The Long View: Jim Farley, President and CEO of Ford

The Long View: Jim Farley, President and CEO of Ford

“The Angle” Music

Cold OPEN “And it was encouraging to me that, you know, in a way, we were rewarded for getting honest with our business. It was a real moment for me as a CEO. Was kind of a cleansing moment.”

Eric Veiel

Welcome back to “The Angle from T. Rowe Price”, a podcast for curious investors. Just a reminder that outside of the U.S. this podcast is for investment professionals only. In this episode of The Long View, we're joined by Jim Farley, President and CEO of Ford Motor Company. In this conversation, we explore Jim's leadership journey, the strategy behind Ford's transformation, and how he sees the future of mobility unfolding.

Jim, thank you for being with us today on The Angle. We're really excited to have you. So, I'm going to start this one in a little bit of a different way. I had to tell you I was super excited when I found out you were going to be on here because my first car. See if you can recognize it here.

Jim Farley

Oh, nice. Yeah. Yeah. The Ranger with a camper top on the back.

Eric Veiel

That's right, and it's a camper top on the back. Because when I graduated from college, all the money that I had saved up and the little bit of graduation money I got, I bought that, and my buddy and I did a huge road trip. Which I know is something that's near and dear to your heart.

Jim Farley

Alloy wheels. You went for it on that one?

Eric Veiel

Well, you know what, it was used, so, yeah. So those are already on there, and we did retrofit it with the camper top, and there may or may not have been a cooler in between the seats with soft drinks only.

So, I'd love to start a little bit with your story. So, you know, I think it's, it's pretty well documented, but maybe not everybody knows that your grandfather was, I believe, employee number 389 or something like that at Ford.

Jim Farley

Yes, yes.

Eric Veiel

And I think your nickname growing up was.

Jim Farley

Jimmy Car Car.

Eric Veiel

Jimmy Car Car. Yeah. So, I mean, this has been in your blood, and I'd love to kind of start there. How did you get so into, so into cars?

Jim Farley

My dad was a banker. He worked at Citibank, and I just always loved cars. I can't really explain why. Bought my first car when I was in my teens, drove across the country. So, always worked on cars. Interesting enough. Ford. Even though I wound up working at Toyota, I wound up putting myself through graduate school at a car restoration shop that was owned by Phil Hill, our first Formula One champion in the U.S. in Santa Monica. So, I've always worked in car repair shops. Restoring my own cars. But then I decided to take a chance and, and, frankly, go to Toyota, actually go to Lexus. There was just a small group at the time when we were starting Lexus, and I was a product planner. I got offers from the domestic car industry. I remember the F-150 offer was for a financial planner for the rear differential on the F-Series. And, I had I had this offer to be the product planner for Lexus. I was, like, whole car versus a differential. So, I decided to do that. Much to the chagrin of my family because my grandfather, as you said, worked at Ford. He wound up owning a dealership, then became a supplier late in life. And, my mom grew up in the East Side, Detroit. My dad fought in World War II, so working for Toyota was, you know, not a very popular move in my family. Actually, was kind of, you know, a serious thing. Awkward for a few years, but then Toyota really took off, and my family, you know, thought that I had made a good choice. But the first couple of years, it wasn't as clear.  And then after all those years, about 20 years, I decided when I met Alan Mulally, that, that here was a domestic company, the one I love the most, Ford, where my grandfather worked. He was just such a good leader. As soon as I met him, I saw his One-Ford plan. I was like, this is the right opportunity to leave Toyota.

Eric Veiel

Yeah. Because you were at Toyota for.

Jim Farley

20.

Eric Veiel

Years. Years? Yes.

Jim Farley

It was. It was, I had lots of opportunities to leave. I had decided I was going to stick with cars. It was just, as you said, my passion. I was always scared that going into the car business would ruin my love of cars. But it never did, and coming back to Ford in 08’ was very challenging. But I really want to see what kind of leader I was really made of. I really felt like Ford was an opportunity where I be tested more than Toyota. And little did we know. I know that that would be more true than, than I could ever imagine.

