Q2 2023 General Motors Co Earnings Call

Speaker 2: Good morning and welcome to the General Motors Company second quarter 2023 earnings conference call. During the open remarks, all participants will be in a listen-only mode. After the opening remarks, we will conduct a question and answer session.

Speaker 2: We are asking analysts to limit their questions to a 1 and a brief follow-up. To ask a question, press star 1 on your telephone keypad. To withdraw your question, press star then 2. As a reminder, this conference call is being recorded Tuesday, July 25, 2023.

Speaker 2: I would now like to turn the conference over to Ashish Kohli, GM's Vice President of Investor Relations. Thanks for joining us.

Speaker 3: Thank you, Amanda, and good morning, everybody.

Speaker 3: We appreciate you joining us as we review GM's financial results for the second quarter of 2023.

Speaker 3: Our conference call materials were issued this morning and are available on GM's investor relations website. We are also broadcasting this call via webcast.

Speaker 3: Joining us today are Mary Barra, GM's Chair and CEO , Paul Jacobson, GM's Executive Vice President and CFO , and Kyle Boat, CEO of Cruze. Dan Burse, President and CEO of GM Financial, will also be joining us for the Q&A portion of the call. In

Speaker 3: These statements are subject to risks and uncertainties that could cause our actual results to differ materially. These risks and uncertainties include the factors identified in our filings with the FCC

Speaker 3: Please review the Safe Harbor Statement on the first page of our presentation as the content of our call will be governed by this language.

Speaker 3: And with that, I'm delighted to turn the call over to Mary.

Speaker 4: Thanks Ashish and good morning everyone. Our operating results continue to demonstrate strong growth thanks to an incredible customer response to our new trucks and SUVs around the world and strong execution of our business plan by the GM team, our dealers and suppliers.

Speaker 4: Together, we delivered $3.2 billion in EBIT adjusted in the second quarter, including an $800 million charge for new commercial agreements we have with LGE and LGES. The charge reflects the conscious decision we made during the Chevrolet Bold EV recall to serve our customers in ways that go beyond traditional remedies.

Speaker 4: and we're taking new steps that will reduce our costs and improve our margins over time. We'll provide more details about EV margin improvement and IRA benefits at the investor day in November .

Speaker 4: Our momentum is broad-based. Year over year, we have now delivered four consecutive quarters of higher retail market share in the US, and our total share was up almost one full point in the first half, with strong pricing and incentive discipline. We lead the US industry in both commercial and total fleet deliveries calendar year to date.

Speaker 4: We now have led the US industry in initial quality for the second year in a row. We are focused on strong cost discipline and we are taking additional steps to lower our capital spending.

Speaker 4: All of this impacts the bottom line, so we are raising our full year earnings, free cash flow, and EPS guidance for the second time this year.

Speaker 4: We now expect full year EBITA adjusted earnings to be in the range of 12 to 14 billion, up a billion from our guidance.

Speaker 4: Adjusted Automotive Free Cash Flow is now expected to be up $1.5 billion in a range of $7 to $9 billion. And APS is now expected to be in a range of $7.15 to $8.15 per share.

Speaker 4: The actions we are taking to be more efficient are also having an immediate effect on capital spending. We now expect capital spending in 2023 to be in the $11 to $12 billion range, which is about a billion less than the high end of our prior guidance. And we're working on more reductions.

Speaker 4: This guidance assumes that we successfully negotiate new labour agreements without work stoppage.

Speaker 4: Our results and our new guidance underscore the strength of our products today. Last quarter we talked about new vehicles we're launching to support strong margins. All of them are connecting with customers.

Speaker 4: At the higher end of the pickup market, the GMC Sierra AT4 and Denali models are now 70% of heavy-duty retail sales.

Speaker 4: Premium models also account for more than 70% of sales for the new GMC Canyon midsize pickup. For the Chevrolet Colorado, our high performance off-road models...

Speaker 4: Z71 trailboss and ZR2 represent more than half of retail sales.

Speaker 4: The new Chevrolet Tracks is also off to a very fast start and it's driving solidly profitable growth.

Speaker 4: In the US, we delivered more than 20,000 tracks in the second quarter and we expect that to keep growing. Half of these customers are new to General Motors.

Speaker 4: All of these new vehicles help us deliver more than a $1,600 per unit increase in ATPs in the U.S. compared to first quarter with flat incentives and essentially flat inventory. We had the largest ATP increase in the industry by far. The other growth products I highlighted last quarter, the Chevrolet Montana in South America and the Trax in Korea also continue to...

Speaker 4: earned more than 50% market share in its segment and two-thirds of the customers are new to GM.

Speaker 4: These hits and the great work the team has done on cost have us on track to deliver significantly higher EBIT adjusted and GM International this year excluding China equity income.

