Rewind: CEO Jim Farley on Ford's EV gamble

30:11So in my case, the waste was that wiring harness, those fasteners, you know, all the, all the welded together front and rear structures that eventually unit casted, unit casting displaced, you see the waste. You look at it, you talk to the people, the engineers. Why do we have this waste? Why do we use a 25-year-old parts release system? And as a leader, you get down on the floor and you ask them the basic questions so you can visualize your decision. That's what base. Love that. Didn't know that before. I need to practice Gemba, clearly. I want to talk about, you have to restructure your company now, but it also seems like you've been talking about restructuring the economy.

31:03You've been talking about a refocus on the essential economy, blue collar jobs that are the backbone of this country. You wrote a LinkedIn essay in June about the focus of AI on white collar productivity, but that we need to do the same for blue collar work. So how are you thinking about automation at Ford? We have a complete crisis in the country that's not talked about. People like Mike Rowe will talk about it. But we have a crisis that's kind of not in the public debate. We have half a million shortfall of construction workers. We have a half a million shortfall of factory workers. Our emergency services, we don't have enough people to support our society.

31:46when things go wrong, firemen, ambulance, medical, the frontline people that make our society run, that we all take, many of us take for granted, plumbers, electricians, we call the essentially economy. And we see that at Ford because we're in the edge of this software-defined vehicle, but we're also a heavy manufacturing industrial company. And whether it's a technician shortage in our dealerships to work on these vehicles or the shortage of our factory workers. I really learned as a leader during the UAW strike, you know, what a crisis we have as a country. And I see it with our customers. Our plumbers and electricians are constantly trying to get young people into those vocations.

32:31And there's no training. The trade schools and the apprentice programs are not there anymore that our grandparents all, you know, made this country so great. And we're very vulnerable as a country. The productivity, as you said, of those essential workers is way behind white collar automation, AI deployment. Everything has happened for all the tools in white collar. There's not the same. And there's very little training. Companies like Ford, thankfully, have enough resources that we can put our backs behind this problem with trade schools and scholarships and stuff, but our society isn't doing it.

33:16In fact, we're going to have a conference here in Detroit in the fall in about a month where we're going to gather other companies that have the same problem, that really see it, solution providers and academia and creative people and government, where we're going to try to start to work this problem. is it a farm aid or you know medical crisis like COVID no it's more in a way it's just this threatening to our society and the way we're thinking about it is we're going to walk the walk ourselves invest heavily we have been we've we spend about a billion dollars on you know the dignity of workplace and safety in our plants we've modernized our buildings you know we're investing in trade schools and scholarships to recruit technicians for our vehicle repair, as well as our factory workers.

34:08But this is a society problem. And the one that bothers me the most is cultural, where we kind of as a culture think that everyone has to go to an Ivy League school to be valuable in our society. And yet we all know that our parents and grandparents kind of made our country wonderful because of these kinds of jobs. And there's incredible dignity, you know, in emergency services. And, you know, people can have wonderful careers. But our society doesn't celebrate those people like they do the latest engineer for AI. Yeah, and that's exactly where I wanted to ask you. I mean, this seems like such a reversal of decades of messaging in America, which is get out of manufacturing, go to the office.

34:53Is your advice to this next generation with AI actually get a job in manufacturing? I think it would help all of us as a society. Look, my son is 17. He's a senior in high school. And look, he's got every opportunity that you could ever imagine. He doesn't have to worry like most people. And I made sure that he had a summer job where he learned how to weld. he learned how to fabricate he learned how to really work with his hands and relate to people and he can make a choice and i have no prejudice for jameson if he turns out to be the greatest welder uh or mechanic working on our super duty diesel engines i'm i i will be so thrilled as parent um and i think we all need to kind of look at ourselves and and decide what kind of society we want to build in America.

