mobile-menu-icon
Ford Authority

Ford Has $8 Billion Cost Gap Compared To Traditional Rivals

Over the past couple of years, Ford CEO Jim Farley has been very vocal about the company’s many perceived inefficiencies, including a major overstaffing issue and quality problems that will reportedly take years to totally rectify. These issues came to light following the automaker’s disappointing 2022 financial performance, though the company remains confident in Farley’s ability to right the proverbial ship. While speaking at the recent 2023 Wolfe Research Global Auto, Auto Tech, and Mobility Conference, Ford CFO John Lawler added some context to the company’s financial struggles by noting just how wide the cost gap is between it and its rivals.

John Lawler, Ford CFO

“So if you look at what we believe our cost gap is to traditional OEMs, about $7 billion to $8 billion,” Lawler said. “And so we think it’s about $3 billion to $4 billion of material cost, which, to your point, is going to be a longer arc to take out. And it’s primarily driven by complexity over design. And that runs through every part of the business, Rod, it runs through material cost, it runs through logistics. It runs through manufacturing, it runs through engineering. And that has to be a key thing that we work on. And you’ve talked about the teardowns and you look at that versus not only traditional domestic competitors, but the new competitors that we have.”

“Of course, warranty is an issue for us of about $1 billion. We had talked about $1 billion to $2 billion. In 2021, we improved by about $1 billion. Last year, we were about flat. So we have $1 billion or so to go. And then you talk about structural cost. We had identified $3 billion of GAAP last March. We’re still about that. And that’s going to run through manufacturing. It’s going to run through spending related, et cetera. But what’s going to be really key to see it, which is an important part of your question is the segmentation because it’s not going to happen the same through each of the segments.”

Ford CEO Jim Farley

Complexity is something else that Farley has mentioned as a source of lost profit in the past, along with overstaffing at a number of levels, inefficient manufacturing, and warranty costs. As the Ford CEO recently pointed out, these problems have been corrected before by The Blue Oval, only to reappear – highlighting the need for long-lasting, fundamental changes to the way the automaker does business.

We’ll have more on this soon, so be sure and subscribe to Ford Authority for continuous Ford news coverage.

Brett's lost track of all the Fords he's owned over the years and how much he's spent modifying them, but his current money pits include an S550 Mustang and 13th gen F-150.

Subscribe to Ford Authority

For around-the-clock Ford news coverage

We'll send you one email per day with the latest Ford updates. It's totally free.

Comments

  1. Bill Howland

    And yet FORDmoco demands that combined Lincoln/Ford dealerships who want to sell their EVs must install both “Ford Branded” Chargers and separate “Lincoln Branded” chargers…

    This is most ridiculous since no one I know of goes to a dealership to recharge for the simple reason that Real Estate at a dealership is at a PREMIUM, therefore all chargers are always blocked by one type of car or another…

    The Second Dopey Principle is that if someone is about to run out of juice, they could care less about the LOGO on the charger escutcheon.

    The Third Dopey Principle is that there are very, very few people who can afford the extra cost of a LINCOLN who don’t realize this is a Badge-Engineered FORD.

    Reply
    1. Michael K

      You read this article and this is what you got out of it?

      Reply
    2. Scott

      … please, step away from your keyboard.

      Reply
  2. mfornetti

    I recall, Ford slogan, Quality is Job One, it must of been long ago.
    If these problems have run through various CEO’s then you have to look at the Board
    selection process for CEO’s and the Ford family influence.
    I canceled my order for my 2023 F-350 because they cannot tell me when it was being built, I lost variable steering and and messaging seats that I have now.
    Ford has a low relationship with suppliers and that tells me they drive price over quality in procurement.
    They are all consumed on EV’s but lost the ability and focus on the ICE side needed to fund EV buildout.

    Reply
    1. Richard MacDonald

      How true, things never change.

      Reply
  3. David Dickinson II

    “If these problems have run through various CEO’s then you have to look at the Board”

    You are so right. Everyone focuses on the CEO, but Boards get fat and lazy. It isn’t a country club, it is a business. A theme that weaves across multiple CEOs is a Board problem, which means this is a Bill Ford problem. It is great that Farley brought on the Haliburton guy for quality, but maybe the Board needs some hands-on “quality” expertise too instead of political operatives.

