Ford Motor Company (F) — Q4 2017 Earnings Call Transcript

Thank you, Ian. Welcome, everyone, to Ford Motor Company's fourth quarter and full-year 2017 earnings call. Presenting today are Jim Hackett, our President and CEO, and Bob Shanks, our Chief Financial Officer. Jim will begin with a brief review of our strategy and operating performance and then Bob will review the quarterly and full-year results in more detail. After Bob's section, we'll open the call up for questions. And following Q&A, Jim will have a few closing remarks. Our results discussed today include some non-GAAP references. These are reconciled to the most comparable U.S. GAAP measure in the Appendix of our earnings deck, which can be found along with the rest of our earnings materials at shareholder.ford.com. Today's discussion includes some forward-looking statements about our expectations for future performance. Actual results may vary and the most significant factors are included in our presentation. Also, all comparisons are year-over-year unless noted otherwise. Before we begin, I want to bring your attention to pages A25 and A26 of our earnings deck, where we have provided you with P&L metrics for fiscal 2015, 2016 and 2017 consistent with the new reporting format we will begin using with the first quarter of fiscal 2018. As we announced last week, we're making these changes to enhance transparency and better align with industry reporting. Now let me turn the call over to Jim.

Thank you, Lynn, and good afternoon, everyone. I was looking forward to this call today not only to discuss our fourth quarter and full-year 2017 results, but also to have a dialogue about our company and how we're managing both the near-term business while simultaneously building out a compelling vision for our future. I'll start with some brief reflections on CES in Las Vegas and NAIAS in Detroit last week and how they support our direction. In fact, I had a chance to catch up with some of you last week at the show in Detroit. I was really proud of how Ford brought to life our passion for great vehicles from the New Ranger, The Edge and The Bullet Mustang to the expansion of our unique EV strategy. Our ability to tap into the passion people have for our vehicles is an advantage for us versus the tech world that might toy with cars and is connected to our vision for the future in a really profound way. At both CES and the Detroit Auto Show, I found myself constantly citing the world of human-centered design to help define the trajectory of our strategy. The importance of this is clear when you consider two major trends. First, cities, which of course house people, are becoming ever more congested. The vehicles which more people use in city infrastructures will become smarter than we could ever imagine. Our opportunity to leverage the capability of smart vehicles in smart environments to tackle that congestion problem can add tremendous value to shareholders and help people have a better, more productive day. We also have the opportunity to improve logistics. Currently, there is an inefficient operating system for goods delivery as neither the vehicles nor the infrastructure is really smart enough. The growth of internet sales is compounding the congestion problem I cited above as customers really prefer convenient online purchases. Our early work with Domino's Pizza confirmed that people enjoyed getting deliveries from a robotic vehicle versus a human. It’s apparent to us that the potential here is dramatic as we imagine a world where smart vehicles in a smart world not only improve traffic flow and reduce congestion, but also enhance logistics. Now let me turn your attention to slide 3. I want to be direct and assure you that as we map out this exciting winning future during times of what we see as profound change, we are intensely focused on fixing the health of the core business today. I know this is foundational to our success. Last week, we provided guidance for 2018. Clearly, I and my team are not satisfied with this level of performance and we see 2018 as an opportunity to prove to you that we can sharpen operational execution, dramatically improve our fitness, and continue to make significant strategic decisions on where to play, how to win, and properly allocate capital. So, take your attention to slide 4. We are continuously addressing the fitness of our business. This includes resetting revenue and trimming costs in the short-term, while also redesigning our business to compete successfully in the future. We can now commit that we have multiple work streams up and running, and we see significant potential benefits downstream, which we will elaborate on in the future. We think of operational fitness as much broader than just cost-cutting. It will certainly eliminate meaningful costs from the business, no question. It's crucial, because it's ultimately the state of our ability to compete. Ford is a strong company, and I’m proud of it. However, we simply have not done enough to truly be fit today. We have the opportunity now to make step-change improvements across our business in areas like product development, manufacturing, and marketing. We’re moving quickly in transforming our business, though much of this work will really begin paying off as you ask in 2019 and beyond. If you turn to slide 5, I’ll highlight some of the main points for the fourth quarter. Significantly, we developed and announced the plan that ensures all new vehicles in the U.S. are connected by 2019 and that goal extends to 90% globally by 2020. At the same time, we continue to advance our autonomous vehicle plan, building our robust business model and making rapid progress in technology capability. In the quarter, we were proud to announce that we will expand our investment and our workforce at our plant here in Flat Rock, Michigan, which will be our initial manufacturing hub for EVs. Additionally, as we discussed last week at the auto show, we have dramatically accelerated our EV plans with an $11 billion investment. On the product side, we are positioned to build on our success. Ford was the bestselling brand in the U.S. for the 8th straight year, and our F-Series franchise marked its 41st year as America's bestselling pick-up with the margin between first and second continued to expand. The good news is that our investment in new products in recent years will start to bear fruit in 2018. We have 23 global vehicle launches planned for this year, more than twice as many as in 2017. Overall, I’m optimistic about the progress we’re making toward our vision of becoming the most trusted mobility company, designing smart vehicles for a smart world. Clearly, we’re going to accelerate this work in 2018. Now, I’ll turn it over to Bob Shanks, our Chief Financial Officer, for more detail on the quarter. Bob?

