general motors (gm) earnings report: q2 2015 conference...

CompanyName:GeneralMotorsCoCompanyTicker:GMSector:ConsumerGoodsIndustry:Automotive

EventDescription:Q22015EarningsCallMarketCapasofEventDate:48.84BPriceasofEventDate:32.155

GeneralMotors(GM)EarningsReport:Q22015ConferenceCallTranscriptThefollowingGeneralMotorsconferencecalltookplaceonJuly23,2015,10:00AMET.Thisisatranscriptofthatearningscall:

CompanyPart icipants

RandyArickx;GeneralMotorsCompanyExecutiveDirector;CorporateCommunicationsandIRMaryBarra;GeneralMotorsCompany;CEOChuckStevens;GeneralMotorsCompany;EVP&CFO

OtherPart icipants

RodLache;DeutscheBank;AnalystJohnMurphy;BofAMerrillLynch;AnalystBrianJohnson;BarclaysCapital;AnalystItayMichaeli;Citigroup;AnalystRyanBrinkman;JPMorgan;AnalystPatrickArchambault;GoldmanSachs;AnalystEmmanuelRosner;CLSA;AnalystMikeStover;SusquehannaFinancialGroup;AnalystDanGalves;CreditSuisse;Analyst

MANAGEMENTDISCUSSIONSECTION

Operator :

WelcometotheGeneralMotorsCompanysecond-quarter2015earningsconferencecall.

(OperatorInstructions)

Asareminder,thisconferencecallisbeingrecordedThursday,July23,2015.

I'dnowliketoturntheconferencecallovertoRandyArickx,ExecutiveDirectorofCorporateCommunicationsandInvestorRelations.Pleasegoahead,sir.

RandyArickx(CorporateCommunicationsandIR):

Thanks.Goodmorning.ThankyouforjoiningusaswereviewGM'sfinancialresultsforthesecondquarterof2015.

OurpressreleasewasissuedthismorningandtheconferencecallmaterialsareavailableontheGMinvestorrelationswebsite.WearealsobroadcastingthiscallviawebcastontheInternet.Includedinthechartsetmaterialspublishedthismorningwehaveincludedthekeytakeawaysfromeachchartinthenotespagesinordertoprovidecolorontheresults.

ThismorningMaryBarra,GeneralMotors'ChiefExecutiveOfficer,willprovidesomebriefopeningremarks,followedbyChuckStephens,GM'sExecutiveVPandCFO.Thenwewillopenthelineforquestionsfromtheanalystcommunity.

Beforewebegin,I'dliketodirectyourattentiontothelegendregardingforward-lookingstatementsonthefirstpageofthechartset.Thecontentofourcallwillbegovernedbythislanguage.

Intheroomtoday,wealsohaveTomTimko,VicePresident,Controller,andChiefAccountingOfficer,toassistinansweringquestions.NowIwillturnthecallovertheMaryBarra.

MaryBarra(CEO):

Thanks,Randy.Welcome,everyone,tothecall.I'mgladyoucanjoinustoday.

Iamreallypleasedtobeabletotalkaboutoursecondquarter.Aswelookatit,wehavedeliveredstrongearningsgrowthinthesecondquarterandwe'vepostedanetincomeof$1.1billionandanEBITadjustedof$2.9billion.AndifyoulookacrossourregionsfromNorthAmerica,itwasstrongyear-over-yearperformanceinthequarterthatwasanchoredbyarecord$2.8billionEBITadjustedanda10.5%EBITadjustedmargin.

InEurope,wedemonstratedanear-breakevenquarter,whichgivesusconfidenceaswemoveforward,andinChina,wecontinuedwithstrongperformancedespite,asweallknow,amuchmorechallengingmarket.

Forthecalendaryear,weareonplantoincreaseourearningsandmargins,andconsistentwiththat,weexpectourEBITadjustedforthesecondhalftobehigherthanthe$5billionEBITadjustedwe'vepostedthroughJune.Sowiththisfoundation,weareconfidentinourabilitytoachieveour2016target.

Tojustquicklylookatthequarter,ourrevenuewas$38.2billion;ourEBITadjustedwas$2.9billionandthisisthesecond-highestquarterlyresultonrecord.Ourearningspershareadjustedwas$1.29,up122%overlastyear,andouradjustedautomotivefreecashflowwas$3.3billion,verystrong,upfrom$1.9billionayearago.

Wehavealsocommittedthateachquarterlybroadcastorearningsbroadcastwewilltalkaboutourreturnoninvestedcapital.Ourtrailingfourth-quarteraverageis23.4%andIthinkitdemonstratesourdisciplinedcapitalallocationispayingoffaswelookacrosstheglobeonhowweinvest.

Withourstrongperformanceinthecashwehavegeneratedithasenabledustoreturnmorethan$3billiontoourownerssofarthisyearthroughthesharebuybacksthatweannouncedearlythisyearaswellasdividends.AndIamalsopleasedthatFitchreaffirmedourperformancebyraisingGMandGMFinancialtoinvestmentgrade.

SobeforewegetintotheQ&A,Iwanttocouplewiththisstrongfinancialperformanceandjustgiveyouacoupleofexamplesofthingsthatweareworkingonandcontinuingtodotoachievethestrategicprioritiesthatwelaidoutlastyear.

First,aswelookattechnologyandinnovation,wedohavealotgoingon.OneexamplethatIdon'tthinkalotofpeopleknowaboutiswehavejustcompletedaridesharingprojectatGoogle'sheadquarterswherewehad50ChevroletSparkEVs.WelearnedatremendousamountofridesharingfromawholeecosystemperspectiveandalotofthoselearningsaregoingintotheCarUnitycarsharingappthatisbeinglaunchedwithOpelinEurope,whichallowsconsumerstorenttheirvehiclestoothers.Sothat'sjustoneexampleinwhattheurbanmobilityspace,aspeoplecallit.

Fromaconnectivityspace,wecontinuetogrowOnStarand4GLTE,andwehaveover1millionvehiclesontheroadtodaywith4GLTE.WewillalsoseeOnStarenterEuropewiththelaunchof--whenwelaunchtheOpelCorsaandwithOnStarwe'llenterBrazilaswelaunchtheChevroletCruze.

IthinkanotherimportantareainthisspaceiswithourGMsmartphoneintegrationtechnology.Itallows

yoursmartphone,whetheritbeAppleorAndroid,toprojectcertainthingsthatyouareveryusedtousingonyourphoneontothecar;noteverything,butsomekeyareas.Thisisreallylisteningtocustomersandputtingthematthecenter.Andyouaregoingtoseeusexpandthistoglobalmarketsveryquickly.

SoIthinkyoucanexpecttocontinuetoseeGeneralMotorsbeveryaggressivewhenwelookatthetechnologyandinnovationwearebringingintothevehicleandforthewholeownershipexperience.

Let'smovetoanotheroneofourstrategicpriorities,oractuallytwo:earningcustomersforlifeandbuildingstrongbrands.Letmejustgiveyouacouplehighlightshere.

Fromaqualityperspective,NorthAmericawewonfourJ.D.PowerinitialqualitysegmentawardsfortheChevroletMalibu,Equinox,Silveradolight-dutytruck,andtheSpark,andChevrolethad10modelsinthetopthreeoftheirsegments.JustthisweektheyalsoannouncedtheJ.D.PowerAPEALStudy.Again,we(technicaldifficulty)performancewithfoursegmentawardwinnersanddemonstratingcontinuedimprovement.

Fromasalesmomentumperspective,withChevroletandGMCfull-sizedpickupsthatmomentumwascontinuing.Sharewasupto38.5%forthequarterandthatisa2.9%year-over-yearimprovement.Wealsorevealedadditionalproductswiththe2016ChevroletCruze,theCamaro,andtheCamaroconvertible,andtheyallreceivedverypositivereviewswiththosevehicles.

