The paragraph is an introduction to the Ford Motor Company's first quarter 2025 earnings conference call. The conference call is being conducted by Layla, the operator, and involves key members of Ford's leadership team, including Jim Farley (President and CEO), Sherry House (CFO), and others. Lynn Antipas Tyson, the Chief Investor Relations Officer, highlights the use of non-GAAP financial measures and forward-looking statements, noting that actual results may vary. The paragraph also mentions upcoming investor relations engagements, including a fireside chat in New York with John Lawler on May 28 and another with Sherry House on June 4. The call is then handed over to Jim Farley.

In the paragraph, Jim Farley updates on Ford's business performance and discusses the impact of tariffs. Ford's underlying business has been strong, exceeding expectations for the quarter and remaining on track with its annual EBIT guidance of $7 billion to $8.5 billion before accounting for tariffs. The company had its best first-quarter U.S. pickup sales in over 20 years and demonstrated product launch execution globally. Farley states that Ford supports the U.S. administration's goal of boosting American manufacturing and creating a level international playing field for OEMs. Ford has a strong engagement with Washington to help policymakers understand the potential impacts of policy changes on the auto industry. He highlights Ford's manufacturing strength, noting that it produced 300,000 more vehicles in the U.S. than its closest competitor last year. While some OEMs have U.S. capacity, they face higher costs and investment needs, and they must balance affordability with the ability to import parts without tariffs.

The paragraph discusses the impact of tariffs on Ford's financial performance and competitive positioning. Ford estimates a gross impact of $2.5 billion and a net impact of $1.5 billion on its EBIT due to tariffs, but is uncertain about competitors' responses and market dynamics, leading them to suspend guidance. Ford benefits from its large U.S. manufacturing presence, giving it a competitive edge. Kumar Galhotra emphasizes the company's progress on cost and quality improvements, aiming for $1 billion in net cost reductions this year, excluding tariff impacts. Ford is narrowing its cost gap with competitors and strengthening its supply chain by focusing on key process improvements, such as readiness assessments in assembly plants and fostering cost and quality improvement ideas.

The paragraph highlights the company's strategic initiatives and achievements in improving operational efficiency and financial performance. They have established a clear future pipeline, conducted in-plant audits to prevent defects, and developed leading metrics for early warning of risks. The results include significant year-over-year warranty savings, reduced launch-related warranty spikes to industry-leading levels, and an improvement in vehicle dependability. They have also successfully mitigated the impact of tariffs, particularly by using bonded carriers to avoid US tariffs on shipments between Mexico and Canada, and are increasing US content in vehicles. The company has ceased vehicle exports to China but continues to use it as a hub for other regions. Lastly, they emphasize a commitment to developing local supply chains despite the high compliance with USMCA for parts used in the US.

The paragraph discusses Ford's continued investment in US manufacturing capacity since 2020, focusing on projects in Tennessee, Kentucky, Michigan, and Ohio. Sherry House highlights Ford's efforts to transform into a higher growth and more capital-efficient company, as demonstrated by their strong first-quarter financial results, including a $1 billion EBIT. Despite the negative impacts of tariffs and planned downtimes for plant upgrades, Ford experienced year-over-year cost improvements and launched several new products, including electric and hybrid vehicles. Additionally, Ford Pro showed resilience with a solid financial performance, despite industry challenges.

The paragraph discusses the strong demand for Ford's commercial vehicles, with Pro leading the market in North America and expanding its presence in Europe. Pro is also growing its mobile repair services and software subscriptions, particularly in fleet telematics. Ford Model e is scaling its production, notably in Europe, and has seen US sales growth supported by a successful home charger campaign. Ford Blue experienced a modest profit despite currency challenges due to higher pricing and cost management, with international operations remaining profitable.

The paragraph highlights Ford's strong performance in several areas. Iconic models like the F-Series and Bronco are leading their segments, with Bronco sales increasing by 35%. Ford's global hybrid sales have grown, and new models, Expedition and Navigator, have higher transaction prices and quick sales. Ford Credit had a successful quarter with increased earnings, distributions to the automotive company, and higher auction values due to limited used car availability. Active commercial credit lines are expanding. Despite a negative free cash flow of $1.5 billion, Ford maintains a robust financial position with extensive liquidity. The company renewed its credit facilities and declared a shareholder dividend, emphasizing its strategic focus on maintaining liquidity and investing in high-return opportunities. It reiterates its commitment to returning 40-50% of free cash flow to shareholders and looks forward to its 2025 outlook.