35:51And it's not, you know, and look, let's say our national defense, we're getting into war somewhere. Google's not going to make the boots, but Ford will. And to defend our own country, we need these people. And now we're in critical, critical issues. You know, the average ambulance is 15 years old. You know, we do not have enough emergency care people. Look at what the firemen are having to go to in California now with the smoke and, you know, their own health. I mean, these are very dangerous jobs and we have a shortage and it's going to affect all of us in a lot of annoying ways. And if we don't really get serious about kind of readjusting our expectations for our kids and the younger people in our country to give them opportunities to grow and these are great jobs.

36:42A factory job at Ford's, you know, could be way over a hundred thousand dollars a year. And you can bridge into a lot of other things. My grandfather was a factory worker at Ford, and he became a Ford dealer late in his life in his 60s. Think about the possibility. He was an orphan. He had nothing. He never went to college. It didn't matter to him.

37:05So, yeah, I'm really excited and energized about this. It's a much bigger problem than fixing Ford and making Ford a world-class company. It's important for our country. And we need to focus on this just as much as, you know, how exciting the new AI is and the new social media dance on Instagram. You know, let's get busy on these important problems. We need to take another break. We'll be right back.

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40:13And we're back with Ford CEO Jim Farley. Before the break, Farley was really diving deep into his personal philosophy around blue-collar work in America and how he thinks, especially with the backdrop of AI, we need to be training the next generation of Americans to consider jobs in Ford's factories, in emergency services, and in trade work. But now I wanted to change gears and ask Jim a very specific question from a very special guest on my show. I do have a call-in question from a guest caller. Good.

40:47Nilay Patel:Hey, Jim, it's Nilay. I'm very excited to be calling in with this question. So as you know, I'm a Mustang guy. I have a 2021 Mustang GT convertible. It's one of my favorite cars ever. People love this car because it's so easily moddable and tunable. You can just reprogram the ECU to make the car go faster. the new version of the gas mustang the one with all the screens running on your new platform the ecus are locked people can't just reprogram them and a lot of enthusiasts attribute the recent drop in sales of gas-powered mustangs to the locked ecus so my questions are do you agree with that that the locked ecus are behind the recent drop in gas-powered mustang sales and do you have a plan to let people unlock the ecus and tune the car more easily thanks for answering the question Joanna, I'm sure you're doing a great job.

41:35I have no idea what that question means, so I'm going to set a timer. You get a minute to answer that. Well, I have this debate with my son, actually, because he has an older Mustang, and he didn't buy the new one for some reasons like that. So I would say the drop in sales, absolutely not due to that. But actually, we're doing really well with Mustang. And I think we're kind of the only one left, really, which we're quite proud of. And we're investing a lot in Mustang. And I think the thing that people don't get about Mustang is the global car. It's the best-selling sports coupe in the world.

42:16And we actually way outsell Mustang outside of the U.S. than inside the U.S. So when I look at sales for Mustang, I look at it globally. and some of our biggest countries like Australia and Sweden, other areas, the Mustang continues to grow because people want a little slice of that America. Everyone wants to do a burnout. And as far as the tunability of the vehicle, I think the call-in question is an outstanding question for this. This is a real dilemma for us, and there's no real easy answer. We want people to modify their cars, but we also have to take quality really seriously. And, of course, privacy as well.

43:01I think he was talking more about the performance of the vehicle. And so our approach would be to give people over time an option to digitally adjust their vehicle from Ford so that we can maintain the quality, but still have the user have their own kind of idea of performance. And that's different for everyone. And I think that vision will come to life in the coming years. The aftermarket is a real kind of opportunity, but it's also a big challenge for us because a lot of people like to write software in the control module that controls the powertrain that gets better performance. But what they don't know and what the user may not be aware of is all the reliability and the quality issues that they may be bringing up that are very expensive.

43:55My daughter's boyfriend is one of these people. He bought a brand new F-150. He's got a supercharger on it. And he recently had a bunch of error codes because he updated the ECU against Ford's standards. And now he has thousands and thousands of dollars of expensive repairs because the vehicle has started chewing its camshaft. And it was great that he could get 650 horsepower out of his EcoBoost F-150. He didn't think about what he was doing to the reliability of the vehicle, but we have to at Ford. So all I would say is it's a tough problem to solve. We always want to give customers the chance to tune their vehicles, but we actually know a lot about the reliability of the vehicle.

