WEBVTT - Ford President & CEO Jim Farley Talks Earnings Amid Tariff Turmoil

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news.

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<v Speaker 2>Ford Motors is out with this latest earnings report. Adjusted

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<v Speaker 2>earnings per share for the fourth quarter beat the average

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<v Speaker 2>analyst estimate, but you're seeing the stock drop in after

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<v Speaker 2>hours trading because of the outlook. Ford warning that profit

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<v Speaker 2>may fall by two billion dollars or more this year

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<v Speaker 2>on an expected drop in vehicle prices as well as

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<v Speaker 2>costly new model launches, and of course behind all of that,

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<v Speaker 2>you also have concerns over new tariffs under President Trump.

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<v Speaker 2>We now want to welcome our TV and radio on

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<v Speaker 2>audiences across the globe because joining us now with more

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<v Speaker 2>is Jim Farley, CEO of Ford. Jim, thank you for

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<v Speaker 2>joining us today. Really appreciate your making the time. I

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<v Speaker 2>want to ask about the expected drop in vehicle prices.

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<v Speaker 2>Is that something that is across the board that we're

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<v Speaker 2>seeing in the industry or is that specific to what

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<v Speaker 2>you're seeing at Ford.

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<v Speaker 3>No, I think it's it's across the industry. We're seeing

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<v Speaker 3>all around the world. You know, after COVID all vehicle

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<v Speaker 3>prices really up, but with the acceleration of evs as

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<v Speaker 3>well as inventories normalizing for customers and dealers, We're seeing

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<v Speaker 3>the prices come down across the globe, and affordability is

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<v Speaker 3>a big concern for customers.

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<v Speaker 2>Yeah, it certainly is, and you of course have some

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<v Speaker 2>new model launches that will be coming up in the

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<v Speaker 2>years to come. But in the meantime, it's a it's

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<v Speaker 2>a matter of managing through this interim period. And during

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<v Speaker 2>this interim period there are a lot of question marks

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<v Speaker 2>over TIFFs. The teriffs that President Trump had planned to

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<v Speaker 2>impose on Mexico and Canada have been.

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<v Speaker 4>Pushed out by a month. How does the.

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<v Speaker 2>Company plan to take advantage of this four week delay

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<v Speaker 2>that was announced earlier this week? Will you be stockpiling inventory,

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<v Speaker 2>for instance, to get ahead of that?

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<v Speaker 3>Well, I think Ford is among the best industrial companies.

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<v Speaker 3>Is scrambling. We have the largest US footprint of any

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<v Speaker 3>car company. You can imagine. We're increasing our component supplies

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<v Speaker 3>both at the company and our suppliers, and we're adjusting

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<v Speaker 3>both our Mexico as well as our US plants to

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<v Speaker 3>make sure nothing crosses the border.

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<v Speaker 4>I think longer term is the bigger concern.

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<v Speaker 3>These kind of tariffs, especially in these two countries, are

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<v Speaker 3>very significant, and if they persist beyond months, you know,

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<v Speaker 3>we could see billions of billions of dollars of pressure

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<v Speaker 3>on the industry, lost jobs, lots of impacts to communities

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<v Speaker 3>and our ecosystem in the industry, and that's what we're

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<v Speaker 3>talking the administration about and congressional leaders.

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<v Speaker 1>So what kind of communications have you had with specifically

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<v Speaker 1>with the White House officials about either tamping down some

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<v Speaker 1>of these potential terrists or assuming that Trump does go

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<v Speaker 1>through with them, how if at all, the auto industry

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<v Speaker 1>either could be compensated or in some way have that

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<v Speaker 1>impact mitigated.

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<v Speaker 3>Well, actually, we spocus the industry, Mary myself, John Elkin

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<v Speaker 3>from Stilantis, we all kind of said the same thing,

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<v Speaker 3>which is four years ago, we can admitted to the

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<v Speaker 3>USMCA tear requirements, and all companies have done their job

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<v Speaker 3>to make sure our vehicle and components are USMCA compliant,

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<v Speaker 3>and we ask for those to be exempt because it's

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<v Speaker 3>a trade agreement that we all agree to. Actually with

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<v Speaker 3>the Trump administration, we think that that's only fair. Look,

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<v Speaker 3>right now, this tariff has proposed as a windfall for

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<v Speaker 3>South Korea and Japanese companies that can import millions and millions.

