Ford Motor Q4 2021 Earnings Call Transcript

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Provided by Quartr
February 3, 2022

There are 12 speakers on the call.

Operator

Good day, ladies and gentlemen. My name is Holly, and I'll be your conference operator today. At this time, I would like to welcome you to the Ford Motor Company 4th Quarter and Full Year 2021 Earnings Conference Call. Group. After the speakers' remarks, there will be a question and answer session.

Operator

Trust. At this time, I would like to turn the call over to Lynn Antipoff Tyson, Executive Director of Investor Relations.

Speaker 1

Thank you, Company. Welcome to Ford Motor Company's Q4 2021 earnings call. With me today are Jim Farley, our President and CEO and John Lawler, our Chief Financial Officer. Chair. Also joining us for Q and A is Marion Harris, CEO of Ford Credit.

Speaker 1

Today's discussions include some non GAAP references. These are reconciled to the most comparable U. Capital expenditures in the appendix of our earnings deck. You can find the deck along with the rest of our earnings materials and other important content at shareholder. Ford.

Speaker 1

Com. Today's discussion also includes forward looking statements about our expectations. Actual results may differ from those stated. The most significant Factors that could cause actual results to differ are included on Page 30. Unless otherwise noted, all comparisons are year over year, company EBIT, EPS Company.

Speaker 1

Bank of America will host a fireside chat with John Lawler and Kumar Galhotra, who is President, America's and International Markets Group. On Wednesday, February 23rd, Conference. Jim Farley will participate in a fireside chat with Rod Lache at the Wolfe Global Auto, Auto Tech and Mobility Conference. And on Thursday, February 24, Company. Bob Holy Cross, our Vice President, Sustainability, Environment and Safety Engineering and Dave Webb, Ford's Treasurer, will participate in the RBC Global Commercial, Social and Governance Conference.

Speaker 1

Now I'll turn the call over to Jim Farley.

Speaker 2

Thanks, Lynn. Hello, everyone. While some may have Describe 2021 as a breakthrough year for Ford, I would simply portray it as a year of important progress for the Company. We strengthened our base business last year and now expect to deliver even stronger results this year. And just Critical, we started moving with real speed and ambition to build a modern Ford.

Speaker 2

Our true breakthroughs are Company. I remain skeptical that a 118 year old company like Ford will emerge as a winner in these disruptive times in our industry. And I'm okay with Truck. So let's dive into last year. As I mentioned, we have significantly improved our base business.

Speaker 2

In North America, our largest market, we have a very hot portfolio of new vehicles. We've now won awards of North America Truck and Utility The Sport, the Maverick, the Mustang Mach E, all of them brand new nameplates for our lineup, All of them hits. Last month, we launched E Transit. In the spring, we're in the middle of launching the Truck. Few people ask us any more about why we phased out sedans, but many more asking when they could take Call.

Speaker 2

We've also made progress outside of North America, and this is very important. Ford has been a 1 legged stool for too Company. We stayed in Europe and South America and other regions because we really believe we can create sustainably strong in those markets. And we want to serve these customers with better, more connected and electric products and services. The Company.

Speaker 2

The deep restructuring in Europe and South America have put us in a position to grow profitability going forward. In China, we're now set up to play a much bigger role in the EV boom going on there. We've quietly grown Lincoln Into a strong contender in the world's largest luxury vehicle market. In fact, China is now Company, the number one Lincoln market globally. Our International Markets Group is profitable, and we're now preparing for the important launch Cup of our next generation Ranger pickup this year.

Speaker 2

While we remain in the teeth of the COVID crisis and semiconductor shortages, Our overall business is still in great shape. And at the same time, we're rapidly making progress on key aspects of our Ford Plus plan. And for customers, that means more distinctive products and solutions, more always on relationship with our Trans and adding ever improving user experiences. Now to deliver these things, we're building new muscles. And that Truck.