Thanks, Jim, and good afternoon, everyone. I don’t plan to go through any slides today. Instead, I plan to make a few remarks to share our perspective on the quarter and the full year. I will reconfirm the guidance for 2018 that we provided last week, and then we’ll take your questions. Let me start by stating that 2017 overall was challenging, including the fourth quarter. However, it was also a year of progress and I’ll touch on that a bit more later. In the quarter, the topline improved with both wholesale volume and automotive revenue higher than a year earlier. The volume improvement was across all regions except the Middle East and Africa. The 7% gain we saw in revenue was due mainly to the higher volume. Company adjusted pre-tax profit was $1.7 billion, down $395 million from a year ago, with the decline primarily explained by the automotive segment. The lower automotive profit was due mainly to higher commodity costs and adverse exchange rates. We also saw increased warranty costs, mainly recalls in North America and Europe. Our automotive operating margin was 3.7%, which was down 200 basis points due to declines in North America, Asia Pacific, and Europe. Within the automotive segment, the largest profit contributor once again was North America, where we earned $1.6 billion, which was down $315 million. Operating margin was 6.8%, down 170 basis points. The year-over-year declines were due to factors from the Expedition and Navigator launches, primarily lower volume and higher commodity and warranty costs. Outside North America in the automotive segment, the combined results showed a loss of $206 million, with a profit in Europe at about breakeven results in Asia Pacific and losses in South America and EMEA. The combined loss of these operations was nearly $300 million greater than last year, due to weak results in Asia Pacific, driven mainly by China, Brexit-related effects, and higher commodity and warranty costs in Europe. Ford Credit, on the other hand, turned in another strong quarter, earning $610 million, up 53%. Every factor with the exception of credit losses contributed to the better performance. Adjusted EPS in the quarter was $0.39, up $0.09, driven by favorable tax filing resulting in an adjusted effective tax rate for the quarter of 10%. Net income came in at $2.4 billion, which was $3.2 billion higher than a year ago, due to significant remeasurement loss on pension and OPEB plans along with favorable tax planning. Automotive operating cash flow was $2.3 billion, up $800 million from a year ago, marking the strongest quarterly cash flow of the year. Ford's balance sheet remains strong, with cash and marketable securities totaling $26.5 billion, and liquidity at more than $37 billion. Let's turn now to the full year of 2017. Our automotive revenue grew 3%, driven by favorable mix, higher volume, consolidated operations, and higher net pricing. Wholesale volume, including unconsolidated operations, was about flat with lower volume in North America, EMEA, and Asia Pacific offset by gains in South America and Europe. Adjusted company pre-tax profit totaled $8.4 billion, down $1.9 billion from 2016, driven by $1.2 billion of higher commodity costs and about $850 million of adverse exchange, about $600 million of which was Brexit-related, as had been expected. The company's internal profit decline for the full year was within our automotive segment. Automotive operating margin was 5%, down 170 basis points due to North America and Europe. These two regions alone accounted for nearly 90% of the commodity costs and 80% of the exchange impacts we saw on a year-over-year basis. Adjusted EPS was $1.78 per share, landing in the lower half of our most recent guidance, and