Eric Veiel

Yeah. Well 08’, let's, let's go there because that was a really important time for the country obviously with the global financial crisis going on, the auto industry in a lot of trouble, but Ford was in a, you know, came through in a slightly, significantly better position as a result of some of the work that Alan and others had done. But talk a little bit about your first days there in 08’ and coming through that, that period.

Jim Farley

It was very difficult. I, I was at Toyota and we never reduced production in 20 years. So, every month we increased  production. So I get there, at Toyota, wasn't sure that people really wanted me to be there. Alan did, but a lot of my peers at Ford were like, who's this Toyota guy? The way I thought, the changes I wanted to make on the revenue side of the business were very different than the Ford approach. But Alan and I saw things eye-to-eye,  where there was, you know, we really like dealers, we really felt like we could grow, we could democratize the brand and expand the brand globally. And so it was very exciting and terrifying at the same time. We shut down our truck plants when gas prices surged before the great financial crisis. Then, thankfully, we had borrowed a lot of money and we had a good restructuring plan. Our competitors went bankrupt. We didn't. All came to life in the hearings in Washington, DC. It was a trying time because our competitors could kind of write off their assets, closed brands, closed dealerships, and we chose a tougher path. Which wound up being great at the beginning because many customers turned to the Ford brand. When; they turned against the other brands. But at the same token, you know, they were a lot cleaner, let's put it that way, financially. Borrowing the money was really smart. We borrowed probably way more than we thought, and we needed every cent of it.

Eric Veiel

That was the story of the GFC. Everybody that borrowed early was in a better spot.

Jim Farley

Exactly. We wound up having to sell PAG. Simplify the company, really focus on the Ford brand, and then we got busy kind of expanding our product portfolio. And most of it didn't work, and some of it really did. We were very small in China. Our competitors were making a lot of money in China after that. And so we had this great resurgence, but then the cost came back in the business and our overseas operations started losing a lot of money. And there we were again, you know, having to fix the company all over again. And two CEOs later, you know, we we made the transition. Then mobility became a big deal. So there's been a lot of changes in the last 15 years.

Eric Veiel

So, maybe let's jump ahead to 2022, where you sort of reorganized the business into Ford Blue, to the model E and to Ford Pro, and maybe talk a little bit about what you were trying to solve for with that original plan. And then we'll pull it forward to where we are today and the more recent announcements that you all have made. Let's take a little bit of a step back to set the set the context.

Jim Farley

Well, I would say as a competitor to Ford, I had realized, I was part of the Tundra project.

Eric Veiel

My Dad may or may not have a Toyota Tundra. We won’t talk about that here.

Jim Farley

Well, we built a brand new plant in San Antonio, Texas. We developed a brand-new product to really take on the F-150. The Tundra, and it was one of the largest global projects, right on par with, I would say, Lexus. And it didn't work. And I really learned how good the domestics were in pickup trucks, not just because the chicken tax, but because they were really focused on quality and their customers. And, that was a big learning for me as a competitor. So, when I came to Ford, I was always curious about this F-150 Super Duty business, and it turned out that the Super Duty business was actually even more attractive than the F-150 business. F-150 we have around 20 to 30% market share. Super Duty Ford has 40 to 50% market share. We're actually, our truck business, we’re bigger than our two next competitors combined. And I, as a CEO, I had watched the company kind of treat this as a sales channel. And when I went to Europe, we actually reorganized Europe business around trucks and vans, in that case, vans. And I saw that when we put human capital behind it, we really started to focus more on the services, parts. Kind of the, up-fitting process. And I was like, why don't we do that at the company level?

So, I had this intuition going into being the new CEO, that Ford Pro should really be something different and that the electrification, but also the software defined vehicle would really affect the B2B business actually more than the retail business because those customers would buy productivity software. They would be more interested in using their fleet more efficiently. They were actually going to be more, they would be leaning into the changes in our industry faster than the retail industry. And then obviously Blue, we really started to bet on more emotional products. We had just started to launch the Bronco lineup. We started to get serious about Raptor as a brand, and we really believe that Ford could compete in a narrower part, really own off-road and on-road enthusiast.

And then, of course, electrification. We really saw as a different animal. We wanted to manage the business differently. We thought it would be different platforms. We thought customers would be quite different. Even the distribution could be different. And so it became very clear to me early on, hey, we need to separate these businesses so we manage them correctly. There'll be some overlap in the industrial side, but really these are actually more different than they are similar.

