General Motors' CEO Discusses Q4 2012 Results - Earnings Call Transcript

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Executives

Randy Arickx – Executive Director-Communications and Investor Relations.

Daniel F. Akerson – Chairman and Chief Executive Officer

Daniel Ammann – Senior Vice President and Chief Financial Officer

Analysts

Brian A. Johnson – Barclays Capital, Inc.

Rod Lache – Deutsche Bank

Itay Michaeli – Citigroup

Patrick K. Archambault – Goldman Sachs & Co.

Chris Ceraso – Credit Suisse

John Murphy – Bank of America Merrill Lynch

Adam Jonas – Morgan Stanley

Ryan Brinkman – JPMorgan

Draft version. An edited version will be posted soon.

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the General Motors Company Fourth Quarter and Full Year 2012 Earnings Conference Call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. (Operator Instructions) As a reminder, this conference is being recorded, Thursday, February 14, 2013. I would now like to turn the conference over to Randy Arickx, Executive Director of Communications and Investor Relations. Please go ahead.

Randy Arickx

Thank you, operator. Good morning, thank you for joining us as we review our 2012 calendar year results. A press release was issued earlier this morning, and the conference call materials are available on the Investor Relations website. GM is also broadcasting this call live via the Internet.

Before we begin, I'd 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 review of the financial results with Dan Ammann, Senior Vice President and CFO. Dan Akerson will then conclude remarks portion of our call with some closing comments.

After the presentation portion of the call, we will open the lines for questions from the analyst community. In the room today we also have Nick Cyprus, Vice President, Controller and Chief Accounting Officer; Chuck Stevens, CFO of North America; and Jim Davlin, Vice President, Finance and Treasurer, to assist in answering your questions.

With that, I'll turn the call over to Dan Akerson.

Daniel F. Akerson

Thanks Randy and thank you to everyone on the call for joining us. From every vantage point, 2012 was another solid year for General Motors.

As you can see on slide two, we grew both our sales and top line revenue in earned net income attributable to common stockholders of about $4.9 billion. Special items reduced net income by about $500 million this year, and Dan Ammann will walk you to these later on the call.

Turning to our operating results, EBIT-adjusted was $7.9 billion for the year, which reflects strong profit growth in many areas of the business.

North America’s results tracked very close to 2011. South America and our international operations are up year-over-year and GM Financial had record income before tax. The $400 million year-over-year decline in EBIT-adjusted was more than explained by losses in Europe. Cash generation in 2012 was very solid. Automotive operating cash flow was $9.6 billion and adjusted for free cash flow was $4.3 billion. That’s up meaningfully year-over-year reflecting our increased cash discipline.

If you turn to slide three, I’d like to review some of the highlights for the fourth quarter. I’m going to focus on initiative that fundamentally improved our competitive position and reduced risk. Let’s start with our new products, we plan to receive the growth in every region around the world. In China, as you many know, 2012 was a record sales year and we gained a four point in market share, we filed this up from January by selling more than 300,000 vehicles in a single month for the first time ever. Domestic sales of Buick, Chevrolet and Wuling Brand all set new single month records.

Moving forward our (inaudible) strategy is becoming increasingly hard for competitors to defend again. For example, on the fourth quarter we launched the Buick Encore. Now this quarter, we are starting to build critical math for Cadillac with local production at the (inaudible). We also introduced the Chevrolet Sail UVA hatchback in India.

In South America, we revealed the Chevrolet Onix, which is part of an award winning top to bottom transformation that began in 2011. In Europe, it’s been exciting to watch the Opel ADAM follow the Mokka’s fast start. Especially since both vehicles are in new segments for the brand.

The Mokka has more than 80,000 customer and dealer orders. In just a few weeks after the ADAM launch, orders from all across Europe exceeded 20,000 with most of them in Germany.

In North America our most important product news was the reveal of the all new 2014 Chevrolet Silverado and the GMC Sierra full size pickup. We are going to share more details about these products in March. But I can tell you that every element of these trucks has been improved, including durability, capability, field economy and refinement which will help us leverage our 13 million strong owner base.

We’ve also have the transition plan to optimize our capacity, sales and marketing share opportunity in a growing U.S. economy. The GM watching the product is undeniably a stronger company then it was even a year ago. For example we continue to advance our European revitalization plan and work toward of objective of achieving break-even EBIT adjusted by mid decade. We strengthen the Opel management team with the appointment of Dr. Karl-Thomas Neumann, as Chairman of the Management Board effective March 1.

We’re brining 23 new products to market between 2012 and 16 while the same time we continue to rationalize capacity and reduce costs. For example, we recently completed the sale of our transmission operations in (inaudible) France and announce that vehicle production at our plant in both Germany will see at the end of the current Opel Zafira’s life cycle 2016, soon we finalize a German labor deal in the next few weeks.

In addition we finalize both our purchasing joint venture with PSA and initial product plants which follow the logistics agreements already in place. GM Financial meanwhile has moved from strength to strength. During the quarter we announced the acquisition of Ally’s operations in Europe and Latin America and its joint venture interest in China. When these deals close in ’13 GM be able to provide financing and markets that represents 80% of our sales volumes, up from above 30% today.

We will also be able to meet demand in strategic and uncertain market all with very good risk adjusted return and a smaller balance sheet that any other captive automotive finance company. Less than a month after we announced the Ally transaction the U.S. Treasury began to sell down its ownership stake in GM, starting with our 200 million share buyback.

Clarity on the government sell down strategy is important because it will help us attract new investors, recruit the best talent and strengthen our brand. That’s why we are eager to put this chapter behind us, but it was a group of period in many ways, because we honored our tax payers vote of confidence with hard work and discipline and a long-term approach to the business.

This perfectly illustrated why our two other transactions that closed during the quarter, which strengthened our quarter’s balance sheet; first, we successfully reduced our U.S. salary, pension obligation by $28 billion. Not only that we have significantly reduced the form of leverage, we also enhanced the income security of our salaried retirees; that’s something that we are especially proud of.

I also note that our U.S. plant were 84% funded at year end and we are not expected to have any mandatory cash contributions during the next five years. The second transaction saw us replace our existing $5 billion revolving line of credit with two new credit facilities totaling $11 billion. This additional liquidity is appropriate for a company of our size.

We have made landmark deal was the fact that we earned investment grade pricing and investment grade terms and conditions. Clearly vote of confidence is GM and the progress we have made.

Now I will turn the call over to Dan Ammann to review our results in more detail and I will rejoin the discussion at the end of the call for final comments. Thanks.