up $0.02 from a year ago, reflecting a 15.3% adjusted effective tax rate. Net income came in at $7.6 billion, up $3 billion from 2016, due to significant lower remeasurement loss on pension and OPEB plans and favorable tax planning actions. Full-year automotive operating cash flow came in at $3.9 billion, down from $6.4 billion a year ago due to lower automotive profit but also less favorable working capital changes. As we enter 2018, we expect external conditions to be mixed, with industry volume globally expanding to some extent in most markets, with the exception of the U.S. where we expect volumes to be lower. Still, commodities and exchange rates continue to be headwinds. For 2018, we expect company revenue to be flat to up. This will be supported by 23 global product launches compared to 11 in 2017. We see adjusted EPS volume within the range of $1.45 to $1.70, assuming an adjusted effective tax rate of about 15%, similar to 2017. Using our new 2018 reporting elements that Lynn just touched on, the top end of the range assumes an automotive segment that is about unchanged from 2017, despite continued headwinds from commodities and exchange rates. The drivers of our outlook for a decline in adjusted EPS are lower profit at Ford Credit and an increased loss at mobility. The Ford Credit change is due to a lower financing margin as interest rates rise along with a valuation change for derivatives. The lower results in our mobility segment is driven by higher investments for our autonomous vehicle program, as well as increased investments in Ford Smart Mobility as we build capabilities and create future service opportunities. At the low end of our adjusted EPS range, we recognize the normal volatility associated with recalls and further pressure from exchange and commodity prices. But we also recognize potential challenges in fully delivering the recovery actions we’ve developed to offset the adverse year-over-year impact of commodities and exchange. I would like to draw your attention to two slides. An EBIT margin bridge from 2017 to 2018 on slide 35, and on slide 32, a long-term view of commodity market price changes since the Great Recession and the impact that they have had on our bottom line. As the commodity slide indicates, we’ve always been transparent with investors about the drivers of our profitability, including commodities. Regardless of whether there are tailwinds or headwinds, we are doing the same now with the guidance we’re providing for 2018. We are confident in the processes our team uses to manage our commodity exposures and their impact on the business globally, and we have applied them consistently throughout the inevitable highs and lows of the commodity cycle. As of the end of January, a little more than one-third of our commodity exposures for the full year are already locked into fixed contracts, hedges, or purchases made. I have mentioned that 2017 was a challenging year, yet we did make important progress as well. The new organization and management team are operating very effectively. We established our vision, our North Star: smart vehicles in a smart world, which sets out the path we are following. We also made important strategic and capital reallocation decisions. Jim Hackett initiated and championed our global fitness reset and redesign initiatives, which he indicated will yield significant opportunities to improve the business going forward. We look forward to 2018 as an important year in our journey to redefine and reshape Ford through our fitness initiatives and the strategic decisions we continue to make. We aim to become the world’s most trusted mobility company. With that, I'll turn it back to the operator to facilitate our Q&A.

