GM Financial. GM Financial presentation delivered at the J.P. Morgan Auto Conference on Thursday, August 09, 2018 at 8:00 AM

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1 GM Financial GM Financial presentation delivered at the J.P. Morgan Auto Conference on Thursday, August 09, 2018 at 8:00 AM Dan: Good morning. It's great to be here with everybody. I want to point out two other people from GMF here in the front row. Susan Sheffield, who is our CFO. She's been with GMF for about 17 years. Pretty new to her role, but before that, she was treasurer, so she's been involved in a lot of our funding activities for many, many years. Then Steve Jones, who's head of our IR efforts. With that, obviously GM Financial is General Motors' captive auto finance company. We have earning assets of $90.4 billion at June 30, Our operations cover about 90 percent of GM's global footprint. If you go off to the right and you look at the map, we are throughout North America. We have operations in South America. We have a joint venture that we operate in China. Then soon we'll be re-entering the Australian market where GM has a pretty good size presence. We of course sold our European operation a bit back when GM sold their Opel and Vauxhall brands so we're no longer in Europe. We offer auto finance products to about 14,000 dealers worldwide, have about 6 million retail customers. That includes China in each case even though that's a joint venture. We are a strategic business for GM and are well positioned for profitable growth and contribution to overall enterprise value. At the bottom of the page, our overall objective at GMF is to help GM sell cars globally through our product offerings but at the same time make a fair return for a finance company. We've evolved significantly since GM acquired the AmeriCredit organization back in October The strategy has evolved as well. Back in 2010, the acquisition thesis was that GMF, the old AmeriCredit, would provide their subprime expertise to help GM penetrate that demographic from a sales standpoint further. We also had two other mandates, number one to put up a leasing platform. At that point of time, Ally did all of GM's leasing. GM felt that they were not competitive since they were, they weren't a captive really, but they did all the business. They wanted GMF to put out a competitive product

2 just to keep Ally honest at the time. The third thing they wanted us to do is to establish a dealer finance, inventory and real estate finance business, floor plan business. Again, Ally had about 80 percent of GM dealer share at the time. That was a concentration GM was uncomfortable with, because if Ally ever woke up and said they didn't want to do 1,000 dealers, there'd be no place for those dealers to go. We were a safety net, if you will. Business evolved further in 2013 when we purchased all of the old GMAC operations outside the US and Canada from Ally. That's what put us in South America, the China joint venture, put us in Europe at the time. It really established the global footprint for us. 2014, we began to strategize with General Motors in terms of the benefit of having a true captive at the time. GM may be outside, Chrysler was the only major OEM that didn't have a full captive. We went through the benefits, the risks, and decided to really build out the GM platform in North America. It was already built out as a full captive outside North America, but we decided to really do as much of GM's business from a loan, lease, and floor plan standpoint as we could. We launched that effort in 2014, started doing much more prime lending, near prime lending, expanded our wholesale operation. In early 2015, we became the exclusive lease provider for GM, so we do all the leasing now. Starting in 2016, we began to do all the [inaudible] supported loans. That's exclusive with GMF now. Really, now, the platform is mature. We've made all the investments. It's now a matter of driving home what we called a captive value proposition. That has a number of components to it. The captive value proposition includes, number one, helping to drive vehicle sales. We do that in a number of ways by offering a competitive, comprehensive suite of products globally to the GM dealer base. We support GM's Go-to-Market strategies. We really get together and decide what the best incentive programs are for any given month or period. Some of which might be GMF-centric, some of which might not be. We're a big part of the Go-to-Market strategy. Finally, we provide a lot of programs to help sales. We generate a lot of

