Speaker 1: Bloomberg Audio Studios, podcasts, radio news. You want to welcome
Speaker 1: our Bloomberg TV and radio audiences back to our coverage
Speaker 1: a closer look at earnings out of Ford. They crossed
Speaker 1: the wire just a while ago, second quarter results showing
Speaker 1: a justed ebit coming in at about two point one
Speaker 1: billion dollars revenue at fifty billion dollars, but more importantly,
Speaker 1: the company reinstating the guidance it had pulled earlier, saying
Speaker 1: that it is adjusted profit for the year a six
Speaker 1: point five to seven point five billion dollars, the low
Speaker 1: end of that range, slightly below the average of analysts estimates.
Speaker 2: Joining us right.
Speaker 1: Now here in Studio two is Matt Miller. He is
Speaker 1: the co host of Open Interest, and he joins us
Speaker 1: for a very special interview with the CEO of Ford,
Speaker 1: Jim Farley.
Speaker 3: Matt, thanks very much, Romaine, Jim, thanks for joining us.
Speaker 3: I want to ask first about how you're offsetting these tariffs.
Speaker 3: I was on a call with Sherry House, your c earlier.
Speaker 3: She said the hit to growth would be about three
Speaker 3: billion dollars this year from TERRAFS, but you're able to
Speaker 3: recover about a third of that. How are you doing
Speaker 3: that is it through pricing? Are you able to get
Speaker 3: it out of suppliers? What are you doing to get
Speaker 3: that back?
Speaker 2: It's all of it.
Speaker 4: But the biggest strength for us is ford Pro, our
Speaker 4: commercial business.
Speaker 2: And it's not just vehicles, it's also software and our
Speaker 2: parts business on Pro.
Speaker 4: That's where the strength of our businesses and that's why
Speaker 4: we increased our guidance net of the tariffs by about
Speaker 4: a half a billion dollars.
Speaker 2: It's pro.
Speaker 4: We expect flat pricing for the rest of the year,
Speaker 4: so it's really pro.
Speaker 2: It's driving our results.
Speaker 3: Hopefully investors know the story already, Jim, but I don't
Speaker 3: think everyone understands the breadth of service as you offer
Speaker 3: through ford Pro and the kind of growth you're seeing.
Speaker 3: You've added two billion dollars to revenue year over year,
Speaker 3: well over three billion dollars to revenue quarter over quarter.
Speaker 2: And I was looking at.
Speaker 3: The valuations of some of the competing businesses like writer, Geotab,
Speaker 3: Sam Sara. They all blow away your evaluation. I feel
Speaker 3: like ford Pro would get a much higher multiple if
Speaker 3: it was trading outside of the legacy automaker. Have you
Speaker 3: thought about spinning that off.
Speaker 2: But we don't want to do that.
Speaker 4: That's why we broke it out as a separate segment, Matt,
Speaker 4: so everyone could see the profitability. Double digit's margins again,
Speaker 4: you know, really strong results. We have almost eight hundred
Speaker 4: thousand monthly subscribers for our software. As you said, we're
Speaker 4: beating now the third party software providers because we can
Speaker 4: control the vehicle speed, we can control access to the
Speaker 4: vehicle now third party can't do that. We also have
Speaker 4: a very strong parts business. Our dealers have invested two
Speaker 4: billion dollars in large repair facilities. We've never really been
Speaker 4: in that business in a big time to compete with
Speaker 4: third party. Now we are, and almost twenty percent of
Speaker 4: the profits now for pron vehicle so it's a great
Speaker 4: ecosystem is something our competitors do not have. That's why
Speaker 4: we broke it out separately so all the investors can
Speaker 4: value just that.
Speaker 1: I certainly was the bright spot. I am curious, Jim
Speaker 1: about the strategy going forward with regards to the electric
Speaker 1: vehicle business. When we talk about the commitment to new
Speaker 1: models and more importantly, commitment to the infrastructure to support that,
Speaker 1: what's the plan.
Speaker 2: Well, that's a great question.
Speaker 4: First of all, Ford is number three in hybrids, but
Speaker 4: we're number one in truck hybrids, so we're going to
Speaker 4: expand our hybrid offering across our internal combustion engine lineup
Speaker 4: and that's going to really distinguish up. But we're starting
Speaker 4: to see different kinds of hybrids that customers are excited about. Erevs,
Speaker 4: which you go about one hundred miles all electric, but
Speaker 4: then you could take a seven hundred.