Speaker 4: Looking ahead, we have several launches and growing segments around the world that will keep our momentum going. In North America, these include the 2024 Chevrolet Traverse, which we revealed earlier this month. It goes into production in Lansing, Michigan late this year.

Speaker 4: In the EV market, we achieved our target of to produce 50,000 electric vehicles in North America in the first half. About 80% were the Chevrolet Bolt EV and EV Plop, but the Altium Plant Form production is increasing. We've had more than 2,000 customer reserve, GMC Hummer, EVs, and Cadillac Lyrics in transit to dealers at the end of June .

Speaker 4: vehicles and it does not force customers to compromise on style, performance, utility, range or towing.

Speaker 4: We have experienced unexpected delays in the ramp because our automation equipment supplier has been struggling with delivery issues that are constraining module assembly capacity. We are working on multiple fronts to put this behind us as quickly as possible and things are already improving.

Speaker 4: For example, we have deployed teams from GM Manufacturing Engineering to work on site with our automation supplier to improve delivery times. We've also added manual module assembly lines. And we're installing more module capacity at our North American EV plants beginning with Factory Zero and Spring Hill this summer, Ramos Arispe in the fall, and Kami in the summer.

Speaker 4: Looking ahead, the next phase of our EV acceleration is coming into sharper focus. For example, we have now secured more than half of our 2030 direct sourcing target for many critical raw and processed materials we need with significant onshore. During the quarter, this included an expansion of our cathode active material joint venture in Canada.

Speaker 4: and an investment to bring manganese sulfate processing to a new facility in Louisiana. As with other recent announcements, these agreements provide us with significant offtake and favorable commercial terms, which is a key component of the EV margin-improven strategy we outlined last quarter.

Speaker 4: Now let's talk about fixed costs. Due to the success of the $2 billion fixed cost reduction plan we announced earlier this year, we have identified another billion in fixed costs that we will deliver over the same 2023 to 2024 timeframe. This new action will offset about a billion dollars into appreciation and amortization, which means that relative to 2022,

Speaker 4: Our automotive fixed costs will be down to billion on a net basis as we exit 24. CAKE components include about a billion dollars from the voluntary separation program, another 800 million in reduced sales and marketing expense, and the remainder coming from significant reduction in all areas of the business, including engineering expense travel.

Speaker 4: We also embrace a strategy we call winning with simplicity that will reduce design and engineering expense, supplier cost, order complexity, buildable combinations, and manufacturing complexity.

Speaker 4: For example, our teams are applying even greater discipline around our color and trim palettes, the way we package features and options, and reuse.

Speaker 4: For our EV and ICE vehicles, we are targeting a 50% reduction in trim levels through a smart bundling of customer features and options. This results in fewer part numbers to simplify marketing, engineering, manufacturing, while maintaining the best features customers want.

Speaker 4: Yet we are maintaining market coverage for all major segments and price points, and the US will compete in ICE and EV segments that represent about 90% of the industry volume in 2030.

Speaker 4: Our next generation full-size pickup and SUVs will show just how powerful Winning with Simplicity will be. We are investing significantly less capital and expect to deliver vehicles that will have much higher levels of customer-facing content and even better margins than today.

Speaker 4: Another great example of a capital-assition program is the next generation Chevrolet Bolt that we plan to execute. Our customers love today's Bolt. It has been delivering record sales in some of the highest customer satisfaction and loyalty scores in the industry. It's also an important source of conquest sales for the company and for Chevrolet.

Speaker 4: More than 70% of customers are new to GM. We will keep the momentum going by delivering a new bolt that delivers what customers have come to expect, which is great affordability, range and technology.

Speaker 4: And we will execute it more quickly compared to an all-new program and with significantly lower engineering expense and capital investment by updating the vehicle with Altium and Altify technologies and by applying our Winning with Simplicity discipline. We will have more details to share soon.

Speaker 4: Now before we move to Paul's comments and Q&A, I'd like to invite Kyle to update you on the important steps Cruise has taken to scale its business and make it profitable.

Speaker 4: to Paul's comments in Q&A, I'd like to invite Kyle to update you on the important steps Cruze has taken to scale its business and make it profitable. So Kyle, over to you.

Thanks, Mary. We are halfway through our first year of rapid scaling, and it's going extremely well. We're on a trajectory that most businesses dream of, which is exponential growth, driven by continuous improvement, engineering innovation, and solid product market fit.

Our formula for driving this growth is quite simple. Number one, we increase the supply of vehicles. Number two, we increase the service availability. Some more people can use it. And number three, we make the product awesome.

So let's talk about how we're doing on all those and then get into the numbers.