Daniel Ammann

Thanks, Dan. On slide four, we provided summary of our 2012 calendar year GAAP and non-GAAP results. Net revenue for the year was $152 billion, up 1.3% from the prior year. Excluding the impacts of FX translation, revenue was 3.8% for the year. GAAP operating income was a large loss to entirely the special items, which we’ll review in a few minutes. Net income to common stockholders is $4.9 billion and earnings per share came in at $2.92. The decline from the prior was largely due to unfavorable special items this year, this is favorable last year.

Now automotive net cash form operating activities was $9.6 billion, the $2.2 billion increase from 2011. For our non-GAAP measures, EBIT-adjusted was $7.9 billion in 2012 and the EBIT-adjusted margin was 5.2%, as improved performance across most of the business in 2012 was offset by the challenging environment in Europe. Finally, our adjusted automotive free cash flow was $4.3 billion for the year, a $1.3 billion improvement from 2011, reflecting improved cash conversion and our increased focus on this area in 2012.

On slide five, we provide EBIT-adjusted by region for 2011 and 2012. GMNA’s EBIT-adjusted had a slight decline to $7 billion as improved underlying performance was offset by $800 million of lower pension income, GME had an EBIT-adjusted loss of $1.8 billion, down more than $1 billion form 2011 due to the very challenging market additions.

GMIO had EBIT-adjusted of $2.2 billion as growth in the region continued and GM South America’s EBIT-adjusted was a much improved $300 million for 2012 as the business continue to favorable profit improvement on the back of the new product portfolios. GM Financial had earnings before taxes of $700 million, a record result and corporate and eliminations was $500 million expense, as total to EBIT-adjusted of $7.9 billion, down $400 million from 2011.

On slide six, we provide an explanation of the 400 million decreased in year-over-year EBITDA adjusted. Our EBITDA adjusted was frequently million dollars for 2011. Volume was a 1 billion favorable due to increased production in North America, actually offset by an increase in Europe. This is unfavorable 600 million continued to shift the smaller makers to North America and Europe.

1.7 billion favorable for the year due to the strength of our new product introductions and that price increases on the makers that were lost in the prior year. Total cost where up to billion including 800 million in reduced pension income and 1 billion from additional material cost from our new product programs. Importantly fixed cost excluding pension well approximately flat in 2012 relative to 2011.

Other was 500 million unfavorable time early due to an absence in 2010 of favorable residual adjustments in North America. Slide seven I identify special items for the fourth quarter and calendar year that had an impact on our earnings per share. I will highlight a few of the major items momentarily. But the top of the side, our net income per common stockholders in the fourth quarter was 900 million fully diluted earnings per share was $.54 the special item listed had a net $100 million unfavorable impact of not income to common stockholders or six cents per share favorable impact on EPS. For the 2002 calendar year our net income per common stock holders was open and billion and our fully diluted earnings per share $2.92.

Special items and then unfavorable impact on net income per common stockholders of $500 million and a $.32 unfavorable impact to earnings per share. On the next slide we will review our largest special items for the quarter and year.

As a result of three full years of profitability and our recent completion about business plans which indicated continued profitability, we reverse the majority of our deferred tax. Last quarter, we indicated (inaudible) assets in GM Europe, of economic and business conditions continued to deteriorate. Unfortunately the industry outlook and other factors have deteriorated and we are now [appearing] our long-life assets in Europe and recording a $5.2 billion non-cash special item, we continue to work towards our objective of break-even EBIT-adjusted final decade, also as we discussed during the third quarter earnings call, we recently completed the annuitization of lump sum agreements for the US seller retention plan. Together these items resulted in a after tax charge of $2.2 billion in the quarter to settle the $28 billion obligation.

Moving on to the results for the fourth quarter on slide nine, our net revenue was $39.3 million, a $1.3 billion decrease from the prior year. Excluding the effect of FX translation, fourth-quarter revenues increased approximately 4.3%. Again the GAAP operating income performance was driven by unfavorable special items in the quarter. Net income to common stockholders was $900 million, a $400 million improvement from 2011. Earnings per share for the quarter were $0.54 on a diluted basis, compared to $0.28 for the same period in the prior year as the automotive net cash from operating activities is $500 million. Our EBIT existed was $1.2 billion for the fourth quarter, $100 million improvement from the prior year. EBIT adjusted margin was 3.2%, up slightly from Q4 2011. Our adjusted automotive free cash flow $1.1 billion for the quarter, a $1.3 billion improvement from the prior year.

On slide 10 we provide the EBIT adjusted by region of the four quarters of 2011 and 2012.

GMNA’s EBIT-adjusted was $1.4 billion. GME had an EBIT-adjusted loss of $700 million. IO had EBIT of $500 million and South America was $100 million for the quarter. GM financial earnings before tax rounded down to $100 million, a slight decrease from the prior year. Corporate eliminations was at $200 million expense. This totals to EBIT-adjusted of $1.2 billion for the quarter for 2012, up $100 million from the same period in 2011.

Slide 11 shows our consolidated EBIT-adjusted for the last five quarters. At the bottom of the slide, we again showed the revenue and margins for the quarter. Our global production numbers including our unconsolidated joint ventures was 116,000 units higher than the fourth quarter of 2011. Our global market share remained fairly steady at 11.5%.

On slide 12, we provide an explanation of the $100 million year-over-year consolidated EBIT-adjusted for the fourth quarter. In Q4 2011, our EBIT-adjusted was $1.1 billion. Volume was $300 million, favorable due to production increases in North American and IO. Mix was $300 million favorable due primarily to improving mix in GMNA. Price was $100 million unfavorable for the quarter because the effect of competitive pressures for all the vehicles more than offset the favorable pricing of the new products.

Total cost were up $500 million, which includes $200 million reduction in pension income and $300 million increased material cost of their recently introduced car, trucks, and SUVs. Other was $100 million favorable due to increased equity income around non-consolidated joint ventures; this totals $1.2 billion for the fourth quarter.

We now move on to our segment results with the key performance indicators for GM North America on slide 13. For the fourth quarter of 2012, our total U.S. market share was 17.1%. Our resell incentive levels on incentive levels on an absolute basis are roughly flat versus the prior year period. On a percentage of (inaudible) basis our incentives for the quarter were 10% equal to the prior year. This puts us to 104% of industry average levels for the fourth quarter of 2010.

