General Motors Co

NYSE:GM

Earnings Call Transcript 2021-Q1

[Operator]

Good morning and welcome to the General Motors Company First Quarter 2021 Earnings Conference Call. During the opening remarks all participants will be in a listen-only mode. After the opening remarks we'll conduct a question-and-answer session. [Operator Instructions]. As a reminder, this conference call is being recorded, Wednesday, May 5, 2021.

I would now like to turn the conference over to Rocky Gupta, Treasurer and Vice President of Investor Relations.

[Rocky Gupta]

Thanks Tabitha. Good morning and thank you for joining us as we review GM's financial results for the first quarter of 2021. Our conference call materials were issued this morning and are available on GM Investor Relations website. As usual we're also broadcasting this call via webcast.

I'm joined today by GM's Chairman and CEO, Mary Barra; GM's CFO, Paul Jacobson; and GM Financial President, Dan Berce. Before we begin, I would 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 Barra.

[Mary Barra, Chairman and Chief Executive Officer]

Good morning and thanks for joining our first quarter earnings call. Our start to this year was very strong with a record Q1 performance that was driven largely by robust product demand in the US, as well as an outstanding quarter for GM Financial. We remain confident that we will achieve our full year guidance. We are on a path to transform our company on the timeline we have shared with you and we are demonstrating our ability to accelerate our plan. Before I discuss the progress, we've made on our transformation and growth strategy, I'll provide some highlights about our performance.

I'm very pleased with the strength of our global business which contributed to EBIT-adjusted of 4.4 billion and an EPS diluted adjusted of $2.25. The strong quarter was a full team effort with people working in our plants all the way to our dealers. Global purchasing and supply chain, engineering and manufacturing have been especially nimble and opportunistic as we manage through the semiconductor shortage.

For example, our engineers are creating effective solutions using chips that are more readily available or by identifying alternatives to conserve semiconductors where possible. Their work helped us maximize production of our highest demand and capacity constraint vehicles, reducing downtime and further demonstrating our team's agility.

While we have production downtime in the second quarter, we expect to have a strong first half with EBIT adjusted around 5.5 billion ish. We are also reaffirming our guidance for the full year and based on what we know today, we see the results coming in at the higher end of the $10 to $11 billion EBIT-adjusted range that we shared earlier this year. We remain committed to fund $7 billion in EV and AV investments that includes capital and engineering this year and accelerating 12 EV programs as we first announced last November. Paul will discuss our Q1 numbers and outlook in more detail in a few minutes.

Looking ahead, I think there are many reasons why we are confident. For starters, we have great product momentum. Despite tight inventories, we maintain a clear lead in the full-size SUV market in the US and our full-size pickups are in high demand. In China, our sales are rebounding sharply with the economy and Cadillac achieved a record first quarter led by its SUV lineup of XT4, XT5 and XT6.

In addition, we are executing one of the fastest production launches in our history. Last November we said we would return full-size pickup production to Oshawa assembly in Canada in early 2022. Because of the team speed, we are pulling the start of retail production ahead into the fourth quarter of this year. The new timeline and incremental volume will begin to have a meaningful impact next year as we ramp up production. But I'm sharing it with you now as another example of how we are working urgently to achieve key milestones.

Let's turn now to our growth strategy starting with a battery update. We intend to lead on all aspects of battery development and cost reduction. And we are moving quickly on every front. Our vertical integration approach to battery technology, which includes building our own cells, will help us scale quickly and efficiently to deploy new innovative chemistries that boost energy density and reduce costs over time. Ultium batteries are unique in the industry because of their large format pouch style cells that can be stacked vertically or horizontally inside the battery pack.

This allows engineers to optimize better battery energy storage and layout for each vehicle design. Depending on the vehicle, Ultium enables a GM estimated range of up to 450 miles or more on a full charge with zero to 60 miles per hour acceleration in three seconds. As we've previously said, we realized - we will realize a 40% battery cost reduction with our first generation Ultium platform compared with today's Chevrolet Bolt EV and we're already on the road to delivering a 60% cost reduction compared to the Bolt EV with the next-generation of Ultium and we expect costs will continue to decrease from there.

Currently, our next-gen lithium metal prototypes have completed about 150,000 simulated test miles and we expect them to have nearly double the energy density of our current EV batteries. The team has already secured 49 patents for GM's lithium metal battery development with another 45 pending. Our own work along with the intellectual property from SolidEnergy Systems will form the basis of our recent joint development agreement with SES, one of the companies we're working with commercialize lithium metal batteries. We are targeting production of our next-gen Ultium battery by mid-decade and we're also expanding our battery cell manufacturing footprint to control our costs and cell supply.

Last month Ultium Cells LLC our joint venture with LG Energy Solution announced its second high volume battery cell plant in the United States. And construction begins immediately on the site adjacent to our Spring Hill assembly plant in Tennessee. The new facility will create about 1300 new manufacturing jobs when it comes online in late 2023. It will join the Ultium Cell LLC facility in Lordstown that is opening next year. And this is just the beginning and will continue to expand our battery cell capacity on our way to achieving our goal of EV market share leadership in North America.

Let's turn now to our Ultium powered products. During the quarter we unveiled the second new Hummer EV the 2024 GMC Hummer EV SUV, which launches in 2023. And will we build at Factory ZERO in Detroit-Hamtramck. It will be available loaded with new GM developed software driven technologies including CrabWalk, Extract Mode and many more features that are either industry leading or segment differentiators. The Cadillac team unveiled the stunning LYRIQ production model which we accelerated by nine months. And as we've previously said, we have cut the development time of most of our EV's in half because of our use of virtual engineering and other software tools.

Cadillac will take reservations beginning in September with initial availability in the first half of 2022. We were also excited to confirm that Chevrolet will introduce a Silverado full-size electric pickup truck for retail and fleet buyers, with a GM estimated 400 miles of range on a full charge for certain configurations. The initial interest has been overwhelming, especially from commercial and government customers. We gave a small number of them a sneak peek at the interior and exterior design. They said it exceeded their high expectations with zero emissions, long range, pickup capability, innovative storage and strong value along with a powerful design.

What's especially important is that this truck will be in a high volume entry, and one of the most popular and competitive segments in the industry. In addition to Ultium propulsion Super Cruise is a feature that connects all of these vehicles in an increasing number of vehicles we're selling today. Since its debut in 2017, Super Cruise has twice been ranked as the best driver assistance technology in the industry by a leading third-party consumer group. Super Cruise is enhancing our reputation, elevating our brands, and laying the foundation to generate substantial feature subscription revenue for us as we move forward.

