Ford Motor Company (F) on Q1 2024 Results - Earnings Call Transcript
Jim Farley: [Call Starts Abruptly] … a much stronger Ford. We would have a much stronger base. The irony of that though is that if we had done that quicker, would we have really trusted that organization to disrupt itself like we have. I think one of the biggest gifts turns out, one of the biggest gifts the management team has given ourselves is the small skunkworks team, who really came up with a way of executing an affordable platform with a completely different orientation. And my industrial team would have never been able to do. So it's not perfect but yes, I think we'll have regress. And that's a big one for me. So a humbling thing. Q - Rod Lache: It sounds like -- and I'm going to get into that in a minute, but it sounds like that's an indication of where the strategy is changing now and where the focus of the management team is now. Jim Farley: I mean I'll give you an example. Three years ago -- be very precise. Three years ago, when we -- it was the first year, we had kind of record recalls in the U.S. I just become the CEO and I looked at the performance management of the middle and entry managers in supply chain, manufacturing and engineering, and 91% of them had 100% or more in their cash bonus, okay? So now that's not the case. You have to set up a culture shift performance reward system, where every engineering manager, purchasing component manager, every plant manager is fully accountable for the quality and cost of their work. I could give you 20 examples like that. Things that have changed now and we're starting to see the results. Yes, we committed to $2 billion of cost savings across the industrial system. But to me, much more important than that, last year was the first year we turned around initial quality, 10% better. Yes, we lost -- you talked about Pro. We lost a lot of launch volume in Super Duty because we protected the launch for quality because the vehicles were engineered through that same system. We have to put belt and suspenders when we come to launch, and that launch spike was the best we've ever seen at Ford. So there's real progress now after making those changes but as investors, it took some time. Rod Lache: The high-level structure. So I really like how you describe that. We had to focus this company shrink to the areas where we have competitive moats, build off of that base. Those are the basics of any long-term successful industrial turnaround. In terms of the disruptive element of this in separating out Model e, that was also a part of that. You wanted to change the culture, do you see anything coming out of that effort now that in terms of product that you can share and just convey this is different? This is something that we couldn't have done before, and it's going to be different versus what you see in the rest of the industry. Jim Farley: I think the best example, Rod, of that Ford, and I think people are just starting to get their heads around it is the transformation of our Pro business. We always had a super successful Pro business. It was embedded in Ford. It was pretty much invisible to everyone but there was no focus on it. We had like the sales team doing the fleet negotiations with the government. We had the engineering team working with upfitters. It was all distributed through the Company. When we changed the segmentation even before that, when we started -- and I was -- as the head of Ford of Europe turning around Europe, I saw this first in Europe as the leader of Ford of Europe. It was a mess, right? We were losing $1.8 billion when I got there. And I was at Toyota for 25 years. I failed with Tundra to compete against F-150. I knew what Ford was good at. So fast forward to become the CEO, John and I talked about it, I was like, what would happen if we just completely in a way, student body left, double down on this work business. And it has been a transformation. And that, I think people are just starting to see, we had 0.5 million subscribers for software at Pro. The gross margin is 50%. If you want a company in the OEM space that has already have evidence, you will have to look at FSD at Tesla. Look at Ford Pro. We make 50% margin on the software. The average fleet customer spends 21 minutes a day with the Pro fleet software. And these are not UPS plumbers, electricians, HVAC people in the city. So that's one. Second thing is our service retention for this business, which is 35% margin, parts business is really profitable. Look at CAT, look at Deere, ours is just as profitable. Our service retention when we started the Pro journey is tiny. It's like 10% of the people after warranty do business with Ford. So two years ago, we got really serious about building dedicated 24-hour, 7 days a week repair facilities, putting live centers up tracking the number of vehicles that are off the road, managing hard shipment to dealers to get the vehicles off the road. And then the ultimate integration of this is going to be prognostics on the vehicle. We get our new electric architecture for Pro, ICE and EV. We're going to be able to do predictive failure of all components. And 20% of our Pro customers using vehicle health data as the number one thing they buy from us. So that's an indication of how important vehicles not being off the road are. And then getting serious about our parts business, having exclusive recruitment of technicians, building more stalls. We now have almost 2,000 remote Super Duties and transits racked out to do service for Pro customers on the road. We found out 80%. I like Tesla. 