General Motors Company (GM)

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General Motors Company (GM)

Q4 2011 Earnings Call

February 16, 2012 10:00 a.m. ET

Executives

Randy Arickx – Director of Investor Relations

Daniel Akerson – Chairman, Chief Executive Officer and Chairman

Daniel Ammann – Chief Financial Officer and Senior Vice President

Nicholas Cyprus – Vice President, Chief Accounting Officer, Controller

Chuck Stevens – Chief Financial Officer of North America

Analysts

Brian Johnson – Barclays Capital

Christopher Ceraso – Credit Suisse

John Murphy – Bank of America/Merrill Lynch

Itay Michaeli – Citi

Peter Nesvold – Jefferies & Co.

Adam Jonas – Morgan Stanley

Himanshu Patel – JPMorgan

Rod Lache – Deutsche Capital

Timothy Denoyer – Wolfe Trahan & Co.

Presentation

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the General Motors Company 2011 Calendar Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded today Thursday, February 16, 2012. I would now like to turn the conference over to Randy Arickx, Executive Director of Communications and Investor Relations. Please go ahead sir.

Randy Arickx

Thanks, operator. Good morning and thank you for joining us as we review our 2011 calendar year results. As you know our press release was issued earlier this morning and the conference call materials are available on the investor relations website. I would also like to highlight that GM is broadcasting this call via the internet.

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

This morning, Dan Akerson, General Motors’ Chairman and CEO, will provide opening remarks; followed by a more detailed review by Dan Ammann, Senior Vice President and CFO. Dan Akerson will then conclude the remarks portion of our call with some closing comments.

After the presentation portion of the call, we will open the lines for questions from security analysts. I would also like to mention that in the room today we have Nick Cyprus, Vice President, Controller and Chief Accounting Officer; Jim Davlin, Vice President, Finance, and Treasurer; and Chuck Stevens, CFO of North America and South America to assist in answering your questions.

With that, I’d like to turn the call over to Dan Akerson.

Daniel Akerson

Thanks, Randy. Good morning, everyone. Thanks for joining us. Overall we posted a solid performance for the year and showed steady progress towards a sustained long term strong financial performance. Obviously, we still have a lot of work to do in some areas and we’re taking the necessary corrective actions to get the ball over the goal line. More on that in a moment.

For the year global deliveries topped 9 million vehicles, up nearly 8% over 2010. In fact, we increased sales volume in each of our four regions. Not only our total sales volumes up but also was our overall market share. Global markets share came in at roughly 12%, 11.9% to be precise, up 0.4 percentage points.

We gained share in our most critical markets. Our US share was 19.2%, up 0.4 percentage points. China share was up 0.7 percentage points to 13.6%. In fact we grew it more than three times the market and we were the first company to sell more than 2 million vehicles in China in two successive years and each year we do it earlier in the year which is good news.

We also had good growth in emerging market such as Russia where we were up over 53% versus 2010, and we’re making significant progress and establishing our brands as aspirational. For example, Buick outsold the Audi A4, the Lexus IS250, and the Acura TSX in the US last year who would have thought that three years ago.

In addition, 40% of Buick customers in the US were conquest sales, away from non-GM brands. This increase in volume in share translated the top line revenue growth with revenue up more than a $150 billion, up almost a 11% year-over-year.

Our net income for the year was $7.6 billion, though it’s on the chart our net income for fourth quarter 2011 after adjusting for special items in restructuring cost, it was above $900 million, up 6% versus the fourth quarter in 2010 on the same basis.

While full year revenue increased 11% we showed our operating leverage even in the midst of unfavorable mix shifts which we want to do, more cars, fewer trucks, SUVs, etcetera. We improved our EBIT adjust from $7 billion to $8.3 billion or an 18% improvement over 2010.

GM North America delivered very strong results making $7.2 billion for the year with increased volume and favorable pricing, thanks to a vehicle portfolio that continues to gain traction with the American public, and a renewed small and compact car strategy that is starting to payoff. GME while improving from 2010 levels still posted an unacceptable loss of $700 million in a rather challenging market not only for GM Opel/Vauxhall but also for our competition.

GMIO posted solid EBIT adjusted result of $1.9 billion for the year, though this was down $400 million from 2010 levels. Our equity income from joint ventures was actually up about 200 million for the year, or results as the consolidated operations level more than offset this.

GM South America had a slight loss of a $100 million for the year, down $900 million from 2010. We plan to aggressively refresh our somewhat aging vehicle portfolio in South America while also executing stringent cost control actions in the short term. In fact we have seven new vehicles launching in 2012 alone. If the first two product launches are any indication, we should start to see some stability in growth in this area.

Based on these earnings we generated $7.4 billion in automotive cash flow from operations. This allowed us to deploy some of the cash before significantly ramping up our capital expenditure rate, about $6.2 billion, while still retaining positive automotive free cash flow of $1.2 billion and increasing our available liquidity by $4 billion versus yearend 2010.

Away from the numbers, we had a busy fourth quarter with a number of initiatives as accomplishments. As it marked its 100th birthday Chevrolet celebrated 2011 with record global sales. Sales totaled above 4.8 million vehicles that’s a new Chevrolet every 6.5 seconds. Three million of those Chevrolets were sold outside the United States, a sign of the strength of our global brand.

In fact Chevrolet gained sales in the top five global markets in 2011. We’ve already sold more than a million cruisers around the world since our 2009 launch. The new Sonic has outsold Ford Fiesta in the first three months. We formally implemented the Canadian Healthcare Trust during the quarter. This is another important step towards improving our fortress balance sheet even further as we reduced our OPEB liabilities about $3 billion. As part of our effort to return GM Europe to sustainable profitability we made a few important management appointments during the quarter. First, we named Karl Stracke, President of GME and CEO of Opel/Vauxhall. We also appointed Steve Girsky as Chairman of the Supervisory Board. We named Dan Ammann, Tim Lee who runs international operations, and Mary Barra who runs our Global Product Operations Business to the Supervisory Board as well. Dan will soon touch on some of the plans we have for this group and plan to execute in the coming year.

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