To creatively illustrate how fun and liberating Super Cruise can be Cadillac recently wrapped up it's Time to Let Go campaign. It captured celebrities as they drove the 2021 Cadillac Escalade with Super Cruise and its new lane change capability. It was really fun to watch the reactions, and how people quickly shifted from being cautiously curious to just pure excitement. We'll roll out Super Cruise to 22 models by the end of 2023 and we plan to add even more features. Our ultimate vision is that this system enables hands free transportation in 95% of driving scenario.

What makes our large scale deployment of Super Cruise and all of its new features possible is our vehicle intelligence platform or VIP, which connects every vehicle system into one advanced high speed and very secure network. VIP's 4.5 terabytes of data processing power per hour represents a fivefold increase from our previous electrical architecture. That's enough capacity to manage all of the data loads of our self-driving technology, driver assistance systems, electric propulsion, over the air updates of every vehicle module plus capacity to manage feature applications. It's also an enabler for software as a service, including new apps and capabilities that we can market to our customers such as the latest must have trailering and parking apps. By the end of '23, VIP will be on 7 million vehicles in 38 Global models.

Another major element of our growth strategy is our Bright Drop commercial delivery business and it is progressing and on track. In March our product and manufacturing teams reached an important milestone as they conducted EV600 prototype builds. Plans to build the Bright Drop EV600 at Cadillac's - excuse me at GM Canada's CAMI assembly and Ingersoll are progressing rapidly. The Bright Drop team remains on track to reach its goal of delivering EV600's to its first customer FedEx Express by Q4 of this year. Interest is high and we continue to have active discussions with many prospective new customers who are seeking the efficient and zero emission delivery solutions that Bright Drop offers.

And this is encouraging as third parties estimate that the addressable market for eLCV's could be $3 billion by 2025 and double that in 2030. As our EV volumes grow, we are also investing in relationships to build a robust, reliable and easy to use public charging infrastructure. Last week we revealed Ultium Charge 360 an innovative and holistic approach that integrates charging networks, GM vehicle mobile apps and other products and services to simplify the charging experience for GM EV owners. It builds on our existing work and partnerships to support a charging ecosystem that will give GM EV owners more confidence and convenience.

We have signed agreements with seven major charging networks giving customers a more seamless access to nearly 60,000 plugs across the US and China. As part of our existing collaboration with EVgo we've opened the first three fast charging stations in California, Florida and Washington, on our way to 2700 plugs by the end of 2025 and we expect about 500 fast charging stalls to go live by the end of this year. We'll continue to provide updates about Ultium Charge 360 including new elements and collaboration.

The last major EV development I want to share follows up on our joint announcement last year with Honda that we will co-develop two Ultium based EVs for Honda to be built in North America by the GM team. Honda recently confirmed these vehicles, a large SUV for the Honda brand and one for the Acura brand, and will launch in North America market for the 2024 model year. This further validates our Ultium technology, and we continue to work closely with Honda to expand our partnership and cooperation in key areas such as purchasing, research and development and connected services.

Turning to AVs, Cruise continues to establish itself as a leading force and commercializing self-driving vehicle technology. In the latest funding round that closed after raising 2.75 billion, it included investments from Microsoft and Walmart. And this brings the valuation of Cruise to more than $30 billion, with GM continuing to own a majority stake. Cruise is moving steadily closer to commercialization. Its real world driverless vehicle testing in San Francisco and its last mile delivery pilot with Walmart in Scottsdale, Arizona will help pave the way for new commitments like the one Cruise just signed with the city of Dubai. Cruise will be the city's exclusive provider of self-driving taxis and ride hailing services with plans to deploy up to 4000 self-driving vehicles by 2030. Dubai chose Cruise over several competitors. So it's another great validation of Cruise's technology and our overall approach to autonomous vehicles.

Before I turn the call over to Paul, I want to quickly update you on our coronavirus measures. We remain diligent and disciplined with our safety protocols to keep employees safe as variants and new hotspots emerge. The GM medical team continues to monitor new COVID-19 cases globally and our vaccine task force teams are working to understand vaccine administration priorities for each country and determine how we can best assist our employees, including operating vaccine clinics in several of our US facilities. All the work GM medical has done behind the scenes was crucial as we restarted production last spring. And their work has helped the rest of the team stay focused on driving our business today and driving our growth strategy.

I also want to recognize the entire GM team for its hard work flexibility and resilience. In addition to our suppliers and our dealers who are helping us manage the semiconductor issues, we are also working to serve our customers and leveraging everything we can do to turn inventory quickly. Everyone has been remarkably dedicated, and it shows in our results, and we appreciate everyone's hard work. This is just the beginning for the next generation of General Motors. We are well on track with our plans to transform our company and lead the industry into the future. And we are pleased with the significant progress we have made on all fronts during the quarter.

We look forward to building under strong momentum and providing a more comprehensive update on our growth initiatives and progress later in the year. We plan to have an investor event in the Detroit area and we'll announce a date later in the summer because we would like this event to be face to face. We'll use this event to go deeper into our growth strategy and financial opportunities and everything that drives them including software, hardware and services, along with our strong brands.

So with that, I'll turn it over to Paul to provide more details on our financial performance and our full year guidance.

[Paul Jacobson]

Thank you, Mary, and good morning, everyone. Thanks for taking the time to join us this morning. This has been a very exciting first full quarter for me at GM. I see so much opportunity here for us to use our world class capabilities in manufacturing, engineering and customer loyalty to really leverage these with our scale to achieve our growth initiatives.

First to set the stage before I get into the details, we had a great quarter, a first quarter record in fact, despite the volatile backdrop. Our strong Q1 performance continues to highlight the resiliency of our business, as well as our ability to take decisive actions to adapt to the fluid supply chain environment.

In Q1 for example, we were able to build in wholesale more vehicles than forecasted and defer anticipated plant downtime. This strong operational execution combined with the additional actions on price and expense reductions enabled us to deliver stronger than expected results for the quarter.

We are collaborating across the global supply chain and working tirelessly to route available parts to the appropriate plants in order to maximize plant efficiency. We've been focused on leveraging every available semiconductor to build and ship our most popular and in-demand products, including our highly profitable full-size pickups and full-size SUVs.

I'm very proud of the team for everything they've accomplished in the first quarter and what they're continuing to do, including strong pricing for every vehicle that we're able to produce, prioritizing production of higher demand vehicles, continuing to be very controlled on cost and being agile across the board.

