1
00:00:02,520 --> 00:00:15,000
Speaker 1: Bloomberg Audio Studios, podcasts, radio news. You want to welcome

2
00:00:15,040 --> 00:00:18,520
Speaker 1: our Bloomberg TV and radio audiences back to our coverage

3
00:00:18,520 --> 00:00:20,880
Speaker 1: a closer look at earnings out of Ford. They crossed

4
00:00:20,920 --> 00:00:23,880
Speaker 1: the wire just a while ago, second quarter results showing

5
00:00:23,880 --> 00:00:26,160
Speaker 1: a justed ebit coming in at about two point one

6
00:00:26,200 --> 00:00:29,520
Speaker 1: billion dollars revenue at fifty billion dollars, but more importantly,

7
00:00:29,560 --> 00:00:32,680
Speaker 1: the company reinstating the guidance it had pulled earlier, saying

8
00:00:32,680 --> 00:00:35,360
Speaker 1: that it is adjusted profit for the year a six

9
00:00:35,400 --> 00:00:38,240
Speaker 1: point five to seven point five billion dollars, the low

10
00:00:38,400 --> 00:00:41,720
Speaker 1: end of that range, slightly below the average of analysts estimates.

11
00:00:41,880 --> 00:00:42,720
Speaker 2: Joining us right.

12
00:00:42,600 --> 00:00:45,239
Speaker 1: Now here in Studio two is Matt Miller. He is

13
00:00:45,280 --> 00:00:47,720
Speaker 1: the co host of Open Interest, and he joins us

14
00:00:47,720 --> 00:00:50,400
Speaker 1: for a very special interview with the CEO of Ford,

15
00:00:50,760 --> 00:00:51,400
Speaker 1: Jim Farley.

16
00:00:51,520 --> 00:00:54,560
Speaker 3: Matt, thanks very much, Romaine, Jim, thanks for joining us.

17
00:00:55,080 --> 00:00:57,800
Speaker 3: I want to ask first about how you're offsetting these tariffs.

18
00:00:57,840 --> 00:01:00,680
Speaker 3: I was on a call with Sherry House, your c earlier.

19
00:01:00,720 --> 00:01:03,920
Speaker 3: She said the hit to growth would be about three

20
00:01:04,040 --> 00:01:06,840
Speaker 3: billion dollars this year from TERRAFS, but you're able to

21
00:01:06,959 --> 00:01:10,880
Speaker 3: recover about a third of that. How are you doing

22
00:01:10,920 --> 00:01:13,160
Speaker 3: that is it through pricing? Are you able to get

23
00:01:13,160 --> 00:01:15,480
Speaker 3: it out of suppliers? What are you doing to get

24
00:01:15,480 --> 00:01:16,000
Speaker 3: that back?

25
00:01:17,640 --> 00:01:18,319
Speaker 2: It's all of it.

26
00:01:18,400 --> 00:01:21,400
Speaker 4: But the biggest strength for us is ford Pro, our

27
00:01:21,440 --> 00:01:22,959
Speaker 4: commercial business.

28
00:01:22,640 --> 00:01:25,160
Speaker 2: And it's not just vehicles, it's also software and our

29
00:01:25,200 --> 00:01:26,360
Speaker 2: parts business on Pro.

30
00:01:26,760 --> 00:01:29,119
Speaker 4: That's where the strength of our businesses and that's why

31
00:01:29,160 --> 00:01:32,800
Speaker 4: we increased our guidance net of the tariffs by about

32
00:01:32,840 --> 00:01:34,280
Speaker 4: a half a billion dollars.

33
00:01:34,319 --> 00:01:34,880
Speaker 2: It's pro.

34
00:01:35,920 --> 00:01:38,679
Speaker 4: We expect flat pricing for the rest of the year,

35
00:01:39,520 --> 00:01:41,199
Speaker 4: so it's really pro.

36
00:01:41,400 --> 00:01:42,440
Speaker 2: It's driving our results.

