Ford's Q2 2024 Earnings Call

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[00:00:35] I'm Gary and I will be your conference operator today.

[00:00:38] At this time, I would like to welcome you to the Ford Motor Company's Q2 2024 Earnings Conference Call.

[00:00:45] All lines have been placed on mute to prevent any background noise.

[00:00:50] At this time, I would like to turn the call over to Lynne Antipas-Tyson, Executive Director of Investor Relations.

[00:00:57] Thank you, Gary.

[00:00:58] Welcome to Ford Motor Company's Q2 2024 Earnings Call with Media Dayer Jim Farley, President and CEO,

[00:01:05] and John Lawler, Vice Chair and Chief Financial Officer.

[00:01:08] Also joining us for Q&A is Kathy O'Callaghan, CEO for Credit.

[00:01:12] Our discussion also includes forward-looking statements about our expectations.

[00:01:15] Actual results may differ from those stated.

[00:01:18] The most significant factors that could cause actual results to differ are included on page 20.

[00:01:23] Please note this event is being recorded.

[00:01:43] Hello, everyone, and welcome to Kilowatt, a podcast about electric vehicles, renewable energy,

[00:01:48] autonomous driving, and much, much more.

[00:01:50] My name is Bode, and I am your host.

[00:01:52] And today we are going to cover Ford's Q2 2024 Earnings Call.

[00:01:57] It was actually a pretty interesting Earnings Call.

[00:02:00] Not typical from what we get from Ford.

[00:02:04] I thought we got a little bit more insight than we normally would about Ford's thoughts on new products,

[00:02:12] on software services, and their current EV lineup.

[00:02:18] So I think this is going to be a good episode.

[00:02:20] Well, I mean, we'll see, but I think it's going to be good.

[00:02:22] Let's go ahead and jump into Ford CEO's Jim Farley.

[00:02:27] Jim Farley, Ford CEO.

[00:02:29] I'm saying that wrong.

[00:02:30] Anyway, let's talk, let's jump into Jim's opening remarks.

[00:02:33] And as always, these are edited to be specific to what we do and talk about on this podcast,

[00:02:39] which is all the EV fun stuff.

[00:02:42] So let's go ahead and listen in.

[00:02:43] On electrification, we've been very vocal about why electric vehicles are so important

[00:02:48] and a great choice for customers and businesses.

[00:02:53] Customers usage data and cost of ownership data would indicate about 50% of customers

[00:02:59] who buy automobiles would be better served on buying an electric vehicle.

[00:03:05] Now, there's a lots of misconceptions around EVs on the separate areas of costs

[00:03:10] like resale value and insurance, course range and charging and battery life.

[00:03:15] And OEMs like Ford must do a much better job in educating our customers

[00:03:20] about the advantages that any EV offers in terms of cost of ownership.

[00:03:26] As you know, we are the number two EV brand in the US for over two and a half years.

[00:03:34] That's a long time and we've learned a lot.

[00:03:37] And now we have used those learnings to sharpen our strategy.

[00:03:40] What we learned is that it's incredibly important to be transparent about model e-losses

[00:03:48] inside the company as well.

[00:03:51] Forces, this forced accountability and the result is our team is getting much more strappy

[00:03:57] and resourceful in terms of turning the business around.

[00:04:02] We are now more disciplined and have to be for capital and expense.

[00:04:07] And this means we will not launch vehicles at a loss that are not good for our business.

[00:04:13] Knowing what we know now about the reality of the market equation.

[00:04:19] And we clearly see China and Tesla as the cost benchmark.

[00:04:25] We also see excess capacity that will lead to more pricing pressures,

[00:04:29] which is in our business plan, more consolidation and many, many more partnerships.

[00:04:35] We see less vertical integration in some areas to relieve capital.

[00:04:40] And we see a lot of tough choices on footprint.

[00:04:43] Early maturity customers are really different than the early adopters, particularly in retail.

[00:04:48] And we see a lot more openness to hybrids and extended range electric vehicles we call E-Revs.

[00:04:55] We also see a divergence on electrification adoption between commercial and retail.

[00:05:00] Commercial customers focus on total cost of ownership.

[00:05:04] They use the vehicles much more intensely and they do not overbuy batteries that retail customers do.

[00:05:10] They're also investing in our pro charging depots and our integrated software

[00:05:16] because they want to be smart about the cost of charging their vehicles.

