Ford CEO Jim Farley Talks EV Business Overhaul & Extended-Range Hybrid Vehicles

Bloomberg Audio Studios, Podcasts, radio News. We learned that Ford is undergoing a sweeping overhaul of its electric vehicle business and it's going to amount to about nineteen point five billion dollars in charges. It's also going to include scrapping its next generation electric F series truck as a shift gears to a hybrid. Joining us right now to talk a little bit more about this is the host of Bloomberg's Open Interest, Matt Miller, and he brings along with him the CEO of Ford, Jim Farley.

Jim, thanks very much for joining us. This is a major pivot, to say the least, but I think we could all see it coming because the consumer basically helped make this decision. For you tell us what's driven these plans?

Well, as you said, it was really the customer changing their decision. You know, we saw hybrid's really take off last couple of years, Like you know, last month about what we had thirty percent increase in our hybrid sales were now number three in our I think we're eighty percent hybrid market share and trucks.

So we saw this happening.

We also saw the more expensive evs, you know, really suffering the market and the more affordable evs to do better. And then the last couple months really was remarkable. The EV market in the US went from twelve percent of the industry to only five and that that really, in the end was the big decider for US.

But look, we're we're going to fifty percent electric.

Could just be it's going to be hybrids and e revs and electric. It won't be just pure electrics.

So you know, every good trader knows you got to cut your losses when you recognize there's an issue.

You're doing that in this sense with the.

F one fifty lightning as we now know it and the T three project, the next generation truck that would have been built in Tennessee. But you're able to, I guess, salvage some assets and as a result, you've raised your profitability forecasts from six to six and a half billion dollars for this year in terms of EBIT to seven billion dollars. Where are you gaining an opportunity from this, Jim.

Well, great question this year. In the short term, it's really our cost of our company. Our quality is getting better and so our costs are much more competitive. In fact, that Novella's aluminum has cost us more like two billion, but we're still raising guidance. Look for this announcement, Matt, it's really about moving to more profitable vehicles. You know, we're going to make in Tennessee now an affordable pickup truck.

You know, that's a that's a big move.

We're going to convert our battery plans from automotive batteries to energy storage batteries using LFP. That's also a big pivot that is profit positive for the company.

Jim, with regards to that pivot and the energy storage side of it, do you anticipate any concerns by the White House, by the administration here in the US that you are partnering effectively with the Chinese company in order to do that.

Well, look, it's our plant, it's our people, and we designed it that way.

We have a licensing agreement.

But we feel like it's better to build these batteries in the United States with American workers, with our own Ford workers and understand the IP than the import and like they're being done today. The best way to compete with the Chinese is to get close to the IP and then run the plants at Ford. When Ford knows how to build things, we know how to do this. So I think this is much better than for America.

Well, to continue on the energy storage business, you mentioned that this will be profit positive for the company, And when it comes specifically to that new business line, how long would you expect before that alone becomes profitable.

Yeah, great question. Well, we're busy now. We have to This business moves much faster than the auto business. We're converting our Michigan plant as we speak with all new equipment to make energy storage, which is slightly different than automotive with the LP and then we're building a whole new plant converting Kentucky one to twenty gigawatt hours and that will be landing in late twenty seven. We're going to be selling and servicing batteries, not just the sales

In twenty seven. We're already out there quoting this business.

Now we know what kind of price points we need to get to for it to be profitable. And this is not our first row Roudio as a manufacturing company.

It looks like Jim, that we've gotten new regulations, are seeing older regulations scrapped both here and overseas. Right in terms of what's necessary. I'm wondering if the administration here in the US and the EU have helped you and other car makers really serve customer needs better, because we're seeing your rivals also bring back products that were previously canceled, like the hemy over at Stilantis that customers wanted.

Well, look, I think you know I was at the White House of the President he announced the revised cafe standard. You know anything we can do to get the regulations look more like customer demands.

Look, we're going to fifteen percent electric.

There are no gas guzzlers in our future at forward, but we want to offer customers choice. I think that's what the President is trying to do, is just to give people choice. We're going to have this affordable electric vehicle build in Kentucky. I think it's going to be a huge hit with Americans, but it's going to be part of a broader portfolio with choice. And we're seeing the same thing in Europe, seeing the same thing around the world. Look, we all want to lower or see

Though it's not only about power trains, right, I mean, one of the other things customers want is repair ability.

And I wonder if because you already.

Make the F one P fifty in Kentucky, you make it in Kansas City. My Raptor was born in Dearborn, where I was happy to pick it up years ago. But the new trucks are aluminum bodied. Are you going to be able to build steel trucks, for example at the Tennessee plant.

Oh that's a good question.

Well, I'm not going to give because if I tell you, Matt, I'm telling all my competitors.

I'm not going to do that today.

All I would say is we are coming out with affordable vans and pickups that Americans are going to love, and we're the number one brand for both those segments, and they are going to love these new products, and they're going to fit into what Americans are buying today, and they're going to be low CO two and they're going to be more affordable.

That's all I can say, Matt. I'm not going to give anything to my competitors.

All right, you don't have to give anything to your competitors, Jim. But I am curious if you can just speak a little bit more to investors. First about the the nineteen and a half billion dollar charge. Sure, but also the I mean, obviously it's huge, and we talk about this idea as to whether this will be it or whether investors should anticipate potentially more costs associated with online.

Well, look, we're unique from our competitors. We don't have plants at are Electric. We have a whole business at Electric. So we looked at that whole business and evaluated the valuation of the assets, and we made these decisions on the future products. The bottom line is the cash subset of that is about five and a half billion of the nineteen billion, and the ROI on that five and

And vans than we have today.

And we know those are going to be a profitable business for those out there.

So this is a better allocation of capital.

That five and a half billion dollars of cash is going to be a great investment. It didn't make sense to keep plowing billions into products that we knew would not make money.

We had to make this choice.

I hear what you're saying there, and certainly the market spoke. But what gives you the confidence that you think about twenty twenty nine, the goal to have a profitable EV business. You've been losing billions in losses on evs. What gives you the confidence that you'll be able to turn that around by twenty twenty nine.

Well, we think to make business.

To make that business profitable, we have to get to a BYD calls. And so this gunk Works project called the Universe Electric Vehicle that we're making Kentucky that is designed to match the B y D costs in like a Mexico. And we really believe we have that delivered. We've sourced all the parts, now we're testing prototypes, we're starting to run the production line, and so we have real confidence that we can do that, and that's why

Hey, I want to ask about the Chinese, because while I love it when companies go back to steel and V eight's and stick shifts and handbrakes, obviously many people are betting the future is on EV's autonomous vehicles, and the Chinese are certainly making real strides there. As you make this pivot back to sort of the classic American pickup truck, what will you do to keep up with the Chinese as they continue to make strives forward?

Make no you know, make no mistake. Our strategy as a company is to give people choice. Part of that choice is to have fully competitive costs with BYD localized in North America.

Matt.

We are going to have a fully competitive BYD EV built here in America for Americans that we believe are going to be profitable. And to do that, we had to massively innovate, bring LPG in the United States, you know, reduce the manufacturing content of the vehicle, radically, redesign the whole assembly process, engineer the vehicle.

With all new suppliers.

It's a whole different approach on the whole engineering in that vehicle. We are here to compete globally. We're not going to seed our future to the Chinese. And we're the most American car company. But even for us as a most American car company, we're a global company and that UEV product is the heart and soul of our competitiveness for the future. But the Chinese don't know the truck customers like we do. And we know customers want e revs, and they want hybrids, and they want raptors