Speaker 2

Our first wave of EVs, the Mustang Mach E, the E Transit, the F-one hundred and fifty Lightning. And in the past 6 months, We doubled our 2023 planned capacity for EVs to 600,000 units a year. Now this required everything From working with SK and LG to increase battery supplies, to knocking down walls at our Rouge Electric Vehicle Center, Company. While the mortar was still wet to make room to improve and build more Lightnings. Our team knows how to scale Task Force dedicated to lowering the bill of materials for our BEVs.

Speaker 2

Above and beyond just the usual declines Truck. And that's delivered through design simplification, vertical integration and leveraging our scale with supply chain as we Truck. And that team is just getting started. We plan to take full advantage of our 1st mover position in the fully electric pickup truck market, starting with lightning, but there's much more to come. Truck.

Speaker 2

In the coming months, we'll break ground on the Blue Oval City electric truck plant in Tennessee. It will be the largest, the most Company. Advanced manufacturing complex in our history, and it will produce Ford's 2nd generation of a full size electric pick Cup in high volumes starting in 2025. And at the same time, we have 3 large scale battery plants Tennessee and Kentucky, which will be coming on stream with capacity to produce enough battery cells for more than 1,000,000 vehicles a to 40% mix of BEVs by 2,030 with strong margins and equal to or higher market share Company. In the key high profit, high volume segments we compete.

Speaker 2

For example, the F-one hundred and fifty Lightning, if we had full production Company. To meet our current demand, we would rival the Model Y as the leading bev nameplate in the U. Company. While increasing leveraging the benefits of our connectivity. Now this includes things like fewer top hats guided by customer demand and a logistics approach to vehicle content based on deep insights generated from that same vehicle data.

Speaker 2

Truck. We're also being disciplined with capital as we deploy that to our ICE Products, recognizing that as the mix of BEVs increases, we will continue to manufacture ICE vehicles, but with a focus on Let me say that again. Our goal is to continue to improve our auto EBIT margins even customers to life. Our customers are realizing the benefits of our over there software updates, but that's just Company. We're using our hubs in places like Palo Alto to attract more and more great software engineers and technology organization with authority over the in car digital experiences, interfaces, screens and controls.

Speaker 2

The velocity of change at Ford is increasing. We're not seeking half measures. Fear of change And risk has never served legacy automakers well in the past couple of decades. We're done with incremental change. We have a clear plan, a Company.

Speaker 2

Fraction and whatever it takes mindset. We're confident our strong base business will generate the capital we need to on a very exciting future. We're recruiting incredible talent from outside the company to work with the Company. As excited as our customers are for the great portfolio we have in the market today, we can't wait to show Company. Now I'll turn it over to John, who will take you through the results for the quarter and our expectations for this

Speaker 3

Thank you, Jim. In the face of ongoing Company. With semiconductor constraints and industry wide supply chain disruptions, we executed our Ford Plus plan, including closing out redesign, strengthening our product portfolio and investing in exciting new opportunities fundamental to growth and Company. For the year, we posted a $10,000,000,000 Company. Adjusting for the reclass of our Q1 Rivian gain to a special item.

Speaker 3

And despite a 6% decline in wholesales, our automotive The business posted its strongest EBIT margin since 2016. North America delivered an 8.4% EBIT margin and Company. We're very pleased with the progress we made in the quarter. We're very pleased with the progress we made in the quarter. We're very pleased with the progress we made in the our electrification strategy and our most profitable vehicles.

Speaker 3

We also remain highly disciplined with our incentive spend Supply Chain Related Production Losses. Ford Credit, whose profits and dividends are an important source Capital for us delivered a strong year. EBT was $4,700,000,000 as auction values were at record highs and credit losses were Truck. $52,000,000,000 respectively, which now includes our stake in Rivian valued at $10,600,000,000 at the end of the In 2021, we continued to advance our capital strategy given the improvements we're seeing Company. We also further strengthened our balance sheet by repurchasing $7,600,000,000 of high Company.