Eric Veiel

Right, so that's 22’. So, you've, you got Blue going after sort of the core business here with off-road; E for the electric side, and then the Pro. Great heavy-duty trucks. So now more recently you all have announced a reset of that strategy to some extent. And essentially, I think what you said is, look, this is a customer driven shift, and I think you might have said something around the lines of like, the operating reality has changed. So, frame for us what's changed and what you all now are really trying to do to, to adapt to that change. Because this is a big, this is a big deal.

Jim Farley

Yeah. There's two big trends in our industry - electrification or lower CO2, you know, degrees pure electric all the way through partial electric powertrains PHEVS, EREVS, hybrid, all the way to traditional ICE (internal combustion engines). And the second is software enabled vehicles, where the vehicle can be updated. We can sell software tied to it, but it requires a huge investment in electric architecture to make the vehicle software defined. And those two changes, including automation tied to the software is like, you know, what's really running our business now.

It turned out that electrification was very lumpy around the world. Places like China were 50% pure electric. Other places like Europe were more like 25 to 30%. In the U.S. was very little, especially, then the government policy started to change around the world. The Chinese government completely bet on pure electrification. Europe was somewhere in the middle. And the U.S., you know, the policy completely changed here 12 months ago with getting rid of really any customer support for electrification journey. Pure electrification and even the tailpipe emissions that have always been part of our industry, you know, really were completely released.

So basically, what we were left with in our core market, the U.S., was the actual customers duty cycle. How do they use the vehicle with these different powertrains and the software enabled vehicles? And it became very clear to us quickly because we were number two to Tesla for three years. We were the second largest electrified brand here with Mach-E and Lightning, and E-transit, that we had kind of put in the market as fast as we could. Our competitors were coming after us with their electric lineup. We learned before everyone else, hey, these really expensive electrification vehicles, the battery cost did not come down to the cost we thought and the customers, they don't want to pay for 30 or $40,000 battery. And so it became very clear to us electrification in the U.S., especially after the policy change, is really going to be left with the customers who actually drive a duty cycle that makes sense for pure electric, which is basically people who drive their vehicles for commuting short distances. And we had bet on the Skunkworks project UEVs. So, we continue with that investment, but the rest we, we stopped developing those vehicles. We had a great next generation all-electric Lightning and lots of SUVs planned that our competitors had just come out with. We canceled all of that. We stopped it all.

Eric Veiel

So, there's a really interesting story that I've heard where I think you said you and your team basically tore apart a BYD, which is, you know, Chinese manufacturers that’s got an unbelievable market share in electric, Tesla and compared it to some of the work that you all had done.

Jim Farley

Oh, boy.

Eric Veiel

Really thought like, oh my gosh. Maybe there's some advances here that we've got to incorporate. How does that fold into the decision?

Jim Farley

Oh, good question. A couple of years before we come out with the Mach-E, it was number two to the model Y, selling very well.

Eric Veiel

Good looking vehicle.

Jim Farley

Yeah, sure. People loved it. Very high loyalty. But when we actually looked at the actual engineering and Doug Fields came from Apple and Tesla, it became very clear to us when we tore apart, you know, the latest model, Model Y, Model 3, actually before the model Y came out, that we had completely developed a vehicle with an ICE (internal combustion engine) prejudice where, you know, electric architecture, we just go out and bid a wiring loom to a supplier and with the battery, you know, think about it as like Apollo 13. If you think about the battery is this huge budget, and you can reduce the size of the battery by $300, it may make sense to spend $200 extra on a wiring harness that is, you know, much lighter. Same with the braking system for Re-gen or the electric motors. You know, the battery is like a huge budget, a $30,000 budget and we saw our competitors like BYD and Tesla completely changed the way they’d engineer the vehicle around that budget. They were spending much more than we were on many of the systems to shrink the battery, and including aero. And we said, oh my gosh. So, at that point we decided, let's build a skunkworks team in California with no ICE prejudice.