On the supply side, we recently hit 390 concurrent driverless AVs. We believe this is the largest and fastest growing AV fleet in the world.

Yet you will see several times this scale within the next six months. This is all on the Bolt platform, which we can scale to thousands of AVs. But we're also about to transition to Origins, which are a game changer for cost and are incredible to ride in.

And today I'm pleased to share that our test vehicles are already running in driverless mode on public roads in multiple cities.

And we are confident in our regulatory and permitting paths despite this being the first time a major OEM has manufactured a vehicle without traditional controls. As a result, we believe we're the only AV company with a well-defined and significantly de-risked path to reach billions in revenue.

On the second item, Availability, we're rapidly expanding cities, hours, and service area.

As of very recently, we now operate a significant portion of our San Francisco fleet 24-7 across the entire city.

We've expanded geofences in hours in Austin and Phoenix, and we plan to expand significantly in the next 30 days.

Lastly, we've done the prep work and will launch commercial service in two or three more cities in the next 12 weeks alone, bringing us to as many as six commercial markets with several more following shortly after.

All the critical ingredients, things like mapping, ground infrastructure, validation, user acquisition, have become several times more efficient as we move from city to city.

On the third, making the product awesome.

We have over 85,000 five star reviews in San Francisco alone. People love the product and it gets better every month with each new software update.

And based on data from tens of thousands of users across multiple cities, it's clear to us now that demand will greatly exceed supply for several years. And this gives us margin opportunity and the potential to be ahead of plan on revenue growth.

Now that is rapid scaling. I'll share a few additional data points before we move on.

Cruise cracked 3 million miles just 49 days after hitting 2 million miles. And the next million is going to be even faster.

We're now doing over 10,000 rides per week, but more importantly, we're growing rides at 49% per month on average over the last six months.

28-day user retention is nearly at the level of a fully matured human ride-hale service, and it continues to trend upwards.

The product is extremely sticky despite the limitations in hours and service availability that exists today.

All of that scaling is occurring while also improving safety and driving down costs. So let's take a look at those.

Safety continues to improve despite increasing complexity.

Our analysis of the first million miles shows 80s experience 54% fewer collisions than human drivers in similar environments.

and 92% fewer where the AV was the primary contributor. In other words, the vast majority of collisions are caused by inattentive or impaired human drivers, not the AV.

And we expect a gap between human and 80 performance to get much wider over the next 12 months.

On the cost side, we're seeing ideal trends. Our operational cost per mile traveled has gone down by an average of 15% per month for the last six months.

led by optimizations in infrastructure, process improvements, and automation.

Our fixed costs due to machine learning training and simulation are also decreasing over time due to better simulation techniques and investments in efficiency. But most exciting is the step function improvements in cost we will see as our newer vehicles and AV architectures launch.

Due to having a much longer service life, the origin significantly reduces our costs per mile. We also have an optimized sensing and compute architecture in late-stage development that costs about 75% less than what will be on the very first origins.

It's the first time Cruises Custom Chips will hit the road, which we expect before the end of next year.

As our fleet rolls over to this architecture, we'll start to see costs head below a dollar per mile, the magic threshold at which road attacks has become cheaper for most people than owning a car. Lastly, we have something else that's fit in the works for a few years that is highly disruptive to the already highly disruptive AV industry.

will start to see costs head below a dollar per mile. The magic threshold at which robotaxies become cheaper for most people than owning a car. Lastly, we have something else that's been in the works for a few years that is highly disruptive to the already highly disruptive AV industry. More on that later this year.

So putting these things together, it's clear now that crews is no longer a science project.

There was one significant risk and reasons to doubt, but it's now a rapidly growing business with a transformational product in a multi trillion dollar TAM. We've made incredible progress in Q2 over Q1, and I'm excited to continue that momentum in the months ahead. We're truly just getting started.

That can be made. Thanks Kyle and thanks for sharing the progress that the cruise team is making is just incredible.

So before we move into Paul's remarks, I'd like to address our negotiations with the UAW, which just kicked off and with Unifor. First and most importantly, I want to say how proud I am of our talented and experienced manufacturing workforce. There's a direct connection between their hard work and our success, and we have a great future ahead of us. As we've talked about today, the future includes continued investment in strategic ICE vehicles and the UAW.

business. Our goal this time will be no different.

That's the best possible outcome for all of our employees, plant communities, dealers, suppliers and investors, and we look forward to constructive talks.

So thank you, and now let me turn the call over to Paul.

Thank you, Mary, and good morning, everyone. Thank you for joining us. I'd like to start by thanking the team for their collaboration on delivering yet another quarter of strong results and consistently meeting or exceeding our financial targets.

