Ford Focuses on Cost Reduction and Quality Improvement

Ford’s Intense Focus on Cost Reduction

Ford Motor Co is taking significant steps to reduce costs across the business, with a focus on commodities, labor, and warranties. Chief Financial Officer John Lawler emphasized the company’s commitment to making meaningful changes in cost and quality over the next year or two.

Plans for Cost Reduction

Earlier, Ford estimated the cost of a new UAW labor deal at $8.8 billion and outlined its strategy to offset that by cutting costs in other areas. The company aims to reduce the complexity of future vehicle designs and minimize the number of hours required to build those vehicles.

Automation and Production Costs

Ford is exploring opportunities in automation within its assembly plants to help lower production costs. The automaker also plans to focus on trimming warranty costs while leveraging the decreasing commodity costs for electric vehicles.

Future Cost Reduction Efforts

Higher production volumes, smaller batteries, and optimized designs are expected to contribute to a reduction in the cost of Ford’s second-generation electric vehicles due at mid-decade. The company envisions a significant step change in further cost reduction efforts for its third-generation EVs toward the end of the decade.

Robust Demand in Commercial Vehicles

Ford continues to experience robust demand in its Ford Pro commercial vehicles, with orders surpassing current production capacity. The company anticipates additional pricing compression in its combustion-engine vehicles next year, along with continued pressure to lower premium prices on EVs.

Convergence of EV and Gasoline Vehicle Prices

Over time, Ford expects electric vehicle prices to converge with those of gasoline vehicles. The company is prepared for continued market dynamics, including pricing compression and the evolution of consumer preferences.