37
00:01:42,640 --> 00:01:45,840
Speaker 3: Hopefully investors know the story already, Jim, but I don't

38
00:01:45,840 --> 00:01:49,200
Speaker 3: think everyone understands the breadth of service as you offer

39
00:01:49,280 --> 00:01:51,640
Speaker 3: through ford Pro and the kind of growth you're seeing.

40
00:01:51,680 --> 00:01:54,800
Speaker 3: You've added two billion dollars to revenue year over year,

41
00:01:55,040 --> 00:01:58,880
Speaker 3: well over three billion dollars to revenue quarter over quarter.

42
00:01:59,360 --> 00:02:01,160
Speaker 2: And I was looking at.

43
00:02:01,000 --> 00:02:05,800
Speaker 3: The valuations of some of the competing businesses like writer, Geotab,

44
00:02:05,880 --> 00:02:09,560
Speaker 3: Sam Sara. They all blow away your evaluation. I feel

45
00:02:09,560 --> 00:02:12,400
Speaker 3: like ford Pro would get a much higher multiple if

46
00:02:12,440 --> 00:02:15,920
Speaker 3: it was trading outside of the legacy automaker. Have you

47
00:02:15,960 --> 00:02:17,840
Speaker 3: thought about spinning that off.

48
00:02:20,639 --> 00:02:21,919
Speaker 2: But we don't want to do that.

49
00:02:21,919 --> 00:02:24,280
Speaker 4: That's why we broke it out as a separate segment, Matt,

50
00:02:24,320 --> 00:02:28,480
Speaker 4: so everyone could see the profitability. Double digit's margins again,

51
00:02:29,400 --> 00:02:32,040
Speaker 4: you know, really strong results. We have almost eight hundred

52
00:02:32,120 --> 00:02:35,920
Speaker 4: thousand monthly subscribers for our software. As you said, we're

53
00:02:35,919 --> 00:02:39,480
Speaker 4: beating now the third party software providers because we can

54
00:02:39,520 --> 00:02:42,560
Speaker 4: control the vehicle speed, we can control access to the

55
00:02:42,639 --> 00:02:45,440
Speaker 4: vehicle now third party can't do that. We also have

56
00:02:45,480 --> 00:02:48,720
Speaker 4: a very strong parts business. Our dealers have invested two

57
00:02:48,760 --> 00:02:53,000
Speaker 4: billion dollars in large repair facilities. We've never really been

58
00:02:53,000 --> 00:02:54,919
Speaker 4: in that business in a big time to compete with

59
00:02:55,000 --> 00:02:58,400
Speaker 4: third party. Now we are, and almost twenty percent of

60
00:02:58,440 --> 00:03:01,720
Speaker 4: the profits now for pron vehicle so it's a great

61
00:03:01,760 --> 00:03:05,600
Speaker 4: ecosystem is something our competitors do not have. That's why

62
00:03:05,639 --> 00:03:08,080
Speaker 4: we broke it out separately so all the investors can

63
00:03:08,160 --> 00:03:08,880
Speaker 4: value just that.

64
00:03:09,160 --> 00:03:11,520
Speaker 1: I certainly was the bright spot. I am curious, Jim

65
00:03:11,560 --> 00:03:14,240
Speaker 1: about the strategy going forward with regards to the electric

66
00:03:14,320 --> 00:03:17,760
Speaker 1: vehicle business. When we talk about the commitment to new

67
00:03:17,760 --> 00:03:20,640
Speaker 1: models and more importantly, commitment to the infrastructure to support that,

68
00:03:20,960 --> 00:03:21,560
Speaker 1: what's the plan.

69
00:03:23,360 --> 00:03:24,760
Speaker 2: Well, that's a great question.

70
00:03:24,880 --> 00:03:27,600
Speaker 4: First of all, Ford is number three in hybrids, but

71
00:03:27,639 --> 00:03:29,640
Speaker 4: we're number one in truck hybrids, so we're going to

72
00:03:29,639 --> 00:03:34,280
Speaker 4: expand our hybrid offering across our internal combustion engine lineup

73
00:03:34,320 --> 00:03:36,880
Speaker 4: and that's going to really distinguish up. But we're starting

74
00:03:36,880 --> 00:03:40,640
Speaker 4: to see different kinds of hybrids that customers are excited about. Erevs,

75
00:03:40,680 --> 00:03:43,040
Speaker 4: which you go about one hundred miles all electric, but

76
00:03:43,080 --> 00:03:44,680
Speaker 4: then you could take a seven hundred.

