00:00You had, as Sherry House was telling us earlier, you would have raised your full year guidance were it not for this aluminum plant novellus fire.
00:10How deep was the damage? Can you can you quantify that in terms of like F-150 units or expedition and navigator units?
00:19How how hard did it hit you or will it hit you in the fourth quarter?
00:23Well, we're still working through it, Matt. Hi, thanks for having me on the show.
00:26We're still working through it. It'll be, I'd say, around 100,000 units, but we still have the opportunity to improve that.
00:32This is really a retiming of wholesale. What we lose this year, we'll gain most of it back next year, maybe a billion and a half to two and a half billion of EBIT this year.
00:43A little bit heavier on the cash because of how auto works, but we'll be gaining at least a billion, if not more of that back next year.
00:52So it's kind of a retiming, very serious situation, but really proud of how the team dealt with it so far.
01:00We also heard, as Gabriela Coppola just mentioned, that the headwinds from tariffs are really going to be cut in half.
01:06You had previously said you expected about two billion dollars in headwinds from tariffs.
01:10Now you're looking at just a billion in those costs for this year.
01:14How did that happen?
01:16Is this just because of the proclamations that we got last Friday in terms of parts costs?
01:23Yes, it was.
01:24And I have to thank Donald Trump, our president and administration.
01:28This is a huge benefit for America's largest auto producer.
01:34It did cut our tariffs to about a billion dollars.
01:38It'll be about the same next year.
01:40This is basically a reduction of our imported parts that we make, that we have to import for our U.S.-produced vehicles, finished vehicles.
01:49But they also announced a 25% tariff on imported heavy and medium-duty trucks, which is a big benefit for Ford because we make 100% of our super duties our most profitable vehicle in the U.S.
02:03We do not import it, but our competitors do.
02:06So a lot of things going on in the policy area, including the upcoming EPA decision on tailpipe emissions.
02:15I am curious what type of conversations, Jim, that you've had with the administration on the potential for some sort of relief, if not equity,
02:22with regards to how much of your production is based here in the U.S. relative to some of your competitors and whether they understand the potential disadvantage that that would put you in if there isn't some, I guess, some sort of agreement to smooth that out.
02:37Really good question.
02:38So Ford produces 80% of what we sell in the U.S. here in the U.S.
02:43We actually export more, so it's more like 85%.
02:47We are way ahead of our competitors, even our domestic competitors.
02:51Some of them are only importing or making about 50% in this country.
02:56So the administration, Donald Trump himself, really listened carefully to Ford as we made our way through adjusting these new tariffs.
03:07And that was the proclamation we saw last week where we would moderate our tariff.
03:13We still have a tariff net, but this is a much more reasonable level and certainly rewards us as the most American car company.
03:22And you can see our tariff has been cut in half, basically.
03:25Now, we still have more work to do, you know, but we're very thankful to the administration for the adjustments they made.
03:33As we made our way through all this after the bilateral trade agreements with Japan, for example.
03:39What conversations are you having with dealers right now, Jim, particularly when it comes to consumer capacity to spend, particularly given how high that we've seen, at least just general prices across the board, not just on Fords, but overall with regards to car prices?
03:54The number one thing on dealers' mind and consumers' minds, of course, is affordability.
04:01We make America's best-selling vehicle, the F-150, for 47 years now.
04:06And that's what's on the mind of everyone now in the U.S.
04:10We're starting to see payments go out another full year to seven or eight-year financing.
04:15It's not in Ford's captive, but some of the third-party finance companies are starting to see more stress on repossessions.
04:25That's not the case at Ford.
04:26We tend to have the highest-end customers because of our prices.
04:31But that's on everyone's mind right now and a key focus for us.
04:35In fact, our fastest-turning vehicle is a Ford Maverick, an affordable hybrid pickup truck, because it's affordable.
04:43On the other hand, Jim, I imagine those Mustang GTDs that we've all been salivating over are going to be sold out as soon as they're up for sale.
04:55And I'm seeing more and more new Raptors, even Raptor Rs, on the road.
04:59So I wonder how you're doing in terms of those higher-margin, higher-end products.
05:06Well, it's been a great year, and that's one of the reasons why we're so optimistic about next year.
05:10You guys talked about it on the show.
05:12We have tariff and EPA tailwinds.
