Ford CEO on EVs, Detroit, and texting Elon Musk

"After 120 years, we've seen a lot of competition," says Ford CEO Jim Farley to Yahoo Finance Executive Editor Brian Sozzi in the grand hall of the newly refurbished Michigan Central station.

The historic building is, in many ways, the crown jewel of the automaker’s new $1 billion Detroit-based campus. Ford’s 30-acre innovation district, centered around the station, will serve as a base for developing its autonomous and electric vehicle businesses. The development serves as something of an emblem for Ford’s (F) future ambitions, much of that, today, takes the form of the push into the EV space. "It was Bill Ford's vision to make the commitment to revitalize this building," says Farley.

In a wide-ranging interview, Farley discusses everything from demand, the upcoming Presidential election... and whether or not Tesla CEO Elon Musk (TSLA) texts him back.

Video transcript

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I'm Brian Sazi.

Yahoo Finance's executive editor.

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Opening bid has hit the road.

We're coming to you from Detroit inside the historic Michigan Central Station.

Joining us is a very, very special guest Ford CEO Jim Farley, Jim.

Good to see you.

Good to see you here before we, before we get going here.

I have to say uh thank you for agreeing to this interview.

You may not know what I drive, but if I told you, you may actually walk off set.

So do you wanna know I drive a uh a corvette, but it was 1/40 birthday gift.

The newest one and a black wing black.

I mean, that's uh that's a really nice C team is gonna kill me.

All right.

So really uh this building is, is mind blowing.

Um why and how did it come to fruition?

Yeah, I think it was uh uh Bill Ford's vision to um to make the commitment to revitalize this iconic building that it meant so much to the community and the city of Detroit, how, how much of our society went through this building and how many lives were affected uh through the comings and goings of this train station.

And you know, I think the national media came here to kind of gang tackle the decay of Detroit and captured the building is like the most emblematic physical place for the decay of Detroit.

And as a michigander and a Detroiter, uh he said, you know, when there would there be a better project, then the revitalization of Michigan Central Station and for Ford to do it um as a symbol of the rising of Detroit and the rising of this next era of the car business.

This building opened originally in 1913, closed what in 1988 it is laid dormant and what was lost on me is just the history here walking, you know, behind that timeline of Detroit, you know, what will actually be in here and what will it help to do?

I think, you know, the buildings really been revitalized physically, but what's important is we'll have software people here, the future of our pro and our ev business will be down here.

But most of the people will have 1000 up to 2500 in a couple of years.

But most of the building will be occupied by nine non for people who will be focused on innovation.

And what else will happen?

Here is the community Cork Town is the most, the oldest most historic community in Detroit.

And this is a signature part of Cork Town that's was rejuvenated kind of before Michigan Central Station project was started.

So, you know, this will be a destination for the community and for a lot of people to visit.

Um A, a lot of people are from Detroit there.

They may have had been relatives, they may never have been to Michigan.

But you know, the lives came through this place.

I, when I was pulling up in here, uh I couldn't help but to think this is the type of building and, and outside the exterior, the environment that has to help attract talent.

Uh We have so many of the next generation of engineers and tech talent.

They're going off to Silicon Valley trying to find an A I chip in the ground somewhere.

I mean, this has to help this war for talent.

Yeah, I, I think, well, certainly for this ex most exciting kind of generation of a talent to come to Ford companies like Ford and we're the only one ding go bankrupt.

I mean, we're kind of the most iconic company.

I could argue with the most UAW hourly workers, we make all of our trucks in the US.

You know, a lot of that talent wants to come to an industry that's going to be the next industry to build digital products.

You know, there's a feeling I think now that the technology A I is the latest example is done so much for our society and so much progress.

But for physical products, cars going digital is like a huge new category and cars are emotional products.

They're not commodities, at least the ones we make aren't, I don't wanna fall asleep looking at my car.

So, so I think, you know what we've seen is a lot of talent is coming to Ford and they actually are interested in coming to Michigan.

Um for a lot of reasons, a vibrant community, we have plenty of water.

Um It's, it's a growing city now after decades of shrinking.

Um because there's a lot going on here and their day job would be really exciting at Ford.

Um There's uh there's something happening in our industry that never happened before in the last several decades.

I definitely we're going to talk about evs and what you're specifically doing on, on that front and other fronts too.

But what is your view on where the car will be in our lifetime?

Does a car drive by itself?

I see what a company in China like X is doing flying cars, to me it looks like a helicopter, whatever the hell it is.

I mean, what is the next 30 years look like for, for the actual physical thing?

That's a car, I don't think really anyone with a lot of confidence can tell you what 30 years looks like, but it's pretty clear to us what the next 5 to 10 years look like.