On slide 14 we show GM NA EBITDA adjustment for the last five quarter. At the bottom of the slide, revenue was 24.2 billion in the fourth quarter of 1.1 billion for the same quarter in 11. GMNA's EBITDA adjusted margin was 5.8% for the fourth quarter down .7 percentage points from the prior year due to decreased pension income, our US dealer inventory was wondering and 17,000 units at the end of the quarter.

If the increase from the prior year includes 20,000 only Cadillac (inaudible) included in the prior year as well as increased production of current generation full-size pickups in preparation for this year's launch of the all-new Silverado and Sierra. GMNA production was 775,000 units for the quarter, 36,000 vehicle increase from the prior year.

Turning to slide 15, we provide the explanation of the €100 million a year decline in GM North America a bit adjusted. GMNA's EBITDA I just was 1.5 billion for the fourth quarter 2011, volume was 100 million favorable, mix was 400 million favorable the third the recent introduction of the Cadillac ATS and XTS and increased production of higher-margin vessel. This is the first time in nine quarters that GMNA has benefited from favorable mix and underscores the importance of our new model launches.

Price was the hundred million unfavorable due primarily to the effect of pricing actions on our older vehicles for the photo and as a sense for 2013. Cost of a 400 million unfavorable due to 200 million decline in pension income, 100 million increased cost for our new vehicle launches and 100 million increased in DNA. This nets to an EBITDA adjusted of $1.4 billion.

On slide 16, GME reported an EBIT-adjusted loss of $700 million for the fourth quarter, comparing deterioration from the prior year. Revenue was $5.6 billion for the quarter, down $700 million due to declining industry sales, unfavorable foreign exchange in the small loss of share.

EBIT-adjusted margin in the region was negative 12.5%. GME’s production for the quarter was 209,000 units, 40,000 less than the prior year, as we continue to take actions to reduce inventory. GME’s market share in the fourth quarter was 8.3%, a 0.3 percentage point decline from ‘11.

On slide 17, we provide the major components of GME’s $100 million year-over-year decline in EBIT-adjusted. Volume was $100 million unfavorable, mix was $200 million unfavorable due largely to a shift in sales to lower margin countries. Price was $100 million unfavorable due to competitive pressure in the region, cost was $200 million favorable, because of $100 million unfavorable material price performance and $100 million in lower restructuring charges, the total to GME’s EBIT-adjusted loss of $700 million for the quarter of ‘12.

On slide 18, we show GMIO’s EBIT-adjusted for the most recent period, and the fourth quarter EBIT-adjusted was $500 million including equity income from our joint-venture of the quarter. At the bottom of the slide, GMIO’s revenue from our consolidated operations was $7.9 billion, up $900 million from the prior year. GMIO’s EBIT-adjusted margin from consolidated operations was 0.5%, the decline from the prior year largely driven by increased cost we took over in a moment.

Our average net income margin from our China JVs was 9.1%, a 0.7 percentage point increase from the prior year. GMIO’s total production for the quarter was up 124,000 units from the prior year as we increased the market share to 9.8% in the growing industry. The market share in China rose more than 1 percentage point in the fourth quarter to 14.3%.

Turning to slide 19, we provided the major components of GM rose $100 million increase in the EBIT adjusted. Impacted volume was 200 and favorable you would increase wholesale units into the consolidation of the GM India in 2012, mix was a $100 million unfavorable. Price was $200 million favorable due to our recently launched products including the whole new Chevrolet (inaudible).

Cost was $400 million unfavorable due to 200 million increase in material and manufacturing costs to nearly launching vehicles, 100 million in decrease sales of CK (inaudible) and some other items including the consolidation of bearing the operation. Other was 200 million favorable including 100 million increase in equity income. The total GMO fourth quarter 2012 EBIT adjusted.

On slide 20 we move on to the South America region, EBIT adjusted for the last five quarters excluding restructuring costs for region for profitable in four quarters of 2012. at the bottom of the slide revenue was 4.5 billion in the fourth quarter, 300 million increase from 2011. EBIT adjusted margin in the region was 2.2%, a significant improvement in the loss in the prior year period.

GMSA’s production was 223,000 units roughly flat to the prior year. market share in the region was 17.7% in the quarter, a 0.7 percentage point declines from the prior year.

On slide 21 we look at the components of the $300 million year-over-year in our South American operation. The fourth quarter of 2011 region had a EBIT adjusted loss of 200 million, small production variance at no impact. Mix was 200 million favorable due entirely to the higher margins from recently launched vehicles. Price was $100 million favorable. Cost was 100 million favorable due to the absence of restructuring charges in the fourth quarter of 11. This total to 100 million EBITDA adjusted from South America in the fourth quarter.

Slide 22 provides the adjusted cash flow for the fourth quarter. We now exclude the impact of major voluntary management actions such as the repurchase of four common shares from U.S. Treasury, pension contributions and will continue to do this going forward.

After adjusting for non-controlling interest for deferred dividends and undistributed earnings allocated referred, (inaudible) financial our automotive income was 800 million for the court quarter of 2012. We had 300 million in net on cash special items and our D&A was $1.6 million. Working capital was $1.5 billion source of cash due to seasonal decrease in inventory because of sequentially lower production as well as an overall increased focus on working capital management. Excluding the non-cash impact of the (inaudible) him some transaction in US, pension and (inaudible) payments succeeded by two and 1 million. Other was 500 million years of cash, there are million of improvement from the prior year. This total down to automotive net cash provided by operating activities of 500 million. We had 2.1 billion capital expenditures in the quarter in addition we have to voluntary management actions that we have excluded from our adjusted free cash flows, 2.3 billion pension contribution in the 400 million premium for repurchase shares from the U.S. Treasury.

This total to our adjusted (inaudible) free cash flow of one .1,000,000,001.3 billion increase from the prior year. On slide 23 we provide a summary of our key automotive balance sheet item. After repurchase and 200 million shares of stock from the United States Department of treasury, we finished the fourth quarter with 26.1 billion in cash and marketable securities, with the completion of our new three and five year credits facilities, our available credit facilities now stand at a $11.1 billion, bringing our total available liquidity to $37.2 billion. Please note we changed our disclosure this quarter to exclude uncommitted credit facilities from these totals.

Our book value of debt is $5.2 billion. The $400 million increase from the third quarter is due to the partial redemption GM Korea preferred shares. Series A preferred stock is $5.5 billion, U.S. qualified pension plans are underfunded by $13.4 billion, a slight improvement versus a year ago, which we’ll discuss further in a moment. Our non-U.S. pensions are underfunded by $13.8 billion at the end of the fourth quarter and are underfunded OPEB liability is $7.8 billion. The increase in these liabilities from the prior year is largely due to lower discount rates.

