Ford (F) is having a strong sales year in the US, with May deliveries up 11%, thanks to a nearly 65% increase in hybrid sales from a year ago. Even electric vehicle sales are strong.
The sales success comes after a major transformation within the company last year. New Vice Chairman John Lawler, Ford’s former CFO, was instrumental in the company’s Ford+ plan, which split the automaker’s reporting structure into three units: the traditional gas-powered business (Ford Blue), the commercial operations (Ford Pro) and electric vehicles. (Model e).
Although the EV sector has seen higher costs and weaker consumer demand, the company is still bullish on battery EVs. Yahoo Finance spoke with Lawler this week at the Deutsche Bank Global Autos Conference in downtown Manhattan, where Lawler gave investors and analysts an update on Ford’s prospects for 2024. Here are the edited excerpts:
Pras Subramanian: Ford had a strong sales month in May, powered not only by traditional ICE (internal combustion engine) vehicles but also by hybrids. Did Ford have this in mind a year ago during the Ford+ event? EVs were the big draw back then, but now look at hybrid sales. How do you explain that?
John Lawler: Yeah, so when you think about hybrids at Ford, we’ve been working on hybrids for over 20 years. We are currently number 3 in the US in hybrids. Now our hybrid sales will grow 40% this year; You can’t just turn that on with a switch. So the whole story and hype was around EVs, but we never walked away from hybrids. We always had that in the plan. They were always funded, and you see that now, as demand has increased, we have the capacity to take care of the consumers, and you see that happening.
We’re seeing some slowdown in demand for electric cars, but Ford’s EV sales are still quite strong. What’s your take on that and how Ford can bridge the gap to electric vehicle profitability?
So the way we think about electric cars is that it’s not a matter of if, but of when and how fast. And so we saw a slowdown versus what people expected, but I think there was a false signal coming out of COVID about how quickly demand was going to grow.
This was due to the early adopters: they were very enthusiastic about the choice of electric vehicles. Then we come to the early majority. They’re not willing to put up with some of the other issues that you might have with an EV with range and things like that. So choice is important, and that is reflected where you have hybrids, where you have plug-in hybrids. There are also other technologies coming in that I think will help that transition. So I think you’ll see the growth continue, [but] it’s going to be a little bit slower than what we’ve seen in the past.
It is of course crucial for us that we are profitable. Our segmentation allows you to see exactly how we are performing in EVs, and we have plans to improve that especially with our second generation vehicles, where we will see incremental feature changes in the cost and performance of the vehicles. And that’s where we think we’re going to really get traction with our electric vehicles from a business perspective.
So real profitability could come from those second-generation software-defined electric vehicles?
Precisely. The cost structure of these vehicles will improve dramatically through battery technologies, design efficiencies, and so on. That is because [with] To quickly bring our first generation vehicles to market, we converted gasoline vehicles into electric vehicles. These[second-genEVs)areground-upplatformsdesignedspecificallyasEVs[tweedegeneratieEV’s)zijnvanafdegrondopgebouwdeplatformsdiespecifiekzijnontworpenalsEV’s[second-genEVs)areground-upplatformsdesignedspecificallytobeEVs
You talk about 2024 being a strong sales year. Do you see an adjusted EBIT target of $10 billion to 12 billion (earnings before interest and taxes) in play?
Coming out of the first quarter, we projected that we would be at the high end of that range. And that is where our guidance is now.
I knew you as the CFO, dealing with those numbers and financial metrics, but now you have a more strategic role in the company. I know you used to work in Europe and Asia, and now you’re going to tap into some of those roots, right? What will the new role entail, and how do you make Ford more efficient from an operational perspective?
It’s actually about strategic initiatives. The level of change in this sector is unprecedented right now. There are changes in propulsion, from gas to electrification, and electrification will take many forms as we are starting to see it develop. You also have the digital technologies in the platform. So I’m going to focus on the technologies that we’re going to enter into alliances, and as you said, partnerships are going to be critical.
One of the issues in this sector is capital efficiency, and one way you work through more capital efficient structures is to form partnerships and share some of that capital footprint. So that’s what we’re going to focus on. And then of course I’ve worked all over the world. I spent six years in China. I have worked in Europe. I worked in Japan. And I think I can add a lot of value by working with governments and their leaders on policy and how Ford can help and how Ford will work together in those markets.
Is Ford Still Focusing on China? Is it more of a joint venture situation?
Well, we have always had joint ventures in China, and we have two: one in commercial vehicles and one in passenger vehicles. They are really important partners for us. I like our strategy in China. It’s capital-light, we’re profitable in China, we export from China, we’re growing from that market base. So we have a lot of opportunities in China and I’m excited about the future there.
Pras Subramanian is a reporter for Yahoo Finance covering the auto industry. You can follow him Tweet and further Instagram.
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