WEBVTT - Ford CFO John Lawler Talks Earnings, EV Strategy 0:00:02.520 --> 0:00:07.800 Bloomberg Audio Studios, Podcasts, Radio News Ford. 0:00:07.840 --> 0:00:10.920 Those shares higher in after hours, trading up about four percent. 0:00:11.119 --> 0:00:14.080 Adjusted EPs beating estimates at forty nine cents a share, 0:00:14.120 --> 0:00:17.400 total revenue beating estimates at roughly about forty three billion 0:00:17.440 --> 0:00:21.160 dollars in the company standing behind it's full year forecast. 0:00:21.200 --> 0:00:24.320 John Lawler joining us right now, the chief financial officer 0:00:24.640 --> 0:00:27.280 over at Ford and John, on the surface, these numbers 0:00:27.280 --> 0:00:29.319 look pretty good, as you know, still a lot of 0:00:29.400 --> 0:00:33.120 questions and concerns about cost cutting. How much more should 0:00:33.120 --> 0:00:34.160 investors expect? 0:00:34.400 --> 0:00:37.479 Well, we had a really solid quarter, and you know, 0:00:37.600 --> 0:00:40.880 we didn't expand our guidance range of justiny bit between 0:00:40.880 --> 0:00:43.960 ten and twelve billion, but we have indicated that we're 0:00:43.960 --> 0:00:46.440 our trajectory is towards the high end of that guidance. 0:00:46.479 --> 0:00:48.519 So you know, it looks like we're on track for 0:00:48.560 --> 0:00:49.800 a really solid year this year. 0:00:49.960 --> 0:00:52.199 I'd be remiss in not asking you about a lot 0:00:52.200 --> 0:00:54.880 of the concerns right now going on in the EV space. 0:00:55.160 --> 0:00:57.640 The model E business at Ford was at least the 0:00:57.640 --> 0:01:00.440 worst performing of the major businesses. We got earnings out 0:01:00.440 --> 0:01:02.840 of a couple of your competitors, including GM and Tesla, 0:01:03.160 --> 0:01:05.520 and at least on the EV side, things weren't much better. 0:01:05.680 --> 0:01:07.959 Do you see any hope of improvement in that business 0:01:08.000 --> 0:01:08.440 this year? 0:01:09.240 --> 0:01:13.040 Well, you know, we're segmented, so we're different than many 0:01:13.080 --> 0:01:15.840 of our competitors, at least the traditional OEM. So you 0:01:15.880 --> 0:01:19.280 have the transparency about where we're at with our electric 0:01:19.360 --> 0:01:23.040 vehicle business relative to our commercial business in our internal 0:01:23.040 --> 0:01:26.560 combustion engine business, So you have the transparency. Look, we 0:01:26.680 --> 0:01:29.760 know that we need to have the electric business stand 0:01:29.800 --> 0:01:32.000 on its own. It needs to be profitable, it needs 0:01:32.040 --> 0:01:34.640 to provide a return on the invested capital, and we're 0:01:34.640 --> 0:01:38.000 working diligently to get there. And you know, we have 0:01:38.040 --> 0:01:40.279 a lot of hopes, and we know that our second 0:01:40.319 --> 0:01:42.960 generation in vehicles that will be coming out in a 0:01:43.000 --> 0:01:45.080 couple of years are going to be a big step 0:01:45.080 --> 0:01:48.040 forward and bring us to the point where we will 0:01:48.080 --> 0:01:50.840 be profitable. So we won't launch them if we're not profitable. 0:01:51.160 --> 0:01:53.440 So you know, we've got to make the best of 0:01:53.480 --> 0:01:55.560 it through this period here until we get to the 0:01:55.560 --> 0:01:58.680 second generation vehicles, and we'll continue to manage that and 0:01:58.720 --> 0:01:59.960 optimize across the company. 0:02:00.440 --> 0:02:04.200 Well, John, I mean, hypothetically speaking, what would it take 0:02:04.240 --> 0:02:06.120 for you to maybe say, okay, we're going to make 0:02:06.160 --> 0:02:08.760 this segment much smaller than it was. We know that 0:02:08.800 --> 0:02:12.640 EV adoption has been really slowing down and really below 0:02:12.680 --> 0:02:14.800 what a lot of people, especially. 0:02:14.400 --> 0:02:16.000 The automakers, had expected. 