80% of the things that we can do in a shop, we can do on the road with the Super Duty, outfitted. And we've grown in one year almost 10% of our capacity installs without building any brick-and-mortar. So I would say, yes, the answer to your question is the Pro business is literally doubling in profitability every year. Yes, we have a maybe once-in-a-lifetime infrastructure build-out in the U.S., onshoring, semiconductors. We have 5G being built out. We have one of the biggest government spends infrastructure on roadworks, all the people buy Super Duties and Transit. So we had this huge pent-up demand, literally, dealers can only get about half of what they want Super Duties in Transit now. And then we think, in a couple of years, 20% of the whole profit of Pro won't come from vehicles. They'll come from data and parts. And whether the economy is good or bad, those people still work. So to me, that's the -- so maybe -- is maybe distinctive part of Ford that people didn't really see even inside the Company. Rod Lache: Let me ask you about the EV part of the business. So taking a step back, this debate is super-hot right now, right? We've had a shallower adoption curve, prices have come down there's some questions about government policy and whether things like the IRA, what's the support for EVs going forward? So what's your view on what's happening to EV demand? Did the industry totally miscalculate what the demand is going to be? Or is it that the EVs that are in the market are just not hitting the mark yet? Jim Farley: A little bit of both. Ford is an interesting spot here because unlike the other domestic competitors, we have always been on hybrid. So we have a choice. Now our hybrids are very different. Toyota -- when I worked at Toyota, we had light-duty hybrid systems for efficiency. We have that on Maverick. But Ford is equal bet on hybrid is F-150 hybrid, which has Pro power onboard, Honda generator that does the same work is $5,000. So hybrids are very important to answer this question. So I think the whole -- in the -- the situation is different in all three regions. So if we want to spend time on that, I think we should. But let's just take the U.S., for example. I think that's origin of your question. We -- I think Ford is number two in EV sales in the U.S., a long way behind Tesla. Most people don't realize that for the last two years, actually. And we totally misinterpreted the '21 and '22 spike in sales. Why? Because we had not realized -- sorry, we should have put two and two together but we didn't. When we had the chip crisis, there was a bonanza of supply-driven demand, like there was nothing to buy. Shelves are completely empty. And Tesla because of the way they did the Model 3 and Y electric architecture, they could build as many as they could build. They had no chip issues. So in that moment, when I was relatively new, they could scale very quickly the Model Y and the prices exploded for them. It went from $50,000 to $70,000, and have stayed there for about 18 months and everyone looked at that, including Ford and said, that's the new norm. It wasn't a new norm. As soon as we all had capacity like Mach-E, because we had under called Mach-E enlightening by a lot, like by 1/3 -- by 2/3. As soon as that capacity started coming on, we start to hit those 5,000 to 7,000 a month production numbers. Tesla already figured out, they were bringing their prices down. We had to bring our prices down. And at first, I thought, well, this is Tesla being predatory, turn out that wasn't the case. It turns out, actually, we all had the same situation. To get to that kind of level of scale, we had to go to mainstream customers. And the mainstream customers can do the math on hybrid. We see that every day at Ford. We're now number three and probably number two this year on hybrid in the U.S. And the customers don't have to change their habit on hybrid and they can immediately do the math on the efficiency of the fuel economy. The math on EVs is more complicated. How much risk do I have on resale value. What is the energy cost savings are going to have versus gasoline? It's opaque for a person who's never driven electric car. And -- so I think we're just running into the reality. And as far as our future business plan, we have now, since the middle of last year have assumed that we have to basically sell a EV at a hybrid premium. There is no more money for customers than that. $3,000 to $5,000 that's it and I think that is the right way to approach it. So that turns out that in this next cycle of EVs, some of our competitors don't have the advantage of changing their next generation. We do, thankfully. Got a little bit lucky on the timing. When we made that decision last year, it forced a lot of pivots for our bigger vehicles that are in generic segments like Mach-E or 3-row crossover, we're like, wow, hybrid premium only. We got to think about this. I'm not going to launch any vehicle if I can't make money on it. In the first 12 months, that required a lot of change. We got a delay but a lot of opportunities came up. The battery companies have a lot of excess capacity. So [farmers] are starting to commoditize. We don't need to spend as much money on vertical integration. We can start having a competitive battery situation. We can go to common cylindrical cells that could add a lot of leverage to our purchasing capability. Maybe we should do with another OEM. But the no regrets moves on our EV strategy, we put the foot down on the floor, go small. Rod Lache: Do you have the latitude to actually comply with -- maybe I'll back up a second. So when we look at the industry, a lot of people say, well, the government is prescribing what the industry needs to be California requires 30% by 2026. Jim Farley: Even if the federal government eases off, the states may not. Rod Lache: This is right. So you've got 14 states that copy California. Can you actually -- when you look at what's ahead of you and what you have in your toolkit with hybrids and plug-in hybrids, can you meet that without going to 20% or 30% EV in the next couple of years? Jim Farley: No. Rod Lache: Okay. So how do you... Jim Farley: That's a reality. So the reality is that regulators around the world, including the U.S., put their foot firmly on the scale. And there is no amount of hybrid mix or PHEV mix in the world is going to get you to be compliant. And even if the federal government uses off with the administration change, many of the states, large states that have lots of revenue in them are probably not going to do that. So the reality -- but there's a bigger thing, the biggest thing here than the government, it's called China. And it's called the BYD Seagull. It's called a market that likely will sell 110 million EVs this year in China. So if you're in our business, even if you have