At the same time, we are growing the business with four consecutive quarters of year-over-year U.S. retail share growth and stable incentive spent.

The core auto operating performance continues to fuel the results and fund investments to drive growth in our business, with Q2 EBIT adjusted of $3.2 billion, including the $800 million charge from the LG agreements. We also generated a 7.2% EBIT adjusted margins, including a 180 basis point headwind from those LG agreements.

Aided by a strong consumer and a robust product portfolio, we are raising guidance for the second time this year, driven by great products, successfully balancing supply with demand, and proactive cost management.

We have made bold commitments and to achieve them we are focusing on a solid foundation. As Mary mentioned, we are well along our way to achieving the $2 billion automotive fixed cost reduction.

We're also announcing another $1 billion fixed cost reduction to offset higher depreciation and amortization from the significant manufacturing investments we've been making in our ICE and EV portfolios.

This expands the impact of the plan with the only automotive fixed costs excluded being the lower pension income, a non-operating non-cash item.

The product simplification initiatives are expected to have incremental benefits in the years to come as we refresh future ice products and transition to EVs.

We're also taking a capital efficient approach to our growth initiatives. For example, we have a profitability driven strategy towards selectively re-entering Europe . And we recently announced a collaboration with Tesla to double access to charging for our customers without much incremental investment.

Chemulatively, these factors, along with a reduction in headcount, marketing spend, and overhead costs, will result in us realizing about a billion dollars of year over year fixed cost savings in 2023, with most of this benefit coming in the second half of the year.

Getting into the Q2 results, revenue was $44.7 billion, up 25% year over year, driven by supply chain improvements and stable pricing. Whole-sale volumes year over year were up 20% in Q2 and 12% year to date. For the full year, we now anticipate being towards the high end of our 5% to 10% guidance range. We achieved $3.2 billion in EBITD adjusted.

7.2% EBIT adjusted margins and a dollar in 91 cents in EPS diluted adjusted.

Total company results were up $900 million year over year driven by supply chain improvements versus Q2 2022. But more importantly, we offset a combined $1.4 billion of headwinds from the LG agreements, lower pension income and lower GM financial earnings.

ROIC was above our 20% target, demonstrating consistently strong and improving core operating performance. Adjusted Auto-Free Casulo was $5.5 billion, up 4.1 billion year over year, driven by improved supply chain conditions and higher earnings year over year.

During the quarter, we repurchased $500 million of stock, retiring another 14 million shares, bringing the 2023 total to $865 million and 24 million shares retired. We expect our strong balance sheet and cash flow to support continued share repurchases as part of our capital allocation framework moving forward.

North America delivered Q2 EBIT adjusted of $3.2 billion, up $900 million year over year, and EBIT adjusted margins of 8.6%. The strength of the product portfolio supported market share growth, higher ATPs, and again, stable incentives. North America delivered Q2 EBIT adjusted margins of $3.2 billion, up $900 million year over year,

North America performance was impacted by $700 million of the LG agreement charge, which was 190 basis point headwind to margin in the segment. We've seen two consecutive quarters of higher warranty related costs, an area we're monitoring very closely.

The fundamental quality of our vehicles remains strong as evidenced by the JD power ratings. However, inflationary factors have increased the cost to repair vehicles. And we've also seen incremental expenses associated with the recent ARC airbag and flater recall.

Total U.S. dealer inventory was 428,000 units at quarter end, essentially flat from last quarter. Inventory on dealer lots of our new and most in-demand vehicles continue to run at around 10 days, including our full size SUVs, the all-new Colorado and Canyon mid-size trucks, the Chevrolet Trailblazer and the Chevy Bolt.

We are still targeting to end 2023 with 50 to 60 days of total dealer inventory, although seasonality, production schedules and timing of fleet deliveries may take us out of this range from time to time. Supply chain and logistics challenges are trending in the right direction, however there are ongoing logistics congestion.

customer who decides they're not going to wait for the vehicle, there's several more waiting in line. So again, we're very confident and it's not by accident. It's because we, you know, there's been some criticism that we should have been faster with our EVs. We're going as fast as we can, but we wanted to make sure we were leveraging a platform that's going to give us efficiency with Altium and that consumers weren't going to have to compromise.

Yes, good morning, and thank you for taking the question Jim had strong price and mix again in the second quarter or even a supply and inventory for the industry are gradually recovering and borrowing costs for consumers are higher can you talk about how you expect the market environment to evolve in the second half of the year and are there any levers for Jim in particular in order to help to sustain some of those strong our core automotive performance that you've been.

James.

Hey, good morning, Mark it's Paul Thanks for the question.

Where we're still kind of operating somewhat cautiously as we said from the beginning of the year. You know, we're not assuming major increases are in pricing or in our in the average transaction prices going forward. So you know we are we expect that to continue and it really starts with the demand that we see for <unk>.

