Q2 2026 Ford Motor Co Earnings Call
Speaker #1: The dark one.
Speaker #1: At this time, I would like to My name is Leila, and I work. welcome you to the FORD MOTOR COMPANY Q2 2026 earnings conference call.
Speaker #1: All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a Q&A session. If you would like to ask a question during this time, please use the raise-hand feature at the bottom of your screen.
Speaker #1: At this time, I would like to turn the call over to Maria Ricciadone, Chief Investor Relations Officer.
Speaker #2: Thank you, Leila, and welcome to FORD MOTOR COMPANY Q2 2026 earnings call. I'm Maria Ricciadone, FORD's new Chief Investor Relations Officer. I most recently came from Lockheed Martin, where I was Treasurer and Head of Investor Relations.
Thank you, Isla, and welcome to Ford Motor Company's second quarter 2026 earnings call. I'm Maria Richard, Ford's new Chief Investor Relations Officer. I most recently came from Lockheed Martin, where I was Treasurer and Head of Investor Relations. I joined Ford because the opportunity ahead is tremendous. Few companies today are navigating a transformation of this scale and consequence.
My focus will be straightforward: clear, consistent communication with all of you, and ensuring the market understands how our differentiated strategy translates into profitable growth, capital discipline, and shareholder value.
With that, let's jump in. With me today are Jim Farley, President and CEO, and Sherry House, CFO. Joining us for Q&A are Andrew Frick, President of Ford Blue and Model E; Alicia Boler Davis, President of Ford Pro; Kumar Galhotra, Chief Operating Officer; and Kathy O'Callaghan, CEO of Ford Credit.
Jim will give a high-level overview of the business, and Sherry will provide added texture on the financials and guidance.
We will be referencing non-GAAP measures. Today, these are reconciled to the most comparable U.S. GAAP measures in the appendix of our earnings deck. You can find the deck at shareholder.com.
Our discussion also includes forward-looking statements our actual results May differ. The most significant risk factors are included on page, 20 of Our Deck. Unless otherwise noted, I'll comparisons are year-over-year company. Ebit, Epps and free cash flow are on an adjusted basis.
Upcoming IR engagements include Mike Aragon, President of Integrated Services, at the Goldman Sachs Communacopia and Tech Conference in San Francisco on September 8th, and the Morgan Stanley Annual Laguna Conference in Laguna Beach on September 17th. Now I will turn the call over to Jim.
Thank you, Maria.
I want to start by thanking our extended Ford team.
All of our dealers and our suppliers for their commitment to delivering on our Ford+ plan. I especially want to highlight all the Ford team members who worked so effectively through the novellas—uh, disruption.
For reaching and ratifying your agreement covering all of our Canadian employees.
Our business in Canada, and our manufacturing operations in Oakville are really important to our future at Ford. And this agreement also underscores how important usmca is to our future at Ford.
And the opportunity we have is to build a framework that levels the playing field for North American manufacturers, just like Ford.
Again, the mass imports from Japan and South Korea that carry...
A huge currency advantage.
In the quarter, we delivered a strong performance.
Performance generating 48.3 billion in revenue and 2.5 billion in adjusted ebit.
We're also raising and narrowing our full year. Adjusted ebit guidance to between 10 billion and 11 billion 81 billion dollar raise at the midpoint
The most important part of the quarter is the growing evidence that our strategy is working.
Towards becoming a more profitable more disciplined and generally different company.
Our Ford+ plan focuses on three complementary areas. Of course, we have first, our core auto operations—our retail and commercial vehicles—that are becoming more profitable and more dependable.
Second, we have the software and physical Services layer, which is growing.
Margin accretive.
and built in everything we do at Ford, and third, adjacency businesses such as Ford Energy.
That opens all new sources of profit for the company.
We play only where we have real competitive advantage or we can build one, and we're ruthless about where we put our money. Every dollar must earn durable returns and drive profitable growth.
So let's talk through each of these areas.
For more than three years, we've been relentless about building top quality, and that work is showing up.
In our home market, Ford finished number one among all mainstream brands in the J.D. Power 2026 Initial Quality Study.
We see this win as the first down payment on a much more consequential, virtuous circle.
Going from initial quality.
To long-term durability.
Lowering our warranty costs even further, fewer recalls, stronger customer loyalty, more pricing power.
And for our conquest and growth, improved resale value.
Ford's quality Renaissance gives goes hand in hand with our equally intense drive to improve our cost structure.
We have significantly reduced our warranty and material costs since 2024 and we continue to optimize costs as we enter a heavy, new product launch period over the next 3 years.
Turning to the products themselves.
We're reinforcing our strengths in our trucks, our vans, our personal utility and off-roaders.
Iconic Brands and distinctive products, delivering real pricing power. We can see it in the quarter in Ford blue F-series Remains the number 1 truck brand.
Outselling the closest competitor by more than 80,000 units in the first half of this year, and on track for 50 straight years at the top.
