Ladies and gentlemen, welcome to the General Motors Company Fourth Quarter 2020 Earnings Conference Call. [Operator Instructions]. As a reminder, this conference call is being recorded, Wednesday, February 10, 2021. I would now like to turn the conference over to Rocky Gupta, Treasurer and Vice President of Investor Relations.

Thanks, Tabitha. Good morning, and thank you for joining us as we review GM's financial results for the fourth quarter and calendar year 2020. Our press results were issued this morning and the conference call materials are available on GM Investor Relations website. We're also broadcasting this call via webcast. I'm joined today by Mary Barra, GM's Chairman and CEO; Paul Jacobson, GM's Executive Vice President and CFO; and Dan Berce, President and CEO of GM Financial. It's my pleasure to welcome Paul to his first earnings call with us today and give Paul a chance to talk about his enthusiasm for our shared vision and accelerating our path forward. Before we begin, I would like to direct your attention to the forward-looking statements on the first page of the chart set. The content of our call will be governed by this language. I will now turn the call over to Mary.

Thanks, Rocky, and hello, everyone. Thanks for joining. This morning, we shared the details of our strong 2020 financial performance, including Q4 records for EBIT-adjusted, EBIT-adjusted margin, EPS diluted adjusted, and a record year for GM Financial. These results were driven by the quick actions we took to recover from the early effects of the pandemic. Looking at the past year, our employees, suppliers, and dealers rallied with speed and agility to support our customers and our communities as well as protecting the business. The pandemic has been a catalyst for finding new and better ways to work while strengthening our resolve to win. As some of our plants suspended production in the early days, our teams rapidly turned to producing critical care ventilators and personal protective equipment for patients and frontline health care workers. After our first conversation with Ventec Life Systems, we began production in just 30 days and we built 30,000 ventilators in 154 days. And with that same speed, we developed rigorous safety protocols so we could restart our operations around the globe. This collective spirit was inspiring, and it still drives us and it's contributing to the greatest era of transformation in the history of our company. In spite of the pandemic, we accelerated mission-critical businesses like our EV and AV initiative. We maximized production of full-size trucks, and we launched our new family of full-size SUVs safely and on time. We'll sustain this culture of innovation and leadership in 2021 and beyond, and that is my focus this morning. We are fully committed to a capital allocation strategy that invests in new and existing businesses to drive growth. We're going to generate that growth through our EV portfolio as well as businesses like BrightDrop, OnStar Insurance Services, subscription services like Super Cruise and OnStar…

Thanks, Mary, and good morning, everyone. Before I get into the results, I want to take a quick minute to thank Mary, the broader executive team and really the entire organization for the warm welcome that I've received in my time so far here at GM. I'm really excited for the opportunities that we have ahead of us as we build appreciation for the innovation that we are championing right now. Whether it's in EV, AV, connected services or our overarching vision of zero crashes, zero emissions and zero congestion. We are executing well on our growth strategy and accelerating these growth opportunities with an emphasis on investing in new businesses while maintaining a strong investment-grade balance sheet. We believe we can take advantage of these once-in-a-generation opportunities to achieve strong profitable growth with a solid return on investment. Being a part of GM as it writes the next chapters of its history is a huge honor for me. I look forward to continuing the conversations I've had with the investment community thus far and getting to know those of you I have not yet had the chance to meet. Now let's get into the results. While 2020 was adversely impacted by production challenges experienced in the first half of the year, we demonstrated resilience and flexibility as we quickly moved to preserve liquidity and manage inventory while still launching an all-new lineup of our highly profitable full-size SUVs and prioritizing investments in our all-electric future. Even in the face of the pandemic, we generated results of $122.5 billion in net revenue, $9.7 billion in EBIT-adjusted, 7.9% margins, $4.90 in EPS diluted adjusted and $2.6 billion in adjusted automotive free cash flow in 2020. In the fourth quarter, we continued to see strength in demand as we generated $3.7 billion…

[Operator Instructions]. Our first question comes from the line of Rod Lache with Wolfe Research.

