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:
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?
If there’d have been a way for GM to implode but the good and effective middle-class workers to still maintain some sort of stable employment we’d all be better off. If only so we wouldn’t have been subjected to the horrible monstrosity that’s the current and previous generations of Silverado HD. And that’s just one of their many awful-looking production vehicles.
Ford is so stuck in the past I’m surprised they aren’t still selling Model Ts. Giving the unions everything they asked for, increasing plants to grow more union jobs and control and getting lousy built cars at the top of the cost sale won’t beat the Chinese.
I think Ford needs to be more specific when they say they want to build quality products. Maybe an adjective like “high”, or even “good” would help because somewhere along the line someone has interpreted the mandate as “mediocre”. As delayed as the rollout of pretty much all of their new products has been, you’d think they would have worked the kinks out, but apparently not. It took them 16 months to deliver my ’22 Maverick hybrid. I received it in October of ’22 and have had four recalls. This does not build confidence or loyalty, especially when the remedy for one of them seems to be, “If the engine explodes, stop driving as quickly as possible.”
This dude rubs me the wrong way every time he opens his mouth.
Ford is like everyone else whose bread and butter business in the states, they got drunk on high-end, high profit EVs and never saw the end of that gravy train in the rearview mirror until it slammed into their rear bumper.
Really? That’s what we’re calling it now?
That’s what we’ve been calling it for more than a decade now. It’s got a Wikipedia page: https://en.wikipedia.org/wiki/Great_Recession
That’s dumb. It already had a name at the time. GFC. Who’s knob who decided it should be The Great Recession?
Who decided to name it that? The politicians who didn’t want to be responsible for making it into another Great Depression.
So here’s an article from March 2009 discussing how everyone’s calling it the Great Recession: https://archive.nytimes.com/economix.blogs.nytimes.com/2009/03/11/great-recession-a-brief-etymology/
Not sure what else to tell you here, chief. It’s been the Great Recession from the beginning – this isn’t a post-hoc term.
Sounds like reporters drumming up a bit of drama. Everywhere else I’ve seen it just called the GFC. Maybe it’s just the globe minus the US that called it the Global Financial Crisis.
So if Quality was Job 1 in 1981, where is it ranking now, somewhere in the 6-8 range?
I used to work for a Ford dealer in Michigan who routinely stormed thru the service area bellowing after a customer blew up his office after their new car crapped out.
His usual rant included, “Quality is job one? More like job f***ing six!”
He wasn’t wrong…
“Farley said the company made that decision because the economics on smaller vehicles makes more sense for consumers.”
That statement makes absolutely no sense given that Ford has given up on selling small vehicles and makes most of their money on oversized behemoths.
“Dealer Supply Reaches Highest Level Since Pandemic Started”
Mainly because a lot of dealers and some OEMs are still living in a fantasy that pandemic pricing will last forever.
“Would Ford have been better off bankrupt?”
From the perspective of the Ford family, no.
From the perspective shareholders in general, no (since the shareholders typically get wiped out in a bankruptcy).
From a company housecleaning and long-term health perspective, yes.
“Mainly because a lot of dealers and some OEMs are still living in a fantasy that pandemic pricing will last forever.”
So far they haven’t really been proven completely wrong, though. The avg car price has greatly outpaced inflation (see here). Really isn’t sustainable I totally agree but those greedy fucks aren’t gonna let that go easily.
” I totally agree but those greedy fucks aren’t gonna let that go easily.”
What I’ve been observing is that they are slowing being forced to let it go as I’ve seen pricing coming down. But it’s not even across all makes and models.
Used Tesla pricing is coming down faster because Tesla is cranking out the product and cutting prices to keep their production running at full tilt.
Meanwhile at Toyota, they still can’t get their plug in hybrid production up to meet demand. And that has resulted in used hybrid Toyota pricing staying relatively high.
Yeah I just glaze over Tesla price news anymore since it feels like they adjust it every other week (that, and I don’t care for the brand). I also haven’t paid enough attention to brand-specific prices in general. Even with prices coming down, I still them settling into a higher average than before; the “new normal” so to speak. I guess I simply lack faith American consumers will do anything about it, especially for necessities like housing and transportation.
You’re not wrong.
Yes on the Ford bankruptcy. It would have solved the oversized Ford Family voting power, which in my opinion has overall been detrimental to the other 95% of shareholders.
Note that in a bankruptcy, the shareholders typically get wiped out and the bond holders become shareholders with the ‘new’ shares. So the 95% of shareholders you speak of would have been just as bad off as the Ford Family.
Agree. I mean the hypothetical post bankruptcy shareholders.
Farley often says stuff out loud that other CEOs only think but he runs his company exactly the same. So either he is just a smilin’ salesman blowing smoke, a bad manager that can’t change the culture of his company, or an attention-whore that is always trying to please his audience. None of these are good.
I always get the feeling they picked him to sell the idea that they were fixing problems, not to change anything at the company. So the first one, in my estimation.