That's five decades of trust and capability with our customers.
And we intend to extend our lead.
But it's not just F-Series that makes our truck business strong. We continue to grow our customer base across our entire lineup that spans every price point in the U.S. truck market, from our Maverick all the way through the top end of our Super Duty.
And there is much more to come soon.
Including an all-new F-Series, and an all-new Super Duty.
We also continue to see momentum with our off-road enthusiast vehicles. In fact,
They now make up 25% of our U.S. sales in the second quarter.
We made a huge bet on Bronco Tremor and Raptor, and it has paid off with higher growth and higher margins. And these vehicles are bringing new customers to Ford. They're younger, more affluent, and more geographically diverse.
And we are investing to grow our leadership. In this space, stay tuned.
Hybrids are another strength for Ford. We plan to build on that.
The F-150 hybrid leads among full-size trucks, and the Maverick hybrid achieved record sales in the first half to become America's best-selling hybrid pickup.
We plan to extend our hybrids across our entire lineup over the next several years.
On the commercial side, Ford Pro is the cornerstone of our global business and holds commercial vehicle market share leadership in both North America and Europe.
And the Oakville expansion I referred to earlier is on track to launch in the fourth quarter of this year, adding up to 100,000 units of additional Super Duty capacity.
We're investing in Superduty production to increase our manufacturing flexibility.
To add resilience and to meet pent-up demand.
These investments will help drive Pro's future financial performance.
And turning to Model E.
We're aggressively driving down Gen 1 cross costs.
and will become a major scaled competitor as we invest in affordable, versatile EVs.
The Louisville plant changeover for the new UV platform is well underway. You may have seen prototypes now of our first vehicles off the UV platform testing on roads across the US.
Customer deliveries will begin next year. The first UV product will compete in the affordable heart of the U.S. EV market, where we will offer customers a wholly new proposition that we can't find in the market today. It starts around $30,000, has more cabin room than the Toyota RAV4, and also has a pickup truck bed.
It has bidirectional charging capability. Incredibly fun to drive.
And personalized technology in the experience. In fact, we just announced Apple last week as you know, will be the embedded map provider for every uev platform vehicle.
And we are very excited to show you much more about our move to be among the leaders in the EV space.
On store agreement with gily.
This will bring speed and capital efficiency to our European operations.
The second area of our Ford+ plan is software and physical services, including our parts business.
These businesses have significant Room to Grow our Central to our 8% margin, Target by 2029 and the idea is really simple, combine our Digital Services, our large dealer, networks are physical Services into 1 seamless experience building a flywheel across software vehicles and parts.
On software, we're turning a one-time sale into a lifetime relationship. We said we now have over 14 million connected vehicles.
That's an enormous base to grow from.
Our goal is to activate that base, driving real digital usage and conversion.
Engagement into recurring, high-margin revenues. Our services aren't just digital; they're also physical. We continue to grow our parts business.
For example, we're expanding our parts catalog.
We're growing our sales to us, wholesalers and co-investing with our dealers to increase service-based and our mobile Fleet.
Customers love our mobile service. We have over 5,000 mobile service fans and trucks on the road.
And we see net promoter scores much higher for remote service.
Leading to higher loyalty.
In fact in Q2 we delivered 1.5 million remote services at Ford.
1.1 million just in the US.
Finally, we're making progress on our adjacent businesses. Earlier this year, we launched Ford Energy Reporting through Model E.
It's a strategic business for us at Ford, but one with a very short payback.
Ford energy can win because it's built on capabilities. Few companies can match.
Care for Brazilian worldclass us manufacturing leading Battery Technology and iconic American brand. That is already familiar to communities, who are most in need for grid support and infrastructure upgrades. And of course, the ability to leverage our vast Auto Service expertise.
By late next year, we expect to reach 20 gigawatt-hours of annual capacity for Ford Energy.
Which is.
And we have potential to expand beyond that. We believe this will position Ford for energy among the leading energy storage manufacturers in North America.
Scale matters in this business. It drives efficiency, improves the levelized cost of energy, and creates a competitive advantage that is hard to match with the scale of global auto to leverage.
We're building a business that can integrate further into the energy ecosystem, and that aspires to create value far beyond the sale of our DC Blox.
Our agreement with EDF Power Solutions North America is a good step to serve a broad and enduring customer base. We're in talks with a wide range of strategic customers and look forward to sharing more with you at the right time.
As you can see.
Ford is becoming a more disciplined, higher-return company.
We have a strong automotive business with an increased fit industrial system.
To complement that business, we're scaling high-margin software and financial services around a seamless customer experience, while leveraging Ford Credit.
And adjacent to all of that, we're building new businesses like Ford Energy, where we can establish a competitive advantage. Over to you, Sherry.
Thank you, Jim, and hello, everyone.
Our second quarter results demonstrate our resiliency and intentional actions to drive profitability.