0:02:16.280 --> 0:02:19.280 How committed are you to the EV space when you 0:02:19.320 --> 0:02:22.400 look five ten years out, Well. 0:02:22.240 --> 0:02:24.600 Look EV's. You know, it's not a matter of if, 0:02:24.960 --> 0:02:27.600 it's a matter of how fast they are. The future. 0:02:27.760 --> 0:02:31.080 We will be going there, the industry will be going there. 0:02:31.360 --> 0:02:33.720 It's just I don't think we should question that. It's 0:02:33.760 --> 0:02:36.320 the pace of change, in the pace of adoption, and 0:02:36.400 --> 0:02:39.360 so we're going to write size in the near term 0:02:39.440 --> 0:02:42.560 to match our capacity and the investments to where the 0:02:42.600 --> 0:02:45.960 consumer is, and then we'll accelerate as the consumer accelerates. 0:02:46.240 --> 0:02:49.959 But make no mistake that evs are important because they're 0:02:50.000 --> 0:02:53.200 a big part of what all automotive companies need to 0:02:53.200 --> 0:02:57.720 do to meet compliance for greenhouse gases and zero emission vehicles. 0:02:57.720 --> 0:02:59.639 So they're a big part of what we all need 0:02:59.680 --> 0:03:02.960 to do to hit those compliance regulation requirements that we have. 0:03:03.480 --> 0:03:05.240 Let's talk about the price tag, because I think a 0:03:05.280 --> 0:03:08.480 lot of consumers, in addition to maybe some range anxieties, 0:03:08.560 --> 0:03:11.440 the perception is that EV's are a lot more expensive 0:03:11.480 --> 0:03:14.520 than what I could get from some of those traditional engines. 0:03:14.560 --> 0:03:17.000 So when it comes to your plans for that twenty. 0:03:16.720 --> 0:03:21.440 Five thousand dollars more affordable EV, it seems like it's 0:03:21.480 --> 0:03:23.960 going to take until late twenty twenty six. 0:03:24.320 --> 0:03:26.840 Why is it going to take that long to develop? 0:03:27.440 --> 0:03:30.040 Well, it's a completely new platform and it's a new 0:03:30.080 --> 0:03:32.280 way and a new approach of how you develop a vehicle. 0:03:32.560 --> 0:03:34.520 We have a team out in California. We call it 0:03:34.560 --> 0:03:40.000 our skunk works team. Individuals that have designed EV's, successful EV's, 0:03:40.080 --> 0:03:44.480 profitable evs with other companies are there. It's a whole 0:03:44.520 --> 0:03:47.400 new approach. It's a brand new, ground up platform and 0:03:47.920 --> 0:03:51.440 they're taking you know, they're taking those learnings and they're 0:03:51.480 --> 0:03:53.440 applying it here. And it takes a couple of years 0:03:53.480 --> 0:03:57.000 to develop a complex vehicle like that, and that's what 0:03:57.040 --> 0:03:57.520 they're doing. 0:03:57.880 --> 0:03:59.560 All right. Well, there's a lot of work, certainly to 0:03:59.600 --> 0:04:03.240 do on the EV side. I am curious John, if 0:04:03.240 --> 0:04:05.840 you can talk a little bit about the commercial line 0:04:05.840 --> 0:04:07.960 that you have over there Ford Pro, that unit that 0:04:08.000 --> 0:04:10.560 appeared to be kind of the standout in the most 0:04:10.560 --> 0:04:13.880 recent quarter. What exactly is driving that? And more importantly, John, 0:04:14.160 --> 0:04:16.360 is any of that going to be transferable to the 0:04:16.400 --> 0:04:17.600 consumer side of the business. 0:04:18.040 --> 0:04:21.039 Well, it's an incredible business in Ford Pro. We have 0:04:21.160 --> 0:04:23.559 motes from our products. We have motes from the fact 0:04:23.560 --> 0:04:27.760 that we provide software services that help our commercial customers 0:04:27.800 --> 0:04:32.440 improve productivity and uptime and it makes their business stronger. 0:04:32.480 --> 0:04:34.880 And the learnings that we have there are transferable to 0:04:34.960 --> 0:04:38.080 the retail side, and we're doing that today, especially around 0:04:38.120 --> 0:04:42.039 service and the conveniences that we've learned about from the 0:04:42.040 --> 0:04:45.680 commercial customers. So it's a really strong business. We've talked 0:04:45.680 --> 0:04:48.120 about it being a strong business, and we've talked about 0:04:48.160 --> 0:04:50.320 the earnings potential and I think you see that clearly 0:04:50.360 --> 0:04:52.880 in the first quarter with a print of adjusted EBIT 0:04:52.920 --> 0:04:53.920 of three billion dollars. 