Ford Motor Co. (F) Business Update Call

Corrected Transcript

24-Apr-2019 Ford Motor Co. (F) Business Update Call

Ford Motor Co. (F) Corrected Transcript Business Update Call 24-Apr-2019

CORPORATE PARTICIPANTS

RJ Scaringe Joseph R. Hinrichs Founder and Chief Executive Officer, Rivian Automotive, Inc. President-Global Operation & Executive Vice President, Ford Motor Co. James P. Hackett President, Chief Executive Officer & Director, Ford Motor Co......

OTHER PARTICIPANTS

David Tamberrino Matthew DeBord Analyst, Goldman Sachs & Co. LLC Senior Correspondent, Business Insider John Murphy Tom Krisher Analyst, Bank of America Merrill Lynch Auto Writer, The Associated Press Brian A. Johnson Keith Naughton Analyst, Barclays Capital, Inc. Reporter, Bloomberg LP ......

MANAGEMENT DISCUSSION SECTION

[Abrupt Start]

... last year's shareholders meeting. And so electric is a key component of that in all ways and Ford doesn't have to go all-electric for that to work because the customers [ph] will have (0:15) one choice. So this is a key component in completing the portfolio for us. And this just fits perfect in terms of where we wanted to head. And we're undaunted by the news that people, the way they have switched to electric.

Part of the issues, as we talked to next-generation buyers, they really are interested in this propulsion. The infrastructure system that has to be built out in North America will reduce some of the anxiety that people have. So this is going to happen. I hate to say that I'm guaranteeing anything like that, but it's just the kind of thing that the tipping point approaches and if you wait too long, you can't recover. So, Ford's going to be in a great position as this evolves.

I'm going to let RJ talk about the exclusivity and Joe I think maybe manufacturing...... RJ Scaringe Founder and Chief Executive Officer, Rivian Automotive, Inc. A Sure. So, as we think about building – as I think about building Rivian and growing our organization, one of the things we spent a lot of time on over the last 12 months is thinking about the strategic partners that we'd really like

Ford Motor Co. (F) Corrected Transcript Business Update Call 24-Apr-2019 to bring into the business. And over the course of the last year, we've engaged in a variety of discussions with automotive OEMs, with technology companies. And what you're now seeing is a result of those discussions.

Of course, we announced our Amazon relationship a couple of months back and that's a very important relationship for us in terms of some of the things we're doing around the customer-facing activity and also applications of some of our technology. But just as important is bringing in an OEM partner, an OEM partner that has manufacturing expertise, supply chain expertise and the ability to actually use our skateboard.

So, with that, could there be other applications on our platform down the road with other companies? Certainly. But at this point, that's not what we're looking at and not what we're focused on. We're very much focused on the relationships that we've now built, launching our own products, and making sure our eyes and our focus are on execution.

With regards to production, the question was asked around the production capacity of our plant at Normal, the capacity is about 250,000 units and, with that, that will be capable of producing not only our first two vehicles but subsequent variants on our platform. And in this facility, we'll also be producing, of course, the key components within our skateboard.

And then the last question, which Jim touched on a bit and it's an important one, is what's happening within the premium or aspirational space with regards to electrification. And this actually in many ways sits at the core of the discussion we're having here today and we feel that it's really important that customers have multiple options and different flavors, if you will, different interpretations of what a vehicle can be, different sets of decisions coming together to provide these different vehicle perspectives.

And of course, the perspective and the flavor that Rivian as a brand is providing focuses on activities, adventure, essentially vehicles that can carry your pets, your gear, your stuff, your family very comfortably anywhere you'd like to go. But there's other applications and other marketing brand positions we'd like our technology be applied with and that's some of the things you're going to be seeing coming from this relationship.

So, broadly though, what's important is to make sure that we provide customers with more options and more choice, and that drives towards this beautifully aligned goal that we have with Bill, Jim and his team around getting more sustainable options on the road as quickly as possible...... Q

Great. Thanks, everybody......