In a complex macroeconomic and Industry environment, we generated 48.3 billion dollars in Revenue down 4% year-over-year while earning 2.5 billion in adjusted e that up 17%.
Revenue was impacted due to expected volume reductions stemming from lower Novelis aluminum supply and the sunsetting of certain vehicles as we refresh our portfolio.
Consistent with our deliberate actions to enhance profitability this quarter is evict strength. Was largely a result of strong mix in net pricing.
Liquidity.
We remain committed to our investment grade rating in returning, Capital to shareholders. In fact, over the last 5 years, we have returned more than 16 billion dollars through dividends and anti-dilutive share repurchases in. Today we announced a third quarter regular dividends of 15 cents per share.
Before unpacking the segment results, I want to address our $1.3 billion net loss in the quarter.
As we announced in December 2025, we recognized a one-time special item charge of $3.6 billion, of which approximately $500 million was cash.
This charge was related to the May disposition of the BlueOval SK joint venture.
We expect the vast majority of the remaining cash charges related to our December announcement, which total up to $2 billion, to be completed by the end of the year.
Operationally.
We are successfully navigating the Novelas Aluminum Supply recovery plan, and we remain confident in our next $1 billion. EBITDA improvements are heavily weighted to the second half of the year.
Year to date. We have incurred about 800 million in novellis related temporary costs. And now expect a full year cost impact of about 1 and a half billion.
The Hotmail restart is on track and contingency material is secured.
U.S. inventory of 52. Retail day supply is slightly below our target of 55 to 65 days, and we expect to return to targeted levels as the recovery progresses.
Turning now to the core automotive highlights,
Ford Blue delivered $1.1 billion in EBIT on revenue of $26.1 billion.
Our revenue and EBIT were up 1% and 72%, respectively, reflecting favorable product mix enabled by U.S. regulatory changes and higher net pricing, more than offsetting an 8% decline in wholesale.
These results demonstrated that our focus on off-road vehicles and passion products is resonating.
We had record sales for the Bronco family in Q2. In our 3-row Adventure, utilities are growing with Explorer and Expedition retail sales up 22% in the quarter.
F-150 remains strong while inventories recover, with disciplined go-to-market execution. In Q2, that included the highest retail share.
Lowest incentive spend.
Highest share of revenue with sales focused through our most profitable channels.
Ford Pro delivered a solid quarter despite significant headwinds, delivering $1.7 billion in EBIT on $17.8 billion of revenue, down 26% and 5%, respectively. This was primarily due to temporary Novelis disruption.
We continue to see growth in software and physical services, highlighting the durability of our ecosystem strategy, even in periods of disruption.
This resiliency positions Ford Pro to benefit from second-half volume recovery.
We are confident in the pricing power of our Pro business. And although early 2027 model your customer Contracting in North America is off to a fast. Start placing us about a month ahead of where we were last year.
For Model E, we reported an evit loss of 919 million on revenue of 1 billion.
Reflecting a 31%, even Improvement on declining Revenue.
This was our third consecutive quarter of year-over-year EBIT improvement.
The process was driven by structural cost reduction.
Right size, Gen 1, volumes, and lower U.S. incentives, following regulatory relaxation.
We continue to prioritize profitability and capital efficiency on our path to break even.
As such, we expect to improve Gen 1 EBIT by approximately 40% year-over-year in 2026.
Paving the way for our investments in UAV and Ford Energy.
Our software and physical services keep getting stronger.
Total paid subscriptions grew about 50% to roughly 1.6 million, including more than 900,000 Ford Pro Intelligence paid subscriptions.
Choosing to pay for these services beyond an included trial is a direct signal of values.
We've also seen positive net pricing in our parts business, in line with the industry.
These Services carry attractive, margins and create recurring customer relationships.
For Credit delivered another solid quarter, with EBT of $757 million, up $112 million.
These results reflect our strong financing margin, our high-quality portfolio, and our disciplined approach to capital and risk management.
We remain confident in the quality of our portfolio and in our ability to continue supporting the market shift toward longer-term financing options for customers.
We also continue to execute on our multi-year, certified pre-owned enterprise strategy, which ultimately protects our residual values.
According to third-party data, our year-to-date CPO unit sales growth in the US is over 20%, now positioning us as the number two CPO brand in the market.
Now, I'll turn to our 2026 outlook.
For the full year, we now expect company adjusted EBIT of $10 billion to $11 billion, narrowing the range and increasing the midpoint by $1 billion.
Driven by strong pricing and mix.
An increase in adjusted free cash flows to $6 billion to $7 billion, which now includes flow-through of this higher EBIT. In our expectation, we will receive in 2026 about $500 million of the $1.3 billion IEO reimbursement we booked in Q1.
In capital expenditures, remain unchanged at 9 and a half billion to 10 and a half billion as we invest in higher returns growth opportunities.
Our guidance does not include potential impacts of a significant escalation in the Middle East or a material downturn in the US economy which could have a substantial impact on industry demand.
