Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. We learned that Ford
Speaker 1: is undergoing a sweeping overhaul of its electric vehicle business
Speaker 1: and it's going to amount to about nineteen point five
Speaker 1: billion dollars in charges. It's also going to include scrapping
Speaker 1: its next generation electric F series truck as a shift
Speaker 1: gears to a hybrid. Joining us right now to talk
Speaker 1: a little bit more about this is the host of
Speaker 1: Bloomberg's Open Interest, Matt Miller, and he brings along with
Speaker 1: him the CEO of Ford, Jim Farley.
Speaker 2: Jim, thanks very much for joining us. This is a
Speaker 2: major pivot, to say the least, but I think we
Speaker 2: could all see it coming because the consumer basically helped
Speaker 2: make this decision. For you tell us what's driven these plans?
Speaker 3: Well, as you said, it was really the customer changing
Speaker 3: their decision. You know, we saw hybrid's really take off
Speaker 3: last couple of years, Like you know, last month about
Speaker 3: what we had thirty percent increase in our hybrid sales
Speaker 3: were now number three in our I think we're eighty
Speaker 3: percent hybrid market share and trucks.
Speaker 4: So we saw this happening.
Speaker 3: We also saw the more expensive evs, you know, really
Speaker 3: suffering the market and the more affordable evs to do better.
Speaker 3: And then the last couple months really was remarkable. The
Speaker 3: EV market in the US went from twelve percent of
Speaker 3: the industry to only five and that that really, in
Speaker 3: the end was the big decider for US.
Speaker 4: But look, we're we're going to fifty percent electric.
Speaker 3: Could just be it's going to be hybrids and e
Speaker 3: revs and electric. It won't be just pure electrics.
Speaker 2: So you know, every good trader knows you got to
Speaker 2: cut your losses when you recognize there's an issue.
Speaker 4: You're doing that in this sense with the.
Speaker 2: F one fifty lightning as we now know it and
Speaker 2: the T three project, the next generation truck that would
Speaker 2: have been built in Tennessee. But you're able to, I guess,
Speaker 2: salvage some assets and as a result, you've raised your
Speaker 2: profitability forecasts from six to six and a half billion
Speaker 2: dollars for this year in terms of EBIT to seven
Speaker 2: billion dollars. Where are you gaining an opportunity from this, Jim.
Speaker 3: Well, great question this year. In the short term, it's
Speaker 3: really our cost of our company. Our quality is getting
Speaker 3: better and so our costs are much more competitive. In fact,
Speaker 3: that Novella's aluminum has cost us more like two billion,
Speaker 3: but we're still raising guidance. Look for this announcement, Matt,
Speaker 3: it's really about moving to more profitable vehicles. You know,
Speaker 3: we're going to make in Tennessee now an affordable pickup truck.
Speaker 3: I think is going to really surprise the market. These
Speaker 3: are customers we know, not a lot of guestwork in
Speaker 3: terms of the revenue, the costs we need to get
Speaker 3: at and a more affordable van in Ohio. So these
Speaker 3: are going to be better investments for the company profit
Speaker 3: and all those hybrid sales. You know, those are really
Speaker 3: profitable vehicles for US as we basically deploy hybrid across
Speaker 3: our lineup. But we're also going into the energy storage
Speaker 3: business to twenty giga ont hour.
Speaker 4: You know, that's a that's a big move.
Speaker 3: We're going to convert our battery plans from automotive batteries
Speaker 3: to energy storage batteries using LFP. That's also a big
Speaker 3: pivot that is profit positive for the company.
Speaker 1: Jim, with regards to that pivot and the energy storage
Speaker 1: side of it, do you anticipate any concerns by the
Speaker 1: White House, by the administration here in the US that
Speaker 1: you are partnering effectively with the Chinese company in order
Speaker 1: to do that.
Speaker 3: Well, look, it's our plant, it's our people, and we
Speaker 3: designed it that way.
Speaker 4: We have a licensing agreement.
Speaker 3: But we feel like it's better to build these batteries
Speaker 3: in the United States with American workers, with our own
Speaker 3: Ford workers and understand the IP than the import and
Speaker 3: like they're being done today. The best way to compete
Speaker 3: with the Chinese is to get close to the IP
Speaker 3: and then run the plants at Ford. When Ford knows
Speaker 3: how to build things, we know how to do this.