44:48And are we as a brand going to suffer our quality reputation to give that person the ability to modify the vehicle? I think that's a hard compromise for us to make. I actually understood most of it. I want to move on to the big T, the tariffs in the room. Last quarter, you operated at a loss despite record revenues because you took$800 million in tariff charges in Q2 when tariffs were actually lower than they were now. What are your conversations like right now with the administration? Well, they're very important. Ford is the most American company in terms of the quantity of vehicles we make in the U.S.

45:32We're over 80 percent of our vehicles sold here or made here. but we also are the largest importer of parts. And the discussion we're having with the administration today really covers three policy areas, a tailpipe emissions, tax policy, and especially tariffs. On tariffs, the biggest issue is the bill, the$2 billion bill that we have for our imported parts. And because we make the most in the U.S., we import the most parts. And we have a lot of stackable tariffs. There's fentanyl tariffs, 301s from China. We have steel and aluminum tariffs that are now over 50%. So there's a lot of tariffs that a company like Ford gets because there are auto-specific tariffs and they're not auto-specific tariffs.

46:20They all stack up. And so we have this layering of all these imported parts. And to make an F-150 affordable, there are a lot of parts that we can't make locally. wiring looms, fasteners, thousands and thousands of parts that we have to import because we actually can't even buy them locally in the U.S. And if we did, the vehicle would be$100,$200 a month too expensive for customers. And our discussions with Washington are really clear. Look, you know, we both agree, let's strengthen U.S. companies like Ford that are better in America. We have more UAW jobs than anyone. But don't penalize us for trying to make the vehicle affordable.

47:02And so we've had very productive discussions with Commerce and the president himself and the whole administration. But how can we come up with a way to minimize this$2 billion so that actually we are advantaged as a company? And, you know, originally they were thinking that there would be high tariffs for finished automotive vehicles, 50 of all vehicles bought in the u.s are imported through a port or through a rail across the border and now the standard tariff it looks like it's going to be about 15 12 and a half from japan um and that's not a fair fight um and you know we're just asking for a fair fight so look if you're going to allow people to import with 15 tariffs that includes their parts in the vehicle or at 15 % tariff, but you put a 50 % or 60%, 70 % tariff on our aluminum or steel that goes into our U.S.-made vehicle, hey, let's work on something, a process for tariff relief that would allow us to do that and still make the vehicles affordable.

48:13And that's what we're talking to the administration. They're extremely open. They're extremely supportive of us. They're also making a lot of policy changes on tailpipe emissions and tax as well. Look at the EV credits as an example. We can get to that if you want. But the tariffs are the most critical for our profitability. About 20 % of our profit is evaporated now because of these parts tariff. And we're highly engaged with the administration. I remain personally very optimistic that we will find a solution. But it is very expensive. I wanted to ask about the EV credits because between the tariffs, the EV credits going away, it feels like is this administration on your side yet you also are adding more jobs than ever to manufacturing here in the U.S.?

48:58You're doing the things the president wants. Yes. Well, I do believe that generally those three areas of policy are very important. We didn't I guess Joanna We didn't really feel like We should get a$7 ,500 check On an EV To make the transition successful We do need support For the production tax credit on batteries So that we can be competitive with China On batteries Because they have such a huge advantage And we do need to onshore that IP And start to really scale battery manufacturing Because you can't ship a battery overseas It's very heavy and it's not a good shipper, what we say is a shipper.

49:41So we have gotten a lot of support from them for making batteries here in the U.S. The PTC credit is very important. We have changed our investment on EVs to not depend on the consumer tax credit from the government. And I think that – and we're fine with that. Other countries do support in Europe and in China their EV consumers. We didn't ever really expect out of four. We're kind of a lift ourselves up by the bootstraps kind of company anyway. So, you know, that was something we did anyways. But I'd say the relief of the fuel economy standards is, you know, a very important topic that the administration clearly has a point of view on.