On slide 24, we take a look at the funded status with our U.S. pensions in 2012. At the end of 2011, we had pension obligations of $108 billion and we were underfunded by $13.3 billion, the combined effects of remeasurement are 11.6% asset returns and other items resulted in a $100 million improvement of funded status, we paid out $8.3 billion in benefits to GM retirees and surviving [process] in 2012.

The annuitization agreement in the long sums offered to salaried retirees resulted in a $28.3 billion reduction in the pension obligation and $30.6 billion transferred pension assets for a decrease of $2.3 billion in the funded status. Finally, we made a $2.3 billion cash contribution to the U.S. salary plan, this was less than the $2.6 billion estimate provide last quarter, meaningfully below the original estimate of $4.5 billion as asset returns were more favorable than previously estimated, borrowing the total cost of the annuitization agreement.

Our total unit pension obligations were reduced 25%, funded status improved to negative $13.1 billion, slightly better than 2011. Slide 25 provides the summary of our order financing activities, GM financial reported results this morning and we will be holding an earnings conference call known.

Our US subprime penetration in the fourth quarter has increased over the prior year to 7.2%, our US belief that racial is 14.9% in Q4 of 3.9 percentage points from the prior year. These penetrations in Canada is expand 3% down from the prior year due to a heavier mix of wired year model in the fourth quarter of 2010. We (inaudible) lease industry average and calm because we have a richer mix of trucks from many of our competitors.

GM new vehicle as a percentage of GM financial origination state relatively constant at 43% and GM financials percentage of GM's US consumer subprime financing and leasing was 20% on the quarter. GM financials annualized net credit losses remained over 3.3% and the earnings before tax rate 146 million for the quarter down slightly year ago predominantly due to expenses related to the acquisition a notable which is expected to in 2013.

I'd also like to highlight the GM financial announced in January, the pricing of $1 billion asset backed securities offering with the grated average 1.2%. This is the lowest cost of funds in GM financials history.

We will now give an updated view on our few 2013 items on slide 26. Now that we have a valuation allowance on before taxes in the US and Canada, our effective tax rate for Processes will be approximately 35% in 2013. This actions as not affect the status of our operating loss in tax credit carryforwards accordingly our cash taxes for 2000 13/2 expected to be them out the same rate in 2012. We expect to have approximately 600,000 and reduced GME depreciation and amortization expense in 2013, due lively to the impairment of long lived and intangible assets in GME. These reduced D&A expenses were not (inaudible) until our previously provided outlook for 2013.

Under current economic conditions we don't expect to have any mandatory contributions to our qualified US pension plans for at least five years. Also at the same time we do not have any plans – any current plans to make material pension contributions in 2013, while we will continue to evaluate any opportunistic actions on an ongoing basis. We expect CapEx similar to the $8 billion level, we spent in 2012, and finally we expect to have a $200 million unfavorable special item in the first quarter of 2013 for the recent evaluation of the Venezuelan currency.

Now I'll hand it back to Dan for his closing remarks.

Daniel F. Akerson

Thanks Dan, on prior calls I talked about playing offense with products designed to win – just compete this strategy was in whole display at the North American international auto show in January. Energy around GM was infectious, in fact (inaudible) the company's best auto show and the healthy days of the 1950's (inaudible) best in show, the catalog ELR was named best design, the catalog ATS took home the North American car of the year honor, interestingly the first win ever from the catalog. All of this is great but in many we are still getting going.

During 2013 in 2016 we will refresh our North American portfolio, at twice the rate we did during the last three years. The Chevrolet Silver Auto and GMCCR are only the tip of the iceberg, we are redesigning other foundational product like all new Chevrolet Impala and we are aggressively entering new segments with vehicles like Buick Encore. The same holds true for the Chevrolet product line in South America where we went from having one of the oldest portfolios in the industry to one of the newest over the span of about 18 months. This includes the aforementioned Chevrolet Onix, which is the Car of the Year honors in Brazil.

In Europe, we are not just cost cutting our way to profitability as we have said many times. In Russia, we are investing $1 billion to expand capacity because we expect the industry there to surpass Germany by 2017. In China, we are investing aggressively in all facets of our business, especially Cadillac and Chevrolet, because the market could reach 30 million units by 2020, that’s up from $19 million today. All of this and more is possible because of our profitability, fortress balance sheet and solid cash flow.

We still have a lot of work to drive down our variable cost and ring complexity out of this system, but with $8 billion in annual investment and our drive for results, GM is setting the stage for more than just higher volumes, market share and profit. We are out to create a sustainable competitive advantage and I am pleased with our progress. Our next steps are crystal clear; stay disciplined financially and operationally, sharpen our focus on customers, and continue to play offers with new products.

Thank you and now let’s open the line for Q&A

Question-and-Answer Session

Thank you. Ladies and gentlemen, we will now proceed with the Analyst version of the question-and-answer session. (Operator Instructions) The first question comes from the line of Brian Johnson from Barclays. Please proceed.

Brian A. Johnson – Barclays Capital, Inc.

Good morning. Well, I may be the only other person other than Dan, who actually had a Corvette excuse in their past. Still remember that car. I just want to go through kind of this quarter in light of your guidance region by region. And both to Dan, any big changes, I guess when we look at North America and Europe in particular, how much of the improvement in Europe now coming with depreciation is within your control and how much depends on overall market developments and really kind of the same for North America, thinking about kind of where you got it kind of pickup truck next you have in mind. And then I guess for Dan Akerson around that kind of – what is your sense of Europe right now in terms of your two to three year goals and with the new team in place, how much is really in your control versus how much is depended on competitors taking our capacity and improving the price point?

Daniel Ammann

Okay, well it’s Ammann, I’ll address your first Europe question, I’ll hand it to Chuck to North America and then to Dan in response to your last question. I think as we look at the environment for 2013, really as we talked about a few weeks back end as we talked about back end Q3, we see the industry down this year and obviously find out by how much as we go through the year, but our view on the industry has not gone any more bullish, when we put it that way. As it relates to the things that we control, I do think we feel better and better about the things that we control.

We feel very good about the team that we now have on the ground, we have KT Neumann joining in addition all the other changes we made for the three quarters of the last year. We feel pretty good about receptivity of the new vehicles launches into the market, (inaudible) we have 80,000 order for the Opel (inaudible), 20,000 already for the Adam which is barely even getting going here. And those vehicles from a profit contribution point of view will be quite favorable relative to balance of the portfolio there, so we feel good about that, and we control of the product side.