InChina,weachievedrecordfirst-halfretailsalesof1.7millionvehiclesandwegainedmarketshare.Ithinkit'sveryimportant,andIknowwewillhavetheopportunitytotalkmoreaboutChinaaswegothroughthecallhere,butveryimportantan83%increaseinSUVsalesandrecordsalesforBuick,Cadillac,andourBaojunbrand.

AndjustaninterestingfactwiththeBaojunbrand--andthisactuallyisalaunchthatisinJuly,sothirdquarter.ButtheBaojun560,whichisanSUV,withinthefirst24hoursoflaunchwehad15,000orders.Again,wewilltalkmoreaboutChina,butsomeimportantprogresswasmadeinthesecondquarter.

AtGMFinancialourNorthAmericaretailpenetrationgrewtoalmost30%,upfrom10%ayearago,andit'simportanttonotethesecondquartermarkedthefirstfullquarterinwhichwehavepositionedGMFasour

exclusiveleaseprovider.SoIthinkitdemonstrateswearewellunderwaywiththeGMFstrategythatwehaveoutlined.

Aswelookatdrivingcoreefficiencies,youwillseethroughthedeckandalsointhecommentsthatChuckandIwillmakeaswegothroughtheQ&A,therehasbeenalotofworkdonejusttocontinuallyhavedisciplineindrivingefficienciesintoeveryaspectofourbusiness.Butanotherwaytodrivecoreefficienciesispartnering.

AverygoodexampleofthatisarecentagreementwithIsuzuintheUStoproducethelowcabforwardtrucksforChevrolet,andthiswillbeginnextyear.Thisisreallyimportantbecauseitgivesusabroadersuite,whichisveryimportantforthecommercialcustomersthattheywantone-stopshopping.Sohavethisnotonlyasanopportunitytohavethistruck,butalsowebelievewillhelpussellmorefull-sizepickups.

SobeforeIturnthecallovertoChuck,Iwouldliketospendaminuteortwotalkingaboutour2016targets.Webelievetheresultsinthefirsthalfoftheyeardemonstratethatweareontracktoachievethe2016commitmentswehavemade.IfyoulookatNorthAmerica,ourpotentialforachievinga10%EBITadjustedmarginin2016isevidencednotonlybywhatwedidinQ2,butwitheightstraightquartersnow

ofyear-over-yearmarginexpansion.Andontopofthatwe'vegotsomeimportantlaunches.

WealsoprojectthattherewillbecontinuedhighdemandfortrucksandSUVsandourthree-truckstrategyisreapingstrongbenefits.ThatisevenbeforetherefreshedSilveradoandSierrapickupswithnewpowertrainenhancementshitthedealershipslaterthisyear.Aswelookat2016,ourlaunchscheduleagainisaggressive.Wewillhavereplacementsforthehigh-volumeChevroletCruzeandtheChevroletMalibu.Andremember,aswetalkedabout,thosehaveanestimatedvariableprofitimprovementofabout$1,500perunit.

WhenyoutalkaboutEuropeandachievingourgoalnextyeartohavebreakevenperformance,againwearegettingclosertothatgoal.WiththeAstralaunchlaterthisyear,wewillhavefullavailabilityofbothourhigh-volumeCorsaandAstrain2016.Andtolookatthat,thosetwomodelsrepresentabout50%ofourvolumeinEurope.And,again,weexpectthattheestimatedvariableprofitimprovementwillbeabout$900fortheCorsaandaboutover$1,200fortheAstra.

ChuckisgoingtotalkaboutChinaabitmore,butIwanttomakeacouplepoints.First,weexpectamorevolatilemarketinChinaasgrowthmoderates.Ithasn'tchangedourlong-termviewofChina.Wecontinuetobelievethatthemarketwillgrow.There'sestimatestoabout35millionunitsoverthenext10-to15-yearperiod.

Wearewell-positionedrightnowinthatmarketandwewanttocontinuetobewell-positionedtocapitalizeonthatgrowth.WehaveaverystrongpartnerwithSAIC.WeareseeingthebenefitsofwhatwearedoingwithCadillacandthegrowth--evenadditionalgrowth.WehavesubstantialgrowthopportunitieswiththeCadillacbrandandyouwillseeacrossallofourbrandswe'regoingtocontinuetohaveaveryaggressiveproductcadence.

Havingsaidthat,though,Ithinkaswelookatamarketasitrapidlymaturesweneedtolookatotherwaystocontinuetodriveperformance.AndinChinawearealsodoingthatthecaptivefinancecapabilitythatwearegrowing,ourincreasedaftersales,andOnStar.Again,wearegoingtolookatmultiplewaystocontinuetodrivethemomentuminChina,recognizingthattherehasbeenachange.

Insummary,averystrongquarterwithanEPSadjustedof$1.29.Weareconfidentasweexecutethroughthisyearandintonextyear.

Iwilllookforwardtoyourquestions,butrightnowI'mgoingtoturnitovertoChuck.

ChuckStevens (EVP&CFO):

Thanks,Mary.Ijustwantedtotakeacoupleofminutesthismorningtoprovidesomeperspectiveonthequarterandthefirst-halfresults.

Inadditiontoagreatsecondquarter,wealsohadaverystrongfirsthalffortheCompany.ProfitabilityEBIT-adjustedresultsforthefirsthalfgrewto$5billion,up$600millionyear-over-yearwhenadjustingfortheimpactofrecallslastyear.And,importantly,EBIT-adjustedmarginsforthefirsthalfwereat6.7%,up110basispointsyear-over-year,againadjustingfortheimpactofrecalls.Greatresultsandresultsthatareverymuchonplan.

Theresultswerebroad-based,withallbutoneofourautomotiveregionspostingyear-over-yearprofitimprovementduringthefirsthalfoftheyear.Andalthoughweareverypleasedwiththestrongperformanceyear-to-date,wecontinueandwillcontinuetotakeactionstofurtherpositiontheCompanyforlong-termsuccess.

Forexample,thesecondquarterincludeda$300millionassetimpairmentchargeforGMThailand.Thischargewaslargelyrelatedtoongoingstrategicactionstoreconfigureandrestructureourbusiness,

includingfocusingoncoretruckandSUVbusinessinThailand.Webelievethattheseactionswillpositionthecountryforlong-term,sustainedprofitabilityanddrivereturnoninvestedcapitaltothetargetlevelsthatwewanttoachieve.

TherestructuringactioninNorthAmericaannouncedduringthequarterisanotherexampleofusreconfiguringthebusinesstoimproveourlong-termprofitability.

IwouldliketospendafewminutesonChina.Byfar,thatisthebiggestconcernbeingraisedbyourinvestorsandthebiggestconcernsarearound,obviously,themoderatinggrowthinChinaanditspotentialimpactonGM.Soletmeprovidesomecommentaryonthattopic.

Atthebeginningoftheyear,wehadareallyplannedforsomeindustrymoderationandincreasedpricecompetition.Ourinitialassumptionsasweentered2015were6%to8%industrygrowthoveralland3%pricedeteriorationonayear-over-yearbasis.Ithasbeencleartousforsometimethatthemoderationisstrongerandthepricingenvironmentmorechallengingthanweanticipated.

However,Ithinkit'simportantthatdespitethesedevelopments,wegeneratedverystrongperformanceinthesecondquarterandthefirsthalfoftheyear.$1billioninequityincomeinthefirsthalfoftheyearwith10.1%netmargins,whichrepresentsmarginexpansiononayear-over-yearbasisandamuchmoredifficultenvironmentinChina.

Wewereabletogeneratetheseresultsspecificallybecausewehadbeenveryproactivelymanagingthemarketriskswithseveralactions,suchasfurtheroptimizingmixbyincreasingproductionsofourSUVs.Marymentionedyear-to-dateSUVsalesareup83%versus2014.TheteamsinChinahavebeenaggressivelyreducingcostsbyrollingoutcost-down/efficiency-upinitiativesandwehavebeenworkingcloselywithourdealerbodytomanageinventorylevels.

