1 00:00:03,160 --> 00:00:06,519 Speaker 1: Global business news twenty four hours a day. It's Bloomberg 2 00:00:06,600 --> 00:00:09,680 Speaker 1: dot Com the radio plus mobile lap and on your radio. 3 00:00:09,960 --> 00:00:14,640 Speaker 1: This is a Bloomberg Business Flash from Bloomberg World Handquarters. 4 00:00:14,680 --> 00:00:18,480 Speaker 1: I'm Charlie Pallett, fluxuous stock Star fluctuating their records amid 5 00:00:18,480 --> 00:00:20,960 Speaker 1: a mix of corporate results. We do have the SMP 6 00:00:21,120 --> 00:00:23,760 Speaker 1: five hundred and decks up a point now at twenty 7 00:00:23,840 --> 00:00:26,880 Speaker 1: one sixty eight a gain there of point one percent down. 8 00:00:26,880 --> 00:00:29,800 Speaker 1: Industrial is up twenty eight points to eighteen thousand, four 9 00:00:29,920 --> 00:00:33,040 Speaker 1: hundred forty three, a drop of two tens up one percent. 10 00:00:33,360 --> 00:00:36,320 Speaker 1: Now stack up ten to fifty one fifty. Again, there 11 00:00:36,360 --> 00:00:38,520 Speaker 1: of two tenths of one percent. The ten year down 12 00:00:38,640 --> 00:00:43,080 Speaker 1: three thirty seconds, zeal one point five percent, Gold higher 13 00:00:43,200 --> 00:00:45,960 Speaker 1: up by five eighty, the ounce thirteen thirty two. Again 14 00:00:46,000 --> 00:00:48,640 Speaker 1: there are four tenths of one percent, and crude oil 15 00:00:48,680 --> 00:00:51,400 Speaker 1: down fifty five cents of barrel forty one forty right 16 00:00:51,440 --> 00:00:54,440 Speaker 1: now on West Texas intermediate crude. That is a drop 17 00:00:54,480 --> 00:00:57,960 Speaker 1: of one point three percent. I'm Charlie Pallett, and that's 18 00:00:58,000 --> 00:01:02,440 Speaker 1: a Bloomberg business flash. You're listening to taking stock with 19 00:01:02,600 --> 00:01:07,000 Speaker 1: pin Box and Kathleen Hayes on Bloomberg Radio. Shares a 20 00:01:07,080 --> 00:01:10,200 Speaker 1: Ford Motor Ford Motor Company down about nine and a 21 00:01:10,240 --> 00:01:14,320 Speaker 1: half percent right now after reporting profit that declined nine 22 00:01:14,360 --> 00:01:18,600 Speaker 1: percent in the second quarter, also perhaps tempering its full 23 00:01:18,680 --> 00:01:22,080 Speaker 1: year outlook. And find out more from Bob Shanks. He's 24 00:01:22,120 --> 00:01:25,400 Speaker 1: the chief financial officer of a Ford Motor Company and 25 00:01:25,440 --> 00:01:28,479 Speaker 1: he joins us now from Dearborn, Michigan. Bob Shanks, thanks 26 00:01:28,560 --> 00:01:30,640 Speaker 1: very much for being with us well as always, it's 27 00:01:30,680 --> 00:01:32,520 Speaker 1: a pleasure to be with you, all right, So go 28 00:01:32,640 --> 00:01:34,920 Speaker 1: through the results for us and tell us some of 29 00:01:34,959 --> 00:01:39,400 Speaker 1: the issues that Ford is grappling with. Yeah, we actually 30 00:01:39,440 --> 00:01:43,240 Speaker 1: had a strong quarter. We generated a profit of three 31 00:01:43,280 --> 00:01:47,960 Speaker 1: billion dollars, as you mentioned, that was down nine percent um. 32 00:01:48,000 --> 00:01:51,160 Speaker 1: We generated a record cash flow four point two billion 33 00:01:51,200 --> 00:01:54,200 Speaker 1: dollars and a really healthy margin of seven point seven percent, 34 00:01:54,800 --> 00:01:57,440 Speaker 1: and our top line grew about two point two billion 35 00:01:57,440 --> 00:01:59,640 Speaker 1: dollars to nearly forty billion dollars. So it was a 36 00:01:59,680 --> 00:02:01,920 Speaker 1: strong quarter for us. As you pointed out, it wasn't 37 00:02:01,960 --> 00:02:05,040 Speaker 1: quite what the market