Executive VP & CFO, General Motors Co
General Motors says higher costs are hitting across the board
General Motors CFO Paul Jacobson says the automaker has not added significant price increases as he discusses first-quarter ...
About Paul Jacobson
On General Motors’ first-quarter 2026 earnings call, Paul Jacobson reported that the company achieved EBIT-adjusted of $4.3 billion, which he said surpassed expectations even after excluding a $500 million tariff adjustment. He stated that GM raised its full-year EBIT-adjusted guidance to $13.5–$15.5 billion and its EPS diluted adjusted guidance to $11.50–$13.50 per share. Jacobson noted that gross tariff costs for the year are now expected to be $2.5–$3.5 billion, down from an earlier forecast of $3–$4 billion, and that the company incurred $200 million in incremental gross tariff costs in the first quarter. He also said GM took an additional $1.1 billion in EV charges related to contract cancellations and supplier claims. In media appearances, Jacobson said the company has not added significant price increases and described the quarter as “really strong.” He stated that GM is “sticking with our models” on EVs and is not impairing other EV programs like some competitors, while acknowledging that EVs are “not affordable or not profitable at these levels right now.” Jacobson added that GM is temporarily pausing additional share repurchases until there is more certainty about the operating environment, and that the company is working with the government on tariff refunds under Section 232.
Transcript (18 segments)
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Jon0:00
The buzzword this earnings season appears to be resilient. I think it would be unfair just to call this resilient. It looks strong. So where is that strength coming from?
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Paul Jacobson0:11
Well, good morning, Jon. Thanks for having us. You know, this quarter was a really strong one for us. But I think that resiliency word works really well. It's something that we've demonstrated for the last several years, whether it was the chip crisis or tariffs or inflation. I think the teams responded really well and this quarter was no exception. When you look at some of the challenges that we faced around inventory levels, the go-to-market team did an outstanding job dealing with the traffic that we saw in the stores, which continue to be strong and steady and has continued through April. So we feel good about the quarter. And, you know, we're able to take up our guidance as a result of the tariff accrual that we took in the quarter. And so far it looks like we're able to handle some of the pressure that we've seen in inflationary items, primarily resulting from energy prices.
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Jon1:00
Well, let's talk about that, an important topic. Your supply chains have been battle-tested, battle-hardened: the pandemic, the tariffs, and now this. What challenges are you working through as a team at the moment?
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Paul Jacobson1:16
Well, I think right now, obviously the team has done a really strong job of maintaining it through even some of the DRAM memory chip issues that we saw in the middle part of last year. I think a lot of that has calmed down, but what we're really seeing across the board right now is inflationary effects in raw materials, aluminum, steel. Just overall transportation and logistics costs. We're calling out about $500 million of pressure that we've added to our forecast for the year. So despite our beat, we're not taking up our guidance by nearly as much as that beat, primarily because we're continuing to adjust the business. But we feel good that we're a little bit ahead of it right now, but we are cautious about how long this might last.
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Jon1:54
How much are you able to pass along those extra costs, Paul, to consumers in the face of already relatively high prices, but a very strong consumer demand?
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Paul Jacobson2:09
Yeah. So we came into the year saying that price was only going to be up by about a half a percent, which really was the annualization of model year '26 price increases. We haven't built any significant price increases into our models. In fact, what we're seeing is the industry discounting a little bit more. There's some competitive pressure out there, but our team has held up well. I think when you look at the GM portfolio, we've really got a vehicle for every consumer out there. We're known for our trucks and SUVs, but we sold over 700,000 vehicles last year with a starting price of approximately $30,000 or less. So we've got that portfolio. The Chevy Trax is hitting record levels for us last quarter. So we feel like we're in a good spot depending on where the consumer might be.
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Jon2:55
But any pushback against some of the large vehicles, the SUVs, the pickups in the face of higher gasoline prices, or have you seen no ramifications whatsoever?