Speaker 3: So I think this is much better than for America.
Speaker 3: We're talking about thousands of incremental jobs versus importing batteries,
Speaker 3: like we say today, much better for our America.
Speaker 5: Well, to continue on the energy storage business, you mentioned
Speaker 5: that this will be profit positive for the company, And
Speaker 5: when it comes specifically to that new business line, how
Speaker 5: long would you expect before that alone becomes profitable.
Speaker 3: Yeah, great question. Well, we're busy now. We have to
Speaker 3: This business moves much faster than the auto business. We're
Speaker 3: converting our Michigan plant as we speak with all new
Speaker 3: equipment to make energy storage, which is slightly different than
Speaker 3: automotive with the LP and then we're building a whole
Speaker 3: new plant converting Kentucky one to twenty gigawatt hours and
Speaker 3: that will be landing in late twenty seven. We're going
Speaker 3: to be selling and servicing batteries, not just the sales
Speaker 3: as a contract manufacturer. We're actually going to be selling
Speaker 3: the huge storage containers to utility companies and the AI
Speaker 3: data center companies.
Speaker 4: In twenty seven. We're already out there quoting this business.
Speaker 3: Now we know what kind of price points we need
Speaker 3: to get to for it to be profitable. And this
Speaker 3: is not our first row Roudio as a manufacturing company.
Speaker 2: It looks like Jim, that we've gotten new regulations, are
Speaker 2: seeing older regulations scrapped both here and overseas. Right in
Speaker 2: terms of what's necessary. I'm wondering if the administration here
Speaker 2: in the US and the EU have helped you and
Speaker 2: other car makers really serve customer needs better, because we're
Speaker 2: seeing your rivals also bring back products that were previously canceled,
Speaker 2: like the hemy over at Stilantis that customers wanted.
Speaker 3: Well, look, I think you know I was at the
Speaker 3: White House of the President he announced the revised cafe standard.
Speaker 3: You know anything we can do to get the regulations
Speaker 3: look more like customer demands.
Speaker 4: Look, we're going to fifteen percent electric.
Speaker 3: There are no gas guzzlers in our future at forward,
Speaker 3: but we want to offer customers choice. I think that's
Speaker 3: what the President is trying to do, is just to
Speaker 3: give people choice. We're going to have this affordable electric
Speaker 3: vehicle build in Kentucky. I think it's going to be
Speaker 3: a huge hit with Americans, but it's going to be
Speaker 3: part of a broader portfolio with choice. And we're seeing
Speaker 3: the same thing in Europe, seeing the same thing around
Speaker 3: the world. Look, we all want to lower or see
Speaker 3: or two footprint is industry. That's what Ford's going to
Speaker 3: do going fifty percent electric. But we need to give
Speaker 3: customers choice and then use our manufacturing flexibility to go
Speaker 3: with where the customers are. And that's what this announcement
Speaker 3: is about, having optionality. Jim.
Speaker 2: Though it's not only about power trains, right, I mean,
Speaker 2: one of the other things customers want is repair ability.
Speaker 4: And I wonder if because you already.
Speaker 2: Make the F one P fifty in Kentucky, you make
Speaker 2: it in Kansas City. My Raptor was born in Dearborn,
Speaker 2: where I was happy to pick it up years ago.
Speaker 2: But the new trucks are aluminum bodied. Are you going
Speaker 2: to be able to build steel trucks, for example at
Speaker 2: the Tennessee plant.
Speaker 4: Oh that's a good question.
Speaker 3: Well, I'm not going to give because if I tell you, Matt,
Speaker 3: I'm telling all my competitors.
Speaker 4: I'm not going to do that today.
Speaker 3: All I would say is we are coming out with
Speaker 3: affordable vans and pickups that Americans are going to love,
Speaker 3: and we're the number one brand for both those segments,
Speaker 3: and they are going to love these new products, and
Speaker 3: they're going to fit into what Americans are buying today,
Speaker 3: and they're going to be low CO two and they're
Speaker 3: going to be more affordable.
Speaker 4: That's all I can say, Matt. I'm not going to
Speaker 4: give anything to my competitors.
Speaker 1: All right, you don't have to give anything to your competitors, Jim.