[00:05:22] And I'm happy to say that our EV Pro contribution margin for our EV Vans is now already positive.

[00:05:32] We also have learned a lot about the size of the vehicle.

[00:05:36] We believe smaller, more affordable vehicles are the way to go for EV in volume.

[00:05:41] Why? Because the math is completely different than ICE.

[00:05:46] In ICE, the business we've been in for 120 years, the bigger the vehicle, the higher the margin.

[00:05:52] But it's exactly the opposite for EVs.

[00:05:55] The larger the vehicle, the bigger the battery,

[00:05:57] the more pressure on margin because customers will not pay premium for those larger batteries.

[00:06:03] And lastly, compliance.

[00:06:06] There is a lot of pressure on compliance.

[00:06:11] And the lower demand for EVs, especially the pricing,

[00:06:15] means that CO2 credits are now likely going to be needed for fleet flexibility and optionality

[00:06:22] and will be a critical strategy choice for any company.

[00:06:27] What are the success criterias for EVs in the future?

[00:06:30] Well, the first one is to have the right mix of fully and partially electric solutions.

[00:06:35] This is imperative.

[00:06:37] You have to have a compelling product roadmap and you have to have very flexible manufacturing.

[00:06:43] A good example is our hybrid business.

[00:06:45] The global hybrid portfolio at Ford is on track to go 40% this year across nine nameplates.

[00:06:52] And we really bet on hybrid trucks.

[00:06:56] In the first half of the year, our hybrid pickups Maverick and F-150 grew more than three times the rate of the overall hybrid segment.

[00:07:06] Our F-150 hybrid with pro power on board is a game changer for our customers.

[00:07:11] Commercial customers have power on the run like job sites and our retail customers have emergency power backup.

[00:07:18] And boy, have we seen that in Texas and all the other extreme weather events.

[00:07:23] How important that is for our customers.

[00:07:25] The second success factor is matching the cost of the Chinese OEMs in Tesla, especially on affordable EVs.

[00:07:35] Now, when people hear about affordability and they think about small and unaffordable, I'd like to address that now.

[00:07:44] We are designing a super efficient platform leveraging innovation across our product development, supply chain and manufacturing teams.

[00:07:54] With no engine or drivetain, a smaller vehicle could have a much roomier package, actually the interior package of a class above with a small silhouette.

[00:08:05] That's a big advantage for customers versus ICE.

[00:08:08] And we're focusing on very differentiated vehicles priced under $40,000 or even $30,000.

[00:08:15] And we're going to focus on two segments, work and adventure.

[00:08:21] And why does this matter?

[00:08:23] Well, the use case for smaller vehicles, affordable vehicles mean shorter trips, more urban locations.

[00:08:31] It fits the duty cycle of an EV.

[00:08:34] And affordability, well, smaller batteries have an outsize impact on the cost and margin of the vehicle.

[00:08:40] And the consumer tax credit in the US become a much larger part of the sticker price of the vehicle.

[00:08:46] And that is super charging the lower cost of ownership that EVs have already without it.

[00:08:52] And finally, we have the ability to leverage this platform across many top hats, which will drive scale and large install base for our growing software business.

[00:09:05] And the last success criteria is to be really careful about your larger EVs.

[00:09:10] For us, they'll be part of the picture, but success requires even more breakthrough on a cost efficiency,

[00:09:18] much smarter choices on segments in our case, work and commercial.

[00:09:23] A lot of partnerships and a lot of technology pathways.

[00:09:28] Overall, the EV journey has been humbling, but it has forced us to get even more fit as a company,

[00:09:34] including applying it to our ICE business.

[00:09:37] And that will pay off long run in the long run.

[00:09:39] I am so happy we scaled two and a half years ago,

[00:09:42] and we had the option to incorporate those learnings into our next generation of EVs launching in the coming years.

[00:09:49] All right, a lot to unpack there.

[00:09:52] I do think he is right that at least half of Ford customers would be better served buying an EV.

[00:09:59] I think that's a no brainer as long as they can afford them.

[00:10:02] Right now, EVs are pretty expensive.

[00:10:05] Anything over $40,000 for a car is unattainable for a lot of people.

[00:10:09] Anything over $30,000 is unattainable for a lot of people.

[00:10:13] But I do think he's right that you'd be better off owning an EV because it's less maintenance.

