Great. Welcome, everyone, and thank you for joining us all today for a conversation with one of the leaders in transformation of a critical piece of the real industrial economy. I'm thrilled to be joined this morning by Jim Farley of Ford Motor Company. Jim has been part of Ford since 2007, and assumed the role as President and CEO in October of 2020, as the company and the industry dove into its most significant transformation since the innovation of the Model T assembly line. Under Jim's stewardship, Ford has introduced the Ford Mustang Mach-E and F-150 Lightning, daring to lead the path towards electrification with two of Ford's most iconic and critical vehicles. Ford has also recently reorganized the company and its reporting along the lines of its traditional gasoline powertrain, electrification, and commercial vehicles, providing a pioneering transparency and accountability in the industry. We're thrilled to have Jim with us today to discuss how he has approached revolutionizing a 120-year-old purpose-driven company and an industry with its stakeholders. Before we dive into some questions, we'd like to share some background on Ford's mission and transformation journey with a short video. You could solve Earth's problems with a violin score, a celebrity voice-over saying something profound yet relatable. A scene with small children playing in nature. We'd be just fine by now. A sustainable future is going to take some work, which is what we do it for. Hard work at scale, the kind of work that makes an impact. Transitioning more of our manufacturing to renewable, carbon-free electricity, saving billions of gallons of water, working to reduce waste to zero, and incorporating sustainable materials in our vehicles. The kind of work that takes patience, persistence, and grit. It takes learning, innovation, and a multitude of people, families, and communities. Work that drives change. That's how we've driven progress the last 120 years. Sometimes slowly, other times in the blink of an eye. That's how we'll continue building a better world together. That's the road we're on at Ford, The Road to Better. Great. Jim, thanks for joining us today. Can you start by telling us a little bit about Ford's journey to transform into a leader in electric vehicles, and how is your strategy unique amongst your peers? Sure. Well, first of all, I want to thank those of you who are partners for Ford and the Ford team for being here. We are the number one employer of Americans in our industry. We have about 60,000 hourly workers, about 20% higher than anyone else in our industry. My grandfather was an hourly worker, started the company in 1913. I worked at Toyota for 25 years, so I came back to Ford as kind of a volunteer, really, to make sure, do everything I can to make sure this American company makes it through the Great Recession and the transformation. I would say we're entering the second inning of a nine-inning baseball game. It's, it's in execution now, kind of no longer are questioning what we need to do. We now know exactly what we have to do. The second-order problems that we couldn't see in the first inning are now clear, like the geopolitics of raw material processing for lithium and nickel, the labor overhang for vehicles that are 20% or 30% less labor content. You know, those kind of real issues are very clear now, working through them. Every one of my leadership team is new except for one person. It's been very difficult on a personal level throughout the whole company. We've gotten out of India, gotten out of manufacturing in Brazil, which we were in for 100 years. We've restructured Europe. We've restructured China. Tens of thousands of people have lost their jobs, hiring lots of new ones. As we get into this, I guess, how we're different. We're leaning into what we're really good at, but we don't want to do any more generic vehicles. We want to lean into work vehicles. We're 41% share of commercial vehicles in the U.S. If you have a health problem, you're probably going to be in a Ford ambulance. If you get pulled over, you're probably going to get pulled over by a police officer in a Ford. Or if your house burns down, the fire department's probably going to show up in a Ford. If you have a plumber or electrician, they're probably going to be in a Ford. That's the same in Europe. We do really, really, really well in commercial vehicles, and they're a very difficult, complex business. It requires physical service to the vehicle, if they break down, and 95% of the market is small, medium-sized business. It's very complicated. We do very well with passionate products like Broncos and Mustangs and F-150s, and we do really well on trucks and large SUVs. That's what we're going to focus on in our product strategy. Everyone thought that the transition is going to be to electric. It turns out that's actually not very interesting. It's necessary, but it's not interesting. The most important change is to go from an analog to a digital product. We now know, we didn't a year ago, of what the three shippable software will be for the car. Like your phone was like email and listening to music in '07, '08. We now know it's like safety, security, productivity software, and partial autonomy. It's really exciting to have the teams build out the software and upgrade all the electrical