Good morning, and welcome to General Motors Company Second Quarter 2023 Earnings Conference Call. During the opening remarks, all participants will be in a listen-only mode. After the opening remarks, we will conduct a question-and-answer session. [Operator Instructions] As a reminder, the conference call is being recorded, Tuesday, July 25, 2023. I would now like to turn the conference over to Ashish Kohli, GM Vice President of Investor Relations.

Thank you, Amanda, and good morning, everybody. We appreciate you joining us as we review GM's financial results for the second quarter of 2023. 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. Joining us today are Mary Barra, GM's Chair and CEO; Paul Jacobson, GM's Executive Vice President and CFO; and Kyle Vogt, CEO of Cruise. Dan Berce, President and CEO of GM Financial, will also join us for the Q&A portion of the call. On today's call, management will management will make forward-looking statements about our expectations. 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 filing for the SEC. 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. And with that, I'm delighted to turn the call over to Mary.

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. 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 Bolt EV recalled to serve our customers in ways that go beyond traditional remedies, 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. Our momentum is broad-based. Year-over-year, we have now delivered four consecutive quarters of higher retail market share in the U.S. and our total share was up almost one full point in the first half, with strong pricing and incentive discipline. We lead the U.S. industry in both commercial and total fleet deliveries calendar year to date. We now have led the U.S. 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. 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. We now expect full year EBIT adjusted earnings to be in the range of $12 billion to $14 billion up $1 billion from our guidance. Adjusted automotive free cash flow is now expected to be up $1.5 billion in a range of $7 billion to $9 billion, and EPS is now expected to…

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 set. 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 would make the product awesome. So let's talk about how we're doing on all those and 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 the thousands of AVs, but we're also about to transition to origins, which are a game changer for cost and are incredible to write 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-risk path to reach billions in revenue. On the second item, availability, we're rapidly expanding cities, hours and service area. As very recently, we now operate a significant portion of our San Francisco fleet, 24x7 across the entire city. We've expanded geofences and hours in Austin and Phoenix, and we plan to expand significantly in the next 30 days. Lastly, we've done the prep work and we'll launch…

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 Uniform. 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, like the full-sized trucks, full-sized SUVs, and mid-sized SUVs. Our future also includes retooling existing assembly plans and upscaling the team as we transform the company to grow rapidly in EVs. We have a long history of negotiating fair contracts with both unions that reward our employees and support our long-term success of the 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 spend. The core auto-operating performance continues to fuel the results and fund investments to drive growth in our business, with Q2, even 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 are also announcing another $1 billion fixed cost reduction to offset higher depreciation and amortization from the significant manufacturing investments we have been making, and our ICE and EV portfolios. This expands the impact of the plan with the only automotive fixed cost 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 are 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, the double access to charging for our customers without much incremental…

[Operator Instructions] Our first question comes from the line of Rod Lache with Wolfe Research. You may go ahead.

Congratulations on these numbers. I was hoping to maybe ask you for a broader question about EVs. You made some assumptions for EV pricing and EV costs when you laid out your hands for mid-decade profitability. And I'm hoping that you can just update us a little bit on your thinking just based on how the markets evolved with some cases with more aggressive competitive pricing. And obviously, we're also seeing some manufacturers put in different manufacturing innovations to drive down costs. What are your latest thoughts on that? And have any of your observations led you to change any of your plans?

Thanks, Rod, for the question. I would say we're doing a lot in that space. Our -- what we said last year at Investor Day, it gets low to mid-single-digit margins for our EV portfolio by 2025 remains unchanged. Even with all the things that are moving in that, we're committed to getting there. I think when you look at the incredible cost discipline that we're demonstrating right now as well as winning with simplicity. It's just going to take cost out of every part of the business and make everything more efficient. And we think actually be better from a consumer perspective. . As it relates specifically to manufacturing costs, there's quite a bit of work. We have a special team that is looking at how do we continue to drive efficiency, especially in the body shop. And of course, the battery team is working on how do we take cost out from an LTM perspective with what we've learned by now having that up and running. So I think there are several areas we're working on. We intend to have industry-leading margins, and we're not going to stop until we get there and we still have a lot of levers to pull. I don't know, Paul, if you want to add anything.