3 leads, as the captive. For instance, if we have a customer getting to the end of their lease, we take a lot of steps to make sure that they get back in the GM family. At the end of the loan or when a customer gets in equity on a loan, we send the customer notices that they have equity. They can go and get a new car and trade in their existing one. We have an online credit application on all the GM websites -- our websites as well as dealer sites -- to generate leads. That's a big part of what we do as a captive. A second component of the value proposition is enhancing customer experience and loyalty. We integrate pretty heavily with GM's customer-relationship management efforts there. We have a very customer service-centric approach at GMF with making sure we have first-call resolution, making sure the customer gets their questions answered. All with the idea of getting repeat business and maintaining loyalty within GM. I'm pretty proud to say that we have the highest loyalty rates of any captive out there. In other words, if a customer finances through GMF, their propensity to buy a GM product is higher than any other captive finance company. In fact, on lease, 81 percent of our lease customers buy a GM product again at the end of the lease. On loan it's 68 percent, a big, big part of our value proposition. Third part is supporting GM and GM dealers across economic cycles. We've been in a great economy obviously for the last nine years or so. Last downturn, products like leasing and subprime became very difficult to finance. GM, in particular without a captive, really lost a lot of business in those areas because their lease penetration went down to low single digits. Their subprime penetration was cut about in half. We're building a strong balance sheet and liquidity base at GMF so that, if we do see another downturn, we can be there to finance those tough areas like leasing and subprime. Then finally, contributing to enterprise profitability obviously is important. We believe at scale we'll be making anywhere from $1.5 billion to $2 billion depending on where we are in the cycle. This year we're having a terrific year, already on pace to be somewhere in that range. To that point, upper left-hand side, we've made $979 million in the first half of this year. That's way up from where we were last year. The big delta there is number one, asset growth.

4 We've had pretty good growth in our asset base. I'll talk about that in a bit. Number two, credit, has been very benign, probably even a little bit better this year than last year. Then number three, our residual realizations on off-lease have been much better this year than they were last year, which has really been a boost to earnings. On the upper right-hand side, you can see a metric for credit, which it would be loan charge-offs. 1.9 percent for the first half of 2018, very similar to the first half of Bottom left is origination volumes, grown quite well. Again, we're rolling out prime product, getting better penetration there. Then finally, we're getting the benefit of scale. On the bottom right, our operating expense ratio, which is all of our OPEX as a percentage of average earning assets, is down to 1.7 percent. We think with scale we can drive that down into, say, the low one-percent range. Balance sheet, you can see on the upper left the growth in earning assets, which has been part of the fuel for earnings, $90.4 billion now. We have $23.1 billion of liquidity. We built that up. Again, that's the rainy-day fund for when we do get in a downturn. That's the funds we can use to continue to stand by GM and GM dealers. Our tangible networth is just under $10 billion now. Our leverage ratio is a very modest 9.1 times. We receive a lot of financial support from GM. Not necessarily monetarily or loan guarantees, but we do have a support agreement in place. That agreement has a five-year term, which renews every April for another five-year period. Couple key provisions that are required is 100 percent ownership of GM by GMF. It solidifies our liquidity position by providing us a $1-billion junior subordinated credit line and gives us access to $2 billion of their 364-day revolver. Then finally it establishes leverage limits based on earning asset levels. If our leverage gets above a certain threshold as set forth in the support agreement, then GM would be obligated to put cash in our platform. Currently with $90.4 billion of earning assets, the applicable leverage ratio is 11.5 times or less. At 9.14 we're fully within the threshold. When our earning assets cross $100 billion, which should happen in a year or so, the leverage ratio will be as high as it will be, and that's 12. Again, we're well within that limit now. We, along with GM, are committed to investment-grade ratings. In fact, GM is operating their business to a Single A credit grade.

5 We're currently rated Triple B with all the agencies except for Moody's where we're Baa3. Quick word on our funding platform, it's diverse. Right now, 54 percent of our funding is unsecured. 46 percent is secured. The secured facilities consist of bank lines, of which we have $25.9 billion of committed facilities provided by 29 banks. We've also got $2.2 billion drawn on uncommitted facilities. We use a lot of securitization ABS in our business, different platforms depending on geography and product type. We have issued $6.8 billion in public securitization this year, on our way somewhere to between a $13- and $15-billion run rate. We also do private amortizers to augment the public issuance. On the unsecured side, the main product there is our global senior notes issuances. We have issuances in the US, Canada, Latin America. We also issue in Euros bringing that money back to the US for US purposes. We've done about $7 billion of unsecured debt so far this year. Issuance is about done for this year. We'll probably do a little bit more in the second half. It was really front-end loaded. Much less issuance we expect in the second half of the year. Then finally on the unsecured side, we have recently launched a commercial paper program of different, very short maturities. We had $600-and-some million outstanding at the end of June. It's over a billion now. We'd like to ramp that up to a couple billion as really part of our funding mix. Getting into operations a little bit more now, one of the things we look at as a key indicator of our progress is what percent of GM sales do we finance. A mature captive, a mainline captive, would typically do somewhere in the 60-percent range. A luxury captive, like a BMW for instance, might do as high as 70 or 80 percent. You can see for the June period we were at 45. That's really how we're evolving. We believe we can get that penetration up to captive levels over the next few years by working with GM by adding to our dealer base on the floorplan side. That's really where a lot of the growth and maturity is going to come at GMF. You can see in Latin America the penetration has bounced anywhere from 50-some percent to 66 percent over these periods. They are a mature captive in Latin America simply because they've operated as GM's captive for many, many decades. That number bounces around mainly based on incentive programs geared to GMF or not geared to GMF.

