Let's bring it now Ford CFO John Lawler to give us more of a read on what happened over at Ford. John, thank you so much for joining us. Let's start with the EPs line, which was a miss of twenty cents compared with the consensus. Can you walk us through what dragged the EPs lower to missestimates by that much.
Well, look, we reaffirmed guidance for the year, our just at e big guidance between ten and twelve billion. We increased our free cash flow guidance by a billion dollars. You know, this is one quarter along the journey towards reshaping the company as we transform, as the industry transforms, and it's not going to be.
A straight line up.
But I think the positive here is that we're on track for the year consistent with what we said at the beginning of the year, and our cash flow is coming in better. So you know, we're moving forward, fixing the business, reshaping the company and really leaning into the strengths we have with Ford Pro and with Ford Blue, and really driving increased sales in our electric business, with our high brid sales up thirty four.
Percent this quarter, nine percent of our mix.
So we're seeing strengths in many different areas across the business. But again, full year, we're on track.
Full year year on track. I know that in the past Ward has projected EV losses of up to five and a half billion dollars this year. At what point will Forward make profit on EVS?
Well, in the quarter you saw that we reduce our costs and our EV business and Ford Model E. We're working towards profitability with our second gen vehicles, which will be ground up all new platforms that we're developing, and you know, we won't launch those vehicles unless they are
profitable in the first year of sales. So that's what we're focused on right now, fixing that business, lowering the costs until our second generation vehicles come out, and continuing to drive positive performance or across both Blue and Pro.
So how do you feel about the EV story overall? I'm sure John, you can appreciate a lot of people are focused on this transition and what it means for you. Guys, think about just the Oakville, Ontario plant, for example, the focusing on super duty pickups instead of EV's. How much is Forward backing off of EVS.
Look, we are committed to EV's it's not a matter of if you know they're going to happen. We have tremendous demand for our super duty vehicles. We can't meet customers' needs. So we took a plant that's available in Ontario. We converted it over. We're converting it over to super duty to fit a need. It's going to be capital efficient. It's the quickest plant and path to bring more super duties to market. And then you know, we'll reaffirm later where we're going to build our SUV that was planned
for the Ontario plant. So we're still committed to our electric vehicle business.
It is the future.
The path there is just going to be different than what many people perceived or thought a few months ago, a few years ago. But you know, we're not giving up on EV's. They're an important part of our business. They're an important part of our future.
When you look at the numbers here, it seems like there are certain factors warranties for example, that might have been a big factor in this earnings per share beat. John, I can also appreciate that you're looking to guide toward the future here, but what was the biggest contributor here to the EPs? Miss what are you telling investors.
Well, I think warranty came in did come in higher than we had planned, and that was from models that were engineered and launched before twenty twenty one model years. What you're seeing, though, is that our.
Quality is improving.
If you look at the JD Power initial survey on quality, we moved from twenty three up to number nine.
Now are we happy with number nine? No, we have a lot of.
Work to do, but we're really focused on improving quality. We're seeing it in our internal numbers and you're seeing it validated from third parties, so that's the important thing. And then over time that will start to show up through lower warranty costs as those quality numbers come through our consumers and come through our products there and we're launching in the markets today.
You know, I'm looking at the ford Blue business, which is your ice business, and on a revenue line, it looks like it did better than expected. But when it comes to EBIT one point one seven billion dollars compares with the estimate of two point four to three billion, what happened to account for that bigness on the EBIT line for Ford Blue?
There's two things in there one, most of the warranty increase was in ford Blue.
The other thing is in the.
First half, the first second quarter, and in the first half we were launching a number of vehicles and with those launches came higher costs. Now in the second half, we expect ford Blue to do much better than they did in the first half. We'll have a new F series in the marketplace running at full capacity.
We have the.
Launch of the new Explorer, we have the Ranger, and then we've increased capacity on our Bronco.
So second half for ford Blue will be much stronger than.
The first half because we'll be through all these launches and we'll have a lot more product in the marketplace and those are very profitable products for us in our lineup.
Okay, so the warranty impact, it sounds like John was a one time thing, not something that will be recurring. What does this mean in terms of how you're looking at your costs? Will there be more significant cost cuts?
Yeah, We're working on reducing our costs intensely. It's an incredible focus by the team. Really, it's really equality and cost reductions. That's our opportunity in the near term to really improve the business the teams focused on it, there will be additional cost reductions or on track to take two billion dollars in material cost out, manufacturing cost, freight costs, and we're going to look to you know, accelerate that progress.
At the end of the day, has Ford Pro become the most important part of your business?
With all things considered, I think all parts of the business are important. Our incredible ice platform is going to be here for a long time. Evs are going to be a big part of our future. But yeah, Ford Pro is different. It is a very strong part of our business. It's unmatched in the industry with the strengths
we have. It's the culmination of hardware, software and services coming together other it's in a creative business that's going to you know, drive the bottom line for Ford Motor Company over the next several years.
For sure.
We increased our guidance for ford Pro for the year adjusted EVID guidance by a billion dollars. So yeah, it's a special business within Ford and we're really pleased with how it's performing.
John.
We really appreciate your time today. Of course. That is Ford CFO John Lawler, right on the heels of an important earning season