Congratulations on the performance. I actually had two longer-term questions I wanted to ask you. One is, you alluded that some of the growth initiatives could result in new brands like BrightDrop but notice that BrightDrop is continuing to use the independent dealer model. Obviously, independent dealers make some money. They do cleave off some gross margin and F&I per vehicle, which some of the new entrants are suggesting is kind of a disadvantage for existing players. I'm wondering if there are changes to the way that BrightDrop is -- the franchise agreements work that kind of levels the playing field with new entrants.

So Rod, just in general, we see our dealers as a huge asset to the company. They have -- they're responsible for partnering with us to deliver industry-leading sales and service. And so of course, as the industry transforms, as the customer expects different things, both retail and fleet from a BrightDrop perspective, we know and we are working with our dealers and they're transforming as well. And there, especially, there's a huge percentage of our dealers that are very excited about the EV transformation and the opportunity. And we've been working, and frankly, it accelerated last year during the pandemic, of ways that we can better support the customer, meet them where they want to be and take cost out of both of our business to improve both. So that's the journey that we're on. I'm not going to -- for competitive reasons, I'm not sharing all of the specific changes and transformation activities that we're doing but they're pretty substantial. And like I said, our dealers are very much engaged and excited about that.

Okay. And just secondly, you mentioned subscription services. And actually, one of your slides mentions that your next-generation electronic architecture is going to be available on 29 different models by 2023. It sounds like you think that the vehicles that you sell have the potential to become platforms for deploying services and features that you could charge for. So I was hoping you can maybe give us a little bit more insight into the potential there. Sounds like Super Cruise is one of these things. But what is the sort of projected population of vehicles that you're going to be targeting? What are the kinds of subscriptions that you think you might be able to generate?

So Rod, we're very excited about the opportunity we have to present services, especially as we now have the vehicle intelligent platform, which is our new electrical architecture underpinning the entire vehicle. And it protects the vehicle from a cyber safety perspective as well as gives us tremendous over-the-air updates and the ability to do -- provide services on demand. You mentioned Super Cruise, that is one that will have the ability to do. There are several other opportunities that we're exploring and frankly working on right now. Again, we haven't announced any of them publicly, but I will tell you, we have a whole team across our sales and marketing team partnering with our engineering team and software engineers. So, you'll hear more about this as we go forward, but we think it's going to be a huge growth opportunity for us.

Your next question comes from the line of Itay Michaeli with Citi.

Just had one financial and one strategic question. On the financial question, I was hoping you could quantify for the 2021 bridge just the raw material impact that you're expecting as well just the volume impact embedded in the estimates for the semiconductor shortage.

Sure. So, for the commodities first, we’ve seen about 120% increase in steel and PGM prices over the last, really, kind of since May of last year. That's a couple of billion dollars. I would say that we're making some strides to offset that, and we're going to continue to target where we can in order to drive savings to help offset that, but that's rough order of magnitude what we've included in our numbers. And of course, there's always some lag in terms of being able to respond to those prices. On the volume side, I would say that we -- these numbers are moving around rapidly, and between building vehicles that we will go back and retrofit with the components later in the second half and managing through second half makeup volumes, it's premature to talk about the volumes at this point in time, but that's where we've come up with the $1.5 billion to $2 billion net of the initiatives that we think we can bring together to help offset through this.

Great. That's very helpful, Paul. And then on the strategic question, wanted to focus on the AV part of the story and really kind of 2 parts to the question. First, on Cruise, just given the progress we're seeing in the California reports. I was hoping you'd update us on the latest thinking from yourselves and the Cruise team around when Cruise deploys, do you compete with -- against rideshare networks or do you partner with them or both? Just love some updated thoughts there. And then on the kind of AV investment inside of GM, it sounds like you're accelerating that as well. I was hoping, perhaps Mary, you could talk about the plan around the zero crash vision. How do we think about AV deployment within the GM vehicles, let's say, over the next 5 years? And kind of what kind of path should we expect there?

