Ford Motor Company

Ladies and gentlemen, my name is Andrea and I will be your conference operator today. At this time, I would like to welcome you to the Ford Motor Company first quarter 2022 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's prepared remarks, there will be a question and answer session. If you would like to ask a question during this time, you may press star then one on your telephone keypad. To withdraw your question, please press star than two. Please note this event is being recorded. At this time, I would like to turn the call over to Lynn Antipas Tyson, Executive Director of Investor Relations. Please go ahead.

Thank you, Andrea. Welcome to Ford Motor Company's first quarter 2022 earnings call. With me today are Jim Farley, our President and CEO, and John Lawler, our Chief Financial Officer. Also joining us for Q&A is Marian Harris, CEO of Ford Credit, Hao-Tai Tang, Chief Industrial Platform Officer, and Doug Fields, Chief EV and Digital Systems Officer, Ford Model E. Today's discussions include some non-GAAP references. These are reconciled to the most comparable U.S. GAAP measures in the appendix of our earnings deck. You can find the deck along with the rest of our earnings materials and other important content at shareholder.ford.com. These discussions also include 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 page 28. 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. With that, I'll turn the call over to Jim.

Hello, everyone. Thank you, Lynn, and thanks for joining our FIRST QUARTER 2022 EARNINGS CALL. YESTERDAY I WAS WITH BILL FORD AND OUR INCREDIBLE TEAM AT THE ROUGE FACTORY WHERE MY GRANDFATHER WORKED TO CELEBRATE JOB ONE FOR THE F-150 LIGHTNING. WE WERE ALSO PROUD AS A TEAM FOR DELIVERING A TRULY BREAKTHROUGH ELECTRIC TRUCK AND DELIVERING IT ON TIME AS A LAUNCH. The excitement around the truck is like nothing I've ever seen in my career. In fact, the power went out in the facility and we ran most of the presentation with F-150 Pro Power on board. While we have work ahead to fully scale production and fill an extraordinary order bank, both for our retail Lightning customers and Ford Pro, make no mistake, this is a very important moment for us at Ford. We're accelerating our significant transformation. We have the right plan called Ford Plus. We're putting in place the right organization. As you know, on March 2nd, we announced our plan to form two distinct but interdependent business units called Ford Model E and Ford Blue. Together with Ford Pro, these three automotive businesses allow us to clearly define and assign priorities, make the most of our existing strengths, but also build new strategic muscles and most importantly, capabilities. Ford Model E is responsible for delivering clean sheet breakthrough EV designs, software advanced electric architectures, partial autonomy, and Ford Blue's mission is to deliver a more vibrant and profitable ICE business, a business that's going to serve in the short term as our profit and cash engine for the entire enterprise. So what have we learned since March 2nd? And what are we working on at Ford? In terms of Model E, first, it's very clear to us that battery capacity is the key unlock to our EV aspirations and propel our growth in the future. We're in good shape in the near term. In the medium and long term, securing raw materials Processing precursor and refinement and setting up battery production here in the U.S. and around the world is a big work statement for us. Expect a lot of news from Ford in the future related to the vertical integration of our EV business. Second, we're getting after our talent gap in key areas, EV engineering, software, and autonomous driving technology. We have a very good start already and we will continually be very aggressive on recruiting talent. Third, we're now deep in discussions with our dealer partners around the globe, but especially in North America on brand new standards that are required to launch a completely different customer experience that is leaner and better for our customers that we believe will not only be competitive, but superior to a solely direct model. We're drafting standards as we speak and plan to roll these out this year. Finally, we're crafting our EV future product pipeline and are focused on a small number of highly compelling, highly volume models in key segments where we already lead. I want to make this very clear. Some companies seem to be pursuing a strategy of trying to match Model Y's volume with eight or nine top hats. That's not a winning plan in our view. We will focus on key volume nameplates, constrained capital, because we have it, but really to leverage scale and efficiency to reach and eventually exceed our 8% EBIT target for EVs. I want to be clear here that as we move forward, our EV designs will be progressive, and they're going to be aimed at bringing new customers to Ford and Lincoln. They will not be electric versions of our existing lineup. Now, in terms of Ford Blue, we will accelerate our restructuring and address our uncompetitive cost structure. We're going to attack complexity in areas such as powertrain. We can't wait. This work starts now. We will continue to invest in our ICE business, but in targeted ways to build our most popular and profitable vehicle lines, F-Series, Bronco, Super Duty, and a few others. Another focus is quality. We've made good progress on initial quality and launches. However, We continue to be hampered by recalls and customer satisfaction actions. This has to change. We must do more to aggressively address our engineering process and improve our robustness. Now our Ford Pro business is on track. We see healthy growth in parts sales, mechanical repairs, growth in subscriptions for both charging and telematics, and CV financing. most importantly we're making our customers lives and businesses better they're using data they're improving their uptime and their bottom line supply chain constraints continue to impact our business including some of our key profit pillars that said we're making progress on launching and scaling new products as you can see with lightning that said our major focus now is accelerating a more fundamental change in our supply chain management to improve visibility through our entire value chain and secure supply especially in places like semis and batteries we're absolutely committed to unlocking value by improving our growth profile our profitability and ability to generate sustainable cash flows from our automotive-related businesses. Our new targets include producing more than 2 million EVs in four short years, by the end of 2026. That's about a 70-plus tagger. And we expect that by 2030, EVs will account for about 50% of our global sales. We have also reset our profit ambition. We are now targeting 10% company-adjusted EBIT margins by 2026. Now, in terms of the first quarter, I would describe our performance as mixed. The appeal of our new products is really clear, and customers' demand is extremely strong beyond the supply constraint of our industry. However, we are still grappling with persistent supply chain issues that prevent us from posting even stronger quarter. We're working to break constraints whenever they exist to take full advantage of this incredibly hot product lineup, both new EVs like the F-150 Lightning, but our iconic ICE vehicles as well. We remain committed to delivering our targets quarter after quarter, year after year, earning your confidence along the way. And now I'd like to turn it to John to take you through the quarter and our outlook this year.