Vehicles, we've tried to keep inventory I'm pretty consistent we've grown it a little bit to get it to the lower end of that 50 to 60 day range that we're working on but overall maintaining discipline discipline on the AR on the incentive side as well. So we've really been focused on driving share with margin performance I think the.

Team has done a good job as to whether that will continue yeah. We were we're kind of taking it day by day month by month, and where we're very pleased with the results, but as long as we see demand continuing to be.

As strong as it is for our vehicles are we think we're going to continue to perform.

That's helpful and on cruise and good to hear all of the updates on the progress that our crews is making you know Carl you mentioned cruise vehicles being safer by 54% he'd elaborate a bit on how you're measuring the safety of our vehicles that cruise has with the T V's relative to human driver and you were there any specific features on the origin is it really.

To safety that you could.

I would point out is as perhaps drivers of additional improvement going forward. Thanks.

Yeah sure I'd be happy to do so to clarify the 57% number was a reduction in any kind of collision and the way that we manage are measured that as we looked at.

The first million miles of driving across the cruise fleet.

And compare that to a human benchmark that we established with them, leading transportation research institutes and that was based on.

Millions of miles of driving by human drivers.

Where are we then selected a subset of all of those miles and matched it to the way that the avs drive so it's as close as possible to do it apples to apples comparison.

But beyond that as you know the 50 some percent collision reduction doesn't really tell the whole story because.

Because that includes things where the Avi was sitting still and just got rear ended by an incentive driver. That's that's not really the fault of the a b M.

When you look at collisions, where the a b was the primary contributor a 92% fewer collisions, but most of the time.

Their vehicle that's the primary inhibitor, so any collision that we've seen.

And then I guess, another one where we're really proud of is.

So you said, 73% fewer collisions with meaningful risk because of injuries, usually the more severe types of collisions not just the low speed Fender benders.

So all of these in aggregate to tell a very compelling story and I would emphasize that this is still you know this is the product as it exists today and we push out a new software update each month, which targets specific kinds of safety improvements.

But I think you know there was a question early on.

How to avs do relative to humans I think you know our data shows that we're already.

At least from this data there's strong evidence of significant safety improvements and I think it's going to continue improving.

Improving at a rapid clip as we continue to invest in machine learning.

Technologies and other ways to drive up the safety of the product.

Thank you.

Thank you. Our next question comes from John Murphy with Bank of America. Your line is open.

Good morning, everybody I just wanted to ask a question like we often do on cap you'd I mean, one of 2.7 in North America.

A skeptic might say, hey, listen you're running all out and as you bring on more by you were going to need to add fixed cost and variable cost.

And with the risk of pricing coming down you could see real compression in margin, but you know what an obtuse might say, hey, listen that's staff capacity pricing will hold off and you'll just bring on variable cost is as volumes recover I'm. Just curious you know where in the spectrum. You know think you actually are sort of that that that range because it does.

Like there's some real opportunity if pricing holds up and you just bring on these variable costs, because there might be some real significant upside to margins over time.

Yeah. Good morning, John So certainly that is that has been part of what's been working for us for the first six months and despite that higher capacity utilization, you're you're seeing inventory remaining pretty much flat.

With a lot of the inventory growth or inventory is still trapped in that in transit bucket as vehicles are making their way to the dealers, we see them still turning very very quickly and that's allowed us to continue to lean into the pricing and make sure that we've got consistent our incentive performance and I think you've seen some outperformance.

From G M. A over the last several months in the in that space compared to the industry as a whole. So you know I think we've shown a willingness to balance supply with demand as we did in the first quarter, where we cut some of the capacity utilization.

Intentionally to make sure that we kept our margins flat or kept I'm, sorry inventory flat and margins are strong. So we're you know we're going to continue to watch that but as as we've seen has provided tremendous benefits for us so far and we're going to continue to manage it that way.

But if you were to flex up on volume would it be mostly variable cost that would come in or would there need to be some fixed costs that would come along with that step up and buy it and let's see.

Yeah, it would be mostly variable costs, but when you think about where that capacity being utilized it's at the higher end now with our with the demand that we've seen for the higher trim levels on a full size trucks, Suvs et cetera. So you know we might.

Not be able to do it in a linear way, where you've got some mix if you're a if you're increasing production on some of the lower priced smaller vehicles across the board. So we watch that and try to maintain as much balances weekend.

Just a follow up on fleet, our fleet has been a real good guy for you and the industry you know as we think about their durability and resilience of that in the face of even potentially some risk to the economy here. How durable is that and is there just massive pent up demand on the fleet side that might carry the day, even if rates were a little bit higher and we see a little bit of a soft patch.