Sure, Itay, and thanks for the question. I'm really excited because if you look at the fact that we're going to be putting Super Cruise on multiple vehicles and the strong customer reaction we've gotten from them, and that continues to grow and definitely contributes to a safer world, a zero crashes world, and we've talked about the next generation of Super Cruise, and that will have even more capability that we'll be able to provide to vehicles and, in some cases, launch and provide additional functionality over the air, so that's something that will be quite significant by 2025. Then when you go to Cruise, they continue to hit their milestones. They're on track from a safety perspective because we've always said safety will be our overriding priority. They're also working on making sure the ride is enjoyable from a customer perspective. And again, they're making progress, I'm very enthused. You know that they're testing right now in San Francisco without drivers in the vehicle in certain situations. I'm not going to put a specific time frame on when we'll launch commercially, but the progress we're making puts us in a very good place that, that's not years away like people think or have talked about it. From -- are we in a partner with existing rideshares? We have the ability to go and launch our own service. We already have our own application that is being leveraged by our employees right now. So we have -- I think when we are in a position that we can take the driver out of the vehicle from a -- and launch the business commercially, we'll have many opportunities, and we'll do what's going to drive the biggest value from a shareholder perspective. But I think at that point, you can think of it like a platform.

Your next question comes from the line of Emmanuel Rosner with Deutsche Bank.

First, a financial question and then a longer-term one as well. So on the financial side, it seems like there was very strong price/mix, very strong volume contribution in North America. But then at the same time, I think that there was a bit of a cost headwind, even excluding the airbag recall. And I think your slides talk about some warranty and materials performance. And so I wanted to see if you could give a little bit more detail around what happened specifically in North American cost in the quarter. And how do you think about it in your bridge to 2021?

Emmanuel, it's Paul. The -- you mentioned the biggest one, obviously, was Takata in there. But I would say the other two were primarily really related to content and major materials. So we've taken a conscious effort in the new line of full-size SUVs to improve content. And you're seeing that in the pricing offsets and what we're able to get in the market. These are content improvements that consumers really love and they're willing to pay for and we feel good about that. And then there's a little slug of commodity pressure that we saw in the fourth quarter, probably about 60-40 between materials and commodities, so that remaining piece.

And just on this sort of thinking about 2021, is it fair to then assume in a continued pressure, I guess, from the materials cost, excluding commodities, the content cost?

Yes. I would say that content is a good reflection of where we're heading, especially in terms of the volume of full-size SUVs and trucks.

Okay, great. And I guess on the electrification side, looking a bit longer term. Now you have a few very strong milestones that you've put out there, more than 1 million units BEV by 2025, and then obviously, 100%, I guess, by 2035, and then several high volumes in North America by 2023. Can you give us a sort of like a holistic view of how you think, since we get deployed, what sort of segments or time line can we expect? When can we learn more from General Motors around the bridge to get you to this 1 million units by 2025 and to get you to the 100% by 2035? What models will make this up and on what time line?

Sure, Emmanuel. Well, I think we're really excited. We're launching the Chevrolet Bolt EUV and next generation Bolt EV this week. And so that starts, I think, a very positive momentum, especially when you look at the affordability of the Bolt and the -- well, Bolt EV and the Bolt EUV. Later this year, we'll have the GMC Hummer. Early next year, we'll have the Cadillac CELESTIQ. We've also announced the Cadillac -- or excuse me, the Cadillac LYRIQ, and then we'll have -- we've already shared the Cadillac CELESTIQ, which is really a flagship. And you'll just see a steady launch of vehicles because we've said 2/3 of the 30 by '25 will be in the United States. You'll hear more about which vehicles are coming in what order as we start to move through the year. But I would say, as you then -- so that -- and from competitive reasons, we're not going to share too much but we'll continue to share more as we get closer to these launches as we go through this year and next. When you start to look at 2035, right now, we're a full-line manufacturer. And so we will cover the full line and more when you think about products like BrightDrop and then our first mile, last mile. You put on top of that the services that will be available through the vehicle that we've talked about, subscription service. And then you put things like insurance that we think we can do very well with the learnings we have from our connected vehicles. So it will be a full line broader than we have right now, and that's all enabled by the LTM platform. And we intend to take share and grow overall as we do this with the number of vehicles sold as well as the growth opportunities that sit on top from a services and other businesses perspective.