Pro, if you cannot compete fair and square with the Chinese around the world, then 20% or 30% of your revenue is at risk, maybe 30%. So at the end of the day, I kind of look at it from -- as a CEO, a company that had trouble competing with the Japanese and South Koreans that we have to fix this problem. We have to address this. And that's one of the reasons why John and I decided to create a skunkworks team of new talent. And it turns out, I think the biggest, smartest decision we made as a team is changing our talent game a lot forward. Rod Lache: I'm still struggling with trying to square it because you've got companies in the industry, including Ford, they are being told you've got to get to 20% to 30%. I'm looking at battery capacity last year in the U.S. or North America was 89 gigawatt hours, at least 500 next year. It's like 5 million vehicles worth of battery capacity next year. And I'm not sure how to square that against where the consumer is and how that actually works out well for Ford. So is there something -- like do you think ultimately, regulators look at the reality of the consumer? Or do you think that there's like a nonlinear change in costs that we should be thinking about for... Jim Farley: Okay. California states, I've been Toyota, I've been in Ford, the ZEV requirement in California been around for, like, I don't know, 30 to 40 years. it changed it every year. And there are subtle changes that make a material difference. So I think regulators can't be completely at odds with labor and consumers. And I would expect, as we work our way through this, that we'll get there. But that's not the most important thing. The most important thing is that as the consumer premiums come down to hybrid, all the battery capacity, you have to realize that there is tremendous new risk across different OEMs. It didn't exist a year ago. In Ford's case, we have decided pretty quickly to bet on smaller EV platforms because when you do the economics, including IRA, especially with IRA, the profitability what the customer has now said to us is if you have anything larger than escape, it better be really functional or a work vehicle as an EV. Now it turns out, which has not been reported, and I'm a bit disappointed and maybe it's part of our fault is the EV adoption on Pro is actually going much better than we thought. It's not a huge market but they use the vehicles more intensely. So the operating cost advantages on the energy side are much better, much better than they thought. So we can't make enough e-transit or Pro versions of lightning. But the base cost of lightening is too expensive. So the bigger vehicles, they better be work. But if you do the economics and all that battery capacity, for a vehicle that's, let's say, the escape or smaller. It's totally different. It completely works. In fact, it's dramatically better operating cost than a Corolla or a Civic or even a Maverick. And that is what's really exciting for us. And that's a pivot that isn't entirely obvious that Ford is made but we have made it. Rod Lache: I would speculate that... Jim Farley: And I have the figures. If I were to go over figures on a Maverick size vehicle or that it's pretty remarkable. It's like a over the course of the life of the vehicle, it's like a 10% advantage because of the IRA. Rod Lache: So the smaller vehicles, you've got a plan for that. Jim Farley: Yes. Rod Lache: And I would think that when you -- with the talent that you have in-house, you've got a vehicle platform, a structure, software, electronic architecture, it's real competitive. Jim Farley: Yes, bingo. Rod Lache: The one part of it that I haven't heard from you is the battery. Is that a fair kind of conclusion that we haven't seen Ford solve that yet? Jim Farley: No, we have. it just I don't want to give it up. It's competitive. I mean we were the first company in the U.S. to commit to building LFP technology in the U.S. What will Tesla do, right? Tesla Model 2. I mean that's the future. That's what we're talking about right now. Is it going to be a cylindrical NCM cell? Is it going to be an integrated LFP-cell. Dramatic cost advantage, either one of those choices, actually. And NCM is coming down quickly because of overcapacity. And if you can pick a cell format that's kind of standard now, which you've been talking about for years, now it's happening. There's a big competition between LFP and NCM now, cylindrical. And -- but I haven't talked about it because I don't want my competitors just know what I'm doing. But we think that's one of the biggest unlocks for us. Rod Lache: It sounds like you're optimistic about the Model-E. Jim Farley: I am. I am. Rod Lache: Well, this business lost $5 billion to $5.5 billion this year... Jim Farley: I know. I know. So did our overseas operations. We made $2.5 million now. Rod Lache: I guess I mean to me, there's all this debate around are these companies over earning, you're under earning because you've got this big drag on the Company. And if that -- and we haven't gotten to the top of Pro yet, to be honest. I guess -- but I asked you a question on your earnings call about when do you break even? Or can you give us a sense of what happens from here? Are you able to say at this point, based on how things are playing out in terms of variable cost and the product that the losses are kind of peaking this year? Is it going to get better from here? Jim Farley: I don't want to give a lot of new guidance about our electric losses. I will say that our gross margins will improve during the year. We'll get close to breakeven, which will be a big accomplishment for our company. But until we launch those new models and the market mixes them out, I don't want to make predictions. I've been in the prediction business on the EV business. It hasn't really been a great journey. Rod Lache: Yes [that's why] I asked you. Jim Farley: And it feels great in the moment to say it's 2027 or whatever it is. But it's not reality anymore. What reality is, I have to run the Company by saying to my team, it's not negotiable that we're going to allocate capital to a new affordable electric vehicle with this skunkworks team or whatever, and you have to make money in the