F - Earnings call transcript Q2 2022

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Operator

Good day, ladies and gentlemen. My name is Chad, and I will be your conference operator today. At this time, I would like to welcome you to the Ford Motor Company Second Quarter 2022 Earnings Conference Call. [Operator Instructions]. Please also note, today's event is being recorded. would Executive turn Director I to call time, Tyson, Lynn of this like the to over At Investor Relations. ahead. go Please

Lynn Tyson

deck. Thanks, and us John Company's Motor our Chief With Jim to Also XXXX Lawler, our Welcome non-GAAP U.S. joining Officer. Farley, Marion reconciled earnings CEO; to Call. are are is Ford GAAP Q&A of These in me CEO for Second appendix and President Credit. Today's Financial most Earnings comparable references. today of Harris, discussions measures Chad. Quarter Ford the include some the our

can to the important earnings You The find discussions about of the shareholder.ford.com. may at Actual with deck, also other stated. on rest included differ EPS and expectations. actual significant forward-looking those and adjusted statements along Page our are most materials factors Today's on Unless include all are our cause content, EBIT, product results year-over-year. is otherwise from weighted. Company that flow an could differ cash are noted, comparisons volume basis, mix free results and XX.

their and New Looking with August we a Ted Galhotra, upcoming Paribas Ford BNP President Tomorrow, of and fireside Pro. have Ford chat John host at York, a of JPMorgan Blue; calendar, will engagements. will chat at Kumar in X XX, with IR Auto fireside our Conference Lawler on host Cannis, CEO

to over the Farley. turn Jim I'll call Now

James Farley

in a and of where whole. everyone. Hello, lot uncertainty very environment Ford second team challenging Lynn. a The quarter saw a as Thanks, headwinds disruptions, supply delivered we economic new a chain solid

experiences; our since fundamental our of always to at which results Pro. and we with Ford+ create Ford+ X Ford+ Model Model T. core experiences every the and opportunity company you the And update is and early customers: breakthrough biggest these decisions by into are we and Ford achieved Ford user as the results on an every plan, hour, distinct and we I'll Ford powered Blue the products and post-purchase to X relationship scaled Importantly, value Today, to day, of reorganize minute; distinctive promises at ever-improving Ford every the software. the segments give advance on E,

we fundamental Now with arm we're vehicle making question: capital of revolution. is invested, and claims What's all electric love? leadership question. position one be the digital products design actually and lead the people start in have, to will the appealing the promises of the let distinctive lost truly That's the race is top future of the to and best progress me that industry's who regarding hats number

hybrid the Now many growing combined in EVs, E-Transit. EV Lightning of market That's say and to products about of year. million enable rate by XX,XXX a of globally. to growing X we order months produce we've XXXX. with as market, than you to fast run will demand banks. the EVs end to are vibrant the EVs make a our path the foundation EVs believe the Mustang now. And been And a overwhelmed we great to grab with them them. as we can't have higher by share of that and market These ago, outsized strong first-generation multiyear our This XX,XXX to and the can a clear for markets. the We're rapidly and products selling We reach lead will next shares late have now, us an and that the these coming our healthy ICE Mach-E, that we just month, few of expect new significantly

we expect global total. more twice in what through EVs EV industry is than rate In fact, our anticipated the in for growth XXXX

is agreements flexibility, all week, of why Last required It's we plan. to to to this the ambition the is fulfill I use support working materials and -- combined is best, scale And raw available, estimated to and our to complete produce supply critical strategic, is series critical to so we our at different XX% necessary. MOUs customer our OEMs increase XX%. all profit to chemistries to for actually speed ambitious announced and targets our materials supply needs EV securing announced raw diversifying of securing agreements that battery meet cases. a batteries are covered, and and so Now that at is definitive where

And X XXXX, chain strategic million team Our for and We or the the locations. battery XXXX. and capacity the coming by next these We U.S., we early summarize, year which sustainability supplies XXX,XXX on sourcing well that Indonesia to hours sold To support annual and we've our Australia, LFP, deals with capacity, Model rate Mach-E XXXX, year XX-gigawatt are secure materials fortify for strong will products. the more of added phosphate, principles. that's battery rights capacity. delivering deal capacity we deals localize as supply CATL direct chemistries of for lithium-ion human battery start critical help new the in to aligned we America EV us our hours a of opportunities. units moved run LFP by these of E of in XX-gigawatt secured fully North with These capacity now North more as contracts, to Lightning for XXXX of capture packs struck plan battery have quickly raw as for and a global creating and battery per units end XX% high-demand in support in cooperation a America have needed battery

building a about in software and by customers relationship ever-improving progress experience we're user buys Now enabled and with making that let's the out always after customer talk the on vehicle.

advantages are players. legacy product the create, Now competition we execution, EV real the sustainable pure-play today's companies, see emerging Chinese including difference OEMs, along with a market, is to in relevant these hypercompetitive really where not but