architectures, in-source all of that, all the software that controls the vehicle inside the company. Now we're in the midst of that. We come out with our second-generation products. We're number two in the U.S. in hybrid, and we're number two in the U.S. in EV sales, behind Tesla and Toyota. We come out with our second-generation products, which will be radically different than the first in about two years. We sell about 4 million-4.5 million vehicles a year at Ford. We're like a middleweight in our industry. We're a heavyweight when you look at our overall revenue, because we have very high, expensive vehicles, priced. The average F-150 today is $63,000. When I joined the company 15 years ago, it was $25,000. Actually, Ford's transaction price in the U.S. is just about $10,000 less than a BMW now. They sell 200,000, we sell 2 million. We sell very expensive vehicles now, and that's our strategy. Our second cycle product will be 2 million units of incremental capacity, for the company's never grown since my grandfather was at the company, 2 million vehicles, so a 30% growth in revenue. Our software business. We have 600,000 subscriptions now in software, and that'll grow by tenfold. Our revenue will start to be, you know, in the billions in software over the next couple of years. We're building the platforms, both the consumer-facing platforms and the vehicle, electrical architecture platforms for all that software, and redoing our distribution. At the same time, we have to fix our industrial system to be cost competitive and to restore competitive quality so we can fund it all. That's where we are. We're in the messy middle. The hard work. You're coming out with all these new products. Consumers are going to be adopting them and help them, you know, Ford is going to grow. Mm-hmm. A lot of these are going to be EV products, and there's an infrastructure issue related to that. How do you think about improving the charging infrastructure to support your customers as you grow this part of your business? Yeah, it's a good question. I think, you know, the on the commercial side, it's not an issue. Most of the commercial customers do depot charging. They know exactly what route they do, and they do the same miles. They don't overbuy batteries. Anyone with an EV in this room has probably way overbought your battery, but the commercial vehicle customers don't. The commercial side, you know, we've gotten this far with mostly home charging. If you look at a place like Norway, which has been 50% electric for 10 years now, you can kind of find the answers to retail charging and how it'll play out. The government tried to do it there, it didn't really work. It was really, Tesla did a great job building out the Supercharger network, and then the building standards got serious, and retailers started putting fast chargers in front of their stores, like supermarkets, so people could plug in, and it took, you know, two seconds to fill up your car with electrons because people were shopping anyways. I believe we're, again, like, maybe in the first inning of the infrastructure. I think we're most concerned about the grid. On the infrastructure side, I think it's room for some collaboration between the auto companies, which is totally unnatural for us. I keep thinking, like, in the 1800s, which train. How did the train companies agree on the gauge? The western railroads had narrow gauge to go around corners, and then the plains gauges were much broader, wider for cargo. Someone had to agree who, what gauge you use. Right now, we have two different plugs, for example, NACS that Tesla invented, and then SAE, that invented the CCS. They're completely different, it seems totally ridiculous that we have an infrastructure problem, and we can't even agree on what plug to use. I mean, I think the first step is to work together in a way we haven't, probably with the new EV brands and the traditional old companies. That's one. For us, we have to take commercial charging into our own hands, like Tesla did with the Supercharger network. I need to do that for commercial vehicles. We create our own charging company, our own charging software company, and now we have about 50% attach rates, which is really high. 50% of people who buy EVs, pickup trucks or commercial vans are buying our charging equipment. That was a good move, I think. On the retail side, there's no easy answer. It will take a long time. Of course, everyone wants an easy answer, but there is no one. It's going to be really difficult, like it was in Norway. Speaking of things where there's no easy answer, the big theme around the auto industry recently has been the price cuts around Tesla. Sure. the competitive landscape, when we look at what the product that you need. I have no idea why everyone's surprised at all that. Yeah. How do you- I was going to say, Henry Ford did it in 1913 with the Model T. His intro price was $810, and four years later, it was $500. How do you think about? What a difference. You, you know, you've talked about how Ford is focused on the things that you're really good at- Yeah. Electrifying that first. Yeah. How do you think about preserving that in the face of new competitive products coming from China? How do you think about Ford's position relative to sort of that transformation in the competitive landscape? Thank