A Model For Sustaining Profitability

The GM organization is committed to designing, building and selling the world's best vehicles.

With the launch of the new General Motors Company in 2009, we established a new business model for our company — one that positions us to make money at the top and bottom of the business cycle. This has enabled us to bring more stability to our business and position the company for long-term success. To date, we have made considerable progress. Among the highlights:

We have improved the funding level of our U.S. pension plans with a $4 billion contribution during 2010.
Our $23.1 billion public equity offering in November 2010 was the largest global IPO in history.
Our balance sheet has strengthened through debt reduction of more than $11.0 billion between December 31, 2009, and June 30, 2011.
As of the third quarter in 2011, we had recorded seven consecutive quarters of profitability, and all four of our regional operations around the globe were performing profitably.
The U.S. government's ownership stake has decreased from 60.8 percent to 33.3 percent.
The Canadian government's ownership stake has decreased from 11.7 to 9.3 percent.

This progress has been achieved during a time of historically low industry sales, which demonstrates that our products are winning in the marketplace. In fact, Chevrolet sold more vehicles in the first six months of 2011 than it has in any other first-half year in the brand's 100-year existence. Our challenge is to keep building this momentum by focusing on four pillars that will drive margin improvement and sustain long-term performance.

Chevrolet is focused on a global brand strategy centered on great value and style.

1. Design, Build and Sell the World's Best Vehicles

Our success starts and ends with great products that have compelling design and outstanding reliability, quality and durability. We are working toward this goal from a strong foundation. Our J.D. Power customer satisfaction rankings are above average. We lead in fuel economy in multiple product segments. Our vehicles have a strong safety reputation and competitive advantage through our ownership of OnStar. Our continued investment in advanced technologies and leadership in clean-energy patents, which are outlined in the Design section of this report, is another important part of this pillar and one that directly supports our intent to help displace petroleum, improve fuel economy and reduce emissions.

2. Strengthen Our Brand Value

Great products lead to great brands. Our brands must have a clear, powerful and distinctive position in the marketplace. Key to this is a focus on fewer brands, which enables us to increase product development and manufacturing flexibility, maintain a steady flow of new product launches and allocate higher marketing expenditures per brand. Also key is our decision to launch the Chevy Carbon Reduction Initiative with the goal of eliminating the carbon footprint of the 1.9 million Chevrolet vehicles expected to be sold in the between November 18, 2010, and December 31, 2011. In North America, for example, we have transitioned successfully from eight to four brands. Our global brand strategy is centered on Chevrolet as a brand that offers great value and style and on Cadillac as a premium brand that embodies unique American luxury.

3. Grow Profitably Around the World

Our margin enhancement initiatives are focused on both top-line sales growth and bottom-line operational leverage. In North America, we are continuing to broaden our product line. In 2010, sales volume mix was composed of 36 percent cars, 38 percent trucks and 26 percent crossovers. In 2011, the sales volume mix was composed of 38 percent cars, 37 percent trucks and 25 percent crossovers. In Europe, the focus is on refreshing Opel/Vauxhaull models and growing our Chevrolet brand.

GM International and GM South America are pursuing local and regional solutions to meet specific market requirements. We are capitalizing on our leading share in the fast-growing BRIC (Brazil, Russia, India and China) markets. In China alone, we, together with our joint venture partners, plan to introduce 16 new models and/or major upgrades in the next five years. In BRIC countries, we are particularly focused on solutions that can satisfy fast-growing demand for personal vehicles, while addressing the inevitable demands on energy supply and transportation infrastructure that accompany growth.

By 2015, we expect that over 50 percent of our vehicles will be built in a flexible network of plants that leverage vehicle commonalities.

Profitable growth requires both accelerating our top-line sales and aligning global capacity with global demand. We must achieve a global manufacturing footprint that helps us minimize costs, optimize flexibility and improve capacity utilization. Reducing complexity through more common components and vehicle architectures is key to this goal. We intend to reduce the number of vehicle architectures and the number of engine platforms by about 50 percent over the next decade. By 2015, we expect that over 50 percent of our vehicles will be built in a flexible network of plants that leverage vehicle commonalities. This will enable us to put higher-quality products in the marketplace at a faster pace with more efficient capital investment. This also allows us to more quickly reduce the cost of the advanced technologies we are introducing. In addition, simplified processes and continuous improvement in operating efficiencies will serve to further the resource conservation initiatives that are discussed in the Build section of our report.

4. Maintain a Fortress Balance Sheet

Given the cyclical nature of the global automotive marketplace, it is critical that we maintain a low-risk profile through an income statement with an appropriately low break-even point. Common global platforms and reduced business complexity are at the heart of a disciplined cost structure, as well as a straight-line investment strategy. This means sustaining technology and product development investments through business cycles in order to minimize "start and stop" efforts that result in wasted capital and wasted resources. Our balance sheet objectives will continue to emphasize minimal debt and prudent liquidity reserves. This also will help us to work further toward fully funding our U.S. pension plans and to pursuing an investment-grade credit rating.