The paragraph discusses the company's financial progress and challenges, particularly related to tariffs. The company is on track to achieve a $1 billion net cost improvement this year, excluding tariffs. Without considering tariff impacts, the EBIT (earnings before interest and taxes) is expected to fall within the $7 billion to $8.5 billion range. However, tariffs are causing significant financial impacts, leading to a suspension of guidance for 2025. They estimate a gross adverse EBIT impact of $2.5 billion and a net adverse impact of $1.5 billion in 2025 due to tariff-related issues. The risks from tariffs include supply chain disruptions, tariff changes, retaliatory tariffs, and policy uncertainties. The company emphasizes its strong performance excluding tariffs, a competitive US footprint, and a robust balance sheet. An update on the guidance will be provided during the Q2 earnings call. Finally, the operator invites questions, with Emmanuel Rosner from Wolfe Research asking for more details on the gross tariff headwinds.

In the paragraph, Sherry House discusses the financial impact of tariffs and other costs on the company, estimating $2.5 billion in gross costs split approximately evenly between vehicle parts and imported vehicles. They account for the U.S. content credits in vehicles going abroad, and note that steel and aluminum purchases are mostly domestic, though pricing impacts are anticipated. Additionally, some tariffs are applied to parts imported into China. The 3.75% offset announced by the White House is included in the $2.5 billion estimate. The net adverse EBIT impact for 2025 is projected at $1.5 billion, factoring in around $1 billion in recovery actions. Emmanuel Rosner inquires about details of these recovery actions, asking whether they involve pricing or cost measures.

In the discussed paragraph, Sherry House outlines efforts to optimize market equations, which include strategies like using bonded carriers to avoid US tariffs on vehicles shipped from Mexico to Canada, thus reducing costs. They explored various market scenarios by adjusting factors such as pricing, volumes, and the production of specific vehicle segments, notably full-size pickup trucks produced entirely in the US. These analyses contributed to a $1 billion offset. Emmanuel Rosner inquires about the initial EBIT guidance and any potential negative offsets, while Jim Farley praises the strong start to the year, highlighting improvements in warranty and parts pricing, build material simplification, and new vehicle pricing, suggesting a positive outlook while withholding specific future guidance details.

In the paragraph, Jim Farley discusses expectations for industry volume and pricing in the coming months. He notes that the industry is performing well, with a current seasonally adjusted annual rate (SAR) of over 17.5 million. Farley anticipates industry pricing to increase by 1% to 1.5% in the second half due to tariffs, with overall year pricing remaining flat. He expects the industry SAR to be about 0.5 million units lower than initially planned for the second half, at around 15.5 million units. Farley emphasizes the importance of timing concerning potential pricing changes due to reduced incentives or topline pricing adjustments, likely occurring around June. He highlights the flexibility offered by their operational footprint in adapting to market changes.

The paragraph discusses the company's strategic adjustments in response to market conditions and its inventory levels, which allow for opportunistic market actions if profitable. It mentions the decision to merge two electric vehicle architectures into one, namely FNV3, improving capital efficiency and software deployment. This consolidation leads to significant cost savings and more affordable future products. Additionally, the move anticipates enhanced software capabilities and lower price points, exemplified by the Zone electric architecture being implemented in their CE1 Skunkworks product.

The paragraph discusses the impact of potential supply-chain disruptions due to tariff volatility, specifically regarding rare earth materials from China, which can complicate imports for the industry. Kumar Galhotra responds to Adam Jonas' inquiry about the $1.5 billion net tariff headwind and mentions that despite the volatility, there has been no clear sign of disruption yet. However, uncertainties in tax and emission policies could lead to production issues. Additionally, the competitive landscape might be affected if some companies face disruptions while others do not, influencing volume and pricing.

