WEBVTT - Ford CEO Jim Farley Talks Culture Change 0:00:02.480 --> 0:00:07.920 Bloomberg Audio Studios, podcasts, radio news. 0:00:08.039 --> 0:00:09.000 Let's kick it off, Jim. 0:00:09.039 --> 0:00:09.440 I mean. 0:00:10.880 --> 0:00:12.520 It is such an incredible feat. 0:00:12.960 --> 0:00:16.800 Not only coming back from the slide that you were 0:00:16.840 --> 0:00:19.840 in to take number one the number one spot, I 0:00:19.840 --> 0:00:21.880 mean number two or number three would have been impressive, 0:00:21.880 --> 0:00:25.840 but beating Toyota, beating Honda, their legendary for quality. 0:00:26.000 --> 0:00:27.680 How did you actually achieve that? 0:00:28.240 --> 0:00:30.479 Well, it took us four years of hard work to 0:00:30.520 --> 0:00:32.120 be an overnight success story. 0:00:32.960 --> 0:00:36.400 You know, it's been. It's been just an amazing culture change. 0:00:36.440 --> 0:00:40.080 It Ford, Literally, Matt, every one of our engineers has 0:00:40.120 --> 0:00:43.080 been in the plant, every one of our supply chain 0:00:43.120 --> 0:00:47.239 teams are in our suppliers. We are paying attention to 0:00:47.360 --> 0:00:51.000 every detail. It has taken a few years to get there. 0:00:51.560 --> 0:00:54.360 But I think it's really about the culture of putting 0:00:54.480 --> 0:00:59.640 quality before profits, before anything else. And that really is 0:00:59.680 --> 0:01:03.440 what's exciting about this because now what I'm seeing is 0:01:03.480 --> 0:01:06.360 the team really focusing on learn tern durability. 0:01:06.800 --> 0:01:10.440 So what was it your team? Was it an employee 0:01:10.480 --> 0:01:14.720 of labor issue? Was it you know technology? Did you 0:01:14.840 --> 0:01:18.400 use AI? Was it factory processes? 0:01:18.480 --> 0:01:18.560 Like? 0:01:18.600 --> 0:01:20.400 Can you get into specifics of how you did it? 0:01:21.840 --> 0:01:24.200 Yeah? If you if you were to visit today the 0:01:24.280 --> 0:01:26.520 Rouge plant where we make the F one fifty matt 0:01:26.880 --> 0:01:30.560 what you would see is a whole control center around 0:01:30.680 --> 0:01:34.399 data and quality data. So we measure the torque of 0:01:34.480 --> 0:01:37.560 every one of our fasteners. We have AI tools for 0:01:37.680 --> 0:01:42.399 vision systems, but most of all, it's just old fashioned 0:01:42.400 --> 0:01:47.160 hard work of our team members all working together to 0:01:47.280 --> 0:01:50.520 pay attention to the very small details that will make 0:01:50.560 --> 0:01:54.360 a difference between a perfectly built Forward and an okay 0:01:54.400 --> 0:02:01.520 built Toyota. It's just an incredible attention to every single detail. 0:02:02.040 --> 0:02:04.280 So, I mean, it's interesting now that we're in the 0:02:04.280 --> 0:02:07.720 age of AI and we're talking about this technology killing jobs, 0:02:07.760 --> 0:02:11.080 but it seems like in your case it's really experienced 0:02:11.639 --> 0:02:15.520 human workers that made the big difference it did. 0:02:15.560 --> 0:02:18.480 I have to say the process coaches, the area coaches, 0:02:18.919 --> 0:02:21.240 you know, they get up every morning, they look at 0:02:21.240 --> 0:02:24.000 the last shifts, quality data, We look at how many 0:02:24.120 --> 0:02:28.800 vehicles are repaired, and we work that process every moment 0:02:28.840 --> 0:02:32.640 of every day. Every employee walks into anyone on our plants, 0:02:32.760 --> 0:02:35.560 they know exactly are we winning, are we losing yesterday? 0:02:35.760 --> 0:02:39.840 And today. Everyone is fully aware of where we stand. 0:02:39.960 --> 0:02:43.400 We know exactly where Toyota is we know exactly how 0:02:43.400 --> 0:02:46.160 to you know where we need to get to beat 0:02:46.880 --> 0:02:50.000 Tundra and Super Duty better than any of the other 0:02:50.040 --> 0:02:56.000 domestic competitors. And so everyone is aware exactly the quality 0:02:56.040 --> 0:02:59.120 is coming out of our plant in any particular shift 0:02:59.240 --> 0:03:04.280 every fifty seconds. And that is that human motivation to 0:03:04.320 --> 0:03:05.520 pay attention to everyone. 0:03:05.800 --> 0:03:07.320 Everything is amazing. 