Today was General Motors 2012 Stockholders Meeting. Below please find the prepared remarks by GM Chairman and CEO Dan Akerson.
(Speaker’s words definitive)
We earned record net income of $7.6 billion and EBIT-adjusted of $8.3 billion. Our sales were up in every region. We grew our global market share. We made strategic investments in all of our brands. We strengthened our management team, and in the United States alone, we announced new investments in our plants that bring the three-year total to more $7 billion. That money is spread across 30 facilities, and the investments have created or retained 17,800 jobs.
2011 was a good year. But it wasn’t a great year. We have much more work to do because making GM great again is what we are working toward. Just look at this year’s Fortune 500 list if you need proof. GM was ranked No. 5 in revenue. But when it comes to profits GM ranked 20th.
To be great, GM must close this gap by steadily improving our margins and that will be the focus of my remarks today. It’s fundamental to earning a blue-chip multiple for GM stock and ensuring that the company will be successful for generations – not just a few quarters or a few years.
Our journey starts with our products – and I am pleased to report that we are now in the early days of one of the biggest global product offensives in our history.
The impact of new vehicles will be especially profound in the United States, where about 70 percent of our nameplates will be new or freshened over the course of 2012 and 2013.
Many of them will be in segments new to GM – and every one of them is designed to compete and win.
The new Buick Verano – Buick’s third all-new sedan in three years – is one such example.
Early sales have been very strong, and to keep the momentum building, we announced today that we are introducing a new Buick Verano Turbo luxury sedan. Power will come from a 250-horsepower turbocharged Ecotec engine, which is the same engine that was named one of Ward’s “10 Best Engines” for North America.
Another great example is the sporty Chevrolet Spark, which launches this summer. The Spark is designed to capture urban and first-time buyers with bold styling, more passenger and cargo room than key competitors and exceptional affordability.
At the other end of the spectrum are the new Cadillac XTS – our most technologically advanced luxury sedan ever – and the ATS, Cadillac’s new compact luxury sedan.
The Cadillac XTS integrates an incredible suite of technologies for ride and handling, safety and connectivity in a way that enhances the natural elegance of the car. It’s also the launch vehicle for the Cadillac User Experience or “CUE”. CUE is one part driver interface and one part entertainment system, and it has the same intuitive design as the world’s best smartphones and tablet computers.
The mission brief for the ATS, by contrast, is to establish a strong Cadillac presence in the largest luxury market segment. The German brands may not see us as a threat but I think the ATS will get their attention. It has rear-wheel drive, it’s one of the lightest vehicles in the segment, our 270-horsepower turbo engine has 40 more horsepower than a comparable BMW and the car will get better than 30 mpg on the highway.
The investment in our other regions is equally strong.
In Brazil, we are following the successful launches of the Chevrolet S10 pickup, the Cruze and the Cobalt with the all-new Chevrolet Spin MPV, which will be unveiled in about two weeks.
The Spin is a great-looking and affordable choice for families, and it’s the only vehicle in its class that will offer a 6-speed automatic transmission.
We’re also growing in Russia. Over the next five years, GM will increase production capacity to 350,000 vehicles up from 200,000 today.
Underscoring our commitment to Opel, we’re investing billions in new models like the Mokka, which is the first contender from a German manufacturer in the growing sub-compact SUV segment. We’re making this investment even as we address overcapacity and high fixed costs in the region.
And in China, our largest market, GM is increasing production capacity by 25 percent over the course of 2012 and 2013, and we will introduce more than 60 new and upgraded vehicles over the next five years.
To support these plans, we expect to spend the same level of capital – about $8 billion annually – through the peaks and troughs of the global industry.
Internally, this stable spending is going to make our product development factory far more efficient by eliminating churn. Externally it’s going to help us deliver even more new cars, trucks and crossovers, as well as better cash flow, because it’s going to be bolstered by rigorous cost discipline.
Our cost discipline has driven changes in everything from the way we buy advertising to the size and deployment of our corporate staff and how we operate our factories.
For example, in Europe we will build our next-generation Opel Astra in two plants running three shifts, instead of operating three partially full plants like we do today. There also is our new alliance with Peugeot, which is designed to reduce our commodity costs and streamline logistics.
