General Motors Q3 Earnings Call Transcript

123jump.com Staff
18 Nov, 2008
New York City

General Motors, the struggling automaker reported third quaarter loss of $2.5 billion or $4.45 a share. The company plans to cut capital spending, lower production and reduce staff to improve the liquidity by $15 billion. GM is seeking federal help that can only help the company in the short term.

General Motors Corporation ((GM))
Q3 2008 Earnings Call Transcript
November 7, 2008 12:15 p.m. ET

Executives

Randy Arickx - Executive Director of Investor Relations and Financial Communications
Rick Wagoner - Chairman and Chief Executive Officer
Fritz Henderson - President and Chief Operating Officer
Ray Young - Executive Vice President and Chief Financial Officer
Walter Borst – Corporate Treasurer

Analysts

John Murphy - Merrill Lynch & Co., Inc.
Chris Ceraso - Credit Suisse
Brian Johnson - Barclays Capital
Himanshu Patel - JPMorgan
Rod Lache - Deutsche Bank
Itay Michaeli - Citigroup
Todd Lassa - Motor Trend
Paul Eisenstein - Detroit Bureau
Joann Muller - Forbes Magazine

Presentation

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the GM third quarter 2008 earnings conference call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. At that time, if you have a question, please press the “1” followed by the “4” on your telephone. As a reminder, this conference is being recorded Friday, November 7, 2008.

It is now my pleasure to introduce Randy Arickx, Executive Director of Investor Relations and Financial Communications. Please go ahead, sir.

Randy Arickx

Thank you very much. Good afternoon everyone. Thank you for joining us as we review our 2008 third quarter results that we sent to you earlier this morning. I''d first like to direct your attention to the legend regarding forward-looking statements and risk factors on the first page of the chart set. Like always, the content of our call will be governed by this language.

I should also mention that to comply with the SEC''s Regulation G, we''ve provided some supplemental charts at the end of these charts that we''ll be speaking to you today in order to provide reconciling data between managerial financial results as discussed today and the GAAP equivalent results that are in GM''s financial statements.

I would also like to highlight that GM is broadcasting this call live via the Internet and that financial press is participating as well. This afternoon Rick Wagoner, GM''s Chairman and Chief Executive Officer will provide opening remarks; then, Fritz Henderson, GM President and Chief Operating Officer will give an overview of current economic environment and discuss a series of new actions GM is announcing today; Ray Young, GM Executive Vice President and CFO will then review our third quarter earnings results.

After the presentation portion of the call, about 30 minutes will be set aside for questions from security analysts followed by about 30 minutes for questions from the financial press.

I would also like to mention we have several other executives available to assist in answering your questions. With us today are Walter Borst, Corporate Treasurer; Nick Cyprus, Corporate Controller and Chief Accounting Officer; Joe Peter, CFO of GM North America; and joining by phone is Mike DiGiovanni, Executive Director - Global Market and Industry Analysis.

Now I''d like to turn the call over to Rick Wagoner.

Rick Wagoner

Thanks Randy, and thanks to have one for joining us today. In a few minutes Fritz Henderson and Ray Young are going to provide a detailed overview of third quarter earnings as well as some additional actions that GM is taking on the self-help front to adapt to the rapidly changing market companies.

Headlines are a tough quarter in an extremely difficult market environment due to the growing impact of the credit crisis on the real economy. Stepping back GM has been following a consistent business strategy to build a very solid auto company for the long-term.

We made dramatic reductions in structural costs as you know. We''ve consistently delivered award-winning products to the marketplace here and around the world. We''ve grown aggressively in emerging markets around the world, many of which we have leadership positions in and we''ve made meaningful strides in becoming a leader in advanced propulsion technology.

Despite all these actions, these efforts are threatened by a severe downturn in sales and a sharp drop in revenue caused by the widespread credit crisis. I doubt there''s anyone who disputes that we''re operating in very challenging times, certainly one of the most challenging in the history of the US auto industry.

Coming at a time when our balance sheets are weakened due to the restructuring and heavy capital expenditures and technology expense, carmakers can''t get credit to complete their restructurings or put new advanced technologies into vehicles for production. Customers can''t get credit for new cars and other purchases, and consumer confidence has fallen to an all-time low. Suppliers are losing business and can''t get credit to assist them until the industry recovers. And dealers are having difficulty getting credit to finance inventory and other routine business needs.

On July 15th, we announced a $15 billion liquidity improvement program mostly self-help and today Fritz will take you through our plans for another $5 billion reduction including the very difficult decision to further reduce our 2009 capital spending.

I do want to note that the most important projects in advanced technology programs are going to remain on track, despite these cuts and will continue with a fairly heavy new product launch schedule in ''09 and ''10 despite the cuts.

It''s fair to say the liquidity is the top priority for the company and the industry right now. In that regard, you may have seen all the news coverage that we have as an industry, had a number of contacts in Washington including yesterday, my counterparts from Ford and Chrysler along with UAW President, Ron Gettelfinger and I had the chance to meet with the leadership of the Congress, and in addition to meet with the majority leader of the Senate and talk about the state of the auto industry.

We''ve also had our regular series of contacts with the administration and with the President-elect staff. I am sure they''re well informed on the state of the industry and economy and we look forward to further conversations with them on what kind of actions could be taken in the near term to address the weakness in the economy and the credit markets, which is now severely affecting the automotive business starting from the retail consumer.

I''d also like to mention before I turn it over to Fritz, another point that''s been getting a lot of attention, speculation and that''s regarding a potential strategic acquisition by GM. We have recently explored the possibility of such an acquisition on the basis that our analysis suggests that it would generate significant cost reduction synergies and strengthen our financial position in the medium to long-term, while being neutral or modestly positive from a cash flow perspective in the near term. While it''s fair to say that we concluded this acquisition could potentially have provided significant benefits, we''ve concluded at this particular time that it''s important that we put 100% of our efforts on the immediate liquidity challenges. And so, accordingly, we''ve set aside consideration of such a transaction as a near-term priority.

Let me close by saying that the current credit crisis is clearly impacting Main Street and so it has a big impact on the auto industry. It''s fair to say, from the impact on employees, retirees, suppliers, dealers, healthcare coverage, pension benefits, technology spending the US auto industry is a big part of Main Street in America.

We''ve taken significant self-help steps to improve our liquidity and we''re going to continue to pursue all the options necessary to ensure that we have sufficient liquidity to weather this credit induced economic crisis in the US.