Clearly,onthebackoftheseproactivemeasures,basedontheresultsthatyousawinthesecondquarterandthefirsthalf,wewereabletooffsetmarketandpricepressurestocontinuetodeliverstrongearnings.Ithinkitisimportantalsotopointoutthat[GMW's]BaojunportfoliocontinuestoexpandandthatprovidesGeneralMotorswithauniqueopportunityintheChinamarkettocompetestronglywithdomesticOEMportfolios,andparticularlyintheTier2,3,and4citiesandparticularlyinthefast-growingSUVandMPVsegments.

Lookingforward,weareexpectingcontinuedmoderationofindustrygrowthandweexpectthemacroeconomicvolatilitytocontinue.Frankly,basedonthecurrentenvironment,wenowexpecttheindustryinChinatogrowforthefullyearinlowsingle-digitrangeversus2014.Anddespitesomewhatanemicgrowthinthefirsthalfoftheyear,fromanindustryperspectivearound1%,ourlowtomidsingle-digitgrowthforecastisunderpinnedbyseveralfactors.

First,thelaunchcadencebyseveralOEMs,includingGeneralMotors,thatwillintroducenewmodelsinthesecondhalfoftheyear,whichshouldspurdemand.Next,seasonality.TypicallythesecondhalfinChinaisthestrongerhalf,drivenbynationalholidaysinthefourthquarteroftheyear.

Andthen,finally,thepotentialrecoveryfromthecurrentreactiontothevolatilitiesinthestockmarket.Clearly,JuneandthusfarinJulythere'sbeenprettysignificantheadwindsonayear-over-yearbasis.Wedon'tanticipatethatthatisgoingtocontinuethroughtheyear,butthatissomethingwe'regoingtohavetomonitor.

Despiteourrevisedindustryoutlook,weexpecttosustainourfirst-halfperformancethroughouttherestoftheyear.Specifically,increasemarketshareandsimilarequityincomelevels.

Thereareanumberofdriversthatgiveusconfidenceinouroutlook,whichincludeournewlaunches,

liketheBuickVeranoandBaojun560SUVthatMarymentioned;continuedsuccessoftheEnvision,whichisexceedingourexpectationsandcontinuestogrowonayear-over-yearbasis;andfurthergrowthinCadillac.

Second,improvedmixagaindrivenbyrecentlylaunchedproductsliketheBuickEnvision,theBaojun730,andtheBaojun560.Again,aswementioned,SUVsalesareupover80%year-over-yearandtheBaojunbrandsalesareup370%onayear-over-yearbasis.

Third,furthercostactionsandefficiencyimprovements.Ithinktheteamdemonstratedinthefirsthalfoftheyeartheabilitytobeagileandaddressheadwindsandactively,proactivelymitigatethose.Again,basedonourresults.

Ithinkit'salsoimportanttorememberthatourfirst-halfresults--andwetalkedaboutthisinthefirstquarter--werenegativelyimpactedbyplantdowntimeandlaunchcostsaheadofnewproductintroductions.WealsorecognizedoneoftheareascausingelevatedconcernsinChinarelatestopricing,andletmeprovidesomecontextinhowwethinkaboutthatasitrelatestoGM.

AsImentionedbefore,inthepastwehadexperiencedcarryoverpricereductionsofabout3%onayear-over-yearbasis,andgenerallywewereabletolargelyoffsetthatthroughmaterialcostperformance.For2015,giventheincreasedpricingpressures,weareexpectingpricereductionsinthe5%to6%range,giveortake,andobviouslythisissomethingwewillmonitorclosely.

Asageneralruleofthumb,a1%carryoverpricereductionatSGMisworthabout$100millionofequityincomeforGM,absentanymitigatingactions.AndIthinkthat'simportant:absentanymitigatingactions.SimilartoQ1andQ2,wewillcontinuetolookforopportunitiesandweplantofindopportunitiestooffsetthosepriceheadwinds,includingimprovedmixandcostefficiency.

AsImentioned,you'dexpecttheteamisworkinghardonthecostsidetoensureweprotectourprofitability.Wearehighlyfocusedonthat.

Sobottomline,werecognizethemarkethasbecomemorechallenging,butweareconfidentinourplanandwe'retakingthenecessaryactionstohelpmitigatetheseheadwinds.Finally,withregardtoourtotalcompanyoutlookforthebalanceoftheyear,weareverymuchonplanforimprovedfull-yearprofitandmargingrowthversus2014,verymuchonplaninthefirsthalf.ThiswilltranslateintoEBITadjustednorthof$10billiononatotalcompanybasisandourexpectationsarethesecondhalfisgoingtobegreaterthanthefirsthalf.

Andtherewillbeassuredlyputsandtakesversusouroriginalexpectationsaswemovethroughtheyear.Therehavebeenalreadyputsandtakesversusouroriginalexpectations,ifyoulookatSouthAmericaandsomeotherdevelopments,but,overall,weexpectaverystrongoutcomefortheCompanyforthefullyear.

Sothatconcludesouropeningcomments.Wewillnowmovetothequestion-and-answerportionofthecall,thanks.

QUESTIONS&ANSWERS

Operator :

(OperatorInstructions)RodLache,DeutscheBank.

RodLache (Analyst-DeutscheBank):

Goodmorning,everybody.Thanksforthat--allthoseinsights,especiallyonChina.Washopingyou

mightjustclarifyafewthingsforus.

Oneis,Chuck,that1%isabout$100million.Lastyearthatwasa$44billionrevenuebusinessunconsolidated,soIwouldthinkthat1%isover$400millionandwemightgethalfofthat.Sowhatarewemissingthere?

Iwouldimaginethatyourfixedcostsisupalittlebitjustgiventheincreasingcapacity.Canyoumaybecommentonmaybewhatthesensitivityisforevery1%movementinvolumeforyou,justgivenhowyourmixhasshiftedtoday?

Yes,letmetalkaboutthepricefirst.ThepriceandthepriceimpactislargelyisolatedtoSGM.GivenSGMW'spositioninthemarket,theirstrengthinthecommercialvehiclesegment,wearenotseeingthesamekindofheadwind.It'sreallyaroundSGM,soIthinkthatcarvesoffapieceofthe$44billion.

Secondly,thatiscarryoverprice.So,similartoallothermarkets,aswelaunchnewproductstheyarenotfacedwithayear-over-yearpriceimpact.Sothatwouldbetheotherdriverofthat,Rod;whythatis$100millionversusjusttaking1%of$44billion.Ihopethatansweredyourquestion.

Clearlyonyourfixedcostside,yes,aswementionedinthefirstquarterandeveninthefirsthalf,there'ssomeincrementalcostsaroundmanufacturingassociatedwiththelaunch,incrementalD&A,butthere'sstillopportunitiestodriveimprovementinfixedcostsinindirect,inSG&A,indrivingoverallefficiency.AndthatiswhattheteamisveryfocusedoninChina.

Again,fromanoverallindustryperspective,itreallydependsonultimatelyhowthatplaysout.Ourviewrightnowisthatinthatlowsingle-digitgrowthinindustry,wewillseeareasonableimprovementinpassengervehiclesandmoreheadwindsincommercialvehiclesinthecontextofthatoverall.Sothere's--thathasabitofanimpactonmutingtheimpactonouroverallresults.

Myperspective,Rod,whenlookingonayear-over-yearbasis,thebiggestrisktousorthebiggestriskfromaChinaperspectiveisreallypricingmorethanindustrywhenwelookattheoverallpicture.

What'sthesensitivityfora1%moveinvolume?Andcanyougiveusmaybealittlebitofinsightinto--?Youmentionedtwosourcesofgrowth.OneistheTier2through4regionsandsomeofitiscomingfromthenewproduct.WhatistheexposuretodaytoTier2through4andwhatkindofvolumeswouldyouexpectfromsomeofthesenewproducts?

