“As the quality of our vehicles improves, the cost of coverage per vehicle should come down.”

In context

“it is the right thing to do for our customers. Let's start with costs. We are still targeting to deliver a net improvement of $1 billion this year, excluding the impact of tariffs. A significant driver of these savings is material cost improvement actions, which will also flow through into 2026. It is important to note that in the second quarter, our costs would still have been down even if the special field service action or DFSA was included. Turning to quality. Warranty is the largest component of our competitive cost gap. This is a major cost opportunity for us. There are 2 warranty costs investors should focus on. The first is warranty coverage. This is the expected cost to cover our bumper-to-bumper and powertrain warranties. Coverages make up about 60% of our total warranty costs. As the quality of our vehicles improves, the cost of coverage per vehicle should come down. In fact, we are already seeing this improvement. Our latest 0 and 3 months in service metrics are tracking towards our strongest performance in over 10 years. The second part of warranty costs are FSAs, costs associated with recalls and customer satisfaction items. We are not satisfied with the current level of recalls or the number of vehicles impacted. We are working to reduce the cost of these recalls. For example, we are leveraging AI solutions to improve parts traceability to help minimize the scope of recall units. Roughly 1/3 of our recalls over the past 3 years have been software related, and we are addressing this head on. We are using over-the-air or OTA updates to reduce customer inconvenience of having to take the recall units in for service. OTAs are a game changer. OTAs cost”