General Motors Company
Q4 2006 Earnings Call Transcript

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  • Operator:
    Ladies and gentlemen, thank you for standing by and welcome to the General Motors Corporation fourth quarter 2006 and calendar year results conference call. (Operator Instructions) I would now like to turn the conference over to Mr. Randy Arickx, Executive Director of Investor Relations. Please go ahead, sir.
  • Randy Arickx:
    Thank you very much and good morning, everyone. Thanks for joining us as we review our 2006 fourth quarter and calendar year results that we sent to you earlier this morning. I would first like to direct your attention to the language regarding forward-looking statements and risk factors on the first page of the chart set. As always, the content of our conference will be governed by this language. I would also mention that to comply with FCC's Regulation G, we have provided some supplemental charts at the end of the package that we will be speaking to 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 the financial press is participating as well. This morning Fritz Henderson, our Vice Chairman and CFO, will provide a review of the fourth quarter and calendar year. After the presentation portion of the call, about 30 minutes will be set aside for questions from security analysts, followed by 30 minutes with the financial press. I would also like to mention today we have several other executives available to assist in answering your questions. With us today are
  • Frederick A. Henderson:
    Thanks, Randy. Good morning. I have a considerable amount of material to go through today. We have actually extended the call to two hours, with an hour for going through the material and another hour for Q&A, so given how much we have, we thought we would do that to make sure we had time to cover all the things we needed to do this morning, so thanks for making the time. Page two of the deck which was on the website earlier this morning highlights both the fourth quarter and the calendar year results for General Motors on a consolidated basis. In the fourth quarter, our GAAP EPS was $1.68, or $950 million, which was an improvement of about $7.5 billion from the fourth quarter of last year when we had a lot of charges in the fourth quarter results. If you look at adjusted profitability without special items, $180 million in the fourth quarter, a $1.1 billion improvement, driven largely by $1.4 billion recovery in North America. Actually driven, more than explained by the $1.4 billion recovery in North America, I have a considerable amount of material to discuss on GMAC which will come a little bit later in the deck. Total revenue, $51 billion. Our fourth quarter automotive revenue of $44 billion was a fourth quarter automotive record, so another quarter of solid revenue growth. Our adjusted automotive operating cash flow was positive in the fourth quarter, $0.3 billion. Not a large number but it was good to see us generate a small amount of cash in the fourth quarter from automotive operations. The GMAC transaction closed in November 30th. I will spend quite a bit of time on that this morning. In the calendar year, the GAAP loss was $1.978 billion, roughly $2 billion. GAAP loss improved $8.4 billion from last year -- 2005, I should say, excuse me. If you look at profitability on adjusted basis without special items, profit was $2.2 billion, which was a $5.4 billion improvement from 2005, so stepping back, earnings excluding special items was a little over $2 billion profit on a $207 billion consolidated revenue base. Including all the special items, we lost $2 billion on that same $207 billion revenue base. Global share, 13.5%, down six-tenths of a point, driven by a 1.7% decline in North America. We did exceed our $6 billion structural cost reduction goal. We are on track to achieve $9 billion of savings in ’07, and we ended the year with a little over $26 billion. Page three. We wanted to summarize briefly here the impact of the restatements that we have made on General Motors consolidated books. We do plan to file our 10-K tomorrow. The items are noted here that comprise the restatements. The first has to do with deferred tax liabilities and other tax-related adjustments. The net effect of these adjustments, most of which dated prior to 2002, was an increase in stockholders equity of $245 million as of January 1, 2002, so these were items that were discovered as a result of our reconciliation process. They were aged and we needed to restate our books -- principally the beginning retained earnings as of January 1, 2002. The impact in the intervening periods, which you will see in the next chart, was not material. FAS-133 is a result of fairly stringent documentation and assessment requirements for derivative accounting to be eligible for hedge accounting. We determined at the end of the year at both the GM and GMAC level that we had inappropriately applied hedge accounting. At the GM level, commodities and foreign exchange. At the GMAC level, some interest rate hedges on some callable debt. We basically had to unwind these hedges and mark them to market. The accumulative effect of that was $249 million, which I will cover on the next chart, plus the volatility across periods, not only by year but even within quarters, is pretty substantial. Finally, as a result of reopening our books, we chose to book all known out-of-period adjustments. These items were not material either individually nor collectively, but as a result of reopening our books, we booked those as well. Page four shows you what the impact of the restatement was. It shows not only what the GAAP net income amounted to prior, and the chart includes the nine-month results through the end of the third quarter of ’06, going back to calendar year 2002. You see the impact of deferred taxes. These are the results in these calendar years, by the way, so for example, you would not see the impact of the deferred tax adjustment on the beginning retained earnings as of January 1, 2002 on this chart. You can see FAS-133. You can also see that FAS-133 can be volatile. It had a favorable effect, for example, in 2002 of $334 million. It had an unfavorable effect in 2003, and then you see the impact of other miscellaneous adjustments. So the numbers are as restated. For the first nine months of this year, $2.928 billion, which is a loss, excuse me -- a 3.2% improvement from the prior number. In the calendar year ’05, a 1.4% change improvement. Calendar year ’04, a 3.7% reduction in net income. In calendar year ’03, an 8.7% reduction in net income. In calendar year ’02, a 10.2% increase in net income, so you do see that these numbers can be volatile. Page five. On page five, we show the calendar year adjusted results and what we have tried to show for you here is not only what the prior ’05 looked like but what the restated ’05 looks like as well, so you could understand what the restatement impact was on each of our regions, as well as the GMAC level. It also shows you what the final ’06 calendar year number was. Looking at automotive profitability, $422 million profit, a small profit on an adjusted basis in our automotive business in ’06. A $5.7 billion improvement from the prior year. North America drove that but was not the exclusive driver of that. $5 billion improvement in North America, but you saw an over $400 million improvement in GM Europe. GM Europe generating a profit on an adjusted basis for the calendar year for the first time since 1999. GMLAAM was our most profitable region, $533 million, a $381 million improvement, and GMAP generated $441 million of profit, down from the prior year, which was more than accounted for by the fact that we sold the majority of our Suzuki shares in the first quarter of this year and therefore we did not have the equity income from our Suzuki investment. So looking at automotive profitability, again $422 million, a $5.7 billion improvement. GMAC, for the calendar year, profit was $1.5 billion. That is a decline of $1.2 billion from the prior year. I will spend some time in the upcoming charts on GMAC so I will come back to that. The corporate and other was $0.25 billion favorable, a fairly positive, an almost $0.9 billion positive swing there, determined really by two factors
  • Operator:
    (Operator Instructions) Our first question comes from the line of Chris Ceraso from Credit Suisse. Please proceed.
