Ford's Management Hosts Discussion of Details of 2012/13 Sustainability Report Conference (Transcript)

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Ford Motor Co. (F)

Discuss Details of 2012/13 Sustainability Report Conference

June 14, 2013 11:00 AM ET

Executives

John Viera - Global Director, Sustainability and Vehicle Environmental Matters

Bob Shanks - Chief Financial Officer

Analysts

Jerry Hirsch - Los Angeles Times

Jim Montezale - National Public Radio

Will Sarni - Deloitte

Presentation

Operator

Good day, ladies and gentlemen. And welcome to the Ford Motor Company to Discuss Details of 2012 Sustainability Report Conference Call. My name is Philip, and I’ll be your operator for today. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session. (Operator Instructions)

As a reminder, this conference is being recorded for replay purposes. I would now like to turn the conference over to your host for today, Mr. John Viera, Global Director within Ford Motor Company. Please proceed, sir.

John Viera

Thank you very much and good morning. And welcome to our conference call on Ford’s 2012/2013 Sustainability Report. My name is John Viera, and I’m the Global Director of Sustainability & Vehicle Environmental Matters here at Ford.

I’m thrilled to be here today with Bob Shanks, our Chief Financial Officer. Bob’s presence here today to talk on the subject of Sustainability is a first for Ford, not only is it a testament to how strongly he value Sustainability but its speaks volumes about how seriously the entire Ford enterprise take its responsibility for creating a better world.

I’m going to walk through some of the highlights of our report this year. Then I’ll turn the presentation over to Bob who will give you his perspective on Sustainability. After that, we’ll open up the call for questions, first from investors then from members of the news media.

Next slide, so Sustainability at Ford is not just about environmental stewardship. It’s really about finding that balance, that sweet spot of the three elements you see before you, the environmental, the economic and the social. And for us here at Ford it’s also about aligning with our ONE Ford plan.

Next slide, our report highlights progress on social issues, including the training of 325 suppliers and sustainability management in 2012 as part of Ford’s Code of Human Rights, Basic Working Conditions and Corporate Responsibility. Actually 80% of our strategic suppliers have been trained to Ford’s human rights standards and we have trained so far nearly 2,100 suppliers to date.

Next slide, now lets move on the environmental element of Sustainability.

Next slide, for our product CO2 strategy, we consider a variety of different inputs, considering industry trends, market trends, regulatory trends. But we’ve also taken a scientific approach to do our part to help keep CO2 levels in the earth’s atmosphere at or below 450 parts per million.

Let’s move on to the next slide, the resultant of these inputs is what we call our Global Technology Migration path. Our approach is to democratize advanced technologies that address CO2 emissions, so that it reaches not thousands but million of consumers.

We do this by taking an evolutionary approach to make the technology affordable that we start having the desired impacts immediately. This is the journey we’ve been on and stuck to since 2007 and it is consistent with delivering our ONE Ford plan.

Next slide, so as we talk about our ONE Ford plan and really driving this technology migration into our small vehicles, our medium vehicles, our vehicles and we are doing this on a global basis, in Asia-Pacific, the Americas and also in Europe.

Next slide, one of the key elements of our technology migration plan is our full range of electrified vehicles. We believe in offering a power of choice to our customers and you could see on the screen that we have six electrified vehicle choices to satisfy the needs of many different customers.

Next slide, the plan and our commitments however extend beyond our products to our operations and facilities as well, from focusing on water savings, to weight reduction, renewal energy, but also energy efficiency efforts are all a significant part of our overall environmental approach here at Ford Motor Company.

Next slide, so now let’s move to the final element economic. At this point in time, I’d like to turn it over to Bob Shanks.

Bob Shanks

Thanks, John, and good morning, everyone. I’m very pleased to be here today and to have the opportunity to talk about Sustainability from my perspective. Sustainability in our company, our industry, among consumers and in the broader world is an increasingly important consideration. It impacts our reputation, our products and the technologies we develop and use, consideration by our customers and our marketing strategy.

Sustainability also impacts our manufacturing processes and facilities, the offices in which we work, regulatory compliance, our costs and revenues, and even our financial reporting.

