Jim Farley: We’re Number One – In Recalls
It is a breath of fresh air to have someone like Jim Farley at the helm of an automaker. The man brings a bracing level of candor to a world generally filled with sanitized PR statements and corporate double-speak. In a candid call with investors, the CEO lamented about how Ford has been “number one in recalls” and the need “to improve product quality”.
These remarks come on the heels of Ford releasing its annual earnings report, one showing the Blue Oval had a net loss of $2 billion in the 2022 calendar year.
"While we generated a record cash flow,” Farley said, “We left about $2 billion of profit on the table due to costs and especially continued supply chain issues.”
However, unlike most other corner office execs, he refused to lay all troubles at the feet of that easy scapegoat.
"Ford has been the number one in recalls in the U.S. for the last two years," he told industry analysts after releasing the earnings report. "Clearly that's not acceptable."
numbers wonk chief financial officer for Ford, estimated that successfully addressing some of the company’s quality woes could return billions on the balance sheet.
“With our quality numbers where they're at, we've said we have a significant opportunity on warranty,” he said, speaking to the potential to improve cost structure in that part of the company by about $2 billion. “That'll come in over time as quality improves,” Lawler explained.
So they’re nothing if not realistic. Elsewhere, Lawler detailed that the company is in good shape in terms of being able to keep the lights on despite last year’s performance, holding about $32 billion in cash and $48 billion in liquidity. Some of the losses in 2022 apparently came from sour investments, writing down its investments in Rivian by $7.4 billion and Argo AI by $2.8 billion last year. These numbers are making your author’s head hurt.
In sum, Ford says revenue rose about 16 percent last year to $158 billion, mainly thanks to better average transaction prices. They sold 4.2 million vehicles worldwide, up from 3.9 million in 2021, so the losses are not for want of customers. In fact, if not for these so-called ‘special expenses’ – which include the staggering losses relating to Rivian and Argo AI – those holding the spreadsheets say Ford would have posted a $10.4 billion profit rather than a $2 billion loss.
Execs remain bullish on many parts of the company, of course. An estimated 60 percent of Ford’s electric vehicle customers are new to the brand, with their EV growth coming at about twice the rate of the EV segment in general. Talent in software is said to have resulted in an outsized performance at that part of the company, and robust cashflow on the gas-powered side of the ledger means those vehicles are contributing profits and growth.
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