  • Chris Seraso:
    That was impressive. You actually took exactly an hour, just like you said. I have a few items, as you might imagine. First, if you could just recap for us, that $259 million of other financing that was in the corporate other bucket, you said that was the legacy cost benefit and some tax. What does that look like on a normal quarterly basis going forward in the corporate other bucket?
  • Frederick A. Henderson:
    Corporate other, you would have in ’07 versus ’06, you will have a full year versus a half year of favorable legacy. That I know for sure. Taxes can move around, actually. I am not sure you could actually predict that with any certainty at this point but I think certainly we are going to have at least one more full -- we will have six months of favorable legacy. After that, we should be comparable, for example, ’08 versus ’07.
  • Chris Seraso:
    How much of that $6.8 billion that you showed for the full year in North America would have actually been classified in the corporate other bucket?
  • Frederick A. Henderson:
    North America, just thinking here out loud, I would say of the $6.8 billion for the year, I would say over $6 billion is North America, so you could think about the rest of it would be the corp sector. So the lion’s share of it is obviously North America.
  • Chris Seraso:
    This is related to GMAC and ResCap. What is your expectation for, beyond the capital injection but more on a go-forward basis, the adjustment to loss provisions at ResCap? How long do you think it will last? How much on a quarter-to-quarter basis? I know it is probably tough to tell because a lot of the loans may not have actually gone dead yet, but should we expect lower income coming out of GMAC on a go-forward basis because provisions have to keep going up?
  • Frederick A. Henderson:
    Good question. First of all, I am not the right guy to ask that question, but even if I was, I probably would give you the same answer. We certainly think our reserves are appropriate in accordance with GAAP at the year-end. We will have to work through what is happening in non-prime. I think it is going to be a constraining factor on ResCap profitability and therefore GMAC’s profitability through ’07 but I do not think we are in a position yet today to be able to talk in any sort of explicit terms about how much that might be.
  • Chris Seraso:
    So through ’07, we should expect at least some further increases in the provision?
  • Frederick A. Henderson:
    Well, if I look at the impact of non-prime more broadly on GMAC, it is really credit provisions on the held-for-investment. You have a pretty significant dislocation in non-prime held-for-sale, as well as securitization processes. Frankly, the market for that has gotten -- if there is one, it is very volatile. Now, we have curtailed a lot of our origination. We have actually leaned away from it in the second-half of last year but we have to -- what we have left, we will need to securitize. We did a lot of that though in the last part of last year. We will also need to look at the impact of overall residential origination levels in the mortgage industry, so you have a lot of different pieces that affect ResCap. The large piece is non-prime but it is not the only piece. I think on balance, we expect that ResCap’s profitability, if you will, will be constrained in ’07 and will have an effect at the GMAC level.
  • Chris Seraso:
    Okay, next on the -- not working capital but some of the other cash flow items that you outlined as it relates to daily rent and incentives. Should we expect a further hit to cash flow because you are continuing to take down the daily rent? Or have you sort of better balanced what is going out versus what is coming back in? Then, on the incentives, if you normalize from here, does that headwind of $1.6 billion disappear in ’07 relative to ’06?
  • Frederick A. Henderson:
    On daily rent, we expect to reduce our daily rent sales further in ’07 versus ’06, so therefore you are going to have another step-down in that item. And then, in terms of incentives, I do not think so. I think incentives, you would have seen the effect in ’06. I would not necessarily assume that in ’07, for example.
  • Chris Seraso:
    Last one, just to clarify on the Delphi, the $1.5 billion to $2 billion of pension liability, is that included in the $6 billion to $7.5 billion of contingent liability or on top of?
  • Frederick A. Henderson:
    Actually, the $1 billion to $2 billion, we would actually assume the liability but we would get a note which would be worth fair market value, so it is not really a cost, per se. It is simply a way of helping to fund Delphi’s pension plan and we would get a not for it, which would be -- think of it as trade at par.
  • Chris Seraso:
    So the $6 billion to $7.5 billion contingent liability is separate from that?
  • Frederick A. Henderson:
    Correct.
  • Chris Seraso:
    Thank you very much.
  • Operator:
    Our next question comes from the line of Brian Johnson from Lehman Brothers. Please proceed.
  • Brian Johnson:
    Good morning. Where are we going -- where did we see in 4Q and where are we going to see going forward that lease book that you retained out of the GMAC sale, both in terms of the income and the cash flow?
  • Frederick A. Henderson:
    You will see it in the FIO sector and we will make sure we lay it out. We had one month of that in the fourth quarter. I think the pretax effect of that, looking at it, it was like $30 million or $40 million. But you are going to see that separately. We will certainly outline that for you going forward in terms of what the effect is.
  • Brian Johnson:
    Okay, so that will be in that other and FIO?
  • Frederick A. Henderson:
    Correct.
  • Brian Johnson:
    Second question, just a clarification -- does the OPEB measurement reflect the 9% trend rate or the 10% trend rate? The measurement of $60-some billion?
  • Frederick A. Henderson:
    At year-end, 9%.
  • Brian Johnson:
    Okay, thanks.
  • Frederick A. Henderson:
    By the way, I am going to double-check that through this call because this is a pretty complicated area, so I am going to have somebody check that. I may come back and correct that.
  • Brian Johnson:
    Okay, thanks. That’s it.
  • Operator:
    Our next question comes from the line of Rod Lache from Deutsche Bank. Please proceed.
  • Rod Lache:
    I have a couple of questions. You are showing $3 billion of GAAP structural cost savings in the quarter, so since it is annualizing at $12 billion, why does this go down to $9 billion?
  • Frederick A. Henderson:
    We actually kind of pulled forward a lot of the cost into the fourth quarter, but it certainly would not be appropriate to multiply that by four and assume it is going to be 12.
  • Rod Lache:
    Okay. So there was a one-time of some kind?
  • Frederick A. Henderson:
    Yes, you have timing of marketing savings. You have some timing associated with engineering spend. So some element of what we saw in the fourth quarter was timing-related, which is why we did not up the $9 billion.