0:03:07.360 --> 0:03:09.840 Look, we make eighty five percent of our vehicles in 0:03:09.880 --> 0:03:14.240 the US, Matt. That means these are US factory workers 0:03:14.760 --> 0:03:17.800 versus even our domestic competitors. They're some of the biggest 0:03:17.800 --> 0:03:20.920 importers in the US. We're not building these vehicles in 0:03:20.919 --> 0:03:25.680 South Korea or Japan. These are American workers beating Toyota 0:03:25.760 --> 0:03:29.799 and Hyundai and our domestics who import their vehicles. We 0:03:29.840 --> 0:03:34.720 beat them all with the American workers, with the attention 0:03:34.840 --> 0:03:35.360 to detail. 0:03:35.440 --> 0:03:38.800 It's an incredibly compelling narrative. I agree, of course, being 0:03:38.840 --> 0:03:42.920 at Bloomberg, we're focused on the numbers and quality issues. 0:03:43.240 --> 0:03:46.720 Recalls and the like had dragged down profits and margins 0:03:46.520 --> 0:03:49.040 to some extent over the past few years. Can you 0:03:49.120 --> 0:03:52.560 quantify in dollar terms how much this will contribute to 0:03:52.920 --> 0:03:53.560 your recovery? 0:03:53.560 --> 0:03:58.400 This year, one hundreds of millions of improvement we're seeing 0:03:58.400 --> 0:04:02.880 our warranty coverages come down, We're seeing our costs come down. 0:04:03.400 --> 0:04:05.200 These are all contributing. 0:04:04.600 --> 0:04:07.920 To literally hundreds and hundreds of millions of dollars of 0:04:07.960 --> 0:04:09.800 a tailwind for Ford on costs. 0:04:10.160 --> 0:04:11.280 But we didn't stop there. 0:04:11.360 --> 0:04:15.080 We also negotiated our parts costs with our suppliers. We've 0:04:15.080 --> 0:04:17.480 looked at all of our bill material and even our 0:04:17.680 --> 0:04:21.839 manufacturing inventory and our plants and all our manufacturing logistics costs. 0:04:21.920 --> 0:04:24.280 Imagine for Ford Pro it's the most important. You've got 0:04:24.279 --> 0:04:27.040 incredible growth there, you've got double digit margins, You've got 0:04:27.040 --> 0:04:29.760 thirty percent subscription growth. Correct me if I'm wrong on 0:04:29.800 --> 0:04:32.760 any of those numbers. How important is this for Ford 0:04:32.760 --> 0:04:35.320 Pro And does it change the picture at all? 0:04:35.480 --> 0:04:39.160 Well, good question, I would say for Ford Pro, really, 0:04:39.400 --> 0:04:42.719 what this means Bill Ford Tough really means something to 0:04:42.800 --> 0:04:43.279 our Pro. 0:04:43.200 --> 0:04:44.880 Customers on the vehicle side. 0:04:45.360 --> 0:04:48.440 But what we're really seeing there is an obsession with 0:04:48.600 --> 0:04:53.479 long term powertrained durability. We're testing every engine two to 0:04:53.520 --> 0:04:58.000 three hundred thousand miles with transmissions, axles, everything. So those 0:04:58.080 --> 0:05:00.919 Pro customers who use their vehicles little ninety percent of 0:05:00.960 --> 0:05:04.120 the day to run their business, they can not only 0:05:04.120 --> 0:05:07.120 be happy with ninety day quality, but also five to 0:05:07.160 --> 0:05:10.279 ten year quality. That's what it means for our pro customers. 0:05:10.839 --> 0:05:13.320 In the pro business. I'm really interested in the subscription 0:05:14.920 --> 0:05:19.480 growth that you've seen. Can you give us targets there? 0:05:19.520 --> 0:05:22.720 Are you looking at even stronger growth as that business grows. 0:05:24.160 --> 0:05:27.200 We are seeing quarter over quarter, as you said, between 0:05:27.200 --> 0:05:30.440 thirty and forty percent growth. The margins are over eighty 0:05:30.480 --> 0:05:33.960 percent on our growth margin side. Here's what people are buying. 0:05:34.200 --> 0:05:39.480 They're buying productivity. These vehicles, you know, they run their business. Plumbers, electricians, 0:05:39.880 --> 0:05:42.680 ambulance police, you know these customers. 0:05:42.720 --> 0:05:44.440 They use the date off the vehicles. 