Speaker 3

Company. In November, following the launch of the framework, we completed our inaugural $2,500,000,000 green bond issuance, which was met Company with incredible investor demand and will help fund our exciting bev portfolio. Our strong balance sheet, including cash, provides Truck. With a margin of 5.4%, adjusted EBIT was $2,000,000,000 and we Generated $2,300,000,000 in free cash flow. Some modeled stronger EBIT for us in this quarter.

Speaker 3

We know that was largely driven by higher volume Company. North America delivered $1,800,000,000 of profit with a margin of 7.1%. Volume was Enriching customer experiences. In Europe, the underlying trajectory of our business continues to accelerate towards a 6 However, the adverse effect of near term supply chain disruption continues to mask that improvement. Importantly, we were the Key sales in the region are off to a strong start with the order bank building momentum as we accelerate the transition to bevs.

Speaker 3

In China, Lincoln continues to be a real bright spot and gained share in the highly profitable and growing premium segment. In Truck. In the Q4, we achieved record sales of the brand in China, contributing to an almost 50% allows people to order online and through 25 Ford Select City stores. Our International Markets Group performed well 4th quarter and had a record year playing to its strengths, especially from our flagship Ranger pickup, which delivered full year in Thailand to modernize production and launch the next generation Ranger from 4 assembly plants later this year. And in Mobility, we've Company, a level 4 autonomous vehicle solution.

Speaker 3

And in addition, we are rationalizing our investment portfolio and focusing Economist Development. Now I'll share with you our current thinking about 2022. We expect Company. Supply constraints to remain fluid throughout the year, reflecting a variety of factors, including semiconductors and COVID. Based on what we see now, we believe Truck.

Speaker 3

Our full year wholesales will be up about 10% to 15% in 2022, with a high single to low digit decline in the Q1, reflecting supplier shortages Conference related to Omicron shutdowns and semiconductors. For the full year, we expect to earn between Truck. $11,500,000,000 $12,500,000,000 in adjusted EBIT, and that's up 15% to 25% versus 2021. And the high end of the range equates to an adjusted company EBIT margin of 8% and our North America business at 10% EBIT margin, which if It's important to point out that each quarter we will mark to market our investment in Rivian, which sits in cash and marketable securities on Income and EPS results. So looking at how our adjusted EBIT guidance rolls up.

Speaker 3

Our Company. Range assumes significantly higher profits in North America and collective profitability outside of North America as we realize the full benefits Truck 2021 profits, and we expect Mobility and Corporate Other EBIT to be roughly flat. Lastly, we expect to generate Company. Adjusted free cash flow of between $5,500,000,000 $6,500,000,000 Now other assumptions we iconic nameplates. We'll have a full year of production of the award winning Bronco and Maverick in addition to a robust bev lineup with Mustang Mach E, E Transit and However, as I mentioned, we anticipate lower EBT reflecting primarily non recurrence of reserve releases, Company.

Speaker 3

Fewer returned off lease vehicles and more normalized credit losses. Most importantly, we're committed to Truck. Our Ford Plus plan and we'll continue to invest aggressively to drive growth and value creation. This includes devoting resources to customer facing technology, connectivity, Company, our always on relationships with customers and electrification. We are confident the long term payback from those investments will be Company.

Speaker 3

So that wraps up our prepared remarks. We'll use the balance of the time to hear and address what's on your minds. Thank Company. Thank you. Operator, please open the line for questions.

Operator

Thank you. Trust question is going to come from the line of John Murphy with Bank of America.

Speaker 4

Good evening, everybody. Thanks for the time tonight. Company. Just a first question. Jim, there's been a lot of speculation that you might consider spinning a portion of the future car business, whether it be EV Company.

Speaker 4

Or AB with Argo. But there's also the backside of that, that might make more sense to spend some of your legacy ICE assets and Have the entire company become a more pure play EVAV company in totality. So I mean, how do you think about this? And Company. What would be your motivations either way and how are you strategizing this?

Speaker 2

Thanks, John. I don't want to speculate on rumors Truck. Or speculate on the speculation in the press. But I will go back to something we've said and I've Company. I said over and over again, which is, running a successful ICE business and a successful BEV business are The customers are different.

