Today’s issue of The Morning Dump is going to be Ford-heavy; we have a lot of Ford news today, and it’s all worth discussing. The most interesting? CEO Jim Farley let slip that the company has a secret startup company that’s developing a third-generation EV platform to take on Tesla and Chinese automakers.
If you’re a shareholder of Ford you may be more interested in the company’s news that it has enough cash on hand and credit to start handing out some sweet, sweet dividends and that it’s not going to spend quite as much on electric cars. If you’re a Ford dealer, you might be more interested in getting some answers from Ford itself, which maybe sorta didn’t happen at NADA (the National Auto Dealers Association meeting in Las Vegas).
And, finally, a non-Ford bit of news: Toyota is going to build its next three-row electric crossover thing in Kentucky.
Ford’s Big Bet On A Cheap EV To Beat The $25K Tesla And Inexpensive Chinese EVs
Ford Motor Company had its big earnings call yesterday, and the news was pretty good; we’ll get to that in a second. First I want to pick out something curious that Ford CEO Jim Farley said on the call.
Right now Ford is in the middle/end of its Gen 1 EV platform lifecycle, which is Mach-E, E-Transit, and F-150 Lightning. These are net money-losing exercises. Gen 2 will start production around 2025 and include the Ford T3 electric truck.
Here’s what Jim had to say about that in his call (full transcript here):
Now, someone portrayed the change in the EV market as Darwinian. That could be a slow evolutionary change, but we think this has been a seismic change in the last six months of last year.
That will rapidly sort out winners and losers in our industry. Now, the catalyst for that seismic change is a combination of EV manufacturers cutting their price by 20% across all major geographies and a tremendous amount of capital flowing and a ton of new capacity into one single segment, two-row crossovers. Our overall EV strategy has never been more relevant as the seismic change happens, and we want to share with you our targets. Our next Gen 2 products will be profitable in the first 12 months of their launch.
And that will mean that we’ll get to mid to high single-digit EBIT profit margins over their lifecycle. And that’s going to deliver profits above Model e’s cost of capital. And here are our big bets and adjustments. We’re going to spend less capital on larger EVs.
Ok, so if you’re going to spend less money on large EVs, what exactly are you going to be spending your money on, Ford?
We’re also adjusting our capital, switching more focused on to smaller EV products.
Now, this is important because we made a bet in silence two years ago. We developed a super-talented skunkworks team to create a low-cost EV platform. It was a small group, small team, some of the best EV engineers in the world, and it was separate from the Ford mothership. It was a start-up.
Ok, this is getting intriguing. Why are you doing that?
All of our EV teams are ruthlessly focused on cost and efficiency in our EV products because the ultimate competition is going to be the affordable Tesla and the Chinese OEMs. And that bet and all of the rightsizing of capital and even delays to some of our products, given the market realities, better balance growth, profits, and returns for us.
Given the huge advantage that Chinese OEMs and Tesla have in development how, exactly, do you build a Gen 3 product that can compete? Especially when Tesla says it’s targeting a price of $25k for its next cheap EV and, you know, Chinese automakers have plenty of sub-$25k EVs.
Kirsten Korosec over at TechCrunch has a lot of details in her piece, which identifies ex-Tesla exec Alan Clarke and ex-Tesla/Auto Motive Power founder Anil Paryani as the people leading this project. The startup is separate from Ford and based out of Irvine, California.
It seems like Ford wants to have a dedicated platform that’s small and features relatively cheap batteries to get the maximum range out of minimum cost, which isn’t a bad idea.
Ford Beats Earnings Expectations, Declares Increased Dividend
How did Ford do overall last year? The company reported approximately $176 billion in revenue for 2023, up about 11% from $158 billion in 2022. Net income was up to $4.3 billion, compared to a loss in 2022, but adjusted EBIT (Earnings Before Income Taxes/Interest) was flat at $10.4 billion. That’s enough to earn a higher bonus check for UAW workers of about $10,416, up from 2022.
Ford says it’s sitting on a good amount of cash, and declared a dividend of $0.15 per share for Q1 and a supplemental dividend of $0.18 per share.
Here’s the company’s projection for 2024:
Ford anticipates full-year adjusted EBIT of $10 billion to $12 billion and to generate $6 billion to $7 billion in adjusted free cash flow, with capital expenditures of $8 billion to $9.5 billion. The guidance presumes flat to modestly higher full-year U.S. industry volume, with overall lower vehicle pricing. Upsides include beneficial pricing and mix from 12 months of sales of the all-new Super Duty that Ford Pro introduced during 2023.
That’s a little better than most analysts were expecting. Just FYI, Ford is now divided into Ford Blue (hybrid- and gas-powered cars), Ford Model e (electric cars), and Ford Pro (work vehicles).
The market is responding positively to both the revenue expectations and, seemingly, the strategic walking back of EV expenditures.
Ford Irks Some Dealers At Dealer Meeting
This last week was the National Auto Dealers Association meeting in Las Vegas and Ford, which has been trying to improve its relationships with dealers, had a bit of a mixed performance according to this Automotive News report.
On Friday, CEO Jim Farley asked a group of dealers who operate smaller Ford stores for “open and honest” feedback and vowed to spend two weeks traveling the U.S. to meet with as many of them as possible. Elena Ford, the company’s chief dealer engagement officer, acknowledged the group wasn’t happy on a number of fronts and promised change.
The next day, however, some dealers who attended Ford’s larger make meeting left disgruntled after executives offered few specifics on hot-button issues such as electric vehicles or quality improvements. The officials also failed to take questions from the dealers, in a break from the company’s standard practice
Generally speaking, if you’re going to have a meeting with a group that doesn’t feel listened to, uh, you should listen to them. Maybe Ford should set up a Discord like we did.
Toyota To Build New 3-Row EV In Kentucky, is it the Lexus TZ?
Toyota’s main manufacturing facility is Toyota Kentucky in lovely Georgetown, Kentucky where the company pumps out endless Camrys, RAV4 Hybrids, and Lexus ES variants.
Kentucky’s place in Toyota is pretty secure as the company just announced:
Toyota announced a $1.3 billion investment at its flagship Kentucky facility for future electrification efforts including assembly of an all-new, three row battery electric SUV for the U.S. market.
The investment supports the previously announced future BEV assembly at Toyota Kentucky. It also adds a battery pack assembly line to the facility, with batteries being supplied by Toyota Battery Manufacturing North Carolina.
That’s not a lot of detail, but we suspect it’s the 2026 Lexus TZ that was trademarked last year.
What I’m Listening To While Writing TMD
Man, I love The Highwaymen so much and their eponymous “The Highwayman” is so good. Why am I thinking about this first album? Well, it’s definitely because Toby Keith died and I read this:
— Justin Allen (@Jallen_Town) February 6, 2024
Oh man, why would you mess with Kris Kristofferson? Especially after he killed all of those vampires… I also love the idea of Willie Nelson shrugging mischievously next to Ray Charles while all this is going on.
The Big Question
The big debate we had today was which old Ford concept to use for the topshot. I ultimately went with the 021C because it’s a bright color and just stands out so well, which pissed off Adrian. I’ll let you guess what Adrian picked, what Jason chose, and then would love to hear what you’d have done.