You know, we're not, it's not gonna be a future That's only evs, it'll be a mixed power train of ere P hes hybrids, pure ice.

If you're towing something and electrics and electrics will be a big part of the industry, but not the only part of the industry.

Um We're gonna have a lot of software in our lives.

The trips are gonna change, the trips are not gonna be from point A to point B with just bringing in your mobile device and kind of basically catching up with the rest of your life trips are gonna be different now, um with level three autonomy where you're gonna be able to take your eyes off the road on a sunny day, on the highway in two years, people are gonna do conference calls.

They're gonna do I talk to you.

Will my car be able to talk to you?

Like if you pass me by, that's Jim Farley and his Mustang.

But, but you would have to give it permission to share your data, but uh just like your phone, but absolutely and that makes the whole transportation industry a lot safer if the cars can talk to each other.

You know, we have 1500 semiconductors on in the average Ford now.

Um And it's the most technological product that I can think of.

We have up 6 to 8 cameras in every car.

We have ra radar systems, we'll have light our systems.

You know, the, the cars are unbelievable but they're also data capturing machines.

It means we have to be really careful about people's privacy and about remotely controlling the vehicles because they can be remotely controlled with autonomy, they can crash into things.

Um There are a lot of dangers with the new digitally enabled products and our policy makers have to catch up with that reality.

Are they even paying attention to it?

Yes, the, the US government, the president issued an executive order a couple months ago.

Uh all aspects of the federal government are looking at, you know, data privacy and autonomy and the policy around level two and level three autonomy.

Forget about Robo taxis.

You know, there's a lot of exciting eav automated vehicle technology between Robo taxis and today um will be accessible to millions of people.

We have over 26 million hours of blue crews hands free operation.

Now we have hundreds of thousands of people get up in the morning and press that button and drives hands free now on highways.

Um And we're starting to see the government engage in these important policy areas that will really have a big impact on people's daily lives.

Your counterpart of Tessa, um Elon views his company as an A I company for an A I company.

I don't think we constrain ourselves that way.

I mean, you know, we're, we're a passion company.

We don't see our vehicles as appliances, they're not toasters on wheels or iphones on wheels, you know, our, our vehicles um do the daily work of building America through our pro vehicles.

Um The F 150 is the best selling vehicle in the United States.

Um and has been for 40 plus years because it's the most versatile product.

We have an electric one, we have a hybrid one, the hybrid one can power your house for six days with pro power on board.

And of course, we have internal combustion uh F one fifties uh and with two rows of seating, you could practically live in an F 150.

I'm sure someone out there is living in F 150.

Um You know, so I think we have, of course, our vehicles would be filled with A I as they already are to do blues, but we don't limit ourselves that way.

We, we, we want to build vehicles that people care about that change the world.

Not, not just because they're efficient technology, but because they make people's lives better and because people care about them, we want people to name their cars.

Why are, why are the evs become so controversial in this country?

A lot of politicians hate them.

Consumers are worried about, they're gonna run out of charge, going down the block.

I, isn't it just a better way, a more efficient way to get around?

It is for a lot of people, you know, from, we think almost half of Americans would save money by buying an EV they take the politics out of it.

You know, we think for customers, they love the flexibility, they love not having to go to the gas station.

Uh They, they love having a full tank every morning.

They like having a digitally enabled car that normally comes with the NEV V. There's a lot of incredibly attractive consumer aspects of an EV I think it, it, it started off as an expensive technology and one that was really dominated in the urban world where, you know, politics play out and of course, with the charging infrastructure and building a whole new infrastructure outside of gas stations, it was bound to be, you know, politicized, but that's what we're focused on its company.

We're focused on the, the customer, we're seeing customers who buy a ma or lightning.

They don't go back to an ice vehicle.

They, they, it's like a different experience for them and they don't wanna go back to the other experience.

Is it hard to stay committed to ev si mean for your public company for has said it's going to lose four or $5 billion whatever it is on evs this year.

Is it hard to stay committed to that vision when these losses are happening?

And how long do you stay committed to it?

Well, I think first of all, we're not gonna invest in the future of evs unless we're convinced we'll be profitable.

So I'm not gonna, that's my job.

I'm not gonna allocate capital to my leadership team or anyone in the company, if, if we don't think we're gonna be profitable in the next cycle of product.

So, you know, that aspect is, is kind of undeniable.

It's unnegotiable.

Um You know, we, we really, we really believe in the consumer experience for an EV.

And so we want the next ones to be more affordable and that's why we're investing in more affordable evs in the next cycle of products that people see in from Ford in the next couple of years.

