Welcome everybody to the 2023 Wolfe Auto and Auto Consumer Conference. We'd like to thank everybody for coming to us live again, after doing this for years virtually. Do I look any different than on Zoom? I don't know if taller. Yeah, well, maybe skinnier, younger. I don't know. You know, I wanna especially thank our conference team, Tatjana Petrovic, who worked so hard to pull this together. Takes a lot of work to pull these conferences together, and hopefully, you guys will appreciate this, everything will go smoothly, and you'll get a lot out of it. We've got, I think, a great agenda here with management teams and thought leaders who are changing mobility, and it's our view that it's as clear as ever that mobility is going to change the world. Today's agenda is gonna cover a lot of the mega themes that we've been talking about, including EVs and AVs, and we're also gonna hear about a huge opportunity to transform the industry and meet some of the companies that are actually working through that transformation. We're gonna be talking to Ford here in about a minute. Then in our second Fireside Chat, we're gonna be talking about industry cost benchmarks and how transformational they could be and whether they're achievable. You're gonna actually see physical examples of that. Right outside of this room, we've got two huge battery packs, for example. I'm not sure exactly how that was checked into the overhead bin, but it somehow got here. I think it tells you, just It tells you a lot more than you can possibly see in a PowerPoint, and I think it underscores a lot of the things that our next management team is going to be talking about. Tomorrow, we have a little bit of a different flavor to the conference. We'll be focusing a lot on macro issues, and our top-ranked consumer analyst, Greg Badishkanian, is gonna be closing out the day with a candid discussion with some large dealers, auto repair shops, and auto distributors. We think that we're all gonna get a lot out of this. Let's dive right in. We're thrilled to be kicking off the conference with Ford's, Jim Farley and John Lawler. Jim, as many of you know, has been with Ford for 16 years. I actually don't know how long, John has been with Ford. 33. 33 years. Boy, like, the past couple years, the past three years have been really very different for this company. We've seen this company take a lot of actions to address some deep-seated problems to make Ford much more successful in the future. Some of these things are just radical for the auto industry. Exits from major markets and product lines that don't produce appropriate returns. Most recently, Ford announced a radical reorganization that will result in separate entities, including one focused exclusively on EV products. I'd like to thank the management of Ford for joining us. Why don't we sit down, and we can start our Fireside? Great. Well, thanks again for being here. Oh, great to be with all of you. It's actually I think the conference comes at a great time for our industry because it's all in execution now. Yeah. Like I said this morning when we kicked off the conference, the plane has taken off now. Yeah. It's about landing it. I'd like to start maybe by talking about something that you mentioned two weeks ago on the Q4 earnings call, you alluded to some deep-rooted problems at the company, and you characterized it as dysfunction. It sounded like those things contributed to Ford leaving something like $2 billion of earnings on the table from lower than expected volume in 2022. They may have also contributed to disproportionate variable costs and, John, you talked about having something like a $9 billion increase in variable costs or purchasing material costs last year. Right. Half of that wasn't even commodities. Right. I would like for you to maybe start by elaborating on what you mean by dysfunction. How can organizational changes address that? Within that question, at least my impression is that variable cost problems are really, really hard because they typically require engineering to fix them and product cycles to fix them, so it takes a long, long time. Maybe you can start off by talking a little bit about the issue, the org changes, and then how long it's gonna take to fix. Okay. Uh, well, first of all, we-- the two billion is really around lost production in the fourth quarter, um, which goes back to our supply chain readiness and, and fitness. Um, you know, I was on Alan's team. Uh, I've watched, you know, several leadership teams at Ford. Um, and so my, my perspective is we can cut the cost, we can cut people, we can do that really quickly. Um, we'll do whatever we need to. The reality is, if you don't change the efficiency of engineering, supply chain, and manufacturing, the basic work statement, the way people work, the efficiency of that, it'll grow back, 'cause it did. It all grew back. Um, and my job as