IfyoulookatouroverallvolumeinChina,roughlyhalfofitisSGMandhalfisWuling,broadstrokes.AndwithinWulingisBaojun,sothevastmajorityofWulingsalesareinTier2,3,and4citiesandBaojunbrandisup370%year-over-year.Sothatkindofgivestheideaoftheopportunitythatwehaveinthosecitiesandtheexpectedimprovementthere.

ThepressureintheTier1citiesisreallywheretheforeignOEMsdominate.That'swherethepricepressureisandthat'swheresomeofthevolumepressureisaswell.

Sowhatisthesensitivityfora1%move?Istherearuleofthumbthatwecoulduse?

Iwouldthink,ifittranslatedintoafulldollarofrevenueit'sgoingtobekindofsimilartothepricesensitivity.Hardtolookatthatwithoutfactoringinmixandwhere--Ican'tcomeupwithageneralruleofthumb,Rod,onthatbecausethere'sdifferentdrivers.Itdependsagainwherethat1%wouldfall.

Okay,onelastthing,ifImay.IknowI'mtakingtoomuchtimehere.ButinNorthAmericayouaredoingsomeprettyimpressivemargins,especiallyinlightofthefleetpricingandrestructuringcostsandrecallthatyouhad.

Thereareanumberofthingsthatyouhavesaidbeforethatareinyourcontrol,likeproductmaterialcostdeclines,andsomeofthatseemstobecomingthrough.Whatshouldwebethinking,ifyoucanjustrefreshourmemory,intermsofthecostreductionexpectation,netcostreductionforthisyearandnextinNorthAmerica?

Iwilltalkaboutmaterialcostsoncarryoverthusfarandoverall[GPSE].Fromacorporateperspective,wegeneratedabout$1.1billionofyear-over-yearimprovement,roughly$600millionto$700millionofthatwasinNorthAmerica.Ourexpectationswouldbewewouldseethatcontinueintothesecondhalfoftheyear.

Overallfixedcosts.Againfromacompanyperspective;year-over-yearlooktoberelativelyflattoslightlyup.Wecontinuetodrivealotofefficiencywithoperationsexcellence.Sooverallcost,againexcludingthematerialcostsonnewmajorkindofproductprograms,willbedown;fromamaterialcostperspective,relativelyflatfixed.AndIthinkthatisalsoconsistentforNorthAmerica.

Samecadenceintonextyear?

WewilltalkaboutnextyearwhenwecomeoutandtalktoyouinJanuary.

Okay.Thanks,guys.

Operator :

JohnMurphy,BankofAmerica.

JohnMurphy(Analyst-BofAMerrillLynch):

Justafirstquestiononslide14onNorthAmerica.Ithinkyouguyshadalludedtoabouta$300millionhitinauctionsforsomerecallaction,similartowhatwesawinthefirstquarterwhereitwasalittlebitlarger.Ifweweretobackthatout,thatwouldprobablyaddabout1.1%tothe10.5%thatyouguysprinted.

Isthataboutright,Chuck?Isthatwhereyoushakeout?

Themathiscorrect,John.Whenyoulookatjustthatdriverofthebusiness,look,theresultsinNorthAmerica,10.5%margins.Ithinkmarginspeakforthemselvesandclearlyoneoftheheadwindsthatwehadtooffsetinthequarterwasthatauctionissueandthelossatauctionissueonfleet.

Butaswemovethroughtherestoftheyeartherewillbeputsandtakesaswell,butclearlythecoreoperatingperformanceinNorthAmericawasverystronginthesecondquarter.

I'mjusttryingtounderstand;ifweweretobackoutthoserecallactions,aswellastherestructuring,youprobablywould'vebeendoingmorelikea12.4%margininNorthAmerica.Obviously,therewillbeputsandtakesaswegothroughtherestoftheyearandgointo2016,butImeantheongoingunderlyingperformanceisevenstronger.Although10.5%isimpressive,itlooksliketheunderlyingperformanceisevenstrongerthanwhatisgenerallyperceivedandI'mjusttryingtomakesureweunderstandthatright.ButIthinkthat'skindofaboutwherethemathshakesout.(multiplespeakers)

Icertainlywouldn'tdisputeyourmath.MymessagewouldbefirsthalfoftheyearNorthAmericagenerating9.7%EBITmargins,whichtomedemonstratesthatweareverymuchonthepathtoasustained10%marginobjectivein2016.Soweareverypleasedwiththeresultssofar.

Okay.Thenjustaquicksecondquestion;ifwethinkaboutSouthAmerica,a23%dropinvolume,yettherewasalmostnochangeinEBIT.I'mjustcurious,forthatEBITlinetoturnintherightdirection,whatwouldittake.Becauseyouareholdingthelineona23%dropinvolume;couldwebeseeingsomesmallconservationcomingfromSouthAmericaonaverysmallvolumerecovery?

Thisgoesback--andwe'vetalkedaboutthisbefore.Thisgoesbacktotheactionswestartedtoexecutein2012andhavebeenconsistentlyexecuting,andthatistocontinuetodriveefficiencyinthebusinessmodelinSouthAmerica.AndtheteaminSouthAmericadidanoutstandingjobearlierthisyearwhenwesawtheindustryperformanceandthegrowthandsomeoftheheadwindsinBrazilspecificallybutnowkindofspreadingthroughtherestoftheregion,tookvery,veryproactiveaction.WetalkedaboutthatabitwiththeQ1release.

We'vecutourworkforce,hourlyandsalaried,by20%.We'regoingtoseethebenefitofthatinthesecondhalfoftheyearandgoinginto2016.Frankly,IwouldexpectforSouthAmericatoseesecond-halfresultskindofsimilartolastyear,whichisrelativelyclosetobreakeven,evenunderthecurrenteconomicsituation.

Hardtopredictwhat'sgoingtohappen,butunderthecurrenteconomicsituationIthinkyou'regoingtoseekindofthesamecadenceaslastyear.AndmytakeawayiswearehighlyleveragedtoanyrecoveryinSouthAmericaandIthinktheactionswehavebeentakingoverthelastfewyearswillputusinpositiontoquicklygetintoapositiveprofitpositionthere.

SimilarlyonEurope,itwasagoodperformancebutthere'saproductlaunchinthesecondhalfoftheyearandmaybesomemorerestructuringthatmightgoon.Howshouldwethinkabouttheremainderofthisyear?Becauseitlookslikeyouaregettingtobreakevenalreadyandjustcuriousifyoucouldholdthelineonthatinthesecondhalf,orarethereothereventsthatmightchangethepicturethere.

Again,second-quarterresultsisanotherproofpointthattheunderlyingbusinesshasthecapabilityand

weareverymuchontracktoour2016commitments.Typically,ifyoulookatEuropeseasonally,Q3isgenerallyweakerthanthesecondquarterjustbecausethere'sbroad-basedshutdownsacrossthewholeindustryandallthecountries.Soseasonalitywouldsuggestsomeheadwindsinthesecondhalfversustheperformanceinthesecondquarter.

Andaswetalkedabout,biglaunchwiththeAstra,sotherewillbesomelaunch-relatedcosts,bothmanufacturingandpotentiallymarketing,aswetailoutoftheyear.Butformeitwasvery,verypromisingandveryoptimisticbasedontheresultsinthesecondquarterthatwearedevelopingandexecutingtoour2016commitment.Theresultsarestartingtobeaproofpointaroundthat.

Great.Andthenjustlastlyonthebuybackprogram.Ijustwantedtomakesureyouguyshavea10b5-1programinplacesoyoucanbuythroughtheblackoutperiod.Also,isthatrunoffsortofagridoristherearealprograminplacesowhenthestockdropsthereissignificantlymorebuyback?Justtryingtounderstandhowthatprogramisbeingrunandifthere'sanyblackoutperiod,oryoucanjustrunstraightthroughthequarter.