I know he wasn’t popular, but I think Hackett walked Farley’s talk. When he came from Steelcase, he took one look at the “design” department and basically said, “This isn’t design; this bullshit styling.” He then rang up IDEO and started D FORD, which is where you got all of the cool updated interior functionality in the 2021 F150 and the Ford Maverick.
I’m on more of a Portishead/triphop kick right now, but no argument on Elastica for the 90s Britpop scene.
I love Portishead…what are some others in that genre worth checking out?
Well, Massive Attack and Sneaker Pimps are both mainstays, if you like trip hop you’ve likely heard them to death. If you’re willing to branch out, I’d suggest Mazzy Star and Azure Ray, both have more of a blues influence. If you prefer the hip hop aspect, Gorillaz, if you like goth vibes more, than Scarling’s album “So Long, Scarecrow.” Here’s one of my mix tapes (Starry Night Vibes), if you want:
1) Hal – Yasmine Hamdan
2) Wandering Star- Portishead
3) Think – Kaleida
4) Teardrop – Massive Attack
5) Halastjarnan – Kaelan Mikla
6) Space Song – Beach House
7) Halah – Mazzy Star
8) Oh, Maker- Janelle Monae
9) Glory Box – Portishead
10) Soft Sounds from Another Planet – Japanese Breakfast
11) Into Dust – Mazzy Star
12) November – Azure Ray
The Manufacturer’s customers are the dealers, then the dealers sell to us peasants at an adjusted market price. So, is Farley talking to us peasants or the dealers?
Ford is the one domestic company that seems to not have shit the bed in any major way, and even if they killed off all their smaller vehicles they still are leading a mini-revolution in the Maverick
I think it would have been a mistake for them to have gone through bankruptcy, considering how well the other two players have handled it.
They have not shat the bed in any major macroeconomic way, but they have proven beyond a shadow of a doubt that they are incapable of launching a vehicle. Either they have appalling quality issues (from the Focus transmission to the current Explorer “park them all in a field and fix them later” launch strategy), or they self-sabotage with lack of availability (Maverick).
Oddly though, the really difficult stuff that everyone assumes will be a horrific disaster (F-150 aluminum bed, Mach E actually working), turns out fine, or at least nominal.
Oh noooooo… The Mavericks are so popular that they can’t make them fast enough!!
The Explorers are, again, the same story. Popular enough that they are selling them on a guaranteed basis, while having a hard time sourcing chips to finish them. Supply chain issues are not a new thing in today’s world. Been going on for 4 years now.
As to recalls, please point me to one manufacturer that doesn’t have a similar level recall on their hands within the past 10 years.
Not saying that’s a good thing, but you can’t call out one without pointing to the others.
It’s one thing for a car to have 1 or 2 recalls. The current Explorer has had 50 (just counted last week) since it launched!!! That’s a crazy amount of recalls!!!
Last year Honda had more vehicles affected by recalls than Ford (in total.)
Recalls alone are not the final note in whether a manufacturer is crap or not.
This. And, if anything, recalls can be signs that the manufacturer wants to make things right, versus trying to hide defects or have cover-ups.
What’s damning is when the NHTSA forces a manufacturer to recall something and they try to do the bare minimum to cooperate (if they do).
Source? Actual recalls, not TSBs.
Yeah, I was wondering about that as well. Last year Ford total had 53 or 54 recalls.
https://www.dealerrater.com/recalls/Ford/Explorer/
I just went down and counted until the 2020 Model year was introduced. So 50 for the model. There could be more that were in that count for the older generation. Still a horrific number or recalls for one nameplate in 4 years.
Try a primary source like https://www.NHTSA.gov.
They show the most recalls for a single Ford Explorer year being the 2020 with 19, followed by the 2000 with 16, 1999 with 15, 2002 with 15, 2001 with 14 (and probably a fair amount of overlap given the generation), and so on.
The 2021 and 2022 have 11, 2023 has 6. Again, probably some overlap being in the same generation.
So I dunno what BS source “dealer rater” gets their info (the website itself sounds like a paid advertising scheme) from or what math they’re using, but their 50 number is spurious. If you add up the entire generation year-by-year you only get 47, and – again – there’s overlap with the same recalls applying to multiple years.
That said, yeah, 19 is fairly high, but it’s not absurd. There’s years of the Toyota Corolla with 14-17, RAV4 with 14-15, Highlander with 11-14, Chevy Tahoe with 13-16, Silverado with as many as 24, etc.
I’ve said it before and I’ll say it again: recalls alone are not necessarily a metric of quality or lack thereof.
The launch Explorers were not parked in fields because they needed microprocessors, they were parked in fields because they had severe quality issues that Ford decided to address after-the-fact, instead of halting production until the problems could be fixed on the line. (IIRC, transmission programming was one of the big issues.)
I agree that other manufacturers have had a lot of quality issues in the past few years as well, but we were talking about Ford, so…
https://wgntv.com/news/joliet/why-are-hundreds-of-new-cars-parked-at-joliet-racetrack/