Your next question comes from the line of John Murphy with Bank of America.

Mary, I just wanted to ask a question. I mean you're really accelerating the advancement of your EV and AV technology much faster than people would have thought not too long ago. But there's the risk of creating some obsolescence around your core ICE products. And it seems like we're going to reach this tipping point in the next few years. So I'm just kind of trying to understand, I mean, a pessimist may say, hey, you're going to blow up to residuals and you're going to have a real problem. An optimist might say, you're going to create a real super cycle for demand. So just curious how you're thinking about that and how you might manage that.

Well, John, it's an excellent question. And I definitely think it presents a super cycle opportunity for us. When you look at our ICE business and the platforms we invested in over the last 5 years, we're well positioned and that's what puts us in a place where we can be investing more in EV and AV than we are in ICE. And so we're going to leverage the platforms that we already have. The strong franchises in full-size trucks, full-size SUVs, midsize crossovers, and I'm also super excited about products like the Chevrolet Trailblazer and the Encore. So we have a really strong portfolio of products as we make this transition that's going to need limited investment. And then we're demonstrating right now, we also have a very capable manufacturing team, manufacturing workforce. We're transitioning the Detroit-Hamtramck plant right now, Factory ZERO, to build electric vehicles. We've also announced Spring Hill. So we have a very well thought through plan of how we will transition our manufacturing facilities to electric vehicles. We can do it in a pretty short time frame. And with the shorter vehicle development process we have for EVs, those 2 go hand-in-hand. And in some cases, investment that we're making to increase our ICE vehicles, we're doing that with a mind for what it will take to then have a quicker, less expensive conversion to EVs. So it's a very well-integrated plan. We'll be customer-driven, but we're working hard to create a delightful EV ownership experience with the right range, the right charging, the services on top of it and the connectivity that we think we can grow as we make this transition and not have stranded assets.

Okay, that's incredibly helpful. And then just a second question around the chip shortage. I mean when we saw production disruptions and supply shortages last year, what it really resulted in was very -- obviously, tight inventory but very, very strong mix and a focus on your more highly profitable vehicles. I'm just curious, as you go through this process of working through the chip shortage, hopefully be done sometime later this year, how you reallocate these chips to vehicles, how much fungibility there is? And could we be in another environment where mix just remains incredibly strong and offsets some of this potential weakness in production volume? And just how much of that is kind of encompassed in this $1.5 billion to $2 billion EBIT hit you're talking about with the chip shortage?

John, it's Paul. What I would say is that, obviously, the situation is very fluid, and you've seen that from various manufacturers across the board. And what I would say is we're adapting to kind of focus production on two things. Number one, those vehicles that have higher margins and provide better contribution for us. But also with the full-size SUVs and the trucks, they're already operating at full capacity and project it to pretty much for the entire year. So the makeup volume in the back half of the year is harder. So where we are taking chips from are vehicles where we either have a little bit more inventory or more importantly, we've got production gaps in the back half of the year or capacity to be able to make that up. So it's very fluid as we're managing through this but that's all baked into the numbers that we gave earlier.

And then just one quick housekeeping on the dividend. It sounds like the growth investment CapEx, R&D, everything you're doing is going to crowd out the dividend for a little while. Is that a fair statement? Or will there be a rethinking around the dividend sometime this year?

Well, we talked at the end of Q3, we talked about having a dividend that's the right size and at the right time. We continue to be dedicated to that. But we are very much focusing on the first pillar of our capital allocation strategy, which is to invest in growth businesses. So you'll hear more from us later this year as it relates to the dividend. But I think the focus that we have on growth and what we're investing in growth is going to provide a really strong return for our shareholders.

Your next question comes from the line of Joseph Spak with RBC Capital Markets.

Just the first question on the chip shortage. I was wondering if you could help us think through maybe some of the cash flow and working capital timing impact. I know you gave the impact that's included in the guidance. But it would seem like with some of the strategies you're employing, it might be a little bit more of a working capital drain in the first half relative to the EBIT impact and then maybe a recovery in the back half. Is that correct?