Speaker 2: Mile trip once in a while.
Speaker 4: Those look really promising for a three row crossover like
Speaker 4: Explore or some of our trucks. Our EV strategy, we've
Speaker 4: been number two to Tesla in the US for about
Speaker 4: three years. We've really changed that a couple of years ago,
Speaker 4: and now those products are close to market. First one,
Speaker 4: we're going to show everyone in Kentucky the platform. We're
Speaker 4: going very low end, super affordable ease for urban duty
Speaker 4: cycles and for commercial Our each brands have been very
Speaker 4: successful with people who have, you know, schedule routes, they
Speaker 4: don't have to worry about public charging on the fly.
Speaker 4: That's where we're seeing traction with their EV business. The
Speaker 4: real low end for people who just want a commuter
Speaker 4: vehicle that's really cheap to operate, and then EV is
Speaker 4: cheaper than ice and commercial.
Speaker 2: We're not going to.
Speaker 4: Invest in a lot of the very expensive crossovers for
Speaker 4: pure EV.
Speaker 2: We think that's going to be a hybrid business.
Speaker 1: What does the supply chain look like specifically for the
Speaker 1: EV and hybrid business right now? Are some of the
Speaker 1: kinks that we saw last year at the start of
Speaker 1: this year. Has that been worked out?
Speaker 2: It has?
Speaker 4: You know, we're really excited about our new affordable battery.
Speaker 4: We have a plant Marshall, Michigan that's going to be
Speaker 4: one of the first to make in the US LFP battery.
Speaker 4: That battery supply chain has really react did to this
Speaker 4: change in the market. We're looking to repurpose our unused
Speaker 4: battery pant assets and more to come on that. I
Speaker 4: think the supply chain has been very difficult because the
Speaker 4: demand is so much lower than everyone thought. The growth
Speaker 4: has been there, but lower than everyone thought, and we've
Speaker 4: all adjusted to that. We've moved out our cycle plans.
Speaker 4: We focused on affordable and commercial. You know, a lot
Speaker 4: of people are fully pregnant with their a lot of
Speaker 4: OEMs are fully pregnant with their existing lineup.
Speaker 2: Of these very expensive evs.
Speaker 4: We're fortunate we moved three or four years ago and
Speaker 4: we could, we could tilt to hybrid and a specific
Speaker 4: kind of EV and the supply chain has been able
Speaker 4: to move with us so far.
Speaker 3: I want to ask, first of all, I'm excited when
Speaker 3: you when you come out with a three ro row
Speaker 3: e E rev call me up because I'm in the
Speaker 3: market for one of those. I want to ask about
Speaker 3: the unintended consequences of this administration's terrorists, Jim, because the
Speaker 3: Japanese or the Europeans, maybe the South Koreans, they're getting
Speaker 3: away with a fifteen percent flat tariff now, but you
Speaker 3: and other American automakers producing here have fifty percent tariffs
Speaker 3: on steel, fifty on aluminum, twenty five percent on foreign parts,
Speaker 3: up to eighty stacked eighty percent stacked tariffs on Chinese parts,
Speaker 3: to the extent that it's got to really disadvantage you
Speaker 3: when you're competing against a Toyota built in Japan or
Speaker 3: a General Motors vehicle built in South Korea. Can you
Speaker 3: quantify that disadvantage?
Speaker 4: Yeah, I mean we studied it very carefully. If you
Speaker 4: look at labor, if you look at the material costs
Speaker 4: as you mentioned, Matt, and you look at the currency,
Speaker 4: you know a lot of these countries have currencies that
Speaker 4: really advantage their export. We think it's five thousand dollars
Speaker 4: on like say Wrap four versus a Kentucky built Escape,
Speaker 4: and maybe as much as ten thousand dollars on a
Speaker 4: Japanese built for Runner or a Super U versus you know,
Speaker 4: a Bronco built here in Michigan. So it's really meaningful
Speaker 4: working with the administration is to take that layered tariff
Speaker 4: because the autos have their own tear plus or subject
Speaker 4: to all these other tariffs. We're working with Commerce and
Speaker 4: the Trump administration to minimize our tariff expense so that
Speaker 4: we can get more competitive. But the bottom line is
Speaker 4: our plan forward is not to compete in those commodity segments.