Operator: Your next question comes from the line of David Tamberrino with Goldman Sachs...... David Tamberrino Analyst, Goldman Sachs & Co. LLC Q Yeah. Great. Good morning. Jim, Joe, just a question for you. How much savings does Ford think it can achieve versus maybe $1 billion to $2 billion typically needed to bring a new vehicle to market as a result of this partnership? ...... James P. Hackett President, Chief Executive Officer & Director, Ford Motor Co. A

Ford Motor Co. (F) Corrected Transcript Business Update Call 24-Apr-2019 Well, David, good morning. We're not going to obviously announce or discuss any details, but we do see significant opportunity both in terms of cost but also in terms of speed. One of the great benefits you get from working with a start-up company like Rivian and with RJ personally is the opportunity to go faster. So, speed is an important part of this. But certainly we believe that by leveraging a skateboard that's already been developed and has a lot of capability, we can go faster and we can save money on the product program, but we'll save those specifics for ourselves I think...... David Tamberrino Analyst, Goldman Sachs & Co. LLC Q Okay. And then maybe just as the second question, are you planning on replicating the production of that skateboard or will that be built out in the Rivian facility then shipped to wherever you'll be manufacturing your vehicle off that skateboard? ...... James P. Hackett President, Chief Executive Officer & Director, Ford Motor Co. A The skateboard will be produced by Rivian. As RJ said, they have a lot of capacity in Normal and that's their plan is to leverage that capacity to bring scale to their platform. We're not discussing today where our vehicle will be manufactured and how we'll manufacture it, but the skateboard will be produced by Rivian...... David Tamberrino Analyst, Goldman Sachs & Co. LLC Q Okay. And then just lastly, would that be a North America-specific platform or potentially global? ...... James P. Hackett President, Chief Executive Officer & Director, Ford Motor Co. A Well, I'll share more about that later. The first application will be North America...... David Tamberrino Analyst, Goldman Sachs & Co. LLC Q Okay. Thank you......

Operator: Your next question comes from the line of John Murphy with Bank of America Merrill Lynch...... John Murphy Analyst, Bank of America Merrill Lynch Q Good morning, guys, and congratulations. RJ, I just had a couple of questions for you to kind of kick off. I mean, there was a lot of discussion about other companies involved in this process, other automakers. So I'm just curious how competitive a process this was, and were you kind of going out to automakers and looking for partners, or really was this sort of reverse increase that were coming in.

And then also, as we think about other investors and partners in your business, are there any other partners that you think you might need to add to the ecosystem to flesh things out, maybe like a charging company or something else that you might consider in the ecosystem? ...... RJ Scaringe Founder and Chief Executive Officer, Rivian Automotive, Inc. A

Ford Motor Co. (F) Corrected Transcript Business Update Call 24-Apr-2019 Yeah. So I mentioned it a few moments ago, about a year ago we began the process of really thinking about who are the key strategic partners we would want to have in our business, and identifying not only the categories of partners but also the specific companies within those sets that we felt fit nicely with the business. And through that over the course of the last 12 months, have had a number of discussions. Of course, here I'm not able to discuss or disclose any of those details. But that's what ultimately brought us to this point with Ford and we couldn't be more excited. And as I said, the relationship and the alignment that I have and our company has with that of Ford and, again, what Bill and Jim and Joe and the team have done here is very strong...... John Murphy Analyst, Bank of America Merrill Lynch Q And the potential to add other partners in the ecosystem, are there any others that you would think of in other verticals or other spaces? ...... RJ Scaringe Founder and Chief Executive Officer, Rivian Automotive, Inc. A There's always certainly opportunities for partnership and I think, looking at how complex this business is and how many elements there are necessary in terms of developing and creating robust customer-facing ecosystems, it's important for us to think about long-term who are the other types of businesses we'd want to align ourselves with...... John Murphy Analyst, Bank of America Merrill Lynch Q Okay. The $500 million of capital you're getting in, is that going to be dedicated to the Ford program, or is that going into general corporate funds and it might be used for the R1T and R1S? ...... RJ Scaringe Founder and Chief Executive Officer, Rivian Automotive, Inc. A No, the capital coming in is not dedicated to a Ford product. It's coming in – we're able to use it how we'd like...... John Murphy Analyst, Bank of America Merrill Lynch Q Okay. And then, lastly, just for all of you. I mean we're going to have a Rivian R1T, R1S, Ford's going to have similar products in the market, you're going to have sort of stuff that might be going head-to-head. How do you think of sort of positioning sort of the Rivian brand versus the Ford brand up, down, side-by-side? I mean, how does this all kind of work because it seems like there's going to be a lot of product overlap between the two companies? ...... RJ Scaringe Founder and Chief Executive Officer, Rivian Automotive, Inc. A Yeah. I think it's a great point and there's always going to be some overlap in these types of partnerships. We look at it a little bit differently, a little broader though, and we think about it more from the perspective of the need to provide customers with different options and different solutions. And in order to provide that set of different options and different solutions, it's important to leverage the technology across multiple brands.

So, as I said, what Rivian is building and the brand we're creating is very much focused on an active lifestyle space, on an adventure space, and the types of applications that we'll be putting on this platform with Ford will be different than that.

