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Speaker 1: Well, going forward, we've got some new outlooks. The latest

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Speaker 1: from Ford this morning a new range for twenty twenty

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Speaker 1: three adjusted earnings before interest ten billion to ten point

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Speaker 1: five billion, the previous range before suspending guidance eleven to twelve.

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Speaker 1: We've got a lot to talk about. We can do

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Speaker 1: that now with John Lord of Ford c FI. We

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Speaker 1: can mornit John, good morning, let's talk about it. Where

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Speaker 1: is it? Where's my ten billion dollar buy back? Why

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Speaker 1: a different approach from you and the team.

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Speaker 2: Well, we have a great plan in our Ford plus plan,

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Speaker 2: and we're focused on investing in growth, in profitability and

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Speaker 2: through that rewarding our shareholders with a higher price, plus

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Speaker 2: also paying out forty to fifty percent of our free

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Speaker 2: cash flow in dividends. And so we're investing in the business.

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Speaker 2: We have three great segments that are growth segments, Ford

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Speaker 2: Pro our commercial business margins in the mid teens for us,

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Speaker 2: that's very high in our industry. Profits are going to

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Speaker 2: almost double this year, more than double this year, and

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Speaker 2: we have a great opportunity with the mosts we have

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Speaker 2: to drive significant profitability.

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Speaker 1: And cost to gone up as well. By the labor

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Speaker 1: contract nine hundred dollars to the cost of each car

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Speaker 1: off the back of that UAW contract. Now, just for

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Speaker 1: our audience, because you're aware of these figures already, GM,

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Speaker 1: who we spoke to yesterday, are at five seventy five.

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Speaker 1: I'm still trying to sit here and work out how

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Speaker 1: do we get from five to seventy five at GM

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Speaker 1: and nine hundred dollars to the cost of each car

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Speaker 1: a Ford. What is that about?

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Speaker 2: Well, when you look at it, we're five hundred dollars

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Speaker 2: to start in twenty twenty four, and that grows over

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Speaker 2: time as wages increase. The biggest increase in this contract

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Speaker 2: is gross wage increase. It's significant over twenty five percent.

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Speaker 2: And then our footprint in the US is bigger than

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Speaker 2: General Motors. But the rest of that, I'm not exactly

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Speaker 2: sure why their number is that much lower than ours.

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Speaker 2: That's something that would have done packed with them. We

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Speaker 2: know what we've done with this contract. We know what

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Speaker 2: the start point is. It's sixty to seventy basis points

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Speaker 2: on our income statement basis. And now what we need

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Speaker 2: to do is we need to work on driving productivity

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Speaker 2: and efficiencies and reducing the labor hours, the hours takes

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Speaker 2: to build a vehicle and reducing that cost, and that's

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Speaker 2: what we're going to be focused on going forward.

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Speaker 3: So it's going to be cost reductions rather than trying

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Speaker 3: to raise prices for the end consumer.

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Speaker 1: Is that right?

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Speaker 2: Well, now you have to think about pricing differently in

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Speaker 2: our industry because all segments aren't the same. There's different

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Speaker 2: pricing power across the segments. That's why we feel that

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Speaker 2: what we did in segmenting the business and having the

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Speaker 2: transparency around that, it's important. If you look at the

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Speaker 2: commercial business in pro we believe there's still pent up

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Speaker 2: demand and pricing power there. However, in Blue in the

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Speaker 2: more of the retail consumer segment, you're going to see

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Speaker 2: prices come down. We've been consistent talking about that. Back

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Speaker 2: in thirteen thirteen point four percent of disposable income to

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Speaker 2: buy a vehicle went up to fifteen point seven In

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Speaker 2: twenty twenty two, it's down to fourteen point five percent roughly.

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Speaker 2: Now we see that coming back to thirteen point four

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Speaker 2: percent as you move through twenty twenty four.

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Speaker 3: Well, when you talk about lower price points, I think

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Speaker 3: about some of the Chinese car manufacturers and the production

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Speaker 3: much more cheaply of electric vehicles in particular than but

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Speaker 3: are really making a competitive advantage.

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Speaker 1: How do you compete with them, especially.

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Speaker 3: Given the labor contracts and some of the other working

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Speaker 3: operating costs that you're dealing with.

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Speaker 2: Yeah, it's a good point, and that's something that we're

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Speaker 2: very focused on. Again, the segmentation. Each segment is different.

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Speaker 2: We've seen prices come down in the electric segment much

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Speaker 2: quicker than we expected, and the reason for that is

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Speaker 2: that we're moving out of the early adopters who are

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Speaker 2: willing to pay for higher prices. Early majority customers aren't.

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Speaker 2: They're not willing to pay that premium. So we're seeing

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Speaker 2: those come down and we expect them to equalize with

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Speaker 2: gas prices. So it's all going to be about cost

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Speaker 2: and efficiency, capital efficiency, et cetera. We have to get

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Speaker 2: more competitive on cost and that's what we're focused on

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Speaker 2: in our second generation and third generation vehicles.

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Speaker 1: What is handy with demand in the evase. What is

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Speaker 1: happening is this real pushback that changes you approach.

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Speaker 2: I think what it is is it's the adoption rate.

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Speaker 2: It's flatter than when what we had expected. The increase

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Speaker 2: isn't as great. Fifty percent up this year from sales standpoints.