The economy.

Yeah, I think you captured it well John obviously, we've got a lot of pent up demand from the last few years.

Where where fleet took the brunt of you know some of the capacity challenges due to COVID-19 and due to the semiconductor challenges in fact, if you looked at the.

The first half of the year year to date. It was the best fleet performance since 2007.

Largely fueled by the commercial side of the business and as we've said before the fleet business is very different than what it was in the past where it was very very thin margins in an effort to drive volume our fleet business is performing very very well with margins similar to the retail side. So the biz.

This continues to perform the team is doing a great job and we expect that to continue for the short and medium term I'm.

I'm sorry, just one housekeeping question the 792 charge for the LG issue was that contemplated in your initial guidance because if it wasn't it's actually you raised today is more like a $1 8 billion dollar reason you in your outlook I'm just trying to understand if you were contemplating that before.

It's it's it's contemplated in the guidance raise itself it wasn't contemplated as we came into the year.

Okay. So the the raises significant today, it's actually more than 1 billion on an operating basis. If you were to back that out is that correct.

Yeah like like we said that the business continues to perform a going back to what we said.

In the first quarter as long as the consumer held up and strong we expected that we'd be able to surpass the guidance, we put out and that's certainly what you've seen through the second quarter and what we can see July month to date AR has held up very well as well.

Thank you very much.

Thank you. Our next question comes from Adam Jonas with Morgan Stanley . Your line is open.

Hey, everybody. So a question on the new bolt.

I think in your prepared remarks, you said it will be updated with all P M and ultra fight technology, sorry to be pedantic here, but I just want to know is are you using attributes of all team or was this a full ground up all P M platform.

So it will.

Incorporating you know when when the new version comes out we will say its an LTM based product and so we are definitely on leveraging that technology, because that's going to really help us get costs down remember that today's bolt is out of our second generation battery technology and from Gen. Two to Altium you know we saw about a 40% reduction is.

We started to launch so that's going to really help drive the profitability of that vehicle and then you know with the work that we've done from us from software defined vehicle Altafaj. It will have the latest from that perspective as well. So this this is a very capital efficient quick way to build out.

And you know the strong consumer response, we had to the boat and get it affordable vehicle out into the marketplace. So and you know as we continue to look for ways to drive capital efficiency.

This is something we've looked before bad as we've gotten more experienced the team took a look at it and frankly I'm Super excited about it.

Okay. Thanks, Mary just.

Just a follow up Audi announced its gonna use saic's Nextgen EV platform.

For China, and possibly possibly elsewhere since SaaS. He is your biggest Chinese JV partner I'm, just wondering could Jim also consider using.

Actually I C U E V platform to address the specific needs of the Chinese EV consumer or is the strategy there kind of old T them only for China. Like are you are you open to a potential.

Use of another non altium platform, even if he could adapt some technology. Thanks, Yeah. Adam Great question, you know I think the Altium platform is much more efficient I think you know they've already indicated that their dedicated platform wasn't competitive from a cost perspective, we're continuing to take cost out of the old Tam but of course.

We always look at what the joint venture partner can bring to.

To the to the party and we're gonna look for to make sure that we're competitive from an EV perspective in that market as well. So are we we are open and always considering you know whatever is the most cost effective way to have a vehicle. That's gonna have no compromises and meet the performance of in this case are the Chinese consumer.

Thanks, very much Mary.

Thanks, Adam.

Thank you. Our next question comes from Dan Levy with Barclays. Your line is open.

Hi, good morning, Thanks for taking the questions.

First I just wanted to ask about the commentary on on Capex, which you noted the $11 billion to $13 billion for 'twenty four 'twenty five is under review you trimmed the capex for 2023.

Maybe you can just give us a sense of how youre looking at the manufacturing build out I think you noted that there was some simplification initiatives.

Is that just something that was incremental or was that a byproduct of perhaps looking at the market a little differently in terms of demand I guess I'm. Just wondering is that the slowdown in spend just purely the simplification or is there something else on the manufacturing side, where market demand, that's causing you to slow.

Down a little bit the way that you're spending.

And there was no market driven slowdown this was really us looking and making sure we had the absolute right portfolio entries and as I mentioned for both E V and ice where we're gonna by 2030, we'll be covering 90% of the segments, but where we looked and found ways to do that more efficiently. The bolt is a good example, instead of doing it.

All new vehicle are really leveraging the capital that's already there and and the benefits we have be it by having the Altium platform and then I think the winning with simplicity and you know in the past we've gone in and done complexity reduction, but if you don't do it as you design the vehicle you drive a lot of capital.

