Ford Motor Company

Good day, ladies and gentlemen. My name is Holly, and I'll be your conference operator today. At this time, I would like to welcome you to the Ford Motor Company first quarter 2020 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, please press star 1 on your telephone keypad. To withdraw your question, press the pound key. we ask that you limit yourself to one question only. At this time, I would like to turn the call over to Lynn Antipas-Tyson, Executive Director of Investor Relations. Lynn?

Lynn Antipas- Thank you, Holly. Welcome, everyone, to Ford Motor Company's second quarter earnings call. Consistent with social distancing, speakers today are connected from different locations. So, in advance, I appreciate your patience, including any latency as we answer questions. I also personally hope that you and all of your loved ones are safe. Presenting today are Jim Hackett, our President and CEO, Jim Farley, our Chief Operating Officer, and Tim Stone, our Chief Financial Officer. Also joining us is Marian Harris, CEO of Ford Credit. Jim Hackett will begin with a brief review of our results and how we are putting people first through this pandemic, including our team members, customers, and partners. Jim Farley will cover the operational excellence required to execute solutions while ensuring Ford comes out of this even stronger. And Tim will talk about the prudent and proactive actions we are taking to enhance our cash position while preserving the financial flexibility to fund our redesign and growth initiatives, including critical launches. Then we'll turn the call to Q&A, and Jim will close with a few remarks. Our results Discussed today includes some non-GAAP references. These are reconciled to the most comparable U.S. GAAP measure in the appendix of our earnings deck, which can be found, along with the rest of our earnings materials, at shareholderforward.com. Today's discussion includes forward-looking statements about our expectations. Actual results may differ from those stated, and the most significant factors that cause actual results to differ are included on slide 23 of our deck. In addition, unless otherwise noted, all comparisons are year-over-year. Company EBIT, EPS, and operating cash flow are on an adjusted basis, and product mix is on a volume-weighted basis. Now let me turn the call over to Jim Hackett.