Joe, it's Paul. I think that's an accurate assessment. I mean we do expect some choppiness in the near term as we're altering production managing through this as well as you mentioned if we're building vehicles and then coming back to retrofit them. So we do see a bigger working capital and EBIT impact in the first half of the year. And then the expectation is that we'll be able to make up for that in the second half. Also incorporated into our numbers, our cash impact guide, if you noticed, was a little bit wider than our EBIT guide. That's due in part to we were planning, going into the year, on having a little bit of a build and inventory level benefiting working capital that as we make up production volumes in the second half, depending on how the semiconductor situation works itself out, we could see a year-end where inventories are flat or -- and not have that working capital benefit that we might otherwise see, which is why we put a little bit more cash impact into it.

And then the second question is -- and Paul, welcome to GM. But -- and I guess I just want to get your sort of view here as someone that's looking at General Motors with some relatively fresh eyes and I think somewhat of a reputation as being a creative thinker and an ability to help realize value. As you look at GM's assets and balance sheets, I mean how do you think about unlocking further value? And what do you see as the opportunities that may be underappreciated by the market?

Well, first of all, thanks for that welcome, Joe. And I'm not sure who you were talking to but I appreciate it, nonetheless. What I would say is that there's tremendous opportunity here to help the market understand that we're really transitioning from what I would say has been historically kind of an old-school industrial-type mindset for the market to a real technologically savvy, growth-oriented company that's really going into a lot of new markets. And as we see those continue to develop and we continue to ratchet success stories like Cruise and what I believe BrightDrop will be as well as the EV portfolio, I think there's a lot of opportunity here to drive value for our shareholders. And that's ultimately what sold me on coming here to join Mary and the team.

Your next question is from the line of Adam Jonas from Morgan Stanley.

I was going to ask Mary why she hates Norway so much but in the interest of time, we'll move on. Look, I'm not worried about the chip shortage, Mary. I'm worried about the battery shortage. What we're seeing is in the next few quarters or couple of years, the potential for real serious supply/demand imbalance on EV cells. Now fortunately, you're pretty close to the bread truck and you've used your vision to get -- to kind of secure, on a relative basis, a lot better supply domestically and otherwise. But this seems like a real problem. I'm curious, Mary, at a high level, whether you and the team, based on what you see all the way up to the mines on the surface of the earth with the metals, do you see a risk of a cell supply constraint that could really impact volume for the broader EV industry over the next couple of years at this point? And then I have a follow-up.

Adam, well, as we look at it, of course, our purchasing and supply team knows the projections that we have, the volume that we have by year, and we're working to make sure we have adequate supply all the way from the mines. You rightly point that it's one of the reasons why we're investing in our own cell manufacturer. And as I kind of alluded to in my opening remarks, there's more coming than what we've announced already. So we want to be in control of our own destiny, not only from making sure we have the ability to have the cells that we need but also to work on cost improvements and technology improvements. I would also say, the work that we have the joint partnership with LG Chem, not just for manufacturing but also development. We also have significant resources in our R&D, and we're also looking, as part of our cost-out plan, to need less precious metals. So we're working at it from all angles. We know it's strategically critical for our future and so the right attention is placed on it.

And just a follow-up. It is a question on bitcoin. It's inevitable. I might as well just rip the band-aid off, right, Mary? A growing number of high-profile companies including a major competitor are owning bitcoin and crypto as a way to diversify and maximize their cash holdings and treasury outcomes in a world where fiat currencies like the U.S. dollar are being debased and the purchasing power eroding and also the potential means of payment. I mean a $45,000 BTC is optimal for a big ticket purchase like a car. So how does GM think about this opportunity? And yes, this is a very serious question actually. How do you think about this opportunity? Is this something that GM would consider? And what would be the signpost that your team would need to see in treasury in order to move in that direction?