As Mary mentioned, the full year 2021 guidance we outlined last quarter and reiterated a couple of times remains intact. And we expect to be at the higher end of our EBIT-adjusted range. We expect Q2 to reflect the largest impact of the production disruptions resulting from the supply shortages.

The retiming of vehicles we produce without certain modules and plant downtime in the second quarter is expected to be significantly higher than Q1, resulting in lower EBIT-adjusted quarter-over-quarter. Our current view is that our first half EBIT-adjusted will be around $5.5 billion.

Recognizing the situation remains fluid, we're cautiously optimistic that our second half will be similar to or better than the first half. Importantly, our commitment to the acceleration of our EV product programs has not changed. Our important upcoming launches including our GMC Hummer EV super truck and Cadillac LYTIQ are on track and the construction in Lordstown, Factory ZERO, Springhill and CAM is progressing on schedule. We're still planning to invest nine to $10 billion of CapEx in 2021.

Finally, our earnings power and cash generation potential remain robust. In a more normalized environment we expect that certain headwinds we're facing today will dissipate, but the strength of the underlying business powered by exceptional demand for our brands will remain. We expect that our normalized EBIT-adjusted performance will be strong as we continue producing and selling our in-demand and highly profitable full-size trucks and SUVs while continuing to launch new and exciting products and services that position GM to win in the future of mobility.

So let's get into the strong results of the quarter in more detail. In Q1 we generated $32.5 billion in net revenue, $4.4 billion in EBIT-adjusted, 13.6% EBIT-adjusted margin and $2.25 in EPS diluted adjusted and minus $1.9 billion in adjusted automotive free cash flow.

We exceeded expectations by driving strong price and mix performance in North America through our production prioritization actions in our go-to-market strategies. Additionally, high used vehicle prices due to low new vehicle inventories in part drove record results at GM Financial.

Our adjusted automotive free cash flow of minus $1.9 billion was lower $1 billion year-over-year primarily driven by the working capital impact from plant downtime and inventory carrying value of approximately $1.2 billion associated with vehicles built without certain modules due to the shortage of chips, which will reverse when those vehicles are completed partially offset by strong EBIT performance. We ended Q1 with a strong automotive cash balance of $19 billion and total automotive liquidity of more than $37 billion.

So let's take a closer look at North America. In Q1, North America delivered EBIT-adjusted of $3.1 billion, up $900 million year-over-year and a 12.1% EBIT-adjusted margin driven by continued strong pricing on our full-size pickups in performance from the launch of our new all new full-size SUVs. Our average transaction prices were up 9% year-over-year for the quarter with full-size trucks up 10% and full-size SUVs up over 20%, helping to overcome headwinds from commodity inflation and lower volumes.

These results speak to the strength of the consumer and the strong brand equity we have in our products, which we plan to leverage as we roll out our EV portfolio. On the cost side, we continue to leverage efficiencies executed during COVID, including opportunities directly related to third party services travel and all discretionary spend. Teams across the organization have also gone above and beyond to meet strong and rising demand where they can.

To drive strong sales with lower inventory GM has introduced a new proprietary software application that helps dealers track vehicles from when they're completed at the plant to when they're released at their final destination. With many of our full-size trucks and SUVs being sold prior to arriving at the dealer or within days of hitting the lot, this software called Vin View, allows dealers to both track vehicles and provide an informed estimated delivery time enhancing the customer's arrival confidence and experience.

Additionally, we also have a software application called focused ordering that includes a dashboard, which combines vehicle trim options with market data to help dealers ensure they're ordering the most in-demand products to meet customer preferences. This has been a huge help in our prioritization efforts. For example of all the 2021 light-duty crew cab sales in the first quarter, about 60% were based on this focused ordering dashboard. And these models are turning five and a half days faster than non-focused orders.

In addition to these near-term benefits, we expect this technology to drive long-term cost efficiencies and lower inventories within the dealer network. And we still have a lot of excitement ahead of us this year as we complete renovation of Factory ZERO to launch the GMC Hummer EV super truck this fall. Factory ZERO will also build the GMC Hummer EV SUV, and the Chevy Silverado full-size electric pickup, which is the first of many high volume EV entries to come. And it will be the home of the Cruise origin a purpose built all electric and shared self-driving vehicle.

And also as Mary announced our second battery plant recently in the last 18 months, which is a great indicator of our acceleration. Combined, these plants will have a capacity of over 70 gigawatt hours of production, and there are more being planned. We'll make additional cell capacity announcements as we progress in our product rollout.

Let's move to GM International. We continue to be encouraged by our progress in GMI with first quarter EBIT-adjusted of $300 million, up $900 million year-over-year as we move past the initial effect of the pandemic in China. We also experienced positive price and mixed benefits as well as benefits from our structural cost actions across the segment. We delivered $300 million of equity income in China in Q1 due to higher volumes, stabilization and pricing and continued cost actions.

EBIT-adjusted in GMI excluding China was up $400 million year-over-year, the second consecutive profitable quarter as the semiconductor and commodities impact in the quarter was more than offset by the favorable pricing and mix. With continued semiconductor driven plant downtime and low inventory levels, we expect Q2 to be challenged, but these results underscore the improvements in the region.

A few comments on GM Financial, Cruise and Corp segment, GM Financial has provided a significant offset to some of the semiconductor headwinds. Strong used vehicle prices combined with consumer credit strength helped to drive Q1 EBT-adjusted of $1.2 billion, up $1 billion year-over-year. We received $600 million in dividends from GM Financial in Q1. And we anticipate dividends in 2021 from GMF will significantly exceed the 2020 dividend of $800 million, due in part to their expected upside in 2021.

Cruise costs in the quarter were $200 million. And as Mary mentioned, Cruise continues to make great progress towards commercialization every day. Corp segment EBIT was $30 million in the quarter a better than historical quarterly run rate primarily due to mark-to-market gains in the period.

Turning to our 2021 outlook for the calendar year, last quarter, we outline strong full year 2021 guidance of EBIT-adjusted in the $10 billion to $11 billion range, including an estimated net semiconductor impact of $1.5 billion to $2 billion, which is calculated by taking loss contribution margin offset by tactical efforts through costs, go-to-market actions and earnings growth at GM Financial.

EPS diluted adjusted in the range of $4.50 to $5.25 and adjusted automotive free cash flow guidance in the $1 billion to $2 billion range including an estimated semiconductor impact of $1.5 billion to two and a half billion.