Wehavea10b5-1program.Itwillrunthroughthenextwindow,whichwillopensomewherearoundJuly28.Wedohavesomewhatofabuilt-inflexibilitywherewecanincreasetheamountofsharesthatwearebuyingwithinthatprogramdependingontheperformanceofthestock.

Overallonstockbuyback,consistentwiththecommitmentsthatwemadewhenwerolledoutthecapitalallocationframework,we'vebeenaggressive.We'vebeenaggressivewithintheoverallobjectivetodriveourtargetcashdownto$20billion.Boughtback$2.1billionthusfarofa$5billionprogramandwe'regoingto,asaggressivelyandprudently,aspossiblecontinuetoactbecauseclearlyourstockisundervalued.

Reallygoodquarter.Thankyouverymuch.

Operator :

BrianJohnson,Barclays.

BrianJohnson (Analyst-BarclaysCapital):

InChinacanyougiveusasense--?Youcommentedonretailversuswholesaleinthequarterinthecomments,butjusthowthatbreaksupfrombrandandanyvisibilityyoucangiveusintodealerinventory.

Whatclarityareyoulookingforonretailversuswholesalebybrand,Brian?(multiplespeakers)secondquarter?

Whichbrand--?Yes,inthesecondquarterwhichbrandsdidwholesalesrunaheadofretail?Wherediditlagandjusthowareyouthinkingaboutthatbalancebetweenthetwo?

IfIlookatquarter-over-quarterbroadstrokesinthesecondquarter,retailwasdownslightly1.4%;wholesalewasupslightly1.4%,soreasonablybalanced.Whereweareseeinggoodperformanceonayear-over-yearbasisinthesecondquarteronretail,importantlyCadillacandBaojunandinSUVs,whichareupnorthof80%.Andthatsamedynamicholdsonwholesales.

Butfromadealerinventoryperspective,clearlyattheendofsecondquarterassaleskindoftrailedoffourinventorypickedup.We'renotwayoutofrangeofourtargetthatpickedupabout20,000unitsandwewillworkaswegothroughthesecondhalfoftheyeartomakesurewealignsupplyanddemand.Wewanttomakesurethatweproactivelymanagethatwithourdealersandwehavebeendoingthatinthefirsthalfoftheyear,soalittlebitoutofbalanceattheendofthesecondquarterbutnotsignificantly.

Okay.SecondquestiononChina;youhavetalkedaboutnewGMkindofoperatingmodelsandthedisciplineweareseeingcomingthroughinNorthAmericaandEurope.HowisthatdifferentinChina,giventheJVstructure?Andthenhowdoyou--intermsofthecostreductionsyouneedinlightofthedeterioratingpricingsituation,justhowquicklycanyougetyourJVpartneronboardwithsomeofthosemovesandhowdoesitactuallywork?

MaryBarra(CEO):

Ithinkitworksverywell.Thepartnersworkday-to-day,eventhe--theseniorleadershipoftheteamisveryclosetoourSAICpartners.Andsoweveryproactively,aswestartedtoseethingschange,togetherworkedtolookforefficiencies,lookedtoseizeopportunitiesintheSUVmarket.Again,withtheportfoliothatwehave.

Wejustlaunchedthe560,whichisaveryimportantproductforBaojun,anSUV.Sofromtheportfoliotomanagingmixtolookingforopportunities,weworkonanintegratedbasisday-to-daywithaverystrongrelationship,sothere'snoextrahurdletheretogoafterthat.

Areyouabletomovequicklyshouldyouneedtoadjuststaffinglevels?

MaryBarra(CEO):

I'msorry,Ididn'thearthequestion.

Wouldtheybeabletomovequicklytoadjuststaffinglevelsor(inaudible)enterprisetootherbarriersthere?

SAICisagreatpartnerandvery,verycommerciallyminded,so--andwehavedemonstratedthat.Wehaveregularmeetings;theywerejustinDetroitearlyinJunefortheSGMBoardmeetingandwewerethereinApril,sowearetotallyalignedonwherethisbusinessneedstogo.

MaryBarra(CEO):

WhatIwouldalsosayis,inadditiontohavingagreatrelationshipwithapartnerwhereweaggressivelylookatthechallengesinthemarketplaceandhowtomanagethebusinessappropriately,ourheadofChina,MattTsien,wasintownlastweek.AndChuck,myself,Dan,andothersspentanincredibleamountoftimemakingsurewehaveagoodreadofwhat'shappening,whattoexpect,andtheactionsweneed

totakeagaintostayinfrontofit.

Okay.Andthenfinalquestion,NorthAmerica.Justalittlebitofrentalcaraccounting.Wholesaleswereaheadofproduction.Wasthatthereturnoftherentalcar?DidthatactuallycontributetoEBITDAnetofthepriceimpactorwasthatkindofawash?

Well,you'rerightonthefirstpart;wholesalesbeinggreaterthanproductionlargelywasdrivenbyauctiondisposalsofrentalvehicles.Generally,ifyoulookattheoverallEBITimpact,therentalvehiclesdon'tcontributealottothebottomline,sothatextrawholesalewasnotrealaccretivetoearningsinthequarter.Infact,obviouslytheauctionlosshadabitofheadwindimpactforus.

Okay,thanks.

Operator :

ItayMichaeli,Citi.

ItayMichaeli(Analyst-Citigroup):

Great,thankyou.Goodmorningandcongratulations.JustaquestiononChinaagain.

Chuck,withtheoutlookIthinkforkindofflattishequityincomesecondhalfoftheyear,whatdoesthatcometointermsoftheChinamarginfor2015?Andthenanyupdatedthoughtsaroundtheprior9%to10%mid-decadeandbeyondtargetsthatIthinkyoutalkedaboutforChinaattheinvestorday?

Ouroutlookfortheyear;you'rerightwiththemathonceagainthatit'sgoingtobe--sustainedperformanceinthesecondhalfoftheyearwouldputourequityincomeintherange,giveortake,of$2billion.WehavenotmovedoffofourmarginobjectivesinChinaof9%to10%netmargins.Firsthalfoftheyearwegenerated(technicaldifficulty)percent,sowe'renotmovingoffthat.Andwehavenotmovedoffourlonger-termguidance,mid-guidanceoncontinuing9%to10%margins.

Clearly,wewillcontinuetocloselymonitorthemarketinChina.Wewillcloselymonitorthedevelopmentsthroughtherestofthisyearandpotentialimplicationsoverthenextcoupleyears,butwehaven'tchangedourvieweitheronthisyearorgoingforwardyet.

That'sveryhelpful.ThenjustmovingalongtoRussia.Anyupdateonhowthatwinddownisgoing,maybehowweshouldthinkaboutroughlymodelingthatinto2016?

Theexecutionisgoingverywell,verymuchaccordingtoplan.AndasItalkedaboutinQ1whenweannouncedthis,IwouldexpecttheimpactofRussiaandEuropeanresultstodiminishaswegothroughtheyear.And,frankly,lookingatQ3,Q4it'sgoingtoberelativelyimmaterialbasedonourcurrentview.SowewillhavewoundthroughthoseimplicationsaswefinishtheselldownandtheregularcommercialoperationsthatarestillimpactingEBITDAadjusted.

Gotit,terrific.ThenjustlastquestiononCapExandcashflow;itdoesseemlikeCapExisrunningIthinkbelowtheoriginalguidancefortheyear.Iknowyougotsomeproductlaunchesinsecondhalfoftheyear,butloveanupdatethere.Andalsoyou'restilllookingforfreecashflowtobekindofflattishthisyearversuslastyear.I'mnotsureifthereisanupdatethereaswell.