With that, I''m going to pass it over to Fritz.

Fritz Henderson

Thanks Rick. Turning to the deck page two is the agenda for this morning. I''m going to spend time talking about the global economic outlook as well as the incremental initiatives we''re announcing today. And Ray will pick up and cover the third quarter results.

Page three, as Rick mentioned, we are experiencing the worst financial credit crisis in more than 70 years. The financial market turmoil has most aggressively unfortunately spilled over into the broader global economy, the real economy, leading to significant uncertainty and volatility.

Our US economic downturn is, we''re living through it today, declining employment, the employment numbers were announced this morning, unemployment numbers were very, very weak.

Declining real income, we see not only this afflicting the US, I actually see the US leading the downturn in the real economy. Western Europe has turned down sharply in the last three or four months. Central and Eastern Europe are starting to slow. Asia-Pacific growth is slowing and Latin America is also beginning to face increasing external pressure with a risk of slowing due to the moderation of energy and commodity prices. And in part, it reminds me, that we have a globally connected capital market and a globally connected economy. And so, the restrictions that we''ve seen in credit that have affected the US and Europe, we''ve begun to see it hit very hard in the emerging economies as well.

The coordinated global government measures have been taken and welcomed and they have had some effect. They''ve had some effect on thawing credit conditions. I choose the word thawing carefully because I would not say by any stretch that we''ve returned to normalcy, not even close. But if you look at the trends, the trends are encouraging, but we''re still I think in a very difficult period in terms of credit, we haven''t stabilized. And what we''ve seen is the impact of credit or specifically the lack thereof is now being seen and felt directly in the real economy.

Page four, what we know and what we don''t know today. What we know is the credit markets are frozen with some thawing. As I said before, we know that consumer confidence is at historically low levels, lowest on record in many cases or the lowest in measured history.

The US housing market has not bottomed out to the best of anybody''s analysis. Governments are determined, however, to avoid the systemic collapse. There''s been massive amount of liquidity injected into economies. Governments have taken a number of measures in the US but also around the globe to try to provide liquidity and to try to provide some platform for stabilization. And one of the things we have found is that the tax that has been exacted on the consumer in the economies in terms of higher oil prices and higher commodity prices, which in part are linked to oil, we''ve begun to see that tax recede as we''ve seen significant declines in both oil and commodity prices, particularly in the third quarter, and then, again, through October.

What we don''t know, however, is the long-term consequences of the crisis. We also don''t know the impact on consumer savings and deleveraging. It''s our view that when the recovery begins, and it will, we do think that we will see changes in consumer savings rates, in deleveraging of consumer balance sheets, and then how that will affect the speed with which the recovery is occurring in a product like ours, a consumer durable, is yet to be determined.

Business reactions to the crisis, small business. We saw the unemployment numbers today, but I certainly think the various different reactions taken by both small and large businesses to the crisis are yet to be felt, I think, in full.

And then, finally, and probably most importantly for us, the timing of any recovery is uncertain. And candidly in our business what we find is that you don''t know you''re in it till you''re part way through it. So, at this point, we just don''t understand the timing of any recovery.

Page five, global industry sales. We''ve had six years of consecutive record global vehicle sales rising 24% to nearly 71 million units in ''07. Global sales actually peaked in January of this year and we now expect ''08 sales to be below ''07. We expect them to land at about 69 million units, about 3% lower than ''07, with sales in North America and Western Europe now below replacement rates, similar to the downturns that we''ve seen in the ''80s and the ''90s.

The table in the end of this chart though is important. What we''ve seen is the depressive level of the sales actually accelerate through the year, and we do expect these level of sales will continue in ''09 without a pretty marked improvement in the credit markets and more specifically, credit market normalization.

What we''ve shown in the table is SAAR or the seasonally adjusted annual rate for North America, US, Europe and Western Europe, LAAM and AP, and then total, and what we''ve tried to do is here track what''s happened across the quarters in ''08, and then most specifically in October. And what you''ve seen is through ''08, you can see first quarter peaking, second quarter off, with the US actually weakening significantly and Western Europe weakening in the second quarter. Then you saw the level of weakening accelerate in the third quarter in the US and Western Europe. And then, finally, we actually penciled in here the October rate. Obviously, any month data is somewhat preliminary, but I think when you looked at the level of October sales and the 62.5 million unit clip, US at 10.9 million units, Western Europe at 14.4, and then you begin to see both LAAM and AP was up in part, because AP still has some benefit from China. But I think that it''s pretty clear that the rate of erosion in sales has continued through the year and it''s actually accelerated in the third quarter and into October.

So, in light of page six, in light of the credit crisis we''re facing, the conclusion we reached is to plan the business more conservatively. We expect US industry volumes to remain significantly below trend for several years. We are continuing to plan for over time gradually higher oil and energy cost environment with ultimate recoveries. And what we''ve shown here are the planning assumptions we''re using for appropriateness in developing our ''09 operating plan.

US light vehicle industry is first. Year-to-date number for ''08 is 13.8 million units. In July of this year when we announced our last set of measures, we indicated that we''re planning on a US industry light vehicles of 14 million units in ''08 and ''09. As we look at our planning going into next year, we''re going to plan our production schedules, our material requirements, and frankly, our operating plans around 11.7 light industry in ''09 with some modest recovery to 12.7 in 2010. So that would be 12 and 13 in terms of total industry respectively.

You can see oil prices for ''09 we expect to stay in the $60 to $80 range with some escalation in oil prices as we get to ''010, consistent with a gradual recovery in the industry.

What we''ve also shown you here is what assumptions we''re using for Europe. A total European industry next year of 20 million units with Western Europe 14 million units, a LAAM industry at 7.1 million units, somewhat actually in line with what recent experience has been, and then, finally Asia Pacific at 22.3 million units, up, but certainly the level of growth relative to what we''ve seen in the last four or five years in Asia Pacific is significantly slower. So these are the assumptions that we''re using for purposes of planning our business.

When you look at page seven, based upon those set of assumptions, and frankly, the cash burn we''ve seen certainly year-to-date and the challenges we see, as Ray will take you through it, we have some other measures that we''d implement. The top of this chart that goes through the line that says, total announced July 15; these were the actions that we announced in July of this year. The $10 billion of operating and other actions that we term self-help, we are on track or largely complete in every one of these measures. So we have been executing to conserve $10 billion of cash through ''09 in these various internal areas.

