← Decoder with Nilay Patel
Decoder with Nilay Patel
Rewind: CEO Jim Farley on Ford's EV gamble
01:03:48
Joanna Stern talks to the head of Ford about low-cost EVs, competing with China, and what car she should lease next.
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- [00:01]
Podcast Sponsor Announcer
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- [01:11]
Geico Commercial Voice
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Jim Farley
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- [01:43]
Nilay Patel
Hey everybody, it's Nilai. You might remember last year I took a break from Decoder after we had a baby. In my place, we had an excellent slate of guest hosts, and we've been working hard to bring you those episodes in full video since we launched our official decoder YouTube channel. So today we're featuring a really great interview with Ford CEO Jim Farley, conducted by my very good friend Joanna Stern. Joanna was still working for the Wall Street Journal as a columnist when she did this interview, but she's since left the Journal and launched her own new media company, New Things. We actually had her on as a guest talking about her new company earlier this year. We'll link that episode in the show notes. Joanna and Jim talked back in September of last year, right after Ford announced a major new manufacturing process for its electric car lineup. Since then, a lot has happened. The company took a massive $19.5 billion write down on its EV operation, discontinued the all electric F150 lightning, and lost EV and software chief Doug Field. The Verge has Done a lot of stellar reporting on what's going on inside Ford as it tries to pull off its transformation. I'll drop those links in the show notes as well. But back in September, as you'll hear in this interview, Farley very much saw the future of EVs at Ford as a gamble that would require some big risks. And we're obviously now seeing just how big those risks actually were. Joanna also pulled some exclusive news out of Jim at the time, including some really telling quotes about Trump's terrorist policy competing with Chinese EVs and the company's stance on Apple CarPlay. You knew there was going to be some Apple CarPlay in this one, didn't you?
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Guest Caller (Neil)
Okay.
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Nilay Patel
Joanna Stern of New Things interview interviewing Ford CEO Jim Farley.
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Guest Caller (Neil)
Here we go.
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Joanna Stern
Jim Farley, you are the CEO of Ford Motor Company. Welcome back to Decoder.
- [03:23]
Jim Farley
Great to be here with you, Joanna.
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Joanna Stern
So thank you for coming on my show. Obviously, this is not my show. This is Neali's show. But I want to give you some background here. So I listen to Decoder all the time, and I love his car CEO interviews, but often I find myself saying, nilay, why didn't you ask that question? So when he asked me to do this, I said, that's it. I'm going to bring on car CEOs and I'm going to ask the questions I want.
- [03:50]
Jim Farley
I see.
- [03:52]
Joanna Stern
And so you were back on the show in May 2021. Things have considerably changed in the world, in technology, in the country at Ford, and I want to talk about all of those things. But something also changed for me in 2023. I got a Mustang Mach E. As you know, I leased one, and that lease is up next summer.
- [04:18]
Jim Farley
Ah. So I'll be reading about your decision process.
- [04:23]
Joanna Stern
Well, that's gonna inform a lot of this conversation because I wanted to give you the chance to be the world's best car salesman to the most annoying customer. And so I'm gonna. I think that's just gonna set a lot of the backdrop of this conversation here.
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Jim Farley
I love it.
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Joanna Stern
All right, so let's start there. Last month, you said at a press conference that the Maki is not so great, that it's not the future of Ford. Why should I stick with a Ford EV next time?
- [04:55]
Jim Farley
Well, we just won the new Revised Model Y vs Mach E drive evaluation by a pretty respected magazine, so I'm still pretty proud of the Mach E. But, you know, we knew what we knew then five years ago, and. And we now know what we know now. And those Are, as you said, two different things. I would say that Ford in the second inning of product development has really understood more fully the opportunity to serve the EV market differently than we did several years ago and to execute a product with the right approach based on that. Those lessons learned and that's both the consumer, because we've learned kind of what consumers are willing to live with and not like charging on the fly as well as, you know, where in the market Ford should participate and put its limited resources. And I think you're going to find that the Ford is EV product range will be much sharper, more specific, more valuable to customers than it was when you last shopped.
- [06:15]
Joanna Stern
So let's dig into the news you just announced, which is that you have something called Ford Universal EV Platform. What is that and when is it coming? And more specifically for me, will it be out next August and will I be able to get that kind of new Ford vs upgrade to my Mach E?
- [06:37]
Jim Farley
Well, you'll learn a lot more about the first product, it's a platform by next summer, will be out in 2027. So just a few months after that. You know, we learned so much from the Mach E. We've been number two to Tesla, a long way behind them, but number two in the US market. And EV sales, not that EV sales are the most important metric, but it does give you an indication that Ford has learned a and has served a lot of wonderful customers like you. We have all the data coming off the vehicle, so we have learned a lot about, you know, customers. The platform that we shared in Kentucky last week is a breakthrough approach, we believe to develop and deliver to customers an affordable electric platform where we'll develop several vehicles off that platform and launch them over the subsequent few years, and that we can have a profitable vehicle that's sustainable in terms of the company's resources and make it in the us. But in order to compete with the likes of byd, who we think are among the best in the world, we had to completely reinvent the platform for the customers. And there's a lot to that. I'm sure we'll get into it. But you know, I would say, in short, the evolution revolution of our thinking was to develop a vehicle for manufacturability to radically reduce the cost and the complexity of the vehicle with all new thinking that is not embedded in a traditional car company. And to do that, we needed all new talent and we needed them to be separate from Ford, separate from our IT solutions that we use to develop and release parts, separate from A philosophy standpoint on how to radically simplify the vehicle and really get back to the basics of Ford. Henry Ford's idea of a universal car. Our first body style will be a pickup, but it's really not a pickup. It's a new silhouette. I would say what I mean by that, it's got more room than a RAV4, the best selling passenger car in the U.S. and that doesn't include its Frunk and its pickup truck bed. It is very fast, it's rear wheel drive, super fun to drive and it has a digital experience that no one's seen. At least that we've seen. Even in China, the digital experience is quite different for customers. I think the whole package is something that's just not been offered in the US or anywhere to date. And this first product I think was quite revolutionary.