Ford Motor Co. (F) Corrected Transcript Business Update Call 24-Apr-2019 Joseph R. Hinrichs President-Global Operation & Executive Vice President, Ford Motor Co. A So, just to add a couple of things. I mean, John, you know in this world that we're living in today in the transportation space, you're going to have partnerships, alliances, where you work together and where you compete. I mean, we announced the Volkswagen alliance a little bit ago. We, of course, have this today.

Brand differentiation matters, and as RJ said, Rivian will have a unique position for its brand. Of course, we have our Ford and Lincoln brands as well. Importantly though, we believe the skateboard is flexible enough to be able to serve those different brand DNAs in a way that is differentiating and will allow us to at least on these products to be separated.

Obviously, acknowledge that with the Ford F-150 battery electric vehicle, working on a hybrid F-150 coming out next year, we will have some products that we understand will compete in some elements of the business. But that's a normal part of the world we live in today. And importantly, as Jim Hackett has been pushing us, partnerships, alliances are all part of how this transportation system evolves as an ecosystem, we can learn from each other and we can compete with each other at the same time...... James P. Hackett President, Chief Executive Officer & Director, Ford Motor Co. A In fact, Joe, just to emphasize, you got to remember the earlier question about this emerging market with electric propulsion. There's tons of growth opportunity. And then, when you hear RJ talk about the design of this platform with network and propulsion capabilities, I even think your question, John, you may be thinking about the analog world in terms of the way companies compete. This is a whole different world in terms of what's going to emerge. And the power of us together is only in earning more of the share of that together [indiscernible] (11:31)...... John Murphy Analyst, Bank of America Merrill Lynch Q That's great. If I could just sneak in one quick sort of slightly cheeky question. RJ, I mean you've got one other sort of predecessor in this business that's going to report tonight, who is sort of looking at volume relative over profitability. As you think about the future of your company, I mean, are you going to be looking at high-priced, high-performance vehicles that you make a lot of money on, or is this Normal plant just the start of a multi-million unit target for Rivian.

I'm just trying to understand, I mean there's obviously some disparate views on where EVs should go and how the profitability can be built up at low volumes versus lower cost, high volume. Just curious what your philosophy is there...... RJ Scaringe Founder and Chief Executive Officer, Rivian Automotive, Inc. A Sure. Our first two vehicles, our R1T and our R1S, the truck and the SUV, these are the vehicles that launch our brand. So, embedded in those vehicles, there's a tremendous amount of performance and capability. And we need to give customers a very clear reason to pay attention and to be interested in the company. As we expand our portfolio, we'll offer additional variants that do offer vehicles at different price points and lower price points, but we haven't discussed or started to go through any of those future variants......

Ford Motor Co. (F) Corrected Transcript Business Update Call 24-Apr-2019 John Murphy Analyst, Bank of America Merrill Lynch Q Great. Thank you very much......

Operator: Your next question comes from the line of Brian Johnson with Barclays...... Brian A. Johnson Analyst, Barclays Capital, Inc. Q Yes. Thank you. Couple of questions. Since you've talked about starting in North America, we can all speculate about the product line. But given the likely uptake, the EVs in Europe and China due to regulations, is this a partnership that could extend to those markets as well? ...... James P. Hackett President, Chief Executive Officer & Director, Ford Motor Co. A Sure...... Brian A. Johnson Analyst, Barclays Capital, Inc. Q Second, with the aspirations that you have for your own product as well as the skateboards, can you talk a little bit about your source of battery cells? And how confident are you can scale to the volumes that could fill both your own Rivian production as well as the Ford's skateboards? ...... James P. Hackett President, Chief Executive Officer & Director, Ford Motor Co. A Yeah. Thanks for the question. Of course, the battery cell supply question is an important one. However, we haven't announced our battery cell provider. This is a space, it's a very interesting space as we watch the world prepare and the supply chain prepare for a wave of electric vehicles that needs to come. And I used the word needs to come here intentionally. So, as part of that, we've of course spent a good deal of time securing and setting up a very robust supply chain with very strong supplier partners, of course, battery being one of those, but actually across the entirety of the skateboard and vehicle...... Brian A. Johnson Analyst, Barclays Capital, Inc. Q Okay. And then...... Joseph R. Hinrichs President-Global Operation & Executive Vice President, Ford Motor Co. A So, Brian, going forward, we're very comfortable with the capacity that we've also been able to capture. Different – frankly, one of the opportunities here for us to learn from each other because we use different battery cell technologies at the moment, Rivian and then Ford, but there's an opportunity here for us as we partner on sourcing and on scale over time...... Brian A. Johnson Analyst, Barclays Capital, Inc. Q

