Ford Motor Company

Good day, ladies and gentlemen. My name is Holly, and I'll be your conference operator today. At this time, I'd like to welcome you to today's Ford Motor Company first quarter 2021 earnings conference call. After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question, please press star, then one on your telephone. As a reminder, today's call is being recorded. At this time, I'd like to turn the call over to Director of Investor Relations, Lynn Antipas Tyson.

Lynn? Thank you, Holly. Welcome, everyone, to Ford Motor Company's first quarter 2021 earnings call. Presenting today are Jim Farley, our president and CEO, and John Lawler, our chief financial officer. Also joining us for Q&A is Marion Harris, CEO of Ford Credit. Jim will make some opening comments. John will talk about our first quarter results and guidance, and then we'll turn to Q&A. Today's discussion will include some non-GAAP references. These are reconciled to the most comparable U.S. GAAP measures in the appendix of our earnings deck, which can be found, along with the rest of our earnings materials, at shareholder.ford.com. Today's discussion includes forward-looking statements about our expectations. Actual results may differ from those stated. The most significant factors that could cause actual results to differ are included on slide 24. Unless otherwise noted, all comparisons are year-over-year. Company EBIT, EPS, and free cash flow are on an adjusted basis, and product mix is volume-weighted. A quick update on our upcoming IR events. I am very pleased to announce that we will hold our Capital Markets Day on Wednesday, May 26. The webcast will open at 9.15 a.m., and we will start promptly at 9.30 Eastern and end roughly at noon. We will share more information about the meeting Later on this call, an invitation will be sent out shortly. On Monday, May 3rd, Wells Fargo will host a fireside chat with John Lawler and Kumar Gauhotra, President of America's International Market Group. And on June 17th, Deutsche Bank will host a virtual fireside chat with Jim Farley. Now I'll turn the call over to Jim. Thanks, Lynn.