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Joanna Stern
And this first product is what you're going to have out in 2027.
- [09:38]
Jim Farley
Yes.
- [09:39]
Joanna Stern
And you've mentioned BYD, which is competitor out of China that is clearly making low cost, very high tech EVs here in the US. You're up against Tesla, you're up against GM and you've mentioned that you are the second best selling ev. But GM seemed to have some real luck going on with the Equinox EVs and they're quickly taking off because of price. Is all of this move to put this new platform out against this backdrop, is it enough, is it enough to compete both here and China?
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Jim Farley
Well, for us to compete globally, no, it's not enough. But in North America it's absolutely the right strategy, but it's not our complete strategy. You know, I think GM has 14 nameplates. We have, we have three. We came out with our vehicles four or five years ago and they're coming out with them now. So our product life cycle is completely different than them. What I mean by that is we're, we're, we're about to launch our second generation of products. They have their first 14 out now. I hope they outsell us. If I were, if I were them with 14 nameplates, say they should easily scale. I actually personally didn't think that we would be number two for three years with our simple lineup. But you know, it seems to have worked so far in the first inning. No, the competitive reality is that the Chinese are, you know, the 700 pound gorilla in our industry for EVs. There's no real competition from Tesla or GM or Ford with what we've seen from China. They are completely dominating the EV landscape globally and more and More outside of China, they have 20 million units. Locally, about 11 million are EV or E revs. So half their market. I mean, we're barely at a million vehicles here in the US that's 1/10 of the China volume. And Europe's only twice as big as us, so that's maybe only one fifth. And they're successful for good reason. They have great innovation, low cost. For example, they've bet on LFP technology, not these expensive lithium batteries. There's hundreds of companies. They're all sponsored by their local governments, so they have huge subsidies. And they're new brands. It's BYD and Geely and companies like Nio and Xiaomi that have many of them never been in the car business before. And that's a big advantage for them. In China, the brands that are winning are indigenous brands. And they're not global automotive companies. They're really Chinese companies. So to beat them, we really see a completely different approach. It's not a number of vehicles you have or the cost, the price you offer the customer. Everyone's going to have affordable EVs. The question is, if you sell an affordable ev in the US for $30,000, but it costs you 50 to make it, you could say you have an affordable one, but that's not a sustainable business. So three or four years ago, we kind of saw this affordable kind of life cycle, the duty cycle of the customer changing with our sales. And it became very obvious to us, or to me personally, that we have to go outside of Ford, create this maverick group, give them resources and stay out of their way, but make sure that they delivered on a completely new approach. Because the Chinese are so formidable, they have so much support from the government, their customers have such a high expectation for digital experience that, you know, an incremental approach for Mach E would never work.
- [13:35]
Joanna Stern
I love you telling it to me real straight here, and it's exactly. It's exactly what I was sort of thinking in terms of that in some ways, I'm driving a dinosaur, right? Which is the whole reason I leased a number of years back, which you knew.
- [13:47]
Jim Farley
Yes, Smart.
- [13:48]
Joanna Stern
Smart move, man. So much to unpack here. And Nilay's gonna be so proud of me with all the decoder questions that are coming up about how you're gonna structure this new effort. But I wanna go back to price I was charging at Electrify America last week in Connecticut, and four out of the six dolls had these Chevy Equinox EVs in them. And I asked this woman, how does she like hers? And she said she liked it. But the thing she was really talking about was the price. She was really excited about the price. And she said, we like this car so much and the price, we actually got two. And she points to her husband who's in the other stall, which, of course, I'm not thrilled that this family's taking up all these stalls. But yeah, it's fine. I forgive them. And I'm wondering if this is one of your motivating factors right now is just getting that price down so EVs can really finally take off in this lower, more affordable area.
- [14:39]
Jim Farley
I think, Joanna, to your point, it was inevitable that the government support would wane. It was inevitable that the duty cycle of an AVV customer wound up being kind of people who use their car for commuting and shorter trips and occasionally taking a longer trip. But this happened in 19 teens. In the teens in our industry over 100 years ago, steam was 10% or 30%, electric was 30%. The rest was internal combustion engine. And a few years later it was totally different. But back then, you could not call which technology would win. It's the same now. The EVs came at the high end and I would even say $40,000 is expensive. Now for most people we don't talk about in the car business because more than, you know, 2/3 of the car sold in the US are used, and those 2/3 we never really talk about, but their average price is, you know, around $30,000, something like that. The average new car is obviously much higher than that. So most of the vehicles that people are driving around in the U.S. that are, you know, five years old are going to be around $30,000. And, you know, this is the most important part of the EV market. It's not this expensive. Lucids and Teslas and, you know, that's all interesting. But what really is going to move this market is a non government subsidized, affordable EV that people can afford that's lower cost to use than a used Model Y, because there's a lot of those around. And, you know, people in America who have a tough time with all their demands and want to go on vacation and want to put their kids through college and they want to have, you know, a house or whatever it is, $30,000 is the most they want to spend. And that customer you met, I think, is very typical. So this next inning, sorry to use a baseball analogy, is we're moving into this next inning, which is a completely different inning than the first inning, where the fitness of the companies, it doesn't rely on the government, that we have to innovate. And I said it last week and I'll emphasize now, there are no assurances that we can do this. No one has ever built a car in three pieces. No one's offered his own electric architecture at this price. No one. We've never done it. We've never had to. Large unit castings and high quality. No one's done it. Tesla's talked about it, but they haven't done it. In fact, our manufacturing process has radically moved on beyond what Tesla has ever even shown in their unboxing. So there's a lot of risk here. This is not a, this is not a guarantee at all that Ford's, you know, going to get this done.
