Do you want to talk about Ford this morning? Good, me too. CEO Jim Farley went to a conference and said all sorts of interesting things about the company’s quality issues, the future of EVs, the UAW, et cetera. It’s worth walking through them because Farley, and Ford, are in a somewhat unique position.

Ford didn’t go bankrupt. Could the company have gone bankrupt in 2008 like then-Chrysler and General Motors? Absolutely. But Alan Mulally mortgaged much of the company in 2006 and borrowed more than $23 billion, something that seemed desperate at the time. It was the right move, and allowed Mulally to restructure the company in a way that got it through the Great Recession and onto a better footing without declaring bankruptcy.

Somewhat counterintuitively, not going bankrupt has also had a cost for Ford. The company has played a different game and its path has diverged significantly from that of GM and Chrysler, and not necessarily always for the better. I’m not arguing that Ford should have gone bankrupt, but it is rhetorically helpful to raise the idea as we go through Farley’s statements.

Oh, and I’ve got vehicle supply numbers. Let’s also talk about those.

Farley: ‘I Don’t Want A Bullshit Road Map’

So this week was the Wolfe Research Global Auto Conference in New York and it was kinda bullshit I didn’t get invited because it seems like a great party. My kinda scene. Maybe next year?

Ford CEO Jim Farley was there and he didn’t hold back. I’ve already told you about the Ford ‘skunkworks’ team designing a cheap EV, and now there’s some more color to that plan:

Let’s start with the Automotive News report on his statements:

“I’ve been in the prediction business in the EV business; it hasn’t been a great journey,” Farley said during the Wolfe Research Global Auto Conference in New York. “It feels great in the moment to say, ‘it’s 2027,’ or whenever it is, but it’s not reality anymore.”

Bleak. But it gets better:

“It’s nonnegotiable that we’re going to allocate capital to a new affordable electric vehicle … and you have to make money in the first 12 months,” he said Thursday, recounting the message he gave his team. “And I don’t want a bullshit road map. I want, like, a real plan. And if you can’t [execute] that plan, we ain’t launching the car.”

Farley said the company made that decision because the economics on smaller vehicles makes more sense for consumers.

“What the customer has now said to us is, if you have [an EV] larger than Escape, it better be really functional or a work vehicle,” Farley said. “But if you do the economics for a vehicle, let’s say the Escape or smaller, it’s totally different, it completely works. In fact, it’s dramatically better operating cost than a Corolla or Civic or even a Maverick.”

This is all true, though I don’t like anything that seems like Maverick slander or implies it isn’t the perfect vehicle.

There’s sometimes this sense that journalists only want manual brown diesel station wagons, and we don’t want those, but we’ve also been saying that there are too many expensive EVs for a while now so it’s nice to get a little backup here.

So where does bankruptcy come into this? It’s a little complicated, but let’s look at Ford’s rivals starting with Chrysler->Daimler Chrysler->Cerberus Chrysler->FCA->Stellantis. Post-bankruptcy it was sold off to Fiat for a song and has become the multinational automaker it was probably always going to end up being. Making affordable, global EV platforms is now a scalable challenge for a company that has a trillion brands.

And General Motors? The company was already shipping more of its production to Mexico before its bankruptcy, but the reorganized company has doubled-down on cheaply building high-margin trucks and SUVs there, only helped by a long period of relatively low gas prices. GM may have fumbled its Ultium launch, but it’s closer than Ford to having a full lineup of EVs. (I can name a bunch of upcoming GM EVs. But what’s the next Ford EV?).

Would a bankrupt Ford have been forced to merge with someone else and end up part of larger company like Volkswagen? It’s a possibility. Ford’s alone, though, and it probably can’t afford to keep losing $5 billion a year on EVs indefinitely.

Farley mentioned something similar to this as well, as picked up by Reuters in its report:

“If you cannot compete fair and square with the Chinese around the world then 20% to 30% of your revenue is at risk” over the next several years, Farley said.

[…]

“We can start having a competitive battery situation. We can go to common cylindrical cells that could add a lot of leverage to our purchasing capability,” Farley said. “Maybe we should do (this) with another OEM (automaker).”

GM has been a little pouch-heavy with its approach, but that’ll probably change going forward. Should GM and Ford just work together on this?

Here’s GM CEO Mary Barra at the same conference:

“If there’s ways that we can partner with others, especially on technologies that are not consumer-facing, and be more efficient with R&D as well as capital, we’re all in,” GM CEO Mary Barra told investors at a conference sponsored by Wolfe Research.

