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a closer look at earnings out of Ford. They crossed the wire just a while ago, second quarter results showing a justed ebit coming in at about two point one billion dollars revenue at fifty billion dollars, but more importantly, the company reinstating the guidance it had pulled earlier, saying that it is adjusted profit for the year a six point five to seven point five billion dollars, the low end of that range, slightly below the average of analysts estimates.
Joining us right.
Now here in Studio two is Matt Miller. He is the co host of Open Interest, and he joins us for a very special interview with the CEO of Ford, Jim Farley.
Matt, thanks very much, Romaine, Jim, thanks for joining us. I want to ask first about how you're offsetting these tariffs. I was on a call with Sherry House, your c earlier. She said the hit to growth would be about three billion dollars this year from TERRAFS, but you're able to recover about a third of that. How are you doing that is it through pricing? Are you able to get it out of suppliers? What are you doing to get that back?
It's all of it.
But the biggest strength for us is ford Pro, our commercial business.
And it's not just vehicles, it's also software and our parts business on Pro.
That's where the strength of our businesses and that's why we increased our guidance net of the tariffs by about a half a billion dollars.
It's pro.
We expect flat pricing for the rest of the year, so it's really pro.
It's driving our results.
Hopefully investors know the story already, Jim, but I don't think everyone understands the breadth of service as you offer through ford Pro and the kind of growth you're seeing. You've added two billion dollars to revenue year over year, well over three billion dollars to revenue quarter over quarter.
And I was looking at.
The valuations of some of the competing businesses like writer, Geotab, Sam Sara. They all blow away your evaluation. I feel like ford Pro would get a much higher multiple if it was trading outside of the legacy automaker. Have you thought about spinning that off.
But we don't want to do that.
That's why we broke it out as a separate segment, Matt, so everyone could see the profitability. Double digit's margins again, you know, really strong results. We have almost eight hundred thousand monthly subscribers for our software. As you said, we're beating now the third party software providers because we can control the vehicle speed, we can control access to the vehicle now third party can't do that. We also have a very strong parts business. Our dealers have invested two
billion dollars in large repair facilities. We've never really been in that business in a big time to compete with third party. Now we are, and almost twenty percent of the profits now for pron vehicle so it's a great ecosystem is something our competitors do not have. That's why we broke it out separately so all the investors can value just that.
I certainly was the bright spot. I am curious, Jim about the strategy going forward with regards to the electric vehicle business. When we talk about the commitment to new models and more importantly, commitment to the infrastructure to support that, what's the plan.
Well, that's a great question.
First of all, Ford is number three in hybrids, but we're number one in truck hybrids, so we're going to expand our hybrid offering across our internal combustion engine lineup and that's going to really distinguish up. But we're starting to see different kinds of hybrids that customers are excited about. Erevs, which you go about one hundred miles all electric, but then you could take a seven hundred.
Mile trip once in a while.
Those look really promising for a three row crossover like Explore or some of our trucks. Our EV strategy, we've been number two to Tesla in the US for about three years. We've really changed that a couple of years ago, and now those products are close to market. First one,
we're going to show everyone in Kentucky the platform. We're going very low end, super affordable ease for urban duty cycles and for commercial Our each brands have been very successful with people who have, you know, schedule routes, they don't have to worry about public charging on the fly. That's where we're seeing traction with their EV business. The real low end for people who just want a commuter vehicle that's really cheap to operate, and then EV is cheaper than ice and commercial.
We're not going to.
Invest in a lot of the very expensive crossovers for pure EV.
We think that's going to be a hybrid business.
What does the supply chain look like specifically for the EV and hybrid business right now? Are some of the kinks that we saw last year at the start of this year. Has that been worked out?
It has?
You know, we're really excited about our new affordable battery. We have a plant Marshall, Michigan that's going to be one of the first to make in the US LFP battery. That battery supply chain has really react did to this change in the market. We're looking to repurpose our unused battery pant assets and more to come on that. I think the supply chain has been very difficult because the
demand is so much lower than everyone thought. The growth has been there, but lower than everyone thought, and we've all adjusted to that. We've moved out our cycle plans. We focused on affordable and commercial. You know, a lot of people are fully pregnant with their a lot of OEMs are fully pregnant with their existing lineup.
Of these very expensive evs.