the CE-CEO is to make sure far l-- after I'm gone, that it doesn't grow back. To do that, we decide as a team to make a more fundamental change than just what we have to do, cut the output costs. The most important change we're making, that we're deep into now. By the way, quality and cost can be solved by the same approach, is to go into the company and literally change the behaviors on how we engineer something, how we source it, and how we build it. That bet is one of the biggest bets. We have a double transformation. It turns out the building of the new company was easier than we thought. Mm-hmm. Getting the base profitability of the company that funds all that, the first part of the transformation, has been a more fundamental change. We have more than half the leadership team is new to Ford. Of all the things you'd ask us, you should ask us about the talent. They all say the same thing when they come: "I'm so excited to build this new future, but my God, we have a lot of work to do to change the base." That's exciting for us. It's not a bad thing, it's all opportunity. John can go through the specifics, but I want to give an overview that these huge transformations are not linear, perfectly predictable things. Did I think we'd be number two in EV sales in the US? No. Did I think that the Lightning would be the best-selling EV pickup in the U.S.? No, because I thought there'd be three others on the market. Did I think that Ford Pro would be getting the traction it has? No. Did I think that I would have people like Alan Clarke and Doug at the company, or that we're redoing engineering so fundamentally? No. Did I think that BlueCruise would be beating Tesla in Consumer Reports on hands-free operation? No. That has gone really well, and we can get into that, but this is really about redesigning what we do in the 120-year-old part of the company. In terms of us actually seeing evidence of improvement in fixing the base, just considering that it is variable cost related, is this the kind of thing that we'll see this in three or four years when the next generation products come out? Or is this something that even in the short run, we'll see some progress being made there? Yeah. If you look at what we believe our cost gap is to traditional OEMs, about $7 billion-$8 billion. We think it's about $3 billion-$4 billion of material cost, which to your point, is going to be a longer arc to take out. It's primarily driven by complexity over design. That runs through every part of the business, Rod. It runs through material cost, it runs through logistics, it runs through manufacturing, it runs through engineering. That has to be a key thing that we work on. You know, you've talked about the teardowns, and you look at that versus not only traditional domestic competitors, but the new competitors that we have. Of course, warranty is an issue for us of about $1 billion. We had talked about $1 billion-$2 billion. In 2021, we improved by about $1 billion. Last year, we were about flat, so we have $1 billion or so to go. You talk about structural cost. We had identified $3 billion of gap last March. We're still about that. You know, that's gonna run through manufacturing, it's gonna run through spending related, et cetera. What's gonna be really key to see it, which is an important part of your question, is the segmentation, 'cause it's not gonna happen the same through each of the segments. If you guys are gonna look, just look at the income statement and say, "Well, should material cost be coming down?" No, 'cause we'll be growing. As we grow volumes, material cost is gonna go up. You should see the scaling in that and that the cost is going up at a much lower pace than the revenues. Then we'll do the bridges, of course. Then on the structural costs, you'll start to see those structural costs coming down, manufacturing costs, engineering costs, et cetera, that'll start coming down in Blue. We'll be growing in Pro and E, so it's gonna be increasing there. The segmentation is actually gonna be really critical for you guys seeing the traction we're making on these cost reductions and how we're using that to drive growth and profitability in other segments, and then getting ourself where we need to be in the Blue business. it sounds like. On warranty, we'll see an initial quality. Yeah. Obviously, the warranty cost would be a lagging, but you'll see very quick progress on initial quality. That's where or fitness there will show up there first. That $7 billion-$8 billion will show up even in 2025, 2026, 2/3 of the company is gonna be the ICE businesses, and hopefully, we see something. Yes. You'll see that. You'll see it on the year-to-years as we show the bridges. The $2.5 billion cost opportunity that you mentioned for this year- Mm-hmm. Can you elaborate on what that is? Are you confident that you can actually bring this down? The Tier 1 