We're number two in evs in the US behind Tesla, a long way behind, but we're still there and people love their Maquis and Lightnings and they're gonna like the new ones even better.

Um It is what's hard about it is making the physical changes to be profitable, to bring the cost down, to have large unit castings to really change the way we engineer the vehicle uh to minimize that size of the battery because the battery is so expensive and such a big driver of the cost.

So the hard part for us is delivering and executing on affordable evs that make money just like Henry Ford did with model T. Hang with us, Jim, we're gonna go for a quick break.

Uh Please do hang with us on opening bid.

All right.

So Jim, why you were just breaking down um EV production a little bit.

Why are EV still so expensive?

You know, the reason is the, the um NCM batteries that have cobalt and lithium and nickel in them are very expensive and they're very heavy uh on a lightning that battery could be 30 $40,000 a combustion, you know, at scale of combustion uh drive train is gonna be, you know, a 10% of that.

And so really it's the batteries and the one time investment for building the battery plants and the manufacturing facility and engineering these very different kinds of vehicles.

The, the actual engineering of the vehicle, the, the parts that require to build an EV are totally different than a internal combustion engine vehicle.

You have inverters and, and you have uh electric motors and they have to all be integrated and there's high high voltage uh electricity uh that has to be managed.

There's fire risk in the NCM and all that adds cost.

What's exciting and we're the first one to invest in these lower cost batteries in Marshall Michigan is there's battery chemistry out there.

Uh iron phosphate that's much cheaper, like half the cost.

And we're gonna be the first ones bringing, bringing that to us customers.

And that's just the beginning.

We're gonna have a whole low cost platform.

And what we've had to do is completely change our execution.

We had a, a very American uh idea.

The skunk works team in California filled with a lot of Tesla and Apple people who don't have the prejudices that I would as a old school car person.

And they are engineering a completely different approach, a different product at a different cost with a much smaller battery and different chemistry that we're very convinced it will be not only a uh profitable, but it will be affordable for most Americans and it will be fully competitive with the best in the business, which we think are the Chinese.

When does, when does Ford make money from evs?

Is there a date on the calendar?

There is any date a couple of years?

Is it, do you go from losing what 5 billion to maybe like 2 billion and then break even?

And then I think the first generation, we have a lot of opportunity, improve our losses.

But until we get to the second generation, which we start to roll out in the next couple of years, that's when things turn around.

And as those products scale and become a bigger part of our EV business, you'll see the business turn around.

Why is China so good?

In some of these things, the software autonomous, what are, what are we not doing as a country?

I a couple of things, I mean, they really bet on evs, you know, the government got completely behind this technology many years ago and they supported the companies with tax advantages and registration advantages and free subsidies for, for the customers.

Um They invested in battery technology like CATL, which is the leading battery company in the world is Chinese.

I think what we have to do is take the IP S and develop there and localize and get close to it and learn how to do it ourselves.

That's what we're doing in Marshall, Michigan.

I think they, they made a strategic bet um and it's paid off so far.

But after 100 and 20 years, we've seen a lot of competition, we've seen competition from every country around the world and there's always gonna be someone new.

And I think what I find it forward is there are times when the company really rejuvenates itself like the eighties and nineties, like the fifties, like the thirties.

And I believe this time uh in the mid twenties, we're gonna be revitalized again with a whole new commitment to cost and quality and innovation.

Uh not to be a total name dropping, but we got to spend some time with the president on the day he announced tariffs on China.

Will those tariffs on China help Ford?

I I think tariffs are um are an important part of leveling the field for time frame.

But ultimately Ford has to be fully competitive on cost and quality with whoever we compete with, including a Byd or the Chinese players.

And we have a plan to do that.

In the meantime, the government has a job to do just like we face competing in China as an American company.

They have very strict laws around privacy.

You know, you saw Elon have to go there to get permission to have his self driving system approved by, by their government.

You know, they have policies where the government requires.

Um you know, all the privacy data not to leave China.

And, and we need this reciprocating policies around privacy and national security for these vehicles that can be autonomous.

We also need a pullet level in playing field because a lot of the companies there have state sponsorship and you know, we do have to compete.

Um there'll be a time frame where the level playing fields may take the form of this or that government policy like a tariff.

But over time as a CEO, I'm not gonna depend on that.

I'm gonna depend.

My job is to get fully competitive with that competition.

We, when I think of America Jim, I I think of Ford and this is the company that created automobiles.

Um We're getting ready to go into really a contentious election season here in this country.

Uh I had a former president convicted on numerous accounts, you have AAA sitting president not popular with Americans.

What is the outlook for auto demand look like ahead of this big event?

I mean, certainly Ford has seen a couple of presidential cycles we have after 100 and 20 years, you know.