Speaker 2

We think the go to market is going to have to be different. The product development Trend Fundamentally Different. So I'm not going to talk about speculation in the press, but I will tell you that the way we're operating the Businesses acknowledges those differences. And I'm really excited about the company's commitment to operate the

Operator

from the line of Rod Lache with Wolfe Research.

Speaker 5

I wanted to ask you a

Speaker 4

Truck. If you

Speaker 5

hit the high end of your target range. And Jim, you said that you're targeting improving margins from here. So maybe you can give us a little bit more color on that, how we should think about it. I'm not sure that 8% is the benchmark anymore just given how many years ago that's been How many changes there are to the business? You're ramping up a lot of spending on engineering and standing up in EV infrastructure, but you're also going to grow the Ford Pro Truck.

Speaker 5

So maybe you can just give us some of the puts and takes, how to think about it. And as part of it, if you might just give us a data point

Speaker 3

Company. Yes. Hi, Rod. It's John. So I guess Company.

Speaker 3

When you look at the ICE transition, I think there are still a lot of opportunities for us to improve that business. Company. We're very focused on reducing our structural costs. We've done a lot already, but there's a lot more that we think we can do there. We're looking at operating with much lower stock levels as our business continues to develop.

Speaker 3

So we'll operate at leaner inventories than we Truck. We have in the past, which will help our top line and continue to strengthen that top line. We're improving our quality, which is important. We saw that come through this year from Company. Year over year warranty standpoint was down roughly $1,400,000,000 And we want to be the top in quality in every what we have from a connected vehicle to improve warranty even further, as well as improve what we're doing from a Truck.

Speaker 3

Manufacturing standpoint and leverage that technology to bring those types of costs down. There's opportunities in maximizing our parts business, and we're going to lower our There's opportunity there. So we see that over time, as we manage the ICE business, there's opportunity to improve margins even further Company. And then when you talk about BEVs. So as we've talked about in past calls, our BEV margins We have opportunity, but we need to do that through scaling them, right?

Speaker 3

We're not going to chase top hats. We're going to look at scale. We're going to want Have a strong lineup where we can lean into it with key vehicles in high volume segments like we are today with Mustang Truck. The Lightning and in our commercial vehicles with the transit, we're going to reduce complexity, right? We know that one of the Things that we need to do on our vehicles, and we saw that as Jim talked about, with the team finding $1,000 a unit on Mach E and they just got started We need to approach the design of these vehicles differently.

Speaker 3

And that's what's really important about having the 1st mover advantage there. We're on the road with these. We're in production with these. We understand what we need to do in that second generation and we're off doing that right now, improving what we on the road today and really bringing that knowledge into our 2nd generation designs. And then as I said earlier, on the ICE business, we're going to leverage the compute on the vehicles to really Truck line of the vehicle and then distribution.

Speaker 3

We all know the difference in the distribution costs for the legacy system that's out there versus what we see with other manufacturers. So that's an opportunity for us to work with our partners to improve that. So on both of those, we see opportunities. And then You said, Rod, there's opportunities to grow our business and lean into our leading position in commercial vehicles with Ford Pro. And we're looking to grow that

Operator

Question is going to come from the line of Sam Levy with Credit Suisse.

Speaker 6

Hi. Thank you. Dan Levy Company. I'd like to ask about your JV with Global Foundries and just broadly What you're trying to do with electronic components and sort of the notion of simplification, which you talked more about. So we've heard that Company.

Speaker 6

With Global Foundries, I think how Tietang mentioned, you'd like to control more of the sub sourcing to suppliers. Truck. We'd like to dictate more of the design of some of the electronic products that in the past have been handled by suppliers. Maybe you could help us How significant of a change is this in your operating model where you frankly focused especially given you're concurrently undergoing this transition to EV? And broadly, how should we think of the financial Supply Chain.

Speaker 6

Thank you.