first 12 months. And I don't want to bulls*** road map. I want like a real plan. And if you can't be in that plan, we are launching the car. And the backup plan of that is a little bit scary because of compliance because we have a really profitable company now. Everywhere we make money except for Model E. So I don't want to give you a date because I don't know how the market will change. I don't know how our bet on battery for the small vehicle is going to play out versus as I don't know how quickly the Chinese will come. Most of us get in a car in drive the Mexico today, be a long dry but we could get there. Last year, 25% of all vehicles sold in Mexico were sourced in China. Okay? The world is changing. And the Seagull, these kind of vehicles, $9,000 material costs, $8,500 material cost. Yes, they have to make crash, probably another $2,000 on top of that, $11,000 material cost. Yes, 40-kilowatt battery, maybe in the real world on a cold day here in New York City, 140-mile range, 150-mile range. I mean not a fantastic vehicle but pretty damn good. Rod Lache: For $11,000. Jim Farley: So I'm saying like I got to handicap the Chinese here. Why? Well, I watch Europe fast quickly. I was there to help build Toyota Europe from nothing, and then I ran Ford of Europe and the Chinese are 10% of the EV market in Europe. And they were zero two years ago. So don't take anything for granted. This CEO doesn't. So I'd love to give you a date but that date is going to be influenced by a lot of -- a few things, not many, a few things that are variable that I just don't feel like it's smart right now. But what -- but to run the Company, the only deal my team gets is you're not going to get any capital or we're not going to launch vehicles until we make money on it. And that is driving a lot of change. And frankly, if we had not done Model E separately, that would not have happened. And I don't know about other companies like Volkswagen and other competitors. Are they run the Company that way? I don't know. Rod Lache: We're not. When was the timing of the next-gen vehicles. It's '25, '26? Jim Farley: Yes. '25, '26 to '27. That's one people will -- that's one we will know, was this management team right or not. Rod Lache: I want to back up to what you said earlier about if you can go back in time, what do you change and look, I'd say it's impressive that the Company is generating $10 billion to $12 billion of profit when you're -- you've got a $5 billion drag from Model E and probably even a bigger drag on cash flow, just given the capital is required there. And the other thing that I'll bring up again is actually this time last year at this conference, you mentioned that low and maybe a little bit of Pro, there's a $7 billion cost disadvantage within those businesses. So could you talk about what operational changes you're putting in place now to really address this? What structurally has changed? And what gives you confidence that we're going to start to see that turning around? Jim Farley: Okay. I'm really glad you brought this up because it is literally the [central]. When you look at Ford and what are like the top three things we're going to do to transform the Company, one is this issue. This is a foundation for everything. Yes, profitable EVs are really important, getting Pro to where it really needs to be and building out services and all the attach rates for parts great. The foundation of our transformation as a company far beyond when I'm gone, be the culture that we leave in the industrial system for excellence. And I respect deeply competition because they have done a great job. What changes we made are -- I mean, they're pretty remarkable, I think, John would be a better person because he's been at Ford his whole career. He's seen it before. You've seen Alan Mulally make an effort. I was nearly surprising team member on Alan's leadership team. And coming from Toyota, the biggest change is talent in the industrial system. I have found the right group of people who have a lean approach to their work who are -- who know what good looks like in the discipline, the technical discipline of purchasing, manufacturing, engineering and they are starting to get traction with rewiring the Company, rewiring how we work, restoring disciplines we used to have that we didn't do. COVID was an incredibly destructive force at Ford, the industrial system. We stopped visiting suppliers. I mean, I can give you a long list of stuff that stopped doing that. I think others didn't, where Ford got much unhealthier than our competition in COVID. But the changes that Liz is making in supply chain now is restoring supplying to a professional discipline where we follow best-in-class processes and we have the right talent at the Company that we haven't had. In manufacturing, our plants are starting to be run professionally with a lean mentality, inventory coming out every month, workstation work going out, every year, there's labor savings this year. I think the manufacturing team will fully offset the UAW incremental cost. We used the downtime during the strike to completely come up with all the list of cost reductions in our plants. The variability of our quality, delivery and cost delivered for the plants is shrinking. And then the big change in the Company, the huge change is engineering, and that will take time and the pressure we're putting on these launches slow them down. We launch them without launch spikes at Ford has gotten and cutting production during the ramp-up is putting pressure in the Company that I don't think the team has ever seen before. I wish I had done all those things three years ago. But as the CEO with a background, would I handicap my whole team and blow it all up? Would have been a heck of a thing. Would I cause chaos? Maybe. But now I know what I know and we're making progress. It's probably the hardest question to answer for investors because the only way you can see it come with me, to a plant to talk to our supply chain team, see the talent, see how they work, see how they manage risk, they see the relationship with the suppliers, to see how we negotiate insulation-related requests from the suppliers. You can't. So it's a hard thing to