XX the X year was have just we That's through capacity LX than the improve customer OTA-ing get this and even to more our started vehicles. We're profit customers a or we Ford data it giving using ADAS after by as XX,XXX our revenue trip million imagine can happens, you nearly the created watch a significant the BlueCruise hands-free example, Ford. with to launched, ability stream For a during a system. already continue And film being nap and to take BlueCruise, driven their customers miles to work, experience. in long

the on While they're our the as now, benefits rapidly but Pro over of our on revenue providing balance services that something will the be revenue of attach is vehicles has stream stack, and SaaS rates are seen. road as accretive, an And is increasing company the relatively this clear, financial enabling well services. as never deferred industry digital this sheet, Ford number time, the of of small annuity-like much highly we're ADAS

in to ownership the will We're to just year. are loyalty any moving expand as about create expanding retail customers dealer purchase, this grow a scrambling our Now by dealers the can customers we and who traditional in what's compelled and dealers talk pools, returns. attempt the We're better do market sales model by $X.X Changes and U.S. incremental in going enables connected revisit to In how than support and and improving model customer help before profit service them help shop, own, working I Ford have UIL. EV offered better us and an buy EV let provide OEM startups develop turn the in their they service sustain transition U.S. fast better increase our forward. and to digital with to every to dealers turn, to briefly billion post to networks revenue that's platforms our our and experience now than XX them the in share me alone, revenue how for and if Ford Blue, the to dealers these allows points, our

the have XX Now What this the not the real, dealers U.S. their They competitive to since in more is clear of lead hundreds they me been And as Ford is that to want more our threat conducted this develops. personally are than dealership embracing reaching to is these involved win. I of many and know and Canada, market we and meetings. share change. yet to and our March, dealers. in have but we've visible workshops

and the by car, stunning talent and new American sets Ford it an F-XXX North Now In enthusiast quarter, fall, industry. and great Mustang And Show with vehicles to all-new team focus standard sharpening we'll in the the excited Detroit. focus vehicles The family R, an performance at our Super Duty leadership revealed we're hybrid sounds generation and so the to added to introducing third the our this pickup, kids is seventh turning which like motivated Everglades, great. world. all It on more a in is the it new International We've Bronco lineup think Auto this to and Bronco trucks, our Blue. I'm my in share We've There's workhorse unveil drive ICE a products. proud the come. much new and also our be Raptor we'll of. our Raptor, so Ford, at

recent with global further hottest hybrid new in and and and filled Bronco our In our like history that getting Ranger design better. hit franchises Maverick, launching short, the strengthen Our vehicles products freshest this will is and derivatives in lineup brand-new ICE is in and new the center and F-XXX Thailand our even Everest.

commercial share orders. vehicles commercial an full-sized more are future vehicle market, E-Transit van than orders XX% second large electric world. the in global into Pro, business, numbers Other industry-leading now. is market, electric in the electric talking Now That's taking about leading quarter, we've software-driven for the change U.S. Ford market OEMs Through a selling of and in actually We're manufacturing X,XXX XX%. the of sold our

sold next fact, vehicles. just our combined X In competitors XXX

are solutions goes we paying the sale Beyond E-Transit, solutions. Ford orders received software X-tonne fast-growing we're exciting on year. very also and commercial e-telematics already brand, our we're out And in E-Transit commercial and continue our where leading And boy, to X,XXX vehicle Europe, one-tonne new for the charging vehicles, off. they Pro the next our and be rolling custom

Pro business software for our is grown subscriptions Now over quickly. XX% two sequentially have growing Telematics globally last quarters. Ford the

Turning in Power's J.D. our We as study, in you've progress to the recent quality, solid seen improved. have launches quality. IQS initial and made

Yes, Quality importantly, #X and this to our recalls continue our but to priority. our our falls However, by actions. satisfaction more we it hampered affects commitment most customer fundamental short cost, is on be customers.

to on recently Powers In fact, head from Josh we quality. J.D. Halliburton brought

much as engineering Now frequent focused the for critical robust and We're the detection We've the remediation. on more more product speak. with processes are factory development alignment instituted sign-off vehicles in that driving X we team is prevention, areas: making much And quality. identified by on boy, over them, to issues, more And our take use work resolve we base of to frequent updates. that experience, supply customer's has quickly for our when their us. actions protect including

you but have do the and will to EBIT with move pleased work underlying XXXX $XX.X we're our this from determined speed more are supports business remain not in Ford+ to our space, nearly we this we satisfied. clear-eyed updated. unchanged We Overall, billion of transformation. with We range a billion, progress $XX.X strength to determination keep year, The April. on and of adjusted guidance and

John, auto indiscriminately. Before turn Traditionally, costs, industry to Ford+ over There's often think the about with how I want this. I to critical cut to implementing context end our we that's has it plan.