Ford Motor Co. (F) Corrected Transcript Business Update Call 24-Apr-2019 Okay. And then, finally, are there types of technology that Ford will be providing to Rivian? And is it just expertise around scaling manufacturing, or are there things like infotainment, liftgate, you name it, that could flow from Dearborn down to Normal...... James P. Hackett President, Chief Executive Officer & Director, Ford Motor Co. A I'll start by saying that we've leveraged the word intentionally partnership today, so we can search for opportunities that benefit Rivian and Ford. There's nothing specific around a tailgate or anything of that nature. RJ referenced our aluminum structures and where we have some expertise there. So, we'll in a true spirit of – we're making investment in the company Rivian and in the true spirit of partnership, we'll look for opportunities that benefit both parties. But there's nothing else to disclose today. And Rivian is launching their vehicle next year so they're far along on the technology for that product because it launches next year...... Brian A. Johnson Analyst, Barclays Capital, Inc. Q Okay. Thank you......

Operator: We are now going to questions from the media. Your first question will come from the line of Matt DeBord with Business Insider...... Matthew DeBord Senior Correspondent, Business Insider Q Good morning, gentlemen. Congratulations. Two quick questions. First one for Jim Hackett. Jim, just hypothetically if you had beaten out General Motors on this, would that be a good thing for Ford? ...... James P. Hackett President, Chief Executive Officer & Director, Ford Motor Co. A Well, I have talked to you about this notion that Ford has a very clear mission of where it wants to go. And this notion that the vehicle is getting so intelligent that it can drive itself one day and that the environment in the Edge is getting intelligent and there's a marriage of those two in the future is something I've been talking about for 20 months.

And I happened to meet a Ph.D. from MIT in RJ who's been thinking about this same problem. So, that's where all the joy comes from is that I walked in and I see a bit of myself in this entrepreneur. Bill felt the same way. And that's where we're coming from with this.

It really accelerates the perspective that we've been talking about. And isn't it ironic that it has to come from outside the industry as well. What's important is I like that RJ recognizes he needs the industry to make it happen and that's where the press kind of observes that we're either old school or new school, it's just there is a new world that people like Ford are going to participate in because we're open-minded to these things in the way they're evolving. So I'm just so excited about that, Matt, that's the story...... Matthew DeBord Senior Correspondent, Business Insider Q Fantastic, Jim. Thanks very much. And a good segue for a quick question for RJ. I think the big takeaway, RJ, from both the debut of the L.A. show and your presence at the New York show recently was that you're

Ford Motor Co. (F) Corrected Transcript Business Update Call 24-Apr-2019 conducting yourself kind of like what I would call a junior OEM at this point. This partnership and, obviously, the speculation around others, the discussions you were having with players in the industry kind of reinforces that.

So do you see – and just it counters the attitude that's emanated from Tesla somewhat. So, do you see yourself sort of occupying that role as being pressed a bit closer to Detroit, admittedly coming from outside the industry, but closer to Detroit and the Detroit way of doing business than perhaps some other start-ups in this burgeoning electric vehicle space have been? ...... RJ Scaringe Founder and Chief Executive Officer, Rivian Automotive, Inc. A Well, Jim made some comments a moment ago that were really important. And when you look at what goes into a vehicle and what goes into creating a mobility ecosystem, it requires such a broad set of skills, so much broader than what would have been required, let's say, just 10 years ago. Still requires a tremendous amount of depth around software and electronics design, but it also still requires tremendous amount of depth around manufacturing expertise, mechanical engineering, industrialization, supply chain management.

And those skill sets and those talent pools are not always in the same place. So, for that reason, as a company, Rivian has established multiple development locations to be able to access the heart of software development talent, a lot of which exists on the West Coast, but at the same time be able to access the heart of industrial talent in terms of manufacturing and vehicle engineering here in the Detroit area.

And we have a very deep respect for what the auto industry is capable of today. When you look at the scale that comes out of the industry, close to over 90 million cars a year without in many ways breaking a sweat, there's a lot to learn from that and there's a lot of expertise that's been built up over decades of time. That, of course, we're working hard to not only hire from that talent pool but also the partnership that you see here today is an artifact of our belief that there is a lot to learn from companies like Ford that really understand the complexity of producing such a robust and complex product as a vehicle...... Matthew DeBord Senior Correspondent, Business Insider Q All right. Fantastic. Good show. Thanks very much......