Don't have that, any of them work for Ford, although they can interview Ford people. Most of them came from Formula One racing or from Tesla. And let's develop a low-end, very affordable EV, with no ICE prejudice. And the team was the team. The way they approached the problem was completely to, thank god we did that, 30% less labor content. You know, it's just a radically different platform than we would have, than we did with Mach-E. It was, eye opening moment for me as an automotive person to know that, frankly, my ICE team really had such strong prejudice that the Model-E business, they could never really support with a competitive platform.

Eric Veiel

You know, I can't imagine that this decision came easily to take a huge charge and then to basically pivot away from a big investment that you had already made.  So, two aspects of the question I want to ask you, first of all, how did you come around to make that call? That's a big, tough call to make. And then secondly, how was it received by folks who have, you know, this is a 120-year old company been doing things kind of one way for a really long time, and you basically said, hey, we're going to disrupt ourselves.

Jim Farley

Well, first of all, we were in love with the products. And in the automotive business, it's very capital intensive. When you fall in love with products, the management intuition is to keep going. So, this was a very difficult decision even kind of emotionally. Because we were so proud of these products.

Eric Veiel

The Lightning, Yeah.

Jim Farley

The next generation would have blown people away. I mean some really innovative stuff. So, it was very difficult because people had dedicated three years of a life to develop this, these vehicles, and they were very excited that they would really change the industry. But as a CEO, I knew that we would never ever get the return on capital. And I could not really stand, frankly, converting these plants over to these products. And for literally 20 years, making a mistake every 56 seconds. So, I knew we had to make this choice. Thankfully, we got the support from, you know, from the board and Bill Ford to make this decision, it's very difficult for our suppliers, you know, a lot of the value creation in our industry is our suppliers. They had also, fallen in love with these products. And, and these are the same suppliers, some of them that we work on with the traditional vehicles. So, it would be very disruptive to our relationship. But anyways, you know, as a CEO, as a team, we just knew this was never going to work. The customers, as we, you said, the customers would never pay the prices that we written down and this would be a 10-year, 20-year problem. And so, you know, we made the choice. As far as how it was received in the company, there was every emotion you can imagine. Some people were relieved. Some people were against electric in the first place and said, well, you know, finally they came to their senses.

Eric Veiel

Yeah. Told you so.

Jim Farley

Yeah, exactly. But most people, majority people in the company said it was worth a shot. Let's get focused on what's really going to work. UEV and hybridization of our lineup plus EREVs, and our new plan. What was impressive to me was the efficiency of the investor base. They, they kind of already made the choice that this was never going to work. And so, when we announced that, they're like, duh.

Eric Veiel

We had already modeled that out.

Jim Farley

Yeah, exactly. So you guys had figured it out. Yeah. We were rubbing our hands and fretting about this for a long time. And I think it restored a lot of confidence to me in the investment community that that you guys know what you're doing, that you kind of know what companies should do over the long haul, even the midterm. And it was encouraging to me that, you know, in a way, we were rewarded for getting honest with our business. It was a real moment for me as a CEO. Was kind of a cleansing moment. Felt like, you know, I've been away at a retreat. We were really struggling with this decision. But as soon as we made it, we were committed. And, you know, I could see kind of the clouds parted as a management team everyone just got focused.

Eric Veiel

Yeah, yeah. Refocus. Re-energized, probably as well. And, the sense of purpose is, is a powerful thing.

Jim Farley

It is. You're exactly right. As a leader, the most important, one of the most important decisions we make is what do you have your team focused on.

Eric Veiel

Let's talk a little bit about the competitive environment. We sort of talked around it a bit. I don't think people in the U.S. have a full appreciation for what's happened in China. I, you know, I travel there for work on a somewhat regular basis and when you see what's happened to the auto industry over there it's amazing. It's coming to Europe pretty aggressively. And then, you know, ultimately that puts some pressure on your business because all those European makers are going to have to go somewhere if they can't deal with it. So maybe, from your perspective, what the Chinese autos have done, and how this is going to play out over time.

Jim Farley

Well, Ford is the most American car company for sure, because we build the most, we export the most, we have the most UAW workers. But on the other hand, you know, a third of our business is global. A lot of that is in Europe, but a lot of that is in Southeast Asia, actually we’re number two to Hilux globally with Ranger. A lot of people don't realize that we're not only, we're the largest pickup maker in the world. And a lot of that is Ranger.