expected, but when you take it 38 00:02:05,120 --> 00:02:07,680 Speaker 1: with the record first quarter that we had for the 39 00:02:07,720 --> 00:02:10,400 Speaker 1: first half, we had the best results we've ever had 40 00:02:11,080 --> 00:02:13,440 Speaker 1: for North America and for the company. Itself. So you know, 41 00:02:13,560 --> 00:02:16,120 Speaker 1: it's a very very strong start to the year. But 42 00:02:16,240 --> 00:02:19,480 Speaker 1: to your point, we did highlights and issues, well you know, Bob, 43 00:02:19,560 --> 00:02:22,399 Speaker 1: and that's the issues. That's why your stock fell so much. 44 00:02:22,440 --> 00:02:25,200 Speaker 1: And congratulations on the great year we've been, you know, 45 00:02:25,240 --> 00:02:27,440 Speaker 1: having this quarter the conversation for a while now and 46 00:02:28,040 --> 00:02:31,240 Speaker 1: clearly you're in a great spot. But as you said today, 47 00:02:31,280 --> 00:02:34,640 Speaker 1: we're committed to meeting our guidance. But it is at risk. 48 00:02:34,760 --> 00:02:37,400 Speaker 1: Keith Notton in his terrific story. You talked to Keith 49 00:02:37,440 --> 00:02:39,919 Speaker 1: a lot and one of our you know, our Southall 50 00:02:40,000 --> 00:02:44,400 Speaker 1: Michigan or Detroit reporters who specializes in auto's h quote 51 00:02:44,440 --> 00:02:47,400 Speaker 1: someone saying the U S auto markets probably leveling out. 52 00:02:47,480 --> 00:02:50,840 Speaker 1: The risk is when does all that come crashing down? 53 00:02:51,680 --> 00:02:53,200 Speaker 1: How are you going to deal with this? How can 54 00:02:53,240 --> 00:02:56,240 Speaker 1: you cut costs in the second half to achieve your 55 00:02:56,240 --> 00:02:59,440 Speaker 1: goal of matching or beating last year's pre tax profit 56 00:02:59,480 --> 00:03:02,760 Speaker 1: of tempoint billion. Well we laid that out in the 57 00:03:02,800 --> 00:03:05,639 Speaker 1: call today that we had with with cell Side and 58 00:03:05,720 --> 00:03:09,760 Speaker 1: with investors, and we actually delivered about a billion six 59 00:03:10,040 --> 00:03:12,920 Speaker 1: of cost performance versus what we had planned in the 60 00:03:12,960 --> 00:03:15,640 Speaker 1: first half. And as we look at the second half, 61 00:03:16,240 --> 00:03:17,720 Speaker 1: you know we were going to have to come up with, 62 00:03:18,440 --> 00:03:21,680 Speaker 1: you know, an incremental cost reductions versus what we had planned, 63 00:03:21,680 --> 00:03:24,640 Speaker 1: but we're also looking at revenue opportunities. So as we 64 00:03:24,720 --> 00:03:27,120 Speaker 1: laid out, we're committed to the guidance. We are going 65 00:03:27,160 --> 00:03:28,960 Speaker 1: to have to work hard to get there, but we've 66 00:03:29,000 --> 00:03:31,160 Speaker 1: got actions in place and plans to do that. But 67 00:03:31,240 --> 00:03:34,240 Speaker 1: we thought it was appropriate and we're always pretty transparent 68 00:03:34,280 --> 00:03:36,880 Speaker 1: to share with investors of the issues that we see 69 00:03:36,960 --> 00:03:39,800 Speaker 1: that we're we're we're addressing and grappling with, not only 70 00:03:40,440 --> 00:03:42,680 Speaker 1: in the US, but in another couple of markets around 71 00:03:42,720 --> 00:03:44,840 Speaker 1: the world. Bob, I want to talk trucks for just 72 00:03:44,960 --> 00:03:49,000 Speaker 1: a second, and the comparisons with last year's launch of 73 00:03:49,160 --> 00:03:53,200 Speaker 1: the new F one fifty, so that makes the comps 74 00:03:53,520 --> 00:03:56,760 Speaker 1: much more challenging. Focus on that and then take us 75 00:03:56,760 --> 00:04:00,240 Speaker 1: to the new heavy duty truck that you're working on. Yeah, 76 00:04:00,240 --> 00:04:02,200 Speaker 1: that's a good question. Well, one of the issues we 77 00:04:02,280 --> 00:04:05,920 Speaker 1: highlighted is that the overall industry is seen over a 78 00:04:05,960 --> 00:04:08,880 Speaker 1: period of time and very gradually but sort of inexorably. 