joining me now to break all this down and discuss further
is john Lawler, chief financial officer of ford,
john always glad to have you on and I'm sure today
is a good day to be on with kind of a nice earnings report
following it
ford US sales,
those are up 1.8% in the second quarter from about
a year ago that powered by the growth in Suv right
up 8%.
Can you talk to us about how ford's suv
and crossover has contributed to those earnings beats?
Yeah, so it was a very good quarter for us.
Uh,
it's really on the back of our incredible product lineup that
we have in the marketplace today are SUVs are pickup trucks,
are new products, um, that are really well received,
were sold out across the line virtually on every product lineup that we have.
And again,
as we're starting to introduce these new
iconic electric vehicles like the Mustang Mach,
e and the F 1 50 lightning and even our transit van,
you know, they're selling really well.
So it's across the board, it's trucks,
it's SUVs and it's our electric line up really strong demand for our products.
Let's talk about regions because one of the bright spot in the report is europe,
I looked at europe, I think it was 22% in terms of vehicles there.
Can you talk about the regions that are
seeing the biggest growth and biggest demands?
Yeah,
so europe had a good quarter from a sales increased standpoint where a leader in
commercial vehicles in europe and our ford protein is doing a great job there.
We also had a very large increase in sales in the United States and in North America.
Our sales in North America were up 89% when you look at that on year over year basis.
So again it's proof that around the world we're seeing the demand for our products
stay strong,
We're providing them with, you know, these new iconic ice products,
the new electric vehicles that we have out
there and they're resonating with our customers.
And you're seeing that in the sales results
when you look at where current demand is right now and growth is
right now in a good position and then you look at kind of the
macro environment that were in obviously this morning we saw GDP kind of
pull back show to second quarters or two consecutive quarters of contracting GDP,
how is the growing risk of a potential
recession expected to hit demand for new vehicles,
especially at something like the lightning
And what is for doing to prep for the possible
slump in sales or do you not see that happening?
Just given the overall demand for E. V.
And where we're at with things like energy prices?
Yeah.
So you know, we're acutely aware of the the macroeconomic environment and you know,
the potential that we could be heading into a recession when we look at it though.
We think about where our company is in this phase of the cycle where we're
at today versus where we've been in the past and we're in much better shape
for the last three years due to the supply chain disruptions, you know,
we've been able to produce less than what the demand is,
so we have a pent up demand that's out there for our vehicles in our products.
Um from a standpoint of stocks were in very good shape from stock standpoint in past,
in the past, we would have been overstocked at this point, um discounts,
pricing is strong right now.
In the past we would have had my Much higher discounts on
our vehicles heading into what would have been a potential recession.
So the company is in much better shape.
And then when you look at what we've done on redesign
our global redesign of our regions and our overseas markets,
you know, between 2018 and 2021,
we lost a significant amount of free cash flow in our overseas markets,
since that's not the case anymore.
So as a company,
we're in much better shape heading into what
could be a potential recession and of course,
understanding the macroeconomic environment is really important for
us and we're out in front of things,
we're working on all of the levers that will need to pull if we do go into a downturn.
Uh and you know, it's
it's one of those things that's been a very
dynamic environment over the last couple of years.
It's one of those things, we'll have to work, you know,
we're getting ready for it if it does come,
but we're in much better shape than we've been in
the past heading into this part of the cycle.
Yeah, I mean,
I think that's clearly evident when you look at your bottom line and still managing
to kind of outmaneuver their and and overperform
their exceed expectations given that the headwinds,
the overall industry is dealing with when you look forward, right?
I think 2026 is the benchmark. We're looking at where Ford is looking to have annual
production capacity to around two million vehicles.
What is the path to getting there?
And one of the potential production headwinds that could impact this goal?
Well, first of all,
it's really important that we secure the
materials that are required for battery production.
So the battery production as well as the precious metals, lithium, Nickel, etc
that go into those batteries.
And you've heard from our announcements last week that we've
done that we've secured all of the materials and batteries.
We need to hit our 600,000,
you Run rate by the end of 2023 and
we've secured about 70% of those materials that we need
to produce, the two million units by 2026.
So that's the first thing that we need to do is,
we need to secure the batteries and the materials that go into those batteries
and then the second we need to continue the development of our products.
We have three great electric products on the road to today, there's more to come.
And as we launch those and we move into our second generation of products,
you'll start to see some incredibly exciting
vehicles from ford in addition to the three
we have on the road today and it's that that's what we need to do.
And of course,
starting now,
it's ramping is ramping the production of the three vehicles
that we have on the road and you'll see that
continue to happen through the rest of this year and into next year,
from production then to to pricing a bit here,
higher cost projections from materials.
How is that going to affect vehicle prices?
And how do you think that even then layers into affecting demand? Right.
The consumers so far seems to be willing to absorb some of the price
increases that we're seeing just more broadly given that there's a pent up demand.
But is there any concern that that fades?
So pricing and mix has been very strong for us this year?
Uh, and it was strong for us last year as well, but we're, you know,
we're aware that there is a limit to where we can
go with pricing because of the consumer and what's affordable.
So we're very thoughtful about what, what we're doing on that.
And so we're focused on all elements of the business, uh,
and improving other areas of cost to help
offset some of the cost headwinds we're seeing.
So it's a balance that we need to manage.
But you know, the pricing has been strong,
but we're also very aware that there comes
a point where you hit an affordability ceiling
and we need to make sure that we keep that in mind as we move forward
as an industry.
I want to touch on before I have to let you
go a bit of the restructuring with the company right,
starting next year.
The company's gonna report results with three business units ford blue,
that's gonna represent the legacy internal combustion business, ford model e,
the electric vehicle business and then ford Pro,
the commercial vehicle operation with these three divisions.
How do you see total margin growth?
You know, and how do you compare that with other automakers out there,
given that this will be kind of a new structure.
So it's going to provide complete transparency.
You'll see where we're at on our ice business,
our internal combustion engine business,
you'll see exactly where we're at on electric
vehicles and where we're at on ford Pro,
you know, that's all there today, That's all part of our plan,
that's all part of our guidance.
It's just that as we go forward and we break those out.
The consumer are investors,
everybody's gonna see with more transparency how each of the,
those businesses is performing.
And I think that's going to be a real benefit for us as we move forward.
And I think others may have difficulty in the
fact that with that transparency out there for forward,
if you don't have that level of transparency around the business,
that could be a difficult thing to deal with.
So we're really pleased about moving in that direction.
We think it's the right thing for our business,
not only internally,
but it's going to be the right thing for transparency for our investors.
Well, someone who follows the company, obviously for what I do for work,
it'll be fascinating to watch that transparency as Ford is kind of leading
the way when it comes to being a legacy automaker converting to E.
V and then kind of restructuring how we look at the reports,
jOHN really appreciate your time and your insight as always, jOHn Lawler,
chief financial Officer
of ford