We feel good about the progress we are making on the cost side of the business, capacity action, consolidation from (inaudible) to the run out at (inaudible), the sale of Strasbourg transmission facility and so on and we feel good about the progress on the SG&A front. So the things that are in our control, we feel like we are making good progress, the great unknown of course is what happens to the European economies, what happens to end markets demand and the nature of where that demand is, profits of different by country, different by channel, so and so on and obviously that’s not when that control moving (inaudible).

Unidentified Company Representative

Yeah, Brian relative to North America, yes the question was related to industry and nothing is changed from the outlook that we provided a couple of weeks, we are looking at the industry, 15% to 15.5 million total truck segment share a 11, 11.5% and our share of trucks somewhere in the range of 36%, 38% for the year, relative to the other drivers that we talked about back in January, I think our view is still consistent with that.

Brian A. Johnson – Barclays Capital, Inc.

And on the just the technical point on the GM Europe mid decade break-even is that now break-even plus 600 million with the depreciation or was it 600 million at some point contemplated within that break-even number.

Unidentified Company Representative

When we’ve provided those outlooks, they were excluding the impact of the $600 million.

Brian A. Johnson – Barclays Capital, Inc.

Okay, thanks.

Unidentified Company Representative

And we have to yes, good question. How much is within our control as Dan did a pretty good job, but it’s not we’re just hoping for the best. One thing we can’t control is the market, but we have certain leverage we can post.

Brian A. Johnson – Barclays Capital, Inc.

Yeah. Say agreement for both logistics and purchasing will kick in and also we’re going to do, co-development on the MPV-B and MPV-C and the B segment cars, that should in the out years toward know the decade and on should benefit the joint-venture by about $2 billion over that period of time. We’re going to be smart about how we costs, and just closed plans. I mean we closed [Antorp] in ‘11, that was a big deal and it actually forwarded some lead way in early part of ‘11 where we were actually profitable and then the European crisis kicked in the summer of the ‘11. I think what you see when we stole Strasbourg and why do well sell it?

Unidentified Company Representative

Well, it was cheaper to take a write-down of $100 million and less to pay for the labor cost annuity in the cost associated with that. I think that a smart move. In the interim in the last year, as I said Dan touched upon a two, (inaudible) will play out because the Sierra is not going to be assigned to the plans after the ‘16 timeframe. So we’re still in the midst of labor negotiations, we hope to ramp up relatively quickly over the certainly with this quarter, our hope, so I have more to report on that. In the meantime, we’ve also reduced headcount in (inaudible) by 2,500 people last year and we’re doing that, we’re just trying to reshape, remold the cost, the SG&A, the cost profile that we project and we think it will be about (inaudible) this year we continue to work, it’s a work in progress.

At the same time, we can’t just play defense, we are trying to play offense, we are in two new segments we have never been in before, the Adam and Omega represent two new segment entries and we have to continue to do well in the segments we are in. So with all of this, I know it’s kind of a white mosaic that I have tried to characterize or portrait here. It’s our objective to hit break-even by a decade or there above.

Brian A. Johnson – Barclays Capital, Inc.

Okay, thanks.

Unidentified Company Representative

Yeah.

Operator

Thank you. The next question comes from the line of Rod Lache from Deutsche Bank. Please go ahead.

Rod Lache – Deutsche Bank

Good morning everybody. Was hoping first you can explain just two items on the North American and Europe bridge, in the decade shows $100 million impact from volume, production was up about 36,000 units which would imply that $2800 vehicle which is a bit lower past seven quarters have been $6000 to $9000 vehicles and you also mentioned in your commentary in North America that pricing actions you are well up for 2013. Was there any one-time pricing adjustment recorded in this quarter? You did make some adjustments on the (inaudible) for example.

Unidentified Company Representative

Yeah, let me take that right of the chart. From volume perspective, production was up 36,000 units, wholesales however were up 21,000 units and the factor and impact of variable manufacturing that brought the overall environment about to $138 million and 20,000 units, so I think that’s relatively consistent with the variable margins we have reflected in the past.

Relative to pricing, when you think about Q4, the economic price in Q4 year-over-year was kind of flat MSLP increases offset increase in sales volumes and MSRP increases on both carry over and new product, the big driver of the unfavorable price was stock adjustments, primarily driven by the recognition of the GMT900 transition and likely increased incentives as we move through the next six months on that. So that was the primary driver of Q4 price.

Rod Lache – Deutsche Bank

Okay. So that was like a retroactive adjustment to inventory that you had which might have been usually high?

Daniel Ammann

It’s essentially topping up the anticipated liability on inventory on hand in total for expected incentives going forward.

Rod Lache – Deutsche Bank

Okay, and I was hoping you might be able to fill in a few blanks on Europe. How much was the non-recurring impact that you incurred from inventory de-stocking you commented on, some pretty big numbers that you took down, which presumably doesn’t recur this year. And then the negative side, how are you thinking about FX moves and pricing looks like, your pricing was maybe $1400 of vehicle this quarter. Should we be thinking something similar into next year?

Daniel F. Akerson

So on the inventory side, we hit our objective for the year-end inventory for the company which was under our 100,000 units. So we think we’ve set our sales in reasonable shape going forward on that. In terms of how much of that is sort of growing business, non-recurring pieces, I mean obviously it’s just going to be a function of what happens to demand, so going forward our goal is to keep inventory in and around where it is. Obviously seasonal moves within there, but on an overall basis, keep that roughly in line. Sorry, could you repeat the second part of the question.

Rod Lache – Deutsche Bank

FX.

Daniel F. Akerson

Obviously we have seen some strengthening of the euro that favorable relative to imported product, particularly what we're important from Korea, so I will say overall strengthening Euro as a head wind as of right now but we will continue to try and just go accordingly.

Rod Lache – Deutsche Bank

Okay and then on pricing? Pricing was about $1400 in the quarter.

Unidentified Company Representative

Yes pricing, we're continuing to manage pricing actions here in conjunction with what's going on in the market, we're obviously looking to make up as much as we can on product launches that we have going on in the marketplace. (inaudible) Exactly how pricing is going to hold for this year at this point.

Rod Lache – Deutsche Bank

One last one, I was hoping – wondering whether you might care to comment a little bit on the shape of this year's 2013 earnings, just presumingly you're going to be facing some launch clause and pricing actions in North America in the beginning of the year and then things get better, any broad commentary if you're willing to provide on what we should be expecting unusually this year?

