I wanted to ask about, you know, the cost cutting and how's it going, because
you wanted to take out two and a half billion this year and you had you said
seven. Last I heard, you said six to seven
billion in structural cost disadvantage as your competitors that you needed to
work on. How's that going at Ford?
We're making progress. It needs to go faster.
But a new culture is setting in in the company.
We have you know, a lot of other competitors have made a lot of personnel
reductions. We see that as kind of more of an in our
journey on cost and quality, more of an output metric.
So what we want to reduce is more like the bill material cost, the industrial
cost in the plants. A lot of extra inventory we want to get
out as well as our negotiated costs with the suppliers.
So our costs we want to get out is actually in the heart of our industrial
system. It's not like just people.
You have said in the past you have 25 percent more engineers working on the
same output as your competitors. Does that mean you're going to reduce
that 25 percent? Are you letting it happen through
attrition? How is it working?
You know, we're very intentional about this man.
I think you're going to see from Ford over the over many years a natural
reduction, not through attrition, but skill mismatch, intentional transition
of our teams, moving some of the engineering to lower cost labor sources.
So it will be a combination of things. But, you know, it's it's obvious that we
we have we have to be more efficient. Uncompetitive advertising and marketing
spend is also something that you've called out.
Actually, I would say on our blue business, we've under invested in
advertising. We want our e-business really not to do
a lot of broadcast advertising. We want the product to speak for itself.
And really the investment in marketing there is really the ownership model.
So people kind of come back in high loyalty.
Same with pro on the blue business. You know, we are starting to see
inventories grow for the only industry. We're in a great space.
We have a really fresh lineup of vehicles.
But that merchandising capability, I would assume we're going to have to
spend more this year and prices will come down, thankfully for the customer.
After all these years of tight supply, how much do you think prices are going
to come down and what's going to drive that we're assuming in our plan this
year and next year, you know, 5 plus percent reduction.
It's kind of in-between where we were maybe in 2019 and where we been.
I don't think we see we're going to go back to the days a couple of years ago.
One hundred days supply. So most people in the 50 day supply
range, you know, I think the natural discounting for someone who is an
older product is going to be in the thousands.
You're starting to see now low APRs from a lot of brands who have older
product. What's unique about Ford is we're
basically we have an all new lineup. So, you know, we're a bit of a unicorn,
but I think the background pricing will be more difficult.
You said in the past year, people have asked, you know, how do you get from 8
percent on your EV business? You want to do 10 percent overall to
like the 17 percent that Tesla has. Do you get up there or do they, you
think, eventually see margin pressure? It's a good question.
Both both are going to happen. We're seeing, you know, look at what's
happening in China with BYD, look what's happening with Tesla.
They've reduced their prices on model Y, their main product, you know, five,
seven thousand dollars. It goes up.
It goes down, but it's it's pretty far down.
I think, you know, they've had the market to themselves.
They have big head start, kind of like what we do on pro.
And now they're seeing a lot more pressure, obviously.
I think we're going to definitely see that, especially in the two row
crossover. We think there'll be like 50 to 100 new
models. So, you know, and a lot of people want
to grow. So there's going to be it's gonna be a
great time to buy ta two row electric EV for for customers like Mach E, where we
compete really in EV pickup trucks, three row crossovers that
we're going to show people today and the commercial vehicle, EV commercial
vehicles, we don't see as much price competition because there's not as many
vehicles choices there. And we've seen that in Lightning,
Lightning's price has actually increased over the last
two years a mightily while the Mustang Mach E has been more competitive.
What we have to do as a company is reduce the build material costs.
So on Mustang Mach E. We've gotten the cost of vehicle down
five thousand dollars and this year we're going to need to do the same thing
and even faster on our Gen 2 product. You mentioned China and there are
reports that you're going to let go. I think thirteen hundred workers there
and you're kind of pulling back a little bit on the China business.
Is there any truth to that? I'm not going to say much about China
other than we've already said. Our business is going to be a lower
investment, kind of a smaller profile. Business focused on commercial, where we
do really well and some of our passion vehicles, you know, like Raptors very
super well, I think we'll sell 4000 Raptors in China this year.
So we're going to be a focused business in China.
That's what we said. And there's really nothing new about
that. Well, I just was thinking, because you
pushed through the CATL battery factory and it seems that you're not
afraid of the political pressure with regards to China.
How do you see that in the medium to longer term?
Well, I think, you know, the IRA was a game changer for companies like Ford.
You know, Tesla have been importing LFP batteries, CATL
batteries for a long time.
And we don't really want to import them, although we can't because there's no
tariff. You know, we'd rather build them and not
just in Mexico, but here in the US. So that CATL company has great LFP
technology and that's a really affordable battery and also has twice to
charge cycles that are great for our commercial customers and has a little
bit lower energy density. And so it's better for like shorter
range, like our commercial. And so that's going to be our factory.
It's a Ford factory is Ford workers Ford's building the factory.
I think it's it's the right kind of structure of a deal for the IRA to
to build 3000, 4000 jobs in the US instead of importing and then we'll make
the batteries so maybe we can do it ourselves.
So scaling is, in batteries, Scaling is the biggest problem, right?
Yes. You've made now a new partnership on
lithium. Yes.
That you announced today that could be difficult in the future.
Even copper and aluminum, you know, are going to be in short supply.
Look what's happening in Chile at the mines.