- [17:47]
Joanna Stern
We need to take a quick break. We'll be right back.
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- [21:40]
Joanna Stern
And we're back with Ford CEO Jim Farley. Before the break, we were discussing Ford's new EV platform competing with China and why price plays such an important role in the electric car market. But now it was time to ask Farley the decoder questions, and in particular, how he thought about the structure of the team now responsible for overhauling Ford's EV strategy. Well, you've segued really nicely into some of my next set of questions, which are the decoder questions, which is really you've set out to build something, and now you've got to figure out the structure to build it. You said you had to create a maverick group. It was separate from Ford. It was separate in terms of it. And now you've got to take this Skunk Works engineering team, which I believe is in California, and you've got to bring that into the big castle that is Ford. How do you think about integrating these new Skunk Works ideas to this bigger system? I mean, do you have a map of how that's going to happen?
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Jim Farley
Yes, we've Been working on that for a couple years now. And you know, one of the things that really helped us in that regard was that Alan, the leader of this, this team universal platform, he was free to have four people on his team, but he had the rights to say no to anyone. And so he went through a very rigorous process. So we have in manufacturing engineering the team that kind of is the scouts for the manufacturing process, for all this new stuff. You know, he's had them on the team for three, four years and of course we've been kind of listening to them. And of course we have a lot of good experience at Ford too that knows how to handle risk in supply chain and risk in manufacturing and new processes like the process we used with aluminum F150. Different problem, but same process of risk elimination. It's a plan that's come together, but like any plan, you know, it's important to have a plan. But pretty quickly you get out of the plan because you get surprised the supplier isn't as good as you thought or they're running late, or the software for this module's running late and you know, then you have to really de risk. And so the de risking is often. Or the way we're thinking about is let's make a really simple one first. Let's not try to add all the complexity. Why don't we just make one color, one version, one spec at the beginning and massively simplify the task for everyone. So what is that basic level of software capability for the vehicle? We don't have to have all the singing and dancing hands free automation from launch. Maybe we really focus only BlueCruise on a simple operating domain like high speed safety, hands off highway operations, hands off for the Autonomy solution. Then gradually, as you verify the delivery of that base capability, whether it's the vehicle structure or the manufacturing process of the suppliers, or even automation. And that we then start to introduce more complexity and more capability over time when we feel comfortable. And that makes it stressful for the go to market team because they frankly aren't sure what they're going to be selling in a year and a half. But that's really the only way to do this, I think we found.
- [25:31]
Joanna Stern
I want to stay on some more decoder questions and kind of call you out because in your first decoder interview in 2021 you dodged the question how do you make decisions? In fact, I was listening to the episode in my maqu e last week and I'm just screaming, jim, you didn't answer. You answered the strategy of the company. But you didn't answer how you specifically make decisions. And I feel like you've had to make some big decisions here with this new platform. How do you do it?
- [25:58]
Jim Farley
That's a very good question in this case. Let's just be specific. In this case. I looked at the wiring loom and the Mach E. It's a beautiful wiring loom, but it's 70 pounds heavier than the Model Y wiring loom. And it's $200 a battery to carry that wiring loom around. That's 70 pounds. And I just had to ask myself the question, can my team do it? Take the wiring loom as a metaphor. Can my team beat byd? And the answer I got personally that I went to Bill Ford and the board and my team, I said, I love you guys, but I don't think we can do this. So the decision I got to, which was highly informed by meeting Doug Fields, was I think we had to do it separately, completely separately. And then when I started to really ask Doug, you know, who's the Model 3 chief engineer, worked on the car project at Apple. He was one of the first generation software designers in aos. He also designed the Segway early in his career. I mean, he's been at the forefront of a lot of technology revolutions time and time again. I asked him, you know, why can't Fordo it? He's like, Jim, your part release system, your IT, your CAD design systems, they're 25 years uncompetitive. There's no way you can beat BYD with that. You need real expertise. BYD has vertical integration. The batteries, the batteries are 30% cheaper than what we can buy from CATL. For us to beat that battery to be even in the neighborhood of cost, we have to radically redesign the efficiency of the motors, gearboxes and inverters on the EV side. So it uses 30% less batteries. Because we can't beat BYD's vertical integration on the cost of battery. The only way we can beat them is with the innovation on the draw of the battery. And when I got the whole list of inventory from Doug about what we have to do to beat byd, even three, four years ago, it just became very obvious to me that I had to look my team in the eyes and say, eventually, we're going to come back to you for the industrialization of this product, but for now, leave these people alone, trust that they don't have any prejudice to come up with something better. And if you want to get mad at me, you can Come in my office and shout at me, but don't waste their time. And I talked to Bill. I asked Bill to go. And I also do Gemba. So I make every big decision I ever make. I go in person. And so I went to that teardown and I went to look at every piece. I looked at the number of fasteners in a Model Y. It was literally a third of the fasteners that go into a Mach E. And you know, from a customer standpoint, you won't tell the difference, but from a manufacturability standpoint and a cost standpoint, you know, fasteners are kind of like, you know, it's an output metric for how elegant the simplicity of your engineering solution is. And when I looked at those fasteners, when I looked at the wiring loom, I knew I had no choice because I Gemba'd it. And I really talked to people that knew. And I can't put the company's future at risk by making people happy. I have to do the right thing in that particular decision. That's how I approached it.
