Disrupt or Be Disrupted: Ford CEO on the Future of the Automotive Industry

Michael Rivo: Welcome back to Blazing Trails. I'm Michael Rivo from Salesforce studios. Today, I'm joined again by Monica Langley, EVP of Global Strategic Affairs at Salesforce. And before joining Salesforce, Monica spent 27 years at the Wall Street Journal, covering CEOs, billionaires, presidential candidates. She's a best- selling author, a corporate attorney, and a well- known TV news commentator. Welcome back to the show. Monica.

Monica Langley: It's great to be back with you, Michael.

Michael Rivo: So today, we're going to be hearing another episode of The Inflection Point, our series of conversations with CEOs about their personal backstories and how values informed their leadership. Monica, who are we hearing from today?

Monica Langley: Today, we are hearing from Jim Farley, the CEO of Ford Motor Company, the 118- year- old automaker.

Michael Rivo: Fantastic. Well, that must've been fun because I did a little research and saw that you are the daughter of a Ford dealer in Knoxville, Tennessee, so you've got some Ford blood

Monica Langley: That's true. He has, even more than I do, but I'll tell you about mine first, and then we'll get into his details. Since I was five years old, my father, Fred Langley, was an owner of a dealership called East Tennessee Ford, and I spent a lot of time there on the weekends. On Saturdays, you try to get people's attention, driving by, so there would be a tent with balloons and we'd give away free hot dogs and soft drinks. And I was out there doing that, giving that stuff away, and then, if I got tired of that, I would go in and help the operators answer phones. But then, on Sundays, we would go to watch NASCAR races and East Tennessee Ford sponsored David Pearson, who was a great NASCAR driver back in the day, in the'60s and'70s. And I would go and sometimes hang out in the pits, in the center of the race, if you know what the pits are, and then, because here's the thing, if you went on Sundays, you sell on Mondays.

Michael Rivo: Well, Monica, you definitely have the car business in your blood, but are you a car person?

Monica Langley: Well, I wouldn't go that far. I don't think I can talk about torque and all that other stuff. But let me tell you, Jim Farley, the CEO of Ford since October, is a bonafide car person, and that is why that Wall Street and dealers and car enthusiasts are so excited that he became the CEO of Ford. He is a car guy like none other right now leading in the auto industry. He was called Jimmy Car- Car as a boy, and he learned all about cars from his grandfather who worked on the Model T under Henry Ford, and so when other kids were reading Mother Goose, he was reading auto magazines with his grandfather.

Michael Rivo: Yeah, it's quite a story. And he had an inflection point, a moment about staying in the car business where he had a different career opportunity. Tell us a little bit about that.

Monica Langley: Well, as you know, Michael, because the show is called The Inflection Point, I ask every CEO and leader on the show, what was that moment in their life when everything changed? And for Jim, it was a time after he had left... He left Toyota. He was recruited to Ford after having been at Toyota for many years, because he was a marketing wiz. The industry caught note of him and Ford brought him to the company where his grandfather had been. But another industry watched him and wanted him and asked him to come. And he thought about it. He kind of wanted to do it, but he went deep inside and said," Do I want this fun opportunity or do I want the hard way," because Ford was not that easy to do. It was not. Toyota was the one soaring, not the American car companies at the time. And he said," I'm going to take the hard way. This is my heart," and he has stuck with it. And look today, just in the last 30 days, Ford Motor Company, its stock has surged 30%.

Michael Rivo: Mm- hmm(affirmative). Just myself, I'm seeing it out there. I saw a review of the new F- 150 Lightning pickup. I'm not even a truck guy, but I was like," I want one of those." And everything that's happening there is so exciting with the lineup of cars, and it's all this innovation that Jim was leading as the COO as well. What do you think is driving him to innovate so well?

Monica Langley: Well, first of all, Michael, if you want an F- 150, get on the list. Did you know, in the 48 hours after they announced they were doing an electric F- 150, they had 45,000 reservations, and after the iPhone, the F- 150 is the second- most sold product in the United States? But Jimmy is showing a broader vision because not only is he trying to lead the electric revolution on consumer cars, he's also going to do something that Elon Musk can't do. He's going to do it in commercial vehicles and that's the F- 150 for services, and also the Fleet customers, because Ford is the leader in commercial vehicles, in the world.

