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Ford CEO Jim Farley Talks EV Business Overhaul & Extended-Range Hybrid Vehicles
00:11:23
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Jim Farley
Bloomberg.
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Bloomberg Audio Studios Announcer
Audio Studios Podcasts Radio News we learned.
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Matt Miller
That Ford is undergoing a sweeping overhaul of its electric vehicle business. It's going to amount to about 19.5 billion in charges. It's also going to include scrapping its next generation electric F series truck as a shift gears to a hybrid. Joining us right now to talk a little bit more about this is the host of Bloomberg's Open Interest, Matt Miller. And he brings along with him the CEO of Ford, Jim Farley.
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Jim, thanks very much for joining us. This is a major pivot to say the least. But I think we could all see it coming because the consumer basically helped make this decision for you. Tell us what, what's driven these plans?
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Jim Farley
Well, as you said, it was really the customer changing their decision. You know, we saw hybrids really take off last couple years. Like you know, last month about, well we had 30% increase in our hybrid sales. We're now number three in our, I think we're 80% hybrid market share in trucks. So we saw this happening. We also saw the more expensive EVs, you know, really suffer in the market and the more affordable EVs to do better. And then the last couple months really was remarkable. The EV market in the US went from 12% in the industry to only 5. And that really in the end was the big decider for us. But look, we're going to 50% electric. It just be, it's going to be hybrids and EREVs and electric. It won't be just pure electrics.
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Matt Miller
So you know, every good trader knows you got to cut your losses when you recognize there's an issue you're doing that in, in this sense with the F150 Lightning as we now know it and the T3 project, the next generation truck that would have been built in Tennessee. But you're able to I guess salvage some assets and as a result you've raised your Profitability forecast from 6 to 6 and a half billion dollars for this year in terms of EBIT to $7 billion. Where are you gaining an opportunity from this, Jim?
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Jim Farley
Well, great question. This year in the short term, it's really our cost of our company. Our quality is getting better and so our costs are much more competitive. In fact, the novellas aluminum has cost us more like 2 billion. But we're still raising gu heads. Look for this announcement, Matt, it's really about moving to more profitable vehicles. You know, we're going to make in Tennessee now an affordable pickup truck. I think it's going to really surprise the market. These are customers we know, not a lot of guesswork in terms of the revenue, the cost we need to get at, and a more affordable van in Ohio. So these are going to be better investments for the company profit. And all those hybrid sales, you know, those are really profitable vehicles for us as we basically deploy hybrid across our lineup. But we're also going into the energy storage business to 20 gigawatt hour. You know, that's a, that's a big move. We're going to convert our battery plants from automotive batteries to energy storage batteries using lfp. That's also a big pivot that is profit positive for the company.
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Matt Miller
Jim, with regards to that pivot and the energy storage side of it, do you anticipate any concerns by the White House, by the administration here in the US that you are partnering effectively with the Chinese company in order to do that?
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Jim Farley
Mm, well, look, it's our plan. It's. It's our people, and we designed it that way. We have a licensing agreement. But we feel like it's better to build these batteries in the United States with American workers, with our own Ford workers, and understand the IP than the import them like they're being done today. The best way to compete with the Chinese is to get close to the IP and then run the plants at Ford. When Ford knows how to build things, jobs, we know how to do this. So I think this is much better than for America. We're talking about thousands of incremental jobs versus importing batteries. Like we say today, much better for America.
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Matt Miller
Well, to continue on the energy storage business, you mentioned that this will be profit positive for the company. And when it comes specifically to that new business line, how long would you expect before that alone becomes profitable?
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Jim Farley
Yeah, great question. Well, we're busy now. We have to move this. This business moves much faster than the auto business. We're converting our Michigan plant as we speak with all new equipment to make energy storage, which is slightly different than automotive with the lfp. And then we're building a whole new plant converting Kentucky 1 to 20 gigawatt hours, and that will be landing in late 27. We're going to be selling and servicing batteries, not just the cells. As a contract manufacturer, we're actually going to be selling the huge storage contain containers to utility companies and the data center companies in 27. We're already out there quoting this business. Now we know what kind of price points we need to get to for it to be profitable. And this is not our first rodeo as a manufacturing company.
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Matt Miller
It looks like, Jim, that we've gotten new regulations or seen older regulations scrapped both here and overseas. Right. In terms of.
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Jim Farley
Yes.
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Matt Miller
What's necessary. I'm wondering if, if the administration here in the US and the EU have helped you and other carmakers really serve customer needs better because we're seeing your rivals also bring back products that were previously canceled, like the Hemi over at Stellantis that customers wanted.