Speaker 2

Thank you for your question. Perhaps the biggest gift for all the pain We're going through now in semiconductors is that we have very painfully learned the lesson that we cannot manage the supply chain for these key components as In fact, you could argue that in the change of transition to these digital electric vehicles that Company. Supply chain could be one of the biggest advantages a particular company has or doesn't have. The way we look at it The key electric components, memory chips, semiconductors. I would break semiconductors into 2 types.

Speaker 2

I'll I'll come back to GlobalFoundries in a second. Feature rich chips that we still use a lot. A window regulator doesn't need to have a 4 nanometer chip and the advanced, but we also have sensors, power electronics for our inverters, the batteries themselves all the way back to The mine, the inverters, the different battery chemistries itself have different raw materials And kind of ecosystems that support them. So this is a very important topic for the company. How different is?

Speaker 2

It's with them. We need to design the SOC ourselves. We need to direct in the case, in some cases to even Direct, prefer build to print or actually use supplier XYZ to get out of where we've Company. And this takes talent. It takes a different approach.

Speaker 2

It takes more resources. Truck. For us, we're very dependent on TSMC for our feature rich nodes. Obviously, the capacity is at risk over Build them in how to build them in the United States. We can partner with the government, depending on the CHIPS Act to It will be a few years until we benefit from that, but it's a really big thing to descale ourselves on the feature rich chips from the current ecosystem that We depend on around the world, and I think Global Foundries is a really interesting deal when we get into the details.

Speaker 2

We have to put cash up, but we Those feature rich semis will be used by other companies, industrial companies, not just Ford. It's a really interesting deal. Company. And I was talking to the U. S.

Speaker 2

Government today about how critical this is for our company. You can expect the same kind of thing on Country, and this is a culture change at Ford. As I said, this is part of the rhythm change between ICE and BEV.

Operator

Company. Thank you. Our next question will come from the line of Ryan Brinkman with JPMorgan.

Speaker 7

Trend. Hi. Thanks for taking my question. Slide 20 shows you with $36,500,000,000 Company. We're trying to have cash of something closer to in excess of $20,000,000,000 with like another $10,000,000,000 or $13,000,000,000 of more liquidity on On top of that, I get that there's more uncertainty now with the pandemic and the chip shortage.

Speaker 7

And of course, you're investing heavily for electrification. Despite those investments though, I mean, you're still calling for $5,500,000,000 to $6,500,000,000 of FCF this year versus dividend costs like 1 point Company. So with the current trajectory, it seems like the record cash pile should only grow bigger in 2022. I'm just curious what your thoughts are on Truck. Whether you have any updated thoughts on the optimal capital structure, over what time or under what conditions you might move toward that more optimal capital The Caribbean stake once the lockup expires.

Speaker 3

Thanks, Ryan. So yes, we're really pleased with the position we have from a cash standpoint because it gives us the flexibility to invest in the business as we go. We've talked about the investments we'll be making in BEVs, we'll be breaking Truck. We're going to continue to focus on scaling as quickly as we can. The other thing we need to think about is The supply chain for our BEVs, there's opportunities potentially for vertical integration.

Speaker 3

There's opportunities for looking beyond as We move into these connected vehicles with more advanced electronics, potentially leveraging capital to secure supply chain there. So there's a Truck. Opportunities as we move forward to leverage this cash to improve the business. We're also focused on our shareholders. And of course, Company.

Speaker 3

Total shareholder returns is important as well. So we're going to continue to provide dividends to our consumers to our shareholders, Care. Which is important for us as we move forward given our shareholder base. So I think what you'll see is that that Company. And we continue to develop our Ford Plus plan.

Speaker 7

Very interesting. Thank you.

Operator

Our next question will come from the line of Emmanuel Rosner with Deutsche Bank.

Speaker 4

Thank you very much. Good evening. I wanted to I'll ask you a little bit more detail related to 2 items in the 2022 outlook. The First one is your volume and mix assumption. In the Q4, when I look at the Your wholesale were up something like 60,000 units year over year, but the volume mix piece of your North Truck.

Speaker 4

Was up only $100,000,000 and that's despite what F-one hundred and fifty maybe up like 34% year over Company. Sure, if IHS is right. And so just curious what's going on in terms of mix and why that contribution didn't really Truck. And how to think about as you grow your volume 10% to 15% in 2022, what kind of Truck. What's the commercial investment costs.