Michael Rivo: Mm-hmm(affirmative). Mm- hmm( affirmative). Super interesting transformation happening there. Okay, last question. Monica, what was your first car?

Monica Langley: Of course, you would ask me that, knowing that I'm a daughter of a Ford dealer. So I was very lucky, and I must have been really good approaching my 16th birthday, giving out hot dogs and such, so I got a Mustang and it was red and it was chewed as could be. But you know what, after I got that, I could even go on the dealership lot and be a great salesman, just like my dad, because I was a satisfied Mustang driver.

Michael Rivo: Well, a red Mustang sounds like the perfect car for you. Thanks, Monica, for joining us today, and let's get into your conversation with the CEO of Ford, Jim Farley.

Monica Langley: Welcome, Jim.

Jim Farley: Good to see you, Monica.

Monica Langley: This show is called The Inflection Point, so I want to ask you, what was your inflection point? Is there a moment in your life when everything changed and it made such an impact on your life you can say," That made a difference to me"?

Jim Farley: Yeah, it happened in an interview. I remember after 20 years of Toyota, I joined Ford, we turned around the company, the stock went from a dollar to$ 15, and I started to get a lot of offers. And I was in an interview with the founder of a tech company and he turned to me, he goes," Why are you in the auto industry? You should come to our business. It's a lot simpler. That's just such a hard business." And I remember going back to my hotel room and thinking," I do not want to take the easy way. I want to take the hard way. I want to serve Ford, even if it's difficult." And it turned out to be difficult. Many years, our stock price floundered again, and we had to kind of redo the company again. But I committed there and then. That was an inflection point, that I wanted to follow my heart.

Monica Langley: Wow. That is profound because you do love cars and you love Ford. You were called Jimmy Car- Car from as a baby. Now, did that start with your grandfather, who we know was an early employee at Ford working on the Model T for Henry Ford, or did you just love all things on wheels?

Jim Farley: Yes, it was very much my grandfather. I got really close to him, and like a lot of us, grandparents have freedoms that parents don't have. And my dad was a banker, and so I'd watch a NASCAR race or something, he'd get mad at me and say," I don't want you to do that," which incentivized me even more. And then I had a breakthrough where I got to work for Phil Hill to put myself through graduate school at UCLA, and while I was getting my MBA. And I worked in his shop, restoring old 1920s and'30s cars, and I really just loved that job more than any job I ever had. At that point, I decided, hey, this is what I want to do for the rest of my life.

Monica Langley: That wasn't when you drove a car illegally across the country?

Jim Farley: No, I was a little bit younger. And you're right, I bought a Mustang when I was 14, and I lived in the back of it, and restored it over the summer, and then I used my airplane ticket. I traded it in for gas money to make it across the country, back to Michigan. And yes, I didn't have my license or insurance or even a spare tire, but it was a great two days.

Monica Langley: This is so funny, that your dad didn't even want you watching NASCAR races, because as a kid, I used to go to NASCAR races, not just watch them. You remember, my-

Jim Farley: There it is, all right-

Monica Langley: ...dad's dealership, East-

Jim Farley: ...a Talladega Ford. I love it.

Monica Langley: I know. East Tennessee Motor Company used to sponsor David Pearson. I used to go to those races. But you didn't just watch them on TV. Then, you started racing cars, and shortly after, you became the CEO, you won an endurance race against teams, and you race solo. And now, you're preparing to race in Le Mans, right?

Jim Farley: Right.

Monica Langley: So why do you keep racing? You are the CEO of a Fortune 12 company now.

Jim Farley: I think, first of all, I love competing, and racing allows me to do that. It's my main hobby. Some people have golf or tennis or running. For me, it's racing, because it's my yoga. When I get out of the race car and I've concentrated that hard for a couple of hours or even during the test, I forget about everything. I feel so relaxed and rejuvenated. It's like a week vacation in The Bahamas to me. I just feel so refreshed, ready to go back to work. And being a racer, working on the car allows me to stay really connected with what we do and the people in the company. And they see me as one of... that we're on the same team, so to speak, and we're in it for the love of it.