Hi, good evening, thanks for taking my questions. I think firstly just relative to the year-over-year results in Asia Pacific. Can you talk more about the drivers there by causal factor, particularly net pricing? I see that incentives were a $210 million headwind versus $133 million last quarter. How would you rate the competitive environment in China and the relative competitiveness of your lineup there? And then with the six new product launches in China you referenced on slide 33, should investors think about the net pricing for you maybe starting to improve in that market this year?

Just, so I'm going to let Jim Farley handle this one.

Hi, thank you for your question. It was a challenging year in China for us. We were down in unit volume by 6%, but as you mentioned the real change in the market was incentives that affected our financials. Our average age of our product in China is about 4.3 years, so we're at the very end of our cycle, especially in the utility segment, where we're seeing a lot of new domestic players. We did orient our marketing in the second half of the year towards the competitive edge which is starting to pay off. But the key in 2018, in the second half, there will be a new wave of product launches in China. We believe that freshness is going to be a really essential part of our growth story in China again. So, we did see negative pricing last year, especially in the fourth quarter. I think December was about 5%. So, the overall year was approximately 4% negative. But it was most acute in the utility segment, particularly regarding the older vehicles, which is where we are with our cycle plan. However, I am very excited about our new launches in the second half of this year.

Okay, that's encouraging, thanks. And then just lastly, if I may, you've provided a lot of new and helpful data on the impact of commodities. I'd be curious though, what your latest thoughts are with regard to commodity and currency hedging. So, you mentioned that your commodity exposure is about one-third fixed for 2018. Do you think that the right proportion to try to fix going forward is about one-third? Or can you discuss if there is any particular commodity that might be providing a particular pain point in 2018 like aluminum, for instance? What coping mechanisms, if any, might be available to you?

I think as I mentioned in my comments, based on discussions we've had, I think I’ve mentioned that earlier based on what I shared with the media. What I was saying is that we understand, I think, in good sense what competitors generally do. We talk to suppliers, and we understand what OEMs typically do. The feedback we get is that they apply the same tools that we do, like fixed contracts where it's appropriate. For example, steel has no forward market, so it cannot be hedged. So, we kind of tether in through fixed contracts that are staggered through the course of the year and with shield contracts. So, you get some smoothing in terms of the ups and downs of market prices. We hedge a number of currencies and hedge out for certain periods. One thing I want to note though is that I believe this will be true for everyone: these are non-designated hedges. For those who may not know, this means that you can lock in an economic value at the end of the contract. However, because they're not designated, you actually have to mark them to market every quarter, which means you don't escape the volatility of market prices. We do that as well. Additionally, we have spot buys for some of the commodities, which again I think is an industry practice for those specific commodities. What’s interesting is that when you look at the slide we included on slide 32, it shows that Ford's business has been completely correlated to what's happened to the commodity prices, and I would argue that this is true for everyone. You may be able to delay volatility through your own contract plan or hedge or so forth, but data indicates it doesn't allow you to escape the overall trend of prices. As you can see on that slide, we have had some good years and some bad years. Notably, when you consider the results since the Great Recession through 2014, this affected our performance by about $3.4 billion. You can see on the slide there was a smaller downward commodity cycle at that point in time from which we benefitted for two years, about $900 million each year. As for what we’ve seen in 2017 and 2018, given the synchronous growth in the global economy, commodity prices are increasing. We are now at the point in 2017 and 2018 where we were in 2014 on a cumulative basis. When you observe the prices, they have returned to that level. In terms of effects, approximately two-thirds of the impact is largely due to steel and aluminum. For those of you interested in the aluminum story, regarding our strategy on larger pickups and SUVs, that's less than 25% of our impact. The story is mainly steel and other metals, but aluminum plays a role too, albeit not as significant as you might expect.

Hi, good evening everyone. First, I wanted to ask you about the investments in electrification. I think the slides from the Detroit Auto Show showed that this is going from a $4.5 billion plan through 2020 to now $6.7 billion. However, it was not mentioned in the 2018 factors. So, first, which buckets will they be reported in? Is that in mobility, in the regional automotive? Second, can you talk about the cadence for investments over the next few years in terms of significance and whether that’s a major factor in the earnings progression?

Regarding the cadence, I think we will see a consistent increase in investments, driven by the PE factory. We will certainly adjust some of the autonomy investments, so there will be a gradual rise over time. It will be reflected in automotive and within the regions where those vehicles are sold. As for autonomy investments related to mobility, there will be an increase as we move through the program to launch products around the 2021 period, which will show up there. We will also have investments associated with infrastructure to support business operations, such as terminals. Therefore, I would expect both the autonomy and mobility investments to increase.

Okay, that’s helpful. And specifically on mobility investment, could you dimension the progression? You implied that 2018 would be larger. Any sense of size, and going forward, do you see that increasing similarly to electrification, or do you see it leveling off and becoming a positive factor beyond this year?

Yes, we expect increases in AV investments as we progress toward launching products in the 2021 timeframe, and that will show up in mobility. We will also need to invest in what we discussed previously regarding infrastructure supporting business operations, which will increase. Additionally, we’ll be making increases in investments for digital services and Smart Mobility, which will start to generate revenue and profit during our business planning period.

Currently, these investments aren’t totally matched as you can imagine. The technology capability development for AV is ahead of revenue projections for '18, and similarly, Marcy's work on services is building out capabilities. This aligns with our expectations. We felt it was time to be transparent because these core investments matter as we look across competitors that are trying to enter this space and those like us that are genuinely innovating it.

Understood. And, if you could, just dimension the size of the increased investment in 2018?

