ford CEO Jim Farley is disappointed.
Company’s fourth quarter earnings Thursday did not meet analysts’ expectations by a big margin as cost and supply chain issues surfaced again. hurt Ford’s bottom lineFarley knows his company needs to change.
“We have to change our cost profile,” Farley told CNBC after a call with analysts to discuss the results for the quarter. “We know what we have to do. I’d love to give you all the metrics and all the specific gaps that we see. But you know, whether it’s absenteeism, the number of sequencing centers, the number of wiring harnesses we have, we know what it is.”
In short, Farley wants Ford to be a far more efficient company, and he needs to get it done quickly.
Ford is being pushed to change after the automaker reported adjusted earnings of $10.4 billion in 2022, with the company telling analysts it expects $11.5 billion to $12.5 billion that year.
How did Ford fall more than a billion dollars short of reaching a profit target given to Wall Street in late October?
Blame poor execution and higher-than-expected costs. Last quarter, Ford said, overcoming supply chain challenges including a shortage of semiconductor chips drove costs $1 billion more than planned. Ford’s production of 100,000 vehicles was less than the automaker had hoped to build.
Ford workers produce an electric F-150 Lightning pickup at the automaker’s Ford Rouge Electric Vehicle Center on Dec. 13, 2022.
Michael Wayland | cnbc
Supply chain and cost issues have hurt Ford over the past two years. Last September, Ford warned that third-quarter costs would be $1 billion higher than expected. For the past two years, high warranty costs – from recalls and troubled launches of new vehicles – were a problem that Farley and his team have been unable to fix.
Farley said Ford’s complicity is part of the problem.
“We have a lot of complexity relative to the customer and also inside our company. And we can cut out customer-facing complexity like we have, but it takes time to work that out on the parts down the line, to the manufacturing line. , ” They said. “It takes time to work through this and that is what we will do.”
Discussing fourth-quarter results with Wall Street analysts, Ford’s leadership declined to provide details on specific steps it plans to take to cut costs and make the automaker more efficient and profitable.
Farley said the answer isn’t just cutting jobs, which historically is how automakers cut costs. “There are things we can do in the short term, but I don’t want to just cut output without redesigning the work. It has to be sustainable and that’s how we’re thinking about it nowadays,” he said.
Will this new effort to cut costs affect Ford’s growth in production and sales of electric vehicles? Farley said no.
In fact, he said he believes separating the EV and internal combustion engine vehicle operations into two separate divisions would actually accelerate efforts to drive greater efficiency. To prove his point, Farley says that the second generation of Ford’s EVs will be radically simplified, which should ultimately lead to fewer problems and higher margins.
“I can’t wait to show you and the world the next cycle of products,” he added. “A lot of our competitors are just coming out with their first cycles and we can see that their batteries are huge. Their distribution costs are very expensive. They’re spending a lot of money on advertising. You know, we can’t do that.” Can. We don’t plan to do so.”
A Ford Mustang Mach-E GT at the 2022 New York International Auto Show in New York in April that year.
live moon | Bloomberg | Getty Images
When Farley became Ford CEO in October 2020, he vowed to lead the automaker into a new phase of growth led by increasingly electric models. mustang mach-ee-transit commercial vans and F-150 Lightning,
And in many ways he has been successful. Ford is No. 2 in EV sales In the United States, with only 8% market share.
while it ain’t even close to catching Tesla, which sells two out of every three EVs in the US, Ford’s EV production is growing rapidly. Late last year, Ford was building 12,000 EVs a month. By the end of 2023, Ford expects EV production to reach 50,000 per month.
Yet, for all its achievements converting to EVs, Ford continues to face problems with internal combustion engine vehicles, which account for nearly all of Ford’s profits.
Farley knows that investors are watching and waiting for Ford to finally get it together.
“Be patient. You know, we’ve got the right team. We’ve got the right plan. We’re growing like heck in our Pro and EV business,” Farley said of what he would say to Ford shareholders. “This premier team is going to work for you and you are going to get a great return on your investment.”
, CNBC’s Meghan Reeder contributed to this report.