Simply put Sustainability is an integral factor in many other things we do at Ford all around the world. You maybe interested in knowing that our Ford land activity which is overseen by the finance organization, is responsible for the company’s facility and energy management operating systems, working in close corporation with manufacturing and other skill teams in Ford. It also is a key player in the disposition of facilities we no longer need, including remediation of environmental issues in concert with our environmental quality office.

So as you can see, we are all involved in someway in Sustainability at Ford. But beyond the expected areas of Sustainability, one may normally consider, there is another aspect at Ford I’d like to briefly touch on is the way we think about our businesses financial performance.

We are in the cyclical business that’s global in nature and its expose to the winds of change and volatility that we with -- each witness across the world each and everyday. So for us given this environment managing and delivering financial sustainability is very, very important.

At Ford, its start with our ability to maintain an investment credit rating throughout the highs and lows of an economic cycle. It includes our ability to maintain profitable operations in each and every year of the cycle. And it presumes, we provide our shareholders competitive returns on their investment in the company over that cycle.

The two keys to accomplishing this are first to achieve and sustain a strong balance sheet that can withstand the stresses of a severe downturn and secondly, to ensure the business is growing and profitable across all regions of the world and across the vehicle segment in which we participate. This is our ONE Ford plan.

In fact, one might think of our ONE Ford plan as a blueprint for financial sustainability, delivering a better world and possible growth for all. We’re well in our way to delivering financial sustainability in our business as witnessed by the result of the past three years.

Next slide please. Last year, in fact was a pivotal year in our recovery. We delivered a third year of company pre-tax operating profit of at least $8 billion. We achieved a highest pre-tax operating profit and operating margin in North America since at least 2000. We returned to investment grade. We resume regularly dividend payments to our shareholders. And we announced our strategy and initiated action to de-risk our global funded pension obligation.

We saw record revenue, wholesales and market share in Asia Pacific, Africa and China. And we announced and began to implement our transformation plan to return our European business profitability by mid decade. Do we have more to do? Absolutely. But we’re confident that the strategies and plan we are following will enable us to achieve the sustained business performance that’s critical to our future success.

So with that, I’ll turn it back to John who is going to wrap for us and take us to your questions. John?

John Viera

Yeah. Thank you, Bob and thank you for your comments. As I mentioned in the beginning that Sustainability is about the environmental, the economic and the social. And often time the focus is almost entirely on the environmental.

And as you could see and as Bob pointed out, the economic piece is equally as important. And we need to really consider the economic, environmental and social in concert with each other to deliver a comprehensive Sustainability strategy and Sustainability story for our company. So thank you very much, Bob.

With that, I think it’s time to open it up for questions.

Question-and-Answer Session

Operator

(Operator Instructions) Your first question comes from the line of Jerry Hirsch from Los Angeles Times. Please proceed.

Jerry Hirsch - Los Angeles Times

Hi. Thanks for hosting the call. I have a question for John. I was looking at this Interbrand's list where Ford scored second on the best green companies globally. And I noticed that automakers were five of the top entries in that list. So I was wondering why you think automakers might be working on Sustainability both on their operations, on their reputation?

John Viera

Yeah. That’s a good question. And I don’t know if I could answer specifically why automakers but just understanding the methodology that was used for those ranking. I know they looked at the consumer perception but also Deloitte did a deep dive around available information that companies had in the areas of Sustainability.

And I know that the automakers do a fairly extensive job with their Sustainability reports providing that information. So I believe the assessment that were able to be made with the automakers that information was readily available and that could have been a factor.

Jerry Hirsch - Los Angeles Times

Okay. Thank you.

Operator

Your next question comes from the line of Jim Montezale from National Public Radio. Please proceed.

Jim Montezale - National Public Radio

Yeah. Ford has just announced that it was not going to make any changes to the 2004 focus -- 2014 Focus Electric. And a lot of people have the perception that that car is sort of languishing in the market place and that in statements Ford has said that battery electrics are not a big part of its strategy that you have two plug-in hybrids in C-MAX Fusion and that’s sort of what you’re betting on.