Eric Veiel

I don't see many Rangers on the streets in the U.S.

Jim Farley

And the reason is because we built the Bronco off the Ranger platform. And so, Bronco is basically our range.

Eric Veiel

I see a lot of Bronco.

Jim Farley

So Bronco, when you see a Bronco, think of that as a Ranger. But for the rest of the world, we have four/five factories around the world just building pickup trucks. And in many markets, big markets like Australia, New Zealand, we outsell Hilux, which has been the industry standard for emerging market pickups forever. So, you know, we feel the Chinese. We made the tough decision three years ago to stop investing basically big capital in China. You know, we didn't pull out. But what we decided to do is export from China. Now that's wildly profitable for us. We export around the world our Chinese vehicles, but we don't really invest a lot of capital in China for China. So, it's kind of an export only, and it worked great. A lot of competitors, continue to invest in China or they pulled out. We did something totally different than both of them. We actually built our China business for export only. And it's, it's worked really well for us. So, we watch China really carefully because we, we are actually competing with them outside of China, exporting just with them. The market is 29 million. Approximately a third of all vehicles sold on this planet are sold in China, and their capacity is 50% higher than their local market. So, their the largest exporter of automobiles, by far, it's been a couple of years now. Most of Russia market, 25% in Mexico are sourced in China now. But what really happened that you see, and I see, is the local brands, the BYD’s, the Geely's, the Neos, the XPeng, these companies, that China market was dominated by Western brands. That's over now. The whole market is not only the biggest market and the most important and the most advanced for electrification and software defined. It's also dominated by Chinese companies.

Eric Veiel

The local brands.

Jim Farley

And those local brands. BYD was the first, but all those local brands are now moving from just serving China, which was big enough, to really focusing on export and then now localization. And what's accelerating their move globally is the pressure on CO2 and electrification. They bet on electrification. They have the best IP. They have the best cost structure. Their government bet on that. And these Chinese OEMs, I have no doubt, some of them will be the top five globally. Like Toyota and, and Volkswagen have been, and they're now not only exporting in huge volume, they're now starting to localize production in Europe and Southeast Asia. I just got back from Australia. Australia is no different than the U.S. People use their vehicles like we do in the U.S. Pickup trucks, SUVs, that's Australia. What's different about Australia?

Eric Veiel

No local brands.

Jim Farley

They have no local brands. They gave up on local manufacturing and there are no tariffs essentially. And they're pushing electrification heavily.

Eric Veiel

So it's a wide-open market.

Jim Farley

Wide open market. There's 50 Chinese companies there. The Chinese in Australia, just got back, was 10 points of share two years ago and they're now 20, on their way to 50. I would not be surprised in Australia if 50% of the market is Chinese companies. Chinese OEMs.

Eric Veiel

Are they mostly electric?

Jim Farley

It's, it's started non-electric. A lot of it is electric now but most of it is partially electric. PHEVs, EREVs. Hybrid.

Eric Veiel

So, this EREV concept, can we just pause on that because it's a really interesting. I'm not sure how well it's known in the U.S. But just maybe spent 30 seconds on that.

Jim Farley

EREV is a really important technology for all American car buyers. Especially those that tow or use their vehicle for work. A pure electric vehicle is really not, it's terrible for towing. You have to have a huge battery and any time you have a lot of weight in the vehicle you have to add a lot more battery. And the battery extinguishes really quick when you're towing. An EREV is a really interesting technology. It was actually developed in China, but now I think will be very prominent in, in all the markets, including the U.S. Basically, it's an electric vehicle. It’s an electric vehicle, think about a, a heavy vehicle like an Explorer or an Expedition, or a Super Duty. It's all electric, so it drives like a Lightning. It's fast, it accelerates great.

Eric Veiel

Simpler drivetrain. All that.

