year ago.”

Bryan Bezold

Residual values are something to keep an eye on

“Well Dan a good question. It kind of goes hand in hand with what’s been publicized in terms of overall residual pressure, you know pressure on residual values in the industry. That will go hand in hand with equity, obviously the less that a trade is worth with the customer more risk from an equity position. We’ve seen it, I don’t have it, a third in the industry. The latest number I saw is actually below 30%, but it would have been climbing over the last several years. This is, in terms of customers in a not equity position, it’s actually been climbing for several years, couple percentage points a year. With our strong residual values our lower lease penetration in the industry, we run at a more favorable position to that, but it is obviously something the overall residual values that’s some that we are keeping our eye on, we’ve talked about and that one of the reasons that our guidance was not having the industry going up next year is that’s in-line with a lot of positive factors in the industry that’s one of the drags in the industry that we keep an eye on.”

Anything that leads to economic growth is of course good for us

“I think one point I would make is that before we were to change our expectations or our guidance we have to have a better idea of what the set of policies would be proposed and eventually in active. So, I think that would be the first answer to your question. Generally of course anything that leads to faster economic growth, all of the things equal would be to faster industry volume and faster truck sales, but beyond that I don’t have any detail for you.”

Mark LaNeve

You’ve got a yin and yang of positive factors after the election

“Well another good question, we do have the union yang [indiscernible] of, you know you got positive factors, the customer is still in good shape, the consumer confidence is strong interest rates, although a risk of increasing restored relatively very low levels the Car Park is still average age of the vehicle is well over 11.5 years, you know these are all positive gas prices still relatively really low that’s all positive for the industry, but it could be looking at gradual rate increases. We just talked about residual values. So we are always looking at all those factors and trying to balance them up and it turned specifically of the presidential election, but we haven’t changed our financial guidance or our industrial volume guidance as a result specifically to the election Dan.”

Credit is in good shape

“We’ve seen the articles, have seen one or two references and we’ve probably seen from a standpoint of Ford credit our delinquencies are in great shape, not running any different than they’ve run over the last several years and the quality of the customers that we are seeing and buying remains very consistent. So, we haven’t really seen much evidence of what you are referencing.”

America’s Car Mart 3Q16 Earnings Call Notes

America’s Car-Mart’s (CRMT) CEO Hank Henderson on Q3 2016 Results

Used car prices certainly aren’t going up

“We are starting to hear some news from the field that the prices certainly aren’t going up, this time in year like they normally do. So, I think that our folks are optimistic that we are going to be in a position to buy a better car for the same of less money this year compared to what we’ve seen in prior years. It’s not anything huge at this point, but we are starting to hear, if that is happening in certain places and certainly that’s we’ve expected to happen for a while.”

Financing environment still competitive

“Well, obviously, we are hearing the same things at the ground level talking with the general managers; at the store level, they aren’t seeing a big change yet. The competition that’s been out there seems to continue to be aggressive. I think what we are seeing more of and one thing that’s helping us is, this is going on long enough that there has been a kind of a cycle with our customers.

Jeff Williams

Continue to move a lot of trucks and SUVs

“Also, we continue to move a lot of trucks and SUVs, which are in high demand and for the most part carry higher average selling prices. We currently anticipate some increasing overall sales prices for the near-term as demand for the cars we buy is high, especially for trucks and SUVs.”