communicate. And I think actually what only matters is do I get to $2 billion out? Does my quality get better? Does the warranty start going down? Does the reserves start to come down, that's the proof of the whole dam thing. Rod Lache: The biggest part of that $7 billion is variable cost, right? It's material costs and warranty. Jim Farley: Yes. Rod Lache: Which will take a couple of years because you have to reengineer and go through purchasing and things like that. But you're already putting up $2 billion, $1 billion manufacturing and $1 billion in... Jim Farley: We started the year with like a list that is realistic, that all we have to do is execute the part change, negotiate with the suppliers and put it in production. I didn't have to have that last year. I had a great idea list. Now I got no list. Rod Lache: Is this the kind of thing where that level of momentum, that's kind of the speed limit of improvement do you think we can sort of extrapolate from that and say, you know what, we don't know the number for next year but there's another long list next year and we're going to start to see. Jim Farley: It's a cultural change. It's cultural change at the Company. It's not going to slow down. We're betting on lean. I'm a Toyota person. I don't want to do it wrote with Toyota but I'm hiring lean people. They are leading the Company in lean practices and I expect this to get better every year. And eventually, we're going to wake up and go, can you go any further? But the first rotation is what we're seeing now, and let's deliver that first. Rod Lache: The UAW thing was obviously huge last year and you're coming out with $500 per vehicle, higher labor costs immediately and $900 by the end of the contract. Does that have business implications for you in terms of competitive? Like how do you think about that and the competitive benchmarks that you have to hit in the industry? Jim Farley: Good question. This could be a very newsworthy question. I'd just say a few things. I was very proud. It was an extremely difficult moment for the Company. Ford had always prided itself on not having a strike since '70, which we didn't. Have the best relationship and we have 57,000 UAW workers far beyond the other competitors. We make 100% of our trucks with UAW workers in the U.S. Our competitors do not do that. They went through bankruptcy and they moved production, Mexico and other places. So it has always been cost for us. And we always thought it was the right kind of cost. And our reliance on the UAW turned out be -- we were the first drug plant they shut down. And that was a moment for us. Clearly, our relationship has changed, been a watershed moment for the Company. Does that business impact? Yes. I would say I'm extremely proud because this has not been really seen about our negotiation around the battery plants. It's materially different than our competitors. And as far as Ford had a lot of waste in this industrial system. So we do have a lot of runway to improve in manufacturing. We're committing to that as part of the $2 billion but as we look at this EV transition and ICE lasting longer and our truck business being more profitable, we have to think carefully about our footprint. Rod Lache: Yes. Makes sense. Let me just ask a couple of summary questions and if there's any in the audience. So if you were to list the three most important targets for Ford this year. If you're successful, what are we going to see? Jim Farley: $2 billion out of the cost, number one. Contribution margin improvements in our e-business and that Pro guidance. Those are three things. Rod Lache: What are the biggest challenges aside from macro? Jim Farley: The three biggest... Rod Lache: Not three biggest challenges, what's is the thing that execution-wise that you've got to pay the most attention to because there's a challenge there? Jim Farley: $2 billion. Rod Lache: Okay. Actually delivering on that. Jim Farley: And subset of that, another 10% improvement in our initial quality because we are now going from the middle of the pack in initial quality to the top quartile and that is a different game. And we're launching 60% of our revenue is new. So we have to improve the initial quality when literally 60% of our vehicles have a long spike. And that will put us in the top quartile of every segment we're competing in. That is a degree of difficulty. That's like a Olympic dive with a high degree of difficulty because we have so much new, exciting, fantastic, great revenue power, new content products. And so to me, that's the one I watch the most. I'm calling Kumar twice a day. How -- what's going -- right now, we're in the middle of the F-150 launch. It's a major upgrade to the F-150, including the interior, far superior to any of our competitors. They're still literally a generation behind on the inside of the vehicle. And we're already the best, the best revenue. Now we're about to step on the gas. But that product has to launch with very little launch spike and we have to get close to Tundra, 55 problems for 1,000, three months in service. We've never done it. That's the kind of challenge it is to get to. The top quartile is a different deal. So I would say that, that's the one we're focusing on and landing the material cost reductions. Rod Lache: What do you think surprises -- what would be the biggest surprise for investors that you think we're going to see? Jim Farley: Pro. Rod Lache: Is this the upside from that business? Jim Farley: It's, like if you're looking for the future of the automotive industry, stop looking at FSD and Tesla, look at Ford Pro. It's got 0.5 million subscribers with 50% gross margin, they spend 20 minutes looking at the data every day, and they're in the plumbing business, they're not in the car business. They only 10% do business with us for after sales, and we make 35% margin when we sell a part and we're about to go to full prognostics in all of our vehicles. It's like John Deere seven years ago. Yes. And we have multiyear order banks, and we're at excess -- we're at max capacity in all the vehicle lines, and is happening here and Europe. And in Europe we're launching a brand new 1-ton Transit, which is equivalent of Super Duty in