We're fortunate we moved three or four years ago and we could, we could tilt to hybrid and a specific kind of EV and the supply chain has been able to move with us so far.
I want to ask, first of all, I'm excited when you when you come out with a three ro row e E rev call me up because I'm in the
market for one of those. I want to ask about the unintended consequences of this administration's terrorists, Jim, because the Japanese or the Europeans, maybe the South Koreans, they're getting away with a fifteen percent flat tariff now, but you and other American automakers producing here have fifty percent tariffs on steel, fifty on aluminum, twenty five percent on foreign parts, up to eighty stacked eighty percent stacked tariffs on Chinese parts,
to the extent that it's got to really disadvantage you when you're competing against a Toyota built in Japan or a General Motors vehicle built in South Korea. Can you quantify that disadvantage?
Yeah, I mean we studied it very carefully. If you look at labor, if you look at the material costs as you mentioned, Matt, and you look at the currency, you know a lot of these countries have currencies that really advantage their export. We think it's five thousand dollars on like say Wrap four versus a Kentucky built Escape, and maybe as much as ten thousand dollars on a Japanese built for Runner or a Super U versus you know,
a Bronco built here in Michigan. So it's really meaningful working with the administration is to take that layered tariff because the autos have their own tear plus or subject to all these other tariffs. We're working with Commerce and the Trump administration to minimize our tariff expense so that we can get more competitive. But the bottom line is our plan forward is not to compete in those commodity segments.
We're really passion products like Bronco and Mustang, work vehicles like Super Duty and our trucks, you know, and break through evs which everyone will learn about in Kentucky in a little bit.
That's where our capital's going.
So although it's a five to six thousand dollars, you know, disadvantage, our capital really isn't going into those segments.
I get that, and I feel like, you know, Americans, some Americans are willing to pay more to support a seventy dollars an hour labor costs that we have here versus you know, twenty to twenty five dollars labor costs that the Japanese are working with. But it still seems, you know, like General Motors could move more production to South Korea if they get a fifteen percent flat rate and have a huge advantage over you. They're the biggest
auto importer in America. Have you talked to the Trump administration about working this out somehow?
Every day, every week, every month, every year, we have daily conversations with our counterparts and government, and you know, whether it's emissions, whether it's you know, tax policy, but especially tarrat policy. They are very committed to minimizing this disadvantage that we have making eighty percent of our vehicles in the US. But you know, a lot of those vehicles that we make in the US, you can't really find ability a way to make those vehicles outside the US.
And just remember there is a chicken tax that's been around for a long time on heavy trucks that would be very difficult impossible to be competitive overseas. That really affects the commodity segments like raft four and others, but that's not our strategy afford to go after those segments.
I'm very hopeful that the Trump administration understands the predicament that we are in as they make these bilateral trade agreements, and they are going to work with us to do the right thing for our US manufacturing companies.
So Jim, the President is actually speaking now at an event in Washington on healthcare technology, but he's making a lot of comments about bringing US manufacturing back here in the US. He specifically says for factories for AI and cars that he wants all that, of course to be
built here in the US. A reiteration of comments we've heard in the past, based on the policies that at least have been proposed and whatever policies have started to be rolled out, are you seeing any sort of material progress in bringing more auto manufacturing back to the US, and I don't mean just cars but also parts two.
Yeah, We've been watching really carefully our competitors announcements in auto and our suppliers announcements of what's getting reshort, the realities of the fifteen percent and terraff for finished vehicles that is not a high enough tariff you know, it'd have to be in more like thirty to forty percent to build a new factory in the US. Now, we've seen a lot of our competitors, even our domestic competitors, you know, fill open factories here where they have bridge production.
They may make it in Mexico and the US, the same nameplate, and they are moving some of that back to the US, which is good for our country and good for our manufacturing. The key thing is going to be the accumulation of effect of emissions policy, tax policy, as well as this tariff policy. We have to work out a solution for this tariff policy as the Trump administration works through those bilateral trade agreements.
And as I.
Said, the conversations so far have been very productive, and we'll let everyone know when we make material progress.
All right, Well, I'll let you get back to work, Jim. I appreciate you taking time for us on a really busy day. Jim Farley, the President and CEO of Ford and our thanks to Matt Miller, the co hosts of Open Interests right here on Bloomberg Television,