Jim Farley
Chief Executive Officer at Ford Motor
Thank you, Lynn, and hello, everyone. We appreciate that you're joining us. I want to start by welcoming Sherry House to our first earnings call as our incoming CFO, and I want to thank John Lawler as he transitions to our Vice-Chair. Last year was a year of progress in key areas, building on our fundamentals at Ford. Our global revenue reached an all-time record at the company of $185 billion. This was our fourth consecutive year of top-line growth driven by some of the strongest and most durable franchises in our industry. Ford is the undisputed leader of pickup trucks in our industry. The F-series is once again America's best-selling pickup and the best-selling vehicle of any kind. The Ranger has grown into a strong global franchise for us. It's key to our profitability in many markets around the world at Ford. And by the way, Ranger 1, North-America Truck of the Year, that's the fifth time in a row Ford has won that award. Hybrid trucks are a key growth area for us. It's not what you think about when you think of hybrids, but this non-traditional channel is allowing us to capture the lion's share of revenue and command pricing power within the pickup truck market with unique features like Pro Power onboard. Fans are another stronghold globally for us with our best-selling transit family. And the story is no different for Pro as a whole. Our commercial business is focused on unit sales and series mix to maximize revenue. And last year, we really saw that, a sizable growth in mix of profitable high series Super Duties and transit wagon. But at the same time, Pro is building something new, reoccurring revenue streams through our software and physical services business. Pro software subscriptions rose 27% to nearly 650,000 subscriptions last year. Telematics software grew 100%, mobile service units increased 57%. And the stickiness of that ecosystem of services is increasing. The second-half of last year, 25% all of our brand-new telematics customers in North-America purchased additional software, including dash cams and fleet management software. And with Blue Cruise, equipped units have now in operations and now more than doubled in the last year to just under 700,000 vehicles. And since launch, our customers are now driven over 300 miles, 300 million miles hands-free. So you can see our relationship with our customers no longer ends the point-of-sale or financing. We're starting to build lasting relationships and creating new avenues for reoccurring growth at Ford. Last year, Ford had the highest share of revenue among all brands in our home market, the US. But the key for us is matching this revenue growth with improved execution and discipline on cost and quality. We're working differently and it's starting to show. We've upgraded talent throughout our industrial system. We brought in industry's best third-party experts to inspect and validate our findings. We're identifying best practices to attack our operational issues. We're quantifying the upside and most importantly, we're bringing home the savings. We're changing our culture to be more focused on quality and with accountable measures for all of our engineering teams and leadership. These changes produce green shoots delivering about a $500 million of net cost reductions in last year's second-half. But this is frankly a small down payment on the work to be done at Ford. We're focused on closing our competitive cost gap over the next few years. And lastly, we continue to monitor and adapt to the changing market conditions, which last year unfolded about what we thought. The EV market, we continue to see new models launch, increased competition with increased pricing pressure. On hybrids, we continue to see the market grow aggressively, but now in diverse markets like truck customers who are learning that a hybrid can also mean uncompromised towing and torque and payload and other performance advantages, including fuel economy. In the ICE market, the industry -- the industry's inventories and pricing have normalized. We also see the Chinese OEMs continue to expand and be a major force in our industry. Their operational fitness is incredible. Their supply chains are now expanding globally and they're increasing their exports around the world. So let's talk about this year. We expect the company's adjusted EBIT of $7 billion to $8.5 billion range. Sherry is going to get into the details. We want to be clear though that our guidance has not factored in impacts from changes in policy by the current administration. That said, from an operational standpoint, we believe a few weeks of tariffs are manageable given the rate and flow of our products. As everyone is aware, we're already seeing changes in trade policy and we expect changes in tax policy like the IRA and emissions policy CO2 that could be very consequential for our industry. At this early point, I want to emphasize a few things. There's no question that tariffs at 25% level from Canada, Mexico, if they're protracted, would have a huge impact on our industry with billions of dollars of industry profits wiped out and adverse effect