Monica Langley: When Bill Ford offered you the job as the CEO, did you have one condition to him?

Jim Farley: I did. I said," Hey, Bill, about the racing," and he goes," I like a CEO with petrol in his veins." I was like," So we're good?" He's like," Yeah, yeah." Boy, was that a lift off my shoulders. I got immediately on the phone with my race team and said," We're good, we're okay."

Monica Langley: So you knew you had to have that racing in your life?

Jim Farley: Yeah. I mean, I hate to say it, but I think there are things you got to stick up for, whether it's your family, or your loved ones, or your hobbies, when it's all said and done, you have to have who you are, you have to feed what makes you, you. And that's one of the things that makes me, me.

Monica Langley: This shows your long- time love, and so many Ford customers' long- time love with the internal combustion engine. But now, at Ford, as the CEO, you're actually leading the electric revolution.

Jim Farley: Despite Bill Ford being, frankly, ahead of the whole industry and being a spokesperson for environmentalism for more than two decades now, the management team finally caught up with Bill. Our strategy is to electrify our most iconic products, like Mustang or F- 150. And I would say, as someone who's grown up in the car business, an electric car is just a better car.

Monica Langley: To hear you say," The electric car is a better car," is kind of shocking. Why is it?

Jim Farley: Yeah, yeah. I had to get there myself too, but I think if you are just objective about it, for a lot of people, not everyone, but a lot of people, it's got more interior room for the same amount of overall length. Also, you remove 40% of the moving parts and the parts you're removing are the most complicated, most expensive ones to repair, like engine and transmission. They're gone, so it's a much simpler vehicle. It's a much more simple vehicle to make. It's also a digital vehicle, so you can update it over the air. You don't always have to come into a dealership to get it changed or improved. Now, for someone who lives in rural Texas who wants 800- mile range, yeah, probably not the best solution, but for a lot of customers who use their vehicles a maximum, a couple hundred miles, it's actually a great solution.

Monica Langley: And the trend is going electric, right? We had California, really, first at that. California Governor Newsom praised Ford as being early on with supporting the electric vehicle. And now, with the Biden administration, they've rejoined the Paris climate accords, and Biden has come out now and said he wants the government Fleet to be electric. So my question to you is, Jim, what does this mean for Ford, your customers, and the planet?

Jim Farley: So it's a really big deal for all the OEMs to get serious about electric cars. And our strategy is different and we were the only brand, except for a few others, that committed to the Paris accord and California as one national standard across the US. You're absolutely right. And that fits our values. But there are a lot of business challenges too, because it doesn't break as much. Actually, the easiest part is getting the electric vehicles developed and bought by consumers. The harder part is all the second- tier effects, like building out the infrastructure, especially for commercial customers, also, the labor tails. These vehicles are simpler to make, and that means, if we don't do anything special, a lot of people will lose their jobs crosstalk-

Monica Langley: Wow, so that's what you were talking about-

Jim Farley: ...working in the factory.

Monica Langley: The business part of this is more complicated, in actuality.

Jim Farley: Absolutely, because we've been in business for 110 years or more, and we are a family company, and we have to figure out how vertically integrated we want to be. Do we go into cell production? That would allow a lot of labor to come over from making engines and transmissions over to making the electric vehicles. Even though the assembly of the vehicle is much simpler and requires less labor, we can find other jobs for the same people. But to do that, we have to work with government and regulators to make those opportunities available. Most of the battery technology comes from Asia, and so we have to build large battery production facilities in the US, and we want to do that with US workers, and so there's a huge transition. And a lot of people don't know this about Ford. We have more American, hourly workers than any other car company. We have more vehicles made in America. A lot of other people moved to Mexico and Canada and other places. We didn't, and so we think about this maybe more than others, because we are the leader in American jobs and the cell production is a big decision.

