GM (GM) shares are moving sharply higher after reporting better-than-expected fourth-quarter results.

General Motors CFO Paul Jacobson joins Yahoo Finance’s Executive Editor Brian Sozzi to discuss the results, EV adoption, and how the company's growth plans.

Jacobson sees the upcoming year as “the year of execution,” with a focus on developing a sustainable EV platform that ideality would lead to profitability in 2025. Jacobson acknowledges the trepidation surrounding EV adoption, but suggests that EV adoption is "not going to be a straight line over the next decade."

Jacobson highlights “lessons” that the company has learned over the last year, including battling “execution challenges,” that he believes that the company is rectifying.

Regarding Cruise, GM's autonomous vehicle subsidiary, Jacobson notes the unit has faced challenges, but that it's still “a big growth opportunity.”

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Editor's note: This article was written by Eyek Ntekim

Video Transcript

BRIAN SOZZI: General Motors shares revving higher after execs fueled investor optimism around electric-vehicle profits. The auto maker also revealed plans to slash spending in its autonomous driving operation Cruise by nearly $1 billion.

General Motors CFO Paul Jacobson joins us with an inside look into all things GM. Paul, always nice to get some time with you on a busy earnings day. I have to start with that shoutout for variable profits in the EV business in the second half of this year. How do you-- how can you get there?

PAUL JACOBSON: So, Brian, first of all, thanks for-- thanks for having us today, and I want to start by thanking the entire GM team for what they did in 2023. It was another year of overcoming a lot of challenges, some of those unexpected going into the year. But the team has continued to execute financially and drive free cash flow for our shareholders.

So as we think about 2024, it really is a year of execution for us. We've got the roadmap. We talked about 200,000 to 300,000 EVs being produced this year. And as we've articulated at various conferences, scale is a big piece of our walk to EV profitability, and we're happy to be able to say that we've got confidence of getting to variable profit positive in the second half of the year on our journey getting to mid-single-digit margins by 2025.

BRIAN SOZZI: Paul, can you just unpack that a little bit more? What gives you that confidence? Because I think a lot of investors-- you know, I talked to one analyst this morning, and his words were this. He said I'd be shocked. His words, quote, shocked if you hit that guidance. So I there is still some skepticism out there on the Street.

PAUL JACOBSON: Well, sure, and I understand that. EVs have been a difficult trajectory for a lot of people, and we've certainly had our share of challenges that we've been able to work through. And I heard-- you know, if you listen to the call today with Mary's comments, we talked a lot about not only the accomplishments of last year but the lessons that we learned and how we're taking that into 2024.

So for us, we've been hard at work at developing an EV platform. It's not just about making an EV by putting batteries into a vehicle. It's about building that platform that is going to be sustainable for the future. So we've had to overcome a lot of scale costs as we have been ramping up production, and we're starting to see the fruits of that, of that effort and that investment that we made going forward.

So as we start to increase volume and we start to be able to execute better with the incredible slate of products that we have, we feel very good about our ability to recognize those scale benefits and start to begin climbing that ladder to hitting our profitability goals in '25.

BRIAN SOZZI: Why do you think consumers are balking a little more than they had been, let's say, in 2022 on buying an EV?

PAUL JACOBSON: Well, you know, I think we're still seeing growth in the market, and that's important. And I think one of the things I like to say in various conferences, if you ask people what EV adoption is going to look like, most of them will draw you a straight line. The one thing I'm pretty confident in is it's not going to be a straight line over the next decade as we go that, so we're going to have some periods of slower growth, some periods of rapid growth, as we've seen, and we've got to be nimble across the board.

So when you look at some of the challenges that have been out there with people continuing to feel range anxiety, lack of charging, some of the cold-weather performance that we've seen, we think that our built-for-purpose EVs and the platform that we've done are going to continue to show customers that there's a better option out there and one that is going to be able to meet their needs. So we're confident in our products going forward, but we're still going to have to be nimble and make sure that we're giving customers what they want.

BRIAN SOZZI: You mentioned it just now, Paul. The word was lessons or the words lessons learned. Mary mentioned that in her shareholder letter as well for earnings. What lessons did GM learn last year?

