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- [00:03]
Jim Farley
Bloomberg Audio Studios Podcasts, radio news.
- [00:08]
Bloomberg Host
Yeah. I want to welcome our Bloomberg television and Bloomberg Radio audiences to Michigan Central station here in Detroit. I'm sitting down with Jim Farley, the CEO of Ford, as well as Laurent Mekis who runs the Red Bull racing team. It's a pleasure, gentlemen. I'm very excited as a fan of the brand and the league. And let me start Laurent with you because you've that this is the steepest hill F1 has ever had to climb. New regulations this year are sweeping. It's not just a tweak here and there. And you're starting with a brand new partner with Ford who is going to build the engine with you as a collaboration. Why choose Ford as a partner?
- [00:50]
Laurent Mekies
You know, at first you're right, you know, it's, it's the biggest regulation change probably in the history of Formula one, at least in the modern history of Formula one. And it's also on that very same year that we chose the, let me say, crazy challenge to, to go and build our employee in it. And if you do that, you want to partner with the best. And we are in a lucky position where we, we have managed to, to strike this strategic technical partnership with Ford in this crazy adventure of building from absolutely zero our own poor unit. And we go together in this, in these new regulations.
- [01:27]
Bloomberg Host
Jim, for you, this must be exciting because you've built honestly a new legacy for terms of racing. I mean, on the one hand you've got the new industrialized America here. On the other hand, you're going back to Le Mans with a hypercar in a couple of years. You're essentially doing DFV 2.0. Right? This is like the Cosworth of old. Why do you, when you're talking to Bill Ford, when you're talking to shareholders, how do you justify this, this spend and this, you know, drive to go racing?
- [02:00]
Jim Farley
Well, a couple of things. First of all, the tech transfer, this sport that Laurent leads, this team that Laurent leads, know leader in aerodynamics, predictive failure components and software, software control, the hybrid system, high discharge batteries, these are all core capabilities that we need for the next five to 10 years as a company. So the tech transfer is very relevant for us. Like maybe four valves or overhead cams were in the 60s, you know. But the tech transfer is totally different today. Formula one is a complete digital sport and that's where we're going as a company, number one. Number two is, you know, racing especially in the off road, gives us credibility for customers that the product they buy has real capability that's been tested in a way that a brand who doesn't race can't say. And that's what Porsche and Ferrari knew for a long time. Especially for us in the off road world, this is really important. Racing is a fundamental part of our company's business because to beat all the great off road brands and to establish ourselves now we're 2x Jeep sales in the US to keep that going and keep growing the off road brand, off road racing in Dakar, Baja is where our customers will say hey, that Ford has the real deal. It's the real deal. It's not a poser product. So racing is integral into our credibility as a company.
- [03:37]
Bloomberg Host
And you've obviously got a deep, rich history there and you're bringing your software and battery technology, those capabilities to Red Bull racing. But for you, Laurent, this is a whole new thing, right? Building the engine. I know you're getting a lot of help from Ford. What are they helping you with on the, on the fuel side looks?
- [03:56]
Laurent Mekies
I've been helping us on many different topics and at least of topics easier is expanding every day. But let me give you a couple of, of practical examples. James team have unique advanced manufacturing capabilities that we use to produce some of the most critical part of our engine. Only they're able to manufacture these parts for us, but also they do it in less time than we will do otherwise. And that give us a crucial, you know, our business is, is a time to market business. We call it a time to raise business. And when we are able to manufacture complex components in a shorter amount of time at this incredible level of quality that we are looking for, that's a key competitive, competitive advantage.
- [04:39]
Bloomberg Host
Especially since I think you've said you gave up some time focused on last year's car. So you're in a hurry to make sure that this, this new car, when Max gets in it in Bahrain, right. That it's a winner and not a learning moment. How do you make sure that you're winning straight out of the game?
- [04:56]
Laurent Mekies
You know, you will have to bear with us a little bit. The sky, the scale of the challenge is, is monumental. We, we, we are starting, we have started to design and build these engines in what was a field, you know, we, we've made the factory, we've bought the dyno, we've, we've put together an unbelievable group of people and group of partners such as Jim and his team. And it will be foolish and naive to think that from the first day you are going to be at the same level than people that have been doing it for 90 years. So bear with us. It will, it will give us a few sleepless nights, it will give us a few headaches. We feel we have the right people, the right tools, the right spirit across. What Red Bull means and what Ford means will eventually come out of top, but the first few months will certainly be full of learnings.
- [05:51]
Bloomberg Host
Jim, what can you bring back from this, I guess laboratory, if you will, to the Ford customer here in America? Because yesterday we saw figures from the bureau of labor and statistics that showed prices for the average passenger car, not Ford, but you know, across the industry are up more than $500. Prices for the average truck across the industry are up more, more than $1,000. What can you bring back that, you know, puts value into those price increases?