you. Well, first of all, the most important thing that we're learning about electrification is that some of the most appealing parts of the vehicle aren't actually the propulsion system. One of the main reasons why 50% of the Lightning customers, are new to pickup truck and new to Ford, is because you can power your house for three days with the truck. It has nothing to do with the fact that the truck goes 0 to 60 in four seconds, which the President loved. It's actually the grid in the U.S., and Florida, and Texas, and California, has lots of problems, and people don't want to buy big, expensive generators. If you're on a job site and you don't want to have six Honda generators humming away to build a new home, the Lightning is a portable battery system, and a lot of Americans really want portable energy to power their house, or job site or, you know, a giant tailgate or whatever. We're learning that actually we have to challenge ourselves to use the battery more creatively than just move the vehicle. I think that's really important, and I don't think the competitors have figured that out yet. The other thing is that our industry is obsessed with large batteries because the customers are worried about range anxiety, and really, we think the solution is actually not a big battery. It's the smallest possible battery for competitive range. The humans normally taking a long trip are going to stop after 200-300 miles. Actually, if you can fast charge and get another 200 miles in 10 minutes, that'd be better than having a 500-mile range battery, which costs, like, $30,000 extra. Because the battery is so heavy, you actually have to put more batteries in to power the batteries, to move the batteries because they're so heavy. I think as far as the Chinese are concerned, it's going to be really humbling. You know, they produce 70% of electric vehicles in the world, in China, 70, The winners are BYD, Geely, Changan, SAIC, Great Wall. If you add the Western brands up in China on the internal combustion engine, there's 60% share, Not one name I've given you is a Western company. BYD's scale is way bigger than Tesla now. They developed LFP technology, which is a better battery, no fire risk, basically. Doesn't use lithium. It uses a little lithium, it doesn't use cobalt or nickel. It has twice the charging cycle of lithium-ion battery. The Chinese are going to be the powerhouse, I think, we think. To beat them, you either have to have a very distinct brand, which we think we do by leaning into our icons, or you have to beat them on cost. How do you beat them on cost if their scale is five times yours? I don't know. The Europeans let them in, now they're selling in high volume in Europe. We have a decision to make here in the U.S. They have some of the best battery technology, as I said. If the politics of the battery get caught up, the battery localizing their technology in the U.S., it's caught up in politics, you know, the customer is really going to get screwed. We have to work through that in our country. And I think they're really interesting companies. I think we see the Chinese as the main competitor, not GM or Toyota. You're talking about the batteries and just how important it is. Yes. To secure the supply. You know, your targets require a lot of batteries to be built. Yes. Right? 70 kilotons of lithium and nickel for, in the next four years. How do you work with your suppliers and the supply base to make sure that the building of those batteries is aligned with your values and your ESG commitments? Bob and the team are here. You know, it's not easy. We have requirements. Ford was one of the first auto companies to have a sustainability policy, you know, whether it's zero water use or 100% carbon-free electrons to power our plants. In the U.S., we were one of the first. You know, child labor, corruption, you know, all those basic things, we feel like we have to not only go secure the offtake agreements, we have to physically be at the sites where the processing takes place and the mining takes place. We'll have an audit validation process to make sure that this is done right. It's going to be very difficult because the scale of mining and processing the raw materials is a very complicated supply chain. The processing of lithium and nickel is, you know, boats go across the ocean multiple times just to develop the raw materials for battery, cathode nano materials. It's going to be very challenging to say, hand on heart, we're good, but I think we have a, as good a process as anyone in the industry. It's going to require physical, you know, physical oversight. You talk about that value chain. You guys have recently announced this JV to procure nickel in Indonesia. Yeah. which we helped advise you on. Yeah. You've made a couple of other announcements earlier this week. Yes, we did. related to lithium. How important is it for you to go upstream, and are you done? Well, the issue is, like, lithium is super plentiful. The problem is, like, there's not enough now. It takes time, you know. Does anyone know the average permitting in the U.S. for a mine? Years. Yeah. Who wants to have a mine in your neighborhood? It's like 12 to 15 years just to get permitted. There's plenty of lithium, but to actually get it out of the ground and then processing it, there's zero processing