Sure, Adam. Well, first of all, we don't have any plans to invest in bitcoin, so full stop there. This is something we'll monitor and we'll evaluate. And if there's strong customer demand for it in the future, there's nothing that precludes us from doing that. So taking your question very seriously, that's my answer. And I do want to answer your Norway question. I'm 97% Finnish, so I like all the Scandinavian countries. We're actually very -- we look at what Norway has accomplished from EVs, and we think it's a message to have -- make everyone aware and drive awareness and adoption of EVs.

Your next question comes from the line of Ryan Brinkman with JPMorgan.

At GM's EV Day in March of last year, you introduced a target of selling 1 million, I think, Ultium-powered battery electric vehicles between North America and China by the middle of the decade. I don't recall as much discussion of EVs not powered by Ultium batteries. Although I see 1 example, the Wuling Hong Guang Mini EV has, in some recent months, been selling 33,000 or 35,000 units, an annualized run rate of 400,000. So can you tell us a little bit more about the demand you're seeing for these other attainable GM EVs in China and what kind of market you think there could be for them? Do you see the potential to export to markets outside of China? And should we think about their volume being incremental to the 1 million units discussed at the EV Day?

So we're really proud of what our Wuling partner, SGMW, has been able to accomplish. And when we talked about Battery Day, Ultium is our new platform and we are going to continue to roll that out, and we see significant volume coming after that. When -- coming from that, I should say. When we look at the greater than 1 million units by mid-decade, that includes our products in GM China with our joint ventures as well as in the U.S. But that's just a starting point and then we're going to continue to grow LTM as well as potential products, like you say, with the Hong Guang and the EV Mini that have the opportunity to continue to grow. We're always looking at where the right growth is inside and outside of China, but I don't have anything specific to share right now.

Okay. And then just lastly, wanted to check in on GM Financial after the strong result there. I think while the business is benefiting from gains on the sale of off-lease vehicles, given the step-up in residuals, that also the underlying earnings might be growing also on the harvesting of earlier investments. So when should we expect the off-lease tailwinds to subside? And then when they do, what do you think is the underlying earnings power of GM Financial?

Yes, this is Dan Berce speaking. So we're guiding to earnings of -- for 2021 of about $2.5 billion, which is comparable to what we made this year of $2.7 billion EBT. We do expect good gains on residuals again in 2021. We guided to residuals being down low single digits but we're comping to what was a record year in 2020. We're starting the year quite well from an auction standpoint, beating last year's numbers. But the tough comps from a residual standpoint will really be the second half of the year. Even if prices are down a couple of points in 2021, they will still be comparable to where they were in 2019. So leases we made in 2018, 2019, there's -- we expect really good favorability when they come off-lease.

Your next question comes from the line of Brian Johnson with Barclays.

Since most of the housekeeping questions have been addressed, I want to talk about GM Hydrotec. We knew about the Nikola refocused on fuel cells. Navistar was a bit of a surprise. And in fact, the whole renaissance of your fuel cell business is a bit of a surprise. I do remember the Larry Burns Day. So it was the technology of the future that was never quite the future. But now it looks like there's real opportunities there in the commercial vehicle market. So just wondering, in particular, can you talk about where the Hydrotec technology is versus competing fuel cell solutions in terms of cost per kilowatt and other key factors?

Well, we're really excited about the potential of Hydrotec. And when you look at commercial trucks, defense, aerospace and stationary backup power, the situations where you need large quantities of energy over extended periods of time to move heavy payloads. So that's where hydrogen fuel cells are really most applicable. And so we see hydrogen fuel cells as well as EVs being part of the solution. I was here for -- when we started working on fuel cells. We've never stopped and we have a very productive partnership with Honda. So I think we've invested appropriately and shared that investment to be efficient. So I think there's huge opportunity. We're very pleased with our partnership with Navistar, and they'll have vehicles on the road in 2024. So the time has come.

And just as a follow-on. Given that's not core to the passenger personal use mobility business, unlike EVs where you did roll out a spin-off but perhaps more like Cruise, where the structure of the way it's set up kind of contemplates maybe at some point monetization. How would you think about Hydrotec along that spectrum of core could ever consider monetizing to if the price is right, it could go its own way?

