GM Shifts Back to ICE as EV Strategy Costs $7.6B

Date of Call: Jan 27, 2026

Financials Results

• Revenue: $45B, down approximately 5% year-over-year
• EPS: $2.51 per diluted share, up year-over-year
• Operating Margin: North America EBIT adjusted margin of 6.1% in Q4; guided to return to 8%-10% range for 2026

Guidance:

• EBIT adjusted for 2026 expected to be $13B to $15B.
• EPS diluted adjusted for 2026 expected to be $11 to $13 per share.
• Adjusted automotive free cash flow for 2026 expected to be $9B to $11B.
• Gross tariff costs for 2026 anticipated to be $3B to $4B.
• North America ICE wholesale volumes expected to be flat to up modestly.
• Anticipate $1B to $1.5B benefit from right-sizing EV capacity.
• Expect $1B benefit vs 2025 from positive warranty trends.
• Expect deferred revenue from software/services to increase to ~$7.5B by end of 2026.
• Expect headwinds of $1B to $1.5B from onshoring, software investments, and commodity/currency costs.

Business Commentary:

North America Market Performance:

• General Motors achieved its highest full year market share in a decade in the U.S. in 2025, marking the fourth consecutive year of market share growth.
• This growth was supported by low inventory, low incentives, and strong pricing strategies, along with leading the industry in full-size pickups and SUVs.

EV Strategy and Challenges:

• GM faced challenges with EV demand and recorded significant charges, totaling $7.6 billion in Q3 and Q4 2025, due to the need to realign EV capacity with consumer demand.
• The company adjusted its strategy by selling its share in the Ultium Cells Lansing plant and pivoting production from EV to ICE vehicles, reflecting a response to slower-than-expected consumer adoption and changes in U.S. government policies.

Cash Flow and Financial Resilience:

• GM reported $10.6 billion in adjusted automotive free cash flow in 2025, contributing to a year-end cash balance of $21.7 billion.
• Strong cash generation enabled significant share repurchases and investments in capital projects, enhancing financial flexibility and shareholder value.

Tariff Management and Cost Mitigation:

• Gross tariff costs for 2025 were $3.1 billion, below the predicted range, due to effective mitigation strategies and favorable policy developments.
• GM offset over 40% of these costs through go-to-market actions, footprint adjustments, and cost reduction initiatives, showcasing proactive management of regulatory challenges.

Super Cruise and OnStar Growth:

• OnStar Services achieved 12 million subscribers in 2025, including more than 620,000 Super Cruise subscribers, reflecting nearly 80% year-over-year growth.
• The growth in deferred revenue from software and services is expected to reach $7.5 billion by the end of 2026, driven by increased adoption of Super Cruise and other digital services.

Sentiment Analysis:

Overall Tone: Positive

• Management expressed pride in 2025 performance, confidence in 2026 outlook, and optimism about future technologies. Examples: 'I'm incredibly proud of our global team... delivered an exceptional 2025,' 'Our strong foundation and operating discipline are why our average annual free cash flow generation has structurally improved...,' 'We are confident in our ability to deliver this goal ahead of investor expectations.'

Q&A:

• Question from Dan Levy (Barclays Bank PLC): Can you unpack the assumption for pricing to be flat to up? How much of that is just the benefit of ICE or some other dynamics?
  Response: Pricing guidance assumes annualization of 2025 model year increases with no significant further price increases projected, supported by vehicle momentum and new truck launches.

• Question from Dan Levy (Barclays Bank PLC): To what extent does the current product portfolio align with higher near-term ICE mix, and what is the potential for adding hybrids?
  Response: Management believes the portfolio is right, with a strong ICE foundation, dedicated EV platform, planned hybrids in key segments, and ongoing EV cost reduction efforts.

• Question from Michael Ward (Citigroup Inc.): Is inventory discipline going to continue, and what are the implications for cash flow?
  Response: Inventory discipline (target 50-60 days) is expected to continue, contributing to consistent cash generation, though no significant builds are contemplated.

• Question from Michael Ward (Citigroup Inc.): How much can you save from the cost of capital with the new Industrial Bank for GM Financial?
  Response: The bank will provide a complementary funding source to lower cost of funds over time, but savings are not expected to be as high as 100 basis points.

• Question from Joseph Spak (UBS Investment Bank): How is the hybrid portfolio evolving, is it included in CapEx guidance, and will vehicles be able to use the next-gen architecture?
  Response: Hybrid plans are segment-by-segment; products are within the $10B-$12B CapEx guidance. The next-gen software-defined platform and Super Cruise will be available across ICE and EV vehicles.

• Question from Joseph Spak (UBS Investment Bank): Can you unpack the $1B-$1.5B in onshoring and software expense headwinds and the split between them?
  Response: Headwinds are split roughly 50-50 between onshoring ramp-up costs (offset by future production) and ongoing software investment.