For our full year segment Outlook. We now expect an increase in Ford Blues, ebit range, to 5 billion to 5, and a half billion dollars.
A narrowing afford proceed that range to $7 billion to $7.5 billion.
An improvement in Model E, losses to about $4 billion.
This includes about $1 billion in incremental investment for UEE and Ford Energy, mostly weighted towards the second half of the year. And for Ford Credit, EBT is now expected to be above $2.5 billion.
Our guidance continues to assume a US SAR of 16 million to 16.5 million units.
Commodity headwinds of just above $2 billion, and we remain on track to deliver $1 billion in material and warranty cost reductions in 2026, enabling our increased investments in UV and Ford Energy.
For U.S. industry pricing, we now expect full year to be about half a point higher, at plus 50 basis points.
The accomplishments this quarter reinforce our trajectory. The investments we are making in our truck lineup, UAV platform for energy, and high-margin services will bolster our margins over time, keeping us firmly on the path to our 8% EBIT margin target by 2029. With that, let's open the line for your questions.
We will now begin Q&A. To ask a question, please use the raise hand feature, which can be found at the bottom of your screen. Please, please limit yourself to only one question.
Your first question.
We'll come from the line of Andrew Poco with Morgan Stanley.
Great, thanks so much for taking the questions. Can you guys hear me?
We sure can thank you.
Great. Um, well, congrats on the the really strong results. This quarter. Um, I I do want to start on the energy storage side of the business and and just hoping to get more, uh, of an update in terms of the conversations that you're having on that front. Uh, obviously we saw the EDF agreement. So, you know, utilities do seem like the obvious customer here is giving some of your long-standing relationships there with Ford Pro, but I am just curious to what extent, you're having conversations directly with hyperscalers, you know, that might want to lock up some of your domestic, you know, battery capacity. So it's, it's really a 2-part question 1. Are you engaging with the hyperscalers about direct offtake and and 2? What inning would you say you're in? Uh, in terms of getting some incremental contracts to markets to the market? Thank you.
Our customers is, we're in the center of the market, a 20 foot, containerized lfp, Prismatic solution. Uh DC block with a 2, and a 4 Hour. Um, configuration is exactly the heart of the market. So that's a real positive. Uh, they also appreciate our approach to Service. Uh, prognostics digit. You know, remote monitoring. Uh, that's a real big positive that Ford can bring to the, uh, as a product.
We are, um, people are excited about the talent in our team. Uh, we have specialized talent, uh, that have real experience in this market, building this business.
Um, the kind of conversations we're having—we're in the real depth now. The demand signal is very strong for us.
And given there's about a 6-month lag between kind of when you start, when the projects have to land, we're we're kind of a little bit. We're like in the first or second inning to tell you all everything about the customer for 28 capacity. Um, but it looks really good. We're we're in line with our, our forecasts inside the company, which I won't go over. But um, we're we're seeing a broad group of customers. They are not just utility providers, there are other. In fact every day that goes by, we see more broader application of storage batteries um from broader customer bases. Um, we have a whole process where we're
We're monitoring the customers as they go through because these are project-oriented. These are project quotes. We go from kind of initial early discussions, then we go to, you know, the legal and contracting phase, and then we have the final, you know, contract at the end. So I would say we're kind of in the third inning of selling out the 2028 capacity of 20 gigawatt hours. I would say, just to emphasize my speech, that we have the capacity to upgrade at Kentucky 1.
And that we are building prototype cells already in March in Michigan.
So this is not a theoretical business. We are already building cells.
Um, and obviously, Kentucky 1 is building out a little bit later than Marshall. Hope that gives you some more texture.
Yeah, that that's great. If I could just sneak a quick follow-up, there what are some of the things that you're looking at specifically in terms of whether or not you decide to add additional capacity? Is it simply you know booking out the first 80% of that? 20 gigawatt hours over multi you know multi-year period or are there other things that you're kind of looking at? Whether it's legislative tax credit related uh in terms of your decision to you know, go ahead and move and and add more capacity.
I think your list is pretty good. I think it's basically three areas. Obviously, the tax treatment is very important for customers.
Um, we are, we are also, um,
you know, uh,
We're looking very carefully at strategic choices for the company. And, uh, we're obviously looking at the customer flows. So, I would say the list you have is a good working list. I don't want to get into any more specifics than that.
Great. Thanks so much.
As a reminder, please limit yourself to one question today.
And our next question will come from Alex Perry with BFA.
Hi, thanks for taking my questions here. Thank you, and congrats on a strong quarter. I just wanted to ask a bit more about the mix opportunity. Off-road performance trends and other higher-margin trends, such as your V8 series, continue to increase as a percent of sales. Maybe just talk to us about what are the key drivers of the strong trim mix, and how we should be thinking about the mix benefit throughout the balance of the year. Thanks.