But the most profound changes are occurring in product development. We’ve looked at our future product plans and studied the competition, and it’s clear that we can satisfy more customers with far fewer vehicle architectures.
To that end, we’re targeting a roughly 50 percent reduction in architectures by 2018, and I believe we will find additional efficiencies along the way.
I won’t put a dollar figure the savings, but they will be very large. We’ll be paying for fewer prototypes. We’ll get better pricing on material and commodities, and we can share tooling designs around the world. In addition, our quality and warranty costs should improve further, we will be able to get to market faster and the list goes on.
We’re already seeing modest savings start to flow and more will accrue and compound steadily over time. As a customer, you will see the benefit in better-engineered cars and trucks, and more choice. And as a stockholder, you’ll see the benefit in higher margins and stronger cash flow.
Are there risks to achieving this vision? Certainly. So what’s holding us back?
The most pressing is the spread of recession in Europe, which is exacerbating industry issues like overcapacity. We certainly can’t fix the economy. But we are addressing every issue that’s in our power to manage.
This includes delivering the promised synergies with Peugeot, working with our unions to become more competitive, removing capacity when and where we can and driving revenue with new product.
Protecting our core vehicle business from economic shocks is also the driver of our “fortress” balance sheet and pension de-risking strategies.
When I talk about a fortress balance sheet, I mean one strong enough to meet all of our obligations and create value even in the toughest economy. We’re already there in terms of automotive debt, which was $5.4 billion at the end of the first quarter of this year, and we have built total liquidity of $37.5 billion.
“De-risking” the pensions, meanwhile, has several components. One is reducing investment risk inside the plans, which we have done by better matching assets and liabilities.
Another is reducing the size of the plan to keep our liability from growing. To that end, all of our U.S. salaried employees are going to be covered by 401(k) plans going forward, which is how the majority of American companies help their people accumulate wealth for retirement. This month we also announced a plan that will reduce GM’s U.S. salaried pension obligation by an estimated $26 billion.
All of this goes far beyond what any other company has done to reduce pension risk and I’m proud of the way our team tackled the issues, applied creativity and delivered a plan that protects our retirees and makes GM stronger.
What I have laid out for you are the highlights of our aggressive plan for profitable growth – and a clear sign that GM is on the move once again.
I know we can get the job done – and do it well – because the old internally focused, consensus-driven and overly complicated GM is being reinvented brick by brick. We now have clarity of purpose backed by true accountability, and that’s part of a broad cultural change underway at GM.
Without culture change, we could not have accomplished so much in our first full year as a public company and our success would not be sustained over time. But the change is real, and with it, we can achieve great things for our customers, our employees and of course for our shareholders.
General Motors Co. (NYSE:GM, TSX: GMM) and its partners produce vehicles in 30 countries, and the company has leadership positions in the world’s largest and fastest-growing automotive markets. GM’s brands include Chevrolet and Cadillac, as well as Baojun, Buick, GMC, Holden, Isuzu, Jiefang, Opel, Vauxhall and Wuling. More information on the company and its subsidiaries, including OnStar, a global leader in vehicle safety, security and information services, can be found at http://www.gm.com.
In this press release and in related comments by our management, our use of the words “expect,” “anticipate,” “possible,” “potential,” “target,” “believe,” “commit,” “intend,” “continue,” “may,” “would,” “could,” “should,” “project,” “projected,” “positioned” or similar expressions is intended to identify forward-looking statements that represent our current judgment about possible future events. We believe these judgments are reasonable, but these statements are not guarantees of any events or financial results, and our actual results may differ materially due to a variety of important factors. Among other items, such factors might include: our ability to realize production efficiencies and to achieve reductions in costs as a result of our restructuring initiatives and labor modifications; our ability to maintain quality control over our vehicles and avoid material vehicle recalls; our ability to maintain adequate liquidity and financing sources and an appropriate level of debt, including as required to fund our planned significant investment in new technology; the ability of our suppliers to timely deliver parts, components and systems; our ability to realize successful vehicle applications of new technology; and our ability to continue to attract new customers, particularly for our new products. GM’s most recent annual report on Form 10-K and quarterly reports on Form 10-Q provides information about these and other factors, which we may revise or supplement in future reports to the SEC.