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<v Speaker 4>Of vehicles without these tariffs.

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<v Speaker 3>Meanwhile, we have USMCA compliant vehicles and components that are

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<v Speaker 3>susceptible to this, which will have all this devastating impact.

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<v Speaker 3>So what we're asking for is a reason policy around

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<v Speaker 3>tariff that's not just these two countries, and we understand

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<v Speaker 3>the pressures on the border and illegal drugs, but it's

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<v Speaker 3>more comprehensive. We also have to work through CO two

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<v Speaker 3>policy as well as tax policy with the IRA.

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<v Speaker 1>So what is your strategy? Then? I'm good to navigate this.

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<v Speaker 1>I mean, this isn't going away, whether it's twenty five

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<v Speaker 1>or something less. This specter is there's certainly a big

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<v Speaker 1>part of the President's playbook to address the issues that

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<v Speaker 1>he wants to resolve here. You can't just up and

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<v Speaker 1>move a factory overnight, Jim. So what exactly are strategizing

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<v Speaker 1>now with your team to make sure that not only

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<v Speaker 1>are you producing the cars you need to produce, but

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<v Speaker 1>you're producing them at a cost that's reasonable to you

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<v Speaker 1>and more importantly, reasonable to the customer.

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<v Speaker 3>Well, first of all, Ford is in a very fortunate situation.

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<v Speaker 3>We decided many years ago to have an outsized footprint

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<v Speaker 3>in the US. So our manufacturing footprint, the number of

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<v Speaker 3>vehicles that we make eighty percent of our vehicles sold

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<v Speaker 3>in the US are made here, all of our transmissions,

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<v Speaker 3>most of our engines, so we have a really big

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<v Speaker 3>advantage compared to our competitors. But there are optionality that

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<v Speaker 3>we can make. And look, we've localized a lot of

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<v Speaker 3>battery plans and ev production in Tennessee and Kentucky because

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<v Speaker 3>the production tax credit is there. So we're really asking

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<v Speaker 3>an administration please preserve the production tax credit. Let's have

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<v Speaker 3>a reasons tear for approach, and most of all, let's

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<v Speaker 3>have reasonable co two targets that are in line with

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<v Speaker 3>what customers are actually buying.

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<v Speaker 1>Do you have spare capacity inside the US right now?

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<v Speaker 1>A significance.

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<v Speaker 3>No, No, we are matched out in the US. As

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<v Speaker 3>I said, we're the largest US producer. We export more cars.

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<v Speaker 3>A lot of people don't realize that Ford exports a

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<v Speaker 3>lot of cars outside the US. We don't have a

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<v Speaker 3>lot of excess capacity a little bit, and we're taking

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<v Speaker 3>advantage of that, and that's why we're building new capacity

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<v Speaker 3>in Ohio and Tennessee and Kentucky for batteries and these

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<v Speaker 3>new Eviso be coming out in the next couple of years.

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<v Speaker 4>That's why we're investing in the US.

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<v Speaker 2>Terrors are clearly on everyone's mind, and that's something your

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<v Speaker 2>CFO has made in her statement as well. And the

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<v Speaker 2>guidance that you offer does not include the potential impact

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<v Speaker 2>of policy changes by the White House. Once we do

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<v Speaker 2>get the actual tariffs announced and imposed, how quickly can

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<v Speaker 2>Ford come out with some specifics, quantify the impact and

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<v Speaker 2>provide a new forecast. Is that something that you intend

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<v Speaker 2>to do?