77
00:03:44,360 --> 00:03:45,560
Speaker 2: Mile trip once in a while.

78
00:03:45,880 --> 00:03:49,080
Speaker 4: Those look really promising for a three row crossover like

79
00:03:49,200 --> 00:03:53,000
Speaker 4: Explore or some of our trucks. Our EV strategy, we've

80
00:03:53,040 --> 00:03:54,880
Speaker 4: been number two to Tesla in the US for about

81
00:03:54,920 --> 00:03:57,560
Speaker 4: three years. We've really changed that a couple of years ago,

82
00:03:57,600 --> 00:04:00,440
Speaker 4: and now those products are close to market. First one,

83
00:04:00,480 --> 00:04:03,240
Speaker 4: we're going to show everyone in Kentucky the platform. We're

84
00:04:03,240 --> 00:04:07,880
Speaker 4: going very low end, super affordable ease for urban duty

85
00:04:07,880 --> 00:04:10,960
Speaker 4: cycles and for commercial Our each brands have been very

86
00:04:10,960 --> 00:04:15,200
Speaker 4: successful with people who have, you know, schedule routes, they

87
00:04:15,200 --> 00:04:17,320
Speaker 4: don't have to worry about public charging on the fly.

88
00:04:17,760 --> 00:04:20,240
Speaker 4: That's where we're seeing traction with their EV business. The

89
00:04:20,279 --> 00:04:22,960
Speaker 4: real low end for people who just want a commuter

90
00:04:23,080 --> 00:04:26,360
Speaker 4: vehicle that's really cheap to operate, and then EV is

91
00:04:26,480 --> 00:04:28,600
Speaker 4: cheaper than ice and commercial.

92
00:04:28,800 --> 00:04:29,440
Speaker 2: We're not going to.

93
00:04:29,400 --> 00:04:33,360
Speaker 4: Invest in a lot of the very expensive crossovers for

94
00:04:33,480 --> 00:04:33,960
Speaker 4: pure EV.

95
00:04:34,520 --> 00:04:36,600
Speaker 2: We think that's going to be a hybrid business.

96
00:04:36,880 --> 00:04:40,320
Speaker 1: What does the supply chain look like specifically for the

97
00:04:40,360 --> 00:04:42,440
Speaker 1: EV and hybrid business right now? Are some of the

98
00:04:42,520 --> 00:04:44,960
Speaker 1: kinks that we saw last year at the start of

99
00:04:45,000 --> 00:04:46,720
Speaker 1: this year. Has that been worked out?

100
00:04:48,760 --> 00:04:49,320
Speaker 2: It has?

101
00:04:49,480 --> 00:04:51,920
Speaker 4: You know, we're really excited about our new affordable battery.

102
00:04:51,960 --> 00:04:54,240
Speaker 4: We have a plant Marshall, Michigan that's going to be

103
00:04:54,279 --> 00:04:56,880
Speaker 4: one of the first to make in the US LFP battery.

104
00:04:57,279 --> 00:05:01,159
Speaker 4: That battery supply chain has really react did to this

105
00:05:01,320 --> 00:05:05,800
Speaker 4: change in the market. We're looking to repurpose our unused

106
00:05:05,839 --> 00:05:09,240
Speaker 4: battery pant assets and more to come on that. I

107
00:05:09,279 --> 00:05:11,760
Speaker 4: think the supply chain has been very difficult because the

108
00:05:11,839 --> 00:05:14,719
Speaker 4: demand is so much lower than everyone thought. The growth

109
00:05:14,760 --> 00:05:17,839
Speaker 4: has been there, but lower than everyone thought, and we've

110
00:05:17,880 --> 00:05:20,919
Speaker 4: all adjusted to that. We've moved out our cycle plans.