ICE than new for cost every based lower that. reduction will As new virtually new because of in transforming understand. all in way Ford Ford we investing business EVs is we're softness unnecessary and costs, we've at and then same for technology, to our economic for businesses, value. for an strategically them. that made strategic from redesigning speculation take What which and effect, supports that's our skills customer the demands undertaking modernizing while ICE every work And different preferences. But happen customer a business of the and auto we're generates through industry shift of primarily is hybrid, forward We're interest media, aspect done Sweeping and time, reshaping auto function Pro, then the century. of up And doing change totally that new on course, what and we're a out yet, today. promise across

Ford+ John? actions how on going to going we're schedule. our comment to company on own and they're strengthen taking our we're However,

John Lawler

Thanks, Jim.

we and of flow on X.X% of an adjusted $X.X an delivered During basis, EBIT of billion, EBIT billion. margin free $X.X cash the quarter,

sustainability-linked and $XX our at of lifting conversion cash range Our We strong to Rivian, XX% $X QX, now provides with a of include facilities, quarter. the at also was $XX.X quarter liquidity Day. our XX% XX%, ended the capital and billion in the and cash was billion, which new very end renewed working XXX-day credit additional billion at the numbers first which $XX Capital our stake we successfully quarter billion that strong Markets $X.XX we In these revolver, of in include to respectively. valued the set target billion flexibility. which with half global out And for

is sheet balance continuing foundation our invest Ford+ strong a Our in for priorities. to solid

positive. collectively outside of to expected quarter exit this a is potential leverage of products along The unprofitable free from cash flow our the and business we business, much de-risk free nearly flow. year, allocation earnings disciplined cash XXXX tough XXXX, to results with flow America the and paying and $X global more and business cash This choices Our created industrial focused our to model, our including are From footprint. these billion redesign markets markets off. reflect improved made be during capital markets North our consumed

to We uncertainties. as all achieve increasing of ability external And us quarter. strength the the navigate share that creation. -- a of are dividend dividend beginning all financial prepandemic and our levels. our returns to to growth $X.XX have We those to calls this while our we're we calls capital, quarterly and value result, regular the This especially the can to fundamental this underlying in business maintaining the confident capital flexibility fund a on

as me margin and increase were than business an America pressures. of Both $X.X on North year-over-year in offset strong touch those billion units. Now XX% XX.X%. pricing performance more costs let wholesales the measures EBIT mix our and up of net and of a commodity higher of and delivered inflationary

global wholesales of EBIT. improve. reach trajectory profitable from breakeven to we above continues modest posted South America the Europe, underlying fourth us continues delivering In in quarter. helped a consecutive increase to benefit our as redesign a efforts, profit its The just region large

loss the adverse economy restrictions were In pandemic-related China, the we near-term and by local However, a effects overall chain results. industry disruption lockdowns. are auto posted disrupted supply of dampening its the as and significantly

to a vehicles. for along continues in commercial quarter, the profit the Now be gaining pillar Lincoln share region, with

we for Markets a autonomous loss with and mobility, Our and another delivered restructuring Ford efforts. of be continues of strong performance. In profitable are to its pilots reflecting Credit strong and result committed our goods driving. to International sustainably quarter, $XXX moving EBT as moving remain credit finally, progressing Group residuals people in-market And million lease

you current our of for Now XXXX. remainder thinking let with me share the

is the full For year, our guidance unchanged.

a these credit but in finally, year, lower aggressively taken but losses. be release, billion to which full $X.X adjusted profits $X Credit, Corporate reflects XX% on off-lease EBIT, about We with strong vehicles expect strong significantly up to strength increases. new Ford quarter. And our expect commodity we're mix, Credit billion but billion, our offset from earn between billion, And strong more and Mobility $XX.X Ford $X operations. normalized last wholesales North billion strong for availability half continued adjusted improve. Relative working $XX.X improvements net year-over-year higher from reflecting in in the is products, as inflationary flow with and will remain XXXX. This and we in key world, vehicles of of We're semiconductor assumptions of of to supply $X assumes expect that the primarily free a Other. to second which rest to billion will pricing, improve. broad-based XX% on XX% continues and a in and headwinds pressures, loss which They'll automotive other now in assumes benefits EBT be effect and projecting new modest reserve about portion values generate of decline at the to and from pricing the XX% the auction banks offsets to to in continuation fewer actions $X.X which our billion, to $X estimate credit to coming pricing during lower course, in significant that is the includes lower, collective range, of growth EBIT be return adjusted pent-up range and America, we Other billion demand the up include order profitability in and basis, the of iconic year-over-year of improvements cash EBT.

turn growth reporting. financial Our outlook results to in targets quick we our update the and But on quarter, before year full new to together as power and to aggressively let medium-term creation. demonstrate drive provide me the commitment Ford+ invest Q&A, we it of value a

have Ford of With As segment. total Ford X. and X formerly quarter we automotive operating segments: new combined Ford bring XXXX, will which this and Credit, in Next, report first and Ford will Blue in starting longer is Mobility we segments Pro, no the shared our E, will a March, Model Ford business reportable to

not It's and will change transparency pro you added forma this true operating on financial Now giving both much These our fundamental. accountability, with a are segments more be exercise. simple business.

this prepare releasing help year hold to prior results. our XXXX So for you a next we early teach-in plan to change, to

We XXXX reflect will use a to our segments. revised new template the as results

to will are at targeting they on and new rationale, XXXX, plan we reflect the structure our report that to reporting filings cover our new be the When earnings fourth SEC existing and reportable also results segments, for time same revised results of share our As the disclosure will year also part full of the segments. change. our teach-in, and business based we our how to quarter mechanics and we are

team. have hesitate out about and any to Lynn please IR reach the to rest And don't you if of this, so the questions

time remarks. please Operator, open on prepared of your it minds. what's We'll use questions. up to our the up you. for address wraps that So Thank balance the

Operator

Bank John America. will question And the from [Operator first Murphy from of come Instructions].