Jim Farley

Yes, but it's unlike a hybrid, that has actually two high powertrains. It has a small industrial engine, three cylinder, four cylinder, that is, that runs at a constant RPM and charges the battery. There is no transmission for the combustion engine. There's no axles, and no drivetrain at all. It's just a small combustion engine to charge the batteries. And for a Super Duty or F-150, you can get 700 miles of range out of these vehicles, you can maybe have 100 to 150 miles all electric. So, for 90% of your trips, you're all electric. But then when you want to take a long trip, you do not have to plug it in on your trip. You just fill it up with gas. It goes 700 miles. It's not super-efficient when you're towing because the engine is always on.

Eric Veiel

Let's pivot a little bit to, to leadership and your philosophy, on leadership. So, I mean, you're running 170,000-person organization in a highly competitive industry. It's cyclical, it's capital intensive. So, you need to have a sense of urgency in that workforce. How do you create that urgency without pushing it all the way to, you know, chaos or panic?

Jim Farley

Yeah. Good question. Something that, you know, for 40 years in the auto industry, I've kind of watched different systems. The Toyota system and the Ford system were almost the inverse of each other. Look, my philosophy is very much an industrial company with high capital and cycles. Even with software-defined vehicles and new revenue sources like our Pro-business, we're still an industrial company. The most important thing is really ruthless, lean culture. In the end, that is going to define success. Ruthless, ruthless execution of quality and cost and safety at the same time require, I believe, lean principles, problem solving, like frameworks like Kaizen, 5 Why’s, PDCA. These are very well-established lean principles that always focus on waste elimination and focus on the customer. And I think Toyota certainly perfected this with the Deming principles. And I think what Larry's done at GE Aviation, doing that in the Eastern Company is easier; doing it in a Western company where we're a, a group of individuals is completely different animal.

So, I believe, my management system, the way I think about management system is ruthless daily management. So, metrics. You measure metrics. Everyone has a metric; it gets cascaded from the top of the company, all the way through are the key metrics. And we ruthlessly execute against those metrics. And we measure our progress daily management every week, every month forever about where we're going with those metrics, compared to those metrics. And those metrics are informed by benchmarking. There's always a good industrial company that's leaner than you. So, you can always borrow their kind of excellence. And you wire that into the company and then you use daily management to execute that all the way through the organization. All 170,000 people are tied to those objectives. And then they use problem solving tools, common tools, that every, a framework that everyone kind of uses. And, you know, if you put something in place, you want to see how it's done. You do a PDCA plan, do check, act, and you evaluate it. You do that forever. When you have a problem, you do 5 Why’s, and then you use Kaizen when you get stuck to make breakthroughs and problem solving. Those are a common framework. But the daily management is kind of the way you run the business. And you have strategy, deployment and people process to support that, as well as an innovation cycle plan. Those four things all have to work really well in the company. If you just have great daily management and problem solving tools, if you don't have the right innovation and you don't have the right strategy, you're going to still fail.

Eric Veiel

You'll get to a certain point, but then they'll just you'll run out of runway.

Jim Farley

Correct, and then you need the people process to reinforce daily management in the lean tools. Because you need to rate people on how they behave as managers in line with, you know, using those problem-solving tools and using that daily management.

Eric Veiel

Let's double click for a second on the people side of it because workforces are changing, tools are changing. So those two things, how are you all incorporating things like artificial intelligence into the tools that you have your people use, and then ultimately into your people processes themselves?

Jim Farley

I think in the first inning, there's probably nine innings of this AI game, but the first thing seems to be really focused on efficiency. And, obviously customer facing, like our autonomous systems and also support for customers in the vehicle as well. But, on the people side, really, we have a number of AI deployment projects, very large ones. And how I like to think about it is, you document your process, you look at, process, let's say invoicing or how you do accounting or, planning our production. You process-map it and then you see what can be automated, what could be given to AI tools reliably, and what still need to be done by humans. So, the only way to really apply AI on the people side is to be very process-map oriented.

We've learned this from great companies like Dell and others that are further down our path, and we are seeing as we do this process map that we can apply AI tools to many things we do at Ford and be more efficient and redeploy those people in other, more useful ways. And, and in some cases actually taking saves of people. It's a combination of both. The people process of Ford has been really interesting, probably the most interesting topic for me as a leader, because when I came to the company or when I became the CEO, 95% of the people had a 100% bonus. We are $4 stock, and we made $4 billion, and 95% of the people got 100% bonus. So, one of the first things I did is I found the right HR leader, and we, we kind of synced up on a performance management system.