Since we share guidance with you in February, the business has faced additional pressures due to semiconductor shortages, as well as commodity inflation. Even though the gross impact of these headwinds has increased, the Net impact remains the same as the company has identified additional mitigation initiatives, including pricing and mixed go-to-market strategies, growth at GM Financial, pull ahead of Oshawa full-size pickup production and other cost efficiencies.

And what we've been able to prove in the fluid environment we're facing today is that we have the resiliency to flex to the challenges. In spite of the volatility and semiconductor availability, we're confident in achieving our full year 2021 outlook, including EBIT-adjusted at the higher end of $10 billion to $11 billion, with the expectation that first half EBIT-adjusted will be around $5.5 billion.

We continue to expect EPS diluted adjusted of $4.50 and $5.25 and adjusted automotive free cash flow of $1 billion to $2 billion. Our expectation is that Q2 will be the weakest quarter of the year as we increase plant downtime and continue to build vehicles without modules impacting Q2 EBIT-adjusted and working capital as we hold vehicles in inventory to wholesale later in the year once the semiconductors are received.

We are managing the shortage through select plant downtime in the second quarter, which may extend into the second half. However we plan on operating through the traditional US summer shut down in early Q3 at select facilities. We do not believe this short-term semiconductor headwind will affect our long-term earnings power. And we remain committed to our growth initiatives in the EV acceleration we've previously communicated.

In the medium to long-term, we are focused on working cooperatively with our supply base, and the semiconductor manufacturers to improve our line of sight on the full supply chain mapping and gain more control over the chip itself. We're working to proactively implement risk mitigation strategies that will help avoid future disruptions to the supply chain. And we've also learned a lot over the last year about our and our dealers' ability to manage lower inventory levels. We're taking these learnings to implement dealer efficiency tools to optimize inventory levels, and we are creating sales tools to allow for more online shopping and purchase options.

Finally, I want to reiterate our capital allocation priorities. I mentioned that the top priority for us is to invest in both new and existing businesses, with more than half going to accelerate EV growth, as well as continue with strong ICE portfolio that funds our journey while maintaining our investment grade balance sheet.

To summarize, we had a strong beginning to the year highlighting the strength of our underlying business. We have again demonstrated our strength, our flexible ability, our laser focus on execution, and our ability to manage through a significant disruption while still generating strong results. There are still big challenges ahead of us. But we have the team and expertise to navigate this while not losing sight of our vision.

We will continue investing in exciting new growth opportunities including EVs, battery supply and technology and software solutions that will drive growth and desirable differentiated products and services for our customers. Despite the challenging environment, we remain confident in our ability to deliver strong results in 2021. And I couldn't be more proud of the GM family.

This concludes our opening comments and we'll now move to the Q&A portion of the call.

[Operator]

[Operator Instructions] The first question comes from the line of Rod Lache with Wolfe Research.

[Rod Lache, Wolfe Research]

Good morning, everybody.

[Mary Barra, Chairman and Chief Executive Officer]

Hi, Rod. Good morning.

[Rod Lache, Wolfe Research]

I want to probe this semiconductor issue a little bit with you. So you're maintaining the full year, I suspect Q1 was better than you expected and that maybe this Renaissance fire is having a larger impact near-term than you anticipated. But maybe if you can help us a little bit with what's happening behind the scenes. Number one, what's embedded in the implied Q2 earnings? Are all the earnings essentially coming from China and maybe GMF near-term? Number two, I assume that the full year $1.5 billion to $2.5 billion impact from semi's that you talked about has a very large gross negative volume impact and some very large offsets, pricing and other things. Maybe you can provide some color on the gross effects? And then lastly, what gives you confidence in the recovery? Are you - can you maybe share a little bit on what you're seeing happening through the Tier 2 supply chain?

[Mary Barra, Chairman and Chief Executive Officer]

Hey, Rod, there's a lot in there. But I first start off by saying the team is working to get every chip we can and to look at how do we leverage. It maybe chips that we weren't planning to use and how do we leverage them, as well as simplifying some things. So it's a - it's really the ingenuity and creativity of the team that is allowing us to build. Yes, the Renaissance fire did have an impact. And the team goes to work and figures out how to offset or minimize it and that's what they're doing. So I think there was a lot of great problem solving that was done in Q1. We have said we think Q2 will be the weakest. And then we see recovery coming in Q3 and Q4. And that's based on all the work the team is doing working with suppliers, et cetera.

So there's no - it's just chip by chip working the issues to find solutions. And that's what the team is so good at doing. And it remains very dynamic. So I think to look here today and try to quantify exactly what all the ins and outs are going to be for the rest of the year. I think it would that'd be data that has a pretty short shelf life. But I think what you can count on and what we see with all the work that's been done across the whole supply chain and engineering team is that we have confidence that we're going to be able to hit our guidance and that with everything we know today will be at the top end.

[Rod Lache, Wolfe Research]

Could you at least maybe give us some color on the magnitude of the volume loss that you're currently embedding in this full year forecast?

[Paul Jacobson]

Hey, Rod, this is Paul. Yeah, I think the challenge with the volumes is that - as we said repeatedly, this is a really fluid situation. I mean, it quite literally changes day to day. So I think the commentary that we've given that, no doubt this situation has somewhat worsened in the short-term since the first quarter. We're constantly flexing. So some days, it gets a little better, some days, it gets a little bit worse. And what we're trying to do is just kind of reorient everybody around this. This semiconductor challenge was baked into our full year expectations. Certainly the timing is somewhat fluid and you see that. The fact that the first quarter has blown out expectations and 2Q is under consensus. But if you actually look at the first half, when you add Q1 and Q2 together, it's actually exceeding where street consensus was for the first half of the year. So I think we're pleased with the way that we're managing through this. And we want to try to keep it to the big picture because we can really get lost in the details on how fluid the situation is.

[Rod Lache, Wolfe Research]

Yeah, understood and just lastly, very nice to see the international operation ex China approaching breakeven. And I assume a lot of that is related to some of the things that you've talked about before in South America, the actions you've been taking. What's the strategy longer term for that region? And do you think that that fits into the long-term, zero emission future that you described?

[Mary Barra, Chairman and Chief Executive Officer]

So Rod, I am really proud of the GMI team ex China, part of the China team as well. But that team that's really focused on those countries and the great progress they've been making. When we specifically talk about South America, we have strong brands and a strong dealer network and leading products in the in the market. And the team has continued to work on reducing costs and managing the business in a way that has allowed us to achieve those results in Q4 and Q1. That region will be impacted by Q2, which we've indicated overall will be weaker. But again, that's a - it's a temporary thing. And we're continuing to work all aspects because that region, we've got to get to earnings cost of capital. And that's the journey that we're on and we'll continue.