Well, I think, as I've said repeatedly, we will always do what's in the long-term best interest of our shareholders to unlock the most value, so we are committed to doing that. We're in the early days of Hydrotec with -- and also with our GM Defense business and in other opportunities. So right now, we're focused on the growth opportunity that's in front of us. And if at some point, there's a different structure that would enable that growth to be even faster, we'll definitely consider it.

Your next question comes from the line of Dan Levy with Credit Suisse.

Welcome to the team, Paul.

Thanks, Dan.

First question, I wanted to ask about EV. And I think you've mentioned in your opening remarks, you've had discussions with the new administration. And I think we know a big part of EV uptake until now and likely for the foreseeable future is likely the role of government in setting policies, encouraging uptake and you're doing commercials on Norway. Norway has been one of the most aggressive in policies encouraging uptake. You have this new 2035 zero-emission target. Can you tell us what your baseline assumption is for increased regulation in the coming years to encourage EV uptake? How aggressive do you expect the government to be? Or would you advocate for the government to be -- would you advocate for the government, the U.S. government, to institute a ban on combustion vehicles by 2035, similar to what we've seen from other countries?

I think our focus, Dan, is really on delighting the customer with an incredible ownership experience of allowing them to have the vehicle and the segments that they want at the price point that fits their life. And then having the right range, making sure the whole ecosystem supports them from a charging perspective, whether it's home charging, at work, when they're making long-distance trips or if they live in an apartment and how do we make sure they have regular available and dependable charging infrastructure. So I think there's a huge amount of opportunity with business partnering with government to make sure the infrastructure is there to support it. We do want to see the EV tax credit. We think there's a period of time where that's still important. And frankly, we'd like to see that not penalize first movers. But generally, we are very much focused on delighting the customer with the overall ownership experience, having the right vehicles and making sure every aspect of their ownership is a step above what is today. That's really going to drive the adoption we need.

Okay, okay. And then a second question on this 2035 target, which it is the first time you put out firm timing on this target. And I think the word that you used in the release is aspire rather than a hard firm target, which makes sense because it's 15 years out. But maybe you could walk us through the factors that you think could accelerate or challenge your ability to meet this target? What is the largest factor determining the ability to meet the target between cost improvements on EV, addressing the transmission and engine capacity, challenges to be downsized, challenges on distribution or just broadly on U.S. consumer acceptance and product? So what needs to be done to hit this 2035 target? Because you used the word aspire rather than a hard line in the sand.

Well, clearly, customers will drive this and what customers want. And that's why we're focused on creating that excellent customer experience that I just talked about. But there's really nothing holding General Motors back. We have the manufacturing capability. We have the LTM platform, and we already have the second generation of technology that's being worked to further take cost out and allow energy density to increase, which all benefits the consumer. We have the Ultifi-ed buying, and know how we will provide the customer experience, and we're partnering with our dealers to make sure it's in order of magnitude, better customer experience from an ownership perspective. The services, whether it's subscription or what's offered in the vehicle from a connectivity is another thing we think where we can completely delight the customer and build on the fact that we have leading technology right now. So to me, there's not 1 big factor that's going to hold us up. We have all the assets to achieve this. We've got to solve issues and win customers, but I think we're well positioned to do that across the portfolio. And that's why we see such a tremendous growth opportunity for General Motors.

Your next question comes from the line of Philippe Houchois with Jefferies.

Following on to this discussion about this aspiration and your target or aspiration for 2035. I'm trying to understand, thinking 10 years out or so. If we assume that SAAR grows relatively slowly in a mature market and GM targets no ICE by 2035, what happens if adoption is lagging significantly, let's say, 50% or so? Logically, GM must be prepared to either shrink volume or compensate hardware revenue with other source of revenue. And keeping in mind, for me, shrinking if you got more growth and better margin, it's not, let's say, negative for the markets. It's quite the contrary. Expectedly, if you don't want to shrink or not planning to shrink, you need to work on squeezing your competitors especially basically making their growth in EVs more difficult. I'm just trying to understand strategically, over the next 10, 15 years, is GM ready to shrink or is GM going to be aggressive? I'm trying to understand. Or am I missing something?