suppliers aren't exactly knocking the cover off the ball in terms of their earnings. I mean, there's a seating company that'll be speaking later. Mm-hmm. They had like a 2% margin last year. Just curious about how you're managing that and them coming back to you as they did last year with incremental asks? Well, you had raised it earlier, is the increase in the material, roughly $9 billion about. Less than half of that was commodities. We do expect to see commodities come off this year, so just looking at the forwards and the curves, maybe $1 billion to $1 billion and a half there. The other thing is we have a lot of our suppliers on what we call an index program, so their commodity costs, we mark with the indexes. When commodity costs are rising, they'll go up a little bit quicker. As they're coming down, they should come down quicker for us, I think, relative to others. We have about $1 billion this year that we're gonna take out, back to what Jim was talking about relative to dysfunction. We had very poor schedule stability last year. You add our complexity on top of that, schedule stability drives a significant cost in expedites, premium freight, production disruptions in our competition, labor sitting around, down weeks that were planned that, you know, we had to pay for. We need to fix that piece of it to normalize our production schedules, let that flow through. We believe there's at least $1 billion of opportunity there just by fixing some of the error states. Yeah. I wanna switch gears and ask you about the consumer in the U.S., and affordability. The average transaction price in a car has gone up from, by about 28% from December 2019 to December 2022, which is a lot. You did mention that you thought average transaction prices might come down by about 5% by the end of the year. Is that enough to support a recovery, or do you think that affordability is just the reality it's gonna constrain the market for a while? You want me to go? Sorry. Yeah. Yeah. On, on that, we're still seeing strong demand. Our order bank was up about 14% in the fourth quarter. The industry's still constrained. We're seeing next year, this year at about 15 million. Probably normal run rate would be about 17 million. We do see prices coming in. There's room to move with the dealer margins. We see that the back half of the year, we're probably gonna see incentives increasing. Demand remains relatively strong. Remember, we've been at this constrained industry for about three years. One of the interesting things for us is we look at it, now that we look at it in the segments, we see that demand in the commercial vehicle business is gonna remain strong. Vehicles are aging. Fleets need to be replaced. There has been significant demand beyond supply for the last few years, and the order bank is extremely robust. Battery electric vehicles, I mean, that's ramping. That's new. We're selling every one we can. Lightning order bank is sold out. When it comes to the ICE vehicles, as I said earlier, we're still seeing strong demand. That's where we're gonna see probably the issue come to fruition first, if it does, and see that in the back half, and that's where incentives will be coming back. As that plays out over time, I think we need to see what the run rate is coming out of this year, where demand is, what's happening with the economy, and then we can take a look at 2024. I think what we've called for this year is a pretty solid foundation for 2023. A lot of pent-up demand. Yeah, a lot. is essentially the answer there. At the consumer level, we can't ignore the used car price change. Mm-hmm. Payments are going up a lot for customers. Thank goodness we have such a fresh lineup, as John said. Where we're seeing that is retained gross for dealers. Their retained gross margin is almost perfectly correlated to the increase or decrease of inventory. Stocks going up, retained margins going down, the OEM is after that. Mm-hmm. You know, you have dealers here, you can ask them about that. I think the pressure we'll see at the consumer side is their used car value is not what it's not nearly worth what it was a year ago, and that's forcing payments up. You know, we have a new Super Duty. We have a new Ranger. We're sold out of Maverick. We're sold out of Bronco. It's a long list. We're very fortunate. About a third of that 28% inflation is actually dealer margin. Mm-hmm that's gone up. As you said, I mean, it's already coming down a bit in the past couple months. Yes ...there's a lot of room to go. You're talking about also changing distribution more fundamentally. was hoping you might talk about where that needs to go and why you think this $2,000 per vehicle of cost is actually achievable. What's the incentive on the other side to work with you on that? First of all, Ford is like a very different company than our competitors. We have Pro. We're 50% of that market, 