6 On the floorplan or wholesale side, again here our penetration is just 22.9 percent. It's increased steadily in the US over the last few years. We started from zero. A captive that's been around a long time would have more like 80-percent type penetration. Again, this is an area of growth and maturity for us. Again, by way of example, in Latin America the penetration is in the upper 90s. The retail loan book has reached $35.7 billion now at June 30th. $30.6 billion was in the US or North America, a very small amount in Canada. We originated $6 billion of loans last quarter, but the bar pretty much segments the type of loan. $4.1 billion was a loan financing a new GM vehicle. The $600 million, the light blue, was financing a used vehicle. The $500 million was our AmeriCredit brand. We still have the old AmeriCredit brand where we finance a used car at a Toyota dealer, for instance, mostly subprime. Then finally the other piece of the bar is Latin America. All the growth has come financing new GM vehicles mainly on the prime side. If you look at the metrics below the percentages, we did 34 percent of all GM's prime new-car business in the June quarter. That needs to be up over 50. We did 38 percent of the subprime. Our weighted average FICO score has really gone up as our prime penetration has increased. It's now 728 for originations in the June quarter. Credit performance? I won't spend much time here, benign. Whether you look at delinquencies or losses, very, very stable. Again, if not better this year than last year even. Losses 1.7 percent. The good-news story here as well is that, when we do have a repossession and sell the vehicle at auction, our recoveries have been really quite strong -- over 50 percent for this entire five-quarter period. That's been an element of strength in our credit metrics. We do expect that over the second half of 2018 and into 2019 used-car values will weaken a bit. We've seen much more stability there than we expected. I'll talk about that more when we do leasing. Our lease book now is $44.1 billion. About $40 billion or so of that is in the US. The rest is in Canada, very small amount internationally. We're the exclusive lease provider for GM. The origination levels will go up or down based on how much leasing penetration GM desires. Back about a year ago, GM's leasing penetration got over 25 percent. Probably 26, 27, 28 percent. Now it's back below 25. You see the originations of $6.2 billion in the June quarter were less than originations a year ago when they were $6.7.

7 The lease book is very prime. It has a very high FICO score overall. Leasing is a prime product, and thus the credit performance is exceptional. 99 percent of our leases are current and very low charge off-rates. The risk on leasing is clearly on residuals. We hold the residual risk on that entire $44 billion book. At the end of the lease, the customer either takes the vehicle at the contract residual or they return it to us, and we have to auction it off and realize proceeds. Going into 2017, we saw a very weak and concerned used-car market in the first half of In fact, prices were down a good six, seven percent in the first half. Then they stabilized. Then the hurricane occurred, which drew a lot of supply to the market in a time where the market is seasonally weaker. That was a big benefit to used-car values. Since then, we've seen what I would call stability in used-car values. We went into 2018, again, expecting a decline in values. We thought the hurricane effect would wear off. It hasn't. We had a very strong first half. Seasonally, the second half is weaker. July was exceptional again. You can see on this chart, it represents first of all, the number of vehicles that we have to sell when they return to us off a lease. That number is going up because, as you recall, we became the exclusive lease provider for GM in Most leases are three years. We're about at the point now where just about every GM lease vehicle is returned to us as opposed to Ally or US Bank, which were previous providers. The volume is going up. It will peak here in the next 12 months or so before it stabilizes and maybe goes down a bit. The lines on the page, the dotted line represent the percent of original contract residual that we realize at lease end. You can see that was flattish, down a bit into 2017, into We had an exceptional first June quarter where that number got up to 105 percent. That really drove to a great extend our beat in first half income, that income. Commercial lending. This is our floor plan business. Steady growth there. We've got a little over $10 billion outstanding. In that business, of which $9.4 billion was in the US and Canada. We have a little over a thousand dealers now in the US, which is an increase of 23 percent, year over