111
00:05:20,960 --> 00:05:23,880
Speaker 4: We focused on affordable and commercial. You know, a lot

112
00:05:23,960 --> 00:05:26,400
Speaker 4: of people are fully pregnant with their a lot of

113
00:05:26,440 --> 00:05:29,400
Speaker 4: OEMs are fully pregnant with their existing lineup.

114
00:05:29,080 --> 00:05:30,640
Speaker 2: Of these very expensive evs.

115
00:05:31,200 --> 00:05:33,719
Speaker 4: We're fortunate we moved three or four years ago and

116
00:05:33,760 --> 00:05:36,880
Speaker 4: we could, we could tilt to hybrid and a specific

117
00:05:37,000 --> 00:05:39,760
Speaker 4: kind of EV and the supply chain has been able

118
00:05:39,760 --> 00:05:41,039
Speaker 4: to move with us so far.

119
00:05:42,120 --> 00:05:44,040
Speaker 3: I want to ask, first of all, I'm excited when

120
00:05:44,040 --> 00:05:45,400
Speaker 3: you when you come out with a three ro row

121
00:05:45,480 --> 00:05:47,719
Speaker 3: e E rev call me up because I'm in the

122
00:05:47,760 --> 00:05:50,039
Speaker 3: market for one of those. I want to ask about

123
00:05:50,040 --> 00:05:56,240
Speaker 3: the unintended consequences of this administration's terrorists, Jim, because the

124
00:05:56,360 --> 00:06:01,080
Speaker 3: Japanese or the Europeans, maybe the South Koreans, they're getting

125
00:06:01,120 --> 00:06:05,840
Speaker 3: away with a fifteen percent flat tariff now, but you

126
00:06:06,200 --> 00:06:11,239
Speaker 3: and other American automakers producing here have fifty percent tariffs

127
00:06:11,279 --> 00:06:15,240
Speaker 3: on steel, fifty on aluminum, twenty five percent on foreign parts,

128
00:06:15,320 --> 00:06:19,679
Speaker 3: up to eighty stacked eighty percent stacked tariffs on Chinese parts,

129
00:06:19,960 --> 00:06:22,839
Speaker 3: to the extent that it's got to really disadvantage you

130
00:06:23,120 --> 00:06:25,719
Speaker 3: when you're competing against a Toyota built in Japan or

131
00:06:25,760 --> 00:06:28,760
Speaker 3: a General Motors vehicle built in South Korea. Can you

132
00:06:28,839 --> 00:06:30,479
Speaker 3: quantify that disadvantage?

133
00:06:32,200 --> 00:06:35,159
Speaker 4: Yeah, I mean we studied it very carefully. If you

134
00:06:35,240 --> 00:06:37,479
Speaker 4: look at labor, if you look at the material costs

135
00:06:37,480 --> 00:06:39,920
Speaker 4: as you mentioned, Matt, and you look at the currency,

136
00:06:40,800 --> 00:06:43,440
Speaker 4: you know a lot of these countries have currencies that

137
00:06:43,600 --> 00:06:46,880
Speaker 4: really advantage their export. We think it's five thousand dollars

138
00:06:46,920 --> 00:06:50,360
Speaker 4: on like say Wrap four versus a Kentucky built Escape,

139
00:06:50,360 --> 00:06:53,039
Speaker 4: and maybe as much as ten thousand dollars on a

140
00:06:53,120 --> 00:06:56,520
Speaker 4: Japanese built for Runner or a Super U versus you know,

141
00:06:56,560 --> 00:06:59,520
Speaker 4: a Bronco built here in Michigan. So it's really meaningful

142
00:07:00,160 --> 00:07:03,800
Speaker 4: working with the administration is to take that layered tariff

143
00:07:04,000 --> 00:07:06,400
Speaker 4: because the autos have their own tear plus or subject

144
00:07:06,440 --> 00:07:09,800
Speaker 4: to all these other tariffs. We're working with Commerce and

145
00:07:09,840 --> 00:07:13,880
Speaker 4: the Trump administration to minimize our tariff expense so that

146
00:07:13,880 --> 00:07:16,920
Speaker 4: we can get more competitive. But the bottom line is

147
00:07:17,120 --> 00:07:20,680
Speaker 4: our plan forward is not to compete in those commodity segments.