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<v Speaker 3>Of course, I mean, we're always transparent. I will be

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<v Speaker 3>able to say though in our guidance we can handle

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<v Speaker 3>a couple of weeks of tariffs. If it goes beyond that,

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<v Speaker 3>obviously it will be billions of billions of incremental incremental,

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<v Speaker 3>you know, profit headwinds for the company. So you know,

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<v Speaker 3>I think the most important thing is having a productive

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<v Speaker 3>discussion with the DC leaders, the Trump administration, congressional leaders

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<v Speaker 3>about what this could do to our industry, what it

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<v Speaker 3>means for US jobs.

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<v Speaker 4>And you know, they ran on a campaign of making the.

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<v Speaker 3>Auto industry stronger, and that's what we expect out of them.

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<v Speaker 4>As policy makers.

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<v Speaker 3>We have a lot of policy decisions to make in

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<v Speaker 3>the coming year, As I said, CO two tax policy,

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<v Speaker 3>and we believe that this administration, congressional leaders are going

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<v Speaker 3>to back to US industry companies like four that have

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<v Speaker 3>doubled down in the US.

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<v Speaker 2>Right, Okay, I want to talk a little bit about

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<v Speaker 2>your ED business as well. The EV strategy. Clearly in

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<v Speaker 2>overhaul mode, you're more affordable models that go further on

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<v Speaker 2>a single charge won't really be available for two years

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<v Speaker 2>and for it is kind of unusual on that you

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<v Speaker 2>do break out your EV profits and your financial reports.

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<v Speaker 2>When will you have visibility on those affordable models that

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<v Speaker 2>go further on a single charge in terms of being

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<v Speaker 2>able to really turn around that business.

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<v Speaker 4>Well, look, we made the decision.

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<v Speaker 3>We've been number three to Tesla in the US EV

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<v Speaker 3>sales for three years now, we've been number two for

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<v Speaker 3>three years, and we're also number three on hybrid, so

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<v Speaker 3>we know a lot about these customers. We decided a

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<v Speaker 3>couple of years ago, based on what we heard from customers,

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<v Speaker 3>that we really needed to redo our EV lineup. So

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<v Speaker 3>we made that decision a couple of years ago. You know,

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<v Speaker 3>we canceled a couple models. Those vehicles are in development now.

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<v Speaker 3>We would rather grow profitably than grow and that's that's

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<v Speaker 3>what we're deciding on.

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<v Speaker 4>So this next couple of years. We're number two to

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<v Speaker 4>test a long.

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<v Speaker 3>Way below them, but we scaled one hundred thousand unit

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<v Speaker 3>plus for a couple of years. Now we want to

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<v Speaker 3>wait until those new vehicles come out in a couple

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<v Speaker 3>of years. As you said, that will really transform our

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<v Speaker 3>model ly profits. You know, they're designed differently, They're going

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<v Speaker 3>to be manufactured different they have a different supply chain.

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<v Speaker 3>We've really learned a lot from Tesla, from the Chinese,

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<v Speaker 3>from a lot of people on how differently we need

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<v Speaker 3>to design these evs to be profitable.

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<v Speaker 1>So Ford is committed to a long term EV strategy.

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<v Speaker 3>Then absolutely what about absolutely we see I was just

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<v Speaker 3>going to say, we see the people buy evs, they

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<v Speaker 3>don't go back to combustion. You know, they're they have

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<v Speaker 3>very high level satisfaction with the vehicle. It's a small

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<v Speaker 3>part of the industry in the US, only eight percent,

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<v Speaker 3>but it's growing. But the only way it's going to

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<v Speaker 3>grow in a sustained way if it's a profitable business

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<v Speaker 3>for us, and that's why we had to completely redesign

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<v Speaker 3>our vehicle and our approach.

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<v Speaker 1>Jim, we want to really thank you for taking time

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<v Speaker 1>for us here on what I'm sure is a very

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<v Speaker 1>busy after for you. Jim Farley there, he is the

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<v Speaker 1>CEO over at Ford. Those earnings just out, and we

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<v Speaker 1>shoull reiterate here. The numbers in the most recent quarter

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<v Speaker 1>did beat, but some concerns here about the guidance going forward,

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<v Speaker 1>largely because of costs and maybe some tamp down of

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<v Speaker 1>pricing power. Those shares down five percent in the after

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<v Speaker 1>hour straight