[00:10:19] And if you have the ability to charge at your home or at your apartment or at your business,

[00:10:25] then that's going to be much cheaper versus paying for gas every day.

[00:10:33] But the reality is the internal combustion engine side of Ford is subsidizing the EV side right now

[00:10:42] because Model E, Ford's EV business, is not making any money.

[00:10:47] He mentioned in there that commercial EV customers are not over buying on the batteries

[00:10:53] like retail customers do.

[00:10:55] Commercial EV customers likely know which routes these vehicles are going to be driving

[00:11:00] and they buy a battery pack that fits their business needs.

[00:11:05] Versus you or I, we might decide, oh, well, we're not going to go with the biggest battery pack,

[00:11:10] but we'll go with the medium because we want to make sure we have that little bit extra.

[00:11:14] I guess that's not really going on with fleet sales.

[00:11:18] We're going to talk a little bit more about China and Ford in the next clip.

[00:11:23] So I'm going to skip that.

[00:11:25] He talks about eRev and it looks like eRev is a portable generator to charge the EV.

[00:11:30] I don't know if that's going to be built into the vehicle.

[00:11:32] It said removable when I looked up on this, I did a Google search for this.

[00:11:39] But yeah, that's kind of what it looks like is just a portable generator to charge your car

[00:11:46] if you need one.

[00:11:48] Let's see.

[00:11:49] I was a little bit surprised that there are more margins in smaller EVs than the bigger EVs,

[00:11:55] but that does make sense.

[00:11:56] Big EVs, big batteries, and that really does cut into the margin.

[00:12:00] We talked last episode about the lowered cost of EV batteries,

[00:12:06] but we're still not at nothing.

[00:12:08] It's still pretty expensive.

[00:12:10] It looks like there's a new smaller platform in development for Ford, for vehicles.

[00:12:18] We're going to talk a little bit more about that.

[00:12:20] There's a clip later on that they don't really announce anything,

[00:12:23] but they do talk a little bit more about it.

[00:12:26] Software services, I cut this part out,

[00:12:29] but they expect there to be $1 billion in revenue just from software services in 2025.

[00:12:35] They mentioned that their vehicles would continue generating revenue

[00:12:41] even after the purchase, which again leads right back to software and services.

[00:12:48] Next we are going to hear a question from Adam Jonas,

[00:12:53] and it's going to be about low-cost EVs and whether or not China will be involved.

[00:12:59] Just a follow up on Skunkworks.

[00:13:01] Your team has made a number of visits to China over the last couple years,

[00:13:06] including I think just a couple months back, I believe you were there.

[00:13:09] What are you learning from these trips?

[00:13:11] Specifically, you mentioned China along with Tesla, the cost benchmark,

[00:13:16] but do you think Ford can bring to market a low-cost EV profitably

[00:13:21] without help from your partners in China?

[00:13:24] Or is China part of the solution?

[00:13:26] If China is part of the solution, then what are you going to do about it?

[00:13:31] Yeah, great question and an important question for any OEM as the EV market evolves here.

[00:13:38] Look, we made the bet on CATL many years ago.

[00:13:42] It was a very important bet for our company to localize LFP cells in North America,

[00:13:48] happen to be in Michigan.

[00:13:49] We're two years into that project.

[00:13:51] That is a signature partnership.

[00:13:53] CATL is the largest battery maker in the world,

[00:13:56] and they lead iron phosphate cost and reliability.

[00:14:02] That is a signature partnership that we launched many years ago

[00:14:06] that we've been working hard on, and Marshall's on track.

[00:14:10] Look what Volkswagen is doing with X-Pang and many others

[00:14:15] who are kind of taking a Chinese low-cost platform and using that.

[00:14:20] That's not our strategy.

[00:14:22] Our partnership strategy will be on the component side,

[00:14:25] going deep into the supply chain for IP that is critical and unique.

[00:14:31] I'm not going to get into specifics, but CATL is one example,

[00:14:35] and we're going to learn how to do that at the company.

[00:14:38] We believe that this is essential know-how for the company

[00:14:41] because the true fitness test for EV profitability will be on these small vehicles.

[00:14:47] And we have learned from our experience with Mazda and Kia and many others

[00:14:51] that we have to have this know-how on the company

[00:14:54] because it applies across all of our vehicles, not just EVs.

