John Lawler: Yes. Maybe I’ll start, Jim, and then hand it over to you. What I would say is that there’s a real focus now in the company, and Jim mentioned it in his remarks, around excellence and delivering, right, execution. When you look at the real fundamental issues that we’ve had across the industrial platform, it’s the way we work together, our focus of the work, and the structure of the work, and there have been those that have thought this has been an issue for years and others that haven’t. And I think we’re finally starting – not finally, as a team, we are coalesced around those root cause issues. We have great new talent in the company, Liz Door, from a supply chain standpoint, her domain expertise is outstanding.
Bryce Currie from a manufacturing standpoint, outstanding. And then in addition to having Doug, bringing Kumar back into the fold, who grew up in the system as a design and release engineer and understands the Ford system and understands the air states really well, having them all together now driving this foundational change is important. And as Jim said, it’s the area under the iceberg, right? It’s what’s under the water, and it’s the most important piece of it. And the progress isn’t showing up as quickly as we would like in the part you see above the water, but the change is being driven below the water. And it’s the same root cause issues that are driving the quality problems, as well as the cost structure issues. And it’s the material cost at about 4 billion, and now we have warranties about 2 billion, and then you have manufacturing, etc., in there.
And so, it’s the talent. It’s what we’re attacking. It’s the relentless focus on excellence, and it’s the way we’re working together as a team to go after these issues. And having the new team in place and having the new talent in place and watching what they’re going after and how they’re working together as an integrated team is what we need to get this done.
Jim Farley: And I would just complement that in two ways. On quality, our real test for our commitment, talent, all things that John talked about came together in the launches of our most important products like Super Duty. And I am so confident in our tackling these systemic issues because of what happened on our recent launches. The team doubled down on testing. They did the extra work on supplier quality and readiness in the factory and really tested the vehicle for failure. And we did something that Ford maybe hasn’t done in the past. We held the vehicle until it was right. And in the case of Super Duty, that was $1 billion-plus decision. And that was proof to me this team understands that quality is our top priority. That message was sent throughout the company.
Everyone got the memo. On cost, on EV, I’m encouraged because we’re designing from scratch, and a lot of the talent we brought in approaches that cost is a pride point for them in designing it in. The real test for us as a leadership team beyond quality is going to be bringing our material cost and negotiated parts price cost down on our carryover ICE vehicles. That is going to be the test, and we believe we have more than $1 billion of ideas already in the hopper for this year, for 2024. And we got to deliver it on those ideas. They’ll test our standards from rust protection and NHV. They’re going to test our standards. They’re going to test our parts release process. It’s going to be – but it’s us to execute.
Dan Levy: Great. Thank you. Just a follow-up quickly on pricing, which I think has continued to outperform beyond anyone’s expectations. Maybe you can give a little bit of voiceover on what you’re seeing on pricing, especially in light of all the questions out there on affordability and how long you think some of these pricing tailwinds can be sustained into next year.
John Lawler: I think it’s different for each of the business segments, right? We’re continuing to see incredible downward pressure on pricing this year on the EVs, right? But Pro, really strong pricing power right now. As Jim mentioned in his prepared remarks, we’ve got really good strength in the orders coming in for the model year. You know, we’re a good ways through the model year, and the pricing is held. And then when you look at the fresh lineup we have on Blue, we’re continuing to see the pricing hold for the most part. Now, are we starting to see that there’s some pressure on pricing? Sure. And we said there would be, but it’s been more resilient than we thought this year. That’s for sure, especially through the third quarter.
But affordability, we’ve talked about this before. Affordability is an issue. Right now, it takes a consumer about 14% of their monthly disposable income for a vehicle. Pre COVID and pre the inflation that we’ve seen, it was about 13%. So, we think it’s going to revert back to that, and then we think it’s going to happen over the next 12 to 18 months. And so, to do that, it would be about a net price reduction of $1,800. But we also believe that part of that’s going to come through the OEMs in lower prices. But it’s also going to come through dealer margins because dealers are still transacting at a much higher percent of MSRP than they have in the past. And so, it’s going to be both of those. Now, we expected some of that to occur throughout the year.
So far, it hasn’t much. And so, I think you’re going to start to see that come through as we move into next year.
Operator: The next question is from Rod Lache with Wolfe Research. Please go ahead.
