Back in the 1980s, Ford’s ad campaigns ran on the idea that quality was “Job One.” If there was ever a time for truth in advertising, it’d be now, when Ford’s pervasive manufacturing issues keep costing it billions of dollars every year. On today’s morning news roundup, we lead with just how Ford is trying to get it together on the quality front.
Also on today’s docket, we have Mary Barra’s big payday; some tough news for General Motors on the chip shortage front; and more on Elon Musk’s price-cut strategy at Tesla, which may depend on being able to deliver one of his biggest and most ambitious promises. There’s a lot going on—no Bare Minimum Mondays in The Autopian’s Blog Mines—so let’s get into it. [Editor’s Note: What the hell? Bare Minimum Mondays are a thing? That’s it, I’m going to be keeping a close eye on our Monday numbers. A close eye! -DT].
Ford Tries To Raise The Bar, Starting With The New Super Duty
It’s a tough time for Ford Motor. In addition to undertaking the same electrified and digital transformation as almost every other automaker, it’s having to address quality and reliability issues at the same time—two major undertakings, but the first one cannot happen without the second.
After all, Ford had to post a $2.2 billion loss for 2022 and a good chunk of that can be attributed to $4.17 billion on warranty claims that year alone. (Yes, that’s a lot.) Basically every new Ford vehicle launch in recent years has seen quality issues, costly recalls and upset customers. That’s not what you want when you’re try to roll out a ton of new products, chase Tesla on the EV front and convince buyers and investors alike that you have what it takes to survive long-term.
CEO Jim Farley is one of the sharper guys in the business right now, so you know he knows his ass is on the line to fix this. How could it not be? So today we have a good deep-dive from Reuters into what’s being done to fix these quality issues, starting with the new Super Duty truck line at its Louisville, Kentucky plant.
There’s no single magic bullet here, but a lot of different, detail-focused initiatives. Those include adding quality inspectors, using more cameras for detailed inspections, driving a higher percentage of vehicles to check for defects and even halting the line to catch problems if necessary—a last-ditch move that can cost millions of dollars. But it’s being done here if that’s what it takes:
As part of a new approach to stamping out quality demons, Kentucky Truck Plant manager Joseph Closurdo said he stopped production for as long as three days earlier this year. The halts gave engineers and suppliers time to fix defective parts discovered as workers began building a new generation of Ford’s highly profitable heavy-duty pickups.
“We would shut the build down if we weren’t meeting one of the targets” for quality, Closurdo said on the plant floor last week.
Halting the assembly line rather than building trucks and fixing them later was just one element of a new approach to attacking quality problems that Ford is road-testing with the launch of the redesigned Super Duty trucks.
[…] Instead of test-driving a small sample of trucks to check for squeaks, rattles or infotainment system glitches – problems that take down scores on external quality surveys – Kentucky Truck deployed workers to drive 28,000 of the first new-generation Super Duties along a 25-mile (40 km) route near the factory.
“If it’s got a button, touch it. Make sure it works,” said David Jones, a member of the test-driving team and a 34-year Ford veteran whose father also worked at Kentucky Truck.
The story says that Kentucky Truck’s two lines are now running at close to full speed, cranking out an array of trucks and SUVs about once per minute. And the quality lessons learned here will soon be rolled out to other plans like the one making the new 2024 Mustang.
With any luck, these improved tactics will cut down on Ford’s recall headaches. It literally cannot afford to keep getting this wrong.
Mary Barra Takes Home The Big Three Payday Crown Again
Speaking of American auto industry CEOs, GM’s Mary Barra kept her title as the highest-paid chief executive in 2022, although it was down a few hundred grand from the previous year. (I hate it when that happens.) This detail comes to us from Securities and Exchange Commission filings reported by The Detroit News.
Here’s how much money car company CEOs make, if you’re curious:
Barra, 61, received pay last year of $28.97 million, down slightly from her 2021 compensation of $29.1 million. Even with the decrease, her 2022 compensation was more than both of her crosstown rival CEOs.
In late March, Ford Motor Co. reported that CEO Jim Farley, 60, made nearly $21 million in total compensation in 2022 — down 8% from 2021. Carlos Tavares, 64, CEO of Stellantis NV, maker of Jeep SUVs, Ram pickup trucks and other vehicles, received $24.8 million in 2022, a 22% increase from 2021.