Unidentified Company Representative

I don't think there's going to be anything too unusual, I think you may see things a little more back-end loaded especially out of the first quarter, than we have seen in previous years, it's not a huge change but I'd say there is some more waiting for the middle and back-end of the year.

Unidentified Company Representative

Yes another dynamic in that too as well (inaudible) our full size as you read plans, or down the weeks in the month of January for a part of the conversion, so that's going to have a bit of an impact on Q1 and as Dan mentioned I think we will see a bit more weight in the second half of the year versus the run rate over the last three years.

Rod Lache – Deutsche Bank

Great, thank you.

Operator

Thank you, the next question comes from the line of Itay Michaeli, from Citigroup. Please proceed.

Itay Michaeli – Citigroup

Great, thank you good morning. Just want to talk about the pension you have indicated that you’re not expecting to making this voluntary contribution, update us on your latest thinking around potential de-risking actions for the Ally plants in the U.S.?

Unidentified Company Representative

I’d say overall with our total de-risking strategy, we come a very long way over the last couple of years with the whole host of actions, all of which three year multiple times, and I think where we ended the year, we feel very, very good about in terms of having got the salary deal done all of the other actions that was taken and it gives us a level of flexibility that we would not at this point of time.

As we mentioned in our comments we have five years, we expect with no mandatory contribution and what that does for us it gives us a lot of flexibility, it will continue to look at opportunities to further de-risk for sure, talk about all the whole further de-risk as we move along, and some thing compelling comes along, we’ll act on it, so I think what we really signaling here is because of the actions we have taken we feel like we made a lot of progress in the position where we have a fair amount of flexibility, so we will act something interesting comes along.

Itay Michaeli – Citigroup

Absolutely. And then going back to the taxes, the cash tax rates be pretty similar 2013 verus 2012, as we think about cash taxes beyond 2013, as there are certain rate we should be modeling in terms of the out years, is a better way of thinking about kind of cash tax benefit relative to the higher effective GAAP tax rate.

Unidentified Company Representative

On 2012 we were roughly 10% and we are signaling we’d expect that’s whole 2013 and I think the next two years beyond it would be similar to that?

Itay Michaeli – Citigroup

Great, and the Scott lastly how should we think about working capital in 2013, as (inaudible) production starts to come back a bit in the second half of the year perhaps Europe, should that be less of a headwind maybe even a trailing for you, 2013.

Unidentified Company Representative

What we have some reasonable performance in, tailwind from an earnings point of view or cash point of view, depends…

Itay Michaeli – Citigroup

Cash flow working capital.

Unidentified Company Representative

From a cash flow point of view, we continue to opportunity, we made some progress in 2012 relative to our original plans for the year on that front and we brought more discipline and a pretty keen focus on that and we’re seeing the benefits of that the month-to-month. So we continue to see opportunity on that in ’13, what I would point out is most of you will know is that typically Q1 is the sizable outflow from working capital and then Q2, Q3 through the middle of the year tends to be more sort of neutral and then we get a sizable pickup in the fourth quarter to pace down shutdowns and so on, and we’d expect that seasonal pattern to continue this year, hopefully with some overall improvement underlying that.

Itay Michaeli – Citigroup

That’s great. Thank so much guys.

Operator

Thank you. The next question comes from the line of Patrick Archambault with Goldman Sachs. Please proceed.

Patrick K. Archambault – Goldman Sachs & Co.

Yeah. Thank you, good morning. I have a cash question and a Europe question, I mean first on the cash question, it looks like if you were to generate something close to what you generated this year or maybe slightly above you’d be back into the $30 billion cash range and you’ve stated that at least for 2013 there’s no voluntary contributions required. So can you just maybe walk us through what the remaining cash calls are on what seems to be a fairly sizable piece of liquidity there. And if there’s any room for additional shareholder actions potential throughout this year?

Unidentified Company Representative

So the couple that fairly obvious one is they’re closing of the (inaudible) transaction, what we said at the time was that would be about a $2 billion cash contribution from the motor company to the finance company to close that, so that’s one number. Secondly, we pay about 900, which gets lost in the mix sometimes, if we pay about 900 million a year in dividends so that’s another call on that, our mandatory convertible which is a piece of that will convert at the end of this year, so that will go away going into next year into 14.

We have the series B, the (inaudible) preferred that’s out there that becomes (inaudible) end of ’14 and that’s a very expensive piece of paper and that’s something that we would like to redeem as soon as it’s reasonably able to be done. So it’s something that’s not this year, but it’s that’s on the horizon. And then we have potiential other voluntary pension actions, with interesting opportunities come along on that front. So there are handful of sort of known and identifiable items out there. And obviously we will lay on that, opportunities from a shareholder point of view, we took from our perspective very major step in that direction around the UST buyback at the end of last year, and we talk (inaudible) balanced to the way that we’re deploying cash.

Patrick K. Archambault – Goldman Sachs & Co.

Okay, thank you. Very helpful. And then onto my question on Europe, maybe two things, number one is; it’s been written in the press, I don’t know (inaudible) that the cooperation with PSA has kind of downshifted a bit. There is no longer the D segment program. I think it’s the B and then some SUVs. My first question is sort of, why the narrowing of the scale of cooperation, just give them the need for variable cost efficiencies down the road. And then number two is what’s the prognosis perhaps for bringing some Chevrolet stuff into your OPEL facilities. Things like the crews or semi version of the more cars, something like that? Thank you.

Daniel F. Akerson

This is Dan Akerson, I will answer that. I think (inaudible) said she can’t believe everything you read and there is a great ad on television about, I read it on the Internet, it’s got to be true. Don’t take too much stock into what you read, a lot of people like to talk. This all good robust and healthy joint ventures are based on self interest and when you can’t pencil a car like the segment car and for either party, then you shouldn’t do it. I mean this is in some sort of fraternity here, its full calculated business deal. We respect the PSA folks a lot and the relationship is good.

From a manufacturing point of view, whether we would shift around the globe and bring Chevrolet to Europe or that we won’t comment on. That is something we look at on a routine basis, but we are not going to wash our laundry in the public about what we may or may not do. I apologize for that.

Patrick K. Archambault – Goldman Sachs & Co.

Okay, great. Thank you very much.

Daniel F. Akerson

Thank you.

Operator

Thank you. The next question comes from the line of Chris Ceraso from Credit Suisse. Please proceed.

Chris Ceraso – Credit Suisse

Thank you. Good morning. Quick question about the consolidated portion of IO. Do you have the number there Dan on the adjusted EBIT and it looks like it was a bit of a down shift from the previous run rate, can you explain what the weakness there was?