Yeah, thank you, Alex. This is Andrew Frick. Um,
Speaker #4: So Jim made some comments in his statements in his opening comments, and I'll maybe add a little context to that. We've seen growth in our portfolio mix, our product portfolio mix, in large utilities and the Bronco family.
Speaker #4: In fact, Bronco family had our best first half sales ever. You mentioned off-road mix. We grew that by over three and a half points in the first half, and actually in the second quarter, it was up over four points year over year.
Speaker #4: And we have series mixes like Tremor that is now 15% of our expedition sales. And Raptor is really strong right now across our portfolio.
Speaker #4: We've grown our Raptor sales 9% so far this year. And you mentioned V8, so we're increasing our V8 mix as well. Bottom line, to answer the question, we expect that level of product mix and series mix to continue through the balance of the year.
Speaker #5: Perfect. That's incredibly helpful. Best of luck going forward.
Speaker #4: Thank you. Thank you, Alex.
Speaker #1: Our next question will come from Joseph Spak with UBS.
Speaker #6: Thank you. Good afternoon, everyone. Maybe you could just talk—I heard in the prepared comments that the Novelis ramp is proceeding as expected. Maybe you could just talk a little bit about what you see for F-Series here in the back half, because in your guidance, you do factor in a lower volume recovery.
Speaker #6: So that's a little bit more measured, and it doesn't sound like it relates to Novelis. So is that just some prudence because of what you're seeing in terms of the competitive dynamics in that segment, and you want to remain pretty vigilant there to protect price?
Speaker #4: Yeah, thanks. I’d like Andrew to comment. But what we are seeing on F-Series is around a 45-day supply, which for us is very lean. So, we have a lot of upside on the wholesale side, not just the retail side.
Speaker #4: Andrew, anything you want to highlight?
Speaker #6: Yeah, I would just add the—
Speaker #4: Overall truck demand right now, across from Maverick all the way up to Super Duty, is really strong. And we're seeing strength across the lineup.
Speaker #4: Maverick Hybrid achieved a record in the first half. For F-Series specifically, we're really confident in the strength of our F-Series business right now.
Speaker #4: Jim mentioned we're on our way to 50 years of leadership. And we lead the competition right now in key go-to-market metrics. So we have significantly lower incentives, higher share, higher share of revenue, with really strong turn rates.
Speaker #4: This is an indication of the strong demand, and we're also being really disciplined on our channel mix with the limited production we have. In fact, we've had really low rental volume, whereas a lot of our competitors have really increased this year.
Speaker #4: Year over year. So as Jim just mentioned, our day supply is in good shape at 45. That gives us upside coming out, and the demand continues to look really strong.
Speaker #6: What is driving the lower volume recovery?
Speaker #4: Can you repeat that, Joe? I didn't hear it; we didn't hear you.
Speaker #6: Sorry, you mentioned in the guidance that a lower aluminum headwind is offset by a lower volume. The volume recovers at the lower end, so I'm just curious—what changed?
Speaker #2: It's just mix. It is just mix. And as I said, we are planning to be able to still have a year-over-year improvement of $1 billion.
Speaker #2: So you had roughly 2 and a half billion on the top line, 1 and a half billion due to Novellis costs. Now lower than what we had originally thought before we thought 1 and a half to 2 billion, but now it's tracking at the lower end.
Speaker #2: So, the results are going to be the same in terms of what we guided, and it's the mix change.
Speaker #6: Thanks, Sherry.
Speaker #2: Yep.
Speaker #1: Your next question will come from Mark Delaney with Goldman Sachs. Mark, you may now unmute your line and ask your question.
Um, good afternoon, thank you for taking the question, which is on uh, the Tariff and trade environment. I think on tariffs, you left your Olive and change. But under the current, uh, policy rules. Maybe talk about the ability to to further mitigate that going forward. And you also spoke a bit on usmca and Jim curious, if you have any early, thoughts around how the discussions are are going and based on some of the proposals to potentially require more us specific content. Uh, how might that affect? Uh, Forge operations and supply chain, thank you.
Our orientation for USMCA is maybe a bit different than others. We want to make it easier for Ford and other U.S. makers to compete with Japan and South Korea. They have incredibly strong local supply chains, like steel and aluminum. They have much weaker currencies—in some cases, 40-year lows.
And they have a modest 15% tariff. Even some of our domestic competitors import from those locations, and they have huge advantages.
We are prepared to support.
Revising the USMCA, so long as it allows the promotion of a more competitive U.S. auto sector.
Um, and that's really our lens for this negotiation. It's really what we want to put forward—and companies like Ford that are committed to U.S. manufacturing—in an advantaged, a better level playing field with these foreign competitors. Um, we're in the early days of engaging, so at this point, I think, you know, um,
You know, it's very early days, but that's going to be our orientation in terms of tariffs, etc. I think, you know, there's been some recent news, but I would say as a whole...
