WEBVTT - Ford CEO Jim Farley Talks EV Business Overhaul & Extended-Range Hybrid Vehicles

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<v Speaker 1>Bloomberg Audio Studios, Podcasts, radio News. We learned that Ford

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<v Speaker 1>is undergoing a sweeping overhaul of its electric vehicle business

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<v Speaker 1>and it's going to amount to about nineteen point five

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<v Speaker 1>billion dollars in charges. It's also going to include scrapping

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<v Speaker 1>its next generation electric F series truck as a shift

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<v Speaker 1>gears to a hybrid. Joining us right now to talk

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<v Speaker 1>a little bit more about this is the host of

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<v Speaker 1>Bloomberg's Open Interest, Matt Miller, and he brings along with

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<v Speaker 1>him the CEO of Ford, Jim Farley.

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<v Speaker 2>Jim, thanks very much for joining us. This is a

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<v Speaker 2>major pivot, to say the least, but I think we

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<v Speaker 2>could all see it coming because the consumer basically helped

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<v Speaker 2>make this decision. For you tell us what's driven these plans?

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<v Speaker 3>Well, as you said, it was really the customer changing

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<v Speaker 3>their decision. You know, we saw hybrid's really take off

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<v Speaker 3>last couple of years, Like you know, last month about

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<v Speaker 3>what we had thirty percent increase in our hybrid sales

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<v Speaker 3>were now number three in our I think we're eighty

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<v Speaker 3>percent hybrid market share and trucks.

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<v Speaker 4>So we saw this happening.

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<v Speaker 3>We also saw the more expensive evs, you know, really

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<v Speaker 3>suffering the market and the more affordable evs to do better.

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<v Speaker 3>And then the last couple months really was remarkable. The

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<v Speaker 3>EV market in the US went from twelve percent of

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<v Speaker 3>the industry to only five and that that really, in

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<v Speaker 3>the end was the big decider for US.

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<v Speaker 4>But look, we're we're going to fifty percent electric.

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<v Speaker 3>Could just be it's going to be hybrids and e

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<v Speaker 3>revs and electric. It won't be just pure electrics.

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<v Speaker 2>So you know, every good trader knows you got to

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<v Speaker 2>cut your losses when you recognize there's an issue.

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<v Speaker 4>You're doing that in this sense with the.

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<v Speaker 2>F one fifty lightning as we now know it and

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<v Speaker 2>the T three project, the next generation truck that would

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<v Speaker 2>have been built in Tennessee. But you're able to, I guess,

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<v Speaker 2>salvage some assets and as a result, you've raised your

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<v Speaker 2>profitability forecasts from six to six and a half billion

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<v Speaker 2>dollars for this year in terms of EBIT to seven

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<v Speaker 2>billion dollars. Where are you gaining an opportunity from this, Jim.

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<v Speaker 3>Well, great question this year. In the short term, it's

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<v Speaker 3>really our cost of our company. Our quality is getting

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<v Speaker 3>better and so our costs are much more competitive. In fact,

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<v Speaker 3>that Novella's aluminum has cost us more like two billion,

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<v Speaker 3>but we're still raising guidance. Look for this announcement, Matt,

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<v Speaker 3>it's really about moving to more profitable vehicles. You know,

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<v Speaker 3>we're going to make in Tennessee now an affordable pickup truck.

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<v Speaker 3>I think is going to really surprise the market. These

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<v Speaker 3>are customers we know, not a lot of guestwork in

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<v Speaker 3>terms of the revenue, the costs we need to get

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<v Speaker 3>at and a more affordable van in Ohio. So these

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<v Speaker 3>are going to be better investments for the company profit

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<v Speaker 3>and all those hybrid sales. You know, those are really

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<v Speaker 3>profitable vehicles for US as we basically deploy hybrid across

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<v Speaker 3>our lineup. But we're also going into the energy storage

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<v Speaker 3>business to twenty giga ont hour.

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<v Speaker 4>You know, that's a that's a big move.

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<v Speaker 3>We're going to convert our battery plans from automotive batteries

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<v Speaker 3>to energy storage batteries using LFP. That's also a big

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<v Speaker 3>pivot that is profit positive for the company.

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<v Speaker 1>Jim, with regards to that pivot and the energy storage

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<v Speaker 1>side of it, do you anticipate any concerns by the

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<v Speaker 1>White House, by the administration here in the US that

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<v Speaker 1>you are partnering effectively with the Chinese company in order

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<v Speaker 1>to do that.

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<v Speaker 3>Well, look, it's our plant, it's our people, and we

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<v Speaker 3>designed it that way.

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<v Speaker 4>We have a licensing agreement.

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<v Speaker 3>But we feel like it's better to build these batteries

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<v Speaker 3>in the United States with American workers, with our own

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<v Speaker 3>Ford workers and understand the IP than the import and

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<v Speaker 3>like they're being done today. The best way to compete

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<v Speaker 3>with the Chinese is to get close to the IP

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<v Speaker 3>and then run the plants at Ford. When Ford knows

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<v Speaker 3>how to build things, we know how to do this.