No, I think you covered it. I think, Rod, one of the things that we've asked -- we've been asked on this call frequently is about pricing strategy. And when you look at the demand we have for our vehicles and as we're ramping up production, we still have pent-up demand. People are hanging in there with orders. And I think with some of the challenges identified as we ramp production, we see a lot of consistent strong demand for the products that we're producing. And I think that comes from a purpose-built EV that we did from the ground up, which I think is going to continue to impress people as we get more vehicles out on the road.

Okay. And just a follow-up on that. Just it sounds like you're not changing your expectations for mid-decade pricing. Just wanted to clarify whether there's been any changes based on observations that you've made on capacity growth and competitive actions? And then secondly, can you just maybe elaborate a little bit on this $800 million LG charge? And what that actually means you alluded to lower cost, but it wasn't clear whether that was a one-timer or was that launch cost or something else?

So first of all, on pricing in our plan, of course, we're going to be -- we're going to watch what's going on in the marketplace. But I think one of the things we demonstrated for almost 15 years now is we're going to be very disciplined with incentives and with our vehicles and when I think when you look at the original pricing that we announced I think it was very in line with what the customer expects for the value they're going to see from the products. And so far we're seeing that. So we believe we have priced the vehicles right. Again we have a lot of pent up demand. The feedback we're getting anecdotally for instance, from LYRIQ, new LYRIQ owners is they're just delighted with the vehicle. So I think we've got the pricing strategy right. Of course, we're going to watch it. And we're not changing our mid -- our 2025 EV profitability guidance. We'll pull all the levers that we have to either get there if there's challenges or make it even stronger. So again, Rod, we know it's a dynamic business, but we're committed to get there. And I think this leadership team continues to be able to do what they say. As it relates to the $800 million, there were many issues that we wanted to take care of, but I would say a chunk of it was us doing the right thing for our customers that goes beyond what a traditional recall expense back to a supplier would be as we look at that because we chose to do the right thing from a timing perspective. And I think our customers are happy as evidenced by the still the strong. Actually, we can't build enough Bolts right now. So we'll share more about what everything means for our EV margins when we get to November. But again, we thought it was the right thing to do, and we are -- have been and will continue to work with our partner, LG ES to take cost out of what of the Ultium and specifically the Cells,

Our next question comes from Itay Michaeli with Citi.

And congrats on the results. Just wanted to ask a couple of questions on the Ultium ramp. First, the issue what you identified with the automation equipment for the modules. Can you talk about when you expect that to be fully resolved? And are you still targeting the $400,000 of cumulative volume by the first half of next year?

Yes, we so we're not walking away from any of the targets we put out, whether it's 100,000 in the second half of this year, leading them to 400,000 by middle of next year. And what you're going to see in the second half of this year and then really crank up in the first half of next year is a lot more Ultium-based product. . We were surprised the supplier, we thought they were in better on track for the delivery that they had. So we have seen in our teams to help them get the automation up and running. We've already seen a lot of improvement from I'll say, the last four to six weeks, we're going to continue on that path. But to derisk it, we've also added additional lines because we don't want module production to gate our launch of all the products that we have coming in the second half of this year and continuing into next. And we know we're going to need that module assembly capability anyway as we continue to grow beyond the 400,000. So disappointing, I've personally been reviewing the lines. As you know, I've spent time in ME earlier in my career running. So we'll get this behind us. I'm very confident of the teams we have in place. So you'll see it improve as we get through I would say, into the end of third quarter, beginning of fourth quarter, and then I think it will primarily be behind us by the end of the year, if not a month or so sooner.

Terrific. That's all very helpful. And then just a follow-up on -- broadly on U.S. EV demand. There's been a lot of focus on rising inventory. So just curious how you slot reservation orders as you ramp up Ultium products. And also how you're thinking about the Silverado EV pricing just given the recent action from your competitor.