  • Rod Lache:
    Okay, and then I have a question on slide 31. It looks like your cash healthcare costs for retirees is going up in ’07 versus ’06, but you have the full-year benefit of the healthcare deal, so could you just explain what happened to the cash savings from the healthcare deal?
  • Frederick A. Henderson:
    If you actually put all the Delphi check boxes in that number, so what we did is -- I mentioned before that we actually reclassified a portion of the Delphi accrual into OPEB, and what you see is in that 3.4, you see all the cash payments associated with the people who actually checked the box and retired as a GM employee, which is why you do not see the continued downward reduction. Part of it is basically we are paying for the Delphi retirees now.
  • Rod Lache:
    Okay, and the commensurate OPEB obligation, is that fully trued up for all the Delphi flow-backs that you are going to have?
  • Frederick A. Henderson:
    Well, we obviously have to negotiate the rest of the deal. What we have reclassified so far are the people who actually already checked the box and flowed back to us.
  • Rod Lache:
    On slide S2, you are showing non-vehicle sales in North America up 50% to $15.5 billion. Can you explain what that is? And then, just on cash flow, any expectations for GMAC dividends this year and cash restructuring expenses here?
  • Frederick A. Henderson:
    GMAC dividends, what we have is we have agreed with the consortium that GMAC would be expected to about 40% of their LLC earnings, so it is basically going to be whatever LLC earnings are times 40% is what we would expect to receive as the dividend. Your second question, Rod?
  • Rod Lache:
    Is it 40% or 49% of the LLC?
  • Frederick A. Henderson:
    No, 40% of the earnings would be divided out. We get 49% of the earnings in our financial statement, so think of that as we get 49% of the earnings, 40% of which we would get in cash as a dividend.
  • Rod Lache:
    Right, okay. And the cash restructuring expense in ’07?
  • Frederick A. Henderson:
    For ’07 for GM?
  • Rod Lache:
    Yes.
  • Frederick A. Henderson:
    You have some cash restructuring expenses in Europe. You will have some further cash restructuring expenses in North America, but I would think that the large item in ’07 you are going to see would be just continued restructuring around GM Europe. I am not going to give you the exact number, but you will see some in '07. The answer on the question on OPEB, I was right. It is 9%. It does ramp down over a period of time, as we have done in prior years, I think it is over six years to 5%, actually.
  • Rod Lache:
    The last thing I had asked about was in the appendix here, it shows non-vehicle sales in '05 of $10.5 billion, going to $15.5 billion in '06, and I was wondering what that was.
  • Frederick A. Henderson:
    A couple things
  • Operator:
    Our next question comes from the line of Jon Steinmetz from Morgan Stanley. Please proceed.
  • Jonathan Steinmetz:
    First, starting out on slide 18, in the quarter the number that you gave on the net price and other contribution margin was a $400 million net income negative. Can you just talk a little bit about, in the quarter, the drivers on that? How much was price? Was there a raw material number that would have negatively affected that? Maybe a little more clarity on what caused that.
  • Frederick A. Henderson:
    Let me quickly turn myself to page 18. I actually think this is mostly price. You had pretty significant increases in some incentives in the fourth quarter. I will let Paul actually cover a couple items, but -- no, he is actually saying I got it right so I think I am in good shape. It is largely pricing. The impact of let's say commodity costs and what not, I would not say it was particularly unusual in the fourth quarter. This was largely price.
  • Jonathan Steinmetz:
    Okay, and then on the same page on the mix, you have a $700 million positive. On the surface of it, it looks like on production you were down about 8% on car, North America, down about 17% on truck. Is this just the impact of the new pick-up and the Crossovers coming through, because the surface level mix does not seem like it would be that big of a driver?
  • Frederick A. Henderson:
    New pick-ups, new Crossovers, the full-size use, and then richer mix across all three. We have very high option mix on all three; I mean, very high.
  • Jonathan Steinmetz:
    Okay, and then turning on the cash flow on slide 27. You had an $800 million source of cash from accrued expense and other in the quarter. You kind of gave the walk for the year but in the quarter, what was the driver on that? Were taxes the biggest driver?
  • Frederick A. Henderson:
    Yes.
  • Jonathan Steinmetz:
    Thanks, and then staying on that 27, the $3.5 billion inter-company flow between GM and GMAC, could you explain that a little deeper? Was that tying out some of the loans that had been extended from GMAC to GM?
  • Frederick A. Henderson:
    Exactly. As part of the deal, we agreed we would basically pay down a number of the inter-company exposures. We did. We paid down loans for company cars. We paid down some rental car loans. We paid down loans in Europe. We basically met our obligations, if you will, under the purchase and sale agreement and reduced the inter-company exposure, in line with exactly what we said we were going to do.
  • Jonathan Steinmetz:
    Okay, and just to be clear, the net liquidity number includes the $1 billion that needs to go back out to GMAC? In other words, the real net liquidity, so to speak, would be $1 billion light of that 26-plus figure?
  • Frederick A. Henderson:
    Correct.
  • Jonathan Steinmetz:
    Thank you.
  • Operator:
    Our next question comes from the line of Robert Barry from Goldman Sachs. Please proceed.
  • Robert Barry:
    I wanted to follow up on a couple of things. One, just to clarify; that $64.3 billion OPEB liability, that does include the $4.5 billion from Delphi?
  • Frederick A. Henderson:
    Yes.
  • Robert Barry:
    So it is possible, depending on how things settle out, that could go up another $1.5 billion to $3 billion?
  • Frederick A. Henderson:
    It depends on how we settle out with Delphi.
  • Robert Barry:
    I wanted to also follow-up on the pricing question and I guess ask what you are seeing there. I guess it was a little disappointing to see the pricing be so negative, especially given where we are in the product cadence and what you have been doing from the incentive perspective, trying to pull back on the incentives.
  • Frederick A. Henderson:
    You have seen some volatility there. I must say, I tend to look at it as what did we do for the calendar year as opposed to then just the fourth quarter. The fourth quarter was a little higher spending. It was not, from my perspective, that unusual. We had some moves around, for example, between fleet and retail which affected the number. I must say, I was not that concerned about what happened in the fourth quarter. I would say we have to see what happens in '07 but for the calendar year, we were reasonably pleased to see that number be flat.
  • Robert Barry:
    What would make it really better in '07, just given the macro environment and given where you are in the product cadence?