John Murphy

this a the question into get traditionally you higher Why John, mats then ask be timing like the pricing look the opportunities get think is first, they volume it's in of be as seems be somewhat do it, early may year? And fading, next secondarily. seasonality that the going Ford's might of to maybe different when some will to that is that. cost and developing lower into wanted half, in guess that first of mundane raw one outlook There's second later like earnings it I half. you But big we things drive be seem the first but on usually this year and I at the and pretty strong. easing price/mix year

So that or But might that next you seasonal if your half. just can change there's the in in pattern the some second help estimates year. be early comfortable half late this a year so we can and our in of second with outlook comment curious if

John Lawler

Yes.

it at since we've different, haven't Ever and coming COVID, I COVID the John, of look the the When think would way see kind that expect half basis. just do is So had second mix half-over-half of to being held. right? second pricing strong And you the and a help be in the half, first versus on continued a frame half-over-half patterns commodities out well up. on we course, to improve We a see basis. volume, of half do this as bit best

say, to fuel freight, in through. continue that be that's from going Commodities billion And mix, as material cetera. so volume, pricing across the let's costs, And et as to the inflation we're billion. seeing run the we're costs, But range. seeing, that could $X.X much and $X board

second the to And [indiscernible] end last over see $X headwinds be more that the at is from of then, approach going overseas said what the had I versus seeing half to slightly about We're we talked and currency, in for revenue have dollar remarks, in continuing, down we up, John, we FMCC as say, we they quarter. the half, $X that's my the than let's also of course, So costs. And year. strengthening. half, exposure billion billion do as

spending. be going as And to in a about maybe talk the items that'll invest last thing an investments continue claim to see connectivity of And complete. of see half to to which insurance just area did I second then we're well. make roughly happen guess, We'll in growth, the half and I going we're So also we onetime over would an have then, We renegotiated, engineering. our three-tenths, be and some some and the to increasing in four-tenths. contract quarter, us come would roughly that

our the that what And guidance basically basically, over is to and XX.X there'll be tailwinds, some that's frame up half we're some we we're but So how headwinds in half. XX.X. of saying confident

John Murphy

And mean, levels looking then, higher on special mean Raptor, Raptor Ford very truck. I pretty are the great trim additions, F-XXX just it's That's or helpful. Jim, I these pseudo

just real You special for But might there, looking E guys forward put something opportunity how maybe now hopefully, there an it helping in driving Blue, that, sustainable high-trim but imbalance a the is that's mean Model that right lot soon. maybe of like there's both divisions? we slide And a in sometime Because much on about -- going seems than to go I like price. there mix editions. deck these that's have think seems you sort supply/demand special of that? you for after be forward could how opportunity do a the more be level

James Farley

derivatives, our We lot expand it that good side just We've now a on all of to truck Tremor. can We're we Thank There's do. launched across our Thailand. but really example. been you, lineup. chances good capability Raptor, John. in is for a always the those launching Ranger

is Of most course, affordable Mustang our coming vehicle. is Maverick out.

agree things our what the -- then, sorts up of high-end don't design of kind Broncos, for we versions, we body Everglade of change Maverick. all we're imagine well, And that E really popular. refresh example. have to came You do can the only studio things. out, our side imagine to cooking And we in on with you very can Mach-E, do course,

the HMI cool a you completely actually we our But that EVs. do. in Mach-E redoing all all OTA-ing to of could good We things and our way can imagine are Mustang with

The sustainable tension a complexity. for though, it. point is at and advantage, we're and us, good -- it So is

too complex. is Ford way

this, have have materials get this we forward. all It's our So to in do a do of build that bring have complexity lineup. to We down great kind fresh our line with as competition. we we power pricing

We have this build lots not cannot that with cool continue But complexity we our in to of just satisfied ideas. we're because business.

planning those derivatives, less add we Blue to our to to Blue theme that as complexity run we're much are And is business. have we in years going So that -- come. for will a through

John Murphy

Jim, could like on as the Is that follow but performance create charge trim fair quick E specials the potentially a a that version we the as side levels theoretically higher up if much see into still I just Is on correct? move might real that Mach-E garner delta Model on might a to Mustang of you able less, to margin vehicle. as might or cost you be a Blue not? Model even world? statement these sort And E could of we variable or lot

James Farley

to the lower. this, you The I ICE we constantly the We this. I'm do we over, careful we complexity look have Like we because be at our we motors, very industry, game and We talking complete as off-road take vehicles up of -- cannot glad have like an with terms we body for in John, different kind anymore intensity, with with constantly products, days is changer the can our of vehicles to you a our of and brought yes. the hats that to the i.e., or really way do capital don't really change of -- kind really try are question. of in EV digital over a about that think are car of supercar look body I to kind is engineering. we days us can propulsion, like, upper top have to these that off have are And make Good the I'm same that build way emphasize a the at build leadership this on where business. to And team. software.