79 00:04:08,880 --> 00:04:13,400 Speaker 1: We've seen increases in incentives of ourselves come along with 80 00:04:13,520 --> 00:04:17,120 Speaker 1: the industry um but again very gradual. When you look 81 00:04:17,200 --> 00:04:20,239 Speaker 1: at what happened in the quarter. We did have negative 82 00:04:20,240 --> 00:04:22,880 Speaker 1: net pricing that was driven by higher incentives. A portion 83 00:04:23,040 --> 00:04:25,240 Speaker 1: of that is exactly what you're talking about, which is 84 00:04:25,240 --> 00:04:27,640 Speaker 1: the fact that a year ago we were just coming 85 00:04:27,640 --> 00:04:29,839 Speaker 1: out of the launch of the second facility for the 86 00:04:29,920 --> 00:04:34,000 Speaker 1: F one fift, so we had extremely low levels of incentives. 87 00:04:34,040 --> 00:04:37,800 Speaker 1: This year, F one f is doing fantastically. We're growing share. 88 00:04:37,880 --> 00:04:41,640 Speaker 1: The average transaction prices are higher, but in terms of incentives, 89 00:04:41,920 --> 00:04:46,159 Speaker 1: incentives are called them normal. They're still very very good 90 00:04:46,279 --> 00:04:50,040 Speaker 1: versus our domestic competition, but they're the normal, whereas last 91 00:04:50,080 --> 00:04:52,159 Speaker 1: year they were pretty extraordinary because of where we were 92 00:04:52,200 --> 00:04:55,000 Speaker 1: in the launch. When you look at the third quarter, 93 00:04:55,760 --> 00:04:59,320 Speaker 1: we have a complete ground up new super Duty that 94 00:04:59,360 --> 00:05:03,719 Speaker 1: we're going to belaunching in in Louisville, and that vehicle 95 00:05:03,760 --> 00:05:06,800 Speaker 1: hasn't been given such a change in nineteen years, and 96 00:05:06,920 --> 00:05:08,760 Speaker 1: we're gonna be putting them on a new frame. It's 97 00:05:08,760 --> 00:05:11,960 Speaker 1: going to pick up a similar aluminum body as we 98 00:05:12,000 --> 00:05:14,920 Speaker 1: have on the F one fifty. New technologies features, our 99 00:05:15,040 --> 00:05:18,440 Speaker 1: drink upgrades and so forth. So it's a very very 100 00:05:18,560 --> 00:05:21,720 Speaker 1: major launch. A lot of costs UH and investment associated 101 00:05:21,760 --> 00:05:23,359 Speaker 1: with doing that. But when we come out of it. 102 00:05:23,839 --> 00:05:26,120 Speaker 1: We're gonna have we already have the best vehicle in 103 00:05:26,160 --> 00:05:28,080 Speaker 1: that segment. We're gonna have a vehicle that's going to 104 00:05:28,160 --> 00:05:30,720 Speaker 1: be very strong for the next decade or more. Well, 105 00:05:30,720 --> 00:05:34,960 Speaker 1: that's good, that's good. But how you're gonna cut capital 106 00:05:35,000 --> 00:05:36,960 Speaker 1: spending then, because it seems to be part of that 107 00:05:37,040 --> 00:05:39,200 Speaker 1: is going to be capital spending. You noted on the 108 00:05:39,200 --> 00:05:42,200 Speaker 1: call today that's been reduced to seven billion this year 109 00:05:42,240 --> 00:05:44,920 Speaker 1: from seven point seven billion. How did you remove seven 110 00:05:44,960 --> 00:05:47,800 Speaker 1: hundred million? How can you remove even more if you've 111 00:05:47,800 --> 00:05:51,520 Speaker 1: got to ramp up your your your