MUSTAFA MOHATAREM Chief Economist, General Motors

MUSTAFA MOHATAREM Chief Economist, General Motors

INTRODUCTION The U.S. economy continues to grow at a gradual but also erratic pace The current recovery is one of the slowest in the post-wwii U.S. history. Consequently, we have not yet seen the excesses and imbalances built up as much as we witnessed around the peak in previous cycles. Thus, I expect the U.S. economy to continue growing at a modest pace Labor market is improving. Household balance sheets are strong. Gasoline prices dropped 28% in 2015 from 2014, and averaged $2.10 through July in 2016. Interest rates are at historical lows. These developments have created a perfect environment for the auto industry, leading to record high vehicle sales U.S. auto sales reached a record high of 17.9M, including medium and heavy duty trucks, in 2015. We expect 2016 will be another record year In the longer term, vehicle demand will remain healthy as population grows and vehicle ownership rate recovers

THIS IS A VERY SLOW ECONOMIC RECOVERY Real GDP (Billions, $2009) 20,000 Current Recovery 1975 Recovery 1983 Recovery 1991 Recovery 19,000 18,000 17,000 16,000 15,000 14,000 13,000 2008 2009 2010 2011 2012 2013 2014 2015 Source: Bureau of Economic Analysis, GM calculations

LABOR MARKET RECOVERY HAS BEEN ESPECIALLY WEAK. IT TOOK MORE THAN 5 YEARS TO RETURN TO THE EMPLOYMENT LEVEL OF 2007 600 Employment Gain Unemployment Rate U-6 Unemployment Rate 18 400 16 Employment Gain (Thousand) 200 0-200 -400-600 14 12 10 8 6 4 Unemployment Rate (%) -800 2-1000 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 0 Source: Bureau of Labor Statistics

FISCAL POLICY HAS BEEN A SIGNIFICANT DRAG IN THIS RECOVERY, WHILE MONETARY POLICY WAS SUPPORTIVE Government Contribution to Real GDP Growth Effective Fed Funds Rate 2.5% 25% 2.0% 20% 1.5% 1.0% 15% 0.5% 10% 0.0% -0.5% 5% -1.0% 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 0% 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 Source: Bureau of Economic Analysis, Federal Reserve Board

HOUSING RECOVERY IS MISSING IN THIS CYCLE, PARTIALLY BECAUSE OF THE BUBBLE IN THE SECTOR IN THE EARLY 2000 S 7.0% 6.5% Residential Investment % GDP 2,500 Housing Starts (SAAR, Thousand Units) 12-Month Moving Average 6.0% 5.5% 5.0% 4.5% 4.0% 3.5% 3.0% 2,000 1,500 1,000 500 2.5% 2.0% 1960 1970 1980 1990 2000 2010 0 2000 2002 2004 2006 2008 2010 2012 2014 2016 Source: Bureau of Economic Analysis

AUTO SALES HAVE BEEN A BRIGHT SPOT IN THIS RECOVERY AND TRACKED PREVIOUS RECOVERIES Vehicle Sales 20 Current Recovery 1975 Recovery 1983 Recovery 1991 Recovery 18 Units in Millions 16 14 12 10 8 2008 2009 2010 2011 2012 2013 2014 2015 2016 Source: Bureau of Economic Analysis, GM calculations

SUVs AND CUVs HAVE OUTPERFORMED Market Share 80% Car Crossover/SUV Truck 70% 60% 50% 40% 30% 20% 10% 0% 1975 1978 1981 1984 1987 1990 1993 1996 1999 2002 2005 2008 2011 2014 Source: GM Sales Reporting

HELPED BY THE LOWER OIL PRICES West Texas Intermediate (USD Per Barrel) Annual Data 100 100 80 80 60 61.65 60 40 20 37.38 48.68 2016 CYTD 40 20 0 0 1946 1951 1956 1961 1966 1971 1976 1981 1986 1991 1996 2001 2006 2011 2016 YTD Source: Energy Information Administration. Note: Shading Indicates Recession, Annual Data excluding 2016 which is calendar year to date.