[00:14:58] And the lowest cost is the most important capability.

[00:15:02] We believe that many of our competitors will turn to their Chinese,

[00:15:07] either independent companies or partners to basically use their platform globally.

[00:15:13] We learned a lot, not just from China, but from MEB.

[00:15:16] We've been scaling MEB.

[00:15:17] We know the cost of Volkswagen.

[00:15:19] They're one of the leaders in scale.

[00:15:21] And what we found in that trip and subsequent trips to China

[00:15:26] is that we have a very competitive battery with CATL,

[00:15:30] but many of the Chinese players in the lower cost have very affordable batteries,

[00:15:35] but they don't have the most efficient design outside of the battery

[00:15:40] on the other EV components.

[00:15:42] And our team, the Skunk Works team,

[00:15:43] we might as well call it a big team now because it's no longer Skunk Works.

[00:15:46] We're betting on them as our affordable platform.

[00:15:50] They have really designed breakthrough EV components with our own design

[00:15:54] that we think are better and cheaper.

[00:15:57] And we have a very competitive battery localized with the IRA benefit.

[00:16:05] And the partnership discussion, I think, we think will largely put out

[00:16:11] in larger vehicles.

[00:16:13] We think that's where the partnership, big partnership opportunity really lies.

[00:16:19] In the commercial vehicles that I talked about, we have nothing to say right now,

[00:16:24] but this is why is the partnership so important?

[00:16:28] Because the bigger vehicles have this kind of inverted cost

[00:16:32] and the partners allow you to be more capital efficient and have better returns.

[00:16:37] And that's why we think that the partnerships on larger vehicles

[00:16:41] will play out as vibrantly as affordable vehicles.

[00:16:47] All right, he talks a little bit about Western OEMs.

[00:16:52] I don't even know if he's speaking specifically to North American automakers,

[00:16:56] but he talks a little bit about automakers partner with Chinese companies

[00:16:59] and that's not going to be the right decision for Ford.

[00:17:02] And you know what? I think he's speculating here.

[00:17:05] Maybe some of these companies will partner with Chinese EVs

[00:17:09] and maybe some of them won't.

[00:17:11] You know, Chinese kind of a hot button issue right now.

[00:17:15] I don't know that a Western automaker would want to go down that road

[00:17:21] of spending money and time partnering with something

[00:17:24] only to find out that one of the TVC's of technology is no longer allowed

[00:17:28] where they make the most amount of business.

[00:17:30] Like, I'm not saying this is going to happen.

[00:17:32] I'm saying this has got to be at least a thought

[00:17:34] in the process when they're deciding these things.

[00:17:37] But there are plenty of EV partnerships.

[00:17:40] Jim Farley actually talks about their partnerships with Volkswagen

[00:17:45] who is, you know, Volkswagen has the MEB platform

[00:17:50] and Ford, you know, was developing something on the MEB platform.

[00:17:56] I don't know if they still are or if they've abandoned that to do their own thing.

[00:18:00] But plenty of these companies are partnering.

[00:18:03] GM and Honda are partnering.

[00:18:07] Let's see here.

[00:18:10] Toyota and Subaru are partnering.

[00:18:15] So there are examples of companies partnering

[00:18:18] and sharing their EV technology.

[00:18:22] Tesla is, at least Elon says they are happy to partner with these OEMs

[00:18:28] on a lot of different things, whether or not they will. Who knows?

[00:18:30] Lucid Motors has announced, you know, several times, not announced,

[00:18:34] but, you know, Peter Rawlinson's said several times

[00:18:37] that they're open with partnering with other EV manufacturers.

[00:18:41] I think where the problem lies is all of these EVs

[00:18:44] that I just talked about in these partnerships, those EVs cost a lot of money.

[00:18:48] Whereas Chinese EVs, as we talked about last week with the Galaxy E5,

[00:18:52] SUV from Geely, they don't.

[00:18:55] They're pretty cheap. They're not too expensive.

[00:18:58] That's a really long way for me to say that I don't think

[00:19:03] that what Jim says here is 100% true.

[00:19:07] I also don't think it's 100% false.

[00:19:09] Like, there's a mushy middle where the truth lies

[00:19:13] and all of these companies, whether it's Ford or GM or Tesla

[00:19:17] or, you know, Solantis, they're all going to do what's right for them

[00:19:21] and get them to, you know, profitability the fastest.

