General Motors Company (GM)

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General Motors Company (GM)

Q4 2012 Earnings Call

February 14, 2013 10:00 am ET

Executives

Randy Arickx – Executive Director-Communications and Investor Relations

Daniel F. Akerson – Chairman and Chief Executive Officer

Daniel Ammann – Senior Vice President and Chief Financial Officer

Analysts

Brendan Dobell William Blair & Co. LLC

Brian A. Johnson – Barclays Capital, Inc.

Rod Lache – Deutsche Bank

Itay Michaeli – Citigroup

Patrick K. Archambault – Goldman Sachs & Co.

Chris J. Ceraso – Credit Suisse

John Murphy – Bank of America Merrill Lynch

Adam Jonas – Morgan Stanley & Co. LLC

Ryan J. Brinkman – JPMorgan Securities LLC

Presentation

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the General Motors Company Fourth Quarter and Full Year 2012 Earnings Conference Call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. (Operator Instructions)

As a reminder, this conference is being recorded, Thursday, February 14, 2013. I would now like to turn the conference over to Randy Arickx, Executive Director of Communications and Investor Relations. Please go ahead.

Randy Arickx

Thank you, operator. Good morning, thank you for joining us as we review our 2012 calendar year results. A press release was issued earlier this morning, and the conference call materials are available on the Investor Relations website. GM is also broadcasting this call live via the Internet.

Before we begin, I'd like to direct your attention to the legend regarding forward-looking statements on the first page of the chart set. As always, the contents of our call are governed by this language.

This morning, Dan Akerson, General Motors’ Chairman and CEO will provide opening remarks; followed by a review of the financial results with Dan Ammann, Senior Vice President and CFO. Dan Akerson will then conclude remarks portion of our call with some closing comments. After the presentation portion of the call, we will open the lines for questions from the analyst community.

In the room today, we also have Nick Cyprus, Vice President, Controller and Chief Accounting Officer; Chuck Stevens, CFO of North America; and Jim Davlin, Vice President, Finance and Treasurer, to assist in answering your questions.

With that, I'll like to turn the call over to Dan Akerson.

Daniel F. Akerson

Thanks Randy and thank you to everyone on the call for joining us. From every vantage point, 2012 was another solid year for General Motors.

As you can see on slide two, we grew both our sales and top line revenue in earned net income attributable to common stockholders of about $4.9 billion. Special items reduced net income by about $500 million this year, Dan Ammann will walk you through these later on the call.

Turning to our operating results, EBIT-adjusted was $7.9 billion for the year, which reflects strong profit growth in many areas of the business.

North Americas results tracked very close to 2011. South America and our international operations were up year-over-year and GM Financial had record income before tax. The $400 million year-over-year decline in EBIT-adjusted was more than explained by losses in Europe. Cash generation in 2012 was very solid. Automotive operating cash flow was $9.6 billion and adjusted for free cash flow was $4.3 billion. That’s up meaningfully year-over-year reflecting our increased cash discipline.

If you turn to slide three, I’d like to review some of the highlights from the fourth quarter. I’m going to focus on initiatives that fundamentally improved our competitive position and reduced risk. Let’s start with our new products. We planted the seeds of growth in every region around the world. In China, as you many know, 2012 was a record sales year and we gained a four point in market share. We filed this up from January by selling more than 300,000 vehicles in a single month for the first time ever. Domestic sales of Buick, Chevrolet and Wuling brand all set new single month records.

Going forward our product strategy is going to become increasingly hard for competitors to defend again. For example, in the fourth quarter we launched the Buick Encore. Now this quarter, we’re starting to build critical math for Cadillac with local production of the XTS. We also introduced the Chevrolet Sail UVA hatchback in India.

In South America, we revealed the Chevrolet Onix, which is part of an award winning top to bottom transformation that began in 2011. In Europe, it’s been exciting to watch the Opel ADAM follow the Mokka’s fast start. Especially since both vehicles are in new segments for the brand.

The Mokka has more than 80,000 customer and dealer orders. In just a few weeks after the ADAM launch, orders from all across Europe exceeded 20,000 with most of them in Germany.

In North America, our most important product news was the reveal of the all new 2014 Chevrolet Silverado and the GMC Sierra full-size pickups. We are going to share more details about these products in March. But I can tell you that every element of these trucks has been improved, including durability, capability, fuel economy and refinement which will help us leverage our 13 million strong owner base.

We’ve also have a transition plan to optimize our capacity, sales and market share opportunity in a growing U.S. economy.

The GM launching these products is undeniably a stronger company than it was even a year ago. For example, we continue to advance our European revitalization plan and work toward our objective of achieving break-even EBIT adjusted by mid decade. We strengthened the Opel management team with the appointment of Dr. Karl-Thomas Neumann, as Chairman of the Management Board effective from March 1.

We’re brining 23 new products to market between 2012 and 2016, while at the same time we continue to rationalize capacity and reduce cost. For example, we recently completed the sale of our transmission operations in Strasbourg France and announced that vehicle production at our plants in Bochum Germany will seize at the end of the current Opel Zafira’s life cycle 2016, assuming we finalize a German labor deal in the next few weeks.

In addition we finalized both our purchasing joint venture with PSA and initial product plants which follow the logistics agreements already in place. GM Financial meanwhile has moved from strength to strength.

During the quarter we announced the acquisition of Ally’s operations in Europe and Latin America and its joint venture interest in China. When these deals close in ’13 GMF will be able to provide financing in markets that represents 80% of our sales volume, up from about 30% today.

Read the rest of this transcript for free on seekingalpha.com