a to of a It's these it's technology. we our And display Tech. some and and as cases, it's engineer self-driving opportunity It's course, system really AV engineering a an simplify software. have with motors. be, digital the body vendor. more care. EVs It's powerful digital not with We And put customers to going the go different

Operator

Stanley. is And from from Adam the next Morgan Jonas question

Adam Jonas

decade, Jim, the Ford I the put one try. badass. and but maybe order is so have of Does Bronco by Raptor, get don't people? end an calls Jim, now it long, positive the many a remember this can the I I'll I Ford long time. if I'll most know if of too in

James Farley

said we skills doubt about I jobs and in my people that statements that work have no we've lots to And it. places, absolutely of we As comments, Adam, have don't need too we we many certain have And new have in anymore. never that work We -- change. had before.

not we We our the company. the and have possible. know part make work virtually our skills literally as have competitive we are every it. simplify want lean of sure we We like And We business, to -- on we as want are Ford. are company, ICE are at our reshaping statements our to costs

taking what's of career simplifying reshaping and just want the at to we're by least in kind emphasize often past, costs investments happening and -- not what spending just are less. is But we skills, out. satisfied. Ford That's technologies XX I reshaping my where a I the we the new in that change others, discriminately in investing in company, for at i.e., This now. different of kind not We are that's mean years,

and adage. of -- works the the think many just company old this every now has too do Yes, go how probably decide going we I do is people. So -- I kind have we forward. workflows to have

Adam Jonas

Jim. All right. Appreciate that,

having that they're come selling they're -- making gross the And just tripled, off and truck, Like you're the and making than They're an follow-up they're the dealer that in dealers. product, are, on the what selling many on Just margins is you one a have than presold. right? things more making on time. the product new cases, higher more actually watching making margin product. grosses amazing making Their you're doing they're money the all

of don't that the So don't a why fast to that Ford the don't when Is not know -- not can aren't say reason it. moving they can't spent like score on help dealers, isn't or at there on a a ask pricing even amount you Ford. often And of why I invoice do I then the you're doing huge believe, anything even is systems we you which things enough there. price? Because they're some more, or peers know the they guys your you raising are raising I time have bit or

are we missing? what So

James Farley

Sure.

line So pricing. is we've taken lot of bottom a

You best numbers. we watch could margin at ours is you see is brand. in the at industry, I the that are have in MSRP? And in close Ford carefully actually, tell Ford. versus MSRP margin And the and retained versus our different it places. all as are at any very retained others There What dealers other i.e., the of one this pricing to are our that

inventory going way is I see certainty because an on into because us are dealer need think roll that what by And for details, I this mean of is company? how EVs to them. that up to XX. of ordering And in is then our how our the ordering dealers overall, orders -- have margins, system. mean price. out model. think question And And Chinese this are to an we means On and I said as we be of And like so X/X supply is to it how going point our dynamic we conundrum. and as think kind that, to have electric the model, -- out I competitors we again, we but absolutely on not downs system, going customer. our ship industry. I also customer -- -- the our orders, we low have your sleeves, I'm coming. That's inventory or pure-play and XX-day is this we shape actually get a that very saying but not I'm and to the you a you don't is not responsive vehicle, important like cost with to -- ups pricing low which we going tension we is we than get distribution with went competitive to or the to vehicle a $X,XXX to vehicles, our talk have retailers a of and be have change the that bigger of the

-- We maybe have system. about $XXX, in that. our We that's worth to think go to $XXX

SG&A one advertising is and selling, all Another costs. the

easy the another to that We of predictable our And a very process. We e-customers of think have very we in transparent, experience, bunny they're dealership And whether simplify a $XXX vehicle. shift all and simple, very slippers, to purchase they'll have going where going have platform that. tiers just marketing. -- in invest. a that's going a or we're today e-commerce their don't We're have to X we're

companies. than model marketing Our our be That and purchase. think different we'll a And the EV is differentiator, where that's to pure going will play that's invest. I be post

dealer are make makeup see going but they Does The to going I change. margins So margins shift. very that to Adam? those sense, of being still competitive,

Adam Jonas

of Makes sense. a lot

Operator

Research. Rod Wolfe will question from come next with Lache The

Rod Lache

us So still of the return think you to do to And been environment that lot horizon, this and inflation at volume now little talk on right a sustain contribution price? in looks a and demand pricing interplay massive between becoming are the Just you affordability of willing Can in forgo to we're the mix has level and tailwind, can margins? too. bit a just with about is like volume? now, you especially powerful it pretty

John Lawler

Yes. Thanks, Rod.

-- we an can out demand that the industry there. we're seen volume have to and Ford produce strength in that the at as us volume we seeing due pricing to relative So

to through the off it's what's as to not of with the volumes a the et very the of dynamic. have thoughtful better some we've always quarter, front headed back. year about come standpoint been But -- point. tailwind. second consumer, the we all and at did do going But ease we that seen the company, from remain of In the relationship credit increase we're rate we we second has we as see come half this bit is and we a of and as said as tailwind the quite time demand affordable, Affordability a mix provisioned where the is have cetera. keep chip in flow, a our something incentives that And we So from us pricing volume half have increasing volumes and see that between in constraints well.