[00:19:25] And if that means they're going to partner with a Chinese OEM on some technology,

[00:19:30] then that actually makes sense.

[00:19:33] Like, Chinese automakers are making really good cars.

[00:19:36] Why wouldn't you other than the geopolitical mess that we're currently in?

[00:19:43] Let's go ahead and move on to our next clip,

[00:19:45] which is honestly similar to the last clip we listened to.

[00:19:50] We need to step back, and I think this touches on Adam Skunk or questions,

[00:19:53] but when you compare Ford now to history, earnings are now significantly higher.

[00:20:00] But the capital basis expanded such that returns really haven't improved,

[00:20:05] and this isn't just Ford. This is most Western automakers.

[00:20:11] The earnings part of the equation is only partly in your control,

[00:20:15] but the structural costs are.

[00:20:19] So how are you thinking about the trajectory of structural costs from here,

[00:20:23] even simply, are they going up or down?

[00:20:26] And B, given this is a similar dynamic for a lot of automakers

[00:20:30] and so many traditional automakers are investing billions in R&D,

[00:20:35] really trying to achieve the same thing with respect to EVs,

[00:20:39] make an affordable EV at scale to compete with Tesla and Chinese OEMs.

[00:20:45] Why do you think the legacy OEMs are all doing this by themselves,

[00:20:50] and why aren't there more partnerships of things?

[00:20:56] Well, I would say that you have to think about how you're going to fundamentally change

[00:21:04] the development process. I think that's the core thing.

[00:21:07] It's not necessarily just doing it with somebody else.

[00:21:10] Sure, we're looking to be as capital efficient as possible,

[00:21:14] bring partnerships in for capital, but you can do that on components,

[00:21:17] so you can do that in other ways as well.

[00:21:21] And we know and we've done a lot of work understanding what has kept this industry

[00:21:27] kind of in the penalty box that Adam was talking about, as you mentioned.

[00:21:31] We're not capital efficient, we're lower margin, we don't grow enough,

[00:21:35] and we're not resilient, it's a very cyclical business

[00:21:38] and we're working to change that.

[00:21:40] We've walked through the areas that we're doing and attacking to improve those two areas.

[00:21:47] But it's really about the efficiency of the design

[00:21:50] and the Skunk Works team is doing something very different.

[00:21:53] That team is unique for a traditional OEM, the talent on that team.

[00:22:00] They're doing an Agile Waterfall Systems Integrated Design process,

[00:22:04] which no other global OEM has done, a traditional OEM.

[00:22:10] And we're really working that to be focused on what can happen from a tech standpoint as well.

[00:22:17] And that vertical integration really helps us drive to those lowest cost.

[00:22:21] And we're finding that there's ways to be more efficient than in many ways

[00:22:25] than some of the Chinese by incorporating the technology that the team is able to bring forward

[00:22:32] and leveraging the know-how that they've had from the last products that they've put forward.

[00:22:37] So I think there's a lot of opportunity for us with that team,

[00:22:41] the talent and the change in the process that's not only going to show up

[00:22:46] when we get to our affordable EVs that are going to come from them,

[00:22:51] but it's also important to understand that if you don't have that transfer function,

[00:22:56] Jim talked about the entire company isn't going to improve.

[00:22:59] And by doing it within the company with that team,

[00:23:02] we have a much higher probability of that transfer function being successful.

[00:23:07] Yes.

[00:23:08] And I would just emphasize that the ambition at Ford for partnering on EVs is record level high.

[00:23:19] We're not going to make any announcements and earning call,

[00:23:22] but this is absolutely a flip-to-script moment for our company.

[00:23:27] We have done partnerships like Volkswagen.

[00:23:30] We have learned how to be successful with the one-ton transit that includes an electric vehicle.

[00:23:38] We really see that opportunity in front of us,

[00:23:41] but we are not going to partner to the level where we delegate our future

[00:23:45] and the future fitness for cost competitiveness outside the company.

[00:23:50] And if we have a partner, we have to have that transfer function that John mentioned.

[00:23:56] I would only say that we need as an industry to start focusing equally on the one-time cost investment

[00:24:05] in the electrical architectures and the transition to digital products.

[00:24:11] Now, the integrated services that we're finding, we have 765,000 paid subscriptions.

[00:24:18] They are different than our competitors who just basically do it for infotainment.

