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Let's turn back to warnings. Shares of General Motors jumping after the company beat earnings and race guidance. The GM CFO Paul Jacobson joined us now for more Paul, the stock is up by more than nine percent. We'll spend some time talking about the numbers, but I just wanted to take a step back with you, just for a brief moment. You've got real experience navigating volatile industries, experience in the airline business, and experience in the auto maker
business too. You took over as CFO in the pandemic. Can you talk to us about this year, Paul, Just how agile have you and the team needed to be and how volatile have things been too?
Well, Jonathan, first of all, thank you very much for having us. It's a great day to be a GM and celebrate the success of all of our employees and partners worldwide. So really appreciate you being here today, having me today. So you know, at the end of the day, it's just another change. I mean, since coming to GM in we've gone through COVID, we've gone through chip shortage, we've gone through tariffs, we've gone through ev pivots and so on. But what we've really tried to do is
create a model that is resilient. And when you look at our balance sheet, you look at our inventory discipline and the way we've gone to market, there's a lot of things that have changed that allow us to be able to react to the world around us faster, and I think that's paved the way for us to have another really strong year in the face of a lot of macro changes.
Pull In order to increase resilience and maybe agility, do you have to sacrifice long term planning? Is that something that becomes harder?
Well, you know, I think what we've really done well as a team, I think is we've kept focus on
that long term vision. So you know, for example, while we've taken a charge on reducing some of our EV capacity reflecting the demand that's out there, we still believe that evs are the future and we think that there's an opportunity for us to take a little bit of a pause in demand growth that we've seen over the last few years, structure really improve it right, size our capacity and make sure that we can be successful as
more and more customers adopted. So It's just an example of how we make sure that we're managing the short team within the face of that longer term vision.
So what if the big steps Paul, that you've taken in order to remain agile, particularly with supply chains and removing any kind of a direct input from China in particular, how much have you rejiggered where you get your goods?
Well, I think we learned a lot in industry from COVID and a focused supply chain that was really susceptible to individualize shocks, and I think we've taken the effort to try to make sure that we diversify our supply chain base. We've made a number of investments, for example, in battery raw materials and other materials in the US, in addition to the four billion dollars that we've announced
this year to increase our US manufacturing capacity. So I think it's been a case of making sure that that's balanced. And then when we went through the chip crisis of twenty twenty one, there were some more challenges about making sure that we expand the places where some of our chips are fabricated and our supply base that we use.
So this has just been part of it. I think we've learned a lot of lessons over the last five years that have helped us and positioned us well to be able to thrive in ever changing circumstances like we see right now.
All this costs a lot of money, and I'm just trying to get my head around. We've all been trying to get our head around where it comes from these extra costs in order to rejigger supply chains to offset any kind of increased costs that might come.
Along the way.
How much is coming from whether it's freezing labor forces or trimming around the edges, how much is coming from higher prices on consumer vehicles?
Well, I think if you look at what GM has done, we've saved a lot of money by rationalizing our inventory balances. So we used to keep probably about forty percent more inventory on the ground at our dealerships around the country, and we've cut that down. That's frees up a lot of working capital to be able to invest and redeploy back into the business. But it also makes sure that we can change much more quickly to changing demand around us.
So our pricing has been stabilized, and I think that's given us a little bit more comfort to invest a little bit more than what we have historically, but still making sure that we're very disciplined with our capital allocation because we still have opportunities to pay down debt and also return capital to shareholders. So it's that balanced approach that I think has really paved the way for our success.
Paul, you and your colleagues in the industry recently had a big win in Washington, a little bit of a prie when it comes to the arrangement on the timeline for the tariff costs for imported auto parts. What else are you asking in terms of terrorfully from.
Washington, Well, you know, I think I want to praise the administration for really listening to the concerns of the industry and making sure that they're helping us to be positioned to be really success full as one of the largest US industrial producers that are out there, And the announcements that were made Friday essentially take what had already been done by the administration in the spring and expands it a little bit to be able to use those
MSRP offsets on a wider variety of parts that we're bringing into the country, and as a result of that, we were able to lower our total tariff forecast for the year by about half a billion dollars from where we started the year. And I think it's that proactive partnership in terms of really making sure that we can remain competitive and help to drive more investment into the US, which we've done.
So do you expect more reprieves, especially as the US goes into negotiations next year with Mexico and Canada.
Well, I think what we're looking for is a little bit of stability. Obviously, this year has been a bit of a transition year for US. The handshake deal that we have with Korea. We're really eager to get that finalized. We do have some production of some of our lower cost models in Korea that help with some of the affordability concerns of our consumers here in the US. But also obviously Mexico and Canada are going to be really
important to us. But as we look at those deals being finalized and we start to look into twenty twenty six, we think that there's actually an opportunity for us to do better in twenty twenty six, and we've done in twenty twenty five and start to work our way back up to those eight to ten percent targeted margins that we set for ourselves before the tariffs were put in place.
Well just find me. Can we stay in Ahia and finish on China? For a long time, we've said on this program, this must be the most competitive market on the planet in any industry. How difficult is it to operate in that country right now? And how much hard is it going to get in the future for us sort of makers like yourself.
You know, about a year ago, Jonathan, we undertook a pretty ambitious restructuring program in China with the realization that you know, we were probably not going to be as big in China as we have been historically going forward with the amount of just tremendous competition that's in the country going forward. But you know, together with our partners, we were able to restructure that business and we've been profitable every quarter this year and look to be able
to sustain that. So it's really about making sure that we're right size for where we are. We've got great products over there, we've got a long legacy, and we've got a good partnership that I think has really paved the way and with that work that the team did in China. Really proud of what they accomplished and think we can be sustainable there.
Well. Appreciate your insight and your experience as always, Sir Paul Jacobson. There the General Motors CFO