Asset sales are in process, but, as we know, the availability of liquidity in many ways drives your ability to execute asset sales. So as we look at it, we are in the process of marketing a number of businesses, but at this point our ability to close those sales is uncertain. So we''re going to execute our plan and we''re going to see.

Capital market activities $2 million to $3 billion behind schedule. That would be an understatement. If you look at the nature of the credit markets, certainly in the fall of third quarter and then in October, they''ve been closed actually. So we''ve not been able to execute the capital market activities.

So the actions we''re announcing today, which I will detail in the next several charts involve another $5 billion of internal actions composed of about $2.5 billion further reduction in capital spending in ''09, a further $1.5 billion reduction in North America structural costs, excluding salary costs actually, working capital improvements of further 5/10th of a billion, and then a final further $0.5 billion in salary cost reduction that affect both our North American sector as well as our corporate sector. So the additional measures we''re announcing today are intended to reduce our cost and improve our cash flow further by $5 billion in ''09.

Page eight, capital spending. You will see a comparable format across the next several pages. The left column is the plan we announced in July. The right column are the additional actions we''re announcing today. The $1.5 billion reduction announced in July was noted on the chart. Well, these were the drivers.

As we look at a further $2.5 billion reduction in ''09, we would bring our capital spending in ''09 to a $4.8 billion level through program and capacity project deferrals. This also results in some reductions in engineering expenses. We protected actually a number of key strategic programs, including our Cruze, our Volt, and we also protected increased global spending on fuel economy improvement.

I''ll have a few more things to say later in terms of what programs will be executed within these budgets, but we do believe we can maintain actually a better launch schedule for our North American business and actually a number of our global businesses in ''09 and ''010, even with the lower level spending vis-à-vis what we''ve seen in ''07 and ''08, particularly in ''08.

Page nine, North America structural costs. In July of this year, we announced $2.5 billion reduction from the prior plan. You can see the actions that were noted here. Today, we''re targeting a further $1.5 billion reduction. So $4 billion in total.

Further revisions to median sales promotion spending reduced, if not eliminated, dealer network restructuring activities, production schedule revisions, which we have announced today actually and further attrition programs would be expected, as necessary, eliminating non-essential plant projects, and then, finally, engineering reductions to match the reduced level of capital spending. So we''re targeting an additional $1.5 billion of structural cost reductions for North America.

Page 10, working capital, beyond the reduction in working capital, we announced 409, again, which was $2 billion we announced in the summer of this year. We have further plans to take another $0.5 billion out of working capital in ''09, additional inventory reductions.

Given the weakness of the softness we''re seeing in the market, frankly, we can take even more risk in this area and so we''ll drain buffer stocks, components and finished goods, and continue to work on receivable and payable policies. For example, we''ve recently made some changes in our indirect material purchasing policies, for example.

Salaried employment costs. We announced in July over 20% reduction in salaried employment cash costs. The further actions we''re announcing today would be another $0.5 billion on top of that. We increased our savings in ''09 in the US and Canada to nearly 30% from more than 20%. Total reduction of more than 7,000 salaried and contract employees including the actions we announced in July. We would further suspend additional employee benefits in the US and Canada, for example, through the 401(k) match.

Savings that we''re targeting in ''09 in Western Europe are also being implemented as part of a necessary broad based labor cost reduction initiative for Europe. GM Europe has engaged labor representatives in the necessary discussions to implement our plans in Western Europe.

Page 12, asset sales. You can see these are the three businesses that we''ve announced, Hummer, Strasbourg and ACDelco. The capital credit crisis does, frankly, put these at risk to a degree given what we think is, we are still marketing these properties and these businesses, but the lack of credit could very well have some effect on all of these three. Beyond the sale of these businesses in terms of capital market activities, we did complete the exchange in September of $0.5 billion of Series D senior convertibles for equity, but we''ve not really been able to tap the markets any further in terms of capital market activities.

Finally page 13 looks at the future product portfolio. This is a quick look at our significant launches. This is not an exhaustive list by any stretch. This is a representative list of some of the more significant launches that we''ll see in the United States.

We also picked just representatives, the international operations, China and Germany. You can see in ''09, actually later in ''08 the Traverse, Hummer H3T. In Germany, we''re actually launching as we speak the Opel Insignia Sedan, Opel/Vauxhall Insignia Sedan; in ''09, the Camaro, the CTS Wagon, the Buick LaCrosse; in the United States Cadillac SRX, the Chevrolet Equinox and the GMC Terrain.

When you look into China and into Germany, you see the new Buick Regal, the new Buick LaCrosse, the Chevrolet Cruze, the Cadillac CTS Wagon. You see the Insignia Hatch and Wagon coming in ''09 and later in ''09 our plan is to launch our Opel Astra five-door hatch.

And then finally, when you look at ''010, the program within the level of capital spending as I said that we''re planning the business around. We would bring into ''010, the Saab 9-5 Sedan & Wagon; the Cruze would be launched in the US on time; the Cadillac CTS Coupe, the Chevrolet Volt at the end of the year, the Saab 9-4x would be launched in ''010.

And looking outside the United States, the Chevrolet Spark in both China, Germany and frankly, at the global program, the Saab 9-5 Sedan & Wagon, the Cadillac CTS Coupe and then when you look at crossover vehicles and/or in this case mono cabs you''d see the Opel/Vauxhall Meriva and the Saab 9-4x internationally.

So even within a significantly lower level of capital spending, our objective is to maintain as aggressive a product role as we can given the highly competitive nature of the business.

At this point, I''d like to turn it over to Ray. Thank you.

Ray Young

Thanks Rich. Good afternoon everyone. Chart number 14 gives you our third quarter financial highlight. GAAP net loss of $2.5 billion or 445 EPS including special items; adjusted net loss of $4.2 billion, you can see that our GAAP net loss actually less than the adjusted net loss. And that''s because we have some favorable special items, which we''ll walk you through.

Adjusted automotive earnings before tax of $2.8 billion, down $2.9 billion versus third quarter last year excluding discontinued ops. And again, primary driver being our North American operations and our European operations. We''ll walk you through that.

Adjusted GMAC results recognized by GM, that''s our 49% interest of 1.2 billion. There''s no GMAC announced earnings two days ago. Adjusted automotive operating cash flow of negative $6.9 billion, and I''ll walk you through this particular number in some later charts. And lastly, third quarter gross automotive liquidity of $16.2 billion, that''s down from the second quarter balance of $21 billion.