8 year. Penetration is today a little over 23 percent. We think we can get that over the next three years, say by the end of 2020, to the mid-30s. At that time, if we get to the mid-30s by the end of 2020, we will have the highest share of GM's floor planning of anybody. We'd surpass Ally by then, which is important. A few quick words about our China joint venture. We have a 35 percent stake in SAIC-GMAC, which is GM and SGM's finance operation in China. SAIC FC has a 45 percent interest. The manufacturing joint venture has the other 20 percent. Basically, with our 35 and GM's half of the manufacturing venture, we have a 45 percent stake in this, GM and GMF have a 45 percent stake in this venture. It's a big, important market for GM. GM has either the one or two share in China at a little over 14 percent. The industry is growing at roughly a five percent rate. The joint venture has earning assets of about $15 billion at June 30th, up $3.4 billion year-over-year. The venture is growing, not only because of the growth in the industry. The Chinese consumer still pay...about 60 percent of the cars are bought for cash. Only 40 percent are financed. If you look at the US, 80 percent are financed. 20 percent are cash. We believe that 40 percent financed number will continue to go up, which it has. Along with the industry growth, this will be a really good earnings tool for GMF. On the upper left, the penetration of GM sales in this joint venture is 36 percent. Lower than that 45 I talked about in the US, but again, only 40 percent financed. 36 out of 40 means we finance about 90 percent of all the car sales that are financed. Upper right, originations are a little over $5 billion. You can see the growth is really good, yearover-year. We earned about $100 million out of that venture in the first half of this year. The other stat here is pretty amazing that the charge-offs in the first half of the year were just nine basis points in the joint venture. Again, globally, we were 1.7 percent for GMF creditors is absolutely pristine in China. With that, I'll wrap it up. GM has a priority to grow GM Financial and expand our captive

9 presence, especially in the US. Our operations cover 90 percent of GM's global footprint. We have incremental growth opportunities in China. US penetration levels are below other captives. We've got some geographic opportunities. I mentioned we're going into Australia. We're also looking at some other markets that we're not in now. We've got a strong balance sheet with investment grade ratings, committed bank lines, well-established ABS, and senior note programs. We're operating the business consistent with a single A criteria. We were at $1.2 billion last year. Almost a billion so far this year. Goal would be to be anywhere from $1.5 billion to $2 billion, depending on economic cycles for a full year. The other point I want to make here is dividend payments. Thus far, we have not paid dividends to GM, primarily because we've been in a growth mode. We've had to retain all the capital that we generated to support that growth, maintain leverage levels at a reasonable basis. We believe that when we get to steady state, which will probably be anywhere from three to five years, most of our earnings will be paid out as a dividend. We may begin to pay a fraction of our earnings even before that. Dividend strategy is something we talk with GM all the time. With that, gentlemen, I think we've got time for Q&A. Interviewer: Thanks, Dan. I have a few questions of my own. Then we'll turn it over to the audience. I thought the slide that you were running through on China was fairly interesting, both in terms of the level of cash buyers in that market and then also the low percentage of charge-offs. What drives that cash buyer percentage down as that market matures? Dan: That's largely a generational thing where the older generations in China hadn't been using credit, weren't used to using credit. As the younger demographic buys cars, they have much more comfort level with using credit. Generationally, as more and more young buyers enter the market, we believe that cash number will converge with the US number. The US number is pretty typical percent financed, 20 percent cash -- compared to other markets around the world. The other interesting thing about the lending market in China at this point is the loans average

