Yahoo Finance Presents: Ford CEO Jim Farley

On this episode of Yahoo Finance Presents, Yahoo Finance Editor-at-Large Brian Sozzi talks with Ford President & CEO Jim Farley to discuss the company’s Ford Pro program. Also discussed was the recent supply and chip shortage in the auto industry and the expansion of Ford’s electric vehicles vs. their competitors.

Video Transcript

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BRIAN SOZZI: Jim, always nice to see you. I know a lot of focus right now among you and the Ford team is on Ford Pro, commercial customers here. Take us through this rollout. Why is it so important?

JIM FARLEY: Well, Ford Pro is something we started about a year ago. We've been building it out. This is the first time small, medium sized business, about 90% of all commercial customers, we're almost 50% share in this business, will get a full one stop shop offer from Ford to allow them to finance their vehicle and their charging, having charging and energy management software and hardware for their new electric vehicles, a telematics solution for them, and a full service including remote service for the physical repair of the vehicle. We're going to offer that for Ford and also non-Ford customers and it will be the first time in the industry that anyone's ever done that.

BRIAN SOZZI: Why the decision to open it to non-Ford customers?

JIM FARLEY: Because so many of our fleets, look, we're 50% of the market. We're number one brand in Europe as well. But still, our customers, some of their vehicles aren't Ford, but they still want telematics solutions, they still want financing products, they still want servicing and we can do all of that. So we just want to make it easier for customers. So that's why we decided to make it not just Ford.

BRIAN SOZZI: Your E-Transit electric vans, when do they start arriving They customers?

JIM FARLEY: Soon. We're just in the final production right now preparation. We should be launching very soon. We have over 10,000 orders already from a lot of different customers. I think we just got over 1,000 orders from Walmart.

So the demand is very high. There's a lot of focus on Lightning, and of course, the Mustang Mach-E and how sold out we are. But actually, E-Transit is strategically very important for the company because our dominant position at commercial.

A lot of Lightning customers are retail customers. Some are commercial, but an E-Transit is going to be 100% commercial. So this is our first [? foray ?] into electric and digital vans.

BRIAN SOZZI: 10,000 orders, that's a significant amount of orders, Jim. I mean, are you still taking orders for these vehicles? I know you closed down orders recently for the Maverick pickup truck.

JIM FARLEY: We're getting close. I mean, we had to close down reservations and orders for Lightning as well, not just Maverick. Mustang Mach-E is sold out for quite some time. We're getting close. We're not there yet.

Commercial customers are a little different. They want to know if their racks fit, if their equipment fits. They want to test out the vehicle, they want to make sure the operators feel comfortable. And then you have to install charging equipment, both in the operator's maybe home sometimes or even depot charging. So they take a little bit more time to get the orders correct, but I wouldn't be surprised if we're sold out on E Transit.

BRIAN SOZZI: You've been around this industry for some time, Jim. Did you ever think we would get to a day where you're essentially telling folks, we can't take any more orders for one of these vehicles we're selling?

JIM FARLEY: No, I never thought we'd be in that position. A lot of people said about Ford's strategy to get out of sedans, why are you doing that? The Fusion is very popular. But they didn't see that we could invest it in Maverick and the Bronco, the Bronco Sport, the Lightning, and the E Transit. These products are so exciting.

But we have the chip crisis going on at the same time. Probably the biggest supply shock I've seen in my career. So all of it is happening at the same time. But I think the real encouraging thing is that Ford can develop great products where we do really naturally well and we're being handsomely rewarded for focusing on our strengths.

BRIAN SOZZI: Definitely want to talk about the supply shortage. It's something you and I have talked about, you and I have talked about in the past, but on the Lightning, how many orders do you now have for that?

JIM FARLEY: We have about 200,000 reservations. Now we're converting those into orders where people have to physically order the vehicle. Very few of them are falling out. Our original capacity was, like, 40,000, then we went to 80, now we're at 150,000. So it's incredible how nimble the company's been in upping our capacity, but it's really encouraging to see.

BRIAN SOZZI: In terms of capacity, I know Ford has moved very quickly in adding extra capacity for electric vehicles with an eye towards, really, 2025. But just given the demand you're seeing for these electric vehicles, and even hybrids, what's the next move by Ford? Are you looking at now a new series of electric vehicle investments?