Ford, I think, has done a good job with our exposure to tariffs, and I think we've worked really hard with the administration as well as, you know, even our strategy around collecting cash to really manage through this in a way that advantages the company. I don't want to get into specifics because I think those are pretty well, pretty well documented by the team.
Thank you.
Your next question will come from Dan Levy with Sparkles.
Okay, great. Thank you for, um, taking the questions.
you know, uh, about a month ago, you, you put out a, a headline that you ranked number 1 in this, uh, JD Power initial quality study. And I know that, you know, warranty and quality has been sort of a, a journey for you. And you reiterated some of the cost benefits uh this year but maybe you can just give us a sense of, you know, just an update
the whole, you know, that way, and what this headline potentially means on incremental cost outs in the future—uh, on the warranty side, if there's any reads.
Factoring in as well for 2027 and beyond.
Okay, I think Sherry would be great to get your view from the financial standpoint, but I think the real essence of this is, is this question about the lagging indicator of recalls, versus our initial quality? And I, I would just emphasize that recalls are not all the same, the software recall and a and a Powertrain recall are quite different things. So, Kumar's want to make a comment about the kind of cost variance you're seeing. So I'll go ahead and start with the the financials. So we do see, um, continued Improvement on a year-over-year basis. So somebody very clear about that. I'm warranty, as well as material costs, and that is what it comprises. The 1 billion year of year uh, Improvement that we're looking uh, to see that we do plan to reinvest in ueb in Port energy. Um, in terms of where that's coming from, it's coming from coverages which is initial quality, which is the number 1 uh mainstream brand award directly relates to and that is 1 of the best.
Indicators is, I'll let, uh, Kumar talk about that—um, our recall. You know, financials will also follow suit shortly.
Yeah, the initial quality improvement is great.
Um, but this focus is permanent. Uh, we're focusing on long-term durability and obviously lowering warranty costs.
That will eventually turn into lower.
Uh, recall costs as well.
So this year, we've recalled about 12 million vehicles.
But the number of recalls is down very substantially from last year.
Uh, it's down about 40%.
And this reflects our intensive strategy to quickly find and fix any hardware or software issues.
Uh, and go the extra mile.
To protect our customers.
Long-term quality, as well as recall improvements, over time.
The closest is 1 of the this is 1 of the most important uh road maps to our 8% margin. Uh is continued to close the cost Gap.
And, um, we're seeing good initial indications. We want to do absolutely what's right for the customer. Um,
What I'm most excited about is the work on seeing in the Next Generation products and the power trains. The team is absolutely obsessed. With these next generation of products, being engineered, and with the right supply chain to make a, a massive move forward and in our, uh, cost of quality.
Great. Thank you.
Our next question will come from the line of Tom Narion with RBC.
Yes. Thanks for taking the questions and welcome Maria. Um, so 1 of the big learnings that we're seeing in recent weeks, has been how automakers are benefiting from software. We already know how about how great this is for you guys at Pro. But I wanted to ask about blue crew's, uh, specifically. You know, could you comment about how blue Crews might be contributing to Ford financials? And then, um, just an add-on to that the Apple Maps integration, you know, could this expand beyond the UVB platform to other
Ford vehicles, thanks.
For sure, it could. You know, we haven't made any announcements, but we're really impressed with the progress that Apple has made in their map.
And we really see the benefit for customers to have a great integrated solution. I would guess the big story there for Ford is the transformation of our electric architectures. I don't think it's been covered in the media yet, but, you know, UEV has a fully zonal electric architecture with our own software.
And our new generation products will come with a massive upgrade to our electric architectures, with a lot of software coming from Ford. And in fact, the 8S solution and the integration of Apple Maps are going to be mostly Ford efforts. So that is a major step forward for our customers.
and I think that's strategically the most important thing we still continue to see, um, great Revenue growth in the blue Cruise. It's, it's probably on the retail side or best proof point for software. Um, paid subscriptions in Q2 grew by 20%, um, which is, which is great to see. Um, and in fact, blue Cruise made up 50% of our retail integrated Services Revenue. So that's how important Bluetooth is. And the cost is going to come down. The functionality will go up.
Um, even the UEE is going to have a ramp to operate on, ramped-up L2 capability, which is number one in that segment at that price point. Nothing else has anything close to that.
So I, I'm blue cruise, I think, for for people to get a dimension of the scale, um, we have now 12.1 million or more than 12 million hours, um, used since since launch, and we have we're approaching a billion miles, uh, 840 million miles down blue Cruise. It's something that our dealers are getting better at selling. It's it's something that we are getting better at specking out tied to our series, mix and packaging. Um, so I would say it's, it's really the revenue management capability in the company around these software is really improving that that doesn't take away at all. All the pro software that also is, uh, you know, is growing really fast. But since that was your question. I wanted to hone in on, on ads and Apple Maps.
Got it. Thank you.
Our next question will come from Mike Ward with Citigroup.