Thanks, Lynn. And hello, everyone. And Lynn, let me thank you for doing an incredible job in putting this virtual call together. In addition to Jim Farley, our Chief Operating Officer, and Tim Stone, our Chief Financial Officer, I'm proud to say that Rudy and Ozzie, my two beagles, are joining me today in the call. Well, you know, the nature of times brings to mind the notion of paradox, and I like to think of the definition of a paradox as two truths that compete. Let me explain. The first truth is that safety is of the utmost concern in a pandemic, yours, your loved ones, and the people you work with, the communities you live in, and amazingly, all other humans you will interact with. Their safety guarantees your safety. The second truth, there is no future if we don't have an economic system that is always on. We didn't realize there was an off switch. We knew it might go into a recession more like a dimmer switch, but off? Well, now as we bring these two truths together, they compete. Turning the economy back on challenges the question of whether it's safe enough. My goal today is to provide an update on where Ford stands and hopefully illustrate that Ford is doing a great job of managing this paradox and confirm that we have control of the business in a very difficult time. I am pleased to report to you that we have the foresight to move early, ahead of the shutdown. We kicked off our coronavirus response task force led by about 30 senior leaders from across the company. Independent of the virus, recall we had around the same time reorganized our top team, enabled by a new chief operating officer position held by Jim Farley. Candidly, this now looks quite prescient as Jim, in his new role, was able to quickly marshal our operating team to focus quickly on the most important actions. Minutes that led to hours made a huge difference in our responsiveness. We went from 1,000 people who work remotely from home to more than 60,000. And we've had terrific productivity in the face of this unforeseen challenge, including our team in China, which preceded the economic closure around the world. But Jim will talk more about that in a moment. Now, as we approach this challenge, we laid out three clear priorities underpinned by what we would say are Ford values. Undeniably, we have to protect the safety of our people and do our part to limit the spread of the virus. Second, to leverage our knowledge and capability to deliver critical supplies to frontline workers and patients while taking care of customers, dealers, and the communities in which we live. And three, skillfully manage our business through the crisis, safeguarding what we believe is a very bright future for Ford Motor Company. I have found it's true that Ford people are at their best in tough times. It was true when Ford was building aircraft and arms that formed the arsenal of democracy in World War II. And it was true just a short decade ago when we rallied to avoid bankruptcy and a government bailout. And we emerged from the Great Recession a stronger company. I want to confirm it's certainly been true today. Let me take you through a bit more detail on those three priorities. As I said, the first priority was to protect our people and do our part to limit the spread of this virus. So in mid-March, we were among the early companies to instruct the vast majority of our employees to work remotely. We also partnered with the UAW and other automakers to introduce new safety protections in our factories and warehouses, and then to shut down those facilities worldwide. In an illustration of the arc of a global pandemic, these actions were taken even as we were cautiously restarting operations with our joint venture partners in China. Sadly, though, in the face of this, Ford has not been immune from the ravages of the virus. We've lost 11 colleagues in the US and the UK to this pandemic. Our second priority was to leverage our knowledge and capability to deliver critical supplies to frontline workers and patients. I couldn't have been more proud of our organization. The bottom line, though, is when society needs you, you answer the call. In this case, we're doing that in many countries that Ford calls its home. Ford's always been a family business, from the generations of leadership to the generations of proud employees, and with that, we believe comes a special responsibility to take care of each other. And this pandemic, of course, is no different. In fact, it requires that in spades. We know this devastating crisis will come to an end. But in the meanwhile, we're doing everything we can to help. As we suspended a large portion of our work on designing and building great vehicles, we rallied to begin producing vitally needed personal protection and medical equipment. Around the globe, our people, including the UAW partners, as I said, have amazed me every day as they engineer and produce hundreds of ambulances and up to 100,000 respirators for healthcare professionals with 3M, more than 8 million face shields so far, 50,000 patient ventilators with GE Healthcare, and about 1 million face masks, more like surgical masks, every day. and up to now 100,000 washable isolation gowns per week with Joyston safety systems. Putting people first also means, though, taking care of our customers. We announced refined payments on new vehicles and a better online experience for customers. No contact vehicle delivery and service, including disinfected products. And roadside and other services through the FordPass app. We also worked quickly to take care of our dealers with digital marketing, sales and service tools, and advice on managing liquidity. As you know, the government instituted a program that dealers could qualify for to enable them to keep their organizations intact. And taking care of our communities with millions of dollars in contributions of vehicles and cash. The third priority, which will be the bulk of our call today, was to skillfully manage our business through the crisis. One of the rallying cries for us through all of this, just as it was in 08 and 09, is that we must not only weather the crisis, we need to emerge from it ready to build a brighter future. So yes, even though we took measures to preserve cash, We are moving forward on our Creating Tomorrow Together plan. You're going to ask me about that, and we're totally committed to it. This is going to leverage fresh new portfolio of vehicles, a commitment to autonomy and electrification along with connectivity, global partnerships that look prescient as well that they've started before this pandemic and they're going to serve service in the future, including Rivian because we've gotten questions about that, and a better customer experience. In a moment, Jim Farley will provide more detail on the progress we're making in our underlying business during the crisis. I'm really proud of him, and he's just worked around the clock, frankly. And so to say it's been a 24-7 effort is not an exaggeration. At the same time, we're pulling every appropriate lever to protect our core business. Strengthen the balance sheet, Tim Stone said. also working around the clock to make sure that the company led in this initiative and bolster our cash to optimize our financial flexibility. I'm proud that we have that all in place before the first quarter was over. Part of skillfully managing through this crisis is having a well-thought-out protocol, though, for back to work. We did this for China, and I'm pleased that Earlier today, we announced we'll restart our European manufacturing production with enhanced employee protection protocols in place. It's taking a phased approach starting on May 4th. We will restart vehicle and engine production at most of our sites in continental Europe, and there'll be a gradual ramp up over the next few months before full production is resumed globally. Well, still, there's no denying the negative economic consequences of a pandemic. In the first quarter, our adjusted free cash flow was negative by $2.2 billion. Revenue, amazingly, was still $34 billion, and we incurred, of course, an EBIT loss of around $0.6 billion. In fact, heading towards the middle of the quarter, listen to this, we were on track to meet or exceed our original guidance for adjusted EBIT in the quarter. Well, as I said earlier, be assured that everyone at Ford is squarely focused on both today and our future. We believe it remains bright, and it's a great source of motivation for us as we serve that future and, of course, take care of all these immediate needs. Right now, I'd like to turn it over to Jim Farley. Jim?