Yes. So I think from the recent competitive action, if you look at the Silverado work truck, the range, the telling capability, the overall performance. It's a true truck. So when people aren't having to make compromises or trade-offs. So I'm very confident, and we have strong demand for the Silverado work truck as well as the RST, which will be -- that's from a retail perspective out toward the end of the year. So I'm very confident with where we are in the pricing for the Silverado EV. And that's -- your first question, Itay, was...

Just probably on EV demand, what you're seeing in reservations and just how confident are you kind of -- what you're seeing for your products in the next few months.

Yes. Again, we're seeing with LYRIQ, we're seeing with the HUMMER truck and SUV, Frankly, the Bolt, I mean these vehicles are getting to the dealers' lots. And if they're not already sold, the -- they've got a list of people who are waiting for them. So -- and we still have a lot of reservations and people who put deposits down. The churn on that is very, very low. And for the rare customer who decides they're not going to wait for the vehicle, there are several more waiting in line. So again, we're very confident. And it's not by accident. It's because we -- 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 Ultium and that consumers weren't going to have to compromise. So I'm very confident with the product portfolio we have coming, the pricing and the demand.

Our next question comes from Mark Delaney with Goldman Sachs.

GM had strong pricing and mix again in the second quarter even as supply and inventory for the industry are gradually recovering and borrowing costs for consumers are higher. You talk about how you expect the market environment to evolve in the second half of the year? And are there any levers for GM in particular in order to help to sustain some of the strong core automotive performance that you've been seeing? .

Mark, it's Paul. Thanks for the question. We're still kind of operating somewhat cautiously as we said from the beginning of the year. We're not assuming major increases in pricing or in average transaction prices going forward. So we expect that to continue, and it really starts with the demand that we see for our vehicles. We've tried to keep inventory 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 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, we're kind of taking it day by day, month by month. And 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, 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 Cruise is making. I recall you mentioned Cruise vehicles being safer by 54%. Maybe you can elaborate a bit on how you're measuring the safety of the vehicles that Cruise has with its AVs relative to a human driver. And are there any specific features on the origin as it relates to safety that you could point out as perhaps drivers of additional improvement going forward?

Yes, sure. I'd be happy to. So clarify the 50-some-percent number was a reduction in any kind of collision. And the way that we measure that as we looked at the first 1 million miles of driving across the Cruise fleet and compare that to a human benchmark that we established with leading transportation research institute. And that was based on millions of miles of driving by human drivers then selected a subset of all those miles and matched it to EV drive. So as close as possible to it, apples-to-apples comparison. But beyond that, 50-some percent collision reduction doesn't really tell the whole story because that includes things where the AV was sitting still and just got rare ended by driver. That's not really the fault of AV. When you look at collisions where the AV was the primary contributor, 92% fewer collisions. So most of the time, it's the other vehicle that's the primary contributor towards any collision that we've seen. And then I guess another one we're really proud of is AV is it 73% fewer collisions with meaningful risk of injuries. These are the more severe types of collisions, not just the low-speed fender benders. So all these in aggregate tell a very compelling story. And I would emphasize that this is still -- 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. So I think there was a question early on, on how the AVs do relative to humans. I think 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 at a rapid clip as we continue to invest in machine learning technologies and other ways to drive up the safety of the product.

Our next question comes from John Murphy with Bank of America.

I just wanted to ask a question like we often do on cap viewed. I mean 102.7 in North America. A skeptic might say, hey, listen, you're running all out and as you bring on more volume, you're going to need to add fixed costs and variable costs. And with the risk of pricing coming down, you can see real compression in margin. But an optimist might say, listen, that's staff capacity, pricing will hold up and you'll just bring on variable costs as volumes recover. I'm just curious where in the spectrum, I think you actually are in sort of that range because it does seem like there's some real opportunity if pricing holds up and you just bring on these variable costs, but there might be some real significant upside to margins over time. .