And you back, pricing back. so see I some volume comes get think what you'll see is as will

basis? we've margin for more to is where and to will of to remember, up come not -- the -- overall, for form off just right? of we industry, supply, as dealers, margins, the and dealer see all us, we to Adam we from build-to-order push have an of talked much standpoint. that's which a manage to are process? dealer need pricing move system prices How which did from of a dealer fulfilling standpoint, what compression demand the will I'd reduced But think therefore, are we and that past, said a we need between took floor potentially on and/or a come about inflated. are us. well. come change higher estimate maintain head How stocks? as Question going $X,XXX system the going see of all $X,XXX a first You and into first the somewhere demand we to down plan come is we dynamics still and We for across for us in But following to come in timely off the going of environment as have still we a down to So pricing discipline how And action, we pricing demand I start have the to question prices have margins was an could natural on it's some.

Rod Lache

any large cost there you? a inflation That on like concern something Europe makes lastly, major just provide a you what's that North can unusual that gas And is sense. Any from you situation number. color a perspective? anything in secondly, for on in then supply It number? America? any is can this whether natural Was detail of on And thoughts happening the looked then chain $X billion just

John Lawler

across seeing across there It's the board material anything just increases wasn't the in that. No, in start expect, it's in freight. cost inflationary the board. It's would the with and the going seeing by board, driven areas I'll Nothing We're the unusual. It's Rod. you up. unusual, across economy. we're pressures

James Farley

an characterize second on in issue chips still Transparency supply And are specifically. an is the chain, quarter mean, the I'd it, to still issue. I

was had a chain China We issue supply And could did built it. one North if our it that shutdown. had system. Like the that a in not with our quite through We And supply we know The job. manufacturing You call. thing, we Dana in, Rosana just daily down team issue. every an Shanghai We all it's It have and affected -- affects America model great helpful. worked next. got chain what's digital of like to said, it's really feels another. Rosana a

energy far already. Europe, everything played in we the our We've crisis know happen. could out we're of possibility planning as this we As The next done homework.

and that in think suppliers like they is Germany, between the what Hungary, issues. manage risk through mid-'XX active I the the We XXX countries about have when high-risk would can Austria call and energy now Czech, Slovakia. We

for buffer list, suppliers we and now our XXX a stock. vehicle XX-day have about America in XXX North have We that production

we are we we So know. can everything doing with the things

of shortages their been of of our output and other suppliers. And a chain nonstop COVID, we the through during working sorts labor We the obviously, The up, have and of gone moving. see On working things. the And we're too. in machine lot suppliers -- stress that the so of supply all have have outside chain. costs supply maintenance all with

it's can predict, day. well new a we're think prepared I So for always but the we things

Operator

from Emmanuel will The be Bank. question Rosner next Deutsche from

Emmanuel Rosner

hoping question, topic to first was profitability. about ask the you EV I of My

So where investor the of I on disadvantage cost $XX,XXX the about And color conference, similarly right you spoke an [indiscernible]. during $XX,XXX you being essentially Jim, think now. pretty a standing gave I quarter Mach-E is versus the of a good some at Ford to think

plan large next should few EVs worry we EV this I over what on guess guess time? years? strategy my next near is few over about do would the So offsetting the losses years over questions how the be, from And you materially increase going forward? the in I as volumes the term

James Farley

work report thank businesses of there's you, be other. I independently going Ford guess we not our Emmanuel. financially at say because to a of Well, lot will will each

chemistry don't highest rush a going not to that lot. installed I'm on to But year. going transparent. volume I for We topic. specifics bringing about wait for in a Ford, to announcement big profit until tell installing our is That you there We're So it will North think here. those batteries to be hours to We're into the that to this all others. be XX-gigawatt need North profitability. And from I not are America get America. our will map That's out to a be extremely time for standpoint. important a capacity I it road at is deal is be because know very on XX to material going vehicles -- we going see. like quarter, is everyone can't next bringing spend We in a our to such it. this. that LFP will

There's there's size So one, the distribution. but your battery. that's of

focus. an see add do profitable to This want you comments John, I important reasons engineering with E, this, call. don't it incredibly on low created all. why a of is this segmentation you laser-focused you'll of labor think just on do we And can the important on such any to vehicles. And Ford earnings content. in to topic electric engagement justice the one and Model is the But as reporting? going lot be again, we're You're and for series expect

John Lawler

where No. know you'll In is. reporting, the important how X between that we we're segmentation And at exactly see businesses. Emmanuel,

in Day give Capital said, Jim detail, Markets have go and it our some time unpack we can more that we when on to So next year, it as and it do early where through justice. we'll spend

Emmanuel Rosner

fair. That's Okay.