Chart number 15, just again, third quarter adjusted results by the various regions, again I''ll spend more time with each of the regions, but you can see that North America down significantly versus third quarter last year as is Europe.

Looking at LAAM, LAAM had a good quarter up versus third quarter of last year, $140 million up. Asia one that''s breakeven. There''s some special factors impacting Asia-Pacific down $192 million versus last year. GMAC automotive earning before tax is $2.8 billion. Our share of GMAC, which is down $452 million versus third quarter last year. And then total GM net income of negative $4.195 billion, that''s down $2.6 billion from last year.

To note worldwide production of 2 million units, actually down 117,000 units versus third quarter last year, again, reflective of what Rick talked about the economic conditions in North America and Western Europe. Global market share down 0.7 points versus third quarter of last year.

Chart number 16, just walk you through some of the special disclosed items, again, adjusted net loss of $4.195 billion. We had a VEBA curtailment gain of $4.9 billion. I''ll talk a little bit about that in some future charts. Salaried health care plan related charges, net $1.7 billion. There''s a combination of gains and some losses there. I''ll walk you through those charts.

Delphi negative $652 million. We''ve got some charts we''ll walk you through there. On restructuring related and other, about negative $641 million. This is primarily related to some plant idling capacity actions and idling actions in US and Canada, but also includes some costs related to our salaried attrition program and our window retirement programs as well as some restructuring over in Europe.

On GMAC investment impairment, we further impaired our preferred investments, preferred equity investments in GMAC, a $251 million charge that results in our carrying value of preferred down to $43 million. We didn''t need to take any charges related to our common equity interests in GMAC, which is currently held at a $1.9 billion value.

In chart number 17 just a little bit on the VEBA curtailment gain. As you know, we had a settlement agreement that became effective in September of this year. It required us to remeasure our Hourly Medical Plan, the UAW plan as well as the Mitigation Plan obligations as well as our hourly pension plan. So we had a $13 billion reduction in our UAW obligations that flowed into our OCI. Also, $2.7 billion increase in our hourly pension plan obligations associated with the lifetime benefit increases. The $4.9 billion curtailment gain is really related to the acceleration of the recognition of net prior service credits that were scheduled to be amortized after January 1, 2010, primarily resulting from the ''05 Healthcare Agreement with the UAW.

Chart number 18 on the net charge of $1.7 billion related to the salaried health care plan. As you''re aware, as part of our July 15th announcement we indicate that we''re going to eliminate 65 US salaried retiree healthcare effective January ''09. We were going to partially offset some of that benefit elimination through an increase in terms of flat benefit associated with pensions. So for those participants already that will be age 65 and over as of January 1, ''09, these actions will result in a decrease in our OPEB obligation of about $2.8 billion and you see that on the table.

But there''s also a related increase to our pension obligation of $2.6 billion related to the pension benefit increase. Because this action constitutes a settlement of our OPEB obligation as relates to these retirees we are also required to recognize $1.9 billion of unamortized actual losses from the salaried OPEB plan. So when you net the three numbers together, it results in the settlement loss of $1.7 billion, which again is non-cash in nature.

For participants under 65, the changes resulted in negative plan amendments for the US salaried retiree healthcare plan and a positive plan amendment for the US salaried pension plans, which more or less offset each other.

Chart number 19 just on Delphi related, again, as you''re aware, we paid $1.2 billion to Delphi related to support payments, 414(l) hourly pension transfer from Delphi to GM of $2.1 billion of net liability. We also received a release from Delphi in $1.6 billion administrative claim.

Upon emergence, the remainder of Delphi''s hourly pension plan for participants with prior GM service to be transferred to GM and will receive preferred stock associated with that.

In the third quarter, we actually increased our reserves on Delphi by $0.7 billion, and this really is reflective of the increase estimates of the pension and other support obligations under the Settlement Agreements offset by the UAW VEBA curtailment gains related to Delphi employees who will be paid out from our UAW VEBA trust. So, in total, we''ve taken $11.7 billion in net Delphi related charges to-date. Just note, Delphi filed a modified Plan of Reorganization in October, and we continue to work with Delphi and the stakeholders to help them emerge from bankruptcy.

Chart 20 is just our walk in terms of global automotive adjusted earnings before tax. I mean, last year in the third quarter about $100 million income, this year $2.8 billion loss. You can see volume mix were major factors contributing towards the deterioration.

I just wanted to highlight that we also had some significant hedging losses. As you know, we''re seeing tremendous volatility in terms of commodity prices as well as FX rates. And so, you can see in the box to the right our mark-to-market losses on a year-over-year basis related to mark-to-markets were about $1.4 billion. So that''s had a significant impact in terms of our reported results here.

Chart number 21, just a little bit more background in term of our approach towards commodity and FX hedging. We take a passive approach towards managing a lot of our commodity exposures and foreign exchange exposures. We run rolling hedges and they vary by size of exposure, depth of the market and our ability to forecast the underlying exposures. But in general about 50% of the underlying exposures are hedged with a tenor depending on the type of exposures from 12 to 36 months.

You can see on the table the significant mark-to-market impacts. This is actually a third quarter actual impact, so in foreign exchange about $1.2 billion mark-to-market, commodities, $1.3 billion, so for a total impact into third quarter about $1.5 billion. As you saw from the prior chart, the year-over-year impact was really a negative $1.4 billion.

Chart number 22, just turn to North America on third quarter results. You can see the significant revenue reduction about $4 billion down versus third quarter last year, reflective of weak economic and industry conditions. Earnings before tax/loss, $2.3 billion. You see the production volume, down 105,000 units with total delivery down 228,000 units. In the United States, in those that the industry SAARs third quarter $13.2 million, dramatically down versus last year. Our market share 24.3% down, again, 0.8 points.

Just a note, our dealer inventory level 717,000 units is actually down significantly versus last year, 179,000, about 76 days worth of inventory. It''s important to note that our inventories of both full size trucks and full size SUVs were actually in a very, very healthy condition since we''ve taken out a lot of production in the first half of this year as well as the third quarter. So, actually when we take a look at our stock levels, they appear very, very reasonable from our perspective.

Chart number 23, just a walk on North America earnings. I''ll walk a little slowly here. Last year, a $300 million loss. You can see volume-related impact $0.8 billion negative. Clearly, industry decline is a major contributing factor towards our volume reductions there.

