Yahoo Finance Ford vice chair John Lawler on EVs, 2024 profits, and why the automaker never abandoned hybrids
Ford (F) is having a strong sales year in the US, with deliveries up 11% in the month of May, driven by a nearly 65% boost in hybrid sales from a year ago. Even electric vehicle sales are strong.
The sales success comes after a big transformation in the company last year. New vice chair John Lawler, Ford’s former CFO, played a big part in the company’s Ford+ plan, which split the automaker’s reporting structure into three units: its traditional gas-powered business (Ford Blue), commercial business (Ford Pro), and EVs (Model e).
While the EV business has seen higher costs and softer consumer demand, the company is still bullish on battery EVs. Yahoo Finance spoke to Lawler at the Deutsche Bank Global Autos Conference in midtown Manhattan this week, where Lawler gave investors and analysts an update on Ford’s 2024 outlook. Here are the edited excerpts:
Pras Subramanian: Ford had a strong sales month in May, powered by not just traditional ICE (internal combustion engine) vehicles but also hybrids. Did Ford envision that a year ago at the delivering Ford+ event? EVs were the big push then but look at hybrid sales now. How do you explain that?
John Lawler: Yeah, so when you think about hybrids with Ford, we've been in hybrids for over 20 years. We're No. 3 in the US in hybrids right now. Now our hybrid sales are going to grow 40% this year; you can't just turn that on with a switch. So all the narrative and hype had been around EVs, but we never walked away from hybrids. We always had those in the plan. They were always funded, and you're seeing that now, as the demand has increased, we have the capacity to provide for consumers, and you're seeing that take place.
We're seeing the demand story for EVs slow down a bit, but Ford's EV sales are still quite strong. What's your take on that and how Ford can bridge the gap to EV profitability?
So the way we think about EVs is it's not a matter of if, it's when and how fast. And so we did see a slowdown relative to what people expected, but I think there was a false signal coming out of COVID of how quick demand was going to grow.
That was because of the early adopters — they were really excited about having the choice of electric vehicles. Then we get to the early majority. They're not willing to put up with some of the other issues that you might have with an EV around range and those types of things. So choice is important, and it's coming through where you have hybrids, where you have plug-in hybrids. Other technologies are coming along as well that I think will help that transition. So I think you're going to see the growth continue, [but] it's going be a little bit slower than what we've seen in the past.
Of course, for us, getting to profitability is key. With our segmentation, you can see exactly how we're performing in the EV space, and we have plans to improve that primarily with our second generation of vehicles, where we'll see step function changes in the cost and performance of the vehicles. And that's where we think we'll really start to gain traction from a business standpoint for our electric vehicles.
So real profitability may come in those second-generation software-defined types of EVs?
Exactly. The cost structure of those vehicles is going to improve dramatically through battery technologies, efficiency of design, et cetera. That’s because [with] our first generation vehicles, to get to market quickly, we converted gas vehicles into electric vehicles. These [second-gen EVs) are ground-up platforms designed specifically to be EVs.
You’re talking about 2024 shaping up to be a strong sales year. Do you see that $10 billion to 12 billion adjusted EBIT (earnings before interest and taxes) target in play?
When we came out of the first quarter, we had guided that we would be at the high end of that range. And so that's where our guidance sits right now.
I’ve known you as the CFO, grinding those numbers and financial metrics, but now you have more of a strategic role in the business. I know you used to work in Europe and Asia, and now you’re going to leverage some of those roots, right? What's the new role going to entail, and how do you make Ford more efficient from an operational point of view?
It's really around strategic initiatives. The level of change in this industry is unprecedented right now. You have the propulsion changes, moving from gas to electrification, and electrification is going to take many forms, as we're starting to see develop. You also then have the digital technologies in the platform. So I'm going to be focusing on which technologies we're going move into alliances, and as you said, partnerships are going to be key.
One of the issues with this industry has been capital efficiency, and a way you work through more capital-efficient structures is through partnerships and sharing some of that capital footprint. So we're going to focus on that. And then, of course, I've worked all over the world. I spent six years in China. I've worked in Europe. I've worked in Japan. And I think I can add a lot of value working with governments and their leaders on the policies and how Ford can help and how Ford's going to interface in those markets.
Is Ford still focused on China? Is it more of a joint-venture situation?
Well, we've always had joint ventures in China, and we have two - one in commercial vehicles, one for passenger vehicles. They're really important partners for us. I love our strategy in China. It's capital light, we're profitable in China, we're exporting from China, we're growing from that market base. So we have a lot of possibilities in China, and I'm excited about the future there.
Pras Subramanian is a reporter for Yahoo Finance covering the auto industry. You can follow him on Twitter and on Instagram.
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