the U.S. And the vehicle that was doing great before was 10 years old. And now we've doubled our scale, purchasing scale, manufacturing scale, all of that, we doubled it by doing all of Volkswagen's vans in Europe. So we basically took our Turkey site and made it twice as big. And now we can negotiate twice as much scale with the suppliers. That's all coming online now. So yes, I mean, it's Pro. Look at all the other stuff, let's say nets out. Pro, you have a lot of upside. Rod Lache: Interesting. Anybody in the audience, Julie has got a mic. Raise your hand if anyone's got a question. Well, I've got one or two more. So the big debate on pricing and where that's headed? So obviously, we saw that 30% increase in average transaction prices. And you've, in fact, already indicated that pricing, you think, for the industry will be down about 2%? Jim Farley: Yes. Rod Lache: Is there any reason to believe that it would be more or less impactful than that? And how would Ford do relative to the industry in that kind of an environment? Jim Farley: Good question. Yes, we said 2%. And what we really look at, John said this during earnings, so I know it's not new to you but maybe some of the investors it is. What we really look at is because comes have gone up too. We look at the ratio between incomes and monthly payment. And that's -- before the pandemic, it was like 13% and had been for a long time. We think we're going to get back to that level of affordability in monthly payments. And I think that's the right way to run the business. How could it change? Well, we have a new F-150. How will our competitors react because -- I mean -- we're not the Ford that people used to think we are. I mean, we are not in all the segments. Our average price paid is like $51,000 in the U.S. We have a different portfolio than we've had in the past. So you got to look at our pricing bet relative to those segments. But there's some offsets there. We have 60% of our revenue is new. So there's some -- that could be some upside. It has been actually the last couple of years. We've had new product like Super Duty is way outperformed what we wrote down. But on the other hand, I can't predict what my competitors are going to do. Truck Month is coming up in Texas this month. Watch that one really carefully. What will Ram and Silverado do in Texas this month with the new F-150 coming around the corner. I don't know. I think that's the one I watch the closest. I don't think there's going to be such an explosion of EVs this year, the 2- and 3-row crossover profit like explore and expeditions are going to be under a lot of pressure. We have a brand new explore and a brand-new expedition this year. So I think we're very well positioned in 2- and 3-row crossovers, especially 3-row where we get a lot. Bronco is really solid. We still have order banks on Bronco. We have new versions coming out every year. We just finished the heritage. It's going well. The Escape is new. So I don't think there's a lot of risk there. It's like six months new. It's going very well and we have an escape hybrid that's super popular. It helps us transition against the Japanese. I don't think my domestic competitors have that. So it really comes down to the F-150, how the new one is received and what pricing policy my competitors have as they -- as we start to scale the F-150. I don't really see a lot of variance from there. Rod Lache: The old Ford used to talk a lot about the weekend and all these other things that were factors. When you were at Toyota, Yen is down 30% in two years. Yuan is down 10% in two years. But Ford has kind of pivoted the portfolio towards F-150 and Bronco and Mustang and all these other things. Is that less relevant for Ford now? Jim Farley: What a great question. It is very relevant relative to our -- so it's funny. We don't really talk about Ford anymore overseas but we should because our Pro business is very profitable in Europe now. We have a very small footprint in China. So we're totally unique among the other OEMs, not a lot of risk, not a lot of reward but we have a very profitable range of business. People wouldn't realize this, the second highest volume vehicle at Ford is Ranger. Ranger globally outsells Super Duty. We are now number two in pickups outside of the U.S. and pickups are growing big time. We sell 5,000 Raptors in China for $150,000 each, and we're the best-selling vehicle in Australia. We almost pulled out of Australia. The Ranger is number one in South Africa, huge pickup market. we're number one in pickups in Europe. The Ranger is growing and super profitable in South America, it's our only vehicle in South America. So I would say the yen is very material for Australia and the 15% to 20% of our profitability overseas. But as far as the U.S. market, we don't really face off with them. Maverick is our number one conquest vehicle of the Company, we get a lot of specific in Corolla customers but there is no Maverick at Toyota, right? The only competition we have is in the KIA and their position, their vehicle totally different than us. So yes, it's a different company. We don't have Focus. We don't have Fusion. We don't have EcoSport. We changed the Company. It's Bronco Sport versus RAV4. That's Ford. Rod Lache: Yes. Great. Well, I think we're out of time. This was terrific. Thanks again, Jim, John, Lynn for coming. Really enjoyed it. Jim Farley: Thank you. Rod Lache: Thank you.
Ford Motor Company: A Strategic Investment in the EV Market
Ford Motor Company: A Value Investment in the Electric Vehicle Market
Ford Motor Company (F), recognized by The Motley Fool as one of the three ultra-cheap stocks under $100, presents an intriguing investment opportunity. Despite a slight underperformance compared to the S&P 500's 7% gains this year, Ford's modest 5% increase in stock price to around $13, coupled with its low forward price-to-earnings (P/E) multiple of 6, positions it as an attractive option for investors seeking affordable entry points into the automotive sector. This valuation is particularly compelling when contrasted with the high P/E ratios of competitors like Tesla, emphasizing Ford's potential as a value investment in the electric vehicle market.