0:05:44.720 --> 0:05:47.480 They teach the drivers how to be easier on the brakes, 0:05:47.760 --> 0:05:50.839 to accelerate better, not to go past the speed limit, 0:05:51.839 --> 0:05:54.800 you know, to do telematics and route the vehicles efficiently 0:05:54.839 --> 0:05:58.440 to their next job. All these productivity software tools that 0:05:58.440 --> 0:06:02.279 we offer customers allows them to reduce their cost and 0:06:02.360 --> 0:06:05.479 improve their uptime so the vehicles never off the road. 0:06:05.800 --> 0:06:09.880 We're now able to send them prognostics or predictive failure 0:06:10.279 --> 0:06:13.120 of vehicle components so that their vehicles are never off 0:06:13.120 --> 0:06:16.400 the road. They can do that predictive maintenance before a 0:06:16.440 --> 0:06:21.320 problem happens, and they absolutely. We're approaching a million subscriptions 0:06:21.360 --> 0:06:22.840 now for pro So and. 0:06:22.839 --> 0:06:25.560 At a time when we see you know, eight hundred 0:06:25.600 --> 0:06:29.359 billion dollars of Hyperscaler capex this year alone to build 0:06:29.400 --> 0:06:34.240 out US infrastructure, tell us what kind of opportunity this 0:06:34.440 --> 0:06:37.120 is for Forden and how much you're able to participate 0:06:37.200 --> 0:06:38.880 in that data center build out. 0:06:39.800 --> 0:06:41.400 Well, I have to say, in the old days we 0:06:41.480 --> 0:06:43.840 used to look at housing. Today what we look at 0:06:43.920 --> 0:06:49.080 is construction. The construction trades are booming, super duty transit, 0:06:49.839 --> 0:06:53.520 exportable power to the job site. This is what customers want. 0:06:53.560 --> 0:06:57.120 They want new vehicles that are efficient with software. But 0:06:57.240 --> 0:07:00.760 also what they want is storage batteries. We're now going 0:07:00.800 --> 0:07:03.680 to be one of the biggest domestic makers of energy 0:07:03.720 --> 0:07:04.600 storage batteries. 0:07:04.640 --> 0:07:08.800 Now we're scaling up that plant. We actually have two plants. 0:07:08.839 --> 0:07:12.320 We'll have twenty gigawant hours of energy storage and not 0:07:12.360 --> 0:07:17.240 only for sustainable grid and the grid reliance, but also Hyperscalers. 0:07:17.280 --> 0:07:21.760 They're going to use our battery electric storage batteries to 0:07:22.720 --> 0:07:26.840 really run our country, help run our country. Between pro 0:07:26.960 --> 0:07:30.840 and Best our energy storage business, we're very well positioned. 0:07:30.920 --> 0:07:31.880 Have you got. 0:07:33.640 --> 0:07:37.960 Contracts with any of these big hyperscalers, Microsoft, Amazon, Google, 0:07:38.840 --> 0:07:40.040 Meta that you can tell us about. 0:07:40.120 --> 0:07:42.400 Jim. Yeah, good question. 0:07:42.480 --> 0:07:45.320 Well, we're in the middle of building out and converting 0:07:45.320 --> 0:07:49.680 these batteries from vehicle batteries to energy storage batteries, which 0:07:49.680 --> 0:07:53.520 are actually very different chemistry wise, format wise, Matt. To 0:07:53.600 --> 0:07:57.520 your point, we've had literally hundreds of customers now in 0:07:57.560 --> 0:08:02.440 the contracting phase. We announced one large one edf and 0:08:02.480 --> 0:08:06.360 they've committed about five gigwad hours over the course of 0:08:06.440 --> 0:08:10.200 several years now, and we're in the process of contracting many, 0:08:10.240 --> 0:08:11.040 many customers. 0:08:11.120 --> 0:08:12.120 It's a mixed Matt. 0:08:12.440 --> 0:08:16.400 We see sustainable grid you know, Win and solar. We 0:08:16.440 --> 0:08:19.720 also see hyperscalers building out. They want that one hundred 0:08:19.720 --> 0:08:21.960 percent up time on their facility. 0:08:22.160 --> 0:08:25.080 The Ford batteries are really useful for that. So it's 0:08:25.080 --> 0:08:26.440 a mix of customers so far. 0:08:26.800 --> 0:08:29.800 If I mean, since we're on Bloomberg, you're talking to 0:08:29.840 --> 0:08:32.720 every single investor on the planet, so you can share 0:08:33.400 --> 0:08:37.280 financial information with us that's material. Is this the right 0:08:37.280 --> 0:08:39.440 time to boost your EBIT target for the year? 0:08:41.559 --> 0:08:44.520 Great question, because we're right about right about a quarter 0:08:44.559 --> 0:08:45.840 or two earnings. 0:08:45.880 --> 0:08:47.160 I don't want to give a preview. 0:08:47.360 --> 0:08:50.880 I would love to love to give everyone insight into 0:08:51.160 --> 0:08:53.400 where we're running. But I would say, you know, good 0:08:53.440 --> 0:08:56.839 solid progress at Ford in our base business but also 0:08:56.880 --> 0:08:58.160 our non vehicle business. 