Monica Langley: Wow, so you have even more on your plate than I thought. I know, even though you're the CEO, you got into the design of the Mustang Mach- E a little bit, or maybe a lot, and the new Bronco Sport that everyone is excited about, and they're both getting rave reviews, but you also are just as ecstatic when you talk about a product line that's not nearly as sexy. That is the commercial vehicle. I've heard you talk passionately about the small businesses that use your commercial vans, the florists, the electricians, the plumbers. Why is that? What was your light bulb moment that got you excited about this?

Jim Farley: There was a gentleman, he was a plumber, and he was saying why he loves his job. And he was basically saying," Look, people don't notice me, but I'm building a cathedral. I make my town run.! And I started to think, all those white trucks out there and vans that we all take for granted, that we don't even look at, are really the things that keep our communities running. The police cars, the ambulances, 50% of those are Fords. And why, as an organization, should we feel so much better about a sports car than that plumber's truck?

Monica Langley: Now, what you're doing is, you're bringing connectivity to these business customers. Now, this is a whole new way to make small businesses more productive.

Jim Farley: Yeah, absolutely. So light bulb moment for me, to go back to the theme of your show, is, I was in the UK, listening to some of our small business owners, and they started to describe their relationship with the data coming off the vehicles. And I said," Oh my God, these people like the data more than the vehicle." It was a huge eye- opener for me, that for commercial customers, if we can connect the vehicles and use the data off the connected vehicles to find error codes, we can make the quality better, we give the data for the customers so they could teach their drivers how to drive better. If we censor the vehicle and use the data off the vehicle, we could literally change the cost for these customers in a way that the product couldn't, so this is a game- changer. In fact, I would say, I thought the electric car was going to be the coolest thing that happened in my career. I was wrong. It's the connected data vehicle, is really the game- changer in our industry.

Monica Langley: Okay, so you're doing all these bold moves at Ford, and it seems that you are taking Ford from an auto manufacturer, it still is, but to an e- mobility company. Is that the goal here, or no?

Jim Farley: Yes, I think it is. And I would say, from a product company to a service enabled by software and products company, the way we're changing is... I would kind of draw the analogy to when mobile came to the Baby Bells. You had people who had a real profitable landline business, and they had a transition to wireless. We're kind of at the same point now, where these battery electric, digital vehicles are kind of our equivalent of the wireless business.

Monica Langley: But this is all futuristic, this is inspiring, but you also are making some hard calls since you took over, some really tough decisions. You shuffled your executive ranks and retired several top executives. You also are restructuring global operations and you closed some factories in Brazil, so is this your way that you're driven to make Ford profitable? I mean, what are you doing? You're rocking things out.

Jim Farley: Yeah, I would say, look, we don't have any more time. Our equivalent of the wireless business is here right now, and we're out of time. The bottom line is, it's time to be decisive. We have three parts of our plan. We have to get our automotive operations to be sustainably profitable because that funds everything. We then have to modernize that, like battery electrics, data and software first, and services first, and then we have to actually disrupt ourself. We have to literally disrupt the idea of personal ownership of vehicles.

Monica Langley: Well, obviously, Wall Street is in love with you, I mean, that your stock is surging and they love that you're willing to make the hard calls as well as the plans for the future. So while you're transforming Ford, the industry at large is under a great transformation too. I mean, do you think dealers are even going to exist in the future?

Jim Farley: I do, but it would be different. If you look at how Target adapted to its competitive model with Amazon, I think our business, when you crash a commercial vehicle, or when you have physical repair to a vehicle, I have to physically go do that somewhere. But I do believe the model is going to change a lot, yes. We will have e- commerce platforms, it'll be kind of a mix of in- person and digital. We learned that from COVID. We actually did. 90% of our sales were DocuSign documents, mobile pickup delivery at people's homes, and people liked it. It worked, so it was a real kind of breakthrough moment.

Monica Langley: Now, let's talk about your charity. You and I texted last weekend and you had just come in, it was 18 degrees in Detroit, and you had been at the Pope Francis Center. I think you had been volunteering to help the homeless. Tell me what you were doing.