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Jim Farley
Well, look, I think, you know, I was at the White House of the President. He announced the revised CAFE standard. You know, anything we can do to get the regulation to look more like customer demands. Look, we're going to 50% electric. There are gas guzzlers in our future at Ford, but we want to offer customers choice. I think that's what the President is trying to do is just to give people choice. We're going to have this affordable electric vehicle built in Kentucky. I think it's going to be a huge hit with Americans, but it's going to be part of a broader portfolio with choice. And we're seeing the same thing in Europe. We're seeing the same thing around the world. Look, we all want to lower our CO2 footprint as industry. That's what Ford's going to do, going 50% electric. But we need to give customers ch choice and then use our manufacturing flexibility to go with where the customers are. And that's what this announcement is about, having optionality.
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Matt Miller
Jim, though, it's not only about powertrains, right? I mean, one of the other things customers want is repairability. And I wonder if, because you already make the F150 in Kentucky, you make it in in Kansas City. My Raptor was born in Dearborn where I was happy to pick it up years ago. But the new trucks are aluminum bodied. Are you going to be able to build steel trucks, for example, at the Tennessee plant?
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Jim Farley
Oh, that's a good question. Well, I'm not going to give because if I tell you, Matt, I'm telling all my competitors, I'm not going to do that today. All I will say is we are coming out with affordable vans and pickups that Americans are going to love. And we are the number one brand for both those segments and they are going to love these new products and they're going to fit into what Americans buying today. And they're going to be low CO2 and they're going to be more affordable. That's all I can say, Matt. I'm not going to give anything to my competitors.
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Matt Miller
All right, you don't have to give anything to your competitors, Jim, but I am curious if you can just speak a little bit more to investors first about the 20, the 19 and a half billion dollar charge.
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Jim Farley
Sure.
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Matt Miller
But also the. I mean, obviously it's huge. And we talk about this idea as to whether this will be it or whether investors should anticipate potentially more costs associated with unwind.
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Jim Farley
Well, look, we're unique from our competitors. We don't have plants that are electric. We have a whole business at electric. So we looked at that whole business and evaluated the valuation of the assets and we made these decisions on the future products. The bottom line is the cash subset of that is about five and a half billion of the 19 billion. And the ROI on that five and a half billion is very attractive. These are great products. They're affordable. That's where the market is today. And we're going to have great powertrains for them and they're going to be able to buy more affordable Ford trucks and vans than we have today. And we know there's going to be a profitable business for those out there. So this is a better allocation of capital. That $5.5 billion of cash is going to be a great investment. It didn't make sense to keep plowing billions into products that we knew would not make money. We had to make this choice.
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Matt Miller
I hear what you're saying there and certainly the market spoke. But what gives you the confidence that you think about 2029, the goal to have a profitable EV business? You've been losing billions in losses on EVs. What gives you the confidence that you'll be able to turn that around by 2029?
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Jim Farley
Well, we think to make business, to make that business profitable, we have to get to a bhiwadi cost. And so this gunk works project called the Universal Electric Vehicle that we're making, Kentucky, that is designed to match the cost in like a Mexico. And we really believe we have that delivered. We've sourced all the parts, now we're testing prototypes. We're starting to run the production line. And so we have real confidence that we can do that. And that's why we're telling people that we think we'll be profitable. We've worked hard for the last couple years on this EV project and we have fully competitive cost with the Chinese. Now it's our chance to bring a pickup truck with that Low cost EV to Americans. We think it's going to be a big hit.
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Matt Miller
Hit.
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Hey, I want to ask about the Chinese, because while I love it when companies go back to steel and V8 and stick shifts and handbrakes, obviously many people are betting the Future is on EVs autonomous vehicles. And the Chinese are certainly making real strides there. As you, as you make this pivot back to sort of the classic American pickup truck, what, what will you do to keep up with the Chinese as they continue to make strides forward?
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Jim Farley
Make no, you know, make no mistake, our strategy as a company is to give people choice. Part of that choice is to have fully competitive costs with BYD localized in North America. Matt, we are going to have a fully competitive BYD EV built here in America for Americans that we believe are going to be profitable. And to do that, we had to massively innovate, bring LFP to the United States, you know, reduce the manufacturing content of the vehicle, radically redesign the whole assembly process, engineer the vehicle with all new suppliers. It's a whole different approach on the whole engineering of that vehicle. We are here to compete globally. We're not going to cede our future to the Chinese. And we're the most American car company. But even for us, as the most American car company, we're a global company. And that UAV product is the heart and soul of our competitiveness for the future. But the Chinese don't know the truck customers like we do. And we know customers want E revs and they want hybrids and they want Raptors like you have. It's a diversity of all that lineup that makes sense for us to compete and win against them.
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