Eric Veiel

Was that because it was like a Lake Wobegon where everybody was above average? And so.

Jim Farley

Yes, Yes, Yes, and it had all of these unintended negative consequences, like no one to be honest about their performance.  People were not getting real development plans because no one wanted to upset anyone.  Well, the problem with that is we're competing with BYD and General Motors and other great companies like Toyota and so we needed those metrics to be world class. And to get at those world class, we needed to reward the really good people, and we needed to get the people who were never going to level up to, you know, find another career path. And we needed to find that most of the people in the middle to be a lot better than they have. And so, performance management wound up being one of the most important keys to unlock the culture change at Ford. Now we're like maybe third or fourth inning of a nine-inning game on the culture change. But of all the things we've done, I believe putting in a performance culture, it's been one of the most hardest, one of the most difficult things to do. But the most important.

Eric Veiel

Got it. So, we are gonna, we’re going to run short on time here. I want to get to your podcast because, it's really good. I've actually gotten to listen to a couple of the episodes in preparation for this. It's called Drive, and it's part of it is about, you know, drive, driving. But it's really about uncovering what motivates people and what drives them. So let me turn that on you. What really drives you, Jim?

Jim Farley

For me? My grandfather was a factory worker for Ford. He was an orphan. He had nothing. His job put my mom through college. What drives me is to create a company that will sustain itself here in America. Because I'm an American kid. So that we can be a world-class car company and compete globally as a world-class automotive company. And that the next generation of Ford will be much brighter than it's ever been before. That's the only thing that motivates me, and that, I visualize that motivation in the form of a lot of families like my grandfather, whose whole family line were completely changed because of his job at Ford.

What we do at Ford is very special. I like to say we don't make shampoo. We make these very emotional products like your Ranger that people love. And we're so lucky to be in an industry where our products are so important in people's lives. Now we'll be able to unleash time on highway with level three autonomy. But really, the social impact and the impact of our company for national defense is so fundamental to have a heavy manufacturing, large-scale company like Ford, success, be successful in America. I visualize our success through the eyes of our factory workers and our entry employees, like our engineers, supply chain leaders, and our dealers. And that's what, the only thing that motivates me and, and my judgment for whether I be successful or not will not be my time as a CEO. It'll be that plus maybe 5 to 10 years after. Did it work?

Eric Veiel

The legacy of that is powerful.

Jim Farley

The culture. Did the culture stick? Did the lean culture stick?

Eric Veiel

So, I got to tell you, Jim, I've had the honor of doing this with a lot of people. Your authenticity and your, you know, your genuine passion for the purpose of the company really comes through. And I'm sure that's inspiring to those 170,000 people.

Jim Farley

I think I'll tell you a little story about that. Why, when I came to Ford, I didn't know Ford, although emotionally I knew the company. I asked the head of product development, what makes a Ford engineer different here than a Toyota  engineer? Just like, I don't know, I worked at Ford, so I wandered the engineering, studios for about two days, and I met this safety engineer, and I, he was working on a what most people call a crash test dummy. And I said, what are you doing? He said, well, actually, it's lunch, and I'm developing an instrument for mid-teenage girls to test our crash worthiness for the, for the internal organs. And he said it's not required by law. We tested 95% sized adult. And I said, why are you doing that? He said, well, actually, I was, I'm a physician, and I was a doctor at the Philadelphia Children's Hospital, and my daughter died in a car accident. And I came to Ford because I don't want that to happen to anyone else like it happened to us. She died of internal bleeding, and I didn't know.

Eric Veiel

Wow.

Jim Farley

And, and he said, I realized I could, I could save more lives at Ford than a doctor.

Eric Veiel

Amazing.

Jim Farley

And that story really resonated with me about the power of, you know, a company like Ford. That's, that's the importance of our work.

Eric Veiel

That's, that's incredible. I usually like to end these with getting to know the person a little bit more in terms of how they unwind. You're really well known for. You love to get out there. You still race I believe. Is that your main way to unwind, or do you even have another hobby or some other way to take some of the stress off?

