Jim Farley, CEO of Club holding Ford Motor (F), was interviewed by “Mad Money” host Jim Cramer for Wednesday evening’s show. The chief executive discussed the automaker’s plans to manage the chip shortage, cost pressures and their initiatives to scale electric-vehicle production. The interview ran after Ford reported a solid quarter after the bell. 1. ‘Scrappy quarter’ Farley described the second quarter as a “scrappy” one as consumer demand outstripped vehicle supply. “The team fought for every chip,” the Ford CEO told Cramer. “We did a great job mitigating all the uncertainty.” The CEO said he was most proud of two things: cost and cash flow. “A lot of our cash from profits is flowing into cash flow. We had to restructure the operations for so many years to get a profitable Ford and now we’re through that.” The company generated revenue of $40.2 billion, which came in solidly above Wall Street expectations, and delivered earnings of 68 cents per share versus the 45-cent consensus. There is one challenge that Farley sees as an opportunity. “We have to deliver profitability on our EVs,” Farley said. What will help Ford bring down the cost of EVs is the upcoming addition of lithium iron phosphate batteries to its EV portfolio , which are cheaper than NCM batteries the company has been using. With the addition of LFP batteries to its lineup, Ford appears to be on track to meet its 600,000 global EV run rate late 2023. 2. Dividend raise despite supply headwinds Another highlight of Ford’s second-quarter was its quarterly dividend hike by 50% to 15 cents per share. The new annualized dividend yield is roughly 4.55%, based on Wednesday’s closing stock price, compared to its previous yield around 3%. Farley said Ford decided to raise the dividend because it is confident in its earning power going forward, even as the company invests heavily in its EV expansion. “The most important part about that decision is that we have plenty of cash to fuel our transformation,” he said. The automaker plans to invest over $50 billion in EVs through 2026 . Farley expressed that Ford has plenty of cash to fund this investment even if there are more headwinds on cost. 3. F-150 Lightning 2-year wait list If you’re in the market for a new Ford, there is a good chance you’ll have to sit on the waitlist. Almost all 2022-model year vehicles sold out including the F-150 Lightning EV as Ford vehicles were “out of control” as it relates to demand, Farley said. “We are totally oversubscribed so it’s our time to scale.” He said there’s about a two year waiting list for a F-150 Lightning. To meet this demand, Ford is scaling F-150 Lightning production from 80,000 to 150,000 units over the next year, Farley said. The automaker is also coming out with a new Mustang, one of Ford’s most celebrated vehicles, along with a new Super Duty truck, which Farley referred to as a “cash-flow king at Ford.” Farley noted that while Ford is putting a lot of energy around its EV initiatives, the automaker isn’t losing sight on its internal combustion engine (ICE) vehicles. “We are leaning into the growth business of going digital with these EV products, but that doesn’t mean we’re going to walk away from our ICE products,” Farley said. 4. Commodity price headwinds The chip shortage isn’t the only obstacle Ford is facing. The company noted in its earnings that it could possibly see roughly $4 billion commodity price headwinds throughout the rest of the year that it could offset with higher car prices and selling a more profitable mix of vehicles. While some commodity prices have eased, including for materials like aluminum, Farley said Ford isn’t breathing easy yet. “We want to be ready for any headwinds that come our way in the next 12 months. Whatever that is. We are seeing commodities ease, but I’ve got to tell you, that doesn’t give me much comfort. We have to execute. That means building product, working with our suppliers, and we’ve got to fix our quality.” (Jim Cramer’s Charitable Trust is long F. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
Source: Business - cnbc.com