And and vendor tooling and in the plant and you know frankly this is something we've been working on for the last several months I'm Mark races, leading this initiative with it with the marketing and manufacturing teams and we are finding there's a lot of ways to take cost out of manufacturing and and you know from a capital perspective is.

Well so.

It's pretty significant you'll hear and see more about it but just the comment I made about getting rid of trends that directly correlates to spending less capital, especially on the vendor tooling side.

Okay. Thank you and then as a follow up I just wanted to ask.

Ask the question on this.

On the charge associated with with the bolt.

And really it just begs the question of opium is a new product and I think that Theres a lot of unknowns with the new product how should we think about the type of warranty expense you may need to accrue on these products how much more there is there needs to be an added level of conservatism.

Ramping or is there some clear data that you have that shows just early on that the.

<unk> will be far greater than the initial bolt, which was you know you you've clearly evolved on your architectures, but just wondering how you need to think about warranty expense going forward I mean.

Yeah, you know I would say.

Say, if you go back into the bowl spending market for several years now and actually had very good warranty performance. Remember this was on two specific manufacturing defects that if that occurred at the same time caused the cause of the issue on the ball that was you know in the L. G. S. A process we.

You know our team worked hand in hand with them, we understand exactly what happened when you look at what we're doing at the Altium plans from a solid perspective, and the amount of error proofing and the fact that we're following the quality process and have you know the traceability that we you know if there were an issue we wouldn't have to do the whole population all of that's been put in place I think you know all of those lessons.

Larry and.

Then when you look at you know what we've got from an LTM perspective already and what we're seeing you know I think we're very confident that we're going to see a strong alright, I would say good warranty performance strong warranty performance on these vehicles because again using the general motors manufacturing.

These systems and processes are across the board.

So I I am I I don't think that because it's new I think you know what there's some of the things we're struggling with to start up with our suppliers as you know the modules, that's not going to necessarily drive a quality issue again, we have quality checks and processes and using the appropriate an error proofing to know that when we when we have a salad.

We have a module when we have a pack.

It's it's measured and checked for quality.

Great. Thank you.

Thank you. Our next question comes from Chris Mcnally with Evercore. Your line is open.

Thanks, So much team wanted to quickly go back to the $30 billion autonomous elephant in the room and just a quick question for <unk>.

Kyle so.

Assuming that the San Francisco policy update goes instead of the industry's favor do you just have a broad sense of when the 24 seven rollout will happen in San Francisco, where the consumer rights I know Theres internal testing, where you know you're blanketing the city, but just curious on the consumer side and then just you know.

How many ABS would it take to sort of blanket a city like San Francisco have a disruptive service similar to Uber can you do it with under one to 2000 origin.

Yeah. Good question so on the on the San Francisco side, So right now as I said earlier, a significant portion of our fleet is operating 24 seven in that services open to employees.

So we are not far from the opening that up to the general public I can't give specific dates but basically you know we're operating that service to employees and things are looking pretty good. So that is something that is coming pretty.

Pretty soon.

And as for what it would take the blanket a city like San Francisco you know our goal is as I think I've said on previous calls just to make sure as we ramp up manufacturing capacity, we've got a variety of markets to absorb those vehicles and ER. There are practical you know reasons to ramp up gradually in the city just to make sure you hustle mates as its transitioning.

A new form of mobility.

So it's not our intention to sort of produce vehicles.

Vehicles in and sort of direct them all into a single city.

That said for perspective, there's over 10000 human right he'll drivers in San Francisco.

Potentially much greater than that depending on how you count it does those drivers of course aren't working.

Eight hours a day like a robo taxi could so it does not take a very high number two.

Generate significant revenue in a city like San Francisco, and Cisco, but certainly there's capacity to absorb several thousand per city at a minimum.

Much appreciated and then just at a high level question on the strategy for cruise when it comes to capital funding.

It looks like there's about three plus quarters before you'd have to sort of consider them.

Ing crews you know just any any thoughts on internal versus external.

Funding given the environment.

You know I don't really have anything to comment right. Now we certainly are generating the free cash flow that we can fund cruises expansion and we'll look to see what's in the best interest of our shareholders.

Thanks, so much.

Our next question comes from Tom Marion with RBC Your language open.

Oh, Yeah, Hey, thanks for taking the question.

Mary question, maybe a philosophical one on autonomy and how you view Ultra cruise you know in light of what we heard from Tesla and how they are.

Planning to license.

S D product.

Just curious to how you view.

For cruise is would that be a revenue profit center or we're just our product enhancer, how how do you see.

The kind of level two plus product for you.

And we definitely see the level two plus product as I, you know revenue generating and profit generating and are very pleased with what we have with Super cruise and we're going to continue to enhance as we move forward and we'll have more to share about this when we get to Investor day in the fall.