Um so I I think first of all commercial business, our pro business is really strong beyond the presidential cycle.

You know, we have a multiyear order bank now for Super Duties and transit vans because America is going through a technology upgrade with five G. It's ons showing a lot of uh manufacturing like semiconductors.

We're seeing huge road construction work after COVID.

Um and all that, it makes our vehicle super high demand and the software and parts that we sell.

So we think our pro business is unique for Ford.

We have a really strong revenue base for many years to come.

Um But we shouldn't assume any anything there.

You know, we have to invest in the best software and parts and, and products but, but it looks really strong on the retail side.

You know, we're very fortunate.

We have a brand new, 60% of our products are new this year.

Uh So we have new F 150 new super duty, a new explorer coming.

You know, all of our main products are New Bronco is still pretty new.

The Maverick is really hot.

Our fastest turning a for and it's a most affordable Ford.

So we go into this, you know, whatever we face with the really fresh product, I think, um we're seeing strong customer base, but prices are deteriorate about 2% year over year.

We think the pricing environment is gonna continue to be difficult as the inventories from our competitors, uh return back to CO pre COVID levels and there's a lot of discounting that's good for customers.

What a what the next year or the year after that, you know, what we really wanna prepare for is a new generation of affordable vehicles at Ford.

Because whether it's next year or five years from now, there'll be a downturn and we wanna make sure we have great affordable vehicles for customers recently.

Uh I recently caught up with the CEO of uh OTIS, of course, they make elevators, uh iconic company as well and it wasn't lost on me on how infrastructure investment in this country has, has helped a company like that.

Is that investment helping Divan for pickup trucks?

Can you make that tie together?

Yeah, not so much on the F 150 side, but on the super duty side.

Absolutely.

We are completely oversubscribed to super duty.

We came out with a new one about, you know, six months ago and, and uh it's incredible.

Yes, you can definitely live in a super duty.

Um but we are totally sold out.

Same with transit van.

I mean, our van business is through the roof.

And interestingly, the pro customer seems to be taken to ev in a more robust way than retail.

We aren't seeing the slow down in the EV business for re for pro customers.

They were slower to start, but now that they're seeing the lower cost because they use the vehicles at higher rates, the ones that have smaller drive cycles and have depot charging at night.

They love evs because it brings the cost down and they have less moving parts, so they're more reliable.

Um So yeah, we, we're seeing a maybe a once in a lifetime kind of demand for commercial vehicles and we're the undisputed leader in the US.

You mentioned.

Um, you mentioned Elon, how's that partnership going?

You know, we just started uh using the supercharger network.

I think we have 100,000 applications for the adapter.

So it's very uh we've, we've shipped, I think we shipped it about a couple 1000.

So far the people get them like them, you know, we, we, we like anything we've learned like, well, the charging port has to be maybe a little bit different in the car.

The the lightning, you have to kind of like inch over because they didn't design their charging system.

But we're really the fir we are the first manufacturer to scale on the super charger network.

It's going well, so far we're really um appreciate working with Tesla um between the number one and number two players in the country.

You know, we think uh giving our customers access to the supercharger network is a good move.

Um but it's early days, you know, I mean, we still need 90,000 abductors.

You got you.

Well, you'll get them right.

I mean, I'm, I'm hoping I texted Elon so last night we'll see what he said.

What, what, what, what is that?

I look from the outside, looking at it.

I see you tweet him the follow on, on Twitter or X. I'm sorry.

X what is that relationship like?

You know, I think there's a mutual respect.

Look, you know, um I think when Elon started um and started scaling model Y and model three, he very much followed the Henry Ford model with the model T bringing, you know, increasing his, his uh utilization of his plant and bringing the cost down for customers as he went mainstream with evs.

Um I think it's been largely positive relationship.

You know, we in 100 and 20 years, we've been through a lot as a company like we know when what a partnership should be and what's realistic to expect out of a partner, you know, we compete.

I mean, Macky and ma y they're in the market competing every day, so we're realistic.

But um so far the partnership has gone well and we have a professional relationship and it's mutual respectful.

Does he text you right back?

Because if you texted me I'm, I'm, I'm, I'm dropping everything.

I'm, no, no, he is really, uh in incredible person like he, he absolutely does.

He, he very much made this decision based on, you know, the adoption of evs in the country and of course, it's good for him.

You know, his, his charging network is very valuable and, and a really wonderful asset for the company.

Um, but he's very responsive and I think it's because he knows we respect each other.

Uh I will say I will just leave it this Jim Farley.

Thank you so much for doing this.

I appreciate it and I will set the record straight.

I do like the Mustang despite my competing uh ownership record.

All right.

That's it for the latest opening bid.