Ford CFO on supply-chain challenges, electric vehicle production

Summary

Ford has launched two new business units, Ford Model E for electric vehicles and Ford Blue for internal combustion engines, to focus on their respective strengths. The company aims to produce over 2 million EVs by 2026, targeting an 8% adjusted EBIT margin for EVs by 2026. CFO John Lawler emphasizes the importance of a strong customer experience and the company's growth potential, attracting new customers with their electric models. Ford is not relying on government EV supportive measures for business planning but is prepared to leverage any benefits that may arise.

Takeaways

• 🚗 Ford is launching two new business units: Ford Model E, dedicated to electric vehicles, and Ford Blue, focused on internal combustion engine business profitability.
• 💼 Ford reaffirmed its 2022 financial guidance of $11.5 to $12.5 billion in adjusted earnings before interest and taxes.
• 🚀 The company aims to produce over 2 million electric vehicles annually by 2026 and expects EV margins to exceed 8% by that time.
• 🌟 Ford's EV division will operate with the spirit and speed of a startup, focusing on creating innovative and scalable EVs.
• 🔧 Ford's strength in body engineering, structures, and chassis, combined with manufacturing at scale, positions it well against EV startups and traditional OEMs.
• 🛠️ Ford Blue will implement lean operations and structural cost reductions to drive higher margins and lower costs.
• 🛒 The customer experience for Ford's EVs will emphasize simplicity and ease of the purchase process, with a focus on maintaining strong customer satisfaction over time.
• 📈 Ford expects EVs to represent half of its global volume by 2030, without relying on anticipated government spending on EV supportive measures.
• 📊 The company is navigating supply chain challenges and raw material costs, aiming to offset these headwinds through operational efficiency.
• 🔄 There may be skill changes and potential headcount adjustments as Ford adapts to the new business structure, focusing on the right skills for each division.
• 🚫 Ford is not currently considering a split or spin-off of business units, focusing instead on segment reporting and creating value for stakeholders.

Q & A

What is Ford's new initiative with the creation of Ford Model e and Ford Blue?

Ford is initiating two new internal business units: Ford Model e, dedicated to the electric vehicle business, and Ford Blue, aimed at delivering a more profitable internal combustion engine business.

What is the financial guidance Ford has reaffirmed for 2022?

Ford has reaffirmed its 2022 guidance for adjusted earnings before interest and taxes to be between $11.5 billion and $12.5 billion.

Why did Ford decide to create distinct business divisions for electric and internal combustion engines?

Ford aims to accelerate the Ford+ plan by creating divisions that allow teams to focus on the unique aspects of each business, driving innovation and creating outstanding products for customers.

What is Ford's target for electric vehicle production by 2026?

Ford is targeting an annual production of more than 2 million electric vehicles by 2026.

How does Ford plan to make its electric vehicle division competitive against established players like GM and Tesla?

Ford plans to infuse the electric vehicle division with the spirit of a startup, focusing on breaking constraints, creating incredible EV vehicles at scale, and leveraging Ford's strengths in engineering and manufacturing.

What is the expected adjusted EBIT margin for Ford's electric vehicles by 2026?

Ford expects margins on its electric vehicles to be greater than 8 percent by 2026.

How does Ford envision improving the customer experience with its EV vehicles?

Ford aims to simplify the purchase process and enhance ownership experience, including a strong partnership with dealers for after-sales support, to maintain a high net promoter score over time.

What has been the impact of Ford's electrification on the average selling price of its well-known models?

The demand for Ford's electric models like the Mach-E and the electric Transit van has been higher than anticipated, attracting new customers and presenting a growth opportunity for the company.

Does Ford anticipate any government spending on EV supportive measures to influence its financial forecasts?

Ford is not planning its business assuming future government spending on EV measures but will consider it a benefit if such measures are implemented.

How is Ford addressing the supply chain challenges and cost increases in raw materials?

Ford is focusing on creating a lean operation with significant structural cost reductions and simplifying its business to drive higher margins and offset the headwinds from raw material costs.

Is there a possibility of headcount reduction as a result of Ford's restructuring?

Ford is considering all elements of the income statement, and while there may be skill changes with new skills coming into the company for Ford Model e, some skills may phase out over time at Ford Blue.

Is the creation of Ford Model e a step towards a potential spin-off of the business units in the future?

Ford is focused on creating segments and reporting by segments, not on splitting the company into auditable and investable entities, so there are no plans for a spin-off at this point.

How does Ford view its competition in the electric vehicle market, including Tesla?

Ford respects all competitors, benchmarks them, and learns from their business models to improve its own. The company is focused on its BEV growth plan and creating value for stakeholders.