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<v Speaker 3>So I think this is much better than for America.

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<v Speaker 3>We're talking about thousands of incremental jobs versus importing batteries,

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<v Speaker 3>like we say today, much better for our America.

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<v Speaker 5>Well, to continue on the energy storage business, you mentioned

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<v Speaker 5>that this will be profit positive for the company, And

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<v Speaker 5>when it comes specifically to that new business line, how

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<v Speaker 5>long would you expect before that alone becomes profitable.

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<v Speaker 3>Yeah, great question. Well, we're busy now. We have to

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<v Speaker 3>This business moves much faster than the auto business. We're

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<v Speaker 3>converting our Michigan plant as we speak with all new

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<v Speaker 3>equipment to make energy storage, which is slightly different than

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<v Speaker 3>automotive with the LP and then we're building a whole

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<v Speaker 3>new plant converting Kentucky one to twenty gigawatt hours and

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<v Speaker 3>that will be landing in late twenty seven. We're going

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<v Speaker 3>to be selling and servicing batteries, not just the sales

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<v Speaker 3>as a contract manufacturer. We're actually going to be selling

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<v Speaker 3>the huge storage containers to utility companies and the AI

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<v Speaker 3>data center companies.

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<v Speaker 4>In twenty seven. We're already out there quoting this business.

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<v Speaker 3>Now we know what kind of price points we need

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<v Speaker 3>to get to for it to be profitable. And this

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<v Speaker 3>is not our first row Roudio as a manufacturing company.

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<v Speaker 2>It looks like Jim, that we've gotten new regulations, are

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<v Speaker 2>seeing older regulations scrapped both here and overseas. Right in

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<v Speaker 2>terms of what's necessary. I'm wondering if the administration here

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<v Speaker 2>in the US and the EU have helped you and

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<v Speaker 2>other car makers really serve customer needs better, because we're

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<v Speaker 2>seeing your rivals also bring back products that were previously canceled,

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<v Speaker 2>like the hemy over at Stilantis that customers wanted.

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<v Speaker 3>Well, look, I think you know I was at the

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<v Speaker 3>White House of the President he announced the revised cafe standard.

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<v Speaker 3>You know anything we can do to get the regulations

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<v Speaker 3>look more like customer demands.

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<v Speaker 4>Look, we're going to fifteen percent electric.

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<v Speaker 3>There are no gas guzzlers in our future at forward,

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<v Speaker 3>but we want to offer customers choice. I think that's

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<v Speaker 3>what the President is trying to do, is just to

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<v Speaker 3>give people choice. We're going to have this affordable electric

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<v Speaker 3>vehicle build in Kentucky. I think it's going to be

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<v Speaker 3>a huge hit with Americans, but it's going to be

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<v Speaker 3>part of a broader portfolio with choice. And we're seeing

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<v Speaker 3>the same thing in Europe, seeing the same thing around

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<v Speaker 3>the world. Look, we all want to lower or see

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<v Speaker 3>or two footprint is industry. That's what Ford's going to

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<v Speaker 3>do going fifty percent electric. But we need to give

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<v Speaker 3>customers choice and then use our manufacturing flexibility to go

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<v Speaker 3>with where the customers are. And that's what this announcement

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<v Speaker 3>is about, having optionality. Jim.

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<v Speaker 2>Though it's not only about power trains, right, I mean,

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<v Speaker 2>one of the other things customers want is repair ability.

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<v Speaker 4>And I wonder if because you already.

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<v Speaker 2>Make the F one P fifty in Kentucky, you make

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<v Speaker 2>it in Kansas City. My Raptor was born in Dearborn,

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<v Speaker 2>where I was happy to pick it up years ago.

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<v Speaker 2>But the new trucks are aluminum bodied. Are you going

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<v Speaker 2>to be able to build steel trucks, for example at

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<v Speaker 2>the Tennessee plant.

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<v Speaker 4>Oh that's a good question.

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<v Speaker 3>Well, I'm not going to give because if I tell you, Matt,

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<v Speaker 3>I'm telling all my competitors.

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<v Speaker 4>I'm not going to do that today.

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<v Speaker 3>All I would say is we are coming out with

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<v Speaker 3>affordable vans and pickups that Americans are going to love,

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<v Speaker 3>and we're the number one brand for both those segments,

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<v Speaker 3>and they are going to love these new products, and

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<v Speaker 3>they're going to fit into what Americans are buying today,

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<v Speaker 3>and they're going to be low CO two and they're

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<v Speaker 3>going to be more affordable.

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<v Speaker 4>That's all I can say, Matt. I'm not going to

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<v Speaker 4>give anything to my competitors.

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<v Speaker 1>All right, you don't have to give anything to your competitors, Jim.

