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.”
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.
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Comments
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.
You read this article and this is what you got out of it?
… please, step away from your keyboard.
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.
How true, things never change.
“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.
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.
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!!!!!!
And this is why Ford discounts are so meager. When you can find $9K off a ’23 Chevy Equinox, why would I want an Escape (production problems aside) for $3K off, when the Escape is more expensive (with fewer features because it’s been heavily decontented)?
where are you getting $9k off a 23’ Equinox?? I’ll swing by that dealer and buy 6!
My thoughts exactly!! & I have looking around for a couple months.
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.
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.
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.
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.
So that’s why Ford stock never goes up.
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.
This has nothing to do with being woke. Jesus.
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.
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.
… as Lily Tomlin once said: “I hate people who use big words, when small ones will do ..”
.
It’s the big picture philosophy that flows from the top (and yes board) that is doing Ford in.
You can be as whacky as you want for all your social and environmental issues, at home. Not when you’re leading multi billion dollar company.
God help them if GM/Dodge get a foothold on the truck end. It’s the only thing left that Ford can build in volume that makes money.
LoL GM and Ram have had a foothold in the truck business for a half century.
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.
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 !