Speaker 4

So you've quantified the step up in CapEx for 2022. I'm just curious if there are things in the income statement that you're able to quantify in terms of Investments in technology that we should think about this year as we model 2022.

Speaker 3

So let me focus Truck. Looking at the walk for 2022, you have to think Company. Pricing, as I said in my remarks, we do expect the continued strong So when you look at volume, mix and pricing, we expect that to be up about 5 point Company. $5,000,000,000 to $6,500,000,000 And so I'll just walk through what where we see on that on the bridge to 2022. Company.

Speaker 3

We are continuing to invest in modernization and that along with our product spend related spending as we're continuing Truck. That's about $1,500,000,000 headwind, but that's broadly offset with other efficiencies that we're working on. You Also see that commodities are going to be a headwind next year of about $1,500,000,000 to $2,000,000,000 And then Ford Credit is going to be strong, but we do expect them to be down about $1,500,000,000 And then of course, we've got lower net pension income. So we expect the top line to be strong with the volume increase. We continue to expect We have strong mix and then we expect pricing to be a strength as well on a year over year basis.

Speaker 2

Company. Sorry, what's nice about Company. And I think that's very encouraging. We'll have lots of statistics about How that compares in the past, but that hasn't always been the case at Ford. And it's great to see that top line flow into our profitability

Operator

Company. Thank you. And our next question is going to come from the line of Colin Langan with Wells Trego.

Speaker 8

Great. Thanks for taking my questions. Just following up on the walk, if I actually annualize Q4, you're running at only $8,000,000,000 What was particularly weaker about this quarter Company. As a sort of starting point, it's also sort of down sequentially on higher sales. Is that seasonality, higher commodity costs getting worse this

Speaker 3

Company. We hit the midpoint of the guidance. And one of the things is I think some expected volumes to be up higher than what we had guided and just we had supply chain constraints hitting us this quarter. Company. Several of our key suppliers, they couldn't produce, they couldn't get us products.

Speaker 3

But net net, when you look at the 4th quarter, Truck. Relative to where we were 3rd quarter, let's say, as a proxy, volume and mix was up slightly. It was up about 0.6. But then we We had additional headwinds on commodities. We had some modernization costs that came through specifically around our IT as well as connectivity as we're investing in those growth Truck.

Speaker 3

And then we saw costs come through from inflation. We saw costs come through on transportation, on fuel, etcetera. So Company. We're seeing some of those headwinds were hitting us in the Q4, but demand was strong. If we could have met the demand and the production without Without the disruptions, you would have seen a stronger quarter.

Speaker 3

And so as we go into 2022, as we see those supply High constraints ease, as we see the demand for our really strong product lineup, we see the top line growing, we see continued improvement in mix, we see continued improvement in Company. And that's going to be much more of a tailwind versus some of the headwinds we're seeing that

Speaker 8

And just following up on the mix, any color on how the lightning will impact as it runs in obviously pretty large battery there. Is that going to be dilutive as we think about second half as that starts to ramp?

Speaker 3

No, I Company. And then coming back, I think one of the questions, Colin, you had asked that I didn't touch Truck. And that was again driven by supply chain disruptions. There were vehicles that we weren't able to build and complete because of certain commodities that weren't

Operator

Company. Our next question will from Brian Johnson with Barclays.

Speaker 9

Yes, good afternoon. I want to talk a little bit about Truck. Dealer pricing versus your pricing, the Detroit press ran some articles in January on Taking action on some of the more egregious markups on EVs. Yet if I look at the broader lineup, I I see that for J. D.

Speaker 9

Power, your revenue per unit is up about $3,800 which puts to your sub point Truck. Yes, the transaction prices are up $5,600 meaning you're leaving about 18 Truck. $50 profit in the dealers' hands, which would be about another $3,600,000,000 of profit. So just wondering Company. As you kind of go forward as the dealers, especially move to this simplified inventory model you're looking at, how Truck.