  • Frederick A. Henderson:
    We know what could make it go better. I am not sure we can predict that though. The market has been, from a retail perspective, running below trend. It is not a bad market, but probably 600,000 to 700,000 units below trend. We had a weak January. February was better for us. I have to see how we close out March, but the U.S. market has been okay but I would certainly not call it particularly robust. What would really help a lot is selling back up to trend but that is not today our forecast.
  • Robert Barry:
    Finally, whenever we were in Detroit, someone asked you about the Goodyear-style OPEB deal. I think your comment was that what happened there has not been lost on GM. Could you update us, if there is anything to update on, how you are thinking about that now?
  • Frederick A. Henderson:
    It remains not lost on me. As you think about '07 bargaining, I am not going to get into what our priorities and objectives are. I think at this point, we will have to just see how that goes as we go through this calendar year.
  • Robert Barry:
    It has been speculated, or maybe this is a fact and I missed it, that in '05 the union actually brought this type of deal to GM as a possibility. Is that true?
  • Frederick A. Henderson:
    I am not going to comment.
  • Robert Barry:
    Thank you.
  • Operator:
    Our next question comes from the line of Himanshu Patel from JP Morgan. Please proceed.
  • Himanshu Patel:
    Slide 18, the $700 million positive mix for the fourth quarter and the net price contribution margin of negative $400 million, how should we think about that for 2007 for the full year?
  • Frederick A. Henderson:
    We would think our '07 mix should be even better than '06. That is our expectation, with the full year of the trucks. We launched the heavy duties. We have the Crossovers. We have the Enclave here shortly, Acadia has been strong. Outlook has been a little bit below our expectations for sure, but Acadia has been strong. We expect mix to be another favorable item for us in '07 versus '06. The pricing is just going to be a function of what happens in the market, to be honest.
  • Himanshu Patel:
    I guess I was thinking of the other non-price related items that go through there, whether it is freight costs or material costs, et cetera. Are you thinking those are kind of a wash '07 to '06?
  • Frederick A. Henderson:
    We talked about at the January meeting the impact of steel on us. We are going to have some headwinds in steel, which is going to I think clearly diminish our traditional material performance. Commodities, and I will call it precious metals, non-ferrous, was a headwind. It has been very volatile, which by the way, introduces a lot of volatility in our statements because we no longer apply hedge accounting for our hedges. We have seen some attenuation in freight. We will have to see what happens, for example, in terms of fuel prices because freight and fuel prices move pretty much in lock step. We have already pretty much absorbed the steel increases. We know what those are, and commodities are going to be what they are. But we did expect, I think we outlined the impact of both steel and non-ferrous to be $1.5 billion of headwind in '07 versus '06 when we met in January.
  • Himanshu Patel:
    A separate question, the variable contribution margin on the new Crossovers, without giving us an exact number, can you rank order or give us a sense on where it is on the hierarchy? Is it possible these are more profitable than the T900 pick-ups on a variable basis, or less profitable? Where would you say that?
  • Frederick A. Henderson:
    If you look at the Acadia, the Outlook, and the Enclave, I think when I talked about this before what I said is it is more appropriate to look at it versus our traditional mid-use. It is more profitable than our mid-use. It is not as profitable as our full-size use for sure. Relative to pick-ups, it is a question of what the mix is. If you look at it versus the crew cab, the up-level crew cab, that is a very profitable business for us. If you moved down to let's say the single or extended cab work truck, it is going to be probably more than that. That is how I try to position it for you.
  • Himanshu Patel:
    Two last questions, going back to slide 28 -- thanks for that walk-down, by the way, that was very useful, on accrued expenses -- when we think of 2007, the sales allowances. Help me understand that. That is a function of absolute incentive levels coming down, but that is also a function of existing dealer inventory stock changes as well, correct?
  • Frederick A. Henderson:
    Correct.
  • Himanshu Patel:
    So to the extent that there are any changes in dealer inventory stock in '07, that would also be affected by that?
  • Frederick A. Henderson:
    While we expect inventory should be flat year-to-year, that is what we are planning on, typically you are going to see if your inventories go up -- and that is not our plan, by the way -- if your inventories go up, accrual goes up. If your inventory goes down, accrual goes down but in this case, if you looked at our inventories, they are pretty much flat year to year, so the reduction you see here is driven largely by lower levels of incentives.
  • Himanshu Patel:
    Fritz, one last question; if the situation at ResCap was to deteriorate further, is there any chance of any further true-up payments of the sort you made in the fourth quarter?
  • Frederick A. Henderson:
    No. The closing balance sheet is closed. We basically put the $1 billion equity contribution back into GMAC and then, to the extent that ResCap continues to suffer, we will suffer with our 49% of it.
  • Himanshu Patel:
    Great. Thank you very much.
  • Operator:
    Our next question comes from the line of Ron Tadross from Banc of America. Please proceed.
  • Ron Tadross:
    Just two questions, and then maybe one housekeeping. Your numbers on pension and healthcare, if I look from '05 through '07, you are down about $5.6 billion on pension and healthcare. Now, as you look forward towards this 25% fixed cost percentage that you are trying to get to, should we expect a similar mix of your structural cost reductions coming from pension and OPEB?
  • Frederick A. Henderson:
    Let me turn to my pension and OPEB. So you are saying '05 to '07 from page 29, your $2.4 billion lower pension expense and OPEB --
  • Ron Tadross:
    $3.2 billion.
  • Frederick A. Henderson:
    I think that is a fair way to look at it. But I think what we have done, you are not going to see further declines in those, per se, unless we actually do something else. That amount of net reduction structural cost is already reflected in our long-term 25% goal.
  • Ron Tadross:
    So you are saying that you are going to get to the 25% by getting cost reductions from other places other than pension and OPEB?
  • Frederick A. Henderson:
    We have a lot of different plans but at this point, we do not have any other plans to change pension and OPEB. That has to be either considered or negotiated. Frankly, if you look at the breakdown, we have to continue to run our plants as productively as possible. We have to continue to be efficient in our capital spend. We have to continue to be efficient in engineering. It is the full panoply. I think it would be fair to say that if you look at the move from '05 to '07, a big piece of it was pension and healthcare. Going forward, we are going to have to do more in other areas.
  • Ron Tadross:
    Yes, I mean -- it was upwards of 60%, was pension and healthcare, so obviously something -- what steps up? Of those things, what is the most important?
  • Frederick A. Henderson:
    The most important ends up being manufacturing because it is our biggest remaining cost item.