Hello, everyone. Thanks so much for joining us today. You know, our first quarter of the year really defies an easy explanation or a pithy soundbite. But if I had to sum it up one way, it would be this. We're executing on our plan, and I'm excited to say Ford is becoming a stronger, more resilient company that can deliver under pressure, manage risks, and seize opportunities all while generating consistent returns for our stakeholders. In the quarter, we earned $4.8 billion in adjusted EBIT. It's our best quarterly adjusted EBIT ever. And we achieved these results in the midst of a persistent global pandemic and an unprecedented supply shock tied to the global semiconductor shortage. We mobilized a global team, as we always do in these times of crisis, and we rapidly adjusted to the realities that we were seeing. Our team very skillfully navigated the supply constraints through sharp yield management and a relentless focus on turning around our automotive operations. That means improving our launching performance, improving our quality, enhancing our brand, strengthening our customer relationships, and improving our go-to-market execution. And Ford Credit, which in our view is the best automotive finance captive in the industry, also delivered an outstanding quarter. Aided by higher prices, Our results benefited from the industry-wide imbalance of supply and demand given the semiconductor shortage. However, we also delivered improvements that will persist over time, including our global redesign in our overseas operations, which contribute to the largest swing in year-over-year profitability for those operations that we've seen. The benefit of our incredibly fresh portfolio refresh which lowers the average showroom age now in the U.S. to just three years. And, of course, we made progress on cost across the business. As we shared with you today, there are more whitewater moments ahead for us that we have to navigate. The semiconductor shortage and the impact to production will get worse before it gets better. In fact, we believe our second quarter will be the trough for this year. We have work to do to get our industry footprint back to firing on all cylinders, or maybe should I say fully charged. Overall, though, I'm proud of the progress we made as a team. As our underlying strength of Ford improves, enhances our cash flow, access to capital, gives us financial flexibility to modernize and disrupt our business while investing in growth. We are very intentional about this because these are the catalyst factors that will transform Ford into a far more vibrant company that will deliver not only our iconic must-have products, but also, and I would argue more importantly, an always-on, ever-improving customer experience for both our retail and commercial customers. So let me share a few milestones from the quarter. Turning around auto. Over the past four years, our overseas markets lost a total of $5.8 billion in EBIT. This quarter, the regions delivered roughly $500 million of EBIT. That's a $1 billion improvement year-over-year. Let's look at those must-have services and products. Well, it starts with the new F-150, which gained share and also gained share of revenue. And it had new innovations like Pro Power Onboard, which showed again that we understand Ford customers at Ford, these truck customers, better than anyone. And the Bronco Sport is off to a fast start, bringing 60% new customers to our brand. The new Mustang Mach-E is proving to be a hit with customers just a few days on lot with very strong demand in North America, now in Europe, and coming to China. And it's also bringing in new customers to the brand, almost 70%. And we still have the big Bronco, the two in the four-door, with an incredible order bank, the F-150 Electric, and the E-Transit. And we have some surprises for you as well. Stay tuned. Just as we are in the early stages of our electric vehicle plans, we are only scratching the surface of our customers benefiting from our fully connected vehicles. We have successfully deployed our first major over there software updates to hundreds of thousands of customers for Mach-E and F-150. And this pace will only accelerate in the next several years, making our vehicles better over time. Later this year, for example, we will offer our very first tested, fully tested, Ford Blue Cruise hands-free driving technology, which will be delivered over the air to Mustang E and F-150 customers. And by 2028, we expect to have more than 33 million over-the-air updated capable vehicles on the road. Now, this install base gives Ford a significant opportunity to develop products, And for us, very exciting new services that will transform the way we deliver products to our customers. They'll make significant improvements to our customers' experience and drive quality of our vehicles. And we're on track to lead the electric revolution in areas of Ford's strength. For example, we announced we're investing $1 billion in the new electric vehicle manufacturing center in Germany, where by 2023, just a few years from now, we'll be assembling our very first high volume, all electric passenger car for Europe. A year later in 2024, all Ford Europe commercial vehicles will be zero emissions capable. And by 2030, all Ford European passenger cars will be all electric. Now these investments are part, just part of our $22 billion commitment to lead the electric revolution in areas that were strong, And yesterday, we announced a very important new development. We have formed a new global battery center of excellence called Ford Ion Park, which will accelerate our research and development of battery as well as battery cell technology, including future battery manufacturing. This only starts to hint at our electric vehicle ambitions. There is so much more to come. Now, before I turn it over to John, let me share a bit more about where we in the industry are in semiconductors. When we initially gave guidance in February, we expected that the semiconductor supply chains would remain constrained through the second quarter. And we have an opportunity to begin recovering lost volumes in the second half. It's kind of played out similar to that with one big exception. The industry faced another setback on March 19th. when Renesas, a leading semiconductor supplier who manufactures about two-thirds of all chips in the auto industry, experienced a significant fire at their NACA 3 facility. Multiple Tier 1s who supply global OEMs sourced their chips from this facility, including nine Tier 1s that supply us at Ford. Now, Renesas expects it will return to full capacity in July, and they're making great progress. While most of the chips for our modules for this facility are definitely dual-sourced, Ford and others are facing additional constraints, and we've yet to see significant new chip capacity come online for our industry. Estimates project the full recovery of the auto chip supply will stretch into July. fourth quarter of this year and possibly even into 2022, making industry volume recovery in the second half of this year even more challenging. As you can imagine, we are working this issue 24-7 and engaging with key political leaders and decision makers globally, as well as, of course, our supply chain. Our relationship with the new Biden administration rests on our distinctive profile, that we assemble more vehicles and have more U.S. auto jobs than than any other competitor. It's also well recognized that Ford sided with California on greenhouse gas regulations when that wasn't the easy choice to make. So from COVID PPE to the current semiconductor crisis to batteries for EVs, this past year has vividly spotlighted the importance of improving domestic supply chain for both our industry and our country. Now we found the White House and the new cabinet engaging, accessible, and responsive. We look forward to continued close working relationship as the country formulates policies to facilitate the transformation from ICE to BEV and finally address infrastructure deficits. As you would expect, we're committed to learn from this crisis to be a much stronger company. We're taking this opportunity to revamp our supply chain to eliminate vulnerabilities down the road. This is especially relevant as we consider not only semiconductors, but also battery cells and other commodities critical to our modernization and transformation. We're also learning, as we operate in this extraordinary low stock, high demand environment in the U.S. and around the world, that we will see a leaner, more efficient company in the future. We're getting more fit. And with that, I'd like to turn it over to John.