148
00:07:21,040 --> 00:07:25,440
Speaker 4: We're really passion products like Bronco and Mustang, work vehicles

149
00:07:25,440 --> 00:07:29,120
Speaker 4: like Super Duty and our trucks, you know, and break

150
00:07:29,160 --> 00:07:31,720
Speaker 4: through evs which everyone will learn about in Kentucky in

151
00:07:31,760 --> 00:07:32,200
Speaker 4: a little bit.

152
00:07:32,440 --> 00:07:34,000
Speaker 2: That's where our capital's going.

153
00:07:34,400 --> 00:07:38,120
Speaker 4: So although it's a five to six thousand dollars, you know, disadvantage,

154
00:07:38,200 --> 00:07:40,600
Speaker 4: our capital really isn't going into those segments.

155
00:07:40,960 --> 00:07:44,720
Speaker 3: I get that, and I feel like, you know, Americans,

156
00:07:44,720 --> 00:07:47,480
Speaker 3: some Americans are willing to pay more to support a

157
00:07:47,520 --> 00:07:50,440
Speaker 3: seventy dollars an hour labor costs that we have here

158
00:07:50,560 --> 00:07:53,920
Speaker 3: versus you know, twenty to twenty five dollars labor costs

159
00:07:53,920 --> 00:07:57,640
Speaker 3: that the Japanese are working with. But it still seems,

160
00:07:57,760 --> 00:08:01,600
Speaker 3: you know, like General Motors could move more production to

161
00:08:01,720 --> 00:08:04,280
Speaker 3: South Korea if they get a fifteen percent flat rate

162
00:08:04,680 --> 00:08:07,280
Speaker 3: and have a huge advantage over you. They're the biggest

163
00:08:07,320 --> 00:08:10,360
Speaker 3: auto importer in America. Have you talked to the Trump

164
00:08:10,400 --> 00:08:13,600
Speaker 3: administration about working this out somehow?

165
00:08:15,440 --> 00:08:19,600
Speaker 4: Every day, every week, every month, every year, we have

166
00:08:19,720 --> 00:08:23,560
Speaker 4: daily conversations with our counterparts and government, and you know,

167
00:08:23,600 --> 00:08:27,320
Speaker 4: whether it's emissions, whether it's you know, tax policy, but

168
00:08:27,480 --> 00:08:32,160
Speaker 4: especially tarrat policy. They are very committed to minimizing this

169
00:08:32,400 --> 00:08:35,640
Speaker 4: disadvantage that we have making eighty percent of our vehicles

170
00:08:35,640 --> 00:08:38,120
Speaker 4: in the US. But you know, a lot of those

171
00:08:38,200 --> 00:08:40,920
Speaker 4: vehicles that we make in the US, you can't really

172
00:08:41,000 --> 00:08:44,320
Speaker 4: find ability a way to make those vehicles outside the US.

173
00:08:44,360 --> 00:08:46,880
Speaker 4: And just remember there is a chicken tax that's been

174
00:08:46,920 --> 00:08:50,000
Speaker 4: around for a long time on heavy trucks that would

175
00:08:50,040 --> 00:08:54,960
Speaker 4: be very difficult impossible to be competitive overseas. That really

176
00:08:54,960 --> 00:08:59,480
Speaker 4: affects the commodity segments like raft four and others, but

177
00:08:59,520 --> 00:09:02,360
Speaker 4: that's not our strategy afford to go after those segments.

178
00:09:04,160 --> 00:09:08,520
Speaker 4: I'm very hopeful that the Trump administration understands the predicament

179
00:09:08,600 --> 00:09:12,000
Speaker 4: that we are in as they make these bilateral trade agreements,

180
00:09:12,200 --> 00:09:14,840
Speaker 4: and they are going to work with us to do

181
00:09:14,880 --> 00:09:18,160
Speaker 4: the right thing for our US manufacturing companies.