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Joanna Stern
Can I interrupt you real quick to tell me what Gemba is?
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Jim Farley
Gemba is something that I fell in love with at Toyota. Gemba is Genji genbutsu, which is a Japanese word for go and see with your own eyes, learn with your own eyes. And it really is actually the five senses. The idea is before you make a big decision, before you want to understand a problem even it's a tool in problem solving. You have to go and see the real problem where the waste is. So in my case, the waste was that wiring harness, those fasteners, you know, all the welded together front and rear structures that eventually unicasted unit casting displaced. You see the waste, you look at it, you talk to the people, the engineers. Why are we, why do we have this waste? Why do we use a 25 year old parts release system? And you as a leader, you get down on the floor and you ask them the basic questions so you can visualize your decision. That's what Gemba is.
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Joanna Stern
Love that. Didn't know that before. I need to practice Gemba. Clearly I want to talk about you have to restructure your company now. But it also seems like you've been talking about restructuring the economy. You've been talking about a refocus on the essential economy, blue collar jobs that are the backbone of this country. You wrote a LinkedIn essay in June about the focus of AI on white collar productivity, but that we need to do the same for blue Collar work. So how are you thinking about automation at Ford?
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Jim Farley
We have a complete crisis in the country that's not talked about. People like Mike Rowe will talk about it, but we have a crisis that's kind of not in the public debate. We have half a million shortfall of construction workers. We have a half a million shortfall in factory workers, our emergency services. We don't have enough people to support our society when things go wrong. Firemen, ambulance, medical, the frontline people that make our society run, that we all take, many of us take for granted. Plumbers, electricians, we call the essential economy. And we see that at Ford because we're in the edge of this software defined vehicle. But we're also a heavy manufacturing industrial company. And whether it's a technician shortage in our dealerships to work on these vehicles or the shortage of our factory workers, I really learned as a leader during the UAW strike, you know, what a crisis we have as a country. And I see it with our customers. Our plumbers and electricians are constantly trying to get young people into those vocations and there's no training. The trade schools and the apprentice programs are not there anymore. That our grandparents all, you know, made this country so great. And we're very vulnerable as a country. The productivity, as you said, of those, you know, essential workers is way behind white collar automation, AI deployment, you know, everything has happened for all the tools and white collar, there's not the same and there's no very little training. Companies like Ford thankfully have enough resources that we can put our, our backs behind this problem with trade schools and scholarships and stuff, but our society isn't doing it. In fact, we're going to have a conference here in Detroit in the fall in about a month, where we're going to gather other companies that have the same problem, that really see it solution providers and academia and you know, creative people in government where we're going to try to start to work this problem. Is it a farm aid or you know, medical crisis like Covid? No, it's more in a way it's just as threatening to our society. And the way we're thinking about it is we're going to walk the walk ourselves, invest heavily. We have been. We spend about a billion dollars on the dignity of workplace and safety in our plants. We've modernized our buildings, we're investing in trade schools and scholarships to recruit technicians for our vehicle repair as well as our factory workers. But this is a society problem and the one that bothers me the most is cultural. Where we Kind of as a culture think that everyone has to go to an Ivy League school to be valuable in our society. And yet we all know that our parents and grandparents kind of made our country wonderful because of these kinds of jobs. And there's incredible dignity, you know, in emergency services. And, you know, people can have wonderful careers, but our society doesn't celebrate those people like they do the latest engineer for AI.
- [34:44]
Joanna Stern
Yeah, and that's exactly where I wanted to ask you. I mean, this seems like such a reversal of decades of messaging in America, which is get out of manufacturing, go to the office is your advice to this next generation with AI actually get a job in manufacturing.
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Jim Farley
I think it would help all of us as a society. Look, my son is 17, he's a senior in high school. And look, he's, you know, he's got every opportunity that you could ever imagine. You know, he doesn't have to worry like most people. And I made sure that he had a summer job where he learned how to weld, he learned how to fabricate, he learned how to really work with his hands and relate to people. And he can make a choice. And I have no prejudice for Jameson. If he turns out to be the greatest welder or a mechanic working on our super duty diesel engines, I will be so thrilled as a parent. And I think we all need to kind of look at ourselves and decide what kind of society we want to build in America. And it's not, you know, and look, let's say our national defense, we're getting into war somewhere. Google's not going to make the boots, but Ford will. And to defend our own country, we need these people. And now we're on critical, critical issues. You know, the average ambulance is 15 years old. We do not have enough emergency care. People. Look at what the firemen are having to go through in California now with the smoke and, you know, their own health. I mean, these are very dangerous jobs. And we have a shortage and it's going to affect all of us in a lot of annoying ways. And if we don't really get serious about kind of readjusting our expectations for our kids and the younger people in our country to give them opportunities to grow. And these are great jobs. A factory job at Ford's, you know, could be way over $100,000 a year. And you can bridge into a lot of other things. My grandfather was a factory worker at Ford and he became a Ford dealer late in his life, in his 60s. You know, think about the possibility. He was an orphan. He had nothing. He never went to college. It didn't matter to him. So yeah, I'm really excited and energized about this. It's a much bigger problem than fixing Ford and making Ford a world class company. It's important for our country and we need to focus on this just as much as how exciting the new AI is and the new social media dance on Instagram. Let's get busy on these important problems.