We can provide more detail when we get to the first quarter. However, I can tell you in slide 35, as you consider everything related to automotive, it's a relatively flat result. The most significant impact on a year-over-year basis will emerge from mobility. That’s primarily attributed to two investments.

Thanks everyone. I've got a couple of questions about the fixed global fitness redesign initiatives. First, can you explain what these fixed initiatives are? And could you tell us about the name of the specific initiatives?

We have a slide on 4 that I think summarizes what I want to share at this time, Adam. The slide on 4 depicts insights into where I feel the company has lost some fitness over time. For example, product complexity: We found that a product had something like 30% of sales and 95% of the part count. We are examining that to find the most significant opportunities for improvement. We’ve discussed product development, which should be an advantage for Ford that we haven’t fully realized. This includes having the global capability with real-time technologies to reduce average costs. We've also talked about marketing. Currently, our advertising and media buying don’t incorporate advanced methods like machine learning as seen in other industries. I’ll pause here since this evening isn’t the time to discuss all six projects. However, I want to convey that the more time I have with this initiative, the more hopeful I am about finding significant savings. Therefore, I'm asking the team to work with me on messaging this to our investors since it’s crucial for them to understand its impact.

If I respect that you don’t want to use this time to talk about these initiatives, it would be fair for us to ask when we are going to know more concrete details around them. I feel it’s legitimate to ask since we expect you to be transparent and provide clarity.

Yes. You don’t have to wait long; you just have to stand in line. We’re preparing to inform the entire organization, and I don’t want to communicate through the shareholder call as of now. The layout we have will be shared soon once the entire organization is fully up to speed.

I won’t push further; I’m just curious if restructuring may be one of the numerous avenues available to achieve these initiatives?

Yes. I think we answered that two quarters ago. The impact from redesign means we're going to have excess capacity in areas we don’t need. I won’t specify those parts of the company now, but of course, we will address them at the appropriate time. I also want to emphasize that in the fitness design process, we must ensure we do not interrupt the flow of business. I have heard stories where certain enterprise systems were implemented prematurely and disrupted business continuity. Currently, we have identified where we want to work, and we’re in the redesign phase, dimensioning value and assigning responsibilities. I’m meeting with teams weekly, and there is progress to discuss with you, but it is not tonight.

Hi, everybody. My question is just kind of along the same line. So, I appreciate the long-term strategic objectives and initiatives you are discussing, but I was hoping you could provide a broad financial framework towards that 8% long-term auto margin target, which is about 250 basis points higher than you're currently achieving, equating to about $3.5 billion of improvement. Can you give us some idea of how you'll bridge that and what high-level buckets you’re considering?

Let me take the first shot at that and then others may want to chime in. As I mentioned earlier, in our current business plan, we see the business achieving the 8% margins towards the end of the business timeline, showing gradual improvement. I can assure you that this is based on physical assessments without including any returns from the global business redesign efforts that Jim has referenced. While I cannot give specifics about these opportunities right now, I have confidence in our ability to meet our targets. A lot of that opportunity lies in product development. We also see significant increases in product launches this year versus last, with more in 2019 and 2020. This should help to drive revenue, and we anticipate additional opportunities as we continue to improve our mix.

Can you clarify what Jim Hackett mentioned regarding the ability to see payoffs starting in 2019?

As Bob noted, we have the workstreams up and running, though the bulk of the benefits we are seeing will materialize a little later because some of these efforts involve substantial redesigns. We need to communicate the values with clear dimensions; however, we are not prepared to release them tonight. It’s not that we don’t know or aren’t doing this, but we want to ensure the organization is fully briefed beforehand.

Should we anticipate improvements in 2018 based on those workstreams or should we expect more significant benefits to materialize in 2019?

While we avoid providing detailed business unit guidance, we expect the second half of this year to be better for Asia Pacific compared to the first half due to these launches. They are not just at the end of the year; there will be effects in the second half as well.

I wanted to follow up on your comments about mobility partnerships. You shared some insights about Domino’s relationship, but what feedback have you received from your partners regarding their business? If there has been an increase in their orders as a result, is there potential for these developments to convert into commercial opportunities and not just be tests? My question is essentially about feedback from your partners on the impacts to their business.