    Reply
  4. Cigna

    As long as Ford remains the industry leader in recalls, their costs will always be higher than their competitors, warranty costs reduce or eliminates their profits and will probably cost them future sales. Also, dealers hate warranty claims since they are only reimbursed for their costs.

    Reply
    1. Kelly

      I have a 2014 Ford escape titanium top of the line but nothing but problems with it since I bought it in June 22 Im NOT happy with this vehicle I’ll NEVER buy another one transmission problem and it was leaking in my windshield water barrings I got fixed brakes I got fixed roaders , axels both front and back Now need to fix oil leak it’s going all over engine now … Junk sorry my opinion!!!!!!

      Reply
  5. SLB

    If Ford would concentrate a little more internally to fix their problems and spend less time and money on reinventing how dealerships should do business and forcing their ideas through required programs, I think they could probably solve these problems a little more efficiently. They should bring their focus in-house, get things done more efficiently at the root and then worry about down stream programs and policies at dealerships. Many dealerships have been in business 50 years or more and have done so by adjusting in short time to what consumers want…market forces make it happen. They don’t need to be force fed proper procedure by the manufacturer when the manufacturer itself isn’t doing things the best way possible. They talk about over complication and in-efficiency….they ought to look at the corporate structure they just instituted this fall above the dealership level….we went from one or two reps handling things with us to ten. Its ridiculous and most of the people in those positions will admit it off the record.

    Reply
  6. NKC919

    They need to focus on those of us who are long time family ford owners. My Bronco has been in the shop since Thanksgiving waiting on 2 headlights.

    Reply
  7. Thomas

    So they need to save 3-4 billion on material cost – while saving 1 billion on warranty cost? Yeah I’m not sure those cheaper parts are going to reduce your warranty work.

    Reply
  8. MIKE BARANOWSKI

    Business as usual for the suits. Use a lot of jargon, blame their predecessors etc. That being said Farley has to go. Cut this,cut that. Invest in engineering and quality and the rest will follow. After being in the dealership racket for a long time I have seen it all. When things were lean Ford would come up with one BS program after another to boost profits. Almost all were buried and forgotten within a year. Look at Toyota and Honda. They focus on quality and value. The vehicles sell themselves. It is so sad, even though I am responsible for a fleet of Ford’s I will not buy one. It wasn’t always like that.

    Reply
  9. Materialman

    So that’s why Ford stock never goes up.

    Reply
  10. David White

    Following Ford’s excuses is like listening to a speech and playing Bullshtt Bingo— time worn excuses. Farley is too full of himself. Go Woke, go Broke. Poor design and launch discipline affecting quality and recalls. Few “car guys”, as they are not valued. Same old same old.

    Reply
    1. RichG

      This has nothing to do with being woke. Jesus.

      Reply
      1. RWFA

        Sen Sheldon Whitehouse had a good line (something like):

        “When they scream “woke!”,
        It’s just smoke!”

        His point is they scream woke, then demand funding cuts on the thing they smeared as woke.

        Reply
    2. RWFA

      Although you did a great job asLarry Tate in Bewitched, you are nuts here.

      You want a car guy, you got one; Farley’s a car guy through and through.

      Then he does what any competent car guy in his position must do, and you complain about that.

      Such comments are self disqualifying.

      You are lucky Endora doesn’t turn you back into a frog.

      Reply
  11. Scott

    … as Lily Tomlin once said: “I hate people who use big words, when small ones will do ..”
    .

    Reply
  12. Dan Brock/904-923-2315

    I am a parts guy who knows Ford very well. Especially a Ford family trying to order a Ford Ranger Lariat. You have to start with the order and work your way down the chain. First step to stop the bleeding is volume,which Ford forgot about. So many packages that Ford offers is not available. Suppliers don’t know about lost sales, which would allow them to gear up workforce.

    Reply
  13. Jerry mulkey

    for S650 chassis give the specs: for improved pickup chassis points;wheel base ; track width; curb weight; nose & rear bumper changes appear as only deviation from S550..?? Thx !

    Reply

Leave a comment

Cancel