Ford's financial health, as evidenced in the first quarter of 2024, shows a company in a state of steady growth and adaptation. With a revenue increase of 3% year-over-year to $42.8 billion and an adjusted per-share profit of $0.49 surpassing analyst expectations, Ford demonstrates resilience despite a 24% decline in net income to $1.3 billion due to rising expenses. This financial performance, combined with a generous dividend yield of 4.7%, underscores Ford's appeal as a long-term investment, especially for those interested in the burgeoning electric vehicle segment without the premium price tag associated with other brands.
However, Ford's journey is not without its challenges. The recent recall of over 242,600 Maverick trucks due to tail light illumination issues highlights the operational risks inherent in the automotive industry. This recall, necessitated by a software flaw in the Body Control Modules, could impact Ford's reputation and financials in the short term. Yet, the company's proactive approach in addressing the issue, including offering free software updates and mobile service options for affected customers, reflects a commitment to safety and customer satisfaction that could strengthen long-term investor confidence.
The current trading dynamics of Ford's stock, with a slight decrease to $12.43, reflect the market's short-term reactions to both internal and external factors. The stock's fluctuation within the day and its performance over the past year, ranging from a low of $9.63 to a high of $15.42, illustrate the volatility and opportunities within the automotive sector. With a market capitalization of approximately $48.51 billion and a significant trading volume, Ford remains a prominent player in the industry, navigating through operational challenges while capitalizing on growth opportunities, particularly in the electric vehicle market.
In summary, Ford's strategic positioning, financial performance, and proactive approach to challenges present a compelling case for investors. The company's affordable stock price, coupled with its potential in the electric vehicle space and commitment to shareholder value through dividends, makes Ford an attractive option for those looking to diversify their investment portfolios with a long-term perspective. Despite the recent recall and the slight dip in stock price, Ford's overall trajectory and business model suggest a resilient company poised for future growth.
Ford Shares Rise 3% Following Q1 Results
Ford Motor (NYSE:F) shares climbed over 3% pre-market today following the announcement of fiscal Q1/24 earnings that surpassed expectations, although revenue slightly missed projections.
The automaker reported first-quarter earnings per share (EPS) of $0.49, topping analysts' estimates of $0.42. However, revenue for the quarter was $42.8 billion, just shy of the expected $42.94 billion.
Looking forward to the full year of 2024, Ford's CFO, John Lawler, stated that the company's adjusted EBIT guidance remains stable, with anticipated results at the higher end of the $10 billion to $12 billion range.
Additionally, Ford adjusted its expectations for adjusted free cash flow upward, now forecasting between $6.5 billion and $7.5 billion, an increase from the prior estimate of $6 billion to $7 billion.
The company also narrowed its capital expenditures forecast for the year to between $8 billion and $9 billion, from a previous range of $8 billion to $9.5 billion, with spending expected to trend towards the lower end of this range.
Ford's Recall and Strategy Amid EV Market Slowdown
Ford Motor Company's Recall and Strategic Adjustments Amidst EV Market Slowdown
Ford Motor Company (F:NYSE) is currently addressing a significant recall affecting 456,565 vehicles across the United States, as mandated by the National Highway Traffic Safety Administration (NHTSA). This recall, encompassing models such as the 2021-2024 Bronco Sport SUVs and the 2022-2023 Maverick compact pickup trucks, is due to a low battery issue that could lead to a loss of drive power and malfunctioning of essential electrical accessories like hazard lights. To rectify this, Ford dealers are set to recalibrate the body control and powertrain control modules at no cost to vehicle owners. This proactive approach to addressing vehicle safety concerns is crucial for maintaining customer trust and loyalty, which can have a direct impact on the company's market performance.
In the broader context of the automotive industry, Ford, alongside General Motors (GM), is preparing to present its first-quarter results to investors. This period has been marked by a slowdown in electric vehicle (EV) growth, compounded by challenges such as global downturns in EV demand, increased competition, and rising borrowing costs in the U.S. These factors have led both companies to reassess their strategies, focusing more on their gasoline-powered vehicles, which continue to be their main profit generators. Despite these challenges, Ford's stock has shown resilience, with a slight increase to $12.085, reflecting a modest gain of $0.025 or approximately 0.21%. This stability in stock price, amidst a fluctuating market, underscores Ford's enduring appeal to investors.
Ford's financial health and market position are further highlighted by its current market capitalization of approximately $47.17 billion and a trading volume of about 26.92 million shares. The stock's performance over the past year, with fluctuations between a low of $9.63 and a high of $15.42, illustrates the dynamic nature of the automotive sector and Ford's ability to navigate it. The company's strategic focus on leveraging its combustion truck business and Ford Pro commercial vehicle operations, coupled with a cautious approach to EV investments, reflects a pragmatic response to the current market realities. By reaffirming its forecast for a core profit of $10 billion to $12 billion this year, Ford is signaling confidence in its operational strategy and financial outlook.