capability in North America other than Tesla's Corpus Christi site. Yeah, it's critical. I mean, this is just like what happened in mobile phones. You have to have the best product strategy, you have to have the best strategy, if you don't control the supply chain, you won't win. You have to secure the raw materials, that's necessary. It's not sufficiency. You know, sufficiency is back to your product strategy and your cost competitiveness, all the basics. There's a land rush right now for us, working with you and many others to secure 100% of the raw materials we need for 2 million vehicles growth. We're building assembly plants and go down to Tennessee right now. We have our largest industrial, you know, site ever. It's 6 miles by 6 miles, and we have, like, four battery plants in construction right now. We got to have raw materials and all that. It's absolutely essential, and there'll be losers. Some people won't. They'll rely on their JV partners, the battery companies, and the battery companies will say, "Oh, sorry, we just couldn't get it," or, "It's too expensive." There'll be winners and losers in the supply chain as we go. Again, I just want to say, the most important thing is not the batteries, it's not the electric motors or the inverters. It's the electric architecture. That's what's going to transform our customers' experience. It's going to be shipping software to them. On this software theme, I mean, software has the ability to make these vehicles safer. Yes. better over time. Yes. flexible, but you have- Yes. to build that architecture in. Yes. It brings in all these new concerns. Yes. that you haven't had to traditionally deal with: data privacy, protection. Yeah. How are you maximizing the benefits of that software and managing those risks that are new in how you've approached your business? it all come down to getting the A players on the talent side, because they attract A players, which our industry doesn't really get. We kind of think of a mechanical engineer, like they're all kind of the same. Software is so different. Like, if you can get the best person, it's a force multiplier. You have to have company values around privacy, and you have to kind of pick your brand's positioning. I think we really like, not because Apple's Apple, we really like their idea about around privacy. You know, you can imagine how personal data is on a vehicle. Like, where you've been, you know, how'd you get there? Who you with? You know, it's really intimate data. we think, you know, for our commercial customers, too, like their clients, you know, like, we really want to be on the right side of that. But we have to use the data off the car, you know, to make the experience really good, to make the software better. It's a huge tension. I'll give you an example, a real one. How many of you have rented cars and lied about the amount of gas that was in it when you turned it in? Right. Like, all of us, right? Yeah. The rental car company comes to us and says, "Hey, you know, that little float in the gas tank, don't you know exactly how much is in there?" "Yeah." "Why don't you just sell us the data?"... We'll charge people based on how much fuel is actually in their car. What do you do then? Now, we can sell the data to the rent-a-car company. If they're driving a Ford, what's our contract with the renter of that Ford? Should we sell their data because we happen to know how much fuel is in there, even though it's actually, frankly, their data? That's like 1 trillion examples like that, of vehicle data coming off the car, how do you handle it practically from a privacy standpoint? I think we have the right ethos and values. We almost kind of don't know what we don't know yet. We'll get into it. I don't want to be entrepreneurial about consumers' data. You know, after looking what happened in Facebook and a lot of social media, I don't want to be too entrepreneurial with my team. On the other hand, I definitely need the data to make predictive failure of the components better for a plumber, because if I can sell them a car that never goes down, that's very valuable to them. You know, if you're a plumber and coming into Manhattan, you lose that van, you're going to lose the revenue for that day. If you have a vehicle that can self-diagnose itself and send warning signals to the owner two weeks before it fails, you know, that's really valuable to them. I have to use the data to make it better, but I can't... there's a line. You've talked about, in this, how important Ford's values are. Yes. You've also mentioned, you know, there's this big labor dislocation. A lot of your core leadership team has actually changed. Yes. How do you change the people and the talent in the way that you're doing it, but preserve that 120-year-old culture and core values of Ford? I mean, this seems like an enormous challenge. How do you balance that? You got to recruit for people upfront that, you know, share that. One of the things, values of the company is grittiness. People. We found a lot of technology people don't have the grittiness, so we have to recruit for the values. Then you have to codify them. We have in our behaviors, what we expect from leadership team, and then you have to evaluate people based on them and give them regular feedback. It's not easy, though, because some people