5-0. Our second place competitor isn't even half our size. The dealership distribution model for Pro is our advantage because we only get 10% of customers doing parts and service business with us post-warranty on Pro. With the software that we're seeing consume now and the cycle of people turning to us for more parts and service, actually 24/7 service, physical service, as well as now we have thousands of mobile trucks doing service for Pro, the retail network we have is actually our biggest advantage, as well as body upfitters and our lineup of product and the software we're shipping to the customers and the product. On the retail Ford Blue side, you know, our distribution model through franchise dealers is a premium model. We have to give more to the customer, like remote pickup and delivery for all transactions, like a lot of initiatives. For us, we're going 50% of our sales now in Ford Blue are from orders. Mm-hmm. We're trying to lean the inventory out. That, that's a really different model than I think our competitors. We were 6% sales from delivery just a year and a half ago. The real change we see in the efficiency of distribution will be retail EVs. We can debate how big that market is, but the direct model that's emerged is gonna change too. If I could take this whole room and everyone online and go to Norway, you would see a very different Tesla in Norway. Physical outlets, a lot higher cost, because their UIO is so large in Norway, they can't get by with just online and remote service. There's a point where your units in operation get so big that you need to handle used cars and trade-ins, complicated financing, and especially physical repair service. The direct models will get more expensive. We think we have to really change fundamentally the cost of our distribution for retail EVs. Go online, okay? We need to cut the number of people it takes to sell a vehicle, and that needs to be a really simple couple clicks to buy online e-commerce. We have to get the inventory out of the system. Inventory is The cost of inventory is very expensive, and it's spread across many different people, so it's not obvious. When you actually do the calculation, it's an enormous cost. Of that $2,000, it's like a third. We have to get the inventory out and we're gonna go to that model. The next thing is we have to make sure that we do things remotely, so people don't have to go into a physical dealership. Mm-hmm. All transactions pick up delivery. Probably the most fundamental change for us is non-negotiated price at the brand level. When you buy a Ford EV in January next year, customers won't negotiate. That takes people and money and time for all that to happen. Non-negotiated price really facilitates e-commerce, and it's good for the customer too. I think there's a next layer of efficiency we have to find beyond that, 'cause you could sell a lot of EVs, but if you wanna make 8%, it is a game changer in terms of every cost in our system, and I hope we get into that. From engineering the vehicle, the labor content in the vehicle, our supply chain of vertical integration, so much has to change, and distribution has to change too. I think even the direct model may not be fully competitive to get to 8% in a fully competitive, overserved market. Maybe two years ago, it was fine. In a market where there's lots of choice, lots of competition, and high pricing pressure, can you get away with no advertising? Can you get away with the distribution model that a direct model has? I'm not sure. I think the industry needs to start focusing on making money on EVs. When you do that, it's a total game changer, including distribution. I think there's another layer we have to get to of efficiency. I'm gonna ask you about what you're alluding to in terms of EV cost competitiveness in a second. First, just maybe higher level on growth. Ford in 2019, pre-COVID, did $144 billion in automotive revenue, excluding Ford Credit. Three years later, in 2022, you did $149 billion in a smaller market. In North America, you went from $98 billion to $109 billion. Obviously prices are up. Now you're spending, you're increasing your spending in a number of areas. If you are successful, how big is Ford in three years? A lot bigger than we are. I mean, just look at the plants and the battery plants. What's different about Ford is our Blue business, we have reconstructed the segments we compete in very carefully. They're the segments that probably won't go electric immediately. The brands that are in the two-row crossover business and the passenger car business, the EV transition will be much faster for their customers. A Super Duty, you know, an F-150, a Bronco customer, they're different. We've seen already in the very first inning of a nine-inning game, our EVs are like 70% incremental to the company. Mm-hmm. I mean, we have so much upside on Pro. We're 50% of the market. When