Ford fights $8 billion cost deficit

Ford Motor Co. has identified measures to secure 8 percent margins on its next-generation EVs due at mid-decade but could take years to close an overall cost disadvantage of up to $8 billion against competitors, executives said on Wednesday.

The automaker can save up to $2.5 billion this year through better management of production schedules and a drop in commodity prices, CFO John Lawler said at an auto conference.

The automaker posted dismal quarterly results earlier this month and blamed chip shortages, supply chain disruptions and production "instabilities" for adding to its costs.

Lawler has said Ford faces $5 billion in higher costs this year and that the company will be "very aggressive" in reducing expenses in its manufacturing, supply chain and distribution operations.

Longer term, the company aims to reduce dealer inventories and drive more transactions online, among other measures, according to CEO Jim Farley.

Ford shares were down 2 percent in afternoon trading.

The company has "locked down" the designs of its new electric trucks and crossovers and aims to lower battery cell costs to less than $70 per kilowatt-hour as it phases in cheaper lithium iron phosphate chemistry, Farley said.

In order to boost profitability on its second-generation EVs, Farley said Ford plans to shift to large underbody castings to reduce parts count and simplify manufacturing - a process Tesla Inc. pioneered.

Other gains will be made by introducing more efficient battery chemistries and reducing pack sizes, while shifting to more aerodynamic vehicle designs, the executives said.

Making an EV more aerodynamic can save "thousands of dollars in battery costs," Farley said. "Why do you think we are doing Formula One? Because they have the best aero people in the world."

He said Ford is still fighting entrenched mindsets in design and engineering - one of the reasons he created a separate organization, Ford Model e, to oversee development, manufacturing and distribution of the automaker's future electric vehicles.

"We have a bracket group," Farley said. "We have hundreds of engineers who make brackets. If you want to make 8 percent margins in EVs ... There's no bracket group."