[Rod Lache, Wolfe Research]

Okay, thank you.

[Operator]

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

[Itay Michaeli, Citi]

Great, thanks. Good morning, everybody.

[Mary Barra, Chairman and Chief Executive Officer]

Good morning,

[Itay Michaeli, Citi]

Maybe to start first just a couple financial questions, Paul, any thought to where US dealer inventory could end the year? And with the new tools that you've implemented for ordering, any updated thoughts on how you're thinking about running dealer inventory, let's say over the next couple of years?

[Paul Jacobson]

Yeah. And good morning Itay, thanks for the question. I think - I don't think anybody would say that dealer inventory levels are optimized right now just drive by some lots and you see empty lots. It certainly means that that we're operating much, much lower than what I think - we even think is optimal. But as we mentioned in the comments, there's a lot of tools that we're learning how to operate at these lean levels that I think will provide some long-term efficiencies. And the dealer network has done really an amazing job of not only working with us, but also providing an environment for the customer that where the vehicle may not be immediately available, they give them reassurance to help drive that purchase transaction versus the customer being disappointed that the vehicle that he or she doesn't want isn't there on the lot.

So that visibility, I think, undoubtedly will help us over the long-term. And we're taking those lessons and we're figuring out how to make sure that we manage that as efficiently as we can. But we certainly came into the year expecting to build inventories out of - coming out of the COVID situation. That clearly is challenged amid some of the production issues that we've seen with the semiconductor shortage. But we certainly hope to build as we get into perhaps late 2021 into 2022, to start getting inventory levels at what we think is a is a much safer value to have vehicles on the lots where customers want to purchase them.

[Itay Michaeli, Citi]

That's helpful. I appreciate the detail, Paul. Then maybe just one strategic question actually on AV, of the 27 billion of spend on EV and AV can you maybe dimension how much of it is going towards the AV side? And how much of that may be is outside of Cruise? I'm trying to get out is sort of, maybe you can give us a bit of a sense of your vision for autonomy on the GM consumer vehicles whether Cruise may or may not play a role within that and kind of how you see that developing over the next several years as part of the objectives of the company.

[Mary Barra, Chairman and Chief Executive Officer]

Sure. Well, our focus at Cruise is to get creative technology that's safer than a human driver and deploy in our first market from a commercialization perspective, and then we'll continue to expand that into other cities and really excited with the progress they're showing in San Francisco, obviously, Dubai is very significant as well. So you take that and I've always said, we have kind of a revolutionary and an evolutionary strategy around driver assistance all the way to full level four and level five autonomy. So you see crews really focused on that full autonomy, but Super Cruise, we continue to add more and more features. And we've said that we envisioned that to get 95%, of being able to handle all solutions.

Later in the decade, I believe and there's a lot to still unfold, but I believe we'll have personal autonomous vehicles, and then that will leverage the capability we have at Cruise, with the capability that we have at the car company, to really be well positioned to delight the customers from that perspective. So both paths are very important because the technology we put on vehicles today, I think makes them safer and delights the customers and is going to give us an opportunity for subscription revenue. And then the ultimate work that we're doing our Cruise, I think that is fully autonomous. Really opens up more possibilities and I think we can outline to that.

[Itay Michaeli, Citi]

That's all very helpful. Thanks so much.

[Mary Barra, Chairman and Chief Executive Officer]

Thank you. Itay.

[Operator]

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

[Emmanuel Rosner, Deutsche Bank]

Hi, good morning, everybody.

[Mary Barra, Chairman and Chief Executive Officer]

Good morning.

[Emmanuel Rosner, Deutsche Bank]

First, a financial question, so Paul, I was hoping you could talk a little bit about sequential factors of profitability comparing first half to second half. So you're calling for similar levels of profitability at 5.5 billion each. But obviously, in the first half, you started out very strong in the first quarter and a lot of the headwinds in the second quarter are somewhat unusual and likely to repeat. So there's obviously some offset for the raw materials and cost and pricing. But just could you sort of talk about these various factors?

[Paul Jacobson]

Yeah, thanks Emmanuel for that question. It's obviously a challenging environment to be able to be thinking about longer term, even six months, nine months ahead as we are navigating through this. So I think what we see is well, I would say cautious optimism. So while we talk about the second half of the year being similar or potentially slightly better than the first half, there's some caution in that. So for example things like the used car vehicle prices that GM Financial is clearly benefiting from that's likely to stay in place as long as new car inventories remain low. So that's an example of I would say that a variable that's sort of hedged directly against the challenges of the semiconductor.

But as more vehicles come online, and I think most industrial forecasts are that chip availability is going to be better in the second half than it is in the first half. And I think we think that's true as well. That could lead to pricing that maybe isn't as strong as it was in the first quarter. So I think we're trying to maintain some caution and some rationality. The reality is we're - we and others are right in the middle of this, I think we're doing a really good job of managing through it as evidenced by the first quarter. And the fact that the first half of the year is coming in above consensus estimates before we announced. That - it's trying to provide a mix of reassurance in the projections that we've given, as well as some cautious optimism about what the future holds.

[Emmanuel Rosner, Deutsche Bank]

Okay, and if I could just follow up quickly on this one. Are you able to dimension at all some of these more discrete buckets? So for example, raw materials, how much larger of a headwind could it be in the second half versus the first half? And then I also noticed in your first quarter cost walk, you're talking about higher engineering costs for EVs in particular. How should we think about that over the rest of the year?

[Paul Jacobson]

Well clearly on the second part of that question first, you're going to continue to see engineering expenses pivoting into EVs. And I think as we continue to lean in and accelerate some of those vehicle programs, we are we are investing resources to be able to do that. So the first part of your question clearly commodity inflations had a massive impact. You just need to look at some of the indices to be able to see that, but we're not really isolating that because we're taking all of the cost pressures that we've seen both from our initial expectations and what's constantly changing and putting that all into the same bucket. So much the same way that the semiconductor issue is fluid in day to day, so are the commodity prices going forward? So while we have a little bit of forward purchasing going on, obviously, in the supply chain there's some exposure out there, but there's also some potential goodness if prices normalize. So we're trying to keep all of that very, very fluid as we manage it in the aggregate, both in terms of go-to-market strategies, as well as production prioritization.