10 about 27 months. In the US, it's approaching 70 months. The down-payment is 40 percent. In the US, it's 10 perhaps. That structure of the loan drives a lot of the good credit performances well because it's very short, pays off quickly, and the customer has a huge stake in the vehicle. Credit will be used more and more in China. I would expect our charge-offs at some point to go up as well because that's just virtually none. Interviewer: Thanks. Another point I wanted to drill down on is just on used vehicle prices. You talked about this as well. I think last year, around this time, we were in a very different place in terms of used vehicle prices. A lot of people had a more negative outlook on that front. Then the hurricanes hit and the outlook improved. The hurricanes are long gone now and used vehicle prices have still been trending better than a lot of folks had been expected. I know your outlook for the back half of the year is for some seasonality and weakness to play in. What, in your view, outside of the hurricane, has been driving the better than expected used vehicle and residual performance? Dan: The strength in the first half of the year surprised us a bit. When you drill down, there's some really good fundamental support now in the used-car market. First of all, supply comes from not only off-lease, but from new car trade-ins, fleet activity, repossessions. The only component to that that's really increasing now is off-lease. That's even projected to peak about mid Repossessions are down because credit's good. Fleet activity is pretty stable. Trade-ins with a stable SAAR are pretty flat as well. The supply situation isn't as exacerbated as what everybody thought it would be. There's a lot of other underlying trends. New car average transaction prices have escalated pretty steadily over the last few years with better content. That tends to bring used-car values up behind it. Another factor is in the last few years, the percentage of vehicles sold that are trucks, crossovers, and SUVs has really increased at the expense of sedans. That hurt used-car values for a few years because the used-car market still had more sedans. That's maturing now so that the mix of used cars is beginning to look more like the mix of what consumers want. That's made a difference. We can't ignore the fact that we're in an environment

11 of full employment, low interest rates. The used car is purchased more by a near-prime or sub-prime consumer. Not in every case, but that would skew that way because it's affordable. With full employment, decent wage gains, and low interest rates used cars are pretty affordable. It's a pretty good, attractive option for a lot of people right now. Things are probably better than what we thought they would be going into the year. We're optimistic that second half, there will be some seasonality. Then, we get into '19 and we hit that peak in off-lease returns. If we can get through that point, I think we've escaped much of the risk. Interviewer: Do we have any questions from the audience? Dan: Back there. Audience Member: I'm curious the China JV. How does that finance its loan book? I understand the US and ABS structures. Does it work differently in LATAM and China? How do they do that? Dan: China is all funded within China. The construct is very similar. They have bank lines that they draw in. They have a pretty active securitization program in China. The joint venture is the longest and largest issuer of ABS in China. Then, they do unsecured debt, much like we do in the US. It's all raised in Chinese funds and funded locally but much the same construct here in the US. Pretty much the same in Latin America, it's a combination of bank lines and various forms of unsecured debt. The Latin American markets really aren't mature to use ABS at this point. We did issue in Europe when we had a European operation. It's mainly bank lines and unsecured in Latin America. Everywhere we fund, we pretty much fund locally. We fund in pesos, or yuan, and whatever other currency that we're lending in. We don't take much currency risk. Interviewer: The follow-on to that, because it seems like you mentioned the China credit is so strong, is it more competitive? Are the net margins you're making in China relative to US smaller, larger?

12 Dan: The margins we're making in China are a bit larger than they are in the US. They're converging as the market matures and as consumers get more used to credit. The margins will converge with what we see elsewhere. For now, they're a bit outsized. Interviewer: A quick follow-up on the leasing trends, what is the trend for the return rate in leases and if you can delineate that between cars and trucks? [inaudible] how often you would face the used car market. If that rate is going up, the return rate, then obviously the risk is increasing. Then a follow-up question to the China issue, 50 percent down payment on a car is very typical Chinese major asset financing type of terms. Same thing with mortgages, typically 50 percent down. If GM Financial in China joint venture decides to go and relax the terms, would the Chinese partner in the SAIC be open to that do you think? Is there a way to drive the penetration in China through maybe relaxing the terms, 30 percent down as opposed to 50 or 45? Dan: I'll answer that question first. Then go back to the leasing. The down payment is regulatory driven. The Chinese government requires a certain down payment for a new and a used car. That's the driving factor there. I would expect over time, that to become less just because with credit more available and consumers using credit, that might an outlet to allow consumers to buy cars more affordably. For now, it's mandated. On the leasing front, return rates have gone up over the last few years. We think they'll settle in the let's say 80 percent range. Some of that's a function obviously of used car values today versus at the time of the contract. That's where we think it'll settle. The return rate for trucks is much, much lower than sedans. That's been a dynamic helping us because as more of the lease returns have been trucks and SUVs, that return rate will be more favorable to us. Interviewer: I think we're out of time, folks. Wanted to thank Dan, Susan, and Steve for their time today.

13 [applause] Dan: Thank you. Webcasting and transcription services provided through MAP Digital, Inc.