Yes. So certainly, that has been part of what's been working for us for the first six months. And despite that higher capacity utilization, you're seeing inventory remaining pretty much flat with a lot of the inventory growth or inventory still strapped 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 incentive performance. And I think you've seen some outperformance from GM over the last several months in that space compared to the industry as a whole. So 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 margins flat or kept -- sorry, inventory flat and margins strong. So we're going to continue to watch that. But as we've seen, it's 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 a variable cost that would come in? Or would there need to be some fixed costs that would come along with that step-up of buying with.

Yes, it would be mostly variable costs. But when you think about where the company is being utilized, it's at the higher end now, with the demand that we've seen for the higher trim levels on the full-size trucks, SUVs, et cetera. So we might not be able to do it in a linear way. where you've got some mix 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 balance as we can.

Okay. Just a follow-up on fleet. Fleet has been a real good guy for you and the industry. When you think about the 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 that might carry the day even if rates were a little bit higher and we see a little bit of a soft patch in the economy? .

Yes. I think you captured it well, John. Obviously, we've got a lot of pent-up demand from the last few years where fleet took the brunt of some of the capacity challenges due to COVID and due to the semiconductor challenges. In fact, if you look at 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 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 business continues to perform, the team is doing a great job, and we expect that to continue for the short and medium term.

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 -- the raise today is more like a $1.8 billion raise in the outlook. I'm just trying to understand if you were contemplating that before?

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

Okay. So the raise is significant today. It's actually more than $1 billion on operating basis if you were to back that out. Is that fair.

Yes. Like we said, the business continues to perform 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 certainly what you've seen through the second quarter and what we can see July month-to-date has held up very well as well.

Our next question comes from Adam Jonas with Morgan Stanley.

So a question on the new Bolt. I think in your prepared remarks, you said it will be updated with Ultium and Ultifi technology. Sorry to be pedantic here, but I just want to know, are you using attributes of Ultium? Or is this a full ground-up Ultium platform?

So it will incorporate -- when the new version comes out, we will say it's an Ultium-based product. So we are definitely leveraging that technology because that's going to really help us get costs down. Remember, today's Bolt is our second-generation battery technology and from Gen 2 to Ultium. We saw about a 40% reduction as we started to launch. So that's going to really help drive the profitability of that vehicle. And then with the work that we've done from a software-defined vehicle, Ultifi, it will have latest from that perspective as well. So this is a very capital-efficient quick way to build. And the strong consumer response we have to the Bolt and getting affordable vehicle out into the marketplace. So as we continue to look for ways to drive capital efficiency, this is something we look before. But as we've gotten more experience, the team took a look and frankly, I'm super excited about it.

Okay. Just a follow-up. Audi announced it's going to use SAIC's next-gen EV platform for China and possibly, elsewhere. Since SAIC is your biggest Chinese JV partner. I'm just wondering, could GM also consider using SAIC's EV platform to address the specific needs of the Chinese EV consumer? Or is the strategy there kind of Ultium only for China? Like are you open to a potential use of another non-Ultium platform even if you could adapt some technology.

Yes, Adam. Great question. I think the Ultium platform is much more efficient. I think they've already indicated that their dedicated platform wasn't competitive from a cost perspective. We're continuing to take costs out of Ultium. But of course, we always look at what the joint venture partner can bring to the party, and we're going to look to make sure that we're competitive from an EV perspective in that market as well. So we are open and always considering whatever is the most cost-effective way to have a vehicle that's going to have no compromises to meet the performance of, in this case, the Chinese consumer.

Our next question comes from Dan Levy with Barclays.

First, I just wanted to ask about the commentary on CapEx, which you noted the $11 billion to $13 billion for '24, '25 is under review. You trimmed the CapEx for 2023. Maybe you can just give us a sense of how you're looking at the manufacturing build-out. I think you noted that there's some simplification initiatives. Is that just something that was incremental? Or was that a byproduct perhaps looking at the market a little differently in terms of demand. I guess we're just wondering is that the slowdown in spend just purely the simplification. Or is there something else on the manufacturing side with market demand that's causing you to slow down a little bit the way that you're spending?