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<v Speaker 1>But I am curious if you can just speak a

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<v Speaker 1>little bit more to investors. First about the the nineteen

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<v Speaker 1>and a half billion dollar charge. Sure, but also the

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<v Speaker 1>I mean, obviously it's huge, and we talk about this

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<v Speaker 1>idea as to whether this will be it or whether

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<v Speaker 1>investors should anticipate potentially more costs associated with online.

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<v Speaker 3>Well, look, we're unique from our competitors. We don't have

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<v Speaker 3>plants at are Electric. We have a whole business at Electric.

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<v Speaker 3>So we looked at that whole business and evaluated the

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<v Speaker 3>valuation of the assets, and we made these decisions on

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<v Speaker 3>the future products. The bottom line is the cash subset

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<v Speaker 3>of that is about five and a half billion of

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<v Speaker 3>the nineteen billion, and the ROI on that five and

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<v Speaker 3>a half billion is very attractive. These are great products,

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<v Speaker 3>they're affordable, that's where the market is today, and we're

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<v Speaker 3>going to have great power change for them and they're

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<v Speaker 3>going to be able to buy more affordable Ford trucks.

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<v Speaker 4>And vans than we have today.

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<v Speaker 3>And we know those are going to be a profitable

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<v Speaker 3>business for those out there.

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<v Speaker 4>So this is a better allocation of capital.

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<v Speaker 3>That five and a half billion dollars of cash is

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<v Speaker 3>going to be a great investment. It didn't make sense

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<v Speaker 3>to keep plowing billions into products that we knew would

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<v Speaker 3>not make money.

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<v Speaker 4>We had to make this choice.

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<v Speaker 5>I hear what you're saying there, and certainly the market spoke.

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<v Speaker 5>But what gives you the confidence that you think about

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<v Speaker 5>twenty twenty nine, the goal to have a profitable EV business.

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<v Speaker 5>You've been losing billions in losses on evs. What gives

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<v Speaker 5>you the confidence that you'll be able to turn that

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<v Speaker 5>around by twenty twenty nine.

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<v Speaker 4>Well, we think to make business.

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<v Speaker 3>To make that business profitable, we have to get to

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<v Speaker 3>a BYD calls. And so this gunk Works project called

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<v Speaker 3>the Universe Electric Vehicle that we're making Kentucky that is

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<v Speaker 3>designed to match the B y D costs in like

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<v Speaker 3>a Mexico. And we really believe we have that delivered.

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<v Speaker 3>We've sourced all the parts, now we're testing prototypes, we're

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<v Speaker 3>starting to run the production line, and so we have

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<v Speaker 3>real confidence that we can do that, and that's why

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<v Speaker 3>we're telling people that we think will be profitable. We've

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<v Speaker 3>worked hard for the last couple of years on this

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<v Speaker 3>EV project and we have fully competitive costs with the Chinese.

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<v Speaker 3>Now it's our chance to bring a pickup truck with

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<v Speaker 3>that low cost EV to Americans. We think it's going

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<v Speaker 3>to be a big hit.

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<v Speaker 2>Hey, I want to ask about the Chinese, because while

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<v Speaker 2>I love it when companies go back to steel and

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<v Speaker 2>V eight's and stick shifts and handbrakes, obviously many people

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<v Speaker 2>are betting the future is on EV's autonomous vehicles, and

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<v Speaker 2>the Chinese are certainly making real strides there. As you

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<v Speaker 2>make this pivot back to sort of the classic American

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<v Speaker 2>pickup truck, what will you do to keep up with

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<v Speaker 2>the Chinese as they continue to make strives forward?

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<v Speaker 3>Make no you know, make no mistake. Our strategy as

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<v Speaker 3>a company is to give people choice. Part of that

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<v Speaker 3>choice is to have fully competitive costs with BYD localized

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<v Speaker 3>in North America.

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<v Speaker 4>Matt.

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<v Speaker 3>We are going to have a fully competitive BYD EV

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<v Speaker 3>built here in America for Americans that we believe are

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<v Speaker 3>going to be profitable. And to do that, we had

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<v Speaker 3>to massively innovate, bring LPG in the United States, you know,

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<v Speaker 3>reduce the manufacturing content of the vehicle, radically, redesign the

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<v Speaker 3>whole assembly process, engineer the vehicle.

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<v Speaker 4>With all new suppliers.

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<v Speaker 3>It's a whole different approach on the whole engineering in

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<v Speaker 3>that vehicle. We are here to compete globally. We're not

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<v Speaker 3>going to seed our future to the Chinese. And we're

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<v Speaker 3>the most American car company. But even for us as

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<v Speaker 3>a most American car company, we're a global company and

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<v Speaker 3>that UEV product is the heart and soul of our

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<v Speaker 3>competitiveness for the future. But the Chinese don't know the

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<v Speaker 3>truck customers like we do. And we know customers want

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<v Speaker 3>e revs, and they want hybrids, and they want raptors

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<v Speaker 3>like you have. It's a diversity of all that lineup

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<v Speaker 3>that makes sense for us to compete and win against

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<v Speaker 3>them