we get this cycle going like we're seeing now, I mean, we haven't had new product in Europe for several years in commercial, and our share keeps going up. Why is that? Because we're focusing on Pro, the services side of Pro. I don't know if, John, if you wanna be any more specific than that. Yeah. We'll break out in May, Rod. We're not gonna talk about today what the actual numbers are. What we'll do in May is, as we get into the strategy on the segments, we'll start talking a little bit more about revenue pools, volume pools, and profit pools to kind of frame that up for folks. Okay. -how we see that. It's really important to think about the segments differently. Let me ask it a little bit differently then. Maybe you could address this. You're targeting 2 million electric vehicles capacity by 2026. We assumed about 3/4 of that'll be North America. It's kind of proportionate to the size of the company. Maybe that's right or wrong. We applied some assumptions to the ramp and thought, okay, maybe by then, there's 1.3 million EVs sold here in North America. Maybe 1/3 of those are incremental to Ford's market share. A? I don't know. I mean, you think it's set still 70% in that timeframe? Well, I guess the point is, even if it's just a 1/3. The design of the vehicle's in our hands, right? Yeah. we are very intentional about that. Like, the most important question people should be asking Ford about EV profitability is, what segments are you gonna be compete in? Yeah. Well, let me ask you- I would say, you know, we'll give you the details, as John said, but I'm not putting in that kind of capacity for a third incrementality. Well, even if it was only a 1/3, you'd be gaining 200 basis points of market share in North America, which is a lot, just given the history of the company. I know this is a very different area, and there's a lot of opportunities, but where do you see that coming from? We see it on the commercial side, coming from our traditional competitors who have not moved in the same way we do. We'll be on our second cycle of EVs while they're coming out with their first. Some won't even have their first. And then on the passenger car side, we see it from the import brands. Like, we're already seeing it. We're already seeing it from them. It's interesting, Lightning customers are mostly new to pickups. Think about that. Pickup is 13% of the industry. Yeah. Almost all of our Lightning sales are not to traditional pickup truck customers. Yeah. They're people who have hesitated to buy a pickup, but like the imagery and the capability, but now they have lockable storage. They have a mobile generator. It's a different kind of product than a traditional pickup, and we're seeing new people. I think a lot of those, the trucks and the commercial, will be from our traditional competitors who aren't moving as fast or investing or executing as well. We'll have a lot of conquest like we're seeing on Maverick. Mm-hmm. Most of Maverick sales are Toyota and Honda, Civic, Corolla, especially RAV4. Sounds like the competitive landscape's gonna change over the next couple years. Yes. A lot. Let me ask you about competitiveness on costs. I asked you this question on the earnings call about whether you would be able to make a $40,000 crossover and get a 20% margin on something like that, and your answer was interesting. You said, "Look, we don't really wanna make that 'cause that's not really that rewarding to shareholders. We wanna focus on our strengths." I think that's great. Like, that's the biggest determinant of profitability- Yes. is always price, not- Yes. -cost. Yes. I still Sure. understand competitiveness on costs. About a year ago, you talked about the cost of a Mach-E being $25,000-$27,000 more than the Edge, including $18,000 for the battery and electric motor versus the internal combustion engine, which seemed like that was a jaw-dropping number. I'd like to know, just including IRA, do you think that you can get costs down to a similar level in this 2026 timeframe? Which is another way of asking, do I wanna own a company that's 40% EV? Yeah, I'll start. Yep. You know, we set the target of 8% on our BEV business, 10% as a company, 2026 timeframe. We believe that, yes, we can bridge that to 8% from where we're at today on our battery electric vehicles. There's five key areas that we need to unpack there, and Jim will talk about it 'cause he's got a lot of passion about this. I'll set it up. Really, I'll be a little bit more technical about it or look at it and say, okay, there's battery chemistries. You've gotta have the different battery chemistries, and they're evolving, and they're lowering costs. We just announced our LFP this week, and we see that having a significantly lower cost, and that's gonna be could service up to 20% of our BEVs. We have NCM. You have LFP. You got manganese-rich coming. Eventually, you'll have a