• Question from Andrew Percoco (Morgan Stanley): What if the South Korea tariff reverts to 25% from 15% in the guidance, and what are the tariff mitigation efforts for 2026?
  Response: Management hopes the negotiated 15% tariff is implemented; mitigation efforts (go-to-market actions, footprint changes, cost reductions) are expected to result in a >40% offset, with net tariffs lower in 2026 than 2025.

• Question from Andrew Percoco (Morgan Stanley): What regulatory approvals are needed for Super Cruise international expansion, and what improvements are coming before full hands-off driving?
  Response: Expansion is planned with no significant regulatory barriers; specific roadmap for features leading to L3 autonomy in 2028 will be announced later.

• Question from James Picariello (BNP Paribas): How do you get to 8%-10% North America margins yet only $14B total company EBIT guide?
  Response: North America margin improvement is driven by EV profitability gains, warranty, and regulatory benefits, with confidence in delivering ahead of investor expectations.

• Question from James Picariello (BNP Paribas): What is the status of memory chip supply and pricing for the year?
  Response: No supply issues are currently expected; team is actively working on supply and demand, with no specific headwinds beyond the $1B-$1.5B commodity/DRAM/FX category.

• Question from Itay Michaeli (TD Cowen): What is embedded in the guide for the full-size pickup launch regarding volume, price, and mix impacts?
  Response: New truck launch involves some downtime and volume impact in 2026; pricing benefits will be a 2027 tailwind, with confidence in maintaining pricing discipline.

• Question from Itay Michaeli (TD Cowen): How much of EV volume decline could translate to incremental ICE demand for GM?
  Response: Team will maximize ICE production where possible, but steady-state EV demand in the new environment is still uncertain.

• Question from Colin Langan (Wells Fargo Securities): What is driving the expected EBIT increase if quantified puts and takes net out?
  Response: Expected upside from lower net tariffs, regulatory benefits, and continued EV profitability improvements, leading to strong year-over-year margin improvement.

• Question from Emmanuel Rosner (Wolfe Research): What are the mix benefits assumed in the outlook, and what drives the $1B warranty cost benefit?
  Response: Mix benefits include lower EV losses and potential ICE volume optimization; warranty savings are driven by stable monthly cash flows, fixes for V8 engines, and detailed cost analyses.

• Question from Ryan Brinkman (JPMorgan Chase & Co): Why is the emissions regulation savings assumption less than prior spending?
  Response: Savings reflect a split between CAFE (zeroed out, providing savings) and pending GHG credits (amortized over remaining life), leading to a lag effect.

• Question from Ryan Brinkman (JPMorgan Chase & Co): How are international operations performing outside of China, given pressure from Chinese automakers?
  Response: Improvement seen in South America (e.g., Brazil) despite competition; strength in brands and vehicles supporting performance, with Europe as a future growth opportunity.

• Question from Mark Delaney (Goldman Sachs Group): What is driving the big step-up in Super Cruise revenue in 2026, and what are other digital services momentum areas?
  Response: Super Cruise revenue growth driven by vehicle sales with prepaid services and high renewal rates; OnStar basics packages also contribute to deferred revenue and customer engagement.

• Question from Mark Delaney (Goldman Sachs Group): What offsets could help GM China if the broader market softens?
  Response: Strength from new energy vehicle portfolio (>50% of sales), disciplined inventory/incentive management, improved dealer profitability, and strong Cadillac/Buick brands.

Contradiction Point 1

Onshoring Expense and Software Investment Timing

Contradiction on whether onshoring costs are a near-term headwind or a long-term benefit.