on the US jobs as well as the entire value system in our industry. Tariffs would also mean higher prices for customers. We said that, we believe based on our conversations in DC with the Trump administration and congressional leaders that they are committed to strengthening, not weakening our nation's auto industry. That is certainly our expectation. And we look-forward to working with our leaders to make sure that becomes a reality. Because they understand and appreciate how vital our industry is to jobs, the economy, our national security and the communities across our country. As America's leading auto producer and the leading exporter of automobiles, we applaud the administration for their agreement they announced with Mexico and Canada on Monday, and we are closely monitoring the situation in China. There is a fundamental transformation happening in the backdrop of these policy changes in our industry globally. Of course, the overall tariff and trade situation, the growing importance of digital vehicles, the Chinese OEMs growing to become a global reality, these dynamics will all play-out for some time to come. But Ford controls its future. While we are certainly operating interesting times, at the end-of-the day, we control our destiny. Our products and services are compelling and get even stronger this year with great new launches like the Expedition and the Navigator, the all-new electric Puma as well as Ford Pro's service offerings. We will match that potent revenue power with real progress on cost. To realize this multi-billion dollar upside opportunity on cost, we will stay focused on the following areas: faster identification of defects and issues in the field, deploying dedicated teams into our supply base to help them improve key manufacturing disciplines to improve their part quality to us, holding suppliers accountable when they send us defects reducing complexity to eliminate waste, dramatic increase in our OTA capability, we performed 9 million over there updates in 4th-quarter alone, 80% of those were focused on addressing customers' concerns and warranty. We're enhancing our software development process. For example, more upfront experts reviewing coding, not just ours, but our suppliers to catch potential issues early. And we're continuing to integrate AI, data analytics and other tools and process to further improve our manufacturing efficiency. Early input metrics provide us confidence in our 2025 cost-reduction target. We already have over $1 billion of product design cost-reduction ideas to be implemented this year. We have fewer loss units during our launches. The improvement in the number of days from warranty defect and field fix is an encouraging sign for us in warranty. We're seeing an 18% improvement in the quality of our vehicles leaving our facilities for the 25 model year launches. And we're increasing the number of supplier technical assistant site visits for critical suppliers. I want to touch on our EV strategy since it's so critical for any car company. We're on course. We're deep in the development of our next-generation of vehicles that we believe will be affordable, high-volume and great for our business. On the US retail side, the sweet-spot that has emerged is small and medium-sized trucks and utilities. These vehicles use-case fits perfectly for EVs, daily commuters, well-suited as the second vehicle in the household. They require smaller, much lower-cost batteries. These vehicles can be offered at lower prices to help adoption of EVs for the customers who really appreciate the lower operating cost. But for larger retail electric utilities, the economics are unresolvable. These customers have very demanding use cases for an electric vehicle. They tow, they go off-road, they take long road trips. These vehicles have worse aerodynamics and they're very heavy, which means very large and expensive batteries. Retail customers have shown that they will not pay any premium for these large EVs, making them a really tough business case given the expense in the batteries. For Ford, the our commercial customers do show potential for large EVs. They're willing to pay a premium over ICE because they can really measure the TCO advantages of EV and they can live with depot charging. They don't have the same range anxiety that retail customers have. Profitability for these larger family haulers that take long trips will be more frequently occurred through partial electric options. Yes, we have, but especially hybrid and eRevs then on one tank of gas can get over 700 miles of range, but still drive most miles all-electric. Ford will be developing flexible body on frame and unit body platforms that will be designed for these multi-energy powertrains that are needed given the realities of customer affordability and range requirements. We are in the heart of our transformation of Ford. My optimism comes from our improved execution and our commitment to delivering on Ford Plus, creating a more dynamic, more capital-efficient, higher-margin company. Now I'd like to hand it over to Sherry to walk you through last year's operating performance and an outlook for this year.