- [06:19]
Jim Farley
Well, Matt, I think Laurent said it really well if there was an initial premise of what those transfer technologies would be to help the company. But what we're learning working with him over the last several years is actually that list is growing and it's more diverse than we thought. Of course we thought it was aero and high discharge batteries for performance hybrids. Well now it turns out performance hybrids are really important for the company. 25% F150 is now hybrid sales people are buying it because of pro power on board, not just because of efficiency. And every day, honestly the list of things that we can take from the effort with Laurent, his team, because the sport is so hard and the time pressure is so high, that list is getting longer every day. I could give you a, a long list and most of the value that we're seeing on the tech transfer side are things that we didn't even have on the list when we started four years ago. It's a long list. But I would say that the real signature is for me is really the software, the control software for the hybrid system predictive failure components. These are the essence of the new software defined vehicle globally to beat China. And they are really good. We need these capabilities from Formula one and we can put them right into transit van. He can help us with the, you know, language models and the logic of predictive failure. For a component on a formula one race. We can use that same know how hopefully to help our customers in the transit know that something's going to break way before it breaks. And that's the same capability he has to deliver for Max. This is really the cool part of Formula one. It is such a high pressure, high tech sport that actually the list of value like lubrication, it's just going to keep getting longer.
- [08:22]
Bloomberg Host
Laurent, the President of the United States was with Jim a couple of days ago here touring their plants as the US Turns more inward. It's interesting that you're participating in this sort of global sport. Right. We've just learned of new visa restrictions on people from many nations, including Brazil. Do you find it harder to get people in to Miami, to Las Vegas, to Austin? I know there have been problems already holding up gear at the border.
- [08:52]
Laurent Mekies
Really, you know, it's not an issue. Today we are, we are a global sport. As you have said, we are enjoying racing in pretty much every part of the world, or nearly every part of the world. We have incredible logistic capabilities, which is also something that we are brainstorming and exchanging with with with Jim and his team. And these teams together with the help of Formula One makes it very, very smooth to go around and we, we back to back races from the US to the opposite side of the globe without, without any issue. So, you know, it's a privilege at the sport have as a global sport to be able to, to move around very freely.
- [09:31]
Bloomberg Host
Jim, how are your discussions with President Trump? I know that you have pointed out in the past that the tariffs as they're set up now as they're designed, put you at a disadvantage to somebody, even an American auto manufacturer that produces in South Korea or Japan, for sure. I know you're going to meet with Jameson Greer tomorrow in the great state of Ohio. Have you had a chance to talk with the President? Have you made any progress in getting maybe carve outs?
- [09:58]
Jim Farley
We're really encouraged. I mean, look, Ford is the most American car company. We produce the most, most hourly workers, we export the most. And so the administration has been great to work with. They always answer the phone. But there is a long list of things we got to work through. I think we've made progress on mitigating some of the tariffs, but we have more work to do for us. We have a high exposure aluminum, for example. The EPA changes are really welcome, frankly, and we're seeing that play out really in our business. Part of the reasons why our valuation is increasing is because people understand we can build more profitable vehicles now and that's more employment in the U.S. but there's a long list. We got the USMCA coming up. Very important negotiation for Ford. We need to change usmca, but we built our entire vehicle business as an industry between Canada, Mexico and the U.S. we have to get this revised, but it will be very important, I think continue to work with administration on tariffs how we handle the China. You know, if you look at what's happening in Europe right Now, in the UK the Chinese are now quickly almost 10% of the marketplace in electric cars, even higher. They pose a lot of threat to labor locally. They have huge subsidies from the government that they're exporting. As a country, we need to decide how, what is a fair playing field from a cost. How do we handle, you know, these vehicles? If we're scared of a balloon, you can imagine a car with 10 cameras that can drive itself. You know, these are incredibly sophisticated technologies, and when we deploy that in China, it has to be approved by the Defense Department because, you know, those vehicles can be guided into all, all sorts of things. Well, we need the same. You know, we have a good starting point for that philosophy of the itc, of the vehicle, the digital footprint. Now we have to, you know, make sense of that for the China threat. I know that the President talked about that during his visit at the Economic Club. How do we handle Chinese cars now? His personal opinion was we should let them into the US but, but maybe, you know, I think we need to work through that as a, as a company and as, as a country. I think there's always a lot of big topics for the car industry because it's so important for our, for our country.
- [12:18]
Bloomberg Host
Well, we'll be covering all of those here in Detroit with you, Jim, and you, Laurent. Thank you so much for joining us.