- [37:32]
Joanna Stern
We need to take another break. We'll be right back.
- [37:43]
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- [38:32]
Nilay Patel
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- [38:33]
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- [39:38]
Geico Commercial Voice
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- [40:05]
Jim Farley
It feels good to have support. It feels good to Geico.
- [40:14]
Joanna Stern
And we're back with Ford CEO Jim Farley. Before the break, Farley was really diving deep into his personal philosophy around blue collar work in America and how he thinks, especially with the backdrop of AI, we need to be training the next generation of Americans to consider jobs in Ford's factories, in emergency services and in trade work. But now I wanted to change gears and ask Jim a very specific question from a very special guest on my show. I do have a call in question from a guest caller.
- [40:47]
Jim Farley
Good.
- [40:48]
Guest Caller (Neil)
Hey Jim, it's Neil. I, I'm very excited to be calling in with this question. So as you know, I'm a Mustang guy. I have a 2021 Mustang GT convertible. It's one of my favorite cars ever. People love this car because it's so easily moddable and tunable. You can just reprogram the ECU to make the car go faster. The new version of the gas Mustang, the one with all the screens running on your new platform, the ECUs are locked. People can't just reprogram them. And a lot of enthusiasts attribute the recent drop in sales of gas powered Mustangs to the locked ecus. So my questions are, do you agree with that, that the locked ECUs are behind the recent drop in gas powered Mustang sales and do you have a plan to let people unlock the ecus and tune the car more easily? Thanks for answering the question, Joanna. I'm sure you're doing a great job.
- [41:34]
Joanna Stern
Yeah, I have no idea what that question means. So I'm going to give you, I'm going to set a timer. You get a minute to answer that.
- [41:44]
Jim Farley
Well, I have this debate with my son actually because he has an older Mustang and he didn't buy the new one for some reasons like that. So I would say the drop in sale is absolutely not due to that. Actually we're doing really well with Mustang and I think we're kind of the only one left really, which we're quite proud of and we're investing a lot in Mustang. So. And I think that the thing that people don't get about Mustang, it's a global car, it's the best selling sports coupe in the world and we actually way outsell Mustang outside of the U.S. than inside the U.S. so when I look at sales for Mustang, I look at globally and some of our biggest countries like Australia And Sweden, other areas. The Mustang continues to grow because people want a little slice of that. America, everyone wants to do a burnout. And as far as the tunability of the vehicle, you know, I think the call in question is an outstanding question for this. This is a real dilemma for us, and there's no real easy answer. We want people to modify their cars, but we also have to take quality really seriously and of course, privacy as well. I think he was talking more about the performance of the vehicle. And so our approach would be to give people over time an option to digitally adjust their vehicle from Ford so that we can maintain the quality, but still have the user have their own kind of idea of performance, and that's different for everyone. And I think that vision will come to life in the coming years. The aftermarket is a real kind of opportunity, but it's also a big challenge for us because a lot of people like to write software in the control module that controls the powertrain that gets better performance. But what they don't know and what the user may not be aware of is all the reliability and the quality issues that they may be bringing up that are very expensive. My daughter's boyfriend is one of these people. He bought a brand new F150. He's got a supercharger on it. And, you know, he recently had a bunch of error codes because he updated the ECU against Ford's standards. And now he has thousands and thousands of dollars of expensive repairs because the vehicle has started chewing its camshaft. And, you know, it was great that he could get 650 horsepower out of his EcoBoost F150. He didn't think about what he was doing to the reliability of the vehicle, but we have to at Ford. So all I would say is it's a tough problem to solve. We always want to give customers a chance to tune their vehicles, but we actually know a lot about the reliability of the vehicle. And are we as a brand going to suffer our quality reputation to give that person the ability to modify the vehicle? I think that's a hard compromise for us to make.
- [45:02]
Joanna Stern
I actually understood most of it. I want to move on to the big T, the tariffs in the room. Last quarter, you operated at a loss despite record revenues because you took 800 million in tariff charges in Q2 when tariffs were actually lower than they were now. What are your conversations like right now with the administration?