[00:24:21] We are basically productivity on pro as well as blue cruise.

[00:24:28] And to take that to the next level, make that business supercharged.

[00:24:32] We need to invest heavily in electrical architectures, not just on our EVs,

[00:24:36] but also in our ICE vehicles and hybrid vehicles.

[00:24:40] And that will be a one-time investment.

[00:24:43] And the benefit of that was what I was trying to highlight in my script,

[00:24:46] which is, you know, when the economy turns down, we still have those subscription.

[00:24:52] Our service business customers turn to that even more in a downturn

[00:24:56] because they keep their vehicles longer. They have to do more maintenance.

[00:24:59] These are ways to kind of de-risk our exposure to economic cycles.

[00:25:06] And we have to make OTA, the updated IVI system,

[00:25:12] the integrated services team, both B2C and B2B are electrical architectures.

[00:25:18] These are all basic enablers that go beyond EVs.

[00:25:22] And the industry is going through that transformation too.

[00:25:25] And I believe Ford is in advance of others

[00:25:31] because we have more complicated platforms than Rivian and Tesla and many of the other OEMs.

[00:25:39] And because of that, we also have more scale.

[00:25:45] We have more complexity, but we have more scale.

[00:25:49] And I think that transition and kind of structural change in the industry

[00:25:54] is as big as the EV change.

[00:25:59] We're going to get to a billion dollars of revenue, we think, next year on software.

[00:26:04] I wouldn't have thought of that two, three years ago.

[00:26:07] I don't know that I have much to add on this that I haven't already said,

[00:26:12] but I do appreciate where Ford's head is at when it comes to EVs.

[00:26:21] And honestly, the transparency of telling us what they're thinking

[00:26:28] because I found this earnings call to be extraordinarily thoughtful on Ford's behalf.

[00:26:34] And we're just finding out little nuggets here and there that we'll be able to use later on

[00:26:41] as we try to parse what announcements come in the future.

[00:26:46] But services are going to be a big deal for Ford and a smaller EV.

[00:26:52] And I'm looking forward to seeing that smaller EV.

[00:26:55] And Jim said that, and we're on first name basis now,

[00:26:59] Jim Parley said that maybe even under $30,000.

[00:27:04] I think that's the exact right number.

[00:27:06] We have plenty of cars that cost a lot of money or plenty of EVs.

[00:27:10] We need EVs that are more affordable.

[00:27:14] All right, let's go ahead and move on to our final clip,

[00:27:17] which has to do with Ford's electrification strategy in regards to the presidential election.

[00:27:25] Let's listen to that.

[00:27:25] I'm wondering if you could just address the electrification strategy

[00:27:30] in light of the November presidential elections.

[00:27:35] We know obviously there's one candidate who's talked about pulling back on the EV mandate

[00:27:39] and there could be some implications on IRA or the federal or California mandates.

[00:27:47] I appreciate you talked about the need to have flexibility.

[00:27:51] I think you've been referenced earlier on the call that credits will play a role.

[00:27:57] But maybe you could give us a sense of where the strategy is.

[00:28:03] Is your strategy one that's more existential and clearly with Skunkrop seems to indicate that it is?

[00:28:09] Versus a strategy that is maybe one that's just more meant to reach compliance

[00:28:15] with a longer term goal in mind,

[00:28:17] but maybe you can give a sense of how the strategy might change if at all depending on the outcome of the election.

[00:28:24] Yeah, thank you.

[00:28:27] Obviously Ford's had a lot of history, a lot of experience and wisdom after 120 years of election.

[00:28:35] And I would say think about our strategy this way.

[00:28:40] We believe that the fitness of the Chinese in EVs will eventually wash over our entire industry in all regions.

[00:28:52] And so we believe as a company, even if there were short term adjustments we can make to a compliance-led,

[00:29:01] lower requirement lineup, we're not going to approach it that way.

[00:29:06] We really believe what I said, which is that many Americans would find an electric vehicle lowering the cost.

[00:29:14] Not everyone, but a high percent.

[00:29:17] And we believe that to be fully fit globally, whether it's our ranger business, commercial business, anything really,

[00:29:26] we have to find a way inside the company to be fully fit with lots of partnerships on the supply chain side.

[00:29:34] And so this is a kind of enduring strategy at the company.

