Speaker 1: Let's bring it now Ford CFO John Lawler to give
Speaker 1: us more of a read on what happened over at Ford. John,
Speaker 1: thank you so much for joining us. Let's start with
Speaker 1: the EPs line, which was a miss of twenty cents
Speaker 1: compared with the consensus. Can you walk us through what
Speaker 1: dragged the EPs lower to missestimates by that much.
Speaker 2: Well, look, we reaffirmed guidance for the year, our just
Speaker 2: at e big guidance between ten and twelve billion. We
Speaker 2: increased our free cash flow guidance by a billion dollars.
Speaker 2: You know, this is one quarter along the journey towards
Speaker 2: reshaping the company as we transform, as the industry transforms,
Speaker 2: and it's not going to be.
Speaker 3: A straight line up.
Speaker 2: But I think the positive here is that we're on
Speaker 2: track for the year consistent with what we said at
Speaker 2: the beginning of the year, and our cash flow is
Speaker 2: coming in better. So you know, we're moving forward, fixing
Speaker 2: the business, reshaping the company and really leaning into the
Speaker 2: strengths we have with Ford Pro and with Ford Blue,
Speaker 2: and really driving increased sales in our electric business, with
Speaker 2: our high brid sales up thirty four.
Speaker 3: Percent this quarter, nine percent of our mix.
Speaker 2: So we're seeing strengths in many different areas across the business.
Speaker 2: But again, full year, we're on track.
Speaker 1: Full year year on track. I know that in the
Speaker 1: past Ward has projected EV losses of up to five
Speaker 1: and a half billion dollars this year. At what point
Speaker 1: will Forward make profit on EVS?
Speaker 2: Well, in the quarter you saw that we reduce our
Speaker 2: costs and our EV business and Ford Model E. We're
Speaker 2: working towards profitability with our second gen vehicles, which will
Speaker 2: be ground up all new platforms that we're developing, and
Speaker 2: you know, we won't launch those vehicles unless they are
Speaker 2: profitable in the first year of sales. So that's what
Speaker 2: we're focused on right now, fixing that business, lowering the
Speaker 2: costs until our second generation vehicles come out, and continuing
Speaker 2: to drive positive performance or across both Blue and Pro.
Speaker 4: So how do you feel about the EV story overall?
Speaker 4: I'm sure John, you can appreciate a lot of people
Speaker 4: are focused on this transition and what it means for you. Guys,
Speaker 4: think about just the Oakville, Ontario plant, for example, the
Speaker 4: focusing on super duty pickups instead of EV's. How much
Speaker 4: is Forward backing off of EVS.
Speaker 2: Look, we are committed to EV's it's not a matter
Speaker 2: of if you know they're going to happen. We have
Speaker 2: tremendous demand for our super duty vehicles. We can't meet customers' needs.
Speaker 2: So we took a plant that's available in Ontario. We
Speaker 2: converted it over. We're converting it over to super duty
Speaker 2: to fit a need. It's going to be capital efficient.
Speaker 2: It's the quickest plant and path to bring more super
Speaker 2: duties to market. And then you know, we'll reaffirm later
Speaker 2: where we're going to build our SUV that was planned
Speaker 2: for the Ontario plant. So we're still committed to our
Speaker 2: electric vehicle business.
Speaker 3: It is the future.
Speaker 2: The path there is just going to be different than
Speaker 2: what many people perceived or thought a few months ago,
Speaker 2: a few years ago. But you know, we're not giving
Speaker 2: up on EV's. They're an important part of our business.
Speaker 2: They're an important part of our future.
Speaker 4: When you look at the numbers here, it seems like
Speaker 4: there are certain factors warranties for example, that might have
Speaker 4: been a big factor in this earnings per share beat. John,
Speaker 4: I can also appreciate that you're looking to guide toward
Speaker 4: the future here, but what was the biggest contributor here
Speaker 4: to the EPs? Miss what are you telling investors.