Inventory related actually a positive $0.8 billion, and that''s just simply due to the fact that our inventory reduction in the third quarter this year was actually less dramatic than the inventory reduction that we had in the third quarter of ''07.

We actually had some segment mix related impacts that also drove volume. On the mix side, you can see that $1.3 billion decline. It''s primarily driven by product line mix due to lower wholesale volumes on full-size pickups and UTs this third quarter compared to third quarter last year.

In terms of price you can see positive price. Part of it is driven by lease reserve adjustments. We''re actually seeing stabilization, actually some improvements in terms of residuals of some of our truck models and that''s resulted in some favorable adjustments to our lease reserves.

As I pointed out in the second quarter call, we felt that when we did the mark in terms of residuals that ended in June, we thought that was actually a fairly conservative mark. And so, we''re actually seeing some recovery in terms of residuals, in part due to dropping gasoline prices, but also in part due to just good inventory management on those particular vehicles.

Pricing/incentives. Other pricing/incentives down slightly negative $0.3 billion. Canada also contributed towards that North American deterioration.

On net materials, you can see unfavorable commodities on a year-over-year basis. Again, we''ve seen some dramatic reductions in the recent commodity prices, but when you look at the average price over the third quarter, it was still on average fairly high.
The commodity price reductions really occurred in the month of September and more recently in the month of October. There are some program major costs. That was offset by material performance.

On the pension/OPEB manufacturing, some good performance here in the manufacturing attrition side. As you know, we execute the SAP program or the attrition program in the middle of July. People were flowing out in the third quarter, so we''re starting to reap some of that benefits on a year-over-year basis.

And then, lastly, in terms of hedging, exchange and other negative $0.6 billion, including $1 billion mark-to-market on the commodity hedging. I talked about in some earlier charts there are some positive gains on exchange, primarily related to the Canadian dollar translation of the GM Canada liabilities as the C$ weakened in the third quarter.

For Europe, you can see again the impact of contagion in global economies impacting Europe with revenue down $1.3 billion year-over-year, a tough quarter, $974 million earnings before tax. If you take a look at the production volumes in Europe, again, down 48,000 units as they adjusted towards the lower industries.

You can see the industry SAAR, 1.9 million unit reduction year-over-year in terms of the SAAR rates over in Europe. Market share is down slightly. If you look in some of our key markets in Germany, again, industry down, market share down a point. In UK, again, industry is down 0.7 million units year-over-year, our share down slightly.

We also put down the average Euro count exchange rate, because this is a very important exchange rate for our European business, as we have fairly good market share in the UK and we have a large Euro exposure across the footprint related to vehicles that we ship from Europe into UK, as well as parts purchases from our Vauxhall operations from the UK. So you can see a dramatic weakening of the pound on a year-over-year basis, which had a dramatic impact in our results.

And lastly, in terms of Russia, we still saw growth on a quarter-by-quarter basis in terms of the industry, and we continue to gain share in our Russian operations here.

Chart 25 is just the year-over-year walk. You can see again last year''s about $100 million loss, the volume mix unfavorable 0.4 billion units, combination of some share performance, industry declines, as well as some model/option mixed deterioration.

Price slightly unfavorable offset by cost factors, but you can see hedging, exchange and other. Again, we saw, again, exchange-related transactional losses related to the pound weakening against the Euro on a year-over-year basis, some FX and commodity hedging, mark-to-market losses, and then some other losses as well. This more or less walks us to the $1 billion loss.

For chart number 26 Latin America, Africa, Middle East, a good quarter for the operations as the South American and the African, Middle East economies remain fairly strong in the third quarter, revenue up $737 million, earnings before tax up 140, good pre-tax margin 9%.

When you take a look at production volume actually up year-over-year, industry SAARs up, our deliveries were up, our market share down slightly. That was just due to also some constrained volumes in certain markets.

Brazil, which is our largest market, again, industry was strong, running at 3.1 million unit SAAR, up 0.5 million units. Share down. Again, at the beginning of the quarter, we were still relatively product constrained in terms of some of our small vehicles.

Argentina up year-over-year, market share down as we diverted product from Argentina into Brazil. And then the Andean markets, the industry actually is experiencing some weakness, primarily driven by the Venezuelan market down 300,000 units, our market share down. Again, that''s driven primarily by the fact that the Venezuela market has weakened.

Chart 27. I won''t spend any time. That''s just a year-over-year walk in terms of LAAM.

Chart 28, on Asia-Pacific, again, I just want to remind people that Asia-Pacific results include the export operations of GM-DAT to operations around the world. So, therefore, the profitability of GM-DAT exports is captured in our Asia-Pacific results.

When you take a look at revenue down $0.5 billion that was in the large part due to the export business of GM-DAT as the markets, particularly, in Western Europe and Russia started weakening. They start reducing the amount of exports to these markets.

China joint venture equity income down $36 million, still a healthy $50 million, but that''s again due to some softening in terms of our market share there. Actually, we gained market share when there is a mixed issue in term of our Chinese operations in terms of products.

Our earnings before tax more or less breakeven in ''08, but down $192 million versus a year ago. I''ll go through a walk there. In terms of the industry you can see that compared to last third quarter down 600,000 units, our deliveries were up slightly, so therefore, our total Asia-Pacific market share was actually up slightly up 0.4 points.

China industry down slightly. We picked up share and a lot of it''s driven by the strength of our Wulin operations, which is our small commercial vehicle operations based in China. In Australia flat industry, our market share down primarily driven by product industry mix in that particular market. And in GM-DAT, you can see that in terms of production down 12,000 units primarily driven by the export production of GM-DAT.

Chart Number 29, again just the walk in terms of year-over-year, you can see that we had some volume/mix impacts in price. That''s again primarily driven by the export operations of GM-DAT. Although, we did see FX hedging losses there. And that''s just for information. GM-DAT does hedge a lot of their receivables, exposures and as you know, the one actually weakened considerably. So we took some mark-to-market losses.

The underlying export business for GM-DAT actually becomes healthier, becomes stronger as the yuan depreciates versus the Euro and US dollar. So the recent movement, the yuan actually is helping the business of GM-DAT to go forward.

Chart number 30 on GMAC, GMAC released the results two days ago. They had their analyst conference, on a standalone basis a $2.5 billion net loss, a deterioration versus third quarter last year. They talked about the North American Auto Finance business negatively impacted by increased provisions as well as weak economic conditions, as well as some residual value pressures in the Canadian value operations.