PAUL JACOBSON: Well, you know, we had a lot of scaling challenges, particularly with some of our module assembly, some of the software challenges that we've seen going forward. And, you know, I think what's been great is that the management team has pivoted. We've made some organizational and process changes to be able to respond to that and make sure that we're meeting customer needs faster and much more consistently than we've been able to do.

So a lot of that work went into 2023. I think there was some-- probably rightly, some criticism for some of the execution challenges we had last year. But we've learned from those lessons, and we feel good about our ability to execute in 2024.

BRIAN SOZZI: One thing I've heard from talking to sources, Paul, I keep getting this pushback when I'm talking about General Motors. Why not more hybrids? Is there a happy medium that you could find between making all these beautiful new EVs, still making internal-combustion engines, and somewhere hybrids play a role?

PAUL JACOBSON: Well, we still see EVs as the right long-term solution, and we've built a very good infrastructure in place to be able to ramp that up and meet our zero-emissions goals by 2035. You know, we have been pivoting, as we talked about today on the call, that we see a role for hybrids in that, not necessarily as a distraction but as a little bit of a stepping stone. So we're pursuing that, and there's more information to come. But I expect that you'll see some hybrids in some of our models in the coming years.

BRIAN SOZZI: Paul, I missed you last week. I spent some time with Mary at a Cadillac facility in Detroit. And, really, that really left an impression on me in terms of watching Cadillac's electric EVs being made by hand by workers. And I came away thinking, wow, Wall Street has no clue what this company is trying to do and how challenging it is to make EVs. I mean, do you-- when you talk to investors, do you think they understand what you're trying to do?

PAUL JACOBSON: Well, first of all, I'm sorry I missed you when you were here on your visit, but I'm glad you were able to see that and meet some of the team going forward. You know, I don't-- I don't think-- I don't think Wall Street's missing the complexity. I think, you know, Tesla has certainly set a very high bar for everybody, but that didn't happen overnight as well. This is a complex process, and we're doing it at the same time while we're executing really, really well on our ICE portfolio as well and driving, you know, record free cash flow levels, record levels of revenue growth, et cetera.

It's really impressive what the team is being able to do while executing both sides of this business, both through the transformation of EVs while still executing the baseline plans going forward. And I think that's one where I think investors are warming up. The performance that we've seen in the stock price and the number of inquiries we're getting since our accelerated share repurchase announcement in November and our reiterated commitment to make sure that shareholders share in the gains that we're making and the cash that we're generating I think brings tangible value into that story while we're completing this transition. So I think there's a lot of great things to come.

BRIAN SOZZI: There's really-- there's no hiding the challenges that the Cruise business has seen over the past six months, Paul, and the team is out this morning calling out $1 billion in cost cuts. That's a lot of cost out of a business that was once seen as, I think, a major growth mechanism for General Motors. How committed are you to Cruise?

PAUL JACOBSON: Well, we're still very committed, and we still see that as a big growth opportunity for us. But as we've articulated, the unfortunate incident and some of the challenges that we've had with the regulatory environment and the repair and the credibility we need to restore among the regulators and the public behind that technology is a work we care deeply about. And as we've looked at the plan and as we've looked at the strategy for rolling it out, we're going much narrower than what we had before.

So we had been investing a lot in a broad outreach of over 20 markets, and now we're going to slow that down to make sure that we're deliberate and we're driving credibility into the story. As a result, we were able to pare back expenses in different geographies and operational and some of the administrative support that we had built for that growth and be leaner in that.

We're still focused on the tech. We're still investing heavily in our engineering staff, and we're committed to do that. We're going to reassess that strategy and think about what's the right way to roll it out and how do we think about capital structure? in the weeks and months ahead, and there's more information to come later this year as we think about what the right approach to bring Cruise to the market is.

BRIAN SOZZI: Paul Jacobson, General Motors CFO, always great to get some time with you on earnings day. I know this is a very busy day for you and the team. We appreciate it.

PAUL JACOBSON: Thank you, Brian.