Operator: Your next question comes from the line of Tom Krisher with Associated Press...... Tom Krisher Auto Writer, The Associated Press Q Good morning, gentlemen. I was wondering is it safe to say that initially anyway Ford would kind of be more of a mass market product off of the skateboard platform, since you're going for the higher-end, RJ? And also, do you see eventually sharing autonomous vehicle technology with Ford because, as Jim mentioned, there's kind of a convergence coming between electric vehicles and [ph] MEB (20:50)? ...... Joseph R. Hinrichs President-Global Operation & Executive Vice President, Ford Motor Co. A Good morning, Tom. This is Joe. So we're not disclosing today what brand and what product, what segment, so we're not going to disclosing of that today. I'll let RJ handle the autonomy question......

Ford Motor Co. (F) Corrected Transcript Business Update Call 24-Apr-2019 RJ Scaringe Founder and Chief Executive Officer, Rivian Automotive, Inc. A As we think about the areas to collaborate, and Joe mentioned this as well, the partnership we're announcing today, it has to do with leveraging our skateboard and our skateboard technology for Ford product. There is, of course, many other things that down the road we'll look to continue to partner with on Ford. And their investment and growth in Argo is certainly something we're aware of and paying close attention to...... James P. Hackett President, Chief Executive Officer & Director, Ford Motor Co. A In fact, I was just at Argo yesterday in Pittsburgh, and Bryan Salesky and Pete Rander who founded that business know RJ really well and can confirm there is a lot talent in this company. So I was very excited about that reaction...... Tom Krisher Auto Writer, The Associated Press Q Okay. And then one last thing, how does this fit with the Amazon partnership? It sounds like there's kind of two different products that would be developed here. RJ, if you can explain that? ...... RJ Scaringe Founder and Chief Executive Officer, Rivian Automotive, Inc. A The Amazon relationship and partnership is separate from this deal. So this deal is entirely between Rivian and Ford. There are a number of exciting things that we're putting together with Amazon – Rivian is putting together with Amazon, but we haven't discussed or disclosed those yet...... Tom Krisher Auto Writer, The Associated Press Q Okay. Very good. Thank you......

Operator: Your next question comes from the line of Keith Naughton with Bloomberg...... Keith Naughton Reporter, Bloomberg LP Q Hi, Jim and Joe. I was just wondering what this means, if anything, for your negotiations with Volkswagen about potentially developing electric vehicles together. The Volkswagen platform, the MEB platform is for smaller vehicles I think than Rivian does. I was just wondering if this in any way hampers or ends your negotiations with VW over electric vehicles...... James P. Hackett President, Chief Executive Officer & Director, Ford Motor Co. A It does not interfere. And I think your instincts are right, these platforms are not ubiquitous, so that this is a specific platform that helps us in areas that we weren't considering with others...... Keith Naughton Reporter, Bloomberg LP Q Thank you.

Ford Motor Co. (F) Corrected Transcript Business Update Call 24-Apr-2019 Joseph R. Hinrichs President-Global Operation & Executive Vice President, Ford Motor Co. A Thanks......

Operator: Our next question will come from the line of Peter Campbell with Financial Times. And that question has been withdrawn. I'll turn the conference back over for any further remarks...... James P. Hackett President, Chief Executive Officer & Director, Ford Motor Co. I just want to confirm, again, our excitement to be able to announce this today and the confidence that we have in our partnership and alliance with Rivian. And I just want to thank Joe Hinrichs. I didn't get in my opening comments to share how much – these kinds of things, people have day jobs. Both RJ and Joe are busy running big enterprises, and this kind of stuff has to happen in parallel. So, Joe, thank you for driving this for Ford and, RJ, thanks for your commitment...... RJ Scaringe Founder and Chief Executive Officer, Rivian Automotive, Inc. No, thanks, Jim. And just to reiterate, we're extremely excited to be here today. I really appreciate and I'm thankful for the support that I have from Bill and from Jim. And very thankful for all the effort that Joe put in. Him and I worked very closely to put this deal together. And over the last six months, we've gotten to know each other really well. So, thank you, Joe, and of course thank you, Bill, and thank you, Jim...... Joseph R. Hinrichs President-Global Operation & Executive Vice President, Ford Motor Co. Thanks. Exciting day for us. Thanks for joining us everybody. Have a good day......

Operator: This concludes the Ford Motor Company call. Thank you for your participation. You may now disconnect.

Ford Motor Co. (F) Corrected Transcript Business Update Call 24-Apr-2019

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