ResCap performance characterized by credit related losses and limited revenue opportunities in a tough domestic and international housing market. Insurance operations remain profitable. Adjusted EBT as realized by GM was a loss of $1.2 billion and this includes the 49% of Canada lease impairment charge taken by GMAC North American Auto Finance.

Just some information with respect to GMAC, again they released their financials on Wednesday, a pre-comprehensive analyst deck. In this call, we''re going to not comment on GMAC results. I think their results stand by themselves, so if there''s any questions, I would encourage you to contact GMAC Investor Relations or the GMAC management team directly.

Chart 31 is a chart we took right out from the GMAC earnings deck. This is their profitability by business line. Again, I encourage folks to talk to GMAC directly in terms of their results here.

What I would like to comment on is chart 32 in terms of GMAC''s impact to GM. Clearly, the significant credit market deterioration impacts their ability to fund. This effect is being felt not just in the United States but as well globally. It does result in reduced GMAC''s lending capacity and a commensurate tightening of lending policies.

For example, retail financing originations have been reduced about 50% to 60%. There''s reduced capital availability for lease originations. As you know, they basically stopped leasing in the Canadian market and significantly curtailed leasing in the US market. And they''ve increased wholesale financing rates to compensate for costs of funding.

GM has also responded with actions to facilitate retail customers financing while allowing GMAC to manage their capacity. As you''ve seen over the past couple of months, we''ve moved towards more cash-based incentives to support the standard rate GMAC financing and enable dealers to pursue other financing sources.

So, for example, recently the financing that this campaign really gives the dealers an option to pursue retail financing from other lenders in the United States.

Chart 33, this VEBA accounting posts third quarter. The settlement agreement became effective on September 2008, after the courts approved it without any issues there. From fourth quarter 2008 through fourth quarter 2009, we''ll continue to recognize service costs for UAW Hourly Medical Plan participants and amortize the remaining net prior service credits.

We expect our quarterly US hourly OPEB expenses to be in a range of about $200 million lower than our run rate in the first half of this year. And this is largely the result of a lower amortization of actual losses due to the third quarter remeasurement.

Starting in January 1, 2010, we expect to account for the establishment in funding the new VEBA as far as termination of our UAW Hourly Medical Plan and Mitigation Plan and report a settlement gain or loss and this gain or loss will largely be based on discount rates, which we cannot reasonably estimate today.

Now after January 1, 2010, we expect to recognize interest expense related to the carrying value of the remaining VEBA contribution obligations. To understand our remaining VEBA contribution obligations, we''ll have detailed information about the amounts owned to our VEBA. That will be found in our third quarter 10-Q that will be filed on Monday. In addition, our payment schedules and certain terms may also be found in a copy of our settlement agreement, which is filed as an attachment to our first quarter 2008 10-Q.

Chart 34 just some comments in terms of our pension funded status. As you know, we actually utilize our overfunded pension plans for our Special Attrition Program for US hourly employees as to pay out the incentives from the plan. They also paid out a flat pension benefit in lieu of healthcare coverage for post-65 salaried retirees effective January ''09. The salaried retirement window program from the incentives were paid out also from the plan and also the Delphi 414(l) transfer that we talked about.

GM has also recognized additional pension liability following the approval of the UAW settlement agreement. So what does this mean? After recognizing all of these changes mentioned above as well as some of the negative asset returns to date, our hourly pension plan was about $0.5 billion underfunded as of September 30th, and our salaried plan was overfunded. And so, on a combined basis, we''re overfunded. We do not expect any minimum funding requirements for both the hourly and salaried plans in the next three to four years.

Chart 35 talking about liquidity. We finished up the quarter at $16.2 billion including $300 million of readily-available VEBA assets. Again, this is down $4.8 billion from the prior quarter. We had access to about $400 billion of undrawn, committed US credit facilities as of the end of the quarter. This represents a decrease of $4.6 billion from the prior quarter, primarily driven by the secured revolver draw that we did. So our net liquidity position was negative $27 billion, or $7.6 billion lower than the prior quarter. And just know our debt balance is $43 billion.

Chart 36 just in terms of gross liquidity, net liquidity position, you can see this in the graph there. Again, 16.2 down 21 billion with our net liquidity position as well down based upon the debt balance of $43.3 billion.

Chart 37; spend some time just walking through the cash flows in the third quarter here. We''ll take some GAAP net income. Again, GAAP net income includes the special items which in this quarter was actually net favorable. If you just exclude the losses in the finance in GMAC operations 1.4. So actually earnings before tax on automotive $1.1 billion. You add back D&A of $1.9 billion, deduct CapEx of 1.4. Change in receivables, payables and inventories, negative $2.6 billion, a fairly large number here in terms of working capital outflow. This was really driven primarily by a combination of factors.

First of all, in Europe, typically, we have a seasonal build up in inventory in Europe. We also saw weaker sales in Europe. And so, therefore, our inventories that is our company-owned stocks, actually built up in the third quarter which was actually a use of cash. In addition, they did some adjustments to the production schedule in Europe which actually resulted in a payable''s outflow as well in the third quarter.

In North America, we had higher receivable balances in some of our exports to overseas, primarily to the Middle East and Africa. And then, in LAAM we had actually lower payables related to some faster releases of payments from Venezuela to some of the suppliers of CKD materials around the world.

So those were the main drivers in terms of why our working capital position actually had a deterioration in the third quarter. I''ll talk about the fourth quarter in terms of why some of these will reverse itself out.

In term of pension/OPEB expense, net of payment, I''ll talk a little bit about on the next page, but that''s again mainly to reversal of really the non-cash curtailment gains on the VEBA. So, therefore, that''s how you walk to adjust the operating cash flow of negative $6.9 billion.

When you take a look at some of the other cash flows, cash restructuring charges of $0.5 billion, and as you know, at the end of the quarter we made a payment to Delphi of $1.2 billion related to our Settlement Agreement with Delphi. Again, this is a nonrecurring item, the $1.2 billion, but we incurred that in the third quarter. So, therefore, on adjusted operating cash flow after special cash charges negative $8.5 billion.