[Emmanuel Rosner, Deutsche Bank]

Great and then my second question on electric vehicles, so your Silverado electric vehicle was confirmed officially in April, I think you said it will be your first high volume EV towards several high volume models by 2023. I'm curious if you could dimension for us how much of a contribution will the Silverado be towards your mid-decade goal of a million plus units by 2025? Or may be expressed differently, what kind of take rates you expect on pickups for EV powertrain, I guess in the relatively near to mid-term?

[Mary Barra, Chairman and Chief Executive Officer]

Well, I think we see it as a huge opportunity. I mean, we've gotten really strong response from commercial and government orders as a lot of fleet customers are looking to have zero emission vehicles. And again, we have incredible know how in this company and how to do full-size trucks, and we're taking that into an EV propelled vehicle. And that I think is going to give us some winning formula. I'm excited to share that vehicle with everyone because it's just stunning. So I think we're going to see strong demand there along with some other products be an important part of getting to our goals to have North America leadership. And I would say it's one of a few or several getting into the high volume segments that obviously we need to do and GM is well positioned to do building on the Ultium platform to achieve that leadership.

[Emmanuel Rosner, Deutsche Bank]

Okay, thank you.

[Operator]

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

[Mary Barra, Chairman and Chief Executive Officer]

Hi, John.

[John Murphy, Bank of America]

Good morning. Good morning, everybody. Hi, Mary. So I just want to get back into this question of the inventory being too tight or light. And I mean, you just put up a record quarter and you're telling us that the inventory is not optimal and it's too light. I mean, would you argue that record profits indicates that you're in an optimal inventory? I mean, the industry is gone through this. And we've been covering this for a few decades now, where the inventory has been out of whack and too high. And now, suddenly, it's supposedly too tight. And we're seeing record profits put up. I mean, is it really too tight? And what do you mean by like, going back to something this is more normal. I mean, if I look at the last three quarters, I mean, I think the inventory was 492,000 in the third quarter of last year and now you're at 335. So is it somewhere in that zip code? Because I mean, you just put up the best three quarter stretch I think GM has had in history with this inventory that's not optimal or too tight. It just seems like you shouldn't change that much. What do you mean by growing the inventory?

[Mary Barra, Chairman and Chief Executive Officer]

So John, I think you're right, that will never go back to that levels of inventories that we held post our pre-pandemic because we've learned we can be much more efficient, getting the right models to the right dealers at leveraging and not having as much on the lot. But there are still customers who want to walk into a dealership and walk out or drive off the dealership with a brand new vehicle and we've got to be responsive to those customers as well. So I think it's going to end up being a little higher, especially when you look at our dealer network. I've got them sending me pictures of they have virtually nothing on the lot. So there's an optimal level, significantly lower than it was in the past, but higher than it is now. I think what you're seeing now, though, is the ingenuity of our dealers and the new tools we provided that give them insight into what's coming, and they're selling deep not only into the inventory, but deep into the pipeline of vehicles that are on the way. So I credit the - just how dedicated this team is of satisfying every customer. But I think there's an optimal level that's a little higher than we have right now.

[John Murphy, Bank of America]

Yeah, I just think you're being sort of too apologetic. And the ingenuity you're forcing on the whole chain is actually driving a better outcome you've ever had before. And it just seems like you're doing in some ways, you've reinforced, the value chain is being forced in doing the right thing. And you're that ingenuity should continue. And it sounds like you're keeping that up. But I mean, I just think rebuilding the inventory too much might be not exactly the right answer.

[Mary Barra, Chairman and Chief Executive Officer]

So John just to be clear, we won't over build inventory to be crystal clear. And we will keep the ingenuity, the tools - I mean because it's better for everybody. It's better for the car company, it's better for the dealer.

[John Murphy, Bank of America]

Absolutely. Yeah. I mean it's just a much better outcome right now. Second question, Mary, you're talking about 30 new EVs by 2025. Globally, two thirds of those will be in North America. So horseshoes and hand grenades by my dumb guys map that's about 20, maybe a little bit more. What ICE vehicles are still going to be launched between now and 2025? It seems like almost everything that would be launched in North America between now and 2025 would be EVs that you're saying right here. Are there any ICE vehicles that are notable that we should think about between now and then?

[Mary Barra, Chairman and Chief Executive Officer]

Well, John, I'm not going to give you the full product cadence between now and '25. I'm sure you went along with everyone on the call. But there's some important products coming as we look at making sure on our franchise products that we are leading from an industry perspective and continuing to delight those customers. But what I will say is, I think what's important with the investments that we've made over the last five to seven years with new platforms from an ICE perspective, whether it's small, mid, and then full-size trucks, SUVs we don't have to make huge investments in architectures, it's mainly making sure those products are going to win in the marketplace from a customer facing perspective. And that's where we'll be focused on between now - frankly, now and 2035, when our aspiration is to sell all EVs from a light duty perspective.

[John Murphy, Bank of America]

Okay, that's helpful. And then just last scenario, on Slide 7, you went from OPM Bright Drop Cruise, charging infrastructure, a bunch of other stuff. There's nothing in there when you're talking about it seems like fluff at all, and all seems very, very real. How do you keep track of like the capital invested, the returns and the profits on all of these new growth initiatives? Because like you said, nothing seems like fluff, it all seems very real. It's not just any PowerPoint stuff, you guys are throwing up. How do you keep track of that? And then maybe sort of the follow on to that, when you think about Dubai, and 4000 cruise origins floating around, I don't know if you can even sketch the economics for us of what that means. I mean, I would guess that's a few 100 million dollars of EBIT that would be sticky and not volatile, like the rest of - or not a lot more or less volatile than the rest of the company. But I mean, how are you keeping track of all this stuff? How are things measured and then maybe some idea of what the Dubai economics look like?

[Mary Barra, Chairman and Chief Executive Officer]

Well, we have a really good CFO. And I mean that in all seriousness John, because you're right, and you look at Page 7 or you look at Page 6, but you look at everything in our deck, they are all real. And we have a long-term plan and a short-term plan, and everyone has to earn its place to get whether it's engineering, IT or capital allocated to it. So we have a very rigorous process. So rest assured that this is not PowerPoint, these are real initiatives that are being executed on an accelerated fashion. As it relates to Dubai, I mean, I think it highlights the fact that as we grow, not only in Dubai, but in other cities across the United States, across North America and across the world, we're uniquely positioned in the AV space, because we have the ability to produce those vehicles, I mean, we're already tooling up the origin to be produced at Factory ZERO.