05:15But you're right.
05:16The demand for our real passion vehicles and our high-end pro vehicles, work vehicles, F-250s, 350s, 450s, is really strong right now.
05:27And I think we're really in the sweet spot of new products, as you said, with Mustang and especially our off-roaders.
05:34Bronco, Raptor, Tremor, these are really popular vehicles, and they're also very profitable for Ford.
05:42We love those customers, and we're really leaning more and more into that part of our product range.
05:48Yeah, I don't want to get too far off the beaten path, but I know you have a Raptor rally coming up this weekend.
05:53More than 700 customers are going to be in Havasu, Arizona.
05:55And I know last time we talked on my podcast, Bloomberg Hot Pursuit, with Hannah Elliott, you said you'd really love to win the Dakar even more than F1.
06:05How much are you leaning into that sort of high-end off-road racing business?
06:10This is one of the pillars of our product strategy, which is to really be the Porsche of off-road.
06:17There is no such thing, and Ford has all the rights with Bronco and all the products you mentioned, Matt, for us to really own off-road, especially the performance off-road area.
06:28We're having all the Raptor people come in from, customers coming in from around the country.
06:33They're driving from even outside of the U.S.
06:36It's kind of a rally for our owners.
06:39We're just seeing incredible enthusiasm for these off-road vehicles.
06:44And we feel like Ford is best positioned to expand our lineup, to expand Bronco and Raptor even more.
06:52We're investing a lot more in this business, and I can't wait for you to see all the future product coming.
06:57All right, Jim.
06:57You can invite me, too, if you want.
06:59Don't just let Matt have all the fun.
07:03In all seriousness, Jim, I do just also want to circle back to the whole question about EVs and the strategy there.
07:10And do you see this as a reset of what we're going through right now with regards to EV production and, for that matter, EV demand?
07:20It's a very dynamic market.
07:22We've been the market leader in the U.S. for a couple years now.
07:24I think GM has now moved into second place.
07:28We came into the market four or five years ago with Lightning and Mach-E and e-Transit, and we have learned a lot.
07:34We'll update everyone on how we're adapting to these changes, but the market is clearly changing in front of our eyes.
07:43Now, that isn't the case around the globe, though.
07:46Europe is about 18% all electric.
07:49The Chinese are really making a lot of progress in Europe.
07:52And in China, half the market is Pheaven EV.
07:55So, globally, because Ford's a global competitor, you know, this EV trend is very strong.
08:00And we believe in the U.S. that the affordable EV market is going to be robust for many years to come.
08:07That's why we're investing in our universal electric vehicle that we'll launch in a couple years in Louisville.
08:13It's an affordable vehicle, about $30,000.
08:16We think that's the most vibrant part of the U.S. EV market.
08:19Can't wait to see the next-gen EV truck that you make either, Jim.
08:23And yesterday, I was lucky enough to sit with Mary Barra and Mark Royce when they showed their next-gen EV tech.
08:31And I asked them how they can get to some sort of rare-earth minerals independence.
08:37Because, you know, no matter what you do as a business leader, you're always kind of beholden to China or trade talks, at least now.
08:45What are you doing at Ford to try and deal with that really difficult issue for U.S. producers?
08:53It is.
08:54And I would just add not only rare-earth, but obviously processed raw materials for batteries.
08:59And I would put a new one on the table now, mature-node semiconductors that go into every Ford.
09:07All three of those are critical for Ford and for U.S. manufacturing.
09:11Matt, so you're spot on.
09:13Look, for rare-earth, we continue to diversify our supply chain.
09:17There are some American and FTA country sources of rare-earth.
09:21They're not as big yet.
09:23But we're really encouraged to see the administration's focus on this.
09:27And also, you know, those companies are getting more resources now.
09:32And they're getting more serious.
09:33And with backing of companies like Ford, they'll be able to invest more.
09:37I believe we're on the right trend on rare-earth.
09:40But on battery-processed raw materials, we have not made a lot of headway.
09:44And the NXperia shortage is a great reminder.
09:48Diodes, transistors, these are basic semiconductor components.
09:52They also are being dominated by China.
09:55And this is a crisis going on right now, actually.
10:00And we're going to have to make our way through this whole transition.
10:03But you know Ford, we've been around for 120 years and never went bankrupt.
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