0:04:54.240 --> 0:04:56.000 And that gets to this idea too, because I mean, 0:04:56.040 --> 0:04:57.760 when you look at some of the features that go 0:04:57.839 --> 0:05:01.279 into a lot of the commercial vehicles and the idea 0:05:01.320 --> 0:05:04.440 that at some point, at least when the cost is feasible, 0:05:04.480 --> 0:05:06.800 that could transfer there. There's been a lot of discussion 0:05:06.839 --> 0:05:10.200 here about Ford kind of upping its software game, basically 0:05:10.279 --> 0:05:12.520 getting beyond just obviously what you do best, which is 0:05:12.560 --> 0:05:15.080 the actual building up the cars themselves. When it comes 0:05:15.080 --> 0:05:16.920 to the software and the tech side of this year. 0:05:17.200 --> 0:05:19.320 Have you done hiring in that space, Have you done 0:05:19.360 --> 0:05:21.279 any sort of made so, any sort of attempt to 0:05:21.320 --> 0:05:24.040 actually beef up that business if you will. I know 0:05:24.120 --> 0:05:26.000 it's not technically a standalone business. 0:05:25.640 --> 0:05:28.640 But you know what I mean absolutely, Over the last 0:05:28.680 --> 0:05:31.760 few years, we've been hiring. We've been bringing in experts 0:05:31.760 --> 0:05:36.240 from the outside, consumer product software experts, etc. And that's 0:05:36.279 --> 0:05:38.120 a real big part of what we've seen with the 0:05:38.520 --> 0:05:40.920 Ford Pro story. If you look at it over the 0:05:41.000 --> 0:05:44.320 last twelve months, about thirteen percent of their EBITs come 0:05:44.360 --> 0:05:47.400 from software and physical services, and we expect that to 0:05:47.400 --> 0:05:50.080 grow to twenty percent of their adjusted EBIT in a 0:05:50.080 --> 0:05:52.400 few years. So we have a team in place. We 0:05:52.440 --> 0:05:54.599 have a great team we've recruited from the outside with 0:05:54.680 --> 0:05:57.680 some folks that we had inside building out those services 0:05:57.720 --> 0:06:00.880 that are pro customers love because make some more productive, 0:06:00.920 --> 0:06:01.919 it improves their business. 0:06:02.320 --> 0:06:02.960 And I also want to. 0:06:02.920 --> 0:06:05.560 Talk about some of your other models, specifically your gas 0:06:05.680 --> 0:06:08.520 powered models. I'm thinking about the Bronco for example. I'm 0:06:08.560 --> 0:06:11.080 thinking about the Maverick in addition to the. 0:06:11.040 --> 0:06:11.719 F one fifties. 0:06:11.720 --> 0:06:14.000 But I feel like I've seen so many Broncos on 0:06:14.040 --> 0:06:17.280 the road. How are you thinking about output levels in 0:06:17.320 --> 0:06:20.680 those areas. Again, those gas powered vehicles. 0:06:20.760 --> 0:06:26.320 Well, we have incredible brands across our company between F Series, Bronco, Mustang, 0:06:26.360 --> 0:06:29.679 you name it, and demand's very strong. Demand's very strong 0:06:29.720 --> 0:06:32.679 for all of those vehicles. So we're meeting that demand. 0:06:32.800 --> 0:06:35.760 We're continuing to produce. We're working on, you know, getting 0:06:35.800 --> 0:06:37.840 as much out of our factors as we can, and 0:06:37.960 --> 0:06:40.240 you see that in our results. We just launched the 0:06:40.240 --> 0:06:43.240 brand new F one fifty in the first quarter here. 0:06:43.279 --> 0:06:45.640 It's now selling very well, so there's a lot of 0:06:45.680 --> 0:06:47.480 upside there in the blue business through the rest of 0:06:47.520 --> 0:06:47.839 the year. 0:06:48.040 --> 0:06:51.080 All right, John, really appreciate your time today. On the 0:06:51.120 --> 0:06:53.520 heels of that earnings release are thanks of course. 0:06:53.360 --> 0:06:56.560 To John Lawler. He is Ford's chief financial officer.