solid-state or a form of solid-state. Having the right battery chemistry is important, so you can ride that. Eventually, we believe the batteries will be commoditized, and they'll be about the same. There's not gonna be that much of a difference there. You have to obsess over efficiency. The most expensive part, as you just said, of the EV is the battery. What are you doing to get the lowest size, smallest size battery you can in the vehicle? That comes to design. What helps you do that is a complete clean sheet, ground up design process for those BEVs. We're in the second generation. We've already started our third generation. We have the folks at our company now, to Jim's point about talent, that are radically changing the way we approach this, and they're obsessing over the efficiency of the battery and getting the smallest battery we can in the vehicles with the right chemistry to get the maximum amount of range that we think is needed for those customers, and it's customer specific. That's what you have to do. It's chemistries, it's efficiency obsession, it's clean sheet design to simplify the design, it's being in the right segments, it's the differentiation that you're gonna have through your fully networked vehicle and architecture and the software that you can put to that. It's the distribution cost, as Jim said, then it's the service and how we can be competitive there. Those are the buckets we're driving that'll bridge us to the 8%. What we'll do at Capital Markets Day is we'll build that out in detail to show you what that is and put some meat behind that. I want, maybe Jim, you can answer this question, on Model e and how this is different. We host this weekly webinar on Thursdays called Car Talk. Okay. We asked our listeners, investors, people that are here, do you think that legacy automakers generically could become cost competitive with Tesla? 100 people decided to answer the poll question. 92% said no. Yeah. I'm with them. Yeah. It's okay. I'm with them. You're not surprised. I'm in the 92% camp. That's why we split the business. Okay. Maybe talk about that. The prejudice is so high for how we've done things. I'll just give you some examples. We're already engineering second cycle. We're working on third now. Some are just delivering their first. Why did we split the company? Because I heard my head of engineering say there's no design cost difference between a Model Y and a Mach-E. Mach-E is super popular with customers, let's just talk the part the customers don't see, the cost. I was like, "Hmm." You know? The reality is our wiring harness is 1.6 km longer. It's 70 lbs heavier. In battery costs, it's $500 of weight just to carry the wiring harness around. The battery is so expensive in these vehicles that the math totally changes around aero, around simplicity of engineering. Even the cooling system that we use which is an ICE cooling system metric, had to withhold like four times the pressure of the cooling system that we actually had to use in the Mach-E. Even the piping of the cooling system was triple what it needed to be in terms of spec. We have 50% more fasteners. We have redone all of our platforms, completely changed the engineering, large castings, completely different math. What you'll see is a vehicle with like half the labor content, half the fasteners, half. Not just lower parts, but radical simplicity. That's what John was talking about. Every watt of energy is measured. It's like Apollo, the Apollo program. Every watt has to be measured. If you need to spend more on the wiring system, not just for weight, because it's much more efficient and save $900 on a battery, spend the money. Mm-hmm. Aero. A fully optimized full size truck on aero, 75 miles more range. How do you institutionalize that? It sounds like you're gonna have to. We created a different company. Right. I understand. How does the people that you're bringing in there's a different mindset in that company? Oh, totally. than there is in auto companies. Completely. Is it all ex-Tesla people and Apple people and... No, it's a mix of people, but the prejudice has to be different. We found, whether it was distribution, vertical integration of supply chain, but especially in the engineering side, we needed a completely different prejudice. It's not like we just didn't know. When I saw that, when I saw Team Edison, remember the successful products that we now. We're now number two. That was not created by Ford. It was created by a skunk works called Team Edison, okay? I saw how the Team Edison team was treated in the company. I watched it really carefully, and it became crystal clear for us as a leadership team, especially when we got the new talent in the company. No, we cannot use our prejudice. Our prejudice will never get us to 8% profit. Mm-hmm. We have to design the vehicle totally differently. We have to, you know, we have to manufacture