  • Ron Tadross:
    Then, on your global share, you guys were down about 60 basis points globally on market share. Arguably, you are at the peak of your product cycle here. How do you reconcile that? The fact that you were down on share and your product cycle is pretty good here? What do you capacitize for globally in terms of share?
  • Frederick A. Henderson:
    We are down 1.7 points in North America and 1.7 points in the U.S., and '06 was in part due to lower rental sales but also part, we did not necessarily achieve all we wanted to achieve from a retail perspective. When we announced our capacity reduction program end of '05, we talked about moving our capacity down a million units of capacity in order to bring us better in line. We are on track to achieve that. We have been pretty aggressive in Europe in terms of trimming our capacity and we will continue to do that. Every place else, frankly, we are fully utilized. There may be a little bit of issue in Australia, for example, but your question about global capacity utilization, I would say our capacity utilization issues are largely in North America first and foremost, and we need to execute the plan we have announced, and then secondarily in Europe, and there we have been pretty aggressive in terms of taking capacity out.
  • Ron Tadross:
    I guess that would apply then if you are running 13.5% share globally, that really would need to get below 13% or maybe even closer to 12% to get you to have to rationalize capacity again.
  • Frederick A. Henderson:
    Paul wants to step in and then I will come back.
  • Paul Ballew:
    Ron, I do think it is important to keep in mind this is a volume issue, and we were at 9.1 million units of sales globally and at record levels in three of four regions last year. So while you can talk about share, really for us it is volume in relationship to our capacity footprint. Our entire volume reduction was due to the rental reduction in the U.S. last year. We continue to grow at a healthy pace, actually best in the market outside the U.S. As Fritz alluded to, we know we have a North American capacity issue. We have addressed it with the decisions we have made over the last 18 months. In North America, our primary goal right now is, as we have talked about month-in and month-out, is retail sales around 3 million units in the U.S. and that is how we are capacitized.
  • Ron Tadross:
    So as long as you can keep volumes flat in a somewhat growing market, you are okay with that?
  • Paul Ballew:
    Our goal is not to keep volumes flat outside of North America. We have been growing at a very healthy pace outside of North America -- in fact, faster than the industry.
  • Ron Tadross:
    Just one other thing; in the $64 billion healthcare number, just to be clear, the $15 billion is in there, those concessions you got in the end of '05?
  • Frederick A. Henderson:
    Yes, it is net of that. If you looked at the '05 number, you can see it is down considerably.
  • Ron Tadross:
    Can you just give us the fourth quarter, the breakout of the fourth quarter payments, pension and OPEB payments, just for the fourth quarter, if you have those? That is my last question.
  • Frederick A. Henderson:
    The answer on pension payment was 0 for the U.S. Let me turn to my cash flow page here. Fourth quarter -- I actually do not know that we made any contributions to pension plans in the fourth quarter of last year anywhere, that I know of. I am just thinking about Canada or Australia, so I think whatever the payments are, are OPEB and it is pretty much -- think of that number as -- if you go to the OPEB expense chart, $0.9 billion.
  • Ron Tadross:
    Okay. Thanks a lot.
  • Operator:
    (Operator Instructions) Our next question comes from the line of John Murphy from Merrill Lynch. Please proceed.
  • John Murphy:
    On Delphi, it looks like your proceeds are going to be about $2.6 billion. You are going to assume the under-funded UAW pension plan and receive a note for $1.5 billion to $2 billion for that. That note will be paid upon re-emergence. Will that have to be earmarked for the pension plan or can that come back into the core company outside of the pension plan?
  • Frederick A. Henderson:
    It can come back into the company.
  • John Murphy:
    Okay, so you will actually realize that money in the company. How many flow-backs do you have from Delphi so far?
  • Frederick A. Henderson:
    Around 4,000, actually.
  • John Murphy:
    Then just turning back to page 19, it looks like your run-rate is pretty strong on your structural cost saves. Should we be baking in or do you expect to get the full $9 billion in 2007? Because you are talking about it on a run-rate basis, but will it actually be achieved in 2007, given your expectations?
  • Frederick A. Henderson:
    Yes.
  • John Murphy:
    Then, on the pension plan, I was wondering when that asset reallocation actually occurred, if it happened at the beginning of the year or a couple months in, because clearly the equity markets have had a pretty significant change since the beginning of the year. How much of that asset base is actually duration matched verses liabilities at this point? Or once you go through that reallocation?
  • Frederick A. Henderson:
    We accomplished it, you know, think of it as end of last year, early this year, number one. Then, your duration matching -- tough question for me to answer actually because in fact, as we allocate assets, we know we have very long dated liabilities but we do not necessarily look at it that way. At least I never looked at it that way. I am sure I have some in my investment group that do look at it that way but I do not necessarily look at it that way. But to answer your first question, we accomplished it largely I think late last year, early this year.
  • John Murphy:
    So your timing was pretty good?
  • Frederick A. Henderson:
    So far, but never forget luck.
  • John Murphy:
    You will take it any way you can get it. Then, if we look at GMAC, just getting back to the question of potentially any more capital infusions to GMAC, it sounds like you might not be on the hook to top up the equity any further. Is there the possibility that you would make capital infusions to GMAC to help facilitate or maybe even accelerate the return to investment grade there? How do you think about balancing those capital contributions versus the cost advantage or the financing advantage you might have in GMAC, relative to an investment grade rating where you are now?
  • Frederick A. Henderson:
    Good question. We laid out our plan with the consortium when we did the deal last year. We talked about a 40% dividend, at least a part of which they actually re-invested in preferred, as I recall, their portion. Between us and Cerberus, we are committed to building the capital base at GMAC. We have re-invested, for example, our proceeds, $1.4 billion into preferred. I think what we have tried to do is be intelligent and balanced in terms of looking at dividend withdrawals, and we have actually attenuated about 40% versus 70% in the out years, because we do want to build the capital base. I would say we do not have any plans. We have not discussed it between ourselves and the consortium. It would be inappropriate for me to comment beyond that. I would say both we and Cerberus and the consortium are very committed to building GMAC's capital base. We have as an objective, as does GMAC, to reestablish the investment grade rating.
  • John Murphy:
    As long as you have no liquidity crunching in the core company, would it make sense to defer those future dividends to build that capital base? That is a decision you will have to make when you get to that point.
  • Frederick A. Henderson:
    Yes, that is a decision we would have to make when we got to that point.
