Episode 3 - Jim Farley - Ford Motor Company

Hi, I'm Jim Farley. We're here at Ford's Dearborn campus. I'm so excited to do this show, Office Hours Business Edition with Monica Langley.

Well, when Henry Ford was born in Cork, Ireland, he came to Corktown in Michigan and then his family settled on a farm only a half mile from here. So, and my great-grandfather also lived here in Dearborn. When Henry started to build his plants, he built them in downtown Detroit, but his home was really Dearborn. So when we became really successful with the Model T, he moved the company from Detroit to here and built a whole campus. We have the Lions practice facility, which is owned by his grandson William Clay Ford and my boss, the chairman, and his family. Right next to us is our test track that was used for the Tri-Motor Ford airplanes. Across the street is Greenfield Village and the Henry Ford Museum, which was inaugurated by Thomas Edison. They built a whole campus for employees and children to be educated about innovation. We have our global product development center here and our famous headquarters, which we're now moving to a brand new facility across the street. This is ground zero for America's car company for over 120 years.

Well, we do our active testing of our new vehicles there and we have to camouflage them. But Monica, you know someone so we can get in there.

To me, a car is one of the most expensive consumer products a person will ever buy around the planet. There are about 90 million sold around the world. In some countries, it's the most expensive thing that someone will ever buy in their lifetime. A car is certainly transportation, but it's changing a lot. In Asia, more than 20% of the time people spend in cars is stationary, not in traffic. It's like a place. It's like a new third or second place for people, especially in a busy China, a mom going back into a three-generation home, it's her chance to watch a movie and rejuvenate. So the car is changing, but it's a place. It's a third place in our lives. And with automation, it's going to really change. The trips are going to go from getting from point A to point B to being a different experience completely.

Oh my god. We have the Raptor rally this weekend in Lake Havasu and it's completely sold out. People coming from all over the world with the Raptors to be around other people. I've seen people cry and laugh because cars are really emotional for people. And cars to us personally in my podcast, I found it doesn't matter if you're Tom Brady or not, everyone has a connection, a road trip, their first car, an emotional event in their life. That's why people name their cars.

Well, it's changed a lot during my life. I entered the industry apprehensive because I loved cars. I thought it's a business, it could actually ruin my love of cars. Over time though, it really changed from cars to the people. As I got more responsibility, I've seen so many great cars and now what really gets me excited is watching people grow.

Yes. And it's interesting you say that because I have older friends from college who still think of me as kind of one-dimensional car person. If they saw my average day and what I'm like, I think they would be shocked. I'm not that person anymore. Of course, I love cars and it's so important to me, especially when I have a bad day, I'm still in love with what we do. But to lead a company of 180,000 people, a $200 billion public company, it's really not about the cars.

Well, of course it is about the best product and always will be. We're a consumer products company, but in my job as a CEO, I would not be successful if all I did is focus on the best vehicles. It's not that simple. The reality is we have to have competitive cost, competitive quality, great talent, great technology for the future of vehicles, and we'll have adjacent businesses like our finance business today or our software business. There'll be new adjacencies. Who knows? Maybe making a large-scale robot in the future that works at your house for you. I don't think my job affords me to just focus on the physical four walls of the product.

Yes, I do. I race anything I can get my hands on. I race at Le Mans this year in a Mustang with 50 other people. I race modern cars, Mustangs. I race vintage cars like the Ford GT40 that I own that won Le Mans back in 1966.

I've won a lot of races, but no, not my GT40. I think I came in second at Le Mans Classic.

I said it's my yoga. I'm not giving it up. I talked to Bill Ford and the board, and I also flew gliders, so I can't do both. But they said, "Look, we trust you, Jim." I know the FIA tracks where there's a lot of runoff, and I don't take unreasonable risk, but racing is filled with risk. I find it to require 100% focus, like piloting an airplane. You can't think of anything else while you're driving. I love that because it gives a mental vacation. Last weekend I was at Watkins Glen. For three hours I thought about nothing other than the next turn and the person next to me. There was nothing else. And it really refreshes me. I feel completely rejuvenated. And I'm around car people, and they ground me. It takes a team to win. I'm talking to the mechanics, working on the car late at night. It grounds me as a leader. I'm not Jim Farley the CEO, I'm Jim Farley the teammate. I think that's essential for leaders to have a place where you can fill up your bucket.