OIL PRICES ARE LIKELY TO REMAIN LOWER FOR LONGER 250 WTI (Real, 1985 Peak = 100) 200 150 236 Months Shale, Iran 100 50 Nov. 1985 North Sea June 2005 0 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012 2015 Source: Energy Information Administration

THE IMBALANCES THAT USUALLY BUILD UP AT THIS STAGE OF RECOVERY ARE NOT VISIBLE HOUSEHOLD BALANCE SHEETS REMAIN HEALTHY Household Debt as % of DPI Household Net Worth as % of DPI 140 700 Household Debt % DPI 120 100 80 60 650 600 550 500 450 Household Net Worth % DPI 40 1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012 2015 400 Source: Federal Reserve Board

INFLATION REMAINS LOW CPI Core CPI 16% 14% 12% 10% 8% 6% 4% 2% 0% -2% -4% 1974 1977 1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 2013 2016 Source: Bureau of Labor Statistics Inflation (Percent Change YoY)

U.S. DOLLAR HAS STRENGTHENED SINCE THE FED ENDED QUANTITATIVE EASING 140 120 100 80 Nominal Broad Trade-Weighted Exchange Value of the USD (Jan-97=100) 60 40 The Fed Ended QE 20 0 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012 2015 Source: Federal Reserve Board

WEAK DEVELOPMENT OVERSEAS DOESN T HELP EITHER LARGE EMERGING ECONOMIES HAVE SLOWED DOWN OR ARE IN RECESSION 12% BRIC Real GDP Growth Y/Y 10% 8% 6% 4% 2% 0% 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 Source: National Bureau of Statistics

EUROPE IS RECOVERING BUT AT A VERY GRADUAL PACE 6% EU28 Real GDP Growth (Y/Y) 4% 2% 0% -2% -4% -6% 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 Source: Statistical Office of the European Communities

BREXIT ADDED NEW RISKS AND UNCERTAINTY TO THE UK AND EUROPEAN OUTLOOK 1.50 USD/GBP 1.45 1.40 1.35 1.30 1.25 Jan 2016 Feb 2016 Mar 2016 Apr 2016 May 2016 Jun 2016 Jul 2016 Source: Wall Street Journal

PERFORMANCE OF GLOBAL VEHICLE SALES CLOSELY TRACKING ECONOMIC FUNDAMENTALS 30 China, Western Europe, U.S. Vehicle Sales 2000-2015 Western Europe North America China Millions 20 10 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Millions 4.0 3.0 2.0 1.0 BRIC (Brazil, Russia, India, China) Vehicle Sales 2000-2015 Brazil India Russia China (2nd axes) United States (2nd axes) 30 20 10 Millions 0.0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Source: GM Sales Reporting 0

AUTO INDUSTRY IS UNDERGOING SIGNIFICANT CHANGES, FOR BETTER 3,200 3,150 3,100 3,050 3,000 Miles Traveled (Billion Miles, 12-Month Rolling Sum) 45.0% 40.0% 35.0% 30.0% Share of Vehicle Sales by Age Group 2010 2015 2,950 2,900 2,850 2,800 2,750 2,700 2001 2004 2007 2010 2013 2016 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% Under 35 35-49 50-69 >=70 Source: Federal Highway Administration Source: J.D.Power/PIN, General Motors

NEW AND INNOVATIVE MOBILITY OPPORTUNITIES, SUCH AS RIDESHARING AND AUTONOMOUS VEHICLES, ARE CHANGING THE CENTURY-OLD INDUSTRY

SUMMARY The U.S. is an island of stability in a turbulent world. We expect the U.S. economy will continue to grow at a modest pace with auto sales remaining at record high in 2016 Low oil and gasoline prices will continue to support sales of larger vehicles, especially crossovers Long-term demand for vehicles remains very promising. We don t see that this time is different Contrary to popular belief that young people will not buy vehicles, they are coming to the market as a major group of buyers New mobility opportunities such as ridesharing and autonomous vehicles will increase demand for trips by providing mobility to those who are restricted otherwise and, therefore, presents a new opportunity to the industry

BRANDS THAT INSPIRE PASSION AND LOYALTY