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One stock that we're keeping a close eye on this morning is GM shares are lower active. Company said it will take a one point one billion dollar hit to profit from President Trump's tariffs. Let's bring in General Motors chief financial officer Paul Jacobson for more. Paul, it's great to have you with us. I want to talk about potential levers that you can pull here because my understanding is that you really haven't raised prices to this point
to offset some of those costs. I know that you're taking other measures, but is it possible that you could raise the sticker price on some of your vehicles to make up some of that hole.
Well, good morning, and thanks for having me today. It's a beautiful day here in Michigan, and you know, we're celebrating another another good quarter. And you know, I think obviously tariffs have had some pressures. We've adjusted to them. But as we just said on our earnings call, we're ninety days into this, and you know, our plans are still very consistent with what we said at the beginning,
and we're going to continue to execute on that. You know, we've got a strategy here that is both short term and long term. And the shorter term we've talked about our ability to offset thirty percent of the tariff impact. That's through some cost austerity as well as some manufacturing
changes and pricing. But we think that as we maintain our consistent pricing strategy, where you know, we look at the demand for our vehicles and where that sits in our disciplined inventory approach, that we can continue to absorb that and reflect that in our traditional and sort of consistent pricing actions rather than going out and announcing big tariff related increases because we don't think that's necessarily good
for the consumer as well. So pricing is a part of it, but nothing out of the ordinary or extraordinary from what our current strategy has been.
How much flexibility do you have to make adjustments to supply chains here to meet the evolving auto tariffs and the parts that tariffs might hidden of the supply chain.
Well, there have been things that we've already been working on, so really kind of since COVID, we've been looking at creating more resiliency in the supply chain, and we've onshoed a lot of things as we as we mentioned in our last call. Only about three percent of our direct purchases come from China through the supply chain, so that's helped us a little bit in terms of being proactive
on that. Obviously, we'll do some resetting in partnership with our supply chain partners, but you know, it really starts
with our manufacturing footprint. Earlier in the quarter, we announced four billion dollars of investments over the next couple of years to increase production in the United States, And when we're done with that, which will start in about eighteen months, we'll be producing more than two million vehicles here in the US, so comfortably putting us in a position where we most produce more vehicles here in the country than anybody else. So we're working on those and also partnering
with the supply chain across the board. So while we you know, have a pretty sizable tariff impact this quarter, as we've talked about, it's not a surprise against what we told the street at the beginning of it, and our plans are executing well according to our playbook.
Let's talk about how those plans play out over the course of twenty twenty five. Because GM has said that you can offset one third of that four billion to five billion dollars in terriff exposure later this year, as more of your mitigation efforts really start to take hold, can you give us a timeline there one might we see some of those efforts actually start to bear fruit in terms of offsetting some of these costs that you're dealing with.
We'll really begin to see that in the third quarter, in the fourth quarter as we as we've told investors, you know, some of it is pricing, and you know our pricing was up in the first quarter. It was about flat here in the second quarter, but we've expected pricing to be up about a half a percent to one percent for the full year in twenty twenty five. So as Model year twenty six comes out, we start
to see some of the benefit of that. Going forward, there's some cost initiatives which will be coming in in the second half of the year. The team's done a good job of making sure that we're maximizing efficiency where we can, so we don't have to put all the burden on our customers to absorb all that. So I
think we're in good shape. The second half should should be better and should be more offsets than what we saw in the second quarter as we're just adjusting to it, but that remains consistent with that thirty percent assumption that we had going into the year.
Paul, and this isn't specific to GM, but I do wonder how you can have confidence to say, you know, the third quarters when we might start to see these efforts fare through, given that it feels like the tariff landscape in particularly dramatic periods, can change day to day.
And from where you're sitting as the CFO of General Motors, is your opinion that the current tariff structure, the current stance of this administration, does this make US manufacturers, US automakers actually be more competitive at the end of the day, Well, I think.
Over the long term, certainly, we do believe that it can be more rational and more stable industry for US across the board, and we're going to work through that. We've already announced significant plans to increase production here in the US. It started with the decision to increase the line rate and our production rate in Fort Wayne, where we'll produce another fifty thousand trucks and SUVs on our trucks on that line going forward, and that'll hit us
this year so that's already taken effect. The changes that we announced earlier this quarter, will start to see those in about eighteen months across the board, So you know, I think it clearly is having the intended result and one that I think will be met good for us
going forward over the long run. We are optimistic about, you know, bilateral trade deals and as they work through, in particular with Canada and Mexico and also Korea with our footprint there, but where we feel comfort in the fact that the auto industry is very important to us as well as it is to Korea, so we believe that they'll be able to work out a deal and ultimately that'll be good for both countries.
What can you tell us about any future capital allocation? Is GM planning to do any share buybacks, especially in light of some of the cost reduction efforts you're taking in the second part of the year.
So capital allocation is one thing that I think we're really proud of as a team and what we've been able to deploy consistently. First, we invest in the business. We'll be investing ten to twelve billion dollars over the next couple of years. That will allow us to both improve and continue our great vehicle portfolio, but also these
footprint changes that I mentioned earlier. But even with that, we're producing sizeable free cash flow and we're able to make sure that we protect the balance sheet as well as return capital to our shareholders, and we've established a pretty good track record for that. Earlier this morning, we announced that we've resumed share repurchases in the month of July. As of June thirtieth, we had four point three billion dollars remaining under our authoryation and strong free cash flow projected.
So I think it's something that the shareholders can benefit from as well as we drive this efficiency into the business to ultimately help mitigate some of this terrif exposure. So overall, I feel good about where we are and we're working hard for the shareholders.
Paul Jacobson, Chief financial Officer of General Motors, we thank you so much for joining us this morning.