I have a couple of questions, is that true that you are neglecting the Focus Electric and also how does it work with California’s Zero-Emission standards because they want Zero-Emission cause which plug-in hybrids and I’m not sure how it works in terms of partial credits for that, maybe you could explain that?

John Viera

Yeah. Let me start by talking about the Focus battery electric vehicle. The Focus battery electric vehicle is an important part of our overall strategy. Again, the approach that we’ve decided to take is not to just offer a pure battery electric vehicle or only a plug-in electric vehicle or only hybrids. We actually offer all three types, hybrids, plug-in hybrids and battery electric vehicle.

And the reason we do that is that we recognize that different customers have different needs and different ways they use their vehicles, so which provide them choices. Now the subset of customers that are going to be using battery electric vehicles, frankly, are going to be smaller than the subset that would need a plug-in electric vehicle or a hybrid, but the battery electric vehicle is part of our portfolio and it does address an element of the consumers that that's out there albeit smaller than the other consumer sets.

Jim Montezale - National Public Radio

Okay. But you didn’t -- why didn't you updated and I also have the question about the California ZEV regs?

John Viera

Yeah. So let me talk about the California ZEV. So the battery electric vehicle does get credits for California as you know from ZEV mandate standpoint. We do get the smaller percentage of credit for our plug-in electric vehicles. But yes, the Focus battery electric vehicle does satisfy the requirements from a California Zero-Emission vehicle standpoint.

Jim Montezale - National Public Radio

Well, does it do that if you don’t sell very many of them?

John Viera

So the question again in terms of not selling very many of them.

Jim Montezale - National Public Radio

Yeah. I mean, isn’t harder to meet the credits if the product -- if the program is pretty small?

John Viera

Well, again, I mean, we in terms of program begin small. We -- there is obviously an increasing number of ZEV’s that you do need to sell in California, and obviously, we’re trying to produce vehicles to meet those numbers. So that number does increase overtime and yeah, it will become more challenging as we get into the further, given the current demand, but the desire obviously is to meet the mandate.

Operator

(Operator Instructions) And your next question comes from the line of Will Sarni from Deloitte. Please proceed.

Will Sarni - Deloitte

Yeah. Thank you. John and Bob thanks for the presentation. Congratulations on the number two slot. Obviously, you’re not just performing with respect to Sustainability, but getting market recognition for that and I think that’s quite an achievement. The question I have relates to employees. So, what are you seeing in terms of employees embracing your Sustainability program and really helping to drive that forward?

John Viera

Yeah. That's a good question, Will. Our employees are embracing Sustainability. I mean, one of the approaches we’ve taken is that we don’t have a large central sustainability group here at Ford. We really look to embed sustainability into all of our operations and in order to embed it into all your operations you really need to have employees that within each of the operations that are encouraged and are enthusiastic about working on sustainability types of initiative.

So the good news is, those individuals are out there in our work force and there more than willing to work on sustainability efforts as they relate to their particular job function and that’s the beauty of it all because that’s how you really incorporate and adopt Sustainability into the operations but we are getting a lot of good enthusiastic responses from the employees to work on those types of projects.

Will Sarni - Deloitte

That's great. John, thanks, and also thanks for your leadership on water stewardship issues. I think that is very unique in the industry sector and really making lot of progress?

John Viera

Great. Thank you.

Operator

Ladies and gentlemen, this will conclude today’s question-and-answer session of today’s conference. I would now like to turn it back over to John Viera for closing remarks.

John Viera

Well, once again, I’d just like to thank everybody for their attendance at the forum today. It was an excellent effort I think on part of what the company has done in this space, but in particular, we have fantastic input from a variety of different external stakeholders that really guide us on what are the right areas we need to be working on and giving us guidance around, if we need to perform differently in certain areas, how to go about doing that.

So we appreciate the external stakeholders out there that have supported us in this effort and we appreciate all of you for being on this call today that have taken an interest in this topic. So have a great day and thank you very much.

Operator

Ladies and gentlemen, that concludes today's conference. Thank you for your participation and you may now disconnect. Have a good day.

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