WEBVTT - Ford CFO John Lawler Talks EPS Line

0:00:00.120 --> 0:00:02.520
<v Speaker 1>Let's bring it now Ford CFO John Lawler to give

0:00:02.600 --> 0:00:06.160
<v Speaker 1>us more of a read on what happened over at Ford. John,

0:00:06.200 --> 0:00:08.360
<v Speaker 1>thank you so much for joining us. Let's start with

0:00:08.400 --> 0:00:11.320
<v Speaker 1>the EPs line, which was a miss of twenty cents

0:00:11.360 --> 0:00:14.240
<v Speaker 1>compared with the consensus. Can you walk us through what

0:00:14.520 --> 0:00:18.079
<v Speaker 1>dragged the EPs lower to missestimates by that much.

0:00:19.600 --> 0:00:22.640
<v Speaker 2>Well, look, we reaffirmed guidance for the year, our just

0:00:22.720 --> 0:00:25.440
<v Speaker 2>at e big guidance between ten and twelve billion. We

0:00:25.560 --> 0:00:28.200
<v Speaker 2>increased our free cash flow guidance by a billion dollars.

0:00:28.360 --> 0:00:31.920
<v Speaker 2>You know, this is one quarter along the journey towards

0:00:32.000 --> 0:00:36.080
<v Speaker 2>reshaping the company as we transform, as the industry transforms,

0:00:36.280 --> 0:00:37.040
<v Speaker 2>and it's not going to be.

0:00:37.040 --> 0:00:37.839
<v Speaker 3>A straight line up.

0:00:38.080 --> 0:00:40.640
<v Speaker 2>But I think the positive here is that we're on

0:00:40.720 --> 0:00:43.279
<v Speaker 2>track for the year consistent with what we said at

0:00:43.280 --> 0:00:45.800
<v Speaker 2>the beginning of the year, and our cash flow is

0:00:45.800 --> 0:00:49.159
<v Speaker 2>coming in better. So you know, we're moving forward, fixing

0:00:49.200 --> 0:00:52.360
<v Speaker 2>the business, reshaping the company and really leaning into the

0:00:52.360 --> 0:00:55.680
<v Speaker 2>strengths we have with Ford Pro and with Ford Blue,

0:00:55.960 --> 0:00:59.560
<v Speaker 2>and really driving increased sales in our electric business, with

0:00:59.600 --> 0:01:01.520
<v Speaker 2>our high brid sales up thirty four.

0:01:01.400 --> 0:01:03.880
<v Speaker 3>Percent this quarter, nine percent of our mix.

0:01:04.200 --> 0:01:07.240
<v Speaker 2>So we're seeing strengths in many different areas across the business.

0:01:07.520 --> 0:01:09.479
<v Speaker 2>But again, full year, we're on track.

0:01:09.959 --> 0:01:12.080
<v Speaker 1>Full year year on track. I know that in the

0:01:12.120 --> 0:01:14.720
<v Speaker 1>past Ward has projected EV losses of up to five

0:01:14.760 --> 0:01:17.560
<v Speaker 1>and a half billion dollars this year. At what point

0:01:17.560 --> 0:01:21.039
<v Speaker 1>will Forward make profit on EVS?

0:01:22.000 --> 0:01:23.840
<v Speaker 2>Well, in the quarter you saw that we reduce our

0:01:23.880 --> 0:01:27.119
<v Speaker 2>costs and our EV business and Ford Model E. We're

0:01:27.120 --> 0:01:30.840
<v Speaker 2>working towards profitability with our second gen vehicles, which will

0:01:30.840 --> 0:01:34.600
<v Speaker 2>be ground up all new platforms that we're developing, and

0:01:35.120 --> 0:01:37.720
<v Speaker 2>you know, we won't launch those vehicles unless they are

0:01:37.760 --> 0:01:40.400
<v Speaker 2>profitable in the first year of sales. So that's what

0:01:40.400 --> 0:01:43.800
<v Speaker 2>we're focused on right now, fixing that business, lowering the

0:01:43.840 --> 0:01:47.240
<v Speaker 2>costs until our second generation vehicles come out, and continuing

0:01:47.280 --> 0:01:52.120
<v Speaker 2>to drive positive performance or across both Blue and Pro.

0:01:53.200 --> 0:01:55.960
<v Speaker 4>So how do you feel about the EV story overall?

0:01:56.040 --> 0:01:58.200
<v Speaker 4>I'm sure John, you can appreciate a lot of people

0:01:58.240 --> 0:02:01.240
<v Speaker 4>are focused on this transition and what it means for you. Guys,

0:02:01.440 --> 0:02:04.920
<v Speaker 4>think about just the Oakville, Ontario plant, for example, the

0:02:05.040 --> 0:02:08.919
<v Speaker 4>focusing on super duty pickups instead of EV's. How much

0:02:09.440 --> 0:02:11.520
<v Speaker 4>is Forward backing off of EVS.