Jim Farley

I think racing gets a lot of, a lot of, you know, it's kind of an unusual thing for a CEO to race. But I would say probably my favorite moments is with my family, doing laundry, cooking. But really, my deep passion that no one knows about is I like to build plastic models.

Eric Veiel

Interesting.

Jim Farley

Every day I spend 30 minutes to an hour. It really allows me disconnect and I make; they're almost all racing cars, and I give them to friends for birthdays or loved ones. Every year I make a model for Bill Ford, the Chairman. It's just a way to build something.

Eric Veiel

And what are  the core pieces, like, what is the.

Jim Farley

It's. These are very complicated models from Asia. It will take me 3 or 4 months. I paint everything, you can see the engineering in the vehicle. There's thousands of pieces. It all comes in white plastic. It all has to be put together and painted and prepared and put together just nicely. And there, you know, large-scale models, and they look great in people's offices or desk, and most of my friends are car people. So, so like, I'd love to make a model of your Ranger.

Eric Veiel

It would go in my office, I promise you that.

Jim Farley

And people love that because when they get something that's custom for them, they're like, wow, that's a really cool gift, it's not something you can buy. I'd say that's, you know, it's something I could do. As I get older. And I love the engineering figuring out, you know, how the, how the race car engineer kind of thought about each car. I think that's a secret hobby that no one knows about. Now, now, a few people do.

Eric Veiel

Okay, we're going to end on a new segment that we're doing, which is going to be some really quick, kind of one-word rapid fire questions. It's kind of a little bit of a, it's going to be a work theme, a car theme, and then a sort of a pop culture theme. You ready? Okay.

Work theme - big team meeting or one on one conversations? Which do you prefer to do?

Jim Farley

Big team get more done.

Eric Veiel

Sport coat or quarter zip? What's your go-to in the office?

Jim Farley

Oh, geez. Yeah, I say sport coat.

Eric Veiel

All right. Single best thing about being the CEO of Ford.

Jim Farley

Watching people grow.

Eric Veiel

Le Mans or Formula One?

Jim Farley

Lamar?

Eric Veiel

All right. Yeah, I can't even say it. Yeah, I know, I'm French-Canadian. Right. So all this fell apart. Okay. Single favorite driving song?

Jim Farley

It's got to be the Doobie Brothers. Any of the Doobie Brothers.

Eric Veiel

I'll give you any Doobie Brothers. That's fine. Okay. Favorite episode of drive with Jim Farley?

Jim Farley

Tom Brady.

Eric Veiel

Favorite car movie?

Jim Farley

Bullitt.

Eric Veiel

Okay. Last one. How accurate? On a scale of 1 to 10, with one being, like, not accurate. Was the movie Ford versus Ferrari?

Jim Farley

I give it two numbers, eight and three. Eight for the general accuracy of what happened, and three for the accuracy of the people in the movies. Three, like the people, Carroll Shelby was actually pretty close, and Ken Miles is pretty close. Yeah, everyone else, complete Hollywood-like. Actually, because it was historical, some of the people involved, it wasn't fair because they were actually really earnest, hard-working people, and they were portrayed in the movie as jerks. And these are like humans, like my family. And it was tough on their families to see their relative, or their father or uncle or, you know, portrayed inaccurately. And just because it sold more and made it more dramatic. But the single most important thing is that Ken Miles still would have been the only human to have won all three endurance racing. Still, after 120 years, if, if we had not staged the PR one, two, three photo finish, and be surprised that, he actually finished second instead of first, he would have still been the only one to win Sebring, Daytona, and Le Mans, unfortunately, and he died right after. I met his son Peter and in the movie he’s my age, and, I called him, and I said, look, someone from Ford should call you and say that, you know, it was great that your father finally got his due.

Eric Veiel

Yeah. That's amazing. Jim, this has been so great.

Jim Farley

Thank you so much for the time, I appreciate it. I love The Angle.

Eric Veiel

Yeah. Thank you. Appreciate  it. Thanks.

Again, I'm Eric Veiel. Thank you for listening to The Angle. We look forward to your company on future episodes. You can find more information about this and other topics on our website. Please rate and subscribe wherever you get your podcasts.

The Angle. Better questions, better insights. Only from T Rowe Price.

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