Hello and welcome to Business Innovators Unplugged, where we break down the moves, mindsets, and moments that took them from idea to impact. I'm Kate Kaggel, host of Rebuilding LA and an anchor at Spectrum News 1, filling in this week for Anna Maganian as the host of the Business Innovators Unplugged podcast.
If you like cars, this is the episode for you. We have the CEO of Ford, Jim Farley, and he's here at a fascinating time for the car industry, this iconic American brand that is now dealing with competition from China, the shift towards electric vehicles. And what we really want to know is what does the future of driving look like for Americans?
Jim, thank you so much for being here and on a very important day. Ford making a major announcement. This is one of the biggest projects in the company's history. How is Ford having another Model T moment right now?
Well, four or five years ago, we dissected a Tesla and a BYD. It became very clear that our first generation EVs like Mach-E and F-150 Lightning were just not going to be competitive. So we created a small group in Irvine called Skunk Works and none of them came from Ford. My badge didn't even work in the building. And they were tasked with coming up with an affordable EV for Americans to compete with what we thought would be the standard, which is Tesla and BYD. And today we released a video about some of their approach. We've been working in silence for three years to really challenge the established players and even ourselves with a radically redesigned approach. And the whole approach is completely different than what you would want an American icon like Ford to do with an affordable EV. We're going to put our highway autonomous driving in our most affordable vehicle, this vehicle first. And it's a great challenger project in the company. It was not super popular in the company. But sometimes to really be competitive, you have to challenge yourself. It was tough to bet against my team in ways, but it was the only choice we had.
Well, because our team after 100 years had perfected the internal combustion, hybrid, and they thought even in a company like Ford, we didn't go bankrupt in '07. We've had this continuity since the Model T, and there's just a lot of overconfidence in the company that we can compete and beat Tesla just because we're Ford. Well, it turned out our wiring harness was 70 lbs too heavy. It was 1.6 kilometers longer than the Model Y. When we took apart the BYD, it had like 30% less parts than we did and we were extremely humbled four years ago and we had to catch up. So, it was unpopular because when you tell your team you don't have the rights to create your next exciting product, that's really tough for the team.
This comes on the heels of Ford announcing a nearly $5 billion loss in EVs. You recently said the consumer has spoken. But now I hear you also critiquing Ford's approach to EVs. So, how are you moving forward trying to find that secret sauce when it comes to something like you said, you've perfected one product and now the market is shifting?
Well, I would say, whenever there's a disruptive technology, everyone thinks you're in the seventh inning and you're really in the first inning. We wind up just going into the second inning now of a nine-inning game. And what we thought were the most important things weren't really that important. Turns out that the Chinese have been working on EVs for 20 years and they're really good at them and they have IP. And for companies like Ford, which the country will turn to in times of war and need like COVID, we have to compete and beat the Chinese and they're not easy. They get huge subsidies directly from the government and their market is almost 60% electric and their market is almost one and a half times the size of America's market. They actually make 60% of all EVs on our planet are made in China. 25% of all the vehicles sold in Mexico are made in China now. So, we had to really challenge ourselves. And frankly for me as a grandson of a factory worker, this is really the moment where we decide will we make it or not. We're very prosperous. We make a lot of money but for the next hundred years, EVs are a really important part of the market and we don't want to cede that to the Chinese. We want Ford to win.
I want to dig into more your connection to Ford's legacy as an iconic American business, but let's stay on EVs and even the in-vehicle technology. You talked about Chinese in-vehicle technology being far superior. This is your quote. Even calling it the most humbling thing I've ever seen. What did you see that was so impressive to you?
Well, Xiaomi is like the Apple of China and they have a very charismatic founder and they decided unlike Apple to go in the car business. So when you go to China, you can buy kind of the equivalent of an Apple car there and they took a Porsche Cayenne, basically made it for $25,000-$30,000, 0 to 60 in two seconds. It's a beautiful looking vehicle. It has facial recognition. Your whole digital life comes with you when you sit in the car. You can consume media like this podcast inside like visually as a passenger. It's an incredible piece of technology. It's all $30,000. When I drove that car and brought it back to Dearborn and drove it and showed it to all my peers, it was one of the most humble moments when you realize, boy, the earth is shifting competitively under your shoes and as a leader, what are you going to be, a victim? You have a moment that's just motivated us more. I put a picture of that car inside my metaphorical locker every morning. And as an American, it's very important for our country to compete and beat them.
You know, we're filming this in Los Angeles, a city where a lot of people have embraced EVs. I know a lot of folks who drive EVs, but even the folks who have been willing and excited about this technology, a lot of them tell me, 'I still have to have a second car that uses gas in case there's an emergency, an earthquake, a long trip.' Where do you see EVs right now in the market? And how is that going to change over the next 10 years?
Well, I think as we said, the customer has spoken. They've been really clear in America. For vehicles for short distance and most of our lives are commuting or going to the store, an EV is perfect. It's actually much cheaper to own even in California where electricity prices are expensive. It's cheaper to own, less maintenance. But that's not all the miles we drive. And as Americans in California, we drive long distance, too. And the charging isn't there yet. As much as the supercharger networks are great, we have a lot of work to do. Look, it took us over a hundred years to build the infrastructure for the internal combustion engine. It's going to take us some time to build a second infrastructure, this electrical infrastructure. But in the meantime, there's a lot of exciting technologies coming where it can do both. An EREV is a good example. It's a vehicle that drives an electric vehicle, but has a gas tank and a combustion engine, but it's an industrial engine, super efficient. It doesn't drive the power of the vehicle. It just charges the battery. So, you can go 700 miles on a tank of gas and 90% of your trips are all electric. And it doesn't have a transmission. It doesn't have a driveline. It's much lighter than a PHEV or a hybrid which has two separate drivetrains. And it works great. So, I think what we found is that until the infrastructure catches up, until we're used to charging on the road, companies like Ford have to give customers more choice. Our hybrid is one of the most popular options, the F-150, which has been the bestselling vehicle in our country for 47 years. And hybrid pickup trucks, I mean, a couple years ago, no one ever thought that there would be a hybrid F-150. It's our fastest turning vehicle. It also allows you to power your house for six days using the hybrid system. And a lot of people who lose power during the fire season here or in Texas or Florida, they really like having their vehicle as a backup. Not having to have a gas generator or expensive backup generator, having your vehicle do that, it makes sense. So, I think this partial electrification really doesn't get the credit it deserves. Hybrid sales continue to grow. Customers makes perfect sense to have an F-150 hybrid and one of our new affordable electric vehicles side by side. That makes perfect sense to me.