I mean…

Farley: Quality Regrets Is A ‘Humbling Thing’

Generally speaking, Alan Mulally has gotten a lot of deserved credit for streamlining Ford’s organization and trying to create a better product mix. Who deserves blame for Ford’s quality issues, then? Was it Mulally? Was it the lost period from Mark Fields to Jim Hackett?

It doesn’t matter whose fault it is, because it’s Farley’s problem now, which he acknowledged in the same conference, via Automotive News again:

“I wish I had the same laser-focus on transforming our industrial system” as on other parts of the business, Farley said at the Wolfe Research Global Auto Conference in New York. “The capability atrophy in engineering, supply chain and manufacturing at Ford — [CFO] John [Lawler] and I talk about this every day — needed a much more fundamental reset than I had realized. I think we all have regrets, and that’s a big one for me. It’s a humbling thing.”

Ford has seemingly done better lately, changing things such as tying manager bonuses to quality performance and delaying launches of new products until those products are actually ready to launch.

GM had this issue when Barra took over, including the ignition switch recall, but that was really an “old GM” problem that “new GM” had to deal with. Ford did reorganize, of course, but would the clean slate of a bankruptcy addressed this earlier?

Farley: ‘We Have To Think Carefully About Our (manufacturing) Footprint’

Here’s the one where the non-bankruptcy becomes most evident. As Micki Maynard pointed out before here, Ford’s longstanding partnership with the United Auto Workers has fundamentally changed.

Ford has the most union workers and has long prided itself on having a less contentious relationship with the UAW.

Those days are in the past, per The Detroit News:

Farley said as the company looks at the transition from internal combustion to electric vehicles, “we have to think carefully about our (manufacturing) footprint.”

Ford, Farley said, decided to build all of its highly profitable big pickup trucks in the U.S., and by far has the most union members — 57,000 — of any Detroit automaker. This came at a higher cost than competitors, who went through bankruptcy and built truck plants in Mexico, he said. But Ford thought it was the “right kind of cost,” Farley said.

“Our reliance on the UAW turned out to be we were the first truck plant to be shut down,” Farley told the conference. “Really our relationship has changed. It’s been a watershed moment for the company. Does this have business impact? Yes.”

Did UAW President Shawn Fain have a response to this? Of course he did:

This contract was a major victory for working families across this country, and if Ford is upset about that, that tells you a lot about the leadership of this company. https://t.co/NoDqIkQDEK

— Shawn Fain (@ShawnFainUAW) February 16, 2024

The sense that I get is Ford is a little irked about how the strike went down last year and is still licking its wounds a bit, though I wonder how well this kind of rhetoric serves the company long-term (in the short term, investors probably don’t mind hearing it).

This goes back to what I said before about General Motors and Mexico, but GM makes about 700K vehicles there, which is almost double what Ford is making in that country. Could Ford build its next cheap EV in Mexico? Is keeping a strong labor base a tangible benefit for Ford or another legacy cost?

Dealer Supply Reaches Highest Level Since Pandemic Started

Yesterday I wrote about how vehicles have started to become more affordable, and the corollary to that is dealers have the highest supply of vehicles since June 2020, when the pandemic was in full swing.

According to Cox Automotive, vehicle supply is now at 80 days, with an average vehicle listing price of $47,142.

At the start of February, the total U.S. supply of available unsold new vehicles was 2.61 million units. That is 870,000 units – or 50% – above a year ago. Inventory was down from 2.66 million at the start of January.

Day’s supply at the start of January hit 80, up 38% from the same time a year ago. The last time days’ supply crossed the 80-days mark was June 1, 2020, when it was 83 days’ supply.

To the surprise of no one, the highest supply are among domestic automakers, specifically Ram and Jeep, though Genesis and Infiniti dealers are also clearly getting vehicles back on the lot in large numbers.

The tightest supplies are for the Toyota Grand Highlander, Ford Maverick, and Chevrolet Trax.

What I’m Listening To While Writing TMD

Is Elastica really the best Britpop band of the ’90s? I am open to the argument. Certainly, lead singer Justine Frischmann has had the most interesting post-Britpop life, having discovered and nurtured M.I.A., become a painter, and apparently married an atmospheric scientist.

The Big Question

Would Ford have been better off bankrupt? (I realize this sounds like a wild question). Or would that have meant the death of the company and caused way more ultimate damage?