I think we're going to be aggressive because I think we've got the technology, we've got the talent. We have the manufacturing capability. We already sell more vehicles in the United States and we're 2 in China. So I think we're well positioned because of our current brand strength around the world and our position and then with the technology that we're bringing forward. So we don't plan on shrinking. We plan on growing, especially if you look at in the United States on the coast, we don't get what I would say is our fair share of the market. That's a growth opportunity right there. But we think we're extremely well positioned. And we -- again, I can't underestimate how much opportunity we have with the LTM platform because of the modularity of it that we can take so many vehicles across so many segments price points to really delight the customers. So that's our focus.

Your next question comes from the line of Chris McNally with Evercore.

Mary, I wanted to follow up on the questions on Cruise. And I know you can't be too specific on exactly when a launch would happen or even maybe a more extensive beta testing of a program in San Francisco. But could you at least maybe talk about some of the ambition to test aggressively in other cities for whenever a commercial launch or beta launch was to happen? Could we expect multiple launches sort of in succession on a sort of an annual type basis?

I think you will see that we talked very early on that once we have launched in 1 city, the opportunity to go to the next to do the work, to make sure the technology, is adaptable to the unique things of another city. So I think once we launch successfully and demonstrate that the technology is safer than a human driver and we demonstrate to customers, I think that we can really increase the number of cities that we're offering it quite quickly, and that's what we'll focus on doing.

And then finally, the rationale behind the tax deconsolidation of Cruise, it's super interesting. I'm just curious, does it ever make sense that Cruise is its own separately listed assets so that funding options would be obviously much broader than internal or external private investors?

Chris, it's Paul. So I would say those two issues are pretty separate and distinct from each other. The tax deconsolidation is really just mechanical because our ownership is below the required thresholds to consolidate for tax. And obviously, with their spend and their growth, we benefited from that, which is why we're seeing a tax increase with the deconsolidation. I think what we've proven out with the last round of funding is an ability to partner and raise external capital alongside the strength and the foundation that GM provides. So I think access to capital is really unconstrained the way we think about it right now, and we bored that out in the last fundraising round.

Our last question comes from the line of Jairam Nathan of Daiwa.

I have two questions, one for Mary, one for Paul. For Mary, longer term, do you see EVs as an opportunity to enter -- reenter Europe with a clean slate, especially given governments have been more conducive to giving incentives to EVs? I believe EVs amounted for like 10% penetration in the fourth quarter of 2020. What's your thoughts around that?

There's nothing that precludes us with the sale of Opel/Vauxhall to do that. We already have our iconic products in Europe right now with Cadillac and the Chevrolet Corvette, et cetera. So there's nothing that precludes us and I think it's a natural growth opportunity for us as well.

Okay. And Paul, coming from an industry which benefited significantly from consolidation, what are your thoughts for the automotive industry there?

I think that's a bit of a trick question. But I think they're obviously very different industries across the board. I think there's some similarities in that the industries are both capitally intensive. But what we have here is much more of a platform to create a growth model. And I think we saw some of that in my past life as well. But really here, it's about diversifying the business. It's about growing into the increasing tipping point-like demand of EVs and AV technology going forward. And when you combine that with the strength in the brands and the capabilities of GM, I think we've got a lot of opportunity ahead of us.

I'd now like to turn the call over to Mary Barra for her closing remarks.

Thank you. Well, first of all, I appreciate all of you joining, and thanks for the great questions this morning. I hope you know and see that it's overwhelmingly true that we are at an inflection point on sustainability, on inclusion and diversity and on growth that will deliver shareholder value not just this quarter but for many years to come. I hope that's coming into even sharper focus for all of you. Every quarter moving forward, you can expect to hear us advance our story. I believe we have the talent, the technology, the profitability and the balance sheet to lead, and we will continue to innovate and I look forward to sharing more in the months ahead. So thank you. Please take care and stay safe.

Ladies and gentlemen, that concludes the conference call for today. Thank you for joining.