it, we have to source it, we have to sell it totally differently. That's been a big transition. I think equally exciting about that change is what's happened with Pro, which people I don't think really understand. If you're an investor in Ford, you need to be understanding what's happening in Pro, 'cause that's really the future state of the company will emerge first there. All the things that you're talking about here that, by the way, you all should check this out. We've got examples of what these big castings look like versus all the 300 parts that typically go together. Yeah. You mentioned the 5-pound pressure cooling system instead of 21 pounds. Yeah. You can see that here. Okay. I think it really brings. Okay ... what you're saying to light. We have a brackets. Group group. We have a brackets group. Yeah. hundreds of engineers who make brackets. Yeah. If you wanna make 8% margin on an EV- No brackets. No brackets. There's no bracket group. Yeah. You can't allow people. Fasteners have to have at least three jobs. In the ICE world, fasteners can do one job: fasten a carpet to the floor. In the world we're going to, fasteners have to have three roles at a minimum. They have to locate, they have to fasten something, they have to make sure that it's put correctly together. It's a different world. You'll see it. On the competitiveness side, you announced this $3.5 billion battery plant. Just going through the math on that, it looked like it was about $100 million per gigawatt hour, which still looks a little high versus what we see from Tesla and maybe a couple others. Could you address the competitiveness of investment in batteries and whether you what are the benchmarks that you're looking for to assure that on battery cost per kilowatt hour, you're competitive? Yeah. When you look at that, not all plants and not all processes are created equal. We've done extensive benchmarking. There's four phases, right? There's the electrode. You've got to assemble that electrode, then you do the formulation around it, and then you put the array together. Many of those announcements don't have all four steps in the plant. Each of those steps is about 25% of the investment. You gotta get apples to apples comparisons. Okay. Right? The other thing is the building costs are a significant amount. Is it a greenfield site? Is it a brownfield site? What's happening to that? What are you building your capacity for? Is your initial announcement and capacity where you're gonna get to, or can you expand for a much lower cost? There's examples out there where when you do that basic math, we're competitive with that, and then there's others out there saying they're more competitive. As we've unpacked that, they might not have the electrode piece in the plant. They might not have the assembly piece in the plant. We've normalized that across all of those elements. Of course, we're being very thoughtful about it, and we're driving towards that competitiveness to make sure we are competitive. At the end of the day, as I said earlier, we think batteries are gonna be more like commodities, and we will get to a normalized level. There's not that much difference between all of them. That's not where the game changer is. Yeah. I would just say that actually capacity turns out in this growth business, capacity winds up being a strategic thing, a strategic advantage. You know, how each player announces the actual capacity is a competitive thing. Mm-hmm. What do you wanna give to competition? That's a choice. If I said that competition is targeting cell costs $70-$90 per kilowatt-hour cell, not pack, by the middle of the decade, those are the kinds of numbers that you guys are looking at? Yes. Mm-hmm. LFP, even more attractive. Yeah. Okay. Even more attractive. Mm-hmm. Let's see if we have any questions in the audience. We've got a couple minutes. Raise your hand if you do. I appreciate everything you're saying. Maybe of all that happening, it's just you guys are trying to rush to get to market a product that's really good with Mach-E. If you weren't trying to rush to beat the competition, some of the traditional leads, we did. How much of all those problems and extra cost and materials is more just trying to get the product to market quick versus the engineers really kind of missing the big picture of, okay, we need the pack to be lighter. We need, you know, we gotta save on weight. You know, every kilowatt-hour matters, all that. You know, because I'm sure you have engineers that they know that they gotta make with less material, less weight. If you're an engineer working on the Mach-E, which again, is like sold out, right? The product appeal's real high. You have a standard at Ford for the thickness of the cooling system. You have a standard for what a wiring harness costs. No, it wasn't because we rushed. It's because we have a prejudice. That prejudice