Unidentified Company Representative

Yeah. As I said in my prepared remarks, it was down a bit from the previous run rate, mostly due to timing of some cost items in there. I will say that as we covered in January, we do see margin pressure in the IO business this year, some of that driven currency and the strengthening of the Korean, we have been manufacturing based on Korea. As you know not as big as some, but given (inaudible) so we see some currency headwinds there that will bring some pressure on the cost equation relative to the revenue play here.

Chris Ceraso – Credit Suisse

Okay. Can you give us a feel for some of the big picture, cost items as we walk from 2012 to 2013, what are you thinking about material costs, what’s your expected change in pension expense, other structural cost changes. In addition that you mentioned exclusively the $600 million in the amortization, what are some of the other big puts and takes from ‘12 to ‘13?

Unidentified Company Representative

This is for the whole company or?

Chris Ceraso – Credit Suisse

Yeah. I guess for North America, and then if there’s anything specific beyond that for other regions, that will be helpful?

Unidentified Company Representative

Chuck can comment it briefly, we don’t want to get a modelling exercise, line item by line item and we gave a fair bit of color back in the meeting in January, but Chuck, if you…

Chuck Stevens

Yeah. I think just directionally as we talked back in January, there’s material performance, freight performance will be relatively flat obviously there’s going to material cost increases associated with product launches that will lead more than offset by price. From a fixed cost standpoint, as we talked about three big drivers, I think there’s going to be pension income year-over-year that we talked about before non-cash, D&A will be up, primarily tooling associated with the new programs, another non-cash item and we’re investing in significant amount of money in incremental marketing in 2013 to support new product launches as well as improve our share voice. So those are the three big fixed cost drivers year-over-year.

Chris Ceraso – Credit Suisse

Okay.

Chuck Stevens

A couple of them on cash.

Chris Ceraso – Credit Suisse

You don’t want to go into any specific numbers around those?

Chuck Stevens

No.

Chris Ceraso – Credit Suisse

No, okay. And then just on Europe, you were very clear in the text that the 600 million is added into the earlier guidance, but you also mentioned that you decided to take that action because things deteriorated. So if the previous guidance was that Europe would be better in 2013 than 2012, is it better again by 600 million or is the underlying worse than you thought just a few weeks ago?

Daniel F. Akerson

I guess it’s this way, which is back in Q3. We said two things, we said we have an objective to break-even by mid-decade and then we saw an opportunity for buying slight improvement including relative to ’12. So as we said on the outlook and then we separately said that there is a chance that we may impair along our assets in Europe. So we said all that together in the third quarter, as we’ve gone from Q3 to Q4, we’ve seen as we expected we have seen a deterioration in the environment in Europe from an industry perspective, from an economic perspective, from a fourth quarter top line perspective, and that lead to the impairment analysis and the impairment charge that we’re showing there. So in that outlook that we provided, the $600 million savings was not incorporated into that outlook.

Chris Ceraso – Credit Suisse

And then just the last one, you guided a 35% tax rate, Ford’s been running at about 32, they were full year into not having evaluation allowances, is there anything that’s materially different about your mix of profit that would argue for a higher tax rate for you?

Daniel F. Akerson

From our perspective 35% was an estimate of where it will be. We don’t have the benefit of tax benefits on our European losses for example, whereas I think they do, so that would be something that’s a difference between the two.

Chris Ceraso – Credit Suisse

Okay. Thank you very much.

Operator

Thank you. The next question comes from the line of John Murphy from Bank of America Merrill Lynch. Please proceed.

John Murphy – Bank of America Merrill Lynch

Good morning guys. First question for you (inaudible) I've mean as we look at the capacity utilization you ran at in the fourth quarter 934 and then full year 975, that's pretty high, I mean just somewhat capacity constraint of getting close to it. Just curious if you think about that versus your pricing strategy broadly, is there any reason that you would soften pricing or increase incentive, it seems being capacity constraint you might consider raising prices were broadly, I understand there are some specific programs and inventory here and nearly you need to take some actions but you're in a good position, the industry seems like you want to get to a position (inaudible) capacity utilization, I am just curious as you're thinking about 2013, shouldn't this be a good year for pricing?

Unidentified Company Representative

Yes let's talk about capacity first, that's 97% on a two shift basis. If we looked at our capacity on a three shift basis, ultimately we'd like to be in the range of 120% to 130% so there's an opportunity to continue to drive that, we've 8 plants on three shifts so we'd like to increase that, so we continue to same structural cost. But talking about pricing next year and where we are with the GMT 900, obviously we want to transition thought that and have a good position in the market from a share standpoint as we launch the (inaudible), we don't want to give up market position from that standpoint, so I think when you look at carry overpricing year-over-year, the biggest headwind our challenge we'll have will be related to the GMT 900, I think from the rest of the portfolio perspective we're going to continue to opportunistically look at improved pricing.

John Murphy – Bank of America Merrill Lynch

Okay that's very helpful and then Dan and mentioned you got a (inaudible) deal of $1 billion at 1.2% GM financial am obviously that is very inexpensive relative to what you're charging your customers, are we going to see a lot more deals like that for GM financial over the (inaudible) in the future, where you are actually doing sort of on balance sheet funding for a GM Financial?

Unidentified Company Representative

Those are on balance sheet decortization so there are placed on the GMA balance sheet and that’s being a primary funding tool for GMF for the last little while because it’s just such an efficient way to fund number one, number two, it matches perfectly the duration of the assets and the liabilities so you don’t get into any sort of carry trade issues, if you like there. We have issued for the last year and a half, $1.5 billion of unsecured debt out of GMF at increasingly attractive rates as well. And so we are migrating to a broader set of funding tools for the business there, as we grow the portfolio. The acquisition of Ally will further broaden out the sources of funding that we have for the business.

So it’s a pretty deliberant and steady development of the funding base, keeping it as efficiently as possible well matched liquidity point of view is possible diversified sources of funding, pretty much the evolution that you want to see as we continue to grow the business.

John Murphy – Bank of America Merrill Lynch

Okay and then just lastly on cash structure and how you are looking at adverse which were in (inaudible) obviously the pension year kind of cap this as far as cash contributions likely in this year, you’re talking about focusing on mandatory convert in (inaudible) you might be focusing on next as far as taking down, could there be more share buybacks or dividend put in place before you get the mandatory and you even refer that out of the way, or do you think you need to focus on building up cash and taking those out before you return more value to shareholders recognizing you already bought back shares, but I’m just curious sort of in order operations, where cash flow go there?