Okay, let me see. The user wants me to rewrite the earnings call question into a concise one. The original input has two parts. First, they're asking about the evolution of the hybrid portfolio and if it's included in the CapEx guide. Second, they want to know if all vehicles can use the next-gen software.I need to combine these into one question without any explanations. The key points are hybrid portfolio's evolution, inclusion in CapEx, and next-gen software compatibility. Let me check the example response they provided. It starts with "How is the hybrid portfolio evolving..." and then adds the CapEx part with "and is it included..." Then the second part about the software. The example uses "Will all vehicles..." as the second part. So I should structure it similarly. Make sure to use concise language and end with a question mark. Avoid any extra words. Let me try: "How is the hybrid portfolio evolving, and is it included in the $10-12B CapEx guide? Will all vehicles be able to use the next-gen software architecture?" That's the original input. The user wants it rewritten but concise. Maybe combine the two parts into a single question? Wait, the example has two questions separated by a question mark. The user's example output is two questions. Wait, the input has two questions, and the example output also has two. So I need to make sure each part is a separate question but concise. Wait, the user's input has two questions separated by a period and "Will". The example output keeps them as two questions. So the task is to rewrite each part concisely. The first part is about the hybrid portfolio and CapEx guide. The second part is about the next-gen software. The example response is: "How is the hybrid portfolio evolving, and is it included in the $10-12B CapEx guide? Will all vehicles be able to use the next-gen software architecture?" So that's the same as the input but maybe slightly rephrased. Let me check if it's more concise. The original input is: "How is the hybrid portfolio evolving, and is it included in the $10-12B CapEx guide? Will all vehicles be able to use the next-gen software architecture?" The rewritten version is the same. Wait, maybe the user wants to make it even shorter? But the example output is the same as the input. So perhaps the input is already concise, and the task is to present it as is. But maybe there's a way to combine them into a single question? But the original has two separate questions. The user's example output has two questions. So I need to make sure that the rewritten version is concise but maintains the two separate questions. Maybe the user's input is already concise, so the answer is the same. But perhaps there's a way to rephrase to make it more concise. For example, "Is the hybrid portfolio's evolution included in the $10-12B CapEx guide, and will all vehicles support next-gen software?" But that combines both parts into one question. But the original input has two separate questions. The example output from the assistant also has two. So maybe the user wants to keep them separate but make each part as concise as possible. The original input is already pretty concise. So perhaps the answer is the same as the input. But maybe there's a way to rephrase the first part. For example, "How is the hybrid portfolio evolving, and is it part of the $10-12B CapEx guide? Will all vehicles support next-gen software?" That's slightly shorter. "Part of" instead of "included in" and "support" instead of "use the next-gen software architecture". But the user's example uses "included in" and "be able to use". So maybe the user wants to keep the exact phrasing. The strict output constraints say to output only the rewritten question, no explanations, so perhaps the example is correct. So the answer is the same as the input. Wait, the input is the original question, and the user wants it rewritten into a concise version. But the example output is the same as the input. Maybe the user made a mistake. Or perhaps the input is already concise, so the answer is the same. I need to check. Let me read the input again: "How is the hybrid portfolio evolving, and is it included in the $10-12B CapEx guide? Will all vehicles be able to use the next-gen software architecture?" The example output is the same. So maybe the assistant's example is correct. Therefore, the answer is the same as the input. But maybe there's a way to make it even more concise. For example, "How is the hybrid portfolio evolving and included in the $10-12B CapEx guide? Will all vehicles use next-gen software?" But combining "evolving and included" - Joseph Spak (UBS Investment Bank)

2025Q4: The headwind is roughly split 50-50 between onshoring ramp-up costs and ongoing software investment... Onshoring costs will be offset as production ramps up in future years. - [Paul Jacobson](CFO)

What is the current status of the onshoring program and its impact on P&L? - Paul Nolte (Stifel)

2025Q3: Onshoring expenses are largely behind us and the headwind is now primarily from software investments. - [Paul Jacobson](CFO)

Contradiction Point 2

Tariff Mitigation Outlook

Contradiction on the magnitude of self-help offsets for tariffs.

What does the guide include regarding volume, price, and mix impacts for the full-size pickup launch? - Andrew Percoco (Morgan Stanley)

2025Q4: ...Self-help offsets... are expected to result in a net tariff position lower than 2025, implying an offset greater than the previous 40%. - [Paul Jacobson](CFO)