182
00:09:18,400 --> 00:09:20,760
Speaker 1: So Jim, the President is actually speaking now at an

183
00:09:20,760 --> 00:09:24,160
Speaker 1: event in Washington on healthcare technology, but he's making a

184
00:09:24,160 --> 00:09:26,760
Speaker 1: lot of comments about bringing US manufacturing back here in

185
00:09:26,760 --> 00:09:30,080
Speaker 1: the US. He specifically says for factories for AI and

186
00:09:30,240 --> 00:09:32,080
Speaker 1: cars that he wants all that, of course to be

187
00:09:32,120 --> 00:09:34,520
Speaker 1: built here in the US. A reiteration of comments we've

188
00:09:34,520 --> 00:09:37,080
Speaker 1: heard in the past, based on the policies that at

189
00:09:37,160 --> 00:09:39,800
Speaker 1: least have been proposed and whatever policies have started to

190
00:09:40,320 --> 00:09:42,880
Speaker 1: be rolled out, are you seeing any sort of material

191
00:09:42,960 --> 00:09:47,360
Speaker 1: progress in bringing more auto manufacturing back to the US,

192
00:09:47,360 --> 00:09:49,240
Speaker 1: and I don't mean just cars but also parts two.

193
00:09:51,080 --> 00:09:54,800
Speaker 4: Yeah, We've been watching really carefully our competitors announcements in

194
00:09:54,880 --> 00:09:58,600
Speaker 4: auto and our suppliers announcements of what's getting reshort, the

195
00:09:58,640 --> 00:10:02,240
Speaker 4: realities of the fifteen percent and terraff for finished vehicles

196
00:10:02,480 --> 00:10:05,000
Speaker 4: that is not a high enough tariff you know, it'd

197
00:10:05,000 --> 00:10:07,040
Speaker 4: have to be in more like thirty to forty percent

198
00:10:07,120 --> 00:10:10,280
Speaker 4: to build a new factory in the US. Now, we've

199
00:10:10,280 --> 00:10:14,239
Speaker 4: seen a lot of our competitors, even our domestic competitors,

200
00:10:14,800 --> 00:10:18,160
Speaker 4: you know, fill open factories here where they have bridge production.

201
00:10:18,240 --> 00:10:20,400
Speaker 4: They may make it in Mexico and the US, the

202
00:10:20,440 --> 00:10:23,080
Speaker 4: same nameplate, and they are moving some of that back

203
00:10:23,080 --> 00:10:25,679
Speaker 4: to the US, which is good for our country and

204
00:10:25,720 --> 00:10:29,360
Speaker 4: good for our manufacturing. The key thing is going to

205
00:10:29,360 --> 00:10:34,439
Speaker 4: be the accumulation of effect of emissions policy, tax policy,

206
00:10:34,880 --> 00:10:38,360
Speaker 4: as well as this tariff policy. We have to work

207
00:10:38,440 --> 00:10:42,040
Speaker 4: out a solution for this tariff policy as the Trump

208
00:10:42,080 --> 00:10:45,959
Speaker 4: administration works through those bilateral trade agreements.

209
00:10:46,080 --> 00:10:46,640
Speaker 2: And as I.

210
00:10:46,559 --> 00:10:49,800
Speaker 4: Said, the conversations so far have been very productive, and

211
00:10:49,880 --> 00:10:52,360
Speaker 4: we'll let everyone know when we make material progress.

212
00:10:52,400 --> 00:10:54,240
Speaker 1: All right, Well, I'll let you get back to work, Jim.

213
00:10:54,240 --> 00:10:56,080
Speaker 1: I appreciate you taking time for us on a really

214
00:10:56,080 --> 00:10:59,240
Speaker 1: busy day. Jim Farley, the President and CEO of Ford

215
00:10:59,440 --> 00:11:01,360
Speaker 1: and our thanks to Matt Miller, the co hosts of

216
00:11:01,520 --> 00:11:04,040
Speaker 1: Open Interests right here on Bloomberg Television,