Unidentified Company Representative

Well I take a couple of things, one just a minor point which is the mandatory convertible, will convert to common stock in November, terms so that’s not a cash flow per se, that’s more cash opportunity, because once that converts, we want to be paying the coupon that we are paying on that currently, so it’s the point on that one or generally I would say, we have a pretty disciplined capital allocation framework that we have used over the last year plus now that we used to review opportunities with our Board of Directors and we look at everything on a relative basis in there.

So what I identified earlier was to find opportunities that we see out there, we are always evaluating relative effect of this one opportunity over the other, things come along that we don’t expect necessarily or out planning for such as the buyback that we executed in December; that wasn’t something that we foresaw as a defined opportunity, too much ahead of times, so I guess the point is there are things out there that we know we would like to do. There are opportunities that are well defined right now that could come along and we will evaluate those in a defined disciplined risk adjusted return to our share owners framework.

John Murphy – Bank of America Merrill Lynch

That’s very helpful. Thank you very much.

Operator

Thank you. The next question comes from the line of Adam Jonas from Morgan Stanley. Please proceed.

Adam Jonas – Morgan Stanley

Hey thanks everybody and Dan I would like the (inaudible) slip on the core value there to be initiating Valentines Day presents. Question on Europe, we understand you have done a great job of reducing inventory as a company level, can you give us an update on where you stand in terms of unit inventory at the dealer level?

Unidentified Company Representative

Dealer level is a little higher. And we are working that down sort of through this quarter as well. So I would say we are in better shape on the company side than we are on the dealer side, but we are making some good progress on that as well and when we think about inventory, we think about whole chain if you like and we are focused on both of these.

Adam Jonas – Morgan Stanley

Okay. And a question on your preserved guidance either in the U.S. or Europe incorporate in anyway 94 yen-dollar or 125 yen-euro, have you or do you expect to see any competitive pressure from the Japanese players as a result of this.

Unidentified Company Representative

I guess I mean the whole currency equation that’s much more multidimensional and just what the yen doing on the flip side, you fletcher as I said earlier, the volume on strengthening which tells me other direction for those guys. So you also have, when the yen strengthened is much as a big, kind of going back few quarters, are you sure to rush the localization by some of the Japanese to get more localization here. So there may not be a perfectly symmetrical unwind avail as side of that as well. So what we said our plans for the year, we obviously fix assumptions in there, say as we move into their early part of the year, there are some headwinds and some headwinds to certainly call the overall effect for the year. South America for example, presumably the rails move favorably for us there. So it’s you gave me the impact of Venezuelan evaluation. So…

Adam Jonas – Morgan Stanley

Got it.

Unidentified Company Representative

Certainly, equilibrium has been a lot of currency activity or really sure or a lot of contracts.

Adam Jonas – Morgan Stanley

Okay. I appreciate that, and just finally, you’ve been looking for new head of global marketing for about six or seven months. We believe you’re still interviewing candidates from outside the company, it sounds like go in, is there still a unified head of global marketing job to be filled or are you moving back to global brand has instead, so that there is no longer really relevant and in that vein, we’re still on track for the $2 billion of savings from commonwealth as a result of potentially reconsidering your global marketing strategy? Thanks.

Unidentified Company Representative

The answer to the question is it will probably evolve more to a global market head, rather than the global chief marketing officer. And yes, the commonwealth structure was got in place, which largely surrounds Chevrolet is still operative, still in place and the same is still projected.

Daniel F. Akerson

Yeah, no change there.

Adam Jonas – Morgan Stanley

Thank you.

Operator

Thank you the last question will come from the line of Ryan Brinkman from JPMorgan. Please proceed.

Ryan Brinkman – JPMorgan

Hi, good morning. Thanks for taking my call. At the Detroit show you guided to roughly flat GM financial earnings year-over-year in 2013, inclusive of a partial euro profits from international operations and I am not sure what your assumptions are for (inaudible) various different portions of international close or what you expect in terms of profit contribution from those operation. So maybe you can just help me understand what your underlying assumptions are for the current core North American GM Financial operations in 2013. It would seem to incorporate a decent decline and I was just hoping you could walk through some of the drivers there given that they are coming off at a record year in 2012?

Daniel F. Akerson

I am not sure. Well, I think the outlook that we provided stands, which is there will be core for the existing GM will be down slightly and offset by some portion of a partial (inaudible) in the business. Exactly how that’s a function of transaction closures and the closures in a series of steps by geography, so that’s all (inaudible). What I would say is on the core GMS business is we have had some tailwinds last year from some of the pre-acquisition portfolio and how that was accounted for and would (inaudible) through that previously that gave some extra yield to some of those assets through the P&L. So little bit of that tailwind in that one would occur this year.

So there is no huge change in the fundamental outlook, it’s more just some of the way that the accounting worked for some of the pre-acquistion portfolios rolling off and back to kind of a core for the business. So I’d say that the assuming the LA transaction is closed roughly on time through the second and third quarters that we would expect to be essentially roughly flat year-over-year.

Ryan Brinkman – JPMorgan

Okay great. Then last question, full size pick up truck sales have improved recently in U.S. it looks like your share also back quite a bit stronger in December and January relative to what it was in October and November, so can you maybe just discuss for us, the sensitivity of your North American earnings to these pickup truck volumes and maybe just kind of walk us through how you’re feeling now, about the pickup truck market in the U.S. and your inventories in light of how the market and your share has trended over the past couple of months.

Unidentified Company Representative

Yeah, I would say that first we need to recognize that our capacity in full size pick ups is relatively flat year-over-year. We are going to have significant downtime in transition time, so as the industry improves, the segment share increases, our share increases there is not a lot of production upside, what it does is reduce our inventory levels, and from an inventory perspective I would say after December and January results, we are executing to our plans. There is a lot of variability and volatility in that but we are reasonably comfortable with our truck inventories, where they are now, as we had into the transition.

So I would say from a 2013 there is pretty limited upside on full size pick up production just because of the transition.

Ryan Brinkman – JPMorgan

Okay, great thanks for all the color. Congrats on the quarter.

Operator

Thank you Mr. Arickx. I will now turn the call back to you, please continue with your presentation or closing remarks.

Randy Arickx

Thank you operator. Thanks everyone for your time today. We will be talking to you soon. Bye now.

Operator

Thank you ladies and gentlemen, that does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your lines. Thank you and have a good day.

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