In the non-operating related numbers, you can see that change in debt $4.3 billion. That''s primarily driven by the revolver draw in the United States. We had some asset carve out flows. Those are the lease assets that we retained when GMAC separated. Also note the FX translation effect of non-US dollar cash balances. We actually have a lot of overseas cash balances in countries where we actually saw some devaluation of their currencies, such as in Brazil, such as in Korea. So, therefore, when we actually translate the US dollar, we saw a reduction in the US dollar balances. As you know, in these countries, their expenses are also in local currency terms. And so, therefore, while this was a reduction in term of reported cash balances on the US dollar bases, from their entity basis, their cash positions really did not deteriorate. So, once you adjust for all that, our net cash and cash-related is up negative $4.8 billion.

Chart 38 just kind of walks through a little more detail in term of the reconciliation, in term of the pension/OPEB flow. Again, this is primarily reversing the non-cash gain on the VEBA curtailment gain and the non-cash net charges associated with the salaries Post-65 OPEB settlement. So that''s how you get to the negative $2.9 billion.

We did have OPEB payments of $900 million for the quarter, and that''s why pension/OPEB expense net of payment is negative $3.9 billion.

In terms of the accrued expenses, I do want to spend a moment here. You''ll probably notice the net sales allowance payments of negative $1.7 billion, a fairly large outflow there. That''s driven primarily by a couple of things.

First of all, the significant US dealer stock reduction in the third quarter of 70,000 units, that really results in a negative working capital impact as we kind of payout the sales allowances on the units that we sold, but we really didn''t add to inventory. So we really didn''t accrue much sales allowances. So that was one major contributing factor.

The other one actually is the fact that as we move towards more cash-based incentives in the month of September, both August and September for that matter, there is a working capital impact on GM because we actually reimburse the dealers on average about 10 days after they sell the vehicle versus retail incentives, whereby we reimburse GMAC on average for about 40 days after the vehicles are sold.

So as we did this one-time shift towards more cash-based incentives as opposed to retail-based incentives, there is a one-time working capital impact that we saw in the third quarter.

In addition, there were also some payments related to GMAC related to some adjustments to lease residuals. Again, that was in the context of our unsecured exposure pact with GMAC.

The last thing to note, the $1.5 billion add-back, this gets back to the mark-to-market loss that we took in the third quarter of $1.5 billion. Again, that''s non-cash in the near-term. So that''s a reversal of that non-cash expense of the mark-to-market. So that''s how you arrive at the total accrued expenses of $0.2 billion positive.

Chart number 39. I want to spend a moment talking about our drivers for cash flow in the fourth quarter. Our adjusted operating cash flow, there are about four elements I want to kind of highlight when we compare fourth quarter versus third quarter.

First of all, in term of sales allowance reserves, in the third quarter about $300 million net outlay on sales allowance is simply due to the fact that we had a dealer stock reduction. In the fourth quarter, not only will we not have the dealer stock reduction, we''ll also have some dealer stock buildup as we get back to more normal levels of inventory in the United States. So, therefore, we expect in the fourth quarter this could be a source of funds for us relative to the third quarter.

In addition, as I mentioned, the working capital impact of that incentive strategy change that we execute in the third quarter, that is the cash versus APR. That was a one-time adjustment. So, to the extent that we manage the same level of cash versus APR financing in the fourth quarter, we won''t see any further deterioration. In fact, if we shift towards a little bit more retail financing, we would actually have a positive there.

And finally, I''ll talk about the GMAC prepayment of $0.4 billion, that''s a one-time adjustment in the third quarter. We don''t expect that in the fourth quarter.

In terms of inventory and working capital, I mentioned about the buildup of European inventories, particularly in the third quarter due to combination of seasonality as well as just the weaker industry conditions.

We''ve taken a lot of actions over in Europe to adjust our production schedules, and this will result in a reduction in terms of the European inventories in the fourth quarter. And this is specifically related to inventory that we, GM, own at the national sales companies. This will result in a generation of working capital for us in the fourth quarter as well. There are other parts of the world which experienced similar phenomenon in the third quarter as well.

Thirdly, timing of interest payments and accruals, fourth quarter interest payments are going to be made in the following quarter. So we''re going to accrue the expense in the fourth to actually pay in the following quarter versus in the third quarter we actually had the outflow on interest payments related to second and third quarter accruals.

And finally, in terms of capital spending, we do expect slightly higher capital expenditure levels in the fourth quarter due to timing of projects.

So when we sum up, look at fourth quarter versus third quarter, we actually expect our fourth quarter adjusted OCF to be more in line with the cash burn that we saw in the first and second quarter of this year.

I also just want to talk a little bit about our forward liquidity position. I think you''ve read in our press release we''ve talked a little bit about our perspective in terms of our liquidity going forward.

As Fritz stated earlier, we are implementing an additional $5 billion of liquidity initiatives. Together with the $15 billion liquidity measures announced on July 15, 2008, these initiatives will conserve or generate cash of up to $20 billion by the end of 2009. We are confident that we will be able to execute these actions that are within our control.

However, there are certain measures, such as asset sales in capital market initiatives that are more challenging to execute in the current environment. With the initiatives that we have executed in 2008, we will approach the minimum amount necessary to operate our business.

But looking into the first two quarters of 2009, our liquidity will fall short of that amount, unless global economic conditions improve and the level of automotive sales, particularly in the US and Western Europe, improve, or we receive substantial proceeds from asset sales, or we achieve even more aggressive working capital initiatives, or we gain access to capital markets or other forms of financing, or we secure government funding under one or more current or future programs, or some combination of these actions.

We will provide more details on our liquidity situation in our Form 8-K, which will be filed this afternoon with the press release and the earnings charts, and the 10-Q that we will be filing on Monday.

So turn to chart number 40, just on summary. As Rick indicated, liquidity is the top priority of this company. As Fritz has highlighted, we are taking tough actions to generate and preserve liquidity. Clearly, the third quarter results reflect the challenges facing the US and the global economy and the difficult credit market conditions.

As I indicated, the third quarter cash burn rate is not indicative. We expect significant improvements in the fourth quarter on our cash burn rate. But, nevertheless, we do have a challenging near term-liquidity situation, particularly in the first and second quarters of next year.

The industry, General Motors and consumers are all facing unprecedented challenges. This is really the worst global financial and credit crisis in over 70 years. And from our perspective, the immediate federal funding is essential to help the US automotive industry in order to weather this downturn. As Rick has indicated, the US automotive industry is a critical element of the US economy.

With that I''ll stop, and turn it over to Randy.

Randy Arickx

Operator, if we could open it up for questions from the analysts, we would appreciate that.