As 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 EV and ICE we're going to -- by 2030, we'll be covering 90% of the segments, but we looked and found ways to do that more efficiently. The Bolt is a good example, instead of doing an all-new vehicle really leveraging the capital that's already there and the benefits we have by having the Ultium platform. And then I think the winning with simplicity, 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 in vendor tooling and in the plant. And frankly, this is something we've been working on for the last several months. Mark Reuss is leading this initiative with the marketing and manufacturing teams. And we are finding, there's a lot of ways to take cost out of manufacturing and from a capital perspective as well. So it's pretty significant. You'll hear and see more about it. But just the comment I made about getting rid of trims that directly correlates to spending less capital, especially on the vendor tooling side.

And then as a follow-up, I just wanted to pass the question on this -- on the charge associated with the Bolt. And really, this pegs the question, Ultium is a new product, and I think there's 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 -- I mean, is there a need to be an added level of conservatism as the ramping? Or is there some clear data that you have that shows just early on that the quality will be far greater than the initial Bolt, which was -- you've clearly evolved on your architectures. But just wondering how you need to think about warranty expense going forward on the new vehicles .

Yes. I would say if you go back, the Bolt's been in market for several years now and actually had very good warranty performance. Remember, this was two specific manufacturing defects that have occurred at the same time, caused the issue on the Bolt that was in the LG ES process. We -- our team worked hand-in-hand with them. We understand exactly what happened. When you look at what we're doing at the Ultium plants from a cell perspective and the amount of error proofing and the fact that we're following the quality process and have the traceability that if there were an issue, we wouldn't have to do the whole population. All of that's been put in place. So I think all those lessons learnt. Then when you look at what we've got from an Ultium perspective already and what we're seeing, I think we're very confident that we're going to see strong or I would say, good warranty performance, strong warranty performance on these vehicles because, again, using General Motors manufacturing quality systems and processes across the board. So I don't think that because it's new, I think some of the things we're struggling with to start up with our suppliers is the modules, that's not going to necessarily drive a quality issue. Again, we have quality checks and processes and using the appropriate error proofing to know that when we have a cell, when we have a module when we have a pack, it's measured and checked for quality.

Our next question comes from Chris McNally with Evercore.

I wanted to quickly go back to the $30 billion autonomous elephant in the room. And just a quick tech question for Kyle. So Assuming that the San Francisco policy update goes in sort of the industry's favor, do you just have a broad sense for when the 24x7 rollout will happen in San Francisco quarter, the consumer rides, I know there's internal testing where you're blanketing the city, but just curious on the consumer side. And then just how many AVs would it take to sort of blanket a city like San Francisco to have a disruptive service similar to Uber. Can you do it with under 1,000 to 2,000 origin?

Yes, good question. So on the San Francisco side, so right now, as I said earlier, a significant portion of our fleet is operating 24x7, and that service is open to employees. So we are not far from opening that up to the general public. I can't give specific dates. But basically, we're operating that service to employees. Things are looking pretty good. So that is coming pretty soon. And as for what it would take to blanket a city like San Francisco, our goal is, as I think I said on previous calls is to make sure that we ramp up manufacturing capacity. We've got a variety of markets to absorb those vehicles. And there are practical reasons to ramp up gradually in the city, just to make sure it acclimates as it's transitioning to a new form of mobility. So it's not our intention just to sort of vehicles and sort of direct them all into a single city. That's our perspective. There's over 10,000 human ride hill drivers in San Francisco, potentially much more than that, depending on how you count it. Those drivers, of course, aren't working 20 hours a day like a robotaxi could. So it does not make a very high number to generate significant revenue in a city like San Francisco. But certainly, there's capacity to absorb several thousand per city at minimum.