There are two sides of that though. First, there's the stereotype of a car person in the 50s, cigar-chomping, old engineer who points at the design studio and says, "I like that one, I don't like that one." I'm not that kind of car person. I'm actually the opposite. But I do orient my life around cars. This year I took a long trip with my daughter in my 1928 car all the way through Colorado for 800 miles. We loved it with similar people. That's my life. I love the people around cars.

I think all traditional OEMs are really far behind, but Ford had even more catchup to do. This has been a very humbling journey we've been on regarding quality and cost. These are basic things for an industrial company, and we had a lot of progress to make. In addition, we have this transformation of our industry, both electrification and software-defined vehicles. All three things had to be addressed at Ford. Get the industrial system fit, get the technology for your EV strategy right, and there was no playbook. It continues to change. We also needed to get serious about treating our vehicles like digital devices and wrap more services around our business. It was a huge transformation the last five years, and I would say we're about in the middle of things.

My first job was as a newspaper boy in Connecticut. It was great. The original President Bush's mom, Prescott Bush, who was a politician in Connecticut, was on my paper route. When I got paid on the weekend, I would take my Schwinn Stingray and go downtown to the Ferrari distributorship for all of America. Of course, being me, I fell in love with the Italian mechanics on the bottom floor. At 13 or 14 years old, we were talking about cars mostly in English and Italian with all those beautiful Ferraris. That's how I kind of started. But my first breakthrough job was as an interior upholstery person at a car restoration shop in Santa Monica, California. I put myself through graduate school at UCLA for my MBA. I worked for our first American Formula 1 champion, Phil Hill, who was a race car driver for Ferrari. He was my boss. I was a janitor and then I got upgraded to working on interiors. We worked on very special cars that won Pebble Beach. I worked on ostrich hide, frog interiors, fancy cars like Sylvester Stallone's. That was a real breakthrough. I got my PhD sitting around the break room with these artisans who taught me what a beautiful car looks like. I remember a body guy said, "Come over here, Farley. Tell me if this panel's straight." I put a couple fingers on it. He said, "Is that how you hold your girlfriend?" So I used my whole hand. He said, "Don't you feel a lot more information there?" I said, "Oh yeah, this is not flat." I had a thousand experiences like that. So when I look at a car, I go back to that moment when a 70-year-old paint guy who painted cars with no respirator taught me what beauty was. It was my most important job.

I think I was the first MBA in the US to be hired at Toyota. I was hired for product planning, which was my dream job. I wanted to work with engineers to make cars, to conceive the car and execute it right for the customer. That was a breakthrough moment for me. I had offers from Ford, General Motors, and Chrysler. My family is from Detroit. My grandfather was an hourly worker here at Ford. When I called him and said I had a great job, I had actually worked for JP Morgan in corporate finance over the summer, but I decided to follow my dream into the car business. When I joined Toyota, let's put it this way: I don't think my family was super proud I was working for a Japanese company. My father was a naval officer in World War II. My grandfather worked at Ford. It was a tough conversation. But I did my research. I knew Toyota was going to be a force to be reckoned with. Working on Lexus could be a moment for me to learn a lot. It was a big risk. And I guess that's the thread through my whole career: I kept taking risks, but they were calculated, not crazy.

Absolutely. That is why I took the job. I had another offer, which I won't talk about. My wife and I talked about it. I said to her, "These will be big problems. These will be important problems for a lot of people." I want to help the company be the best of Ford because Ford deserves the best. I'm an American kid. My grandfather worked here. His job at Ford put my mom through college. It was a moment where everything came together. Every day I walk into that office, I have no idea what's going to happen, but I am extremely connected to the mission of making this American icon relevant through this transition. I think the next CEO will have a completely different complexion to me. I believe each era requires a specific kind of leader. The board recognized the moment we were in. When I'm done, we'll all know. I know this will be looked on as one of the most critical periods, maybe one of the most awkward periods for that 122-year history.