50:26And we want one national standard and we want to be able to sell what customers really want. And hybrids are really popular now. And so are EVs. So I think we'll find a tailpipe emissions that is more reasonable and sustainable and not have a bunch of states have unique standards that makes logistics for the cars a nightmare to send different states different emission standard cars. And that's really expensive for customers, too. I think the real area that is super critical for Ford and for companies like Ford, as you said, that are committed to the U.S., is this tariffs. working through and making adjustments as the tariffs get announced and deals trade, bilateral trade deals get announced.

51:09You know, we need to find a landing spot that works for companies like Ford, where it's a level playing field from a tariff standpoint and the administration accomplishes what it wants to accomplish. And we're not there yet. And that's why we're working really hard. I spent a lot of time on DC, and there's a good reason for it. This is really important for our factory workers, for the future of our country, and for the shareholders of Ford. And we're not going to rest until we find a solution. I want to come back to me. This is really, this whole podcast is about me, obviously. And you know that one of the main reasons I decided to get the Mach-E, other than it had good range and I love the way it drives, was the fact that it had CarPlay.

51:57Some of your competitors have abandoned CarPlay. A lot of the newer upstart car companies have their own software like Rivian, like Tesla. I want to talk about this new digital experience you guys are working on, but I want to just cut to the chase about CarPlay. What about CarPlay Ultra? Are you considering that? We are. We don't like the execution in round one of Ultra, but we're very committed to Apple. I've talked to Tim many times about this. Ford does not have the rights, in our opinion, of disrupting someone's digital life when they get in their car. We want you, Joanna, and all the customers to bring, whether it's whatever phone, whatever digital life you bring in, we want it to make it as easy as possible.

52:45We don't think we should restrict that to make money off the customers. We don't want it to be a hassle. We don't think we can design an experience that's going to displace your phone. and yet at the same time, whether it's automated systems or the way a trip gets planned, there are things that Ford is working on to add on top of that digital experience of Google and CarPlay that will make it even better. And we're highly informed by what's going on in China right now, the customer experience part of China. Let's say an AI assistant in the car, very important for Ford. We think that every customer should have an AI assistant in the car, Not just a voice to move to your phone-based AI system, but something specific that you can talk to, almost like a companion.

53:38We really believe it's a more complicated journey for us to allow everyone to bring their digital life into the car and have it seamlessly integrated. and then also put on top of that, whether it's a productivity software, we're now up to a million subscriptions now for our pro customers, or whether it's Blue Cruise or whether it's how you plan a trip, the auto-specific things like how your ADAS system works and how it integrates into your entertainment system, we believe we have to design something that works with your digital life as well. It's a more complicated choice, especially when you look at backcasting it into all of our past vehicles.

54:23But I believe it's a more customer-centric approach. And you will see that, Joanna, in your next shopping. You know, you'll make that choice. We'll all read about it. But I think, you know, that's our philosophy. Now, other companies have different philosophies. But we believe that our philosophy is the most customer-centric. But it seems like with the Ford digital experience, which you have rolled out to some cars, it's based on Android Automotive, that you're going to have to choose. Are you going to do this Android Automotive experience with the things you're talking about building on top of?

54:56Or are you going to pick a CarPlay Ultra experience, which is really going all in on Apple? Yes, I see what you mean. Yeah, it's a really good question. I don't know where Apple's going to go. I think Apple has to make a big decision. It's not a Ford decision, actually. And then based on their decision, we will decide. You mean Apple has to make a decision? Are you going to allow this to also run in combination with other software? Yes, not only that, but are you going to allow OEMs with the control of the vehicles? How far do you want the Apple brand to go? Do you want the Apple brand to start the car?

55:34Do you want the Apple brand to limit the speed? Do you want the Apple brand to limit the access? and we're doing that now for our pro customers if you're a pro customer you can limit access to the car the vehicle on the weekend because many of our plumbers and electricians they have a company vehicle and they're not really allowed to use it on the weekend or we allow speed control now can't go above the speed limit you know does that is apple going to want to do that if apple wants to do that i think we're going to have a tough time with that because then the digital experience gets really messy, and we'll have to decide between Google and Apple, to your point.