Speaker 4: We're really passion products like Bronco and Mustang, work vehicles
Speaker 4: like Super Duty and our trucks, you know, and break
Speaker 4: through evs which everyone will learn about in Kentucky in
Speaker 4: a little bit.
Speaker 2: That's where our capital's going.
Speaker 4: So although it's a five to six thousand dollars, you know, disadvantage,
Speaker 4: our capital really isn't going into those segments.
Speaker 3: I get that, and I feel like, you know, Americans,
Speaker 3: some Americans are willing to pay more to support a
Speaker 3: seventy dollars an hour labor costs that we have here
Speaker 3: versus you know, twenty to twenty five dollars labor costs
Speaker 3: that the Japanese are working with. But it still seems,
Speaker 3: you know, like General Motors could move more production to
Speaker 3: South Korea if they get a fifteen percent flat rate
Speaker 3: and have a huge advantage over you. They're the biggest
Speaker 3: auto importer in America. Have you talked to the Trump
Speaker 3: administration about working this out somehow?
Speaker 4: Every day, every week, every month, every year, we have
Speaker 4: daily conversations with our counterparts and government, and you know,
Speaker 4: whether it's emissions, whether it's you know, tax policy, but
Speaker 4: especially tarrat policy. They are very committed to minimizing this
Speaker 4: disadvantage that we have making eighty percent of our vehicles
Speaker 4: in the US. But you know, a lot of those
Speaker 4: vehicles that we make in the US, you can't really
Speaker 4: find ability a way to make those vehicles outside the US.
Speaker 4: And just remember there is a chicken tax that's been
Speaker 4: around for a long time on heavy trucks that would
Speaker 4: be very difficult impossible to be competitive overseas. That really
Speaker 4: affects the commodity segments like raft four and others, but
Speaker 4: that's not our strategy afford to go after those segments.
Speaker 4: I'm very hopeful that the Trump administration understands the predicament
Speaker 4: that we are in as they make these bilateral trade agreements,
Speaker 4: and they are going to work with us to do
Speaker 4: the right thing for our US manufacturing companies.
Speaker 1: So Jim, the President is actually speaking now at an
Speaker 1: event in Washington on healthcare technology, but he's making a
Speaker 1: lot of comments about bringing US manufacturing back here in
Speaker 1: the US. He specifically says for factories for AI and
Speaker 1: cars that he wants all that, of course to be
Speaker 1: built here in the US. A reiteration of comments we've
Speaker 1: heard in the past, based on the policies that at
Speaker 1: least have been proposed and whatever policies have started to
Speaker 1: be rolled out, are you seeing any sort of material
Speaker 1: progress in bringing more auto manufacturing back to the US,
Speaker 1: and I don't mean just cars but also parts two.
Speaker 4: Yeah, We've been watching really carefully our competitors announcements in
Speaker 4: auto and our suppliers announcements of what's getting reshort, the
Speaker 4: realities of the fifteen percent and terraff for finished vehicles
Speaker 4: that is not a high enough tariff you know, it'd
Speaker 4: have to be in more like thirty to forty percent
Speaker 4: to build a new factory in the US. Now, we've
Speaker 4: seen a lot of our competitors, even our domestic competitors,
Speaker 4: you know, fill open factories here where they have bridge production.
Speaker 4: They may make it in Mexico and the US, the
Speaker 4: same nameplate, and they are moving some of that back
Speaker 4: to the US, which is good for our country and
Speaker 4: good for our manufacturing. The key thing is going to
Speaker 4: be the accumulation of effect of emissions policy, tax policy,
Speaker 4: as well as this tariff policy. We have to work
Speaker 4: out a solution for this tariff policy as the Trump
Speaker 4: administration works through those bilateral trade agreements.
Speaker 2: And as I.
Speaker 4: Said, the conversations so far have been very productive, and
Speaker 4: we'll let everyone know when we make material progress.
Speaker 1: All right, Well, I'll let you get back to work, Jim.
Speaker 1: I appreciate you taking time for us on a really
Speaker 1: busy day. Jim Farley, the President and CEO of Ford
Speaker 1: and our thanks to Matt Miller, the co hosts of
Speaker 1: Open Interests right here on Bloomberg Television,