- [45:24]
Jim Farley
Well, they're very important. Ford is the most American company in terms of the quantity of vehicles we make in the US over 80% of our vehicles sold here or made here. But we also are the largest importer of parts. And the discussion we're having with administration today really covers three policy areas. Tailpipe emissions, tax policy, and especially tariffs on tariffs. The biggest issue is the bill, the $2 billion bill that we have for our imported parts. And because we make the most in the US we import the most parts. And we have a lot of stackable tariffs. There's fentanyl tariffs, 301s from China. We have steel and aluminum tariffs that are now over 50%. So there's a lot of tariffs that a company like Ford gets because there are auto specific tariff and they're not auto specific tariffs. They all stack up. And so we have this layering of all these imported parts. And to make an F150 affordable, you know, there are a lot of parts that we can't make locally. Wiring, looms, fasteners, thousands and thousands of parts that we have to import because we actually can't even buy them locally in the U.S. and if we did, the vehicle would be $100, $200 a month, too expensive for customers. And our discussions with Washington are really clear. Look, you know, we both agree, let's strengthen US Companies like Ford that have bet on America. We have more UAW jobs than anyone, but don't penalize us for trying to make the vehicle affordable. And so we've had very productive discussions with commerce and the President himself and the whole administration. But how can we come up with a way to minimize this $2 billion so that it actually we are advantaged as a company. And you know, originally they were thinking that there would be high tariffs for finished automotive vehicles. 50% of all vehicles bought in the US are imported through a port or through a rail across a border. And now the standard tariff, it looks like it's going to be about 15%, 12.5% from Japan. And that's not a fair fight. And you know, we're just asking for a fair fight. So look, if you're going to allow people to import with 15% tariffs, that includes their parts in the vehicle at 15% tariffs. But you, you know, you put a 50 or 60%, 70% tariff on our aluminum steel that goes into our U.S. made vehicle. You know, hey, let's work on something, a process for, you know, tariff relief that would allow us to do that and still make the vehicles affordable. And that's what we're talking to administration. They're extremely open, they're extremely supportive of us, They're Also making a lot of policy changes on tailpipe emissions and tax as well. Look at the EV credits as an example. We can get to that if you want. But the tariffs are the most critical for our profitability. About 20% of our profit is evaporated now because of these parts tariffs. And we're highly engaged with the administration. We remain, I remain personally very optimistic that we will find a solution, but it is very expensive.
- [48:46]
Joanna Stern
I wanted to ask about the EV credits because between the tariffs, the EV credits going away, it feels like is this administration on your side yet? You also are adding more jobs than ever to manufacturing here in the US you're doing the things the President wants.
- [49:01]
Jim Farley
Yes, well, I do believe that, you know, generally those three areas of policy are very important. We didn't, I guess, Joanna, we didn't really feel like we should get a $7,500 check on EV to, to make the transition successful. We do need support for the production tax credit on batteries so that we could be competitive with China on batteries because they have such a huge advantage. And we do need to ensure that IP and, and start to really scale battery manufacturing because you can't ship a battery overseas. It's very heavy and it's not a good shipper, what we say is a shipper. So we have gotten a lot of support from them for making batteries here in the US The PTC credit is very important. We have changed our investment on EVs to not depend on the consumer tax credit from the government. And I think that, and we're fine with that. Other countries do support in Europe and in China, their EV consumers. We didn't ever really expect that of four, we'll kind of lift ourselves up by the bootstraps kind of company anyway. So you know that, that was something we did anyways. But I'd say the relief of the fuel economy standards is, you know, very important topic that the administration clearly has a point of view on. And we want one national standard and we want to be able to sell what customers really want. And hybrids are really popular now and so are EVs. So I think we'll find a tailpipe emissions that is more, you know, reasonable and sustainable and not have a bunch of states have, you know, unique standards that makes logistics for the cars a nightmare to send different states, different emissions standard cars. And that's really expensive for customers too. I think the, the real area that is super critical for Ford and for companies like Ford, as you said, that are committed to the US is this tariffs working through and making Adjustments as the tariffs get announced and deals trade, bilateral trade deals get announced. You know, we need to find a, a landing spot that works for companies like Ford where it's a playing level, playing field from a tariff standpoint and the administration accomplishes what it wants to accomplish and we're not there yet. And that's why we're working really hard. I spend a lot of time on D.C. and there's a good reason for it. This is really important for our factory workers, for the future of our country and for the shareholders of Ford. And we're not going to rest until we find a solution.
- [51:42]
Joanna Stern
I want to come back to me, really. This whole podcast is about me.
- [51:45]
Jim Farley
Good.
- [51:45]
Joanna Stern
Obviously. And where are we? You know that one of the main reasons I decided to, to get the Mach E, other than it had good range and I love the way it drives, was the fact that it had CarPlay. Some of your competitors have abandoned CarPlay. A lot of the newer upstart car companies have their own software like Rivian, like Tesla. I want to talk about this new digital experience you guys are working on, but I want to just cut to the chase about CarPlay. What about CarPlay Ultra? Are you considering that we are.
- [52:18]
Jim Farley
We don't like the execution in round one of Ultra, but we're very committed to Apple. I've talked to Tim many times about this. Ford does not have the rights, in our opinion, of disrupting someone's digital life when they get in their car. We want you, Joanna, and all the customers to bring, whether it's whatever phone, whatever digital life you bring in. We wanted to make it as easy as possible. We don't, I think we should restrict that to make money off the customers. We don't want it to be a hassle. We don't think we can design an experience that's going to displace your phone. And yet at the same time, whether it's automated systems or the way a trip gets planned, there are things that Ford is working on to add on top of that digital experience of Google and CarPlay that will make it even better. And we're highly informed by what's going on in China right now. The customer experience part of China, let's say an AI assistant in the car. Very important for Ford. We think that every customer should have an AI assistant in the car. Not just a voice to move to your, you know, phone based AI system, but something specific and that you can talk to almost like a companion. We really believe it's a more complicated journey for us to execute to allow everyone to bring their digital life into the car and have it seamlessly integrated and then also put on top of that, whether it's a productivity software, we're now up to a million subscriptions now for our pro customers, or whether it's BlueCruise or whether it's how you plan a trip, the auto specific things like how your ADAS system works and how it integrates into your entertainment system. We believe we have to design something that works with your digital life as well. It's a more complicated choice, especially when you look at back casting it into all of our past vehicles. But I believe it's a more customer centric approach and you will see that, Joanna, in your next shopping you'll make that choice. We'll all read about it. But I think that's our philosophy now. Other companies have different philosophies, but we believe that our philosophy is the most customer centric.
