Emmanuel Rosner: Thanks so much. Just a quick follow-up on this. The — should we — will these things take time to play out? I guess I’m looking at your fourth quarter walk and mid-teen freight was still like a $1 billion headwind. So curious if you would need a number of quarters and then it would be a bit more back-end loaded? Or if we could sort of like turn on the switch and see some of these benefits in 2024? And then secondly, curious about your thoughts about the volume outlook for this year, especially for Ford Blue. I think some of the inventory days are sort of like towards the higher end of what you’ve historically been comfortable with it. So I’m wondering where you see volume growth for this year.
John Lawler: Yes, so a lot in there. What I think you should see from a calendarization standpoint on the cost for 2024 is that you’ll see, as Kumar said, a lot of these are the design actions we’ve been working to identify in 2023 that have built up this cadre of actions we call the hopper. And those will start coming through on the model year turnover. So more towards the middle of the year, you’ll start to see a lot more traction there on those. Some of the manufacturing improvements, you’ll see throughout the quarters, probably a little bit more of an even flow of those, I would say, right, Kumar? And so that’s where we’re at. When you look at our day’s supply, when you look at our Blue day’s supply, retail deal day’s supply is in the low to mid-50s, so it’s at about the limit of where we expect it to be.
So leaning back that into volume, we expect the industry to be — for the year, we expect it to be about 16 to 16.5 so maybe up 3% to 4% for us from a wholesale standpoint about that. From a planning perspective, that’s where we’re at. From a pricing perspective, we’re planning to see about a 2% decline, negative pricing. And then when you step back and you look at that from an affordability standpoint, we think 2024 is the year where affordability is going to get back to pre-pandemic levels, where the monthly disposable income it takes to buy a vehicle should be back to about that 13% to 13.5%, which is what we saw before pandemic. So we’re going to continue to see some top line pressure on Blue. We’ve got new product coming in Blue, which is going to give us some mix and some tailwind there.
So that’s going to be a positive for Blue. And then I think Jim covered off Pro. We’re seeing incredible demand on Pro. And as you know, Emmanuel, those commercial orders come in two tranches. Half of them came in last year so they’re all set. The other half are coming through now and we’re continuing to see strength there.
Marin Gjaja: And that portfolio is going to be freshened or new by the year-end.
Emmanuel Rosner: Great. I appreciate it.
Operator: The next question is from James Picariello with BNP Paribas. Please go ahead.
James Picariello: Hey, good evening, everyone. Just wondering if you could help dimension EV volumes for this year associated with the $5 billion-plus in Model e losses. And then with respect to Ford Pro’s mid-teens margins this year, just curious on the impact tied to the fleet demand for EVs beyond companies, of course. Like do you foresee a step-up in Pro EV volumes for year, no Model e losses get more difficult. So just how are you thinking about the EV dynamic for Pro profitability as well?
Jim Farley: On the retail side, I’ll ask Marin to answer that. On Pro, absolutely, our EV sales will grow not only because we’re seeing more interest because the cost of ownership is advantageous for some, but we’re also expanding in Europe quite a bit our electric offering with our two Transit vans coming online. And so that will definitely — and there are a lot of city closures and other kind of regulations in Europe that’s driving adoption for electric vehicles, especially vans specifically. So yes, we’ll have very robust growth in our EVs for Pro.
Marin Gjaja: Yes. We expect growth in sales on the retail side as well. Remember, we had times where we were out of production last year on Mustang Mach-E and F-150 Lightning. So we’ll be overlapping those, we’ll see growth. And then more importantly, we’re launching Explorer in Europe in the second half of this year so that’s going to be a new offering that will help us grow. So we expect to see substantial unit volume growth.
James Picariello: And John, I know you touched on this already but are supplier cost reductions a core component of the $2 billion in savings for the year? Just wondering how commercial negotiations have progressed? And are there any areas that stand out in terms of opportunity?
John Lawler: Yes. A lot of the $2 billion is, again, through the manufacturing system so it’s the industrial efficiencies that we’ve been working on. And then from a design and material standpoint, it’s mostly design reductions that are part of the $2 billion on a year-over-year basis. So it’s those actions that we’ve been benchmarking and working on similar to the ideas that Kumar had described, pretty much design-related.
Jim Farley: So design, labor and freight, yes primarily.
James Picariello: Thanks.
Operator: And the final question today comes from Ryan Brinkman with JPMorgan. Please go ahead.
Ryan Brinkman: Thanks for taking my questions. I mean, obviously, a strong guide in aggregate. Digging into, though, the higher anticipated Model e losses of $5 billion to $5.5 billion, what is embedded within that from like a variable contribution margin perspective? How do you expect that to progress throughout ’24? And then could we also check in a little bit longer term on how you’re feeling about that Model e margin target of, I think it’s 8% by the end of ’26 annualized, right? Including after GM recently lowered their ’25 EV margin target. And given that I think you rolled out that 8% before Tesla cut their prices and saw their overall margin actually like decline to be basically in line with yours. If you’re still targeting 8% with the ’24 guide out there now, it’s really only ’25 is the mystery.
So it seems like quite a step-up then over the course of ’25 to ’26. I know you do expect a big boost from those second-generation EVs you discussed earlier but in comparison to the mixed fuel models. But is that just — is that enough to get you to the 8% or are there other sources of improvement that need to layer in over ’25 and ’26? I don’t know, vertical integration or what are those sources of savings? And how are you feeling about that target?
John Lawler: Yes. So I think it’s clear, given the dynamics in the marketplace and the way the top line come down significantly since we had put that out there that the 8% is not on in the 2026 time period. So I think that’s clear. I don’t think anybody believes that by ’26, we can bridge from here to 8%. It’s going to come down to launching our next generation of vehicles and improving the contribution margin, gross margin, as Marin has said, on the first generation as we go through the year. But Marin, do you want to add more color to that?
Marin Gjaja: John, I think that’s right. I think it’s really the levers we’re pulling this year to improve gross margin over time on Gen 1 and then really sticking to the capital discipline and the operating discipline around launching Gen 2 only when they can be profitable and deliver the kind of returns we want. And over time, that will build a stand-alone profitable EV business. Thanks.
Ryan Brinkman: Very helpful. Thank you.
Operator: This concludes our question-and-answer session, and the conference has also now concluded. Thank you for attending today’s presentation. You may now disconnect.