[00:29:40] It is not a strategy where we handicap the presidential election to the next one and the next one and see what we can get away with the EPA.

[00:29:48] That is not how we run Ford because Ford has, for Dingle bankrupt, we have been enduring.

[00:29:56] And the only way we believe to be enduring is to make money on small EVs.

[00:30:03] And commercial.

[00:30:04] And that's our bet.

[00:30:06] You'll see a play out in the coming year.

[00:30:09] It's a big adjustment from our Gen 1 products.

[00:30:13] I'm glad, as I said, we scaled two and a half years ago because we could learn about the reality of the market equation,

[00:30:18] which is just requiring us to be more fit and move faster.

[00:30:23] The EPA could certainly change, but it would take, as John said, several years through legislation and lawsuits for that to change.

[00:30:33] So even from a compliance standpoint, we can't really count on administrations changing this way or that way.

[00:30:40] I've been to the Hill many times in the last month talking to many Republican leaders of the country.

[00:30:46] And I always say the same thing to them.

[00:30:48] Please realize that there's a subset of customers that absolutely would save money.

[00:30:54] And they're also absolutely a group of customers who like partial electrification.

[00:30:59] And Ford's strategy is choice, manufacturing flexibility and choice.

[00:31:05] We are not going to bet student body left on this or right.

[00:31:08] We are going to give customers choice.

[00:31:10] We're going to be flexible manufacturing.

[00:31:12] That's why we want to be a first adopter to an e-rev or whatever is next on partial electrification.

[00:31:18] Because we want to be first and best at the choice.

[00:31:22] But on EVs, we need to be fully competitive with BYD, GELEE, even our own partner, Chang'an.

[00:31:31] And the only way for us to have done that is through this small group in California.

[00:31:36] All right.

[00:31:37] I don't know who he's referring to with the small group in California.

[00:31:40] I think it might be the Skunkworks that they have because I do know that they've had for some time a Skunkworks in California.

[00:31:48] But I don't know what exactly that references into, you know.

[00:31:57] Jim Farley said that the right choice for Ford was making a small affordable EV and a commercial EV.

[00:32:08] And then, you know, to fill in the gaps is to manufacture hybrids, ice cars, you know, basically what customers are looking for.

[00:32:18] Which is what Jim said on their earnings call as well.

[00:32:22] But and in terms of, you know, changing your business based on which president is going to be in office.

[00:32:33] I would imagine that back in the day, this was not as big of a concern that automakers have had to deal with.

[00:32:44] You know, Ford's been around for a really long time.

[00:32:47] I even think he mentioned that they've been around for a lot of presidential elections since the time that Henry Ford started the company.

[00:32:55] I think you need to be aware of what an incoming president may or may not do.

[00:33:01] But I don't think you need to, you know, completely change course on whatever plan you have.

[00:33:11] You know, if the IRA credits go away, that's not the end of the world.

[00:33:16] Especially if you have a more affordable EV coming.

[00:33:20] You know, if for whatever reason one of the administration makes it more difficult to buy an EV and I'm not picking on anybody.

[00:33:32] I'm just using a hypothetical example here.

[00:33:35] Then, you know, that becomes problematic.

[00:33:39] But I don't think that's going to happen no matter which president gets in.

[00:33:42] I don't think it's going to be more difficult to buy an EV.

[00:33:44] I think the emphasis on renewable energy will change one way or the other.

[00:33:51] All right, I think I've tipped out that line well enough.

[00:33:54] Let's go ahead and call this our show for this week.

[00:33:57] I want to thank everybody for listening to the podcast.

[00:34:02] It really means a lot.

[00:34:04] I would like to ask you a favor instead of giving you a Patreon plug.

[00:34:09] I need to, if you don't mind, to promote the show.

[00:34:16] In the summertime we had a little bit of a dip and we always have a dip in the summer and it comes back.

[00:34:21] But this dip was a little bigger than normal.

[00:34:25] Right before the summer we had a lot of people, a lot of new people listening to this show.

[00:34:30] And then we hit that summer dip and it just kept going.

[00:34:33] So if you can find it in your heart to recommend the show to somebody who you think might like it,

[00:34:40] I would really appreciate that.

[00:34:41] You don't have to do social media stuff or anything like that.

[00:34:43] Just if you know somebody and you want to recommend the show, please do.

[00:34:49] All right everybody, I will talk to you on Tuesday.