Ford CEO Jim Farley Talks Culture Change

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Let's kick it off, Jim.

I mean.

It is such an incredible feat.

Not only coming back from the slide that you were in to take number one the number one spot, I mean number two or number three would have been impressive, but beating Toyota, beating Honda, their legendary for quality.

How did you actually achieve that?

Well, it took us four years of hard work to be an overnight success story.

You know, it's been. It's been just an amazing culture change.

It Ford, Literally, Matt, every one of our engineers has been in the plant, every one of our supply chain teams are in our suppliers. We are paying attention to every detail. It has taken a few years to get there. But I think it's really about the culture of putting quality before profits, before anything else. And that really is what's exciting about this because now what I'm seeing is the team really focusing on learn tern durability.

So what was it your team? Was it an employee of labor issue? Was it you know technology? Did you use AI? Was it factory processes?

Like?

Can you get into specifics of how you did it?

Yeah? If you if you were to visit today the Rouge plant where we make the F one fifty matt what you would see is a whole control center around data and quality data. So we measure the torque of every one of our fasteners. We have AI tools for vision systems, but most of all, it's just old fashioned hard work of our team members all working together to pay attention to the very small details that will make a difference between a perfectly built Forward and an okay

So, I mean, it's interesting now that we're in the age of AI and we're talking about this technology killing jobs, but it seems like in your case it's really experienced human workers that made the big difference it did.

I have to say the process coaches, the area coaches, you know, they get up every morning, they look at the last shifts, quality data, We look at how many vehicles are repaired, and we work that process every moment of every day. Every employee walks into anyone on our plants, they know exactly are we winning, are we losing yesterday? And today. Everyone is fully aware of where we stand.

Everything is amazing.

Look, we make eighty five percent of our vehicles in the US, Matt. That means these are US factory workers versus even our domestic competitors. They're some of the biggest importers in the US. We're not building these vehicles in South Korea or Japan. These are American workers beating Toyota and Hyundai and our domestics who import their vehicles. We beat them all with the American workers, with the attention to detail.

It's an incredibly compelling narrative. I agree, of course, being at Bloomberg, we're focused on the numbers and quality issues. Recalls and the like had dragged down profits and margins to some extent over the past few years. Can you quantify in dollar terms how much this will contribute to your recovery?

This year, one hundreds of millions of improvement we're seeing our warranty coverages come down, We're seeing our costs come down.

These are all contributing.

To literally hundreds and hundreds of millions of dollars of a tailwind for Ford on costs.

But we didn't stop there.

We also negotiated our parts costs with our suppliers. We've looked at all of our bill material and even our manufacturing inventory and our plants and all our manufacturing logistics costs.

Imagine for Ford Pro it's the most important. You've got incredible growth there, you've got double digit margins, You've got thirty percent subscription growth. Correct me if I'm wrong on any of those numbers. How important is this for Ford Pro And does it change the picture at all?

Well, good question, I would say for Ford Pro, really, what this means Bill Ford Tough really means something to our Pro.

Customers on the vehicle side.

But what we're really seeing there is an obsession with long term powertrained durability. We're testing every engine two to three hundred thousand miles with transmissions, axles, everything. So those Pro customers who use their vehicles little ninety percent of the day to run their business, they can not only be happy with ninety day quality, but also five to ten year quality. That's what it means for our pro customers.

In the pro business. I'm really interested in the subscription growth that you've seen. Can you give us targets there? Are you looking at even stronger growth as that business grows.

We are seeing quarter over quarter, as you said, between thirty and forty percent growth. The margins are over eighty percent on our growth margin side. Here's what people are buying. They're buying productivity. These vehicles, you know, they run their business. Plumbers, electricians, ambulance police, you know these customers.

They use the date off the vehicles.

They teach the drivers how to be easier on the brakes, to accelerate better, not to go past the speed limit, you know, to do telematics and route the vehicles efficiently to their next job. All these productivity software tools that we offer customers allows them to reduce their cost and improve their uptime so the vehicles never off the road. We're now able to send them prognostics or predictive failure of vehicle components so that their vehicles are never off

At a time when we see you know, eight hundred billion dollars of Hyperscaler capex this year alone to build out US infrastructure, tell us what kind of opportunity this is for Forden and how much you're able to participate in that data center build out.

Well, I have to say, in the old days we used to look at housing. Today what we look at is construction. The construction trades are booming, super duty transit, exportable power to the job site. This is what customers want. They want new vehicles that are efficient with software. But also what they want is storage batteries. We're now going to be one of the biggest domestic makers of energy storage batteries.

Now we're scaling up that plant. We actually have two plants.

We'll have twenty gigawant hours of energy storage and not only for sustainable grid and the grid reliance, but also Hyperscalers. They're going to use our battery electric storage batteries to really run our country, help run our country. Between pro and Best our energy storage business, we're very well positioned.

Have you got.

Contracts with any of these big hyperscalers, Microsoft, Amazon, Google, Meta that you can tell us about.

Jim. Yeah, good question.

Well, we're in the middle of building out and converting these batteries from vehicle batteries to energy storage batteries, which are actually very different chemistry wise, format wise, Matt. To your point, we've had literally hundreds of customers now in the contracting phase. We announced one large one edf and they've committed about five gigwad hours over the course of several years now, and we're in the process of contracting many, many customers.

It's a mixed Matt.

We see sustainable grid you know, Win and solar. We also see hyperscalers building out. They want that one hundred percent up time on their facility.

The Ford batteries are really useful for that. So it's a mix of customers so far.

If I mean, since we're on Bloomberg, you're talking to every single investor on the planet, so you can share financial information with us that's material. Is this the right time to boost your EBIT target for the year?

Great question, because we're right about right about a quarter or two earnings.

I don't want to give a preview.

I would love to love to give everyone insight into where we're running. But I would say, you know, good solid progress at Ford in our base business but also our non vehicle business.

We're just seeing growth across the board.

Boy, I got to tell you, I love American consumers.

They absolutely love our Ford trucks.

So you know, on the sales side, you've seen two months of sales, very strong results so far.

We got out of the.

Escape business, but still our sales are growing and actually I really believe June could be a breakthrough year a month for Ford sales, so we'll see how it ends.

I have to say that I love watching Max firs stapp in and it's been frustrating in some races, but he's been incredible to watch. I'm rooting for you and Hajar getting a podium was amazing. Can you confirm that they're going to drive for you next year as well?

Well?

Max has I think Isaac were in good shape. Max does have a specific in his contract around around the car being competitive, but I think you know he's world multiple world champion, as you said, Matt, he'll have the option to choose that. What I'm most confident and it's a bit of a dilemma for us, but the FA the Formula One said that the Red Bull Ford powertrain was the most powerful powertrain in the paddock. Unfortunately that doesn't allow us to make as many changes as our

He is amazing.

And you know I was with you and Lamar last year when you announced here coming back to the hyper Sport class in twenty twenty seven, will you get Max behind the wheel of that car?

Well, yeah, Max have been driving a Mercedes at the ring and you know, sure would be great to see him in a Ford. You know, look, we won four years in a row. We're the first American company win Lamar. We're the only Ford American company that had a chassis driver and an engine by an American company win Lamar. We're still the only one, and we're going back next year to win. It would be great to have Max

I think you can do it, Jim. I think you can pull that one off. If anybody can, it's you.