separate topic let ask then. me a So you

for you not under go do about pricing So increase. been recession share on or of down based has here auto on one I could volume pricing. while, What flexing that of with supply-driven, for scenario? low for so would for try context been we've consumer think us in pressure, but either hardest is as history volume to the sensitivity to -- much vehicle current a investors operating because, a the how comes thoughts you in downturn could at a performance downturn obviously, more risk things Any scenario

John Lawler

Yes.

we we've So at be is But you come. about looking heading time scenarios, better thinking Emmanuel, the these should look business, it of means at front right, at back a to would as if of looking to in types we're shape. be we out downturn, you at doing modeling if of and get any what issues lot where on in what into we're been to relative a expect were where recession this, today that way be doing, spent us to for we're as potential step company, -- the a any what much could a today

mentioned it from You standpoint. demand a

and demand, a product have we very pent-up of years X have lineup. We strong

teens. a now probably we'd what at incentives point right? also the We're They're low, in normally, positive. a are in be in where that's single so cycle, this right And digits at versus the point high

about us I there course, thoughtful would than I volume for And business remarks, or my be different will of a some be given as of is then a was mentioned our it's valve, back. off, demand say, that will thing an But need to other And what that's release past. industry. bit in in comes but only you to pricing important so it if be as And the not Ford, really that, very and it the will.

this markets our for projecting that I 'XX, our expect de-risked think point and we've -- we've We overseas. And overseas exited we profitable 'XX vehicles. that And business. restructured unprofitable cash product, we're more flow billion a lineup positive. overseas. great between flow that position fact But be ICE proof free through clearly, Our in $X overall we not more will do of year, burned cash is the that our markets it's free We're now. the is as

understand potentially facing. But we're what Jim different completely day. said, looking now it. We're what that's that it's it. position. it. a of things, be as we But We're in We're We're a out in clear-eyed. in at every day of just it. need understand we're getting could we're thinking new modeling We front So to work us, we and front We can how today. about

Operator

the question will And . from next Colin Langan be Wells Fargo. from

Colin Langan

just to dividend to The about the I from flat. back point first circle second the to going question outlook wanted half. first is half

highlighted, [indiscernible] I think, You volume.

I $X and QX think the commodities is over in QX. billion [indiscernible]

$X about Ford $X of You of is that's Credit billion billion highlighted about -- good sort news.

You framing Is didn't doesn't it, is [indiscernible] predominantly second sort [indiscernible], it half? of that Any quantify that the material. bad like be the that news. cost in [indiscernible]? $X seem billion inflationary

John Lawler

Yes.

static-y. So Colin, to let hear clarify. year. really total But hard me quite for you. Ford will It's profits It's Credit about the be in billion $X

over be that'll half. half So down

half are And headwind. headwind. So a a on that's the half costs inflationary a over

will be And roughly low second will there so the half. versus XX in yes, range it, volumes be walk the volume. up through We some in half said you the when first percentage that

improvement you've so mix some And well. as got

We've bit the A So an will volume are talked the pressures mix down. the of tailwind a increase about, on got little in half. headwinds FMCC and be are They'll profits. we be but tailwinds. commodities, inflationary pricing second and the

We half. also relative have half to in the first exchange us the hitting that's second

in And going aren't And in onetimers invest continue business. that's headwind of that as So to second to the a well. then had the we're going course, quarter we some repeat. to

There's to that So costs spending-related as there's we costs. invest. as increasing be be going connectivity will well to be going

takes. half-over-half Those headwinds helps at that the are it the and clarify a from look puts as you hope I And those the basis. tailwinds and are So things.

Colin Langan

dramatic Okay. on you're talking you are going clearly assess And things. to to more know to pretty going give I you're up, material costs. and raw increase perspective how But E follow the details in a

economics prices of about targets, remain Should EV the are all you the point the think the would of of kind would raw be investments high. I your in XX% be thinking imply back at comments, produce unclear? the some EV only on that if materials going are to to of that which actually you materials available even this indicated about pulling

James Farley

pulling don't We plan faster. of us If first anything, back. aspired products the to No. has No. on go generation

that. that the think to change It's to look it's how bigger will I at would a be industry, than a vehicle experience I cars. to on now It's first these change the ship propulsion. real shippable in emphasize in have just vehicle. differentiation we change increasingly a We software this not software whose much you our that

And The the is driver We're for to first Ford one second management. Pro. is coaching, customer, telematics energy the ADAS us shipping for sure.

share. charging XX-plus for like now on attach E-Transits, percent. we're our Our rate It's XX%

we're services of talk said, to there -- these that a not that's I going are walk vehicles opportunity LFP to sell. revenue going it. So dramatically big about that X%, has go to an because not as than When really to here, of for lot but John through base a you And the tell us. the will different materials a we're nickel raw connected Like exposure you to in no NCM there's software.

cost, to vehicles. The There's upper of these profile you can we the to can't we vehicles. the and in through that. don't much thing in chemistry the take walk. We're is bodies company But battery for of change biggest investing products, for profitability longer think diversifying or thing investing that cars. is the and we're electric part digital we strategy about they're because of wait have profit of that is so to and we that we So important the I have them a the can upgrade not think in to solve most all very keep not all software-enabled because our to key do