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Paul Jacobson3:09
You know, we really haven't seen any changes. In fact, our light-duty pickup sales were up about 8% year over year in the quarter. And like I said, traffic has been strong. If anything, we probably were a little bit light on inventory coming into the quarter because we had such a strong December and with the weather in January and so on, we had difficulty making up those inventory levels. So we're down quite a bit from where we were a year ago. It gives us an opportunity to replenish that stock and make sure that we've got product in the stores at our dealers for customers when they come. But so far, traffic has remained steady.
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Jon3:43
Paul, when it comes to the tariffs, how is it going in terms of getting the refunds back from the US government?
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Paul Jacobson3:49
So, you know, we're exposed a lot differently. I think many companies out there are principally focused on IPR. Many of our tariffs are under Section 232, and there's been a pretty robust process. We haven't had any challenges with the offsets and making sure that we're getting the accounting right with the government to make sure that the cash is flowing efficiently. With the EPA, with the Supreme Court decision that was somewhat unexpected, we took the accrual. We have not moved our free cash flow guidance like we did our EBIT because we're not sure when that refund is going to come. We haven't applied for anything yet, but you know, we're going to work through that with the government in partnership because I think that partnership has worked really well as we've adjusted and tried to benefit the U.S. auto industry the best we can.
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Jon4:39
Well, how deep is this partnership? A few weeks ago, there was a report that the Pentagon is talking to General Motors and other auto companies about making munitions and helping in the war effort. Is that accurate? And where are those conversations now?
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Paul Jacobson4:53
Well, I can't comment on anything specific, but we do have a growing GM Defense business, particularly with the infantry squad vehicle, which has been great for the troops and for the department as well. But this is taking advantage of really strong U.S. manufacturing. And that's where we lead the way, I think, as automakers and do a great job. So, you know, while we would rather not be paying tariffs across the board, we understand the environment that we're in and we're making sure that we can pivot the business the best we can to adjust to that reality. And I think the team's done a good job. When you look at the consistency of our earnings over the last several years, they speak for themselves.
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Jon5:38
Paul, at a difficult time, and we talked all throughout this interview about the challenges on the horizon. How does that inform your approach to capital returns for the year ahead?
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Paul Jacobson5:47
Well, you know, our capital allocation policy starts with investing in the business. We'll put $10 to $12 billion in, much of that this year is actually onshoring work that was previously done internationally. And we're bringing that in as a result of our tariff response. The second pillar of our capital allocation is making sure we've got a strong balance sheet. And when you look at where our balance sheet is, how funded our pension plans are, we're in a really, really strong position. And what that's allowed us to do is take some of that free cash flow and allocate it back to shareholders to reward them for their confidence in the GM story and make sure that they're generating the returns for their customers as well. During the quarter, we were able to repurchase about $800 million worth of stock at about $75 a share, taking advantage of some of that dip and continuing to be very, very consistent about the way we apply our capital allocation.
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Jon6:41
Paul, when you look forward at the potential priorities of General Motors, how much do you see EVs as playing a bigger part just because of some of the questions around oil, as well as, of course, autonomous driving?
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Paul Jacobson6:57
So while we did take a number of charges, special item charges last year and even in the quarter, as we continue to right-size our EV footprint as a result of the new regulatory environment, unlike many of our competitors, we're sticking with our models. We discontinued the BrightDrop van for very specific reasons, but we're not impairing any of our other EV programs like some of our competitors. We continue to believe that we can make EVs work through our winning platform. They're not profitable at these levels right now, and that's something that we've got to work on. So we've got a number of battery chemistry architecture initiatives coming in over the next couple of years that are going to get the costs down and where we think we can take it and continue our leading role. We're already number two in the US in EVs and think we can continue that and continue to grow it in the future.
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Jon7:48
Before we go, inquiring minds want to know: the Corvair behind you, what kind of money we need to come up with?
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Paul Jacobson8:00
It's definitely in your price range, Jon.