This is a story about the essential economy. That's what Ford CEO Jim Farley calls the part of the US market where things get built, moved, or fixed. This week, he held a series of meetings at the restored Michigan Central Rail Station in Detroit, and we traveled there to hear directly from him what needs to be done.
95 million people, a huge part of our GDP, that basically build things. Think about factory workers, construction workers. The people who move things, rail workers, truck drivers. And the people who fix things. Think about plumbers, electricians, people who are mechanics on your vehicle. That's the economy. It's huge, and we have about a million people shortage today.
What's going on there? Why are we short that many essential workers?
It's a combination of things, David, but I think the biggest thing is the societal prestige of these jobs has changed from our parents and our grandparents. You know, people all want to go to a four-year degree, and then they want to go into the white-collar workforce. That's what my grandfather told me. He was a factory worker. 'Hey, Jim, I don't want you to have to work this hard. Go to college.' And the irony of the irony is we have all these data centers, all this new technology to roll out. It still requires electricians, construction workers, you know, and we have this huge shortage. The second thing is our country has really pulled back on investing in education programs, the local college support for these kinds of jobs. There's no high schools around vocational programs anymore. That's the exception, not the rule anymore. I think the last thing is permitting, all the regulatory requirements on these jobs is really tough, especially for small business. And it just makes these jobs hard and complicated.
How does AI fit with the essential economy?
Well, I hope that it will be a help, but it's hard to say that today. We're going to have a lot of tailwinds for the essential economy of AI. For example, we have to build all these data centers, all the transmission lines. That's going to require plumbers, you know, electricians, a lot of technical people to do all that, construction workers. But on the other hand, over the last 20 years, the essential economy productivity has actually gone down, whereas white collar productivity has gone up 20 or 30%. That's like, for the average essential worker, that's like $30,000 a year. So we don't have a good track record here of applying new technology like AI to make these jobs more productive. You know, automation, things like that, those innovations really took jobs out of the job market and out of the essential economy. I think we'd have to twist the technology through the lens of these critical jobs for it to be the opposite.
The government plays a central role in turning around the essential economy, with President Trump emphasizing manufacturing and the need for trade schools. But Farley has yet to see the real results, including with those auto tariffs.
It's too early to tell. I haven't seen a lot of new plant announcements of my competitors who import. You know, our market is 50% import. So what I was looking for is how many of those imported vehicles are now being built in the US. We haven't seen too many announcements. What hasn't changed is Ford's commitment to the US. We build 80% of our vehicles here. We're the largest employer, UAW workers, and we're the largest exporter by far from the US. I would say it is too early to tell. But I'm seeing the tone at the top in DC be very thoughtful about the parts tariffs, which more than 20% of our tariff, of our profits, is lost on these parts tariffs. So, yes, we make in the US, but we import parts from all around the world. Because some of them, like wiring looms, we can't even buy in the US. The tariffs on those parts, maybe 20% of your F-150, is 20% of our profit gone. And I'm seeing a tone at the top in DC where they are listening to us very carefully, because they understand long term that $22 billion of headwind for us will not be good for the US. Especially for a company like Ford. I don't know what they're going to do. But, boy, have we had a lot of conversations with commerce and the president about this. And I remain very optimistic that they'll make the right adjustments. If they make the right adjustments on tariffs with the EPA rule, some of the tax changes, like PTC, I think we will see a much stronger US industry in the coming years. And I'm sure hopeful of that.
When we spoke to Farley a year ago, before President Trump's election, the auto industry was working and investing hard to meet government targets for electric vehicles. Since then, EV policy has been turned on its head, making automakers' lives dramatically more complicated. Roger Penske, founder of the Penske Corporation and owner of IndyCar, says it's the result of ignoring what the customer wants.
No one asked the customer what they wanted, number one, and number two, we didn't have the infrastructure and the expectation on range wasn't there. So everything came together, the way they sold electric vehicles was with government support. The $7,500 is going away. When you think about that, that's $50 billion that the government is going to be able to put, hopefully, towards something that's better off, you know, for our economy, and better off for the country. But I would say they're going through a transition. All of them have said, Mary Barra has, you know, Farley has, they're moving to lower-cost EV vehicles.