So that's a huge opportunity for us and to your point, that's going to drive to the bottom line. So I'm very excited about the future growth opportunities that we have with Cruise, what the production of the vehicles will do for that. But then with all these additional, whether they're going into other markets, like we can leverage with Ultium, expanding in a market we don't really operate that much in right now from a commercial vehicle perspective, with EVs, with Bright Drop and beyond with things like OnStar Insurance and subscriptions for things like Super Cruise. So that's why I'm so confident of our growth capability.

[Paul Jacobson]

John, off the record, I agree with everything Mary said except this point on the CFO.

[John Murphy, Bank of America]

She's just saying that because you're there, Paul. I'm just kidding.

[Paul Jacobson]

Clearly.

[John Murphy, Bank of America]

The - on Dubai, I mean, there are other cities that have like city NV here that Dubai is obviously a great sort of crown jewel to come out there with this. I mean, Mary do you have other cities engaging or reaching out to it? Because I mean, it just, it just seems like that's something that everybody - New York and San Fran, everybody's going to be like, hey, what Dubai is doing in a week, we have to do it, too. I mean, are there other indications of interest that are popping up?

[Mary Barra, Chairman and Chief Executive Officer]

Yeah, I'm not going to get specific, but there definitely is interest in other parts of the world. And I think there's going to be a lot of opportunity in the United States alone.

[John Murphy, Bank of America]

Okay. All right. Thank you very much, guys.

[Mary Barra, Chairman and Chief Executive Officer]

Thank you, John.

[Operator]

Your next question comes from the line of Joseph Spak with RBC Capital Markets.

[Joseph Spak, RBC Capital Markets]

Thanks. Good morning everyone. Paul. I fully appreciate and you said this timing is difficult given everything going on in the industry, but you did say the first quarter came in better. So I guess the implication is that very little of that semi-impact that you call that for the year happened in first quarter, and then you've always called second quarter worse, but it does seem like maybe it's a little bit worse than a few months ago. So at least that's the impression I got. And since you didn't give more clear color on implied second quarter, I think what would really help investors here is if you could compare that second quarter production maybe versus expectations at the beginning of the year? And as we go forward for the rest of the year, you mentioned GMF is better. We saw that in the guidance, but what - and you mentioned pricing, but what are you I guess specifically assuming? Or how are you thinking about modeling pricing to offset things like higher commodities?

[Paul Jacobson]

So thanks for that question, Joe. I think I'd go back to the fact that this is obviously a very dynamic situation. I would say in all honesty that Q2 is probably worse than we expected, it was going to be a few months ago. But that's due in part to some of the timing of how we map this out. So what I would say is that we are carefully evaluating the short-term supply chain, the intermediate term supply chain, and some of the longer-term issues as well. So depending on the confidence of where we see chips coming in and which chips and our ability to reallocate those and reprioritize those. We did see an opportunity to accelerate some production into Q1 to take advantage of the market that we see right now, which is obviously very, very strong and the confidence to be able to make up some of that volume in Q2. So that's why I think we need to be really cautious as we're thinking about the full year. What gives us the confidence is the agility that the team has displayed and being able to respond to this and, how dynamic it really is.

So part of the reason we don't want to anchor in on production volumes and so on is it just because that's going to change, it's going to change next week, it's going to change the week after, sometimes it's better, sometimes it's worse. So it's really trying to operate in at this level of where we need to take go-to-market strategies, where we need to prioritize mix, where we need to accelerate or potentially shut down a plant in anticipation of some challenges that are coming up over the short to medium term, then that's kind of what we're doing. You saw that going into plant downtime in Q1. So I wouldn't say that Q1 was immune from the semiconductor challenges. I think, certainly the consumer has proven to be very robust. Used car values continue to go up, which I think is endemic of the inventory challenges that we see across the board and that everybody sees.

So all of that is just is working in concert, into what I would say is a very agile plan for us to meet our objectives. It's also why we were trying to steer this to the first half versus Q1 and Q2. So there isn't a - there isn't necessarily a read through in the short-term because something that happens in March versus something that happens in April isn't really all that relevant to how we're thinking about managing through this. And that's why when we have the confidence of looking at where first half expectations were, despite the disparity between Q1 and Q2, we actually think that we're performing ahead of expectations that were outlined at the beginning of the year. We just want to be cautious about that in the back half. That makes sense.

[Joseph Spak, RBC Capital Markets]

Yeah, no doubt, but so is it fair to assume that embedded within that the second half versus first half pricing does take stuff down?

[Paul Jacobson]

No, I don't necessarily think that's the case. I think the environment is what it is. And that's kind of what puts us in that 5.5 billion ish type EBIT-adjusted for the first half of the year. But the environment has remained strong. In some cases, it's gotten even stronger through the year. So we're meant to capitalize on that wherever we can. But I don't see in our second quarter, any sort of immediate changes to the pricing environment that we've seen today.

[Joseph Spak, RBC Capital Markets]

Okay. And Mary, you mentioned the relationship with Honda on purchasing R&D and connected services again. That MLU was announced, I think, like eight months ago, any indication now like what type of savings you can expect from that to deliver over time?

[Mary Barra, Chairman and Chief Executive Officer]

We're not going to frame that right now. I will tell you it's a very productive relationship and partnership and we continue to work so as we identify and want to frame those opportunities. There's more, there's more to come, but nothing to share today.

[Joseph Spak, RBC Capital Markets]

Thank you very much.

[Operator]

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

[Adam Jonas, Morgan Stanley]

Hey, Everybody. Hi, Mary. Hey, Paul. So for every adoption there is a de-adoption. And there seems to be clearly this war against ICE waged by governments, by consumers, regulators, right and then lately OEMs waging their own war against ICE. And when I talk to car companies and management teams like you on the topic of potential write downs or impairments, I asked that because many of these investments of course that you've made in ICE go a decade or more, 15 maybe even close to 20 years for in some instances. And so I - maybe it's too soon, but I'd love to get your view on when along this journey away from ice would it be appropriate as you sit down with your auditors to think about curtailment of useful life and that impact the financial impact? Because it could really change your results and I think it's pretty relevant. If I'm wrong, tell me how I'm wrong because I'm scratching my head thinking, how do you avoid at some point is it just you're making too much damn money selling an ICE stuff right now. And it's just that the fit isn't right. And we need to wait for things to get worse. Help me out there on the impairment potential over time. I'm not asking - it's not a 2021 issue, but as we look out.