0:08:58.360 --> 0:09:00.240 We're just seeing growth across the board. 0:09:00.679 --> 0:09:03.520 Boy, I got to tell you, I love American consumers. 0:09:03.600 --> 0:09:05.800 They absolutely love our Ford trucks. 0:09:06.640 --> 0:09:09.320 So you know, on the sales side, you've seen two 0:09:09.360 --> 0:09:12.920 months of sales, very strong results so far. 0:09:13.040 --> 0:09:13.880 We got out of the. 0:09:13.920 --> 0:09:17.760 Escape business, but still our sales are growing and actually 0:09:18.080 --> 0:09:20.600 I really believe June could be a breakthrough year a 0:09:20.640 --> 0:09:23.520 month for Ford sales, so we'll see how it ends. 0:09:24.080 --> 0:09:26.800 I have to say that I love watching Max firs 0:09:26.800 --> 0:09:30.200 stapp in and it's been frustrating in some races, but 0:09:31.040 --> 0:09:32.959 he's been incredible to watch. I'm rooting for you and 0:09:33.000 --> 0:09:36.000 Hajar getting a podium was amazing. Can you confirm that 0:09:36.040 --> 0:09:38.439 they're going to drive for you next year as well? 0:09:39.760 --> 0:09:40.040 Well? 0:09:40.360 --> 0:09:43.520 Max has I think Isaac were in good shape. Max 0:09:43.559 --> 0:09:47.320 does have a specific in his contract around around the 0:09:47.320 --> 0:09:49.960 car being competitive, but I think you know he's world 0:09:50.240 --> 0:09:53.360 multiple world champion, as you said, Matt, he'll have the 0:09:53.400 --> 0:09:57.760 option to choose that. What I'm most confident and it's 0:09:57.800 --> 0:09:59.800 a bit of a dilemma for us, but the FA 0:10:00.080 --> 0:10:03.400 the Formula One said that the Red Bull Ford powertrain 0:10:03.880 --> 0:10:07.720 was the most powerful powertrain in the paddock. Unfortunately that 0:10:07.760 --> 0:10:10.679 doesn't allow us to make as many changes as our 0:10:10.720 --> 0:10:13.480 competitors who are behind us. But I am really proud 0:10:13.520 --> 0:10:16.800 of the four team that a brand new powertrain that 0:10:16.920 --> 0:10:20.880 all the competitors are struggling with. That we at Ford 0:10:20.880 --> 0:10:23.200 were able to partner with Red Bull and give Max, 0:10:23.400 --> 0:10:27.040 multiple world champion, such a great powertrain, But we got 0:10:27.040 --> 0:10:28.839 to put the whole package together. We've got a big 0:10:28.920 --> 0:10:31.720 race coming up this weekend and we're going to do 0:10:31.760 --> 0:10:36.160 everything we can to give Max world championship caliber powertrain 0:10:36.360 --> 0:10:38.839 power unit, and then the rest of the team has 0:10:38.880 --> 0:10:40.800 to do the work. Boy, if we give it to Max, 0:10:41.200 --> 0:10:43.720 he will definitely deliver. How about some of those qualifying 0:10:43.720 --> 0:10:46.040 efforts this year. He is just amazing. 0:10:46.080 --> 0:10:46.920 He is amazing. 0:10:46.960 --> 0:10:48.920 And you know I was with you and Lamar last 0:10:49.000 --> 0:10:51.920 year when you announced here coming back to the hyper 0:10:51.920 --> 0:10:54.920 Sport class in twenty twenty seven, will you get Max 0:10:55.200 --> 0:10:56.440 behind the wheel of that car? 0:10:57.600 --> 0:11:01.080 Well, yeah, Max have been driving a Mercedes at the 0:11:01.160 --> 0:11:03.440 ring and you know, sure would be great to see 0:11:03.480 --> 0:11:06.800 him in a Ford. You know, look, we won four 0:11:06.880 --> 0:11:10.160 years in a row. We're the first American company win Lamar. 0:11:11.520 --> 0:11:15.120 We're the only Ford American company that had a chassis 0:11:15.240 --> 0:11:18.240 driver and an engine by an American company win Lamar. 0:11:18.280 --> 0:11:21.480 We're still the only one, and we're going back next 0:11:21.559 --> 0:11:23.800 year to win. It would be great to have Max 0:11:24.280 --> 0:11:28.760 in the Ford hypercar. You know, I'm going to have 0:11:28.800 --> 0:11:31.480 to really put on my charm school act to get 0:11:31.520 --> 0:11:32.560 him in that car, though. 0:11:33.000 --> 0:11:34.520 I think you can do it, Jim. I think you 0:11:35.320 --> 0:11:37.640 can pull that one off. If anybody can, it's you.