That is a great question. I think it's like professional sports. Thankfully our minds get better and we have more wisdom with age and business. I think there's just a moment when you know. I once saw an interview with Johnny Rutherford who won the Indy 500 many times. It was fascinating to me as a CEO because we're performance-oriented and competitive. He said he knew he was done with his racing career six months before he retired because he came into the garage and he didn't sweat all the little details. Everyone thought he quit because of a bad accident. He said that had nothing to do with it. He knew that when he stopped sweating those details, he was not going to be the best in the world.

Oh, absolutely. This is in your blood because your grandfather worked on the Model T. When you became CEO, I think that was a dream come true job. Has it become a nightmare yet with all the problems going on?

I would say a lot of my true friends, friends that are with you in good times and bad, say, "Holy cow" or worse. But I think that's how all the car companies are facing now. It's an industrial company in the middle of geopolitical tariff war, with China emerging going after every job in the automotive industry outside of China. It's just our lot in life. They say God gives you what you can take. I think it's all happening and it's all okay. I feel I have the right skills and every year I get better.

Absolutely. But that's the board and Bill Ford's decision. That's how it works and that's how it should work, and I respect that completely. But congrats on your recent Q3 earnings. You beat all the Wall Street estimates. It was a great quarter.

If you were to ask me two years ago I would probably say yes, but in retrospect this corner is a bigger corner. It feels like cresting a hill. I feel like we just crested a hill. Not because we had a good quarter, but because as a leader we have a sixth sense about where we are in the journey. You get critical mass in your team and how they work together. You can't predict it, but it just kind of happens. Our strategies are starting to play out in the marketplace. We have lots of headwinds, but I feel like we're cresting a hill now. We're far enough down the execution of our plan that it feels more exciting than it was yesterday.

In my humble opinion, those jobs made our country what it is. Hardworking jobs for generations. I was in Kansas City yesterday. In the summer it's 120 degrees. Putting Raptor bumpers on F-150s in 120 degrees is hard. You and I would leave that job sore for a week. They do it every day, 8 to 10 hours. It is not easy work. It's tedious, and it's important. The essential economy is in trouble in our country. We are not talking about this enough. We have over a million openings in critical jobs: emergency services, trucking, factory workers, plumbers, electricians, tradesmen. It's very serious. We do not have trade schools. We are not investing in educating the next generation of people like my grandfather, who had nothing and built a middle-class life. Those jobs are out there. Mechanics in a Ford dealership. As of this morning, we had 5,000 openings. A bay with a lift and tools and no one to work in it. It pays $120,000 a year, but it takes five years to learn. Take a diesel out of a Super Duty, it takes a lot of skill. God forbid we ever get in a war. Google's not going to be able to make the tanks and planes. This is a self-defense issue for the country. If we work together like we always have in America and shine a light on the problem, getting like-minded people together, we can solve this. But we have a lot of work to do. I'm late in my life. These jobs gave me the ability to go through graduate school. We are in deep trouble when you compare us to China.

I'm so proud of us. There are certain moments where it comes into focus. We were the first company to ratify a union agreement with the UAW and the Canadian unions in their negotiations. Ford was the first in both cases. I believe that during COVID we learned that a two-tier wage system, paying some people $17 an hour and others $25 an hour, is not going to work. We saw huge turnover. Many of those people told me, "Mr. Farley, I work three jobs. Don't expect me to be on time at Ford." So we got rid of the lower tier and paid everyone the same. Now those people have a career at Ford like my grandfather. If you go into special trades, fully fringe, it's $100,000 plus with great benefits. That's the kind of America we want. It would be cheaper to make more stuff in Mexico, but we think it's smarter over the long term for our country to do what we do at Ford: make 80% in the US.