[Mary Barra, Chairman and Chief Executive Officer]

So Adam, a couple things, when you said for every EV adoption there's a de-adoption. For General Motors, I think this is a growth opportunity for us. Because there's a lot of EV interest on the coast, that's where we don't get what I would call our fair share. And frankly, I'm going after more than our fair share on the strength of our product portfolio. So that's point one, we see this as a growth opportunity, not only in the US and markets we're in, but in growing into other markets we're currently not participating in. I would also say with the assets that we have right now, when you look at converting a plant from a plant that builds ICE vehicles to those that produce electric vehicles, there's a lot of reuse. Body shop structures or machinery and equipment, the paint shop, which is a 30-to-35-year asset, doesn't care if it's paint, what the propulsion system is in the vehicle that we're going to be painting. And so there's a lot of capital that can be reused as we go forward.

I would also say with every new internal combustion engine propelled vehicle that we put out; we're looking to make it better for the environment from a fuel economy emissions CO2 perspective. And I also think you have to look at the fact that right now, battery costs are coming down. But look at what's in the marketplace right now. I think we're really one of the only people that have an all electric vehicle that's as affordable as the Bolt EV, we've got to make sure as we move to an all electric future that it truly is for everyone. So that's more than an advertising tagline. That's something that General Motors is very much committed to making sure everybody - because ESG has an S in the middle of it, which is making sure we're doing the right thing for everyone. So I think we're moving at a very quick speed to be able to provide EVs for everyone. I think it's going to be a growth opportunity for General Motors. And I think a lot of the assets that we currently have can be reused in an all EV world.

[Adam Jonas, Morgan Stanley]

Thanks, Mary, I have a very quick follow up, and then we're going to - I'll shut up on Super Cruise. I see on Slide 8, you had talked about it being available on 22 models in a couple of years. Can you tell us what is the attach rate of Super Cruise on the models were available? I think that's probably a more relevant metric. And maybe where that was a year ago. So we can get some sense of the attach rate and the growth penetration year-on-year because this is emerging as really, I think potentially a very, very interesting part of the story. And a little extra transparency there I think will go a long way. Thanks.

[Mary Barra, Chairman and Chief Executive Officer]

Yeah. So Adam, on that I get your point. And I think it's a good question. I think when you look at - the customer - customers who have experienced Super Cruise love it. You've heard the 85% say they either wouldn't buy a vehicle without it or they'd strongly desire it to be on their next vehicle. But in that move to have 22 models by 2023, we're in the very early ramp because it's going to happen quickly. And so the Bolt EV, the Cadillac Escalade. So I think we'll have more to share with you as we go forward. But again, this is one of these technologies that you have to experience it just to understand how phenomenal that it is. And that's why I think having the ability to do it in a subscription model as opposed to having to make the decision on day one, I think is going to be very, very important. So we can be transparent and share more of that information as we go forward. It's a little early right now with the ramp up that we have.

[Adam Jonas, Morgan Stanley]

Alright Mary thanks.

[Operator]

Our last question comes from the line of Ryan Brinkman with JP Morgan.

[Ryan Brinkman, JP Morgan]

Hi thanks for taking my question, which is also on Super Cruise. Are you able to describe in more detail the driver attention system on Super Cruise? What steps have you taken to ensure that drivers remain engaged and always keep their eyes on the road, either in terms of educating the consumer about the capabilities and limitations of the system, or putting in place different technological safeguards, including I'm not sure any measures to prevent consumers from attempting to override your safeguards.

[Mary Barra, Chairman and Chief Executive Officer]

So we're very dedicated to this. And the team has worked really hard on this technology, but we're literally watching to make sure that the driver is paying attention to the road. And if the system sees that you're not, it indicates and it kind of is reminding you to pay attention to pay attention. And if you continue to not pay attention, it shuts down. And so I think it's - that I think one of the reasons it's been recognized as a leading driver assist technology. So I think the best thing to do is get you into a vehicle seat and experience it, because it's quite effective.

[Ryan Brinkman, JP Morgan]

Very helpful and lastly, as a follow up, I see on Slide 21, that you will provide additional insight into software and services at the event later this year. Are you able to maybe share at a high level now how you're sort of thinking about the potential materiality over time of after sales software and services, including subscription services, such as Super Cruise? And I know OnStar is very strong in China, do you offer or plan to offer Super Cruise outside North America such as in China?

[Mary Barra, Chairman and Chief Executive Officer]

Well, we're looking at - we actually already have and looking at how do we continue to expand that in China. But I would say overall, I don't want to get ahead of myself for what we're going to share on our Investor Day later this year. But I will tell you, it's significant when you look at - OnStar is already fairly significant. The after-sell opportunity OnStar Insurance - new features that we'll be offering that can be subscription based. And we have a whole team at General Motors working on leveraging the strength that we have of the OnStar platform in the vehicle and how we can leverage that, especially with the vehicle intelligence platform as well. So I'm excited to share that story as we come out. And I think we're at the beginning of significant opportunity in that space, so more to come.

[Ryan Brinkman, JP Morgan]

Great. Thank you.

[Operator]

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

[Mary Barra, Chairman and Chief Executive Officer]

Well, I want to thank everybody for joining. I couldn't be more pleased with everything that has been accomplished in the first quarter with a lot of headwinds coming at us with the semiconductor challenges and then some of the other natural disasters that impacted the supply chain. But I think it just shows the ingenuity and the creativity and the dedication of our team to find solutions and to work to optimize or mitigate to the extent we can. At the same time the team was doing that we also made significant progress in our transformation from an electric vehicle and autonomous vehicle perspective and some of the new growth opportunities when you look at Bright Drop and OnStar Insurance. So the team has really been working on two fronts a very strategic front while dealing with some of the tactical challenges.

And I think we ought to remember is the challenges we have with semiconductors right now are a temporary situation. We will work through that and move beyond it. And it's not impacting our transformation and growth strategies. I I'd also just like to say that, please take a look at the sustainability report that we announced just a little over a week ago. In it, it outlines very clearly our goals and objectives. And we're tried to be transparent and we will provide updates and hold ourselves accountable to the targets and the plans that we've outlined. So again, really appreciate the opportunity to share all the progress at General Motors with you today. I look forward to being able to see everyone in person later in the year when we have our Investor Day. So thanks everyone.

[Paul Jacobson]

Thanks everyone.

[Operator]

That concludes the conference call for today. Thank you for joining.