56:16Now, Google has two different layers. They have the Google Automotive Services, which is kind of a curated services digital experience in the car, but they also have Android Auto, which is actually an operating system that we can build our own experience on top of. And so Google, as a platform company, gives us a both. Apple's had a totally different approach. And again, I've talked to the Apple team and our team is in contact with them. I think Apple has to decide, do they want control of the entire experience inside a vehicle? If they do, they want to follow Ultra and the Ultra 2 or whatever it's going to be next.

56:52Then I think Ford will have to make a big decision. And I kind of know where we would go. We don't want, we just believe ADAS integration with your entertainment system is so critical. When you're flying down the highway with your eyes off the road, you know, in three or four years at 80 miles an hour on the I-5 and, you know, you're watching a movie or whatever we're going to be all doing or having a Chad GPT moment or having a wearable on, you know, We just don't think that a system from a tech company who's not integrated the car is going to save your life. It sounds to me then that you're really forced with the reality that you've got to build your own.

57:38Yes, yes. But the good thing is now versus five years ago or a couple years ago when you and I talked, the Google Android Auto is really advancing nicely. and we've learned a lot about how to build the experience on that. So for us, a lot of OEMs, I hear a lot of OEMs say, well, it's about control the customer. I don't want Apple to be able to, you know, that's not a big deal for us. Like we just want it to be easy for customers. But if those companies want to control the vehicle, like I just, I think that's a bridge too far. and in that case we do have to we do have to invest a lot more in a Ford experience I hope that doesn't happen by the way I look at what has happened with Huawei and Xiaomi in China it's amazing those companies are totally all in on auto you know when you're a Huawei or Xiaomi customer you know you either buy a Huawei system and someone else's brand or you buy a Xiaomi car and it's completely seamless.

58:47And I wish our tech companies had approached the auto industry that way, but they haven't. You said something really interesting about how you want to have an AI companion in the car. And I am actually spending a lot of time in the car now talking to ChatGPT. I'm not listening to Decoder. I have my, yeah, I have my iPhone, it's coming through CarPlay, it's Bluetooth paired and I've got my ChatGPT app. I'm not looking at it. It's safe, right? And I'm just having it in voice mode. And I'm driving to a meeting, driving a meeting to meet you. I say, tell me a little bit about what I should know about Jim Farley, where he's been in the news.

59:23It's a very interactive conversation, almost like I'm on the phone. Yes. How do you think about this? Does Ford have to be a part of that relationship? It's a good question. I think, yes, especially for the transportation related. I want to go somewhere. I want to know about my car and the condition of the car. I think we either have to be part of the conversation or we have to supply that. We actually think, not to be arrogant, because the safety control and the vehicle control, we think that we can provide a chat experience that is added value beyond your non-vehicle experience. But to your point, we don't want to burden the customer with two different experiences.

1:00:07that would be really arrogant and really bad for the company. And I think just in general, what you're bringing up, Joanna, and you've been on this for many years, but I think people are starting to realize why you've been on this, is that the difference between car companies when you have a software defined vehicles is not going to be what your sheet metal looks like. It won't be how powerful your EV motor is. That's all math. All the cars look nice. it's going to be this digital experience why someone buys this or that uh and so we have to sort this out really thoughtfully now in china i think china um neo has a um an ai companion in the car it's like a physical thing it's like a little person that's your companion and it works really well and customers love it.

1:01:02So I think if you look at China being ahead of the West in terms of integrating AI as a companion in your vehicle, the early indications are that a companion-like functionality from the OEM done really well can add a lot of value to people's lives. And that's a direction we're going similar to not investing in level four autonomy and robotaxi, but putting our effort in the AI space for automation driving into level three high-speed eyes off. It's a similar kind of bet. Just pick a few places where Ford can add value, but don't make the customer go backwards. That's kind of our philosophy. To be clear there, though, you're more focused on that highway driving experience right now with Blue Cruise.