Speaker 2: Well, I think warranty came in did come in higher
Speaker 2: than we had planned, and that was from models that
Speaker 2: were engineered and launched before twenty twenty one model years.
Speaker 2: What you're seeing, though, is that our.
Speaker 3: Quality is improving.
Speaker 2: If you look at the JD Power initial survey on quality,
Speaker 2: we moved from twenty three up to number nine.
Speaker 3: Now are we happy with number nine? No, we have
Speaker 3: a lot of.
Speaker 2: Work to do, but we're really focused on improving quality.
Speaker 2: We're seeing it in our internal numbers and you're seeing
Speaker 2: it validated from third parties, so that's the important thing.
Speaker 2: And then over time that will start to show up
Speaker 2: through lower warranty costs as those quality numbers come through
Speaker 2: our consumers and come through our products there and we're
Speaker 2: launching in the markets today.
Speaker 1: You know, I'm looking at the ford Blue business, which
Speaker 1: is your ice business, and on a revenue line, it
Speaker 1: looks like it did better than expected. But when it
Speaker 1: comes to EBIT one point one seven billion dollars compares
Speaker 1: with the estimate of two point four to three billion,
Speaker 1: what happened to account for that bigness on the EBIT
Speaker 1: line for Ford Blue?
Speaker 2: There's two things in there one, most of the warranty
Speaker 2: increase was in ford Blue.
Speaker 3: The other thing is in the.
Speaker 2: First half, the first second quarter, and in the first
Speaker 2: half we were launching a number of vehicles and with
Speaker 2: those launches came higher costs. Now in the second half,
Speaker 2: we expect ford Blue to do much better than they
Speaker 2: did in the first half. We'll have a new F
Speaker 2: series in the marketplace running at full capacity.
Speaker 3: We have the.
Speaker 2: Launch of the new Explorer, we have the Ranger, and
Speaker 2: then we've increased capacity on our Bronco.
Speaker 3: So second half for ford Blue will be much stronger than.
Speaker 2: The first half because we'll be through all these launches
Speaker 2: and we'll have a lot more product in the marketplace
Speaker 2: and those are very profitable products for us in our lineup.
Speaker 1: Okay, so the warranty impact, it sounds like John was
Speaker 1: a one time thing, not something that will be recurring.
Speaker 1: What does this mean in terms of how you're looking
Speaker 1: at your costs? Will there be more significant cost cuts?
Speaker 2: Yeah, We're working on reducing our costs intensely. It's an
Speaker 2: incredible focus by the team. Really, it's really equality and
Speaker 2: cost reductions. That's our opportunity in the near term to
Speaker 2: really improve the business the teams focused on it, there
Speaker 2: will be additional cost reductions or on track to take
Speaker 2: two billion dollars in material cost out, manufacturing cost, freight costs,
Speaker 2: and we're going to look to you know, accelerate that progress.
Speaker 4: At the end of the day, has Ford Pro become
Speaker 4: the most important part of your business?
Speaker 2: With all things considered, I think all parts of the
Speaker 2: business are important. Our incredible ice platform is going to
Speaker 2: be here for a long time. Evs are going to
Speaker 2: be a big part of our future. But yeah, Ford
Speaker 2: Pro is different. It is a very strong part of
Speaker 2: our business. It's unmatched in the industry with the strengths
Speaker 2: we have. It's the culmination of hardware, software and services
Speaker 2: coming together other it's in a creative business that's going
Speaker 2: to you know, drive the bottom line for Ford Motor
Speaker 2: Company over the next several years.
Speaker 3: For sure.
Speaker 2: We increased our guidance for ford Pro for the year
Speaker 2: adjusted EVID guidance by a billion dollars. So yeah, it's
Speaker 2: a special business within Ford and we're really pleased with
Speaker 2: how it's performing.
Speaker 3: John.
Speaker 4: We really appreciate your time today. Of course. That is
Speaker 4: Ford CFO John Lawler, right on the heels of an
Speaker 4: important earning season