Well, I love when you talk about your car as so much more than this thing that gets you from A to B. I heard in another interview you brought up this really interesting statistic that was specifically for the Chinese market, but that 20% of the time the driver spends in the car, the car is stationary. And you're not talking about traffic. You're talking about when you're sitting in your car checking your email. And I got to say, this is not just in China. American women, all the moms I talked to, we felt very seen because you get home and you kind of have this last couple minutes. It's in your car, you decompress or maybe you're checking your email or you're responding to those last minute texts before you go into the craziness of the house. How does that inform your thinking around cars when you're developing cars?
Great question. No, look, we definitely need to think about the digital experience differently and just think about that 20%. Also think about just around the corner like in a couple years most of the car companies I know at Ford will be offering eyes-off highway driving. So you push a button on the highway and the car drives for you. And that's all found time. That's not really that much different than you sitting in a stationary car. So even for the future autonomous technology that's right around the corner and unlike a lot of promise to autonomy, it actually is. We now have to think about the car as a third space. Like a really legitimate third space. The difference is it could be moving. It could be stationary. I kind of like to think about it like a phone. I used to use a phone to make calls. I don't use a phone that much to do that. Although I still do it. I wonder out loud to myself how trips will change when autonomy comes or we spend more and more time using it as a place to decompress for wellness or just a chance to take a breather or consume some media that you didn't want anyone else to see. I think that third space, those trips are going to change. And that means that when we look at a car, a trip in a car, whether it's a robo taxi, your personal car, whether you're stationary or moving somewhere, I think those trips are going to change. We'll look back and say, we used to just drive from point A to point B with the radio on. I think we'll look at that the same way as we look at phones making calls. Trips are really going to change for all of us. I see some crazy stuff people do in their cars while they're moving. I can only imagine what happens when the car is driving for you. There's going to be all sorts of new social experiences that people can't even imagine today.
No, I think about it so much as a parent when you're in the front seat and driving, right? Your attention has to be on the road and then your kids are doing god knows what behind you, but that whole relationship will change.
Well, what a great example. That's a great example. Like spending time with your kids to do homework on the way home. You can do that with a level three system. You can do that in a robo taxi. We just, you know, I never thought when I joined our industry that we would be the industry giving people time back. But I think, you know, I don't think there's anything more valuable in our life than time. And for us to give highway miles like 40 minutes a day for most Americans, time back, that's going to be a really cool moment. As a car person, I'll be really proud of Ford at that moment. But we got to make sure those experiences are really rich.
You are the quintessential car guy. You know everything about your product, bumper to bumper, inside out, and then everything when it comes to selling cars. And then you also have this historical link to the company that your own grandfather worked on the assembly line at Ford. Do you think about him a lot when you're thinking about what this company is turning into with all the new technology?
Yeah. My grandfather's like most Americans, my grandfather came here. He had nothing. And his name is Emma Tracy. And when I joined the company, they gave me a picture of his ID when he was like 14 years old. He lied about his age. I have a picture of him in the CEO's office because, you know, frankly, my job is to serve those people. Yes, it's to serve shareholders and customers, but I think about my grandfather. You know, his job got my mom to college. My mom got me to college. That job at Ford totally changed our family. And there are jobs around the world at Ford that are still changing families. If we can make this a sustainable company that all Americans are proud of, we'll create a lot of value in our society. And my grandfather keeps me grounded as a person. You know, I can hear him say right now, get back to work. He's a quit yapping. Get back to work. Yes. Yeah. He was a kid of the depression and I do visualize my work as a servant leader to our hourly team.
In your grandfather's time, one income could sustain a family. Yes. In a family where the kids went to college. That's not the case anymore. Do you see the essential economy, those jobs, are they in crisis right now?
Total crisis. And we're not talking about as a country, we keep talking about job creation or job reports. And what we're not really talking about is preparing people for alternative paths that can be very valuable. I mean, I think it's so ironic that so many of us are proud that our grandparents started in America and they were plumbers or electricians or truck drivers and now we are all convinced that we have to send our kids to four-year colleges and that's the only way forward. I think that's why we have a shortage of factory workers. We have a shortage of plumbers and electricians and people that make our society work and we as a society just haven't really talked about the prestige of those jobs and how important they are to our society. I think at Ford those are our customers. We're almost 50% of the commercial market in the US and they are our customers and we can see the crisis. Plumbers, electricians, they have no young people coming up. We have a shortage this morning of 8,000 technicians in our dealerships. Those are $120,000 jobs and we can't find people to work in our dealerships to repair our vehicles.
Yes. This is a real thing in our country that we have to talk about. Skills trades training, trade schools, shop class, high school that many of us grew up with. They're all gone now. They're not funded. And we'll do everything we can at Ford to take care of our own problems. But as a society, I think we have to look in the mirror and say, 'Is a four-year degree the only way to succeed in America?' I don't think so.