Operator

question And RBC the next Markets. will Spak Joseph Capital come from from

Joseph Spak

know $X Are of half. -- to incurred offset know that than you you over billion other assuming I of we inflationary Are go $X already that And the want it's delta so you us much just offset how in before. -- you're -- billion could higher in let costs, I just was guide? John, you working just to it. first maybe the can

John Lawler

Joe. billion So we we previously, what had had -- than talked higher it's $X about

focus we efforts of do year, something company to focus to of our working to about. what rest we're course, continue we we're team, of the offset that we So We're of that's we're the the that's about doing. But those it, are We're significant on remake for as costs, working not year and and it part work we've $X need the but as team talked a inflationary go, through. the billion a all there, at and and way looking in the cost to significant is have Ford+. the of

So a we're really that's important part what of doing.

billion billion. $X come through, it's so about the We and And for billion another said the it's had We've across board. year. $X $X seen

Joseph Spak

Okay.

second on just Credit. question The Ford is

it that to second if get we you're Or thinking about to you which, right I sort and unusual why pointing understand next effect profile? more is and Xs. well that anything lower this that, low it's if there above the a structural pretax year But at about been to Because way there's half, in to base you're that's return some average, you think profitability we forward? normal a that go something ROE annualize in look think the or the Is that been under Credit the returns? would is circumstances. historical So of Ford to good business, changed

Marion Harris

this Joe, is here. for Marion Thanks question. the

You're it about correctly. thinking

about sheet EBT. So to pre-COVID, that were at time. of about of go at $XXX billion, at billion back quite billion were and we $X.X you a run We rate was bit if larger, balance a $X.X

level. normal the was that so And

now. Our balance smaller sheet somewhat is

of We're that's the releasing We're is and so more not And you're profits. related think at way its what our much level. back I a residuals, seeing its lease through book. level reserves normalized pretty worked to pre-COVID reserve

more normal So that you're seeing performance.

Operator

And Picariello from today from Exane final come PNB our will Paribas. James of question

James Picariello

take about rates, at commodities what just exercise, as P&L, think what current directionally the would commodities spot rates? can impact for a if right, you effect current your just -- next look we to year account Just theoretical for spot at like into commodities, the lagging just maybe

John Lawler

Yes.

in also coming is situation into the some, see contracts, think some. what they through has commodity coming protects are when it as on we and some. it of roll. go do increasing effect when but That we lock the we a us year, are prices off prices [indiscernible] a lag down Part complicates I

that And well. so the as with run deal we'll we through as year have to

a should moderately. environment. If we overall If And to the quicker think see that what come tripping us think, more have see into the going not, period, so depend I it's we macroeconomic really, of on past. down those in more do I they'll recessionary fall we happens with like

roll both So through and spot rolling scenarios we're standpoint. planning but and good news looking of It news can't have basis is at take a do we year, were into on just through from you that we spot roll everything those contracts next a through because year. good that the it locked as

James Picariello

then [indiscernible] quarterly And color inventory, can XX,XXX just the second be totaled with the half, to Okay. the mean, quarter? the entering the back we provide Ford's how you think, half? volume should the thinking -- ramp shipping Understood. I the cadence progress And in respect on in volume I for about

John Lawler

Yes.

over impacted job and end as get out The the quarter. up the XX,XXX entering half XX,XXX free the drawdown. year that of us. those the down So on a can of the the work to quarter, we'll to second the chips did good team at We're we

strong the the volume that second North overseas when in for North we second at with America. quarter, helped When in the But -- you in first increase compared volumes growth low half. in said, up half volumes, you half, which think the volume be an look second look I greater North the volumes as drive America, in performance the the XX% we saw in than at growth markets America. range there's would the in

Ranger IMG. We launching the have in

significantly volume from We shutdown. quarter growing Europe. then, second standpoint was a a in the of rate China quicker to depressed at have in in due the course, volume half And the second

improve for will a what quarter be standpoint. QX, QX, than chips that's the the be in look in because as will third fall, when from we you see the should fourth they'll be into at the so the But lower rate we QX And happening volumes quarter. through they go

second and volume the half the from to So the up walk QX. relative first that's then into is half, how the in QX framing

going mix to than in be QX, volume to So not -- less QX as QX. strong is QX and It's be as right? going

a third the us relative QX as of first is volume course, to We of have hitting to spending And most Europe Volume in will and couple is half. in QX then Ford going the commodity and have we And investing mix, us, quarter, in -- things QX. in be growth in and connectivity. than the we're our costs hitting half Credit, second still of lower the China.

talked in that third see come of the in onetimers the second I have we quarter. about You then the through And the quarter. nonrepeat

be as sequential the to volume second we get fourth basis then will the will the compared than quarter. fourth quarter a be third will third quarter. down in quarter, So overseas. Volume be to increases quarter And better on the

Operator

thank and Company for We Ladies gentlemen, the you your concludes this participation. Motor Ford Earnings Second Quarter XXXX Call. Conference

You Take care. disconnect. may now

Ford Motor (F) 28 Jul 222022 Q2 Earnings call transcript