In the paragraph, Kumar Galhotra addresses a question about Ford's approach to automation and robotics in light of onshoring pressures. He states that Ford is not directly working on humanoid robotics but is collaborating with partners on AI projects to reduce costs. He provides an example of employing a Boston Dynamics robotic dog in Ford's Valencia plant, which uses sensors to improve preventive maintenance by detecting issues early. This illustrates how Ford integrates AI to enhance efficiency in quality, manufacturing, and product development processes. Adam Jonas humorously suggests using the robotic dog with someone named Lynn's dogs, and then the conversation moves to Joseph Spak from UBS for the next question.

In the paragraph, Sherry House discusses the factors influencing their ability to provide future guidance with second-quarter earnings. She mentions uncertainties such as tariffs, the economy, and pricing, and emphasizes the importance of understanding policy and tax implications and customer and competitor reactions to pricing changes. Sherry clarifies that they aim to provide an update with the best available information at that time. Joseph Spak acknowledges a misunderstanding, and Jim Farley notes that while some trade uncertainties may be resolving, other regulatory issues like emissions remain to be addressed.

The paragraph discusses Ford's strategic view on various economic and policy factors affecting their powertrain investments and next-generation projects. Joseph Spak inquires about how Ford plans to achieve necessary production volumes amidst these challenges. Jim Farley highlights the impact of tariffs, particularly the situation with Canada, and underscores the importance of production tax credits and the Inflation Reduction Act (IRA) in the U.S. Ford is advocating for favorable tax legislation, especially relevant for Midwestern manufacturing investments. Upcoming policies, including consumer credits for EV purchases and CO2 regulations by the EPA and California, are crucial yet uncertain areas impacting Ford's strategy. Farley expresses optimism about Ford's engagement with U.S. lawmakers, suggesting there's support for Ford's growth and adaptation in a regionally-focused automotive industry.

The paragraph discusses Ford's strategic approach to engaging key decision-makers globally and highlights the impact of tariffs and the current market environment on the company. John Murphy from Bank of America notes that while there is significant focus on the direct costs of tariffs, there’s not enough attention on the indirect effects, such as market share growth and increased demand for Ford's vehicles like the F-150 and Super Duty, as well as the benefits from rising used vehicle prices. Jim Farley responds by saying that Ford is assessing their competitors' situations, including their tariff exposure, pricing strategies, and supply chains. He expresses confidence in Ford's assessment, which factors into their projected $1.5 billion net impact.

The paragraph discusses Ford's strong market position due to its updated vehicle lineup and effective promotional campaigns, specifically highlighting the F-150, Super Duty, and SUVs. Ford's strategy includes an employee pricing promotion that has increased dealership sales, resulting in market share gains in April. John Murphy asks about anticipated industry pricing increases of 1% to 1.5% and their potential impact on demand, suggesting a significant price elasticity. Andrew Frick from Ford acknowledges the question for further clarification.

The paragraph involves a discussion on financial projections and strategies concerning vehicle sales and tariff impacts. It begins with an explanation of run rates and pricing assumptions, factoring in first-half year performances and elasticity within segments. John Murphy queries about a pure light vehicle Sales Rate (SAR) estimate, with Andrew Frick confirming that the estimate excludes medium and heavy vehicles. Jim Farley points out that customers are adjusting to afford new vehicles through longer financing terms. Mark Delaney from Goldman Sachs then asks about the management and mitigation of a $1.5 billion net tariff headwind, suggesting that as the year progresses, these impacts may lessen. Sherry House acknowledges the inquiry, implying efforts to offset the tariff costs through supply chain changes or pricing adjustments if no policy changes occur.

The paragraph discusses the growth projections and strategic focus of a company with respect to tariff costs, offsets, and their Pro software and services. Andrew Frick explains that the software and services division is increasing its share of EBIT, with physical service expansions driving growth. The company has enhanced capacity through investments in their dealer and mobile service networks, with 66 Ford Pro Elite centers and 4,600 mobile service units. Paid subscriptions have grown by 20% year-over-year to 625,000 users, with significant growth in telematics contributing to a 40% increase in average revenue per user (ARPU). The subscriber growth is seen across both big fleets and small to medium-sized businesses.