Sure.Capitalspendfirsthalfoftheyear$3.4billion,whichwasrelativelyconsistentwithlastyearfirsthalf.We'vegotprettysignificantlaunchesasyouthinkabouttherestoftheyear:Astra,Cruze,Malibu.Wecertainlyexpectcapitalspendingandthecashassociatedwiththattoincreaseinthesecondhalfoftheyear.

Wearenotmovingoffofour$9billionguidancefortheyearyet,Itay.Wewillcontinuetomonitorthataswegothroughtheyear.

AsItalkedaboutfreecashflowbefore,Isaidflattoslightlyup.Basedontheperformancewe'veseensofar,Iwouldn'tnecessarilychangethatperspective,butImightunderlineoremphasizeslightlyuponayear-over-yearbasis.Ourperformancesoncashflowisabitaheadofplan,soweareoptimisticthatwewillbeabletodobetterthanweanticipated,butwearenotchangingtheoverallguidanceyet.

Great.Thankssomuchforallthedetailtodayandcongratsagain.

Operator :

RyanBrinkman,JPMorgan.

RyanBrinkman (Analyst-JPMorgan):

Goodmorning.Congratsonthequarter.MaybejusttohonebackinonChinaagain,butkindofdovetailingonthatearlierSouthAmericadiscussion.

YouhaveprovenveryskilledattakingoutcostinSouthAmericawhenvolumedeclinesandtheteamthereisclearlyveryusedtothat.ButinadownsidescenarioinChina,whatdoyouthinkdecrementalmarginslooklike?Idon'tknowthatthere'sreallyaprecedentthatwecanpointtheinvestorsto.

SoI'mcuriouswhetheryouengageinthetypeofdownturnplanninginChinalikeIknowthatyoudoinNorthAmerica.Anycolorwouldbehelpfulwhetherregardtoflexibilityoflabor,abilitytore-timethecapacityexpansion,stuffofthatsortintheoff-chancethatwedoseenotjustaslowingbut,infact,arealpotentialdownturn.

First,asMarymentionedearlier,Ryan,wecontinuetoexpectChinatogrow.Wehaven'tchangedourlong-termviewofChinatobesomewhereintherangeof$35millionandwearenottheonlyonesthatdothat.

Yes,clearlywelookatdownturnscenarios.Welookatpotentialimplicationsthatgrowthisn'tasaggressiveaswethoughtitwasandinarapidlymaturingmarketthere'sgoingtobeincreasedvolatility.Wearenotanticipatingayear-over-yearsalesdeclineyet,butclearlythatissomethingthatwemodelandwelookattheopportunitiestooffsetthatandwhatthatwouldbe.I'mnotreadytosharethatatthispointintime,butwedothatacrossthewholecompanyacrossalltheregions.

Iwouldsaythatwehavenotmovedoffourguidancefortheyearandwehavenotmovedoffour9%to10%guidancefor2016andbeyondatthispointintime.And,asImentionedearlier,wewillcontinuetomonitorthesituationthereandifsomethingchangesthenwewillcommunicateitappropriately.

Okay,great.Thanks.ThenhowdoyouthinkGMispositionedinChinarelativetosomeofthechangestakingplaceinthemarket?YoutalkedaboutthetrendtowardSUVsandCUVs.WhataboutthetrendtowardagreaterportionofthesalestakingplaceinthoseTier3,4,5citiesorinteriorofthecountry,awayfromsortofShanghaiwhereyouarereally,reallystrong?

Perhapsyoucanshareareyoubuildingoutyourdealernetworkanydifferently?Didyoualreadyanticipatethesechanges?WhatareyoudoingtoremainassuccessfulinChinaasyouhavebeenbutinadifferentenvironment?

MaryBarra(CEO):

Ithinkifyoulookevenacoupleyearsback,IthinktheSGMWteamwasverygoodatlookingtoseetheshiftsthatwerecomingwiththecreationoftheBaojunbrandandthennotonlypassengervehiclesfromthecommercialvehiclesthattheyaresogoodatbuildingtotheSUVs,andwiththeMPVthatwewillrolledoutandnowtheSUVthatcomingout.SoIthinkitwasanticipatingwherethemarketwasgoing.

Andthatsomethingalso,withthepartnerandtheseniorleadership,welookandtrytolookoverthehorizontoseewherethemarketisgoingtobe,wheretheopportunityis.Thenthatisaverycapableteamfromanexecutionperspective.Theyhaveaverygood,strongbrandreputationacrossthecountry.

IfyoulookatthisBaojun560SUV,ithas,I'dsay,someprettysubstantialtechnologyinitwhenyoulookatconnectivity,whenyoulookatcrash,whenyoulookatthematerialstrategywithhighstrengthsteel.SoIthinkweareverywell-positionedandIthinksomewhatuniquelypositionedinthatwehavesuchaveryimportantpartnershipwithaverystrongdomesticmakerintheChinamarket.

Okay.Andthenjustlastquestion.Iknowyouareoftenlimitedinwhatyoucansayrelativetolabornegotiations,butIwouldjustobservethatitseemslikeyouannouncedin2QatremendousamountofinvestmentinjobsandfactoriesintheUnitedStates.AndIcouldn'thelpbutnoticethatthesewereaheadof,ratherthaninconjunctionwith,thelabornegotiationsandsortofstoodincontrasttoFord,whichactuallyduringtheperiodoftimethatyouweremakingtheseannouncements,talkedaboutmovingsmallcarproductiontoMexico.

SomaybeyoucouldjustcommentastowhetherthisisareflectionofyourstrongrelationshipwithUAWthatyoudon'tneedtotiethesenegotiationsinconjunction--theseannouncementsinconjunctionwiththenegotiationsandthatyoudoexpectagoodoutcomewiththepartnersthatmaintainsorevenenhancesyourcompetitiveness?

MaryBarra(CEO):

Again,I'mnotgoingtocommentonthespecifics,butIthinkwhenyoulookatit,weareworkingwiththeUAWandhavingconversationsonadailyandweeklybasis.Andsowearegoingtolookatwherewehavecapacity[announcement]expansion,newproductinvestmentstomake,andwelookatdoingthatattherighttime.It'sacontinualcycle.

Iwouldsayoneofthetakeawaysisit'sacontinualdiscussion,but--andIthinkwehaveimprovedtherelationshipandbothpartiesworkhardtodothat.Thatisnottosaythatthereisnotissuesthatwehave

gottosolve.Weareactivelyworkinganddoingthatandusingourcreativeandconstructiveproblem-solvingtolookattheissuesandfindtherightsolutionthatisgoingtobegoodfortheCompanyandhelpusimproveourcompetitiveness,aswellasbesomethingthatisgoodfortheworkforce.

BecausetheUAW--asyoustepbackasidefromthenegotiations,weworkjointlytogetheronsafetyandIthinkoursafetyleadershiprepresentsthat;thequalityworkwearedoing.Andwearetakingthattothenextlevel.

Whenyoulookattheschemingthatwehavedoneourplantstobeabletogetmoremidsizetrucksandeverysinglefull-sizetruckandSUVout,againthat'sdoingthatinpartnership.Sothatisthefundamentalsoftherelationship.We'llworkthroughtheissues.Again,weareconstantlytalkingsoit'snotasitmayhavebeeninthepastthatit'ssavingthingsupforthenegotiation.ButIdon'twanttounderemphasizethatwedohavesomeimportantworktodoandweareonit.

Okay,that'sgreattohear.Thanksandcongratsagainonthegreatquarter.

Operator :

PatrickArchambault,GoldmanSachs.

PatrickArchambault (Analyst-GoldmanSachs):

Thankyou.Goodmorningandcongratsontheresults.AcoupleofChinaquestionsandthenonekindofbroaderproductquestion.