  • John Murphy:
    Okay. Thanks a lot.
  • Operator:
    Our next question comes from the line of Jon Rogers from Citigroup. Please proceed.
  • Jon Rogers:
    Just as a clarification; with the GMAC dividend, was it part of the transaction that the dividends would be reinvested for a two-year period, and then they would be cash dividends?
  • Frederick A. Henderson:
    Walter, do you want to comment?
  • Walter Borst:
    The deal was that we would take out 40% of the earnings as dividends in the first couple of years, so we would not take out the full earnings. Then, in years three through five, the consortium is re-investing some of their dividends back into the company. There are three components. In preferred, we put in $1.4 billion. The consortium put in a little over $500 million up-front. We are taking less dividends over the first couple of years, and then in years three through five, we will get a fuller dividend at GM but the consortium will continue to re-invest some of their dividends in additional preferred.
  • Jon Rogers:
    Fritz, on the capital spending increase, I know it was a little light this year but given where you are in the product cycle, can you tell us what the driver of increased CapEx over the next couple of years is going to be?
  • Frederick A. Henderson:
    We have a couple things. One, we have we think a pretty formidable array of products that we are investing in to actually continue to launch into the market, particularly later on in this decade, number one. Many of them are global architectures which are being engineered today, being tooled in multiple markets and we intend to bring into the market. The second point I would make is that we have a pretty substantial capital spend for power train in the plan. Our conversion from 4's to 6's, for example, is through this lifecycle, pretty substantial investments in moving from 4's to 6's, as well as frankly upgrading a number of our engine programs, including diesels and gas. The third thing I would say is that emerging market growth requires capital. While we do not put a lot of brick and mortar into our capital budget, we are building a new plant in India. We are building a new plant in Mexico. We are building a new plant in Russia. Frankly, even when we are not building new plants, for example, in Korea and other places, we are continuing to re-invest in those businesses. If you think about GM, including GM Daewoo on a consolidated basis, for example, a fair amount of capital spending just comes in to our statements as a result of the consolidation of GM Daewoo, which heretofore would have been included, for example, you would not have seen that. Finally, we are investing heavily in China but you do not see any of that because it is carried in our joint ventures over there and funded by the profitability of our business in China.
  • Jon Rogers:
    Okay. Thank you very much.
  • Operator:
    Ladies and gentlemen, we will now proceed with questions from the media only. Our first question comes from the line of Bernard Simon from The Financial Times. Please proceed.
  • Bernard Simon:
    I wonder if you could tell us about GM’s interest in Chrysler, or lack thereof.
  • Frederick A. Henderson:
    No comment, actually.
  • Bernard Simon:
    Nothing at all?
  • Frederick A. Henderson:
    None.
  • Bernard Simon:
    Okay. Thank you.
  • Operator:
    Our next question comes from the line of Jeff Green from Bloomberg News. Please proceed.
  • Jeff Green:
    I am just curious about Delphi. Is there any chance this could drag on into the fall negotiations and become part of '07 talks? July is the start of it, and we are almost there.
  • Frederick A. Henderson:
    A couple of things. First, I feel bad for Bernard. He wasted his question, actually. Let me come back to your question. I do not think it is anybody's best interest to prolong negotiations at Delphi. They are complicated. There are multiple parties involved. I do not think either we or Delphi, nor actually do I think the unions are interested in having that happen. This is a pretty complicated matter, but is there a chance? I guess. I mean, there is a chance for anything but I do not think anybody -- certainly GM, we are not working to that as our deadline. We are trying as much as possible to bring this matter to resolution quickly so that it does not become part of the '07 bargaining.
  • Jeff Green:
    Is there any kind of visibility you actually have that suggests you will get this done by July?
  • Frederick A. Henderson:
    I am not going to comment on what is happening at the bargaining table.
  • Jeff Green:
    Okay. Thanks.
  • Operator:
    Our next question comes from the line of Tom Krisher from Associated Press. Please proceed.
  • Tom Krisher:
    Just to clarify, did you make money selling cars worldwide in the fourth quarter of last year, and did you make money selling cars in the fourth quarter in North America?
  • Frederick A. Henderson:
    Cars and trucks?
  • Tom Krisher:
    Cars and trucks, yes.
  • Frederick A. Henderson:
    Yes, we did. If you go back to the adjusted profitability chart, I will just point you to it. Fourth quarter automotive profitability was $228 million, for the fourth quarter. For the calendar year, we made $422 million. North America lost $14 million in the fourth quarter, so we basically broke even. North America lost $779 million for the calendar year, so it did not make money for ’06 in the calendar year.
  • Tom Krisher:
    Okay. Thank you.
  • Operator:
    Our next question comes from the line of Jim Mataya from Chicago Tribune. Please proceed.
  • Jim Mataya:
    Can you be any more specific on what you were talking about in terms of your outlook for the calendar year when it came to improved earnings?
  • Frederick A. Henderson:
    Actually, I can but I am not going to. I think what we said earlier this year, and I want to just continue, we do expect to continue to see improved earnings but we are not planning to re-establish guidance at this point.
  • Jim Mataya:
    With that results that you are reporting today, would that or should that have any effect on the impact with the UAW negotiations coming up later this year?
  • Frederick A. Henderson:
    I do not think so. We review the results of our operations with all of our unions on a regular basis, and have been committed to doing that in good times and bad. We will continue to do that. I think the issues regarding '07 bargaining, which we will deal with at the negotiating table as opposed to now, I do not see what we are announcing today as being particularly important to those discussions, other than the fact that we still have a lot of challenges in our business. A lot of challenges that while we improved, we still lost money in North America and while improved, we still have massive healthcare liabilities, and while improved, we still have a lot of pretty significant strategic issues in front of us. We will have to deal with those at the bargaining table when we get there.
  • Jim Mataya:
    Thank you.
  • Operator:
    Our next question comes from the line of Tom Walsh from Detroit Free Press. Please proceed.
  • Tom Walsh:
    A quick clarification on cash flow -- you used the term automotive cash flow and then you said operating cash flow. Are those the same things?
  • Frederick A. Henderson:
    If you turn to page 27, what we try to do is start with automotive net income and corp other and kind of drive down the operating cash flow. This does not really include GMAC, so in effect, that is what we are trying to get accomplished.
  • Walter Borst:
    They are both true. It is automotive and it is operating.