Question-and-Answer Session

Operator

Thank you ladies and gentlemen, we will now proceed with the analyst portion of the question-and-answer session. If you would like to register for a question, please press the “1” followed by the “4” on your telephone. You will hear a three-tone prompt to acknowledge your request. If your question has been answered and you would like to withdraw your registration, please press the “1” followed by the “3” and if you are using a speakerphone we ask that you please lift your handset before entering your request. One moment please for the first question. Our first question is coming from the line of John Murphy from Merrill Lynch. Please go ahead sir.

John Murphy - Merrill Lynch & Co., Inc.

Good afternoon guys.

Rick Wagoner

Hey John.

John Murphy - Merrill Lynch & Co., Inc.

The one thing, clearly this is a tough time and there''s a lot of concerning points in your current situation, but the one thing that seems to be the toughest for me to reconcile as we go forward is the cut in product launches over the next two years. And by what I''m looking at, it looks like in absolute launches you''re cutting your launch schedule by almost a half. I was just wondering when you run these forward scenarios on these dire macro numbers, which I think is a very smart thing to do, how you think about your market share with these much lower product launches, because you had a pretty good launch schedule before, that seemed like it would help stabilize market share, and now it doesn''t seem like that exists anymore. I just want to try and understand, how you think about the size of the company in the US going forward in this very tough market?

Fritz Henderson

John, I am not sure. This is Fritz. How are you doing?

John Murphy - Merrill Lynch & Co., Inc.

Good. How are you?

Fritz Henderson

I''m not sure how you measure that. We look at the move to $4.8 billion. We have deferred some launches, there''s no question, but the large ones that we expected to accomplish in ''09, we will accomplish. I also think, what we''ve done, we had a fair amount of powertrain capacity spend, and frankly, some emerging market capacity spend that was in our ''08 and specifically ''09 capital plans, which we basically just deferred, because we don''t think we need it, with these sorts of planning assumptions.

Yes. I mean I won''t say we''ve left our launch schedule untouched, but if you go back and look at my chart here, in the middle of the deck, which I''ve focused more on ''09 frankly. We''ve kept major programs, for example, like the Cruze, which was scheduled to go in early ''010 still goes. We have the Buick getting launched in both the US and China. We''ve got basically the SRX coming. Frankly, we tried to preserve as much as possible our core launches.

The other thing I would say is, I made the comment and probably should have been more explicit, the chart wasn''t intended to be exhaustive actually. It was intended to be illustrative of the major launches we had. So, when you look at page 13, the Camaro is pretty much on time, the CTS Wagon comes; SRX, Equinox and Terrain are all pretty much kept on schedule.

I guess the other thing is, we really are focusing on pass cars and crossovers, our full-size pickups and utilities continue to perform well actually. So, this doesn''t come without some pain, but as we looked at the actions we''ve taken through, both timing of a number of programs, and specifically, truly, shutting out anything that''s capacity related, we buy ourselves some time and we buy ourselves substantial amount of money.

I obviously, didn''t talk today about what our plans would be, for ''010 and ''011. At a future point we''ll be able to talk to you about that, but really what we really targeted is, what can we manage, and what can we control, in terms of capital spending. What doesn''t have to be done, and just don''t do it. So when you measure half, I''m not sure exactly how you''re measuring it but we''re cognizant obviously that this sort of thing doesn''t come for free. It does affect potentially in a significant way your revenue capability in longer term, which is why we''ve really taken the actions in ''09 and given ourselves a bit more flexibility with respect to ''100.

Ray Young

Yeah. Maybe just to complement Fritz. I just want to emphasize, a lot of these reductions were accomplished through, what we call nonproduct spending. And so, we did have in our original plan quite a bit of capacity being added around the world. And generally what we''re seeing in terms of slowdowns of global economies we made the assessment that we don''t necessarily need to add that capacity, as soon as we had originally planned. So that is a significant element of our capital spending reduction. And also, Fritz indicated that in terms of some of the powertrain capacity, because we were planning to add a lot of powertrain capacity around the world, again we were able to push that off in order to also save on capital spending.

John Murphy - Merrill Lynch & Co., Inc.

So net-net though might there be some incremental capacity actions above and beyond what you''ve announced so far or are you reviewing that?

Fritz Henderson

I would say, what we''re doing as a practical matter is, you should think about our capacity actions, they are on hold. We''re not adding capacity. We''ve really slowed our capacity spending in powertrain. We just launched our plant in Russia here this week. We will execute that plan, and then we''ll monitor what happens with the market, and it will govern really our decisions regarding expanding capacity, but when you look at the assumptions we''re using, John, for ''09, all of that suggests that we should be much more conservative in terms of capacity expansion.

China, a different matter, obviously not in any of our cap spending, because it''s funded completely out of our ventures profitability and cash flow, and so, not in any of our capital numbers. Even in China, we''ve started to see some slowing in the rate of growth. It is probably the best way to put it. And with our partners we''ll assess the right way to add capacity in China as well.

John Murphy - Merrill Lynch & Co., Inc.

Okay. On the government loan package for the Energy and Security Act of 2007, the rules just came out the other day. I was just wondering in looking through those, if you can give us any guidance on what R&D and CapEx that you may have spent already or what you may intend going forward may or may not qualify for that $25 billion program?

Ray Young

Hey John, it''s Ray here. We''re analyzing the regulations. You''re right. The regulations came out. We''re studying them. We clearly know that there are going to be programs, product programs that will qualify, as well as capital investments that will qualify. It''s just interesting to note that the rules of the particular loan program are such that the government''s not going to pre-fund the projects, so therefore, we''re studying, trying to understand what we''re going to be spending every year. Again, this is a $25 billion loan program that goes from ''09 over to ''020. So this is not immediate cash to the automakers. It''s a very, very important point. So therefore, as we make these expenditures on qualifying projects, we will get reimbursed from the government on these spendings. That''s a very important point, because when we talk to Washington about support for the industry, we need to make sure that the people understand that this is not immediate cash. And the other key aspect is, while the regulation states that we''re looking at fuel economy improvements relative to 2005 model year, the rules are very explicit that we will not be able to qualify any projects that we have already spent money. So this is only prospective spending for the automakers and the suppliers.

John Murphy - Merrill Lynch & Co., Inc.

And then just lastly if you could just give us the mix or even the percentage of cash that''s in the US and what''s in your international operations an