don't know what they don't know. Some people don't know what good looks like. It's not easy, and many people haven't dealt with the reality of, you know, firing 5,000 people because they happen to be just in the wrong place. I think there's only so much you can do, but you just have to overcommunicate, you have to make it really clear, and you have to recruit the right people. Anything I missed, team? The other thing is, you've talked about core values, but they're not static, right? You've actually maybe shifted some of the priorities in it. You've started to prioritize a little bit more, you know, speed, innovation, and efficiency. You know, you've talked a lot about lean. Yes How important that is in the organization. Reducing complexity was a big theme of your investor day on Monday. How have you know, shifted that prioritization and the values of the organization overall? That's got to be all the way down to the bottom, right? Yeah. Just tied it to, you know, the business results. I mean, we've had a kind of cult of personality as CEOs, you know, in the car industries, that kind of fall in love with quality and then someone doesn't care, and so, like, if you want to be world-class in quality, you want to be world-class in waste elimination, you have to do it culturally with something like lean, or else it's you know, it'll fall apart the next person, which I want to get better. I'm a transitional CEO. I want the next person, but to get better for them, they don't have to worry about it. I think the needs of the business really speak very clearly on what changes need to happen in our behaviors. Speed is really important, like, there are a lot of... I know my competitors are snickering at the Lightning right now, you know, but they haven't sold 100,000 Lightnings. I have. They're like, "Well, it's not a ground-up EV, you know? It's a, could, you know..." Well, yeah, you were three years late. The President drove our vehicle. We were the first one to innovate in full-size trucks. Speed really does matter, a lot, and we want to be the first one with hands-off autonomy on a highway on a sunny day in New York. We want to be, you know, we have to be first sometimes, it's just the needs of the business. We've spent a lot of time today talking about electric vehicles, the fact is that people are still going to be buying gasoline-powered- Oh, yeah. vehicles for a long, long time. Yes. What opportunities do you see from the work that you're doing around EV and efficiency in improving those vehicles and pursuing those ESG goals, even in the context of a product that some would say is counter to that? Yeah, I think what we learned when we went to aluminum on F-150, you know, we learned a lot. Actually, the image of people who buy a full-size truck for work, actually, they don't want to get left behind. They actually want technology like everyone else. In fact, they're probably more inclined to use technology in the inside of their vehicle than a retail customer. You know, we're number two in hybrid in the U.S., which we don't toot our horn about, but we are. We put hybrid on F-150. It's extremely popular, 'cause it can power your house for seven days. We use it for other things than just more efficient propulsion, like when I worked at Toyota with Prius. We have to modernize the drivetrains so that no one who buys a Ford, you know, Ford Blue or internal combustion engine vehicle feels like they're left behind. Like, they need to feel like, "Hey, I got the most efficient vehicle." What we learned is that there are certain duty cycles or drive cycles that will never go electric, 'cause electric vehicles are a really bad solution. If you're towing a fifth wheel in Wyoming, you do not want an electric vehicle, because it'll only go, like, 100 miles if you're towing something really heavy, or doing real work. We took our internal combustion product lineup, and we only invested in areas that won't be disrupted quickly from electrification. And then modernize, and then also invest in electric architecture upgrades. I think a lot of my competitors will go student body left and invest in electric architectures, Adam, that only on their new stuff, and I think that would be a terrible mistake. Our Super Duty customers, it's the most profitable vehicle for. Our customers love Super Duty. It has the highest Net Promoter Score of any vehicle in our fleet, and we're, like, 50% market share. They're going to like shipping software to their car just as much as a Mustang Mach-E customer. You just have to keep investing, but you have to make sure that the products are durable, the revenue is durable, as much as you can. You need to have really ruthless operators who operate that business to get the most out of the value for the company. Ford purpose is helping to build a better world. That's your mission. How do you feel about your stature in the industry, and what is your responsibility to lead from the front? I think we're a family company. Bill Ford is chairman. Thankfully, our family is very involved in the business, fifth generation now, of Fords involved in the business. There's a long arc to the company. It's, like, 120 years in a few months. We've gone through wars and depressions, all sorts of shit happened. You know, we've kind of made it through. I think our responsibility is to be