  • Tom Walsh:
    So automotive cash flow is that 0.3 positive in the fourth quarter, right?
  • Frederick A. Henderson:
    Correct, yes. Correct.
  • Tom Walsh:
    So that is operating automotive cash flow. So if you got to positive cash flow in the fourth quarter, why are you predicting negative cash flow for calendar '07? What happened in the fourth quarter that will not be repeated the rest of next year?
  • Frederick A. Henderson:
    Well, we burned $3.8 billion for the calendar year in '06, $4.2 billion of which was in the third quarter. So it is -- cash flow can be seasonal, which is why we said we expect it to improve but we still expect to be negative.
  • Tom Walsh:
    Okay, and you will not say how much you expect it to improve?
  • Frederick A. Henderson:
    No.
  • Tom Walsh:
    When was the last quarter that was cash flow positive?
  • Frederick A. Henderson:
    We were around it earlier this year in the first and second quarter. Clearly you had, if you think about we burned $4.2 billion in the third quarter. The calendar year number is $3.8 billion. We generated $0.3 billion in the fourth quarter, so think about the first-half of the year at right around break even.
  • Tom Walsh:
    Okay, thanks.
  • Operator:
    Our next question comes from the line of Chris Isidore from CNNMoney. Please proceed.
  • Chris Isidore:
    If you can give a little more clarity on the sub-prime; you talked about ResCap having a $661 million loss. Was the loss in sub-prime even bigger than that, while the prime in other ResCap business made money? Or were all the lines unprofitable? Are you re-examining whether to stay in the sub-prime business?
  • Frederick A. Henderson:
    A couple things. First, yesterday GMAC went through a very extensive discussion of their results, which included a breakdown of their residential mortgage business. When you looked at it, and I am just turning to it now -- I will see if I can’t get to it real fast. They did incur losses in their residential finance group. They made money internationally at ResCap. They also made money in their business capital group but they suffered pretty substantially in the residential finance group. Underneath that, you have conforming prime, you have non-conforming prime, you have seconds, you have all kinds of different product lines but it was weighed down by performance issues in non-prime. But the other parts of ResCap, at least international as well as the business capital group, performed well. Then, the rest of GMAC; insurance was strong, automotive finance was pretty much as I described. Even within ResCap, the residential finance group, you have servicing income, you have all kinds of other forms of income but frankly, they were in a net loss position largely as a result of adjustments taken for non-prime.
  • Chris Isidore:
    So is pulling out of sub-prime something that you and GMAC are looking at?
  • Frederick A. Henderson:
    Well, we are a 49% shareholder of GMAC. The 51% shareholder I think is important in this discussion, as is the GMAC management team. As they discussed yesterday, late last year, ResCap began to lean away from the non-prime market and there are different levels of non-prime. We have been in certain segments of non-prime; other segments, we have not been in. Other segments we have been a lesser player. I would say a couple things
  • Chris Isidore:
    Okay. Thanks.
  • Operator:
    Our next question comes from the line of Michael Strong from [Debt Wire]. Please proceed.
  • Michael Strong:
    Fritz, did I hear you correctly earlier when you said that you guys were going to handle the $1.5 billion to $2 billion in Delphi pension liability with some sort of note?
  • Frederick A. Henderson:
    Yes.
  • Michael Strong:
    Okay, and on a different point, just in general, you had mentioned that the Goodyear thing was still on your mind. Generally speaking, can you outline just the top two or three issues that would be problematic for you guys to do something like that?
  • Frederick A. Henderson:
    Actually, again, I cannot really get into what we are going to talk about or even not talk about in terms of bargaining. It would not be productive for me to do that this morning.
  • Michael Strong:
    Come on, you can tell us. Who are we going to tell?
  • Frederick A. Henderson:
    How about the other 970 people on this call?
  • Michael Strong:
    All right. Thanks, guys.
  • Operator:
    Our next question comes from the line of David Welch from BusinessWeek. Please proceed.
  • David Welch:
    The $9 billion, I think that was in one of the slides on CapEx going forward, is that going to be your ongoing spend here on out? Is that generally what you want it to be?
  • Frederick A. Henderson:
    About $8.5 billion to $9 billion, and certainly in the next several years that is what we are looking at.
  • David Welch:
    Does that include all of your R&D spend as well? There used to be a memo in the 10-K that had some additional spend on top of that, I believe.
  • Frederick A. Henderson:
    You will see tomorrow when we file our 10-K, we will outline out -- we call it R&D but think of it as engineering expense and no, that does not include that. This only includes capital spending that we actually capitalize, as opposed to engineering spend which we expense.
  • David Welch:
    Do you have that number on R&D and engineering spend?
  • Frederick A. Henderson:
    You will have it tomorrow.
  • David Welch:
    Yes, but I want it today.
  • Frederick A. Henderson:
    You are going to have to wait.
  • David Welch:
    Looking at the results for Asia Pacific and China, all the top-line numbers look good but the profits were, particularly in China, pretty flat. What is going on there?
  • Frederick A. Henderson:
    Profit was flat in China but flat at a very healthy level is the way I would put it. We have had a fair amount of pricing pressure and we have had some mix changes in China. For example, our [inaudible] business, where we have a 31% interest in that business, has been growing like crazy but it tends to have lower profit margins. I would say on balance, we are overall pleased with not only the growth we have had in China but the level of profitability and cash we have generated there.
  • David Welch:
    One of your drivers was mix improvement in North America and you had some pretty significant vehicle launches. Do you have enough other vehicle launches to sustain that? Your early sales tend to be loaded up with all kinds of options, or is that going to start trailing off as the year goes on?
  • Frederick A. Henderson:
    It is true that your early adopters of your products, our mix has been very rich, whether it was our full-sized used, whether it was our full-sized pick-ups, our Acadias, for example. Then, over time you see the broader array of customers come into the product -- by the way, we are very happy with that because we basically get more product out in the market. We generate more volume on it. I would say we have benefited from that so far. As I look at '07, we have a new CTF coming. Later in the year we have a new Malibu coming. We have heavy duty pick-ups that are basically being launched as we speak. We have a new Enclave. The cupboards are not bare and we are frankly in the first full year of acceleration of our pick-ups.
  • David Welch:
    There has been some talk that this big overage you now have in the pension fund, you could possibly monetize some of that and some would probably come from whatever Delphi pays you as a result of that deal. Are there other ways that you can monetize at least part of that, or is that pretty much untouchable money?