Thank you very much. Good evening, everybody, and thanks for doing this.
A half a point to margin at Ford Pro.
Overall, Ford Automotive margin is the type of direction we're looking at.
Yeah, that's a that's a pretty long question, but um, thank you. Um maybe Alicia, I'll ask you to comment on on uh, Ford Pro uh, software. And then Sherry if you want to touch on, then then the subscription numbers, I I will just say overall companies measures subscription and paid subscription is a little differently. Um, and so it's it's kind of apples and oranges. Depending on the company, some companies bundle them into our, their vehicles with a trial. We really afford. Just Phil philosophically. We are focused on paid subscription. Um, even though we have a lot of subscriptions that aren't paid, for example, trial, um, we're very focused on paid subscriptions. So you'll hear that at 4 maybe more than others. Um, Alicia yeah, yeah, I can make a comment first, am I going your first question around to you mentioning, um, 100,000 additional Super Duties, and so we're launching the coat, Bill, uh, facility, uh, later this year. And we'll have capacity to
produce up to 100,000 additional Super Duties. Well, let's have two software and Pro. We're continuing to drive a profitable world, really, by expanding software, services, and parts to increase our share of the wallet, as Jim mentioned. Um, we're really focused on paid subscriptions, and we're over
500,000 for pro. Um, that's over 20% year-over-year growth. And we've expected to continue to see that growing through the uh, balance of the year. And it will be uh it will continue to contribute. Uh, from a, a margin perspective, obviously software has a a higher margin um so not as high as a percent of Revenue but definitely contributing from a margin perspective.
And the net would be as you said, um, primarily be blue Cruise. Um, and and we could absolutely see this um, this business, the integrated Services be being. You know, I have a point of margin for the company. Uh, it's very profitable and uh, we haven't really seen the margins come down.
And I can just clarify the question that you had on the paid subscription. So as I said in my prepared remarks, 1.6 million paid subscriptions—that does include retail plus Pro. The 900 was the Pro Intelligence. So, the 700 remaining paid subscriptions is going to be retail, it's going to be other Pro services, and then it also includes BlueCruise.
Thank you very much.
Our next question will come from Etai with TD Cowen.
Uh, great thanks. Good afternoon, everybody. Um, just kind of a quick question on on just the updated guidance. I was hoping we could do a bit of a second. Half first first half, um, when bridge for for blue and pro. Um, it seems like the second half outlook for pro is, is kind of, um, nicely improved. Uh, but blue seems a little bit lower, but I just kind of curious to get the points and takes between the, the, the, the 2 traits for those segments.
Yeah, so first, Jesse, just the enterprise-level guidance. Um, the increase is really simple—that's mix and pricing—so just putting that out on the table. And then when you're talking about the second half, um, you're talking about the EBIT bridge between, um, second half and first half.
So they are, um, you would have had...
And then do you want to get into, bro—uh, Blue and Pro specifically?
Yeah, that'd be great. Yeah, yeah. I mean, really, what you're seeing is you're seeing increased volume, right? You've got the super duty and you have the F series that are going to be coming back in full force for the second half of the year, you are going to have commodity increasing, you know, we had 500 million dollars, a year-over-year Improvement or um hit impact rather of Commodities. Now in when you get into the second half you're going to have another 900 million. So the second half is going to have a higher
Commodities, that is hitting us, and also the second half has, um, higher investment in UEE as well as sport energy. But what you're really seeing, in terms of the improvement, is the volume—the volume increase in terms of mix and pricing.
The perspective is $3.4 billion for the second half. If you're following, our guidance is $3.6 billion to $4.1 billion, and that's really driven largely by the additional capacity that we have, especially in the Super Duty space.
That's very helpful. Thank you.
Our next question will come from Emmanuel Rosner with Wolfe Research.
Great, thank you so much. Um, so it's good to see, um, all this operational and execution traction this year. Um,
Curious. Uh, do you expect, uh, further Improvement in ebit? Uh, next year in 2027 and if so, would you be able to, uh, speak to us about some of the puts and takes and and the drivers of further Improvement.
Sure, Emmanuel. Thank you for the question and good to have you with us today. So I knew I wouldn't get out of this call without talking about 2027, but it's a little bit early to talk about it in detail. But let me give you some of the puts and takes as you suggested. First step is going to be the non-repayment and balanced. I just gave more Precision around that number today. Um, which we now expect to be about 1 and a half billion so that that starts you out. Um, as you look at the core is you just pointed out? Yes, you're absolutely seeing a fitter Core Business and 1 that has momentum and it's going to be more durable for the long term. So I do expect to continue to see
Um, reductions in in costs, especially in material, costs, and warranty. But also structural costs too. And as we just talked about continued software and physical Services growth, we do have launches um that are going on in 27. So you're going to have launch costs associated with that. Especially um related to our battery energy stationary storage Business board energy, as well as the universal. EV platform, both launching in 2027 and we're going to start investing in preparing for an all new US truck lineup that we've started talking about a bit on the headwinds. You're going to have the non- repeats of that aipa tarafi bit benefit. You'll remember that was 1.3 billion that we booked in q1 and you'll, we'll have to see what happens with commodities at this point. We are planning for 4 quarters of Impact versus 3/4 of impact in 26.