was formed after 100 years of doing... For good reason, we did those things. Now it's different. It's different. You know, I would not say we made those changes. Now, some, yes, like the Lightning. Could we have done a ground up EV pickup truck? Yes. The things I'm talking about engineering in the second cycle, we're not even talking about the third that we're working on, are really things that are embedded in a traditional OEM for good reason, that an electric vehicle with a really expensive battery has completely different orientation. Aero is a good example. In aero in the ICE world, it makes a difference, but it's not a total game changer. In the EV world with a, with an expensive battery, aero is a complete game changer, especially for larger three-row type products. You know, a traditional silhouetted three-row crossover versus an optimized aero for the same interior space or maybe even larger, you know, it's thousands of dollars of battery cost difference. That is just a mindset difference. When you design the vehicle, you can't let the designers take the lead. The aero people have to make the decision. Yeah, I hope when you go over these findings, you'll see what we've saw 2 years ago. You have to have the best aero people, not only in auto, but the best aero people. Why do you think we're doing Formula 1? 'Cause they have the best aero people in the world. Chris? Thanks. I wanna come back to the variable cost question, when you think about it. Okay. You've had so much success with new products, like Maverick, Bronco, and all the rest. I wonder if, you know, you said you sort of over specify things and maybe you're putting too much content in the vehicles. Maybe, maybe it's not too much content, which is why they're so successful. Maybe it's just that you don't command enough price. Maybe it's a brand issue. Can you, can you speak to that? Maybe the content is necessary to be as successful as you've been with these products, but you're just not getting enough revenue per unit. I think when we unpack that, you're right. We've got good content in the vehicles. It's not necessarily content that the consumer sees. We've got complexity, we have tails. Good example, drive shafts on one of our vehicles. We went from 50 to 100 to 300. Do you know that 86% of those have a take rate less than 1%? It's that type of content and complexity that's not value add for the consumer. That's the route that we're getting to. We have a formula now we use with the team. Highest revenue, lowest margin means highest cost. It's that simple. It's that simple. When you look at vehicle line by vehicle line, you just put that equation down and said, "This is where we have the opportunity. Maybe one minute. Last question. Stefan? The two-fold question is, A, why are you realizing this now? Oh, we realized this several years ago. Okay. I said that like a couple times. Okay. We're working on our second cycle. It's almost done engineering. Okay. Then the second question is, how long does it take until we see this in the products? I just said We found this out a couple years ago. We've been engineering a whole second cycle. You haven't seen it, but it's like being locked down now. What's even more important is the third cycle, because no one's gonna stand still. We have to think about the next breakthrough beyond what we've already learned. The biggest change, which we haven't talked about, is the competitiveness of our embedded electrical architecture. 'Cause we've never had the chance to send software to the car. We now know there's three software stacks we can ship to the car that the customers will pay for. Productivity for our Pro business, ADAS, there's a lot more revenue to be had there, and safety and security. Whoever has the best electric architecture will have the best software revenue. At the same time we're doing all the lessons learned on the EV side, we're engineering and insourcing our embed electric architecture to take back that so we have a fully software-enabled vehicle before our competitors. For the traditional OEMs, creating insourcing 100% of your embedded electrical architecture and all the software that runs the car is a huge task. It's a real breakthrough project. I'm proud to say at Ford, I've already seen the working prototype. We've made that much progress. The next EVs you see from Ford. Okay. Starting mid-decade. Yeah. You'll see 'em in the next couple years and we're almost, we're more than halfway through all the engineering. Unfortunately, we're out of time. Jim and John, I wanna thank you so much for taking the time to talk to us. The transformation sounds pretty awesome. Yeah. There's a lot of opportunity here. We're gonna learn more about that in the next session. If you wanna be a better auto analyst, I'd encourage you to pay attention to that one as well. With that, let's we can wrap things up. Thank you. Thank you.