Okay and as a follow up on on crews you know you've made a strong case, obviously on the safety features.

Just wondering if you could give some color on how perhaps your arguing that oh on a regulatory perspective, maybe you know on a federal level like what are kind of the the obstacles and I mean is that something you see happening.

More likely now is is there kind of a greater appeal now that youre seeing all these safety benefits is is it a stronger case now that than maybe it was before.

I think as we continue to grow and miles, but first of all we're not arguing with the regulators, we're talking to the regulators and sharing the information, which we've been doing for several years now and so they understand how we're measuring safety with what Kyle referred to with what we did with outside groups and continuing to share the information.

I think it's very well aligned with what the department of transportation and Knits is looking for ways to improve road safety. So of course, you know we're going to continue that dialogue share the information and we're very optimistic of where we're headed.

Great. Thanks, a lot.

Thank you our last question comes from Ryan Brinkman with Jpmorgan. Your line is open.

Okay, great. Thanks for taking my question it looks like the China equity income in <unk> similar to <unk> rounding to the point 1 billion down from sort of point 2 billion a year ago and of course point 5 billion quarterly pre pandemic with what is required do you think to restore China profitability to where you would like it to be I don't know from a sales or a share.

Or perspective, it seems like you've got really great traction in that market for lower priced E V such as for the Wuling brand how should we think about your strategy for electrifying your higher end brands in China is that the catalyst do you think to higher profits in that market.

Well definitely you know we have a strong ice products and performance there already but cleared a winning as we go forward is having the right portfolio of ETS for Cadillac and Buick special, especially and so we have a lot of those vehicles being launched right now and we're continuing to work to make sure they're efficient and meeting our customer needs, but you know what.

Let's also remember right now you know we're in the high single digit market market share place right now even with them. All the you know the fact that there's 100 new E V entry. So we've got to have the right E vs. At the right price with the right technology I was over there I guess, maybe two months ago now and you know did a full review.

All of our product line and you know obviously.

I spent time understanding where the competition is I think we've got the right products coming we've got to go out there and and cell phone now engage our team to get that done.

Okay, great. Thanks, and then just maybe lastly on the the bolt charge is the charge driven more by you know something differently being done for the consumer versus what was previously communicated or is it more of a like rejiggering of the car sharing agreement between Jim and LG for the previously announced actions well for a portion of it.

Obviously as you announced a recall and then you look what it's going to take you know we took some time working with the L. G E. S team to come up with a diagnostic that you know then over a period of time indicates that the vehicle can go friend that the reduction of 80% battery charged to the back to the full battery charge.

That took a little longer and so as we did that we wanted to make sure. We're taking care of the consumers are replacing a battery packs maybe faster than what we would've ended up needing to do and I'm, just having a attention to them because again, we have a very strong both customer and we wanted to make sure that they understand we're going to stand.

Behind it so I think we took the right actions and as we looked at that where we whereas we were you know well into having that that issue behind us. We look at what was right from where the costs are felt so we just we're doing the right thing because LG as a very strategic partner to us and like I said, there's a lot of work that we're doing.

Together and individually to continue to improve our cost position.

That's very helpful. Thank you.

Thank you I'd now like to turn the call over to Mary Barra for closing comments.

Thank you so much and I want to thank everybody for your questions as I said to open the call. The success, we've had in the second quarter and the first half ties directly to the great New vehicles, we've launch and strong execution of our business plan our outlook both for the second half and over the next several years will increasingly be shaped by our optimized.

Ice and E V portfolio, our investment that we're making not only in the vehicles, but also the growth opportunities as well as our cost discipline and so this will be the focus of our next investor day, that's going to be held in mid November . The agenda will include a detailed look at our software strategy led by Mike.

Bert who joined US from Apple in May you're also going to have the opportunity to drive our newest T. V's and experience are they expanding capabilities as I mentioned of Super cruise.

And one of the most important vehicles, you're going to get to drive as the new Chevrolet Chevrolet Silverado E. B work truck that we talked about it I think it's one of the most powerful examples of the benefits of the investment we made starting in 2018 on the Altium platform. It offers up to 40% more driving range faster charging and far greater towing capability.

Do you think competitors because again it was purpose built to be an EV and that's something that we've made the investments we were going through the growing pains right now others are going to need to do that as they get to their dedicated platforms. So I'm very excited about what we're doing what we're gonna be able to demonstrate in November and just know that we're going to continue to execute with with <unk>.

Discipline across all aspects of the business as we are in Q3 and into Q4. So I appreciate everyone and look forward to seeing you then and probably talked to most of you. Before then so thanks for your participation and I hope everybody has a great day.

That concludes the conference for today. Thank you for joining you may disconnect.

Okay.