[…] Pay for other GM executives in 2022 included:
Paul A. Jacobson, executive vice president and chief financial officer, $10.2 million in 2022, up from $9.57 million in 2021
Mark L. Reuss, president: $14.3 million, up from $12.5 million in 2021
Douglas L. Parks, executive vice president, global product development, purchasing and supply chain: $8.77 million, down slightly from $8.83 million in 2021
Stephen K. Carlisle, executive vice president and president, North America: $8.79 million, down slightly from $8.98 million in 2021
Barra’s had quite a run from the ignition switch scandal to the rapid electrification effort GM’s now undertaking, and I think she’s one of the best CEOs that automaker has had (independent of the fact that the bar for that is extremely low.)
But GM Is Struggling With Chips
But GM’s big electric push can be summarized in two words: “It’s coming.” The Cadillac Lyriq EV is barely anywhere right now production-wise [Editor’s Note: I saw out of my BMW i3’s window Jamie Lee Curtis driving hers in LA just the other day. -DT], the GMC Hummer EV is experiencing serious quality problems (and it’s patently ridiculous), the Chevy Bolt just entered hospice care and the Equinox and Silverado EVs are all still forthcoming. I think this rollout is due to be slower than GM’s been hyping it up to be.
And let’s put aside EVs and just talk normal cars for a second, too. According to a new study reported on by Automotive News, GM’s plants rank among the very worst hit by semiconductor shortages. This all bodes poorly for sales, profits and costs to the consumer:
The 11 GM plants — seven in the U.S., three in Mexico and one in Canada — have cut 327,148 vehicles in total from their production plans in 2023, according to AutoForecast Solutions, which has tracked the disruption of the chip shortage since it began in 2020. That figure accounts for about 58 percent of all chip-related North American production losses in 2023, and about 29 percent of the global total.
Emphasis mine up there, because holy shit. You don’t hear much any more about the chip shortage—I think it’s the kind of pandemic-related news we all know about and almost ignore now—but it’s still very much a thing. And GM’s feeling some of the worst of it.
Tesla’s Price Cuts Hinge On Autonomy And Subscriptions
Finally, here’s the Wall Street Journal’s Tim Higgins on the larger strategy behind these crazy rapid-fire Tesla price cuts we’ve seen all year. It’s not just about gobbling up market share—not entirely, anyway.
Musk’s plan apparently relies on a much-discussed and so far much-loathed possible key to future auto industry revenues: subscriptions. Basically, the plan is to get as many Teslas into people’s hands as they can right now, so they can charge them later on for subscriptions to the so-called Full Self-Driving tech:
Some fear Mr. Musk is picking a page from the industry’s dusty old playbooks by chasing a crown of global sales leadership, potentially at the expense of profit margins.
Mr. Musk maintains he is making a 21st-century gamble that he can, over time, profit from future software subscription-style revenue from Tesla owners, including for autonomous-driving capabilities.
“We do believe we’re…laying the groundwork here and that it’s better to ship a large number of cars at a lower margin and subsequently harvest that margin in the future as we perfect autonomy,” Mr. Musk said last week.
His argument is akin to Apple Inc.’s with iPhones and App Store sales: The bigger the fleet of Tesla vehicles sold today, the more potential for higher-margin software profits in the future.
The plan’s not unprecedented. Hyundai is hoping subscriptions will make up some 30% of future profits. But Tesla’s really the only major automaker still making big, bold, “just around the corner” promises when it comes to autonomy.
Full Level 4 self-driving, depending on who you ask, is somewhere between five years and a century out. The people saying “five years” are typically those who were saying the same thing 10 years ago, and there are fewer of those voices now that Argo AI and other firms have gone kaput.
But Musk remains extremely bullish on autonomy. In many ways, it’s the boldest claim he’s ever made, and for him that’s saying a lot. He’s the one who once promised drivers five figures’ worth of annual passive income from Tesla robo-taxis and made the claim that Tesla would be effectively worthless if it can’t solve self-driving. Clearly, he isn’t giving up on that if “perfecting” Full Self-Driving is the reason behind these price cuts, which have dug into the profit margins Tesla investors love so much.
Well, I’ve used Full Self-Driving (note: Tesla’s cars are not “self-driving” and in fact no cars on sale today are) and it’s like teaching a terrified 15-year-old to drive after they’ve been secretly raiding mom and dad’s liquor cabinet all afternoon [Ed note: This is hyperbole, of course — I feel I need to clarify this given the passionate nature of Tesla stans. -DT]. If this is the plan, Musk and company have a long way to go.
What’s the worst quality issue you’ve experienced on a new car? I’ve been fairly lucky on that front, although I owned an R56 Mini Cooper for several years and I can tell you that some stereotypes are true for a reason.
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