Ford CEO Jim Farley Talks Culture Change

**SPEAKER_1** (0:02)
Bloomberg Audio Studios, podcasts, radio, news.

**Matt Miller** (0:07)
Let's kick it off, Jim. I mean, it is such an incredible feat, not only coming back from the slide that you were in, to take number one, the number one spot. I mean, number two or number three would have been impressive, but beating Toyota, beating Honda, they're legendary for quality. How did you actually achieve that?

**Jim Farley** (0:28)
Well, it took us four years of hard work to be an overnight success story. You know, it's been just an amazing culture change at Ford. Literally, Matt, every one of our engineers has been in the plant. Every one of our supply chain teams are in our suppliers.
We are paying attention to every detail. It has taken a few years to get there, but I think it's really about the culture putting quality before profits, before anything else. And that really is what's exciting about this, because now what I'm seeing is the team really focusing on long-term durability.

**Matt Miller** (1:06)
So was it your team, was it an employee, a labor issue? Was it, you know, technology? Did you use AI?
Was it factory processes? Like, can you get into specifics of how you did it?

**Jim Farley** (1:21)
Yeah, if you were to visit today the Rouge Plant, where we make the F-150, Matt, what you would see is a whole control center around data and quality data. So we measure the torque of every one of our fasteners. We have AI tools for vision systems. But most of all, it's just old-fashioned hard work of our team members all working together to pay attention to the very small details that will make a difference between a perfectly built Ford and an OK-built Toyota.
It's just an incredible attention to every single detail.

**Matt Miller** (2:01)
So, I mean, it's interesting now that we're in the age of AI and we're talking about this technology killing jobs, but it seems like in your case, it's really experienced human workers that made the big difference.

**Jim Farley** (2:15)
It did. I have to say the process coaches, the area coaches, you know, they get up every morning, they look at the last shift's quality data, we look at how many vehicles are repaired, and we work that process every moment of every day.
Every employee walks into any one of our plants, they know exactly, are we winning or are we losing yesterday and today. Everyone is fully aware of where we stand. We know exactly where Toyota is. We know exactly how to, you know, where we need to get to beat Tundra and Super Duty better than any of the other domestic competitors. And so everyone is aware exactly the quality is coming out of our plant in any particular shift every 50 seconds.
And that is, that human motivation to pay attention to everyone, everything is amazing. Look, we make 85% of our vehicles in the US, Matt. That means these are US factory workers versus even our domestic competitors. They're some of the biggest importers in the US. We're not building these vehicles in South Korea or Japan. These are American workers beating Toyota and Hyundai and our domestics who import their vehicles. We beat them all with American workers with the attention to detail.

**Matt Miller** (3:35)
It's an incredibly compelling narrative. I agree. Of course, being at Bloomberg, we're focused on the numbers and quality issues, recalls and the like had dragged down profits and margins to some extent over the past few years. Can you quantify in dollar terms how much this will contribute to your recovery this year?

**Jim Farley** (3:55)
Hundreds of millions of improvement. We're seeing our warranty coverages come down. We're seeing our recall costs come down. These are all contributing to literally hundreds and hundreds of millions of dollars of a tailwind for Ford on cost. But we didn't stop there. We also negotiated our parts costs with our suppliers. We've looked at all of our bill material and even our manufacturing inventory in our plants and all our manufacturing logistics costs.

**Matt Miller** (4:21)
Imagine for Ford Pro, it's the most important. You've got incredible growth there. You've got double digit margins. You've got 30% subscription growth. Correct me if I'm wrong on any of those numbers. How important is this for Ford Pro and does it change the picture at all?

**Jim Farley** (4:36)
Good question. I would say for Ford Pro, really what this means, built for tough really means something to our pro customers on the vehicle side.
But what we're really seeing there is an obsession with long term power train durability. We're testing every engine, two to 300,000 miles with transmissions, axles, everything. So those pro customers who use their vehicles literally 90% of the day to run their business, they can not only be happy with 90-day quality, but also 5-to-10-year quality. That's what it means for our pro customers.