EV Division Losses and Profitability Outlook
Q: Can you discuss Model e's losses and path to profitability?
A: Ford is laser-focused on reducing costs in Model e, having cut over $5,000 from Mach-E's cost, but revenue declines have outpaced these savings due to significant price reductions needed to remain competitive. The company is working to drive every dollar of cost out and aims to achieve contribution margin positivity, but falling EV prices make this challenging. Ford delayed the launch of its 3-row SUV to reduce costs further and meet expected margin levels. " "

Capital Allocation Plans and Dividend Policy
Q: Why is Ford conservative with capital allocation despite strong cash?
A: Ford maintains a policy to return 40% to 50% of free cash flow to shareholders but currently prioritizes investing in accretive growth opportunities during the industry's transition to EVs. The company is comfortable with its strong cash position of about $25 billion this quarter and will consider additional shareholder returns if growth opportunities don't materialize. "

Ford Pro Division's Profitability and Sustainability
Q: How sustainable is Ford Pro's strong performance?
A: Ford Pro is performing exceptionally well, with oversubscribed products like the new Super Duty (demand exceeding supply by 2:1). The company believes Pro's profitability is durable for many years due to fundamental drivers like infrastructure projects and pent-up fleet demand. Ford is expanding capacity to meet this robust demand. " "

Pricing Pressures in EVs and Combustion Vehicles
Q: How are falling EV prices impacting Ford's margins?
A: EV prices have dropped more than expected, with Ford reducing prices by up to 17% to stay competitive. This rapid price decline has challenged the company's ability to match cost reductions with revenue declines, impacting margins. Ford expects EV prices to stabilize but is preparing for continued pressure by focusing on cost reductions and affordable EV offerings. " "

Hybrid Vehicle Strategy and Capacity
Q: Can Ford meet increasing hybrid demand?
A: Ford has significantly increased hybrid capacity, with F-150 hybrid production expanded to 25% of mix and overall hybrid capacity nearly doubling to 400,000 units compared to a few years ago. The company plans to offer hybrid options across all models, mostly by adapting existing engines, requiring modest investments. Ford is confident in meeting hybrid demand without significant new investments. " " "

Impact of New Model Launches on Earnings
Q: Will new launch timing affect Ford's earnings?
A: Ford is taking a more measured approach to new model launches to improve quality, which may cause earnings to be a bit lumpy. The cautious rollout of models like the F-150 and upcoming vehicles like Explorer and Aviator is factored into guidance. The company believes this approach benefits customers and the business in the long term. " "

Regulatory Compliance and ZEV Credit Purchases
Q: Does Ford disclose ZEV credit purchases?
A: Ford confirms that they disclose ZEV credit purchase commitments; last year, they disclosed $700 million in their 10-K. In the first quarter, there wasn't anything material, but they will report future purchases if they are the right lever to optimize compliance and profitability. "

Cost Reduction Initiatives in Manufacturing
Q: What progress is there on the $2B cost reduction plan?
A: Ford is on track to deliver $2 billion in cost reductions in manufacturing, material costs, freight, and overhead, with most savings expected in the second half of the year. The company is making progress in design changes, manufacturing efficiencies, and supply chain improvements, aiming to reduce costs while improving quality. " "

Pickup Truck Demand and Pricing
Q: How is pickup truck demand and pricing holding up?
A: Ford sees strong demand for its pickups, with new models like the '24 F-150 turning in about 7 days. Earlier high inventories were due to building up '23 models before the launch, but incentives are decreasing, and average transaction prices are increasing with the new model mix. Ford acknowledges potential industry-wide pricing pressures but feels advantaged due to its fresh lineup. " "

Battery Raw Material Cost Reductions
Q: Will lower lithium prices reduce battery costs?
A: Ford expects reductions in lithium prices to benefit battery costs in line with contract structures. However, the most significant cost leverage will come from shifting to new battery chemistries with less expensive materials, which Ford sees on the horizon and is adjusting launch timing to capitalize on. " "