Speaker 1: But I am curious if you can just speak a
Speaker 1: little bit more to investors. First about the the nineteen
Speaker 1: and a half billion dollar charge. Sure, but also the
Speaker 1: I mean, obviously it's huge, and we talk about this
Speaker 1: idea as to whether this will be it or whether
Speaker 1: investors should anticipate potentially more costs associated with online.
Speaker 3: Well, look, we're unique from our competitors. We don't have
Speaker 3: plants at are Electric. We have a whole business at Electric.
Speaker 3: So we looked at that whole business and evaluated the
Speaker 3: valuation of the assets, and we made these decisions on
Speaker 3: the future products. The bottom line is the cash subset
Speaker 3: of that is about five and a half billion of
Speaker 3: the nineteen billion, and the ROI on that five and
Speaker 3: a half billion is very attractive. These are great products,
Speaker 3: they're affordable, that's where the market is today, and we're
Speaker 3: going to have great power change for them and they're
Speaker 3: going to be able to buy more affordable Ford trucks.
Speaker 4: And vans than we have today.
Speaker 3: And we know those are going to be a profitable
Speaker 3: business for those out there.
Speaker 4: So this is a better allocation of capital.
Speaker 3: That five and a half billion dollars of cash is
Speaker 3: going to be a great investment. It didn't make sense
Speaker 3: to keep plowing billions into products that we knew would
Speaker 3: not make money.
Speaker 4: We had to make this choice.
Speaker 5: I hear what you're saying there, and certainly the market spoke.
Speaker 5: But what gives you the confidence that you think about
Speaker 5: twenty twenty nine, the goal to have a profitable EV business.
Speaker 5: You've been losing billions in losses on evs. What gives
Speaker 5: you the confidence that you'll be able to turn that
Speaker 5: around by twenty twenty nine.
Speaker 4: Well, we think to make business.
Speaker 3: To make that business profitable, we have to get to
Speaker 3: a BYD calls. And so this gunk Works project called
Speaker 3: the Universe Electric Vehicle that we're making Kentucky that is
Speaker 3: designed to match the B y D costs in like
Speaker 3: a Mexico. And we really believe we have that delivered.
Speaker 3: We've sourced all the parts, now we're testing prototypes, we're
Speaker 3: starting to run the production line, and so we have
Speaker 3: real confidence that we can do that, and that's why
Speaker 3: we're telling people that we think will be profitable. We've
Speaker 3: worked hard for the last couple of years on this
Speaker 3: EV project and we have fully competitive costs with the Chinese.
Speaker 3: Now it's our chance to bring a pickup truck with
Speaker 3: that low cost EV to Americans. We think it's going
Speaker 3: to be a big hit.
Speaker 2: Hey, I want to ask about the Chinese, because while
Speaker 2: I love it when companies go back to steel and
Speaker 2: V eight's and stick shifts and handbrakes, obviously many people
Speaker 2: are betting the future is on EV's autonomous vehicles, and
Speaker 2: the Chinese are certainly making real strides there. As you
Speaker 2: make this pivot back to sort of the classic American
Speaker 2: pickup truck, what will you do to keep up with
Speaker 2: the Chinese as they continue to make strives forward?
Speaker 3: Make no you know, make no mistake. Our strategy as
Speaker 3: a company is to give people choice. Part of that
Speaker 3: choice is to have fully competitive costs with BYD localized
Speaker 3: in North America.
Speaker 4: Matt.
Speaker 3: We are going to have a fully competitive BYD EV
Speaker 3: built here in America for Americans that we believe are
Speaker 3: going to be profitable. And to do that, we had
Speaker 3: to massively innovate, bring LPG in the United States, you know,
Speaker 3: reduce the manufacturing content of the vehicle, radically, redesign the
Speaker 3: whole assembly process, engineer the vehicle.
Speaker 4: With all new suppliers.
Speaker 3: It's a whole different approach on the whole engineering in
Speaker 3: that vehicle. We are here to compete globally. We're not
Speaker 3: going to seed our future to the Chinese. And we're
Speaker 3: the most American car company. But even for us as
Speaker 3: a most American car company, we're a global company and
Speaker 3: that UEV product is the heart and soul of our
Speaker 3: competitiveness for the future. But the Chinese don't know the
Speaker 3: truck customers like we do. And we know customers want
Speaker 3: e revs, and they want hybrids, and they want raptors
Speaker 3: like you have. It's a diversity of all that lineup
Speaker 3: that makes sense for us to compete and win against
Speaker 3: them