  • Frederick A. Henderson:
    We talked about, you already touched on Delphi. I would say the pension funds are there. They are protected by ERISA and they stay there. One of the things that we wanted to do is frankly reduce risk and reduce volatility, which is part of the reason why we actually changed the asset allocation, because it would provide greater -- I will call it lower risk and greater certainty over time of not having to make contributions and preserving the over-funded status of the plan. Beyond that, I am just not in a position to be able to talk about it today. There are a lot of things that have to happen. There are provisions in the code which allow companies to use some parts of their over-funded pension plan but we are not at that level today.
  • David Welch:
    Is it something you are considering though?
  • Frederick A. Henderson:
    We are not close to that level today, so no. I think what we are trying to deal with today is to make sure we preserve the funded status that we have, make sure the funds are invested wisely and do it that way, and it will be a nice problem to deal with if we get out several years from now.
  • David Welch:
    Lastly, on the structural cost cuts, you are going to give it another $2.2 billion it looks like versus what you did for last year. You said something like $3 billion of the $6.8 billion were cash, so there has to be more cash help coming from structural cost reductions, but you still predict that you will be negative cash flow this year. What is the issue there?
  • Frederick A. Henderson:
    We burned $3.8 billion of cash in '06 calendar year and we cut it in half from the burn roughly in '05, but we still have a fair ways ahead of us to get to break-even, so yes, we do benefit from further cash savings but it is about generating cash not only in terms of structural costs but also in terms of contribution margin. Some portion of that is sales. Some portion of that, as I talked about in January, for example, is over time getting back to a more normal performance from a material cost perspective, which could include, for example, if we bring -- assuming we bring the Delphi matter to resolution, starting to take down some of our above-market prices on some of our components.
  • Operator:
    Our next question comes from the line of John Stoll from Dow Jones. Please proceed.
  • John Stoll:
    Can you give me clarity to your attrition expectations for 2007 beyond what has already been accomplished? This special attrition program, are you able to forecast some kind of curve in 2007 beyond that?
  • Frederick A. Henderson:
    We do expect our attrition to be below normal in ’07, for certain. We knew that. When you look at the level of people who took the attrition plan, we were surprised that over 34,000 people took it. So we do expect to be below trend. I actually think as I looked out, I do not remember the exact curves but by ’08, particularly by ’09, we start to get back to more normal attrition levels. But today I do not really have a forecast I can give you.
  • John Stoll:
    So it would be below what the typical trend, say when we were going into 2006?
  • Frederick A. Henderson:
    Exactly.
  • John Stoll:
    In the deal that was struck with the UAW, both GM and Ford seem to be somewhat --
  • Frederick A. Henderson:
    John, do you want to speak up? It is tough to hear you?
  • John Stoll:
    In the deal with Ford and GM and the UAW that was struck with healthcare in 2005, it seems to be somewhat restrictive in further changes you can make to retiree benefits in healthcare until 2011. Is that something that is going to impact how much of changes you will see in UAW talks later this year?
  • Frederick A. Henderson:
    Again, I am not going to get into what our bargaining objectives are. What you are referring to is the class settlement protects the retirees through 2011 and we certainly fully intend to respect that.
  • John Stoll:
    With that in mind, is it safe to assume that there are certain things you cannot do in this round of bargaining that maybe a lot of people are assuming you can do, such as large-scale changes to healthcare on the retiree level?
  • Frederick A. Henderson:
    I know what you would like to talk about but I am just not going to talk about what our bargaining objectives might be.
  • John Stoll:
    Thank you. When you talk about mix improvement, was that year-over-year expectations for mix improvement again this year or somewhat where you were in 2006? In other words, will we see another improvement on a year-over-year basis in 2007 in North America?
  • Frederick A. Henderson:
    We expect to see continued mix improvements year over year ’07 versus ’06 in North America.
  • John Stoll:
    Thank you very much.
  • Operator:
    Our next question comes from the line of Joseph Szczesny from Oakland Press. Please proceed.
  • Joseph Szczesny:
    When did you make the decision to change the allocations in the pension fund, and how did that discussion evolve?
  • Frederick A. Henderson:
    Later last year, and it involves the investment funds committee of the Board of Directors needs to look at and does look at recommendations from management and the pension investment group as to how appropriately manage the fund. That is how the governance works.
  • Joseph Szczesny:
    Where did that recommendation originate then?
  • Frederick A. Henderson:
    Frankly, it would have originated from our investment group, combined with myself and our Treasurer, and it was really about if you think about -- the way I think about, in a FAS-158 world where you have pensions and healthcare on your balance sheet at their present value, you need to be managing the funded status of the plan, consistent with the best interests of the participants. Clearly you need to look after the best interest of the participants in the plan, but you increasingly focus your attention on how do you manage the funded status of, in this case, the pension plan. With the pension plan significantly over-funded, the issue is you want to stay that way because as you find, as we did find in ’02 and ’03, you can actually blow a hole in your pension plan real fast if you have pretty significant changes or dislocations in that case, equity markets. So this was about reducing risk. You never get rid of the risk but it was about how do you manage the risk of your funded status going forward.
  • Joseph Szczesny:
    So you are not going to invest in ResCap securities then, is that it?
  • Frederick A. Henderson:
    There is over hundreds of billions of dollars in that pension plan. I am not going to comment on what they are investing in or not investing in.
  • Joseph Szczesny:
    All right. Thank you.
  • Operator:
    Mr. Arickx, there are no further questions at this time. Please continue with your presentation or closing remarks.
  • Frederick A. Henderson:
    Actually, I am going to make a few final remarks. I want to thank everybody for your patience. Two hours, we had a lot of material to cover. However, this was a primer for tomorrow. Tomorrow we plan to file our 10-K. In there, you will have well over 200 pages of information that will be at your disposal. I encourage you to read it. We will also talk about not only the impact of the restatements in more detail, we outline in there, for example, our management assessment of internal controls and material weaknesses. They are all outlined in there, and so I encourage you to read that and we expect to file it. Again, we very much appreciate everybody’s patience as we had to extend, for the second year in a row, the filing of our K. It is not something we wanted to do but between wrestling through restatements for FAS-133, handling tax issues, getting GMAC closed, having two closing balance sheets, it was a pretty rugged close. I appreciate everybody’s patience with us. We will file that tomorrow and thanks very much.
  • Operator:
    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. Have a great day, everybody.