Jim Farley: Yeah, so I always give out socks and medication and get people's mail because it allows me to talk to the homeless one- on- one and connect with them. Last year in Detroit, there was... I counted about five people that I knew that passed away in the cold, froze to death. The people here, they put their life at risk every winter, living outdoors, and-

Monica Langley: That's eye- opening. Let me ask you a question. As the CEO of Ford, in a position of power, why do you think it's important to lead by example?

Jim Farley: I think it's part of the culture at Ford. We're a company where people volunteer without being asked. We had people driving to South Dakota to make ventilators and they volunteered. No one asked them in the company. We just made it available, hey, 3M needs a hundred people from Ford. If you're a process engineer into manufacturing, they need manufacturing expertise to make more ventilators. They need to 10x the output. People drove to South Dakota in the middle of winter and stayed in their trucks overnight for weeks and weeks because that's what kind of company we are. I grew up in a family where you're not just there to consume, you're there to help other people. And that sense of service to the Ford employees or the community of Detroit doesn't stop when you're the CEO. In fact, it becomes more important, because as the CEO, everyone tells me how great everything's going, but when I'm handing out socks at the Pope Francis Center, I see things and myself a little clear.

Monica Langley: Let's talk about one subject that is a little touchy, but I think we can talk about it. It's not a secret that Chris Farley, the famous Saturday Night Live comedian and the actor, was your cousin. Can you tell me a little bit about Chris and your time with him?

Jim Farley: Chris was very unique. In our family, we all pick our own things and we go deep. And if you're going to pick something, do it well. And he was very good at making people laugh, he was a professional at it, and I loved Chris. He brought joy to so many people and I loved being around him because in person, he was just like he was on the set of Saturday Night Live. And his whole family are just terrific. Both of his brothers are comedians still, to this day, and so comedy is a big part of our big, loud family. We love laughing together, and Chris was the ringmaster. But you get to a point-

Monica Langley: But you also watched him struggle with addiction.

Jim Farley: Yeah, I think we're all surrounded by addiction, one way or the other. And it's a humbling experience, watching someone so talented do what they do, and I have to say, those were Chris's choices. On the other hand, we have to be very empathetic and be there for those people in our lives. And it was so much fun to see Chris excel at what he loved, a little bit like me in the car business. He was great at what he did and he loved every day of it.

Monica Langley: Now, one last thing before you go. As you know, since I'm a daughter of a Ford dealer, I was fortunate enough to have a Mustang as my first car. Now, after this conversation, I'm thinking," I need a Mustang Mach- E," and I've even pulled the specs on an all- black one that I think looks pretty cool for me. As you see, I'm in all black. So what I want to know is, there's a waiting list, how long do I have to wait before I can get a Mustang Mach- E?

Jim Farley: We'll take care of it, Monica. We'll take care of it for you. But yeah, there is a waiting list-

Monica Langley: No, seriously, how long is the waiting list?

Jim Farley: Months.

Monica Langley: My 22- year- old daughter is like," I might want a Bronco Sport." I'm like," Oh my God, we're all about Ford now," so they're hitting different generations.

Jim Farley: Yeah. Our products or services, they have to be vehicles or services that people can't live without, and I know it's important to our employees to have a leader of an organization who loves the product.

Monica Langley: Listen, Jim, I believe you were born to lead Ford, starting with your grandfather raising you to love it, and I thank you so much for being with us today. It's been inspirational and enlightening and fun.

Jim Farley: Thank you, Monica. You're the best. I had a lot of fun today, and thank you so much for giving us the opportunity to tell a story of a company in Detroit.

Monica Langley: Thank you. Jim.

Michael Rivo: That was Monica Langley, EVP of global strategic affairs at Salesforce, speaking with Jim Farley, CEO of Ford. Today's show was an episode from our Salesforce studio show, The Inflection Point, a series of conversations with CEOs about their personal backstories and how values informed their leadership. To hear more of these conversations, please go to youtube. com/ salesforce. Thanks for joining us. I'm Michael Rivo from Salesforce studios.