0:02:12.800 --> 0:02:15.960
<v Speaker 2>Look, we are committed to EV's it's not a matter

0:02:16.040 --> 0:02:19.280
<v Speaker 2>of if you know they're going to happen. We have

0:02:19.480 --> 0:02:23.680
<v Speaker 2>tremendous demand for our super duty vehicles. We can't meet customers' needs.

0:02:24.040 --> 0:02:27.520
<v Speaker 2>So we took a plant that's available in Ontario. We

0:02:27.600 --> 0:02:30.440
<v Speaker 2>converted it over. We're converting it over to super duty

0:02:30.840 --> 0:02:33.079
<v Speaker 2>to fit a need. It's going to be capital efficient.

0:02:33.360 --> 0:02:36.040
<v Speaker 2>It's the quickest plant and path to bring more super

0:02:36.120 --> 0:02:39.519
<v Speaker 2>duties to market. And then you know, we'll reaffirm later

0:02:39.639 --> 0:02:42.280
<v Speaker 2>where we're going to build our SUV that was planned

0:02:42.320 --> 0:02:45.360
<v Speaker 2>for the Ontario plant. So we're still committed to our

0:02:45.400 --> 0:02:46.560
<v Speaker 2>electric vehicle business.

0:02:46.760 --> 0:02:47.720
<v Speaker 3>It is the future.

0:02:48.040 --> 0:02:50.120
<v Speaker 2>The path there is just going to be different than

0:02:50.160 --> 0:02:53.440
<v Speaker 2>what many people perceived or thought a few months ago,

0:02:53.480 --> 0:02:56.080
<v Speaker 2>a few years ago. But you know, we're not giving

0:02:56.200 --> 0:02:58.200
<v Speaker 2>up on EV's. They're an important part of our business.

0:02:58.200 --> 0:02:59.680
<v Speaker 2>They're an important part of our future.

0:03:00.000 --> 0:03:01.680
<v Speaker 4>When you look at the numbers here, it seems like

0:03:01.880 --> 0:03:05.640
<v Speaker 4>there are certain factors warranties for example, that might have

0:03:05.760 --> 0:03:08.280
<v Speaker 4>been a big factor in this earnings per share beat. John,

0:03:08.320 --> 0:03:10.840
<v Speaker 4>I can also appreciate that you're looking to guide toward

0:03:10.919 --> 0:03:14.000
<v Speaker 4>the future here, but what was the biggest contributor here

0:03:14.040 --> 0:03:18.040
<v Speaker 4>to the EPs? Miss what are you telling investors.

0:03:19.000 --> 0:03:21.280
<v Speaker 2>Well, I think warranty came in did come in higher

0:03:21.360 --> 0:03:24.040
<v Speaker 2>than we had planned, and that was from models that

0:03:24.080 --> 0:03:27.840
<v Speaker 2>were engineered and launched before twenty twenty one model years.

0:03:28.080 --> 0:03:29.640
<v Speaker 2>What you're seeing, though, is that our.

0:03:29.600 --> 0:03:30.680
<v Speaker 3>Quality is improving.

0:03:30.680 --> 0:03:34.560
<v Speaker 2>If you look at the JD Power initial survey on quality,

0:03:34.880 --> 0:03:36.920
<v Speaker 2>we moved from twenty three up to number nine.

0:03:36.920 --> 0:03:39.000
<v Speaker 3>Now are we happy with number nine? No, we have

0:03:39.320 --> 0:03:39.840
<v Speaker 3>a lot of.

0:03:39.760 --> 0:03:42.520
<v Speaker 2>Work to do, but we're really focused on improving quality.

0:03:42.800 --> 0:03:45.160
<v Speaker 2>We're seeing it in our internal numbers and you're seeing

0:03:45.200 --> 0:03:48.400
<v Speaker 2>it validated from third parties, so that's the important thing.

0:03:48.800 --> 0:03:51.360
<v Speaker 2>And then over time that will start to show up

0:03:51.360 --> 0:03:55.080
<v Speaker 2>through lower warranty costs as those quality numbers come through

0:03:55.120 --> 0:03:57.360
<v Speaker 2>our consumers and come through our products there and we're

0:03:57.400 --> 0:03:58.680
<v Speaker 2>launching in the markets today.

0:03:59.240 --> 0:04:01.240
<v Speaker 1>You know, I'm looking at the ford Blue business, which

0:04:01.280 --> 0:04:04.480
<v Speaker 1>is your ice business, and on a revenue line, it

0:04:04.520 --> 0:04:06.640
<v Speaker 1>looks like it did better than expected. But when it

0:04:06.680 --> 0:04:10.040
<v Speaker 1>comes to EBIT one point one seven billion dollars compares

0:04:10.040 --> 0:04:12.320
<v Speaker 1>with the estimate of two point four to three billion,

0:04:12.680 --> 0:04:15.280
<v Speaker 1>what happened to account for that bigness on the EBIT

0:04:15.360 --> 0:04:16.360
<v Speaker 1>line for Ford Blue?

0:04:17.640 --> 0:04:19.880
<v Speaker 2>There's two things in there one, most of the warranty

0:04:20.040 --> 0:04:22.000
<v Speaker 2>increase was in ford Blue.