a leader. It's maybe not fair, but it's great. We accept that. We accept that we want to be... Like our competitors do stuff like this: "We'll only have carbon neutral electrons in our manufacturing." What they'll do is they'll go to Florida and buy credits and still run their Michigan plants off coal. We don't do that. All of our plants will get low carbon electrons. It's just the right thing to do. Same with water reuse, same with child labor and corruption, with the raw materials, the rare earth. I think we also should take a lead in things like reaching across from an old company like Ford to a new company like a Tesla or a NIO or a BYD, to kind of work together in a non-natural way as competitors. I think, you know, you'll see Ford do that, just because that's what kind of company we are. All right. We have a few minutes. You ready for the lightning round? Yeah, sure. All right. First of all, how's the F-150 Lightning resonating with customers? Good. We're going into our third year, we're sold out. We've increased the price to $11,000. Tesla's reduced their price by $7,000. We had to follow them on Mach-E, it's only one-third of our volume. Two-thirds are E-Transit Lightning. We thought we'd sell 20,000. We upgraded to 70,000 capacity, now we're rebuilding the facility for the third time in three years to 150,000 capacity in September. Yeah, we're sold out. So far, so good. The competition's going to get really exciting here by the end of next year. There'll be a lot of choices for customers. Good. Tell us the principles you live by. Pretty simple for me. When someone asks, "How are you doing?" I always say, "I'm learning." Yeah. Growing up, before you joined Toyota- Yeah. Before you joined Ford, what was your dream job? be a product planner for a car company, to be, like, the person who invents the product concept. Still doing that work now. It drives my team nuts, actually. "I think we need this." They're like, "Oh!" At least I don't say my, you know, my son likes that or my daughter likes that. no, I actually get as excited on a minivan as I do a Ford GT or a Raptor. I just love seeing. I was a product planner, came up with the idea of a unibody, lightweight crossover for women, and combine it with a great dealership experience called the RX 300 for Lexus in 1992. it created the- we became the number one luxury brand in the United States. I always loved finding a hole in the market that others can't see, you know, because in our business, it's a big advantage. Right. That's what I love, product planning. Yeah. Name a manufacturer, any industry, any part of the world, who's getting it right? I like BYD. Hmm. Totally vertically integrated, aggressive, unapologetic. They're even doing silicon carbide inverters themselves now. Very, very impressive company. They always were committed to electric. This wasn't never a fashionable thing. They did it way before it was fashionable. I like also what Larry's doing at GE a lot. If anyone can install a lean manufacturing system in an American company, it's Larry Culp. What cars are in your garage today, and what cars are going to be in your garage in 10 years? I have no idea, because I flip cars for profit. That's my hobby, is buying old cars and fixing them up and selling them for a profit. It changes a lot. Well, my daily driver is a 1973 Bronco. It's all original. There's nothing fancy about it. No, I guess my favorite car, I have a 1950 Lancia. It's a company that went bankrupt because their engineers were too good. Cost was too high. They were bought by Fiat. They made a better car than Ferrari in the '50s. They were the first V6, production V6 in our industry, the first DDR rear suspension. It was a first independent rear, independent suspension car, first GT design. It's beautiful. Designed by Pininfarina, who wound up doing all the Ferraris. I love that car. It's very complicated. I could see why they went bankrupt. It's really fun to drive because it's actually faster than a Honda Accord and better to drive, but it's a 1952 car. You cannot believe how modern it is. That's probably my favorite. All right. Best book you've read recently or favorite podcast? My favorite podcast is mine. Sorry. I do think I'll drive. You know, I interviewed, like, Tom Brady last year, and only talk about cars. I just did Jimmy Fallon, just did Neil, and Tyson Gracie, Tyson. So I. That's what I do on my weekend, is usually a podcast. I guess I like any podcast about well-being, you know, staying calm, rejuvenating yourself. Kind of a junkie for that stuff. You seem like a very calm person. Yeah. Books, I'm very, you know, diverse. I read a lot about Native Americans. All right. Superpower you'd most like to have, and why? Kindness. Hmm. I'd like to be more kind. I have. Yeah. The CEO of Corning, Wendell, you know Wendell, he's a really special guy. He gave me a Plato sign that I have on my desk that says, "Please be kind because most people are carrying a big burden that they don't share." I kind of live by it. I mean, I wish I had that superpower. Like, I see a lot of really kind people, and that's one I'd love to have. Well, thank you for joining us today. Sure. It was a great conversation. Sure. We're going to have a short break. Please join us here in ten minutes for a panel discussion on emissions data and disclosure. Thank you.