Speaker 9

I would say the answer to your question,

Speaker 2

Company. Thank you. I would say the answer to your question for Isobev would be slightly different. Company. We have about 10% of our dealers last year in the supply constrained environment that Company.

Speaker 2

We're charging above MSRP to our best of our knowledge. We have very good intelligence of who they are Company. Hi, our team. On the bev side, this is quite important topic because the margins that we trigger in for those dealers who choose to price that way, but Company. It's inefficiency, no doubt about it.

Operator

Thank you. Our next question is going to come from the line of Smart with Goldman Sachs.

Speaker 5

Yes. Thanks very much for taking the question. So maybe you could help us better understand the linearity Group. Reaching the 600,000 annualized EV capacity target and what kind of visibility you have into securing the necessary Company. So supply to do that both in terms of things like semiconductors as well as batteries.

Speaker 2

Thank you. So we've been hard at work at this for Quite some time actually. We knew we were oversubscribed pretty early in the process, and the team has been at it. We have been working, really the Company. The primary lift for us is battery availability.

Speaker 2

So we've actually been securing extra batteries for quite some time now. Company. We have some manning options for Mach E. So we will move close to 100,000 This year on Mach E, that'll be our big move this year. Next year, our big move will be Lightning going to 150,000 units.

Speaker 2

I won't get into Battery chemistries and all the details, but I'm really excited about the progress we've made so far in securing batteries. On the F-one hundred and fifty Lightning, Company. We actually had a physical capacity constraint of the facility. And so we took the decision Ready to, again redesign the facility so that we can accommodate the 150,000 units. We have great capacity on F-one hundred and fifty for So this is just a matter of the Mach E getting the labor in place and getting the batteries Truck.

Speaker 2

And the F-one hundred and fifty getting the batteries out of Georgia and redesigning the facility so we can get the final assembly done. Company. As far as chips are concerned, these battery electric vehicles and the supply chain are a strategic advantage for our company. So we will protect in Company. In the constrained where we will protect our battery electric supply production.

Operator

Thank Queue. Our next question will come from the line of Joseph Spak with RBC Capital Markets.

Speaker 10

Thank you. Company. Jim, it's really refreshing to hear you talk about the 2 different businesses and how you I'm running them and planning for them separately. I guess so to the and it's also good to hear you think you would have more to Like to the extent you are able to ring more out of ICE, does that give you Company. Leeway to accelerate or increase your investment in the EV business, like how do you think about combining the 2 businesses back together

Speaker 4

Truck. In terms of

Speaker 2

the investment spend. Absolutely. Absolutely. The profitability of Company. So we definitely want to push our ICE business as fast as far as we can.

Speaker 2

We're going into this transition With the freshest ICE lineup I can think of any of our competitors, not just in the U. S, globally, but we think there's, as John said a ton of other levers that we can pull to improve the margins We see our ICE business increasingly in kind of specialty Truck Groupings of passion brands like Bronco and Mustang and our pickup truck customers retail side using those Truck for recreation and for everything they use them for. And so look at the success The Maverick we've had, for example. So we're really excited about this opportunity for Bev and you betcha. It gives us all sorts of optionality Company.

Speaker 2

We are very excited about the progress we made in the quarter. We are very excited about the progress we made in the quarter. We are very excited about the progress we made

Speaker 4

in the quarter. We are very excited about the progress

Speaker 2

we made in the quarter. Company. Cash and our investment in building the margin for the high growth business through things like vertical integration and new customer experiences,

Operator

Company. Our Your next question is going to come from the line of Itay Michaeli with Citi.

Speaker 11

Great. Thanks. Good evening, everybody. I was hoping Truck. To go back and get an update on Mach E profitability, I think a couple of quarters ago, you mentioned you were already positive EBIT.

Speaker 11

It seems like pricing Truck. Has been really strong in the last few quarters. You talked about taking out maybe $1,000 of cost going forward and of course you're scaling up volume. So hoping you could give an update on kind of where you see Truck. Mach E profitability this year versus your original expectations and maybe even relative to ICE vehicles perhaps like the Edge?