- [54:44]
Joanna Stern
But it seems like with the Ford digital experience, which you have rolled out to some cars, it's based on Android Automotive that you're going to have to choose. Are you going to do this Android Automotive experience with the things you're talking about building on top of or are you going to pick a CarPlay Ultra experience which is really going all in on Apple?
- [55:00]
Jim Farley
I see what you mean. I see what you mean. Yeah, it's a really good question. I don't know where Apple's going to go. I think Apple has to make a big decision. It's not a Ford decision actually. And then based on their decision, we will decide.
- [55:15]
Joanna Stern
You mean Apple has to make a decision. Are you going to allow this to also run in combination with other software otherwise?
- [55:21]
Jim Farley
Not only that, but are you going to allow OEMs with the control of the vehicles? How far do you want the Apple brand to go? Do you want the Apple brand to start the car? Do you want the Apple brand to limit the speed? Do you want the Apple brand to limit the access? And we're doing that now for our pro customers. If you're a pro customer, you can limit access to the vehicle on the weekend. Because many of our plumbers and electricians, they have a company vehicle and they're not really allowed to use it on the weekend or we allow speed control now, can't go above the speed limit. You know, is Apple going to want to do that? If Apple wants to do that, I think we're going to have a tough time with that because then the digital experience gets really messy and we'll have to decide between Google and Apple to your point. Now Google has two different layers. They have the Google Automotive Services which is kind of a curated services digital experience in the car. But they also have Android Auto which is actually an operating system that we can build our own experience on top of. And so Google as a platform company gives us both. Apple's had totally different approach and again I've talked to the Apple team and our team is in contact with them. I think Apple has to decide do they want control of the entire experience inside a vehicle. If they do they want to follow ultra and the Ultra 2 or whatever it's going to be next, then I think Ford will have to make a big decision and I kind of know where we would go. We don't want, we just believe Adas integration with your entertainment system is so critical. When you're flying down the highway with your eyes off the road in three or four years at 80 miles an hour on the I5 and you're watching a movie or whatever, we're going to be all doing or having a ChatGPT moment or having a wearable on, you know, we just don't think that a system from tech company who's not integrated the car is going to save your life.
- [57:33]
Joanna Stern
But it sounds to me then that you're really forced with the reality that you've got to build your own.
- [57:39]
Jim Farley
Yes, yes. But the good thing is now versus five years ago or a couple years ago when you and I talked about, you know, the Google, Google Android auto is really advancing nicely and we've, we've learned a lot about how to build the experience on that. So for us, a lot of OEMs, I hear a lot of OEMs say, well, it's about control the customer. I don't want Apple to be able to, you know, that's not a big deal for us. Like, we just want it to be easy for customers. But if, but if those companies want to control the vehicle, like I just, I think that's a bridge too far. And in that case we do have to, we do have to invest a lot more in a Ford experience. I hope that doesn't happen. By the way I look at what has happened with Huawei and Xiaomi in China, it's amazing. Those companies are totally all in on auto. You know, when you're a Huawei or Xiaomi customer, you know, you either buy Huawei system in someone else's brand or you buy a Xiaomi car and it's completely seamless. And I wish our tech companies had approached the auto industry that way. But they haven't.
- [58:54]
Joanna Stern
You said something really interesting about how you want to have an AI companion in the car. And I am actually spending a lot of time in the car now talking to ChatGPT, not listening to decoder. Yeah. I have my iPhone, it's coming through CarPlay, it's Bluetooth paired and I've got my ChatGPT app. I'm not looking at it. It's safe. Right. And I just have it in voice mode and I'm driving to a meeting. Driving a meeting to meet you. I say tell me a little bit about what I should know about Jim Farley, where he's been in the news and it's a very interactive conversation, almost like I'm on the phone.
- [59:26]
Jim Farley
Yes.
- [59:28]
Joanna Stern
How do you think about this? Does Ford have to be a part of that relationship?
- [59:32]
Jim Farley
It's a good question, I think yes. Especially for the transportation related. I want to go somewhere, I want to know about my car and the condition of the car. I think we either have to be part of the conversation or we have to supply that. We actually think not to be arrogant because the safety control and the vehicle control, we think that, you know, we can provide a chat experience that is added value beyond your non vehicle experience. But to your point, we don't want to burden the customer with two different experiences that would be really arrogant and really bad for the company. And I think just in general what you're bringing up, Joanna, and you've been on this for many years, but I think people are starting to realize why you've been on this is that the difference between car companies when you have a software defined vehicles is not going to be what your sheet metal looks like. It won't be how powerful your EV motor is. That's all math. All the cars look nice. It's going to be this digital experience why someone buys this or that. And so we have to sort this out really thoughtfully now in China. I think China NIO has an AI companion in the car. It's like a physical thing, it's like a little person that's your companion and it works really well and customers love it. So I think if you look at China being ahead of the west in terms of integrating AI as a companion in your vehicle, the early indications are that a companion like functionality from the OEM done really well can add a lot of value to people's lives and that's a direction we're going. Similar to not investing in level four autonomy and Robotaxi, but putting our effort in The AI space for automation driving into level three high speed eyes off. It's a similar kind of bed. Just pick a few places where Ford can add value but don't make the customer go backwards. That's kind of our philosophy.