The automotive industry is at a crossroads, with the transition to electric vehicles presenting both opportunities and challenges. Ford's decision to slow down major electric-vehicle programs, making future EV investments contingent on profitability, is a calculated move to ensure sustainable growth. This strategy, while cautious, allows Ford to adapt to market demands and technological advancements without overextending its resources. As Ford and other automakers navigate the complexities of a shifting automotive landscape, their ability to balance innovation with financial prudence will be key to their continued success.
In conclusion, Ford's recent recall initiative and its strategic adjustments in response to the slowing EV market are indicative of the company's commitment to safety, customer satisfaction, and financial stability. By focusing on its strengths and adapting to market challenges, Ford is poised to maintain its competitive edge in the automotive industry. The slight increase in Ford's stock price, amidst these strategic maneuvers, reflects investor confidence in the company's direction and its potential for sustained growth.
Ford Motor Reports Strong Q4 Results, Shares Gain 4%
Ford Motor Company (NYSE:F) outperformed Wall Street forecasts with its fourth-quarter results and presented an optimistic outlook for the year ahead, causing its shares to rise by over 4% intra-day today.
The automaker announced adjusted earnings per share (EPS) of $0.29 on revenue of $46.00 billion, surpassing the expectations of analysts, who had projected an EPS of $0.12 on revenue of $43.04 billion.
For 2024, Ford set its sights on adjusted earnings before interest and taxes (EBIT) between $10 billion and $12 billion, with adjusted free cash flow in the range of $6 billion to $7 billion.
Ford Motor Falls 2% on UBS Downgrade
Shares of Ford Motor (NYSE:F) experienced a drop of more than 2% intra-day today. This decline followed a decision by UBS to downgrade the Detroit-based automaker's shares to a Hold rating from Buy, citing a view that the stock is now "more fairly valued."
UBS analysts, in their note, expressed a tempered outlook for Ford, indicating less optimism for the company's financial performance in the coming years. They specifically mentioned that they foresee more limited upside to Ford's earnings estimates for 2024 and 2025 than previously anticipated.
In terms of specific figures, UBS predicts Ford's earnings per share (EPS) for fiscal years 2024 and 2025 to be $1.70 and $1.65, respectively. These projections reflect a negative deviation of 4% and 12% from the current consensus.
The downgrade reflects broader industry challenges that Ford, like other automakers, is facing. These challenges include issues related to pricing, affordability, labor, and the need for significant investment, particularly in the context of transitioning to electric vehicles.
Ford Motor Reinstates Outlook, Shares Slightly Decline
Ford (NYSE:F) reinstated its financial outlook for 2023, forecasting an adjusted EBIT (Earnings Before Interest and Taxes) to be between $10.0 billion and $10.5 billion. Following this announcement, the company's shares saw a modest decline intra-day today.
The car manufacturer also revealed that its recent labor agreement with the United Auto Workers (UAW) in the U.S. is expected to bring about expenses totaling $8.8 billion over the contract's duration.
John Lawler, Ford's Chief Financial Officer, commented on the situation, noting the significant technological changes sweeping through the industry. He emphasized that some companies, both new and established, might not keep pace with these changes. Lawler affirmed the effectiveness of Ford's strategy, Ford+, highlighting the company's skilled team, disciplined capital allocation, consistent execution, and reduced cyclicality in growth and profitability.
The major cost drivers in the labor agreement are gross wages, expedited wage progression, and cost-of-living adjustments. By 2028, these factors are anticipated to add approximately $900 to the cost of each vehicle.
Ford had previously withdrawn its financial guidance for 2023 in late October due to a UAW strike affecting some of its operations in the U.S. For 2023, Ford is targeting an adjusted free cash flow in the range of $5.0 billion to $5.5 billion.
Ford Downgraded at Jefferies
Jefferies downgraded Ford (NYSE:F) from a Buy to a Hold rating and lowered their price target on the stock from $17.00 to $15.00. The decision came after Ford reported worse-than-expected losses in the electric vehicle (EV) segment and revised down their guidance for the Model e.
The analysts mentioned that while they appreciate Ford's efforts in disclosure and accountability, there seems to be no apparent change in the mid-term strategy. The focus on Gen 2 being software-centric and a concentrated line-up makes sense, but it will only become effective in 2026, leaving a less differentiated investment case in the years leading up to that point.
Ford updated its adjusted EBIT forecast to be in the range of $11-13 billion, which surpassed Jefferies' previous predictions of $9-11 billion. In response to the positive performance in H1 at Blue and the momentum at Pro, which outweighed the guided $1.5 billion deterioration in Model e, Jefferies raised its estimates to $11.9 billion, reflecting a 10% increase.