Speaker 3

Company. Yes. Hi, thanks. It's John here. So when we look at our Mach E profitability, Company.

Speaker 3

As we said, we are profitable from a marquee standpoint. We're seeing great demand. We're seeing strong mix. So we've seen the profits improve. Importantly, what else we're Seeing as opportunities to continue to reduce the cost and reduce the complexity.

Speaker 3

So we're very focused on improving those margins. But overall, as we've said Truck. And so we have to continue to do work there, primarily around scaling, reducing the complexity But there's other work that we need to do as well to continue to further improve those margins. And our expectation is that

Speaker 2

John's input. Yeah, I'm struck throughout my career, I'm struck at how different The rhythm of this digital bev business is versus ICE. You know, we all grew up in a business where you kind of The vehicle and then you work on a minor change or a next model. I certainly grew up in that model. And what we're finding with ICE, Thank goodness we're scaling now, because what we're finding in Mach E is that actually most of the exciting work starts After job 1.

Speaker 2

That's when the OTAs really make a customer impact. But on the cost side and the profit side, Company. I guess we have learned so much about the lack of integration in Our engineering operations as we compared our engineering and Mach E to others that are best in class. And We are finding lots of profit opportunities as we get after that integration between engineering, supply chain Company. Manufacturing, even within engineering, if I showed you our cooling system for Mach E, it has 4 motors, probably needs to be 2, it has 60 70 hoses probably needs to be a third of that.

Speaker 2

And those are the opportunities we're going after, and we are not going to wait for next year. We're not going to wait for a minor change. We are going to reengineer that vehicle now and then use that expertise for lightning, e transit, and of course, Our all electric platforms. And I just I'm really excited about this opportunity being the industry as long as I have. I haven't felt Cup.

Speaker 2

Much more simple than we thought. The F-one hundred and fifty has 1 cab, 1 box, you know, and we for the same kind of ICE offering, it's like Company. I guess what I'm saying is we're at the very beginning of this journey. And it's already very Company. On the profit improvement, as John said, and I haven't seen this kind of opportunity

Speaker 4

Company. Thank

Operator

you. Our next question is going to come from the line of Anindya Das with

Speaker 4

Trend.

Operator

Okay. Our next question will come from the line of Jeffrey Lambujon with Tudor Driggery.

Speaker 6

Good afternoon. Thanks for squeezing me in. I just wanted to go back to the regional discussion as we think about the thoughts you shared on Truck. In North America that are embedded in the upper end of the full year 2022 EBIT guide. I wonder if you could just give us a sense for how you're thinking About the trajectory of margin improvement in Europe and IMG specifically, just thinking about the semiconductor shortfall evolving over time, the focus on Truck and new product launches potentially helping to accelerate some margin recovery in Europe and then the continued focus on Ranger

Speaker 4

Company.

Speaker 3

At Europe, we expect profit improvement. We Company. Europe is on track to deliver the 6% EBIT margin by 2023. They're continuing to move forward. They're seeing Truck.

Speaker 3

Favorable pricing environment continue. They're accelerating into the BEVs. The Mach E is a very strong product for them. And again, Commercial vehicles, it's a strength of ours and we continue to see that grow next year and be Clear for Europe, a strength for Europe. With IMG, as you go into 2022 International Markets Group, Truck.

Speaker 3

We expect them to be down year over year, but profitable. And that's going to be driven by 2 key things: the India transition and what we see Truck. As well as the fact that our Ranger volumes are going to be down year over year as we launch the new Company. And so it's a transition year for us in the International Markets Group. So they'll be down year over year but profitable.

Speaker 3

And then from there with the new Company. We're really excited about that product and what we can leverage with that product as we move forward in our International Markets Group.

Operator

Thank you. And with that, we will conclude today's Ford Motor Company 4th Quarter and Full Year 2021 Earnings Conference Call. You may now disconnect.

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Earnings Conference Call
Ford Motor Q4 2021
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