Okay, let me see. The user wants me to rewrite the question "What is the tariff mitigation outlook for 2026?" into a concise version. The constraints are strict: only the rewritten question, no explanations, and end with a question mark.First, I need to understand the original question. It's asking about the outlook for tariff mitigation in 2026. "Tariff mitigation" likely refers to strategies or measures to reduce the impact of tariffs. The user probably wants a shorter version without changing the meaning.Looking at the original, "What is the outlook for tariff mitigation in 2026?" Maybe "outlook" can be replaced with "projections" or "expectations" to make it more concise. Also, "tariff mitigation" could be rephrased as "tariff reduction strategies" or similar. Let me try a few options.Option 1: "What are the 2026 projections for tariff mitigation?" That's shorter, but does it capture the same meaning? Outlook and projections are similar. The original is about the outlook, so projections might be acceptable.Option 2: "What are the expectations for tariff mitigation by 2026?" But "by 2026" might imply up to that point, whereas the original is about the outlook in 2026 itself.Option 3: "What is the 2026 outlook for reducing tariffs?" Here, "tariff mitigation" becomes "reducing tariffs," which is more direct. But does that change the meaning? Mitigation could involve reducing the impact, not necessarily reducing tariffs themselves. However, in context, it's possible that the user is referring to reducing tariffs. The original question is about mitigation, which could be strategies to lessen the negative effects of tariffs, but maybe in the context of an earnings call, it's about actual tariff reductions.Hmm. The original question is about the outlook for tariff mitigation. If I change it to "tariff reduction," is that accurate? If the user is referring to strategies to handle tariffs (like finding alternatives, not necessarily reducing tariffs), then "mitigation" is more precise. But maybe in the context of an earnings call, they're talking about the company's strategies to mitigate the impact of tariffs, so "tariff impact mitigation" could be more precise. However, the original is "tariff mitigation outlook," which is a bit vague.Wait, the original is "tariff mitigation outlook." Let me check if "mitigation" in this context is about reducing the tariffs or the impact. Typically, tariff mitigation could mean measures taken to reduce the effect of tariffs on the company's costs or profits. For example, finding alternative suppliers, adjusting pricing, etc. So maybe "tariff impact mitigation" is more accurate. But the user wants a concise version. So perhaps "tariff mitigation" is acceptable as is.So the original is "What is the tariff mitigation outlook for 2026?" To make it concise, maybe remove "is the" and rephrase. "What's the 2026 outlook for tariff mitigation?" That's shorter but still the same. Alternatively, "What are the 2026 projections for tariff mitigation?" That's another way. The user might prefer "projections" over "outlook" for conciseness.Alternatively, "What's the outlook for tariff mitigation in 2026?" That's the same as the original but shorter by using "What's" instead of "What is." But the user wants it concise. Let me check the original input again: "What is the tariff mitigation outlook for 2026?" The rewritten version should be as concise as possible. Maybe "What are 2026 tariff mitigation projections?" That's even shorter. But does it lose clarity? The original ends with "for 2026," so "2026 tariff mitigation projections" might be okay.Alternatively, "What's the 2026 outlook for mitigating tariffs?" But "mitigating tariffs" is a bit awkward. It's better to say "tariff mitigation." So the best concise version would be "What are the 2026 projections for tariff mitigation?" or "What is the 2026 outlook for tariff mitigation?" The second one is slightly shorter. Let me check the character count. Original: 38 characters. "What is the 2026 outlook for tariff mitigation?" That's 39. Wait, maybe "What is the 2026 outlook for tariff mitigation?" is actually longer than the original. Wait, original is "What is the tariff mitigation outlook for 2026?" Let me count the words. Original has 9 words. The rewritten "What is the 2026 outlook for tariff mitigation?" is 9 words as well. Maybe rearranged. "What is - Emmanuel Rosner (Wolfe Research)

2025Q3: Self-help actions are expected to provide a ~40% offset to the tariff costs. - [Paul Jacobson](CFO)

Contradiction Point 3

Tariff Mitigation and Cost of Capital Savings

Contradiction on the magnitude of savings from the new Industrial Bank.

What are GM Financial's savings on capital costs through the new Industrial Bank? - Michael Ward (Citigroup Inc.)

2025Q4: The bank will offer deposits... lowering the cost of funds by basis points, though not by a large amount like 100 bps. - [Susan Sheffield](CEO, GM Financial)

What would be the impact this year if the world reversed direction tomorrow? - Michael Patrick Ward (Citigroup Inc., Research Division)

2025Q2: The $4 billion U.S. manufacturing investment will add capacity... with benefits expected in late 2027. - [Mary T. Barra](CEO)

Contradiction Point 4

Tariff Mitigation Outlook and Self-Help Offsets

Contradiction in the scale and timing of self-help tariff mitigation benefits.

What is the impact of Korea's tariff rate reverting to 25% from 15%, and the mitigation outlook for 2026? - Andrew Percoco (Morgan Stanley)

2025Q4: Self-help offsets...are expected to result in a net tariff position lower than 2025, implying an offset greater than the previous 40%. - [Paul Jacobson](CFO)

Could you clarify what comprises the 30% plus self-help offset? - Emmanuel Rosner (Wolfe Research)

2025Q1: On mitigation, the 30% is from self-help initiatives... The 30% mitigation...and the 30% offset is from self-help. - [Paul Jacobson](CFO)

Contradiction Point 5

Pricing Guidance and Discipline

Contradiction in the assumption and description of pricing discipline and its role in guidance.

What assumptions underlie the expectation of flat or higher pricing, and how much is attributed to ICE benefits or other factors? - Dan Levy (Barclays Bank PLC)

2025Q4: Pricing guidance for 2026 assumes no significant price increases, just the annualization of 2025's pricing actions... The team is confident in maintaining pricing discipline. - [Paul Jacobson](CFO)

How do you approach potential pricing actions considering competitors' moves? - Joe Spak (UBS)

2025Q1: Our disciplined approach...has driven market share gains without chasing volume. This strategy is expected to continue. - [Paul Jacobson](CFO)