And any improvements that might happen—if we start to see a little bit of softening—that would be a tailwind. So, in short, you see a company that is more efficient, more durable, fitter, and better able to absorb headlines.
Thank you. So that's a lot of puts and takes, but overall, what would that net?
Uh, to a higher EBIT in your math, or is that too early to say? It's too early to say at this point.
Understood, thank you.
Our next question will come from Colin Langan with Wells Fargo.
Oh oh great. Thanks for taking my question. Uh, just wanted to sorry. I have more of a modeling question to start off but you know, you mentioned 2 billion Aroma you say 500 is already incurred. So is that the other 1 and a half year-over-year is the headwind in the second half and then you said the billion investment costs little as it impacted already in the first half in any color on the novalis sell. It's, you know, is that, uh, how much is in the first half? How much good news is in the second half? And then is, if I step back, you're the second half, you know, even bit rate is stepping down.
Why not annualize that? Well, what do you know? Because especially with the Navalis improvement, I would have thought that would actually help you. So what is sort of unusual in the second half that we shouldn't be annualizing that, or should we?
Okay, well let's um, take those in turn, um, Helen. So first off with commodities, uh, as we've said, we're expecting a bit over 2 billion for the year. And I'm expecting about 1 and a half billion of that to be in the um, second half.
So 1.4 is right. It said about 900 um additional to what we've already had uh then when you get to nollas um at this point in time, we have had no nollas costs hit us at about 800 million. I also guided that I'm expecting the total cost to be about 1 and a half billion, to the balance of that, 700 million would be in the second half.
Uh, your question's on—then you had a question on the first half bridge versus the second half bridge, and you're right, very strong volume and mix. Is that what your question was, second half versus first half? EVA bridge. Well, if I annualize the second half, it would imply a slowdown. So, and particularly with Navalis actually recovering, I think, you know, you're supposed to get those pickup volumes back up.
You know, why shouldn't we be concerned about the annualized slowdown, particularly as Novalis is sort of back on track in the second half?
Yeah, that's right. So, you've got, um, as you—
A strong volume of mix coming in from novellas—you had some of that in Q2 as well—and what you’re also going to see.
Um in the second half is unfavorable commodity pricing. That I just talked about 2, quarters versus 1 and you also are going to have accelerated investments in Ford Energi, the universal EV platform and the Oakville launch. So a lot coming at us in the second half, but but this, um, strength in coming back with the volume, is going to, um, be what's really enabling us to, to be able to be very close to where we were the first half when you take out the non-repairable,
Billion. Yeah, and we can certainly we can we can follow up offline um and just go through the details of of the model. So so we can follow up after the call.
Um, I think we can take one last question. We're almost at the top of the hour.
Your last question will come from Edison Yu with Deutsche Bank.
Great, thanks for taking a question.
Just want to ask about for defense. Uh, Jim, you had mentioned in the last earnings call. You, you were kind of contemplating, you're doing some work on a component side. I think just the other day, you're now confirmed to be working on a, on a contract for the, for the isv, how should we think about this, this effort going forward and any sense on how big this could be in the the next couple years.
Um, sure, uh, thanks for your question. You know, Ford always calls, always answers the call to do duty. Um, that's our principles of the company.
Uh, we did sign a contract with the US federal government to produce three prototypes they're considering for, um, ah, based on the Super Duty for military use. We're really excited to get into building those.
We already dominate in that market in the commercial world. We want to offer the U.S. government the same advantages that our commercial customers get.
Um, and that includes, you know, great parts availability, and everything else that comes along with being the leader.
um,
It's a great opportunity for us, I think, as a company. Um, this particular, uh, opportunity in the transportation space.
Uh, we are discussing, continuing to discuss additional defense-related projects with the U.S. government, but we have nothing else to add at this point. Um,
you know, we
we do believe we have a lot to offer but um we'll think through this as a adjacency. It has to be a strong business with really good returns and really, really good Capital returns. I have to say, when you look at the scale of the opportunity here and and all the opportunities versus something like best, which has a very short payback, they're, they're pretty different opportunities. They're very asymmetric. So, as I said, we're very focused on these adjacencies that are very close to our Core Business. Like best defense would be another 1. There's there's a few others that we haven't talked about yet, um, but they're not all the same and they, they all don't all have the same opportunity. Um, and I would say at this point Ford energy is, uh,
It is a great opportunity, and we are really excited to get going with the U.S. government on these—on these prototypes. So stay tuned. Nothing else to add at this point.
Ford Motor Company second quarter 2026 earnings conference call. Thank you for your participation. You may now disconnect.