JustIthinkitwashitonalittlebitinRyan'squestion,butthemiximpact;howwethinkaboutitnet-netsomeofthetrendsthataregoingon?It'sobviousthatyouarehavingalotofsuccessintheTier2andTier3citieswhereWulingandBaojunaredoingvery,verywell,right?Butontheflipside,youhavethemoretraditionalSGMproductsthataremorecoastalthatonewouldthinkarehighermargin--theyarecertainlyhigherrevenue--thatareflattishanddownincertainmonths.

AndthenIguessoverlayingthatyouhavethisSUVtrend.SoI'mjusttryingtothinkaswe--forgettingaboutcostsavesforasecond,justaswethinkaboutthevariableimplicationsofthosetrends,wheredoesthatpushmarginsaswegoforward?

Ithink--andlet'sbifurcatejustabitbetweenSGMandSGMW,andwetalkedaboutitbeforewhenwetalkedabout2015andwhatweexpectedtodo.Pricingheadwinds--and,clearly,theyaremorechallengingthanwethought--wouldbeoffsetbymix,mixdrivenbySUVsandCadillacgrowth.WeareseeingbothofthatintheSGMchannel,thegrowthinSUVsup80%andCadillacisupyear-over-year.Wealwayslookedatthatnotonlyfor2015,butbeyondasawaytocontinuetomaintainthemarginsinChina.

SGMW,Ithinkyouhavetwoimplications.YouhavethepassengercargrowthintheBaojunbrandthatisreallygoingtohelpusinTier2,3,and4citiesandyouhaveSUVs.AndtheSUVmarketissplitbetweenkindofpremiumSUVs,likeBuickEnvision,theTraxasanexample,EncoreandotherproductssoldintheTier1cities,andthelowercostSUVs,whichareabiggrowthdynamicinTier2and3and4.

SoSUVsapplytobothTier1andTier2,3,and4cities.CadillacappliestoTier1.Thatmixiswhatisgoingtohelpusmaintainthose9%to10%margins,assumingconditionsnormalizeasweexpecttheywillandgetbackonagrowthtrajectoryinChina.

Okay.Itsoundslike,despitethefactthatsomeofthelocal-orientedstuffisdoingwaymorethanyouwouldhavethought,it'sstillwithintherealmofbeingabletostickwiththatmixstatement.

Oneotherquestionon--justtheimpactofcreditinChina.Itakeitthat'scapturedinGMFratherthaninyourChinaoperatingsegment.Haveyouguyskindofdisclosedanorderofmagnitudethere?BecauseIcanimaginethatthatisprobablystartingtogetimportant.

Onthefinancecompanyequityincome?

Correct,yes.

Yes,thatwillbeinGMFinancial'sresultsanditwillbeGMFinancial'sresultsthattheypublishlatertoday.Broadstrokes,it'sabout$25millionofbenefitinthesecondquarteronourequityshareinGMF.

Gotit,helpful.Andthen,Mary,maybemoreofaproductquestion.

There'snoquestionthatfromatechnologyperspectivethere'satremendousamounthappening,everythingdowntothe4GLTEstuffthat'sbeingrolledoutaggressivelytotheSuperCruisefornextyear.Butthere'sbeenalotwritteninthelastweekactuallyjustaboutsomeofthesecurityconcernsandsoIwasjustwonderinghowyouwerethinking--.Youguysprobablyhavethemostaggressiverolloutofconnectedcarsofalmostanybodyandwaswonderingjusthow--whatkindofsecurityprotocolsyouareabletoputinplacetomakepeoplecomfortablethatthoserisksaremanageable.

MaryBarra(CEO):

Goodquestion,andit'ssomethingwehavebeenworkingonforacoupleyearsnowandveryactivelyinthewaythatwelookatthewholesystemandthelevel--.Reallywhenyoulookatcybersecurityyou'vegottolookatlevelsofsecurity,becauseyoulookatvehiclesontheroadtoday,theyareontheroadfor11years.Andsoaswemoveintoaworldthathasmoreconnectivityyou'vegottomakesurenotonlydoyouhavemanylayersofprotectioninthedesignofthevehicle,butthenalsowhat'sveryimportantisourover-the-aircapabilityaswell.Thatifsomethinghappensyouareabletoquicklygoinandpreventandcorrectifthat'snecessary.

Sowehave--wenamedlastyearourchampion,namingaChiefProductSecurityOfficer,JeffMassimilla,whoisonourteam,wholivesandbreathesthiseveryday.We'vepartneredwithexternalexperts.Weregularlydotesting,butthisisanareayouhavetostaydiligentonandkeeplookingbecauseit'sacrossallofindustry.Wetakeitveryseriously;weworkhardatiteverydayandit'sakeyfocus.

Okay,terrific.Thanksalotforalltheperspectives.

Operator :

EmmanuelRosner,CLSA.

EmmanuelRosner (Analyst-CLSA):

Goodmorning,everybody.WantedtoaskyoufirstaboutthepricingenvironmentintheUS.ObviouslyinyourNorthAmericanearningsworkitseemslike,focusingontheretailside,pricingwassortofslightlynorthofflat,whichisobviouslyaprettygoodperformance.Atthesametime,whenIlookatslidenumber12andyoubringbacktheATPincentiveinformationfromJ.D.Power,itseemslikeyourincentivesaresortoflikejustbeensteadily,butfastincreasingthroughoutthequarterfromlike10%ofATPinthefirstmonth,11%,andthen12%finallyinJune.

AndthenfromwhatweheardsofarinJuly,there'sbeenalsoincreasedincentives,particularlyonthetruck.WouldyoubeabletocommentonareyouseeingsortofadeteriorationofUSpricingoraneedtoaddincentiveinspecificsegments?

Iwillgiveabroadperspective.Overall,intheUSindustrythisyearourexpectationsare,onaretailbasis,arelativelybenignpricingenvironment.Wetalkedaboutthatwhenwetalkedaboutcarryoverpricingbackatthebeginningoftheyearandthat'splayingout.AndIwouldexpecttoseepricingimproveaswemovethroughtherestoftheyearandstarttolaunchsomeofthenewproducts.InQ3,Q4,orearlyQ4,thecarryoverpricingdynamicwillcontinueasithasbeeninthefirstpartoftheyear.

Fromanincentivespendingperspective,thatwill--asapercentoftransactionprice,thatwilltogglebackandforthdependingonspecificgo-to-marketstrategiesatanypoint.Myexpectation,Emmanuel,fortherestoftheyearwouldbethatwewillbeattherunratewehavebeenfortheentireyear,somewhereintherangeof10.5%to11%forthebalanceoftheyear.Overallindustryhasbeendisciplined.Wehavebeendisciplinedandwe'regoingtocontinuetobedisciplined,buttherecanbesomevolatilitywithinanindividualmonthforsure.

Okay,that'sgreattohear.ThenmysecondquestionisonChinaactually.WhenIthinkaboutChinaItotallyagreewithyouthereissomevolatilitynowandobviouslystillaveryexcitingmarketforthelong-term.

Thepartthatsortofworriesmeinthemidtermismoretheamountofcapacitythat'scominginintoChina.AndsowhenIlastmetyourChinateam,itsoundedlikeyouwantedtoincreaseyourcapacityfrom4millionunitsto5millionunitsoverthenextfewyears.Isthatstillthegoal?Andtotheextentthatyouwouldseeapronouncedslowdown,doyoustillhaveroomtosortofpullbackonsomeofthesecapacityadditions?

MaryBarra(CEO):

Absolutely.ActuallyaddingcapacityinChinaissomethingthatwecandoquitequickly.Sowewillcontinuetomonitorthesituationandlookat,aswehaveourplanstoaddcapacity,todoitprudentlywithadailyreadonwherethemarketisandthenlookingoverthathorizonfromatrendofwhereit'sgoing.Sowewillbemonitoringthatcloselyandwewillonlydowhenwethinkit'sprudenttodo.

Istherearuleofthumbthatyoucouldpointto,likehowmanymonthsoryearsinadvancetheplansthatareinplacewillhavetohappen,let'ssayinthenextsixmonths,ayear?Andhowfaroutcanyouactuallysortofpullbacksomeoftheseplans?