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Speaker 2: So they're coming. It's going to be part of the industry.

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Speaker 2: Eventually we'll get to those higher growth rates. So we

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Speaker 2: have to adjust our capital investment. We have to adjust

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Speaker 2: our approach in the near turn.

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Speaker 1: That sounds like a change in execution, not strategy.

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Speaker 2: Absolutely, it is a change in execution, not strategy.

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Speaker 1: So let's talk about the numbers. You've pushed out twelve

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Speaker 1: billion in EV related investments. Should we expect to see

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Speaker 1: a little bit more of that going on?

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Speaker 2: Depends on the customer and the adoption rate and how

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Speaker 2: that pushes out. If the adoption rate starts to grow faster,

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Speaker 2: we'll increase our capital investments.

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Speaker 1: Let's go through the guide. I've got two points. Sure,

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Speaker 1: I want to see if these are still up today.

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Speaker 1: So you did expect half the sales to be electric

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Speaker 1: vehicles by twenty thirty, still the case.

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Speaker 2: Now we think it's going to be less than that

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Speaker 2: given where they how much would it be jump. We

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Speaker 2: haven't put a number on that yet. We're still looking

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Speaker 2: at what that rate will be. I think we'll know

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Speaker 2: more as we go through next year.

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Speaker 1: Is it the same for margins on those evs as well?

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Speaker 1: You have to reassess how big those margins will be.

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Speaker 2: Yeah, I think as the industry adjusts, you have to

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Speaker 2: look at that. But we're targeting. We've set up our

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Speaker 2: business structure and we think the right target is around

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Speaker 2: the eight percent or high single digits.

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Speaker 3: You said that you're very focused on trying be competitive

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Speaker 3: in the ev spice on price. Is that when we

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Speaker 3: asked about margin compression, you're basically saying, we're going to

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Speaker 3: see as we go on what the competitive landscape looks like.

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Speaker 3: But how do you plan to reduce costs? Is it

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Speaker 3: going to be with job cuts? Is it going to

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Speaker 3: be with more automation?

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Speaker 2: So when yes, absolutely, automation that is going to be

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Speaker 2: a key part of what we do. Now when you

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Speaker 2: look at this contract, it's also important to understand for

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Speaker 2: us where the battery plants are and the battery plants

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Speaker 2: aren't part of the contract, and so that's important for

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Speaker 2: vertical integration. And when you're talking about electric vehicles, battery

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Speaker 2: and design is really important and the efficiency of that

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Speaker 2: battery and getting the smallest battery possible in so that

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Speaker 2: second generation design is going to be critical from a

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Speaker 2: cost standpoint. And then overall for us as a company,

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Speaker 2: we have work to do on our cost and quality,

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Speaker 2: and we're focused on that. We've made significant progress over

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Speaker 2: the last few years. We've restructured international operations, we moved

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Speaker 2: out of autonomous vehicles and pulled capital investment out of that,

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Speaker 2: focused on L two. We have the best driving system

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Speaker 2: out there and Blue CRUs according to consumer reports. So

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Speaker 2: we're making the adjustments as we go.

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Speaker 3: When you talk about automation and you know there's a

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Speaker 3: question around job cuts and how much this will reduce

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Speaker 3: the overall number of workers who will have to be

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Speaker 3: employed to make cars, is that what you foresee that

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Speaker 3: there is going to be a fewer team of professionals

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Speaker 3: that are creating vehicles in say five years thank today

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Speaker 3: at the Ford plants.

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Speaker 2: So in certain areas, there may be in other areas

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Speaker 2: we see growth. The key is driving efficiency and productivity.

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Speaker 2: So more coming out per unit of labor doesn't necessarily

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Speaker 2: mean you take the labor out that you get more productivity.

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Speaker 2: That's what we need to drive towards.

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Speaker 1: Let's finish on a dedic A question. I asked this

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Speaker 1: question in a lot and I'd like to ask it directly.

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Speaker 2: If you.

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Speaker 1: Is a Ford F one fifty lightning truck, which weighs

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Speaker 1: about six pounds. Really good for the environment because I

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Speaker 1: struggle with the association between these heavy electrified trucks and

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Speaker 1: climate change. What is the relationship we kind of kid

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Speaker 1: in ourselves.

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Speaker 2: I don't think so. I think that there's two things

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Speaker 2: about the electric truck. One, it's moving into electric is

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Speaker 2: important for the overall environment, that's true. But number two,

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Speaker 2: you also have to think about the consumer and what

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Speaker 2: that truck can do. It fills a niche that hadn't

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Speaker 2: been out there. There are certain individuals that just will

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Speaker 2: not drive an internal combustion vehicle. They never had access

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Speaker 2: to a vehicle and the utility like a pickup truck.

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Speaker 2: They now have that. Plus, for our commercial customers, it's

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Speaker 2: a tool, it's a generator. They use it on the

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Speaker 2: job site to power. Now you don't have gas generators

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Speaker 2: sitting out there. It's electric. It's coming from the vehicle itself.

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Speaker 2: So it is a good step forward in the environmental

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Speaker 2: push in reducing the CO.

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Speaker 1: Two footprint that comes site will continue. It's going to

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Speaker 1: hear from you. Grit's get an udate and the numbers

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Speaker 1: as Wow. Thank you, John. I appreciate it. John a

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Speaker 1: lot of there, the Ford CFO