Right. How is everyone going to get all
the stuff that they need to build the batteries they're expecting?
You want to make two million electric cars in 2026?
Well, I think what we've learned, you know, hiring a lot of new talent in the
company is actually the mining part is not the constraint.
It's really the processing. So turning those raw materials,
especially lithium and nickel into, you know, process materials we can put as a
slurry to make the cells themselves. That processing is the limiting factor.
So you can lock up all the mining capacity, which we're pretty much done
for two million now EVs. And you're right that the pricing
pressure with that given is limited. You know, it's always going to be there
like we've seen the last year. But I think what people need to
understand, it's actually onshoring the processing that's going to be the most
important controller of cost and also politics.
Well, you know, 80 percent of the processing raw nickel and lithium were
being done in China. And we need to localize that.
And FTA countries or even in North America,. How vertical will you go in
terms of, you know, building the batteries, processing the material,
mining it? Well, I think, you know, we we're going
back to kind of where we start as a company.
You know, in the 1920s when Henry Ford built the Rouge and everyone
kind of copied the Rouge. We are definitely going much deeper in
vertical integration batteries. We're gonna have our own plant and our
own labor here in Michigan for LFP. That'll be a big lesson learned.
What we found on batteries is on the manufacturing side, scaling for quality
is a lot harder than we thought. You know, actually building the
buildings, getting the raw material processing, as I said, is difficult.
But the hardest thing we found is to build at scale quality batteries.
And that is the hardest thing to scale. And we now have a lot of lessons inside
the company. I think vertical integration is going to
be the theme of the day because the gearboxes, the electric motors, the
inverters, the whole electric architecture we've farmed out to all of
our suppliers for decades. We're bringing all that in now,
especially the software inside the company.
And it's hard, but it helps with the cost.
And we think all those are difference makers.
So we want to be doing those things and solving the hardest problems at Ford
with the software and the services. You're making a big bet on that.
As far as drivers and boosters to margin as well.
How's that going? Do you have to hire a lot more people in
order to do that? Yeah.
This is the coolest, probably the biggest, biggest thing in our industry.
We've been stuck in evaluation box, you know, with low margins, a lot of capital
and susceptible, a lot of economic downturns.
What's software does and digitization of our product is we could ship software to
the vehicle and those revenues are annuity.
So that's a big game changer to us. We're seeing in a Ford Pro the margins
of their 40 plus percent margin. Customers love it.
Think about a plumber's van that can predict failure weeks before it
happened. I mean, if you're a plumber and you have
five vans and and one of them goes down, you'd lose 20 percent of revenue,
you'll pay a lot of money to predict something.
You know, that's going to fail before it does.
You can go in and deal with it at night. And so for for us, we're starting to see
that software revenue stream on two areas Ford Pro predictive failure, also
telematics. And the second one is semi autonomous
driving. Customers want to take their hands off
the steering wheel. Eventually they're going to take their
eyes off the road on a sunny day on the highway.
And people are really willing to spend money on that because they they want
less stressful highway driving. Those are the two revenue sources we've
never had, Matt. How many bodies have you added in
order to make that a reality? I mean, after the failure of Argo, did
you bring in hundreds of people from there?
Yeah, about 600. We have thousands of new people to
company. And the most important work they're
doing is actually writing the software to control the vehicle.
We're vertically integrating the whole electric architecture of the second
cycle of vehicles so we can send a lot of software to the vehicle or and and
have the vehicle be completely software enabled.
And for commercial customers, that's a big deal.
So we have thousands of people. Now, what we've learned about software
in the company is kind of really different than we expected.
What we've learned is that you need to get the A players because they attract A
players. And software is not like mechanical
engineering where you can kind of hire X amount of people to do X amount of work
software. The best people actually do it with less
people. And unlike our mechanical engineering
side, we don't want a lot of supervision on the software side.
We want people coding inside the company.
It's been two years for us on this journey and we have so much new great
talent. Turns out there is a whole group of
software engineers that want to work at Ford because they feel like the car is
next, you know, digital product. So one place I never want to take my
hands off the wheel or my eyes off the road is when I'm driving the Raptor R.
Ah, it's a beastly experience. You know, I had got the first my first
Raptor from Alan. What's next in terms of the
Raptor-ization of products? You've got a Bronco Raptor.
Are we going to see a Mustang Raptor? Well, that's funny you said that.
Actually, something like that is coming later this year, but it will be executed
a little differently on our our electric vehicles.
I'll leave it at that. You know what we found that is Ford is
best doing what its really good at, which is like trucks, SUVs,
performance vehicles, these icons that people love around the world, like
Levi's 501s, you know, is is kind of what we've leaned into the last
couple of years. Raptor R is a good example.
We have a Raptor Bronco now. We have, you know, Tremor Mavericks.
We have the dark horse Mustang, you know, You have Raptor Ranger coming.
Yes. Can't wait for that to launch.
And they going to do really well in the US and it's done well globally.
So I think we we have our swagger back as a company doing what we really love,
these emotional products. More and more of them are becoming
hybrid for performance. I think you're going to see that now
when it comes to electric. We want to do the same thing.
We want to operate in that very emotional territory.
We're going to surprise people. The off road fun will come to life in
EVs a little differently than it does in our ICE and hybrid world.
Well, I'm excited to see what you've got.
Yes. Thanks very much.
Thank you, man. Thank you.