1:01:54Yes, for sure. Our number one priority is to have, to not be the first one to do eyes off level three highway driving, but be the best and the most reliable and the safest and the one that you want to use for you and your loved ones. And we took all the Argo people and we gave them a choice. you know do you want to do highway high speed eyes off push a button you know watch a movie whatever people want to do uh we could do this podcast in your car you know whatever um that's where all of our ai deployment for autonomous driving because we think that's a cooler problem to solve for most average americans than a robotaxi even though the robotaxi is really cool problem i love being in a waymo you know we think that highway miles are a bigger society opportunity.

1:02:51My last question here, you get to play car salesman. It's next August. I got to get rid of this Mach-E. What do I do? You need to buy another Mach-E. We've improved a lot since your last one. It's a lot more affordable. We have some wonderful new experiences, and I'm going to give you a run for your money in terms of value. It's a really, really incredible product that we've refined over four years now. And the Mach-E's we're making now are pretty radically different than the ones we have OTA'd your car. And I know the improvements in that, but the new vehicle, the compute power on board, the efficiency, the quality, the improvements to the fit and finish are all material enough that I think you should absolutely test drive and see what we have.

1:03:49There's a reason why we just beat the revised Model Y, which is the best-selling alternative, not that you would just use that as your benchmark. But I think you're going to have a lot of fun shopping. And I think I'm going to learn a lot like the rest of America as you go shopping. And if you go, really what I would love for you to do is wait six months. All right. Because I want to show you this new universal car and you're going to go, Jim, I'm so glad you told me to wait. See, that's what you can really do for me. You can give me an extension on the lease. This is what you should have been doing for me.

1:04:24This is where I would have sold me. I would have said extension on the lease, six months. We're going to give you a good deal. We're going to give you a good deal, Joanna. You're going to be happy. And bridge you to something that no one will be able to offer you. Literally, you'll go, oh, my God, this is so much better than anything I could buy, including the Mach-E. And I'm really glad I waited. Yeah, that's the right approach. See, I should be working in your dealerships. That's how I would have sold it. Yes, yes. So, well, Jim Farley, thank you so much for spending so much time. I'm obviously, I've got a ton more questions, but we'll do this again sometime and have you back on the show.

1:05:02I don't think you're driving a dinosaur either. I think you're just, I think you're just, you're driving a fantastic automobile. I love my Mach-E and frankly, we're really proud to have you as an owner. And thank you for being on the podcast. I really always enjoy our interaction and I can't wait to learn more about your Jet GPT experience inside your car. So I hope you don't mind if a few of our software engineers call you. Yeah, they should call me. And again, not sponsored. I have been very happy Mach-E driver. I've been in it a lot this summer, and I can't believe – we didn't get to it, but the charging infrastructure has improved so much since.

1:05:42And I charge for 30 minutes at Electrify America. Electrify America has gotten better. Isn't that amazing? I have that CEO on here. I charge. I'm on my way. I drove 350 miles up to New Hampshire last week. Oh, good. Good. So, like, I've been happy. I just, we got some software things to deal with. We didn't really get into that, but it sounds like you're working on it for me. We are. Thank you for the time, Joanna. Thank you. All the best to you. You too.

1:06:10I'd like to thank Jim Farley for taking the time to speak with me and thank all of you for tuning in and letting me cosplay Nilay Patel. I hope you enjoyed it. If you'd like to let us know what you thought of the show or of me, I guess, or what else you'd like to see us cover. Drop us a line. You can email us at decoder at the verge. The team really does read every email or hit me up directly. I'm at Joanna Stern on all platforms. And don't forget, I've got a book called I Am Not a Robot coming out in 2026. It's all about the year I let AI take over my life. You can subscribe to my newsletter all about that too at joannastern.com.

1:06:47The show also has a TikTok and Instagram. Check those out at decoder pod. They're a lot of fun. If you like decoder, please share it with your friends, your family, your AI chatbot, and subscribe wherever you get your podcasts. Decoder is a production of The Verge, and it's part of the Box Media Podcast Network. The show is produced by Kate Cox and Nick Statt. It's edited by Ursa Wright. The Decoder music is by Breakmaster Cylinder. See you next time. Rock and roll.

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