0:04:22.240 --> 0:04:23.600
<v Speaker 3>The other thing is in the.

0:04:23.520 --> 0:04:26.000
<v Speaker 2>First half, the first second quarter, and in the first

0:04:26.000 --> 0:04:29.359
<v Speaker 2>half we were launching a number of vehicles and with

0:04:29.480 --> 0:04:33.400
<v Speaker 2>those launches came higher costs. Now in the second half,

0:04:33.400 --> 0:04:36.120
<v Speaker 2>we expect ford Blue to do much better than they

0:04:36.120 --> 0:04:37.800
<v Speaker 2>did in the first half. We'll have a new F

0:04:37.880 --> 0:04:40.640
<v Speaker 2>series in the marketplace running at full capacity.

0:04:41.040 --> 0:04:41.920
<v Speaker 3>We have the.

0:04:41.920 --> 0:04:44.240
<v Speaker 2>Launch of the new Explorer, we have the Ranger, and

0:04:44.279 --> 0:04:46.160
<v Speaker 2>then we've increased capacity on our Bronco.

0:04:46.600 --> 0:04:49.320
<v Speaker 3>So second half for ford Blue will be much stronger than.

0:04:49.240 --> 0:04:51.480
<v Speaker 2>The first half because we'll be through all these launches

0:04:51.520 --> 0:04:54.160
<v Speaker 2>and we'll have a lot more product in the marketplace

0:04:54.200 --> 0:04:56.920
<v Speaker 2>and those are very profitable products for us in our lineup.

0:04:57.160 --> 0:04:59.560
<v Speaker 1>Okay, so the warranty impact, it sounds like John was

0:04:59.680 --> 0:05:01.960
<v Speaker 1>a one time thing, not something that will be recurring.

0:05:02.640 --> 0:05:04.560
<v Speaker 1>What does this mean in terms of how you're looking

0:05:04.600 --> 0:05:07.320
<v Speaker 1>at your costs? Will there be more significant cost cuts?

0:05:08.880 --> 0:05:12.600
<v Speaker 2>Yeah, We're working on reducing our costs intensely. It's an

0:05:12.600 --> 0:05:15.760
<v Speaker 2>incredible focus by the team. Really, it's really equality and

0:05:15.839 --> 0:05:18.800
<v Speaker 2>cost reductions. That's our opportunity in the near term to

0:05:18.839 --> 0:05:21.720
<v Speaker 2>really improve the business the teams focused on it, there

0:05:21.760 --> 0:05:24.600
<v Speaker 2>will be additional cost reductions or on track to take

0:05:24.640 --> 0:05:28.719
<v Speaker 2>two billion dollars in material cost out, manufacturing cost, freight costs,

0:05:29.040 --> 0:05:31.520
<v Speaker 2>and we're going to look to you know, accelerate that progress.

0:05:32.440 --> 0:05:35.159
<v Speaker 4>At the end of the day, has Ford Pro become

0:05:35.200 --> 0:05:36.960
<v Speaker 4>the most important part of your business?

0:05:36.960 --> 0:05:40.359
<v Speaker 2>With all things considered, I think all parts of the

0:05:40.360 --> 0:05:43.680
<v Speaker 2>business are important. Our incredible ice platform is going to

0:05:43.680 --> 0:05:45.880
<v Speaker 2>be here for a long time. Evs are going to

0:05:45.920 --> 0:05:48.159
<v Speaker 2>be a big part of our future. But yeah, Ford

0:05:48.200 --> 0:05:51.560
<v Speaker 2>Pro is different. It is a very strong part of

0:05:51.600 --> 0:05:55.440
<v Speaker 2>our business. It's unmatched in the industry with the strengths

0:05:55.520 --> 0:05:59.440
<v Speaker 2>we have. It's the culmination of hardware, software and services

0:05:59.480 --> 0:06:02.520
<v Speaker 2>coming together other it's in a creative business that's going

0:06:02.560 --> 0:06:05.279
<v Speaker 2>to you know, drive the bottom line for Ford Motor

0:06:05.279 --> 0:06:07.080
<v Speaker 2>Company over the next several years.

0:06:07.080 --> 0:06:07.560
<v Speaker 3>For sure.

0:06:08.360 --> 0:06:10.560
<v Speaker 2>We increased our guidance for ford Pro for the year

0:06:10.600 --> 0:06:13.480
<v Speaker 2>adjusted EVID guidance by a billion dollars. So yeah, it's

0:06:13.520 --> 0:06:17.159
<v Speaker 2>a special business within Ford and we're really pleased with

0:06:17.200 --> 0:06:18.040
<v Speaker 2>how it's performing.

0:06:18.400 --> 0:06:18.640
<v Speaker 3>John.

0:06:18.680 --> 0:06:20.600
<v Speaker 4>We really appreciate your time today. Of course. That is

0:06:20.680 --> 0:06:23.400
<v Speaker 4>Ford CFO John Lawler, right on the heels of an

0:06:23.400 --> 0:06:24.440
<v Speaker 4>important earning season