The paragraph discusses the impact of market dynamics and tariffs on Ford's business. It highlights the increased utilization of Ford's services by small and medium businesses as well as larger fleets across the Ford Pro ecosystem. Jim Farley notes margin pressures from import competitors in the heavy-duty van and pickup segments due to tariffs and rental market changes, though he doubts the persistence of these pressures given import competition from Mexico. Ryan Brinkman of JPMorgan asks about how tariffs might affect Ford Credit, exploring how they might impact origination volumes, prices, lease residual values, collateral values, and default rates. He queries whether these factors could potentially offset automotive side headwinds positively.

The paragraph discusses various automotive industry trends and business updates. Sherry House talks about elevated auction prices for used vehicles due to low stock and higher new vehicle prices impacted by tariffs. She mentions that these prices may be impacted by an economic slowdown in the second half of the year and sees a balance in consumer financing applications. Ryan Brinkman inquires about updates on the company's European business, including the impact of Model e launches and competition. Andrew Frick responds, highlighting the successful launch of the Puma Electric vehicle and the strong performance of their commercial business in Europe, with an increase in market share by over 2.5 points in the first quarter.

The paragraph is part of a financial discussion during a company earnings call. It highlights the company's strong market performance and flexibility with its range of vehicles, including ICE, hybrid, plug-in hybrid, and electric models. Sherry House, likely a company executive, explains that unexpected cost factors, particularly positive warranty outcomes and improved material costs, helped the company exceed its breakeven EBIT expectations for the first quarter. Despite a $200 million tariff impact, these factors, along with better-than-expected performance in commodities, contributed positively. James Picariello also notes that this has been the best quarter on record for Model e's loss per vehicle performance.

The paragraph discusses Ford's recent performance and strategy concerning its electric vehicle (EV) segment, particularly focusing on Model e and the Mustang Mach-E. Sherry House notes that Model e has seen significant improvements in both quarterly and yearly performance, largely driven by strategic pricing actions and material cost improvements. Jim Farley and Andrew Frick emphasize that Ford's Mach-E production in Mexico will remain unchanged, continuing as planned due to strong sales and low inventory, which supports compliance targets. The demand for Mach-E remains robust in its fourth year, contrasting with trends typically seen in internal combustion engine (ICE) vehicles.

The paragraph discusses the financial impact of tariffs on a company, specifically mentioning a $2.5 billion tariff impact and related MSRP rebate. Colin Langan seeks clarification on whether this amount includes certain offsets. Sherry House confirms it is included in the $2.5 billion. Jim Farley mentions the uncertainty and newness of the situation, emphasizing the need for flexibility from the government. He notes significant figures, even though they may be lower than others, and mentions government encouragement to shift more parts production to the U.S. He also brings up the upcoming USMCA process, suggesting patience as policies develop.

The paragraph discusses the potential impact of the United States-Mexico-Canada Agreement (USMCA) on sourcing more US-made parts and its iterative effect on tariffs, though details are still uncertain. Colin Langan inquires about the cash impact of tariffs, questioning whether a $1.5 billion figure is all-cash or if factors like working capital or CapEx might alter the outcome. Sherry House responds that, at present, they expect the cash impact to be approximately equal, assuming occurrences settle within the quarter. There will be a CapEx impact, as some ordered equipment is coming from overseas. Colin Langan acknowledges the response. Subsequently, Itay Michaeli from TD Cowen inquires about industry pricing strategy in response to tariffs—whether to prioritize market share or price increases—and asks about Ford's Level 3 autonomy plans amid changes in electrical architecture. Andrew Frick begins to respond to Itay's inquiries.

The paragraph discusses strategic opportunities in vehicle pricing and market share growth, assessing each vehicle segment for profitability. It also highlights the successful launch and usage increase of BlueCruise, Ford's hands-free driving technology, noting significant milestones in miles driven and competitiveness compared to rivals. BlueCruise is increasingly integrated into vehicle specifications and dealership renewals, enhancing business operations for advanced driver-assistance systems (ADAS). Meanwhile, Ford's progress in Level 3 autonomy is on track, though it involves cost and timing considerations.

In the paragraph, there is a discussion about Ford's approach to developing high-speed highway technology. Ford is focusing on creating a unique, internally developed product that distinguishes itself from the supplier-dependent BlueCruise system. The Level 3 team is taking a different path to enhance the brand's differentiation. The conversation concludes the Ford Motor Company's first quarter 2025 earnings conference call, thanking participants for their involvement.

This summary was generated with AI and may contain some inaccuracies.