MaryBarra(CEO):

Ithinkthere'salotofdifferentwaystoaddcapacity.Youcanaddcapacitybyincreasinglinerate,whichismoreequipmentchangesorsmallerexpansions,allthewaytoanall-newplan,andeachofthosehavedifferenttimelines.ButIwouldalsosayChinaisoneofthequickestacrossallofthoseaspectsofbeingabletoaddcapacity.Again,thosearealltheleverswehave.

Justafor-instanceexample,ifyouseeyoustillneedcapacitybutitmightbeslightlylessthanwhatyouthought,youcanpickanoptionofexpandinganexistingplanorincreasinglinerate,etc.Sowewillbelookingatallofthat;thatissomethingwehavealotofexperiencefromaroundtheglobethatwebringtothetableasweworkwithourpartner.Again,itwillbeverydynamicandbasedonnotonlytheday,themonth,butwhatweseeandwhatwepredictthetrendwillbeaswegoforward.

Great,thanksforthecolor.

Operator :

MikeStover,SusquehannaInvestmentGroup.

MikeStover (Analyst-SusquehannaFinancialGroup):

Thanksverymuch.Mostofmyquestionshavebeenhit,butahousekeepingitemonthecashflow.Couldyougiveusasenseofanycashusedforfundingrestructuringactionsandthenanycashthatwould'vebeenimpactedbyrecall-relatedoutflows?

Weindicatedatthebeginningoftheyearthatweexpectedroughly$1.2billionofrestructuring-relatedcashandabout$1.5billionofrecall-relatedcashtoimpacttheresultsthisyear.Stillgenerallyinlinewiththatfirsthalf;wasabouthalf--andsecondhalfwillbeabouthalf.Andsoverymuchaccordingtoplanonbothrestructuringandrecall-relatedcash.

Okay.SoifI--Iamjusttryingtopencilinbackingoutwhathappenedinthefirstquarter.IfIassumethathalfofbothofthoseitemsoccurredinthefirsthalf,thatwouldbeaboutright,Chuck?

Yes,thatwouldbe,broadstrokes,aboutright.

Okay.ThenthesecondthingwasontherampofthenewproductinNorthAmerica.Doyouexpectforthattohaveabiggerimpactontheincrementalcostatthebeginningof2016orshouldthatbeginattheendof2016?Sorry,endof2015rather?

Ithinkthere'stwoaspectsofthat.There'spreproductionstartupandlaunchfromthemanufacturingperspective,andIthinkthatwillprimarilyhitin2016,andthenthere'slaunch-relatedcostswhichwouldbeadvertising.

Onanymajorprogram,whenyoulookatbothofthose,theyareroughlyaboutthesame.Thelaunchmanufacturingcostsandthemarketinglaunchcostsareroughlythesame.Soagain,thinkingaboutthelaunchcadence--theCruze,Malibu,andeverythingelse--Iwouldthinkthere'sgoingtobesome

manufacturingprimarilyinthefourthquarterandmarketingprimarilyinkindofthefirstquarterandsecondquarternextyear,broadstrokes.

Okay,great.Thanksverymuch.

Operator :

DanGalves,CreditSuisse.

DanGalves (Analyst-CreditSuisse):

Thanks,guys.Greatexecutionvarietyofareas,congratulations.

IhadacouplequestionsonNorthAmericaforthebackhalf.Isthereanywayyoucanhelpuswithwholesaleshipments?Typicallyitlooksaboutkindofevenfirsthalfversussecondhalf,butmaybewiththeincreasedrentaldisposalsinthefirsthalfitwouldbealittlelowerinthesecondhalf.Anycoloryoucangiveusthere?

Goodquestion.Typicallysecondhalfoftheyeargenerallyinline.Iwouldsuggestthataswecyclethroughthethirdquartertherewe'regoingtoworkourwaythroughtheseauctionlosses.ThenyouhavethefourthquarterwiththeThanksgivingandChristmasholiday.

Soforplanningperspective,Iwouldthinkrelativelyflattoslightlydowninthesecondhalfoftheyearversusthefirsthalfonwholesales.Again,justgiventheseasonalityinthefourthquarter.

Okay,great.ThenjustgoingbacktoJanuary,onethingonNorthAmericayousaidwasthatitlookstomethatyouwereexpectingfixedcostincreasesrelatedtolaunchestooffsetthe--tomorethanoffsetthereductionsinmaterialcosts.Itlookslikethroughthefirsthalfyouarewayaheadonthatmetricwithmaterialcostsdownalot;fixedcostsbasicallyflat.

Shouldwebeexpectingthatstill,likesomereallysignificantfixedcostincreasesinthebackhalf,orhastherebeenachangeintheview?

Ithinkthefixedcostsinthesecondhalfoftheyearwillbeupversusthefirsthalfassociatedwiththelaunch-relatedcosts.TheteaminNorthAmericahasjustdoneadynamic,greatjobinschemingthebusinessanddrivingefficiencyinthefirsthalf.But,again,Iwouldexpecttoseelaunch-relatedcosts,fixedcostsbeupinthesecondhalfandsimilarlevelofmaterialperformanceinthesecondhalfoftheyearaswellthatwesawinthefirsthalf.

Okay,great.AndjustonemoreonEurope.ArethereanykindofbigpiecesyoucangiveusintermsofthesequentialimprovementfromQ1toQ2?IknowvolumewasupabitandweretheRussialosses(technicaldifficulty)abatingquiteabitinQ2versusQ1?

RussialossesmoderatedforsureinQ2versusQ1andpricinglikelygotbetterinQ2versusQ1.Itdidget

betterastheCorsaandVivarorampedup.ThosewouldbethetwobiggestdriversQ2versusQ1.

Okay,sothatwasmoreGM-specificthanindustrywideonthepricingimprovement?

Okay,thanksverymuch.

Operator :

Thankyou.IwouldnowliketoturnthecallbackovertoMaryBarraforclosingremarks.

MaryBarra(CEO):

Thankyouverymuch.Appreciateeverybody'sparticipationonthecall.HopefullyyousawwerecognizethatChina'sabigconcern;obviouslythemarkethaschanged,morevolatile.It'smoderating.

WetriedtoreallybespecificandsharewithyouhowwethinkaboutChinaandhavethatbethefoundationforwhatwethink--andwe'regoingtokeepthepressureonourselvestodeliverinthesecondhalfoftheyear.But,restassured,weareactivelymonitoringitdailyandalsobeworkingveryhardtoproactivelypositionourselvestocontinuetodrivetheperformancethatwehave.

Iwouldalsoliketosay,asyoulookacrossalltheregions,andIwon'trepeatallofthem,buttherearealotofchallengesandopportunitiesineachoftheregions.HopefullyyouseetheGMleadershipteamisreallydriving--seizingopportunitiesandmitigatingchallengesinaveryproactivefashion.

Wethinkouroverallresultsdemonstratetheverystrongearningspotentialofthiscompany.Andwebelievewhenyoulookatwhatwehavebeenabletoaccomplishinthefirsthalfofthisyear,itlaysthefoundationforthecommitmentsthatwe'vemadefor2016thatweareveryfocusedonexecutingandproving--providingtheproofpointthatwearedoingwhatwesaywe'regoingtodo.

Aswemoveforward,wearegoingtocontinuetoexecutewithdisciplinewithallaspectsofourplan,includingourcapitalallocationframework,andweareconfidentthatwewillcontinuetodriveprofitablegrowth,strongreturnsoninvestedcapitalwhichwedemonstratedthisquarter,alltodriveshareholdervalue.Andthatisourfocusdayinanddayout.

Sothanksagain,everybody.Ireallyappreciateyourtime.

Operator :

Ladiesandgentlemen,thatdoesconcludetheconferencecallfortoday.

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