pickup truck output 112 00:05:51,600 --> 00:05:55,279 Speaker 1: and innovation. Well, that's included the super duties included in 113 00:05:55,560 --> 00:05:59,760 Speaker 1: the seven billion forecast for the year. What we highlighted 114 00:05:59,760 --> 00:06:02,080 Speaker 1: in the call today is what we've actually seen with 115 00:06:02,240 --> 00:06:05,880 Speaker 1: the launches that have concluded over the last half year 116 00:06:06,040 --> 00:06:07,960 Speaker 1: or even year and we're kind of wrapping up the 117 00:06:08,000 --> 00:06:11,039 Speaker 1: books on that and closing out the purchase orders with vendors, 118 00:06:11,800 --> 00:06:15,800 Speaker 1: is that we've been delivering programs more efficiently, both in 119 00:06:15,880 --> 00:06:19,680 Speaker 1: terms of investment and expense than what we had expected. 120 00:06:20,000 --> 00:06:22,320 Speaker 1: So we were able to book some good news to that. 121 00:06:22,400 --> 00:06:25,160 Speaker 1: And then in addition, we've had a real focus on 122 00:06:25,839 --> 00:06:28,839 Speaker 1: reducing our nonproduct investment, and we were quite successful on 123 00:06:28,880 --> 00:06:30,560 Speaker 1: that and a half, and so those two things gave 124 00:06:30,640 --> 00:06:33,080 Speaker 1: us the ability to take the call for the year 125 00:06:33,080 --> 00:06:36,880 Speaker 1: down to seven billion dollars. Bob Shanks Ford Credit, that's 126 00:06:36,920 --> 00:06:39,880 Speaker 1: the financing arm. What happened and does it tell you 127 00:06:39,920 --> 00:06:44,040 Speaker 1: anything about the future? Well, what happened, and it's something 128 00:06:44,080 --> 00:06:47,960 Speaker 1: that that we think is is probably more broadly an 129 00:06:48,000 --> 00:06:51,320 Speaker 1: industry phenomenon. But what happened is and we talked about 130 00:06:51,360 --> 00:06:54,560 Speaker 1: this actually in the first quarter, is that there's been 131 00:06:54,560 --> 00:06:57,440 Speaker 1: more leasing and increasing leasing over the last several years 132 00:06:57,440 --> 00:06:59,960 Speaker 1: in the United States. There are more of those vehicles 133 00:07:00,040 --> 00:07:02,640 Speaker 1: now coming awf lease and coming back into the auctions. 134 00:07:03,400 --> 00:07:06,360 Speaker 1: And what we've seen is that that with that increase 135 00:07:06,440 --> 00:07:10,920 Speaker 1: in volume and also with lower gas prices, that the 136 00:07:10,960 --> 00:07:14,840 Speaker 1: residual values on smaller vehicles are lower than what we 137 00:07:14,880 --> 00:07:17,920 Speaker 1: had expected. So what we've had to do on the 138 00:07:18,440 --> 00:07:21,880 Speaker 1: books a Ford credits, we've had to accelerate or increase, 139 00:07:21,960 --> 00:07:25,400 Speaker 1: if you will, the depreciation of units that are still 140 00:07:25,480 --> 00:07:27,440 Speaker 1: on the books being lease but haven't come back yet. 141 00:07:27,440 --> 00:07:28,960 Speaker 1: But we had to take the lease in value for 142 00:07:29,000 --> 00:07:32,720 Speaker 1: those vehicles down increase of depreciation to get that lower endpoint, 143 00:07:32,720 --> 00:07:35,920 Speaker 1: and that came through in higher residual losses. Bob Shanks, 144 00:07:35,960 --> 00:07:37,960 Speaker 1: thank you so very much for joining us. He's the 145 00:07:38,040 --> 00:07:42,160 Speaker 1: CFO of Ford Motor Company, reporting their earnings today. This 146 00:07:42,320 --> 00:07:47,920 Speaker 1: is Bloomberg coming up on taking Stock. A look at 147 00:07:48,000 --> 00:07:51,360 Speaker 1: small business. 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