JIM FARLEY: Well, I think the first thing for us is to scale. A lot of people have come out with electric vehicles, but our ambition is to get to 600,000 units of scale for our electric vehicles in 22 months. That means sometime later next year in the third or fourth quarter, we'll have a production of about 50,000 to 60,000 units a month. That is a huge scaling by the company.

It requires us to more than double our capacity we had planned on already. So this is a huge scramble by the company. That's our first milestone, to get to 600,000. We think that'll put us probably in number two on electric.

We were number two in the US and sales this year. We now want to be number two with our scaling of our electric production globally. And that's before Tennessee comes online, which is hundreds and hundreds of thousands of incremental products in three years from now.

We're breaking ground on Tennessee right now and the Kentucky battery plants, so that will give us even more capacity. So right now, we're just busy scaling. We have hits on our hands, we just need to make more of these.

BRIAN SOZZI: Does it feel like an arms race inside the auto industry? Every day there's a new announcement of new EV vehicles, new EV capacity. What does it feel like to you right now?

JIM FARLEY: I think everyone's really excited. I wouldn't be surprised if some of them have seen the response by Lightning and Mach-E and very encouraged. But I wouldn't treat them all the same. I think what we found is sticking in our wheel base, on F-150, Mustang, Transit, and really executing very emotional products, even commercial vehicles, very emotional products, and giving them a lot of data capability and digital capability had worked for us.

I think we're scaling before a lot of competitors. Yes, a lot of people are investing. Yes, there are a lot of investments in manufacturing.

What I'm encouraged is that in this first inning, our vehicles are sold out. And we're not going to generic, small cars. We're really focusing on what we do well, which are those three vehicles.

BRIAN SOZZI: You're a competitive guy, Jim. You race cars. This is well known about you. Who do you think is your biggest competitor in the EV market? That person where you sit-in your office, wherever it might be and say, hey, I really want to beat them and I really want to beat them bad?

JIM FARLEY: Well, the companies that I think about that I admire, because of their commitment, and frankly, the hard work they did to earn their reputation, companies like NIO and Tesla. They've been at this a long time. They engineer their vehicles differently. I'm most respectful of Tesla's profitability.

They're now making more than $10,000 a vehicle in their second quarter earnings. But I think Ford has a real chance here. We're not going to be in the same segments as them. We're really doubling down on the customers and the segments we know really well.

F-150 has been the best selling vehicle in America for 40 years and now we're electrifying it. We're just getting started. So I love those companies, but I think we have a wonderful opportunity at Ford, maybe one we haven't had since the Model T.

BRIAN SOZZI: Now, the supply chain shock that you referenced, have you seen any alleviation in these pressures?

JIM FARLEY: No, not really, Brian. The fourth quarter-- It did get better in the second half of last year, but we're still seeing the same run rate in the first quarter. Semiconductors continue to be a constraint. And actually, over the holidays, we saw some basic automotive parts shortages because of our supplier issues not being able to make production. So absolutely, we continue to see the same disruptions in the market and I don't expect those to get much better until next year.

BRIAN SOZZI: That ongoing shortage, Jim, does that mean if I went out, if I want to buy a new car this year and if I go to a dealer, I may not be able to find the car I want?

JIM FARLEY: No, we're really encouraging people to put in orders. We're approaching 40% of our US sales now are from orders. Actual people put in a specific order, waited for that specific vehicle. In fact, we're doing everything we can encourage and even incentivize customers and dealers to put in orders.

Because the customers, they get what they want. It's better for our business because we don't carry stock. Not a lot of waste of inventory sitting around. I haven't seen others do that, but this crisis in a way has really helped us get more fit.

We need to improve the customer experience. We shouldn't have all this stock laying around. This has allowed us to move faster.

BRIAN SOZZI: And too Jim, since we last spoke, a lot of focus on President Biden's Build Back Better Plan. Now, a lot of incentives for EVs in that plan that are essentially collecting dust because the thing is not passed yet. How important is it from your vantage point that this bill gets passed?

JIM FARLEY: Mission critical for the EV incentives. Look, EV sales in the US are only about 3%. Higher in some places than others, but 3%. China now has 50% of all electric cars sold in the world and Europe is approaching 20% on pure electric vehicles.

Now, if we don't get our act together, we'll be behind as a country. It's not just about helping consumers make this transition. All the battery production, all the jobs, the raw material development in our country, all the intellectual property. We're the number one employer in the United States in the auto sector.

We want these jobs, these innovative technology jobs to come to America. This bill and the incentives for consumers will absolutely be the key thing to help us do that. We need to be competitive as a country.