- [61:49]
Joanna Stern
To be clear there though, you are, you're more focused on that highway driving experience right now with BlueCruise.
- [61:55]
Jim Farley
Yes. Oh, for sure. Our number one priority is to have to not be the first one to do eyes off level three highway driving, but be the best and the most reliable and the safest and the one that you want to use for you and your loved ones. And we took all the Argo people and we gave them a choice, you know, do you want to do highway high speed eyes off, push a button, you know, watch a movie, whatever people want to do. We could do this podcast in your car, you know, whatever. That's where all of our AI deployment for autonomous driving, because we think that's a cooler problem to solve for most average Americans than a Robotaxi. Even though Robotaxi is a really cool problem. I love being in a Waymo. You know, we think that highway miles are a bigger society opportunity.
- [62:51]
Joanna Stern
My last question here, you get to play car salesman. It's next August. I gotta get rid of this Mach E. What do I do?
- [63:01]
Jim Farley
You need to buy another Mach E. We've improved it a lot since your last one. It's a lot more affordable. We have some wonderful new experiences and I'm going to give you a run for your money in terms of value. It's a really good, really incredible product that we've refined over four years now. And the Mach Es we're making now are pretty radically different than the ones we have OTA'd your car. And I know the improvements in that. But the new vehicle, the compute power on board, the efficiency, the quality, the, you know, the improvements to the fit and finish are all material enough that I think you should absolutely test drive and see what we have. There's a reason why we just beat the revised model Y, which is the best selling alternative. Not that you would just use that as your benchmark, but I think you're going to have a lot of fun shopping. And I think I'm going to learn a lot like the rest of America as you go shopping. And if you go, really what I would love for you to do is wait six months.
- [64:13]
Joanna Stern
All right?
- [64:13]
Jim Farley
I want to show you this, this new universal car. And you're going to go, Jim, I'm so glad you told me to wait.
- [64:19]
Joanna Stern
See that's what you can really do for me. You can give me an extension on the lease. This is what you should have been doing for me. This is, this is where I would have sold me. I would have said extension on the lease, six months. We're going to give you a good deal. Give you a good deal, Joanna.
- [64:31]
Jim Farley
You're going to be happy and bring you to something that no one will be able to offer you. Literally. You'll go, oh, my God, this is so much better than anything I could buy, including the Mach E. And I'm really glad I waited. Yeah, that's the right approach.
- [64:49]
Joanna Stern
See, I should be working in your dealerships. That's how I would have sold it.
- [64:53]
Jim Farley
Yes.
- [64:55]
Joanna Stern
Well, Jim Farley, thank you so much for spending so much time. Obviously, I've got a ton more questions, but we'll do this again sometime and have you back on the show.
- [65:02]
Jim Farley
I don't think you're driving a dinosaur either. I think you're just, I think you're just, you're driving a fantastic automobile. I love my Mach E. And frankly, we're really proud to have you as owner. And thank you for being on the podcast. I really always enjoy our interaction and I can't wait to learn more about your chat GPT experience inside your car. So I hope you don't mind if a few of our software engineers call you.
- [65:29]
Joanna Stern
Yeah, they should call me. And I, you know, again, not sponsored. I have been very happy Mach E driver. I've been in it a lot this summer and I can't believe we didn't get to it. But the charging infrastructure has improved so much since. And charge for 30 minutes at Electrify America. Electrify America has gotten better. That CEO on here. I charge. I'm on my way. I drove 350 miles up to New Hampshire last week.
- [65:55]
Jim Farley
Oh, good, good.
- [65:57]
Joanna Stern
So I've been happy. I just, we got some software things to deal with. We didn't really get into that, but. But it sounds like you're working on it for me.
- [66:03]
Jim Farley
We are. Well, thank you for the time joining us.
- [66:06]
Joanna Stern
Thank you.
- [66:06]
Jim Farley
All the best to you.
- [66:07]
Joanna Stern
You too. I'd like to thank Jim Farley for taking the time to speak with me and thank all of you for tuning in and letting me cosplay. Nilai Patel, I hope you enjoyed it. If you'd like to let us know what you thought of the show or of me, I guess, or what else you'd like to see us cover, drop us a line. You can email us at decoder at the Verge. The team really does read every email or hit me up directly. I'm Joannastern on all platforms. And don't forget I've got a book called I Am Not a Robot coming out in 2026. It's all about the year I let AI take over my life. You can subscribe to my newsletter all about that too@joannastern.com the show also has a TikTok and Instagram. Check those out at Decoder Pod. They're a lot of fun. If you like Decoder, please share it with your friends, your family, your AI chatbot, and subscribe wherever you get your podcasts. Decoder is a production of the Verge and it's part of the Box Media Podcast Network. The show is produced by Kate Cox and Nick Statt. It's edited by Ursa Wright. The Decoder music is by Breakmaster Cylinder. See you next time. Rock and roll. When I got a new car, I thought my insurance premium would increase and empty my bank account like if a tween won the lottery. I've invested most of my winnings in chicken tenders because they're bomb. But bro, I bought a house and it's sick bro. I'm thinking the floor is gonna be all trampoline bro with the helipad on the roof. The contractor said it's structurally unsound, but they're just being babies. But switching to Geico. Geico saved me hundreds so my bank account is safe.
- [67:43]
Jim Farley
It feels good to save some hard earned cash. It feels good to Geico
- [67:49]
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