Much appreciate it. And then just a high-level question on the strategy for whoever comes to capital funding. Mary, it looks like there's about 3-plus type quarters before you'd have to sort of consider funding Cruise? Just any thoughts on internal versus external funding given the environment.

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

Our next question comes from Tom Narayan with RBC.

Mary, a question -- maybe a philosophical one on autonomy and how you view Ultra Cruise. In light of what we heard from Tesla and how they are potentially planning to license an FSD product. Just curious to how you view Ultra Cruise, would that be a revenue profit center? Or just a product enhancer. How do you see the kind of Level 2 plus product for you?

We definitely see the Level 2 plus product as revenue-generating and profit-generating and 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 Cruise. You made a strong case, obviously, on the safety features. Just wondering if you could give some color on how perhaps you're arguing that on a regulatory perspective, maybe on a federal level, like what are kind of the obstacles? And I mean, is that you see happening more likely now? Is there kind of a greater appeal now that you're seeing all these safety benefits? Is it a stronger case now than maybe it was before?

I think as we continue to grow in 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 safe with what Kyle referred to with what we did with outside groups and continuing to share the information. I think it's very goal aligned with what the Department of Transportation and NYCTA is looking for us to improve road safety. So of course, we're going to continue that dialogue, share the information, and we're very optimistic of where we're headed. .

Our last question comes from Ryan Brinkman with JPMorgan.

Okay. Great. It looks like the China equity income in 2Q was similar to 1Q, rounding to $21 billion, down from sort of $0.2 billion a year ago and of course, $0.5 billion quarterly pre-pandemic. 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 EVs, such as for the Wuling brand. How should we think about your strategy for electrifying your high-end brands in China? Is that the catalyst do you think to higher profits in that market?

Well, definitely, we have strong ICE products and performance there are already clear to winning as we go forward is having the right portfolio of EVs for Cadillac and Buick 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 in meeting the customer needs. But let's also remember, right now, we're in the high single-digit market -- market share place right now even with all the -- in fact that there's 100 new EV entries. So we've got to have the right EVs at the right price with the right technology. I was over there I guess, maybe two months ago now and did a full review of our product line and obviously spent time understanding where the competition is. I think we've got the right products coming. We've got to go out there and sell them now engage our team to get that done.

Okay. Great. And then just maybe lastly on the Bolt charge. Is the charge driven more by something differently being done for the consumer versus what was previously communicated? Or is it more of a like rejiggering of the cost-sharing agreement between GM and LG for the previously announced actions?

Well, for a portion of it, obviously, as you announced the recall and then you look what it's going to take, we took some time working with the LG ES team to come up with a diagnostic that then over a period of time indicates that the vehicle can go from the reduction of 80% battery charge 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 were taking care of the consumers, replacing the battery packs maybe faster than what we would have ended up needing to do. And just having attention to them because again, we have a very strong Bolt customer, and we wanted to make sure that they understood we're going to stand behind it. So I think we took the right actions. And as we looked at that, where we were as we were well into having that issue behind us, we looked at what was right from where the costs fell. So we just were doing the right thing. LG is 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.

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 at the opening of the call, the success we've had in the second quarter and the first half ties directly to the great new vehicles we've launched 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 EV portfolio, our investment that we're making, not only in the vehicles, but also the growth opportunities as well as cost discipline. And -- 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 Abbott, who joined us from Apple in May. You're also going to have the opportunity to drive our new STBs and experience the expanding capabilities, as I mentioned, of Super Cruise. And one of the most important vehicles you're going to get to drive is the new Chevrolet Silverado EV work truck that we talked about it. I think most powerful examples of the benefits of the investment we made starting in 2018 on the Ultium platform. It offers up to 40% more driving range, faster charging and far greater towing capability than 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 they're going to need to do that as they get to their dedicated platform. So I'm very excited about what we're doing to be able to demonstrate in November and just know that we're going to continue to execute with discipline across all aspects of the business as we are in Q3 and into Q4. So appreciate everyone and look forward to seeing you then and probably talk 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.