I'm going to ask Jim Farley to elaborate. However, I want to note that Domino’s CEO, Doyle, recently announced his departure in June. He highlighted his excitement about the partnership with Ford in interviews, which gives you some insight.

Our partners are seeing significant benefits. One key takeaway is that local delivery costs are substantial, and reducing these costs has become crucial for profitability. Companies like Postmates and others we haven't announced are excited about revenue expansion, particularly for local businesses. For instance, consider a home improvement company; automated fleets could represent substantial revenue opportunities as they deliver work materials to sites. Additionally, the data they’re receiving from these deliveries provides important insights for forecasting growth opportunities.

Have you seen any increased order volume or significant potential for revenue generation from your partnerships?

Currently, we are still in testing phases, but feedback has been very positive.

Regarding the launch issues with the Expedition and Navigator—have those been addressed, or will they still impact the Q1 2018 P&L?

The Expedition Navigator launches are going extremely well. In the fourth quarter, we had a slower start than anticipated due to supplier availability issues. However, the product has been well-received, feedback on quality is great, and we are building to plan for the entire year.

Firstly, Jim, regarding the executive performance compensation plan that you inherited, will there be changes in how you balance short-term and long-term performance? The previous structure was 60% short-term, 40% long-term. Are you considering shifts in those ratios?

I have discussed both short-term and long-term compensation plans with the compensation committee. I’ve received their support for aligning the vision we have regarding fitness, quality improvements, and smart vehicles with our performance share program, which ties compensation to shareholder returns and includes a smaller portion of time-invested stock.

Are you shifting your focus toward long-term performance?

Our compensation structure is already ahead of the market in that regard. I want to assure you that the alignment of compensation and performance plans is appropriate.

Regarding your 2018 guidance about mix improvements, there have been new product unveilings from competitors in the pickup market that are enjoying strong increases in transaction prices. Are you anticipating mix and price improvements in pickups despite this fresh competition, or are you primarily referring to all the product launches?

We are fortunate to be entering the year with essentially new models for the F-series as well as a refreshed Super Duty model. In December specifically, we saw transaction prices stabilize. As Joe mentioned, we have the Expedition and Navigator coming, and while the first six months will be competitive, especially as models are being sold down, we expect an improved competitive market in the latter half of the year, which should support pricing.

While reviewing the company, are there insights revealing potential benefits from accelerating spending or committing a larger chunk of capital to enhance fitness or develop AVs faster?

Regarding AV, we are already making considerable commitments with our investments in Argo AI. I believe there’s an art and science at play here, and more funding may not be the solution. We focus on a solid foundation when it comes to developing software for these vehicles, ensuring that over-the-air updates and changes won’t pose future complications. As far as fitness is concerned, if I could find solutions with a return in less than two years, Bob and I would actively pursue those. At this moment, we are not constrained by bureaucracy. What was the third topic you mentioned?

Are you open to acquisitions to achieve these objectives?

We are very open to that. Expect updates in that area as we’re keen to pursue viable options.

Bob, if I heard correctly, the EV spend is included in automotive. If I look at slide 35 where you provided the bridge, I’m assuming that’s in the costs ex-commodities bucket. Can you provide a breakdown between electrification and traditional structural costs in the headwind for ’18?

I'm not going to break out EV specifically, but here’s how I would answer that. Looking at the margin changes, half of that is depreciation and amortization. So, think of that as investment costs across the business, not just EVs. Some costs will already be behind us because those costs will begin to be amortized during the year. About half relates to that, while the other components include increases in engineering, largely related to EVs, and a bit on trucks and SUVs.

Regarding foreign exchange, can you provide context on the impact of currencies, particularly GBP and EUR, which have historically posed a challenge? What does the $1.6 billion figure indicate?

The FX component is slightly less than half of that amount, and we expect that to decrease from what we experienced this year due to favorable conditions with the euro and sterling. The main impact stems from our revenue exposure on a net basis to sterling and cost exposure to the euro.

On mobility and autonomous, regarding the rollout of self-driving vehicles, can you share when you think we can run true driverless operations, removing drivers from the equation along with thoughts on the fleet size projected for 2019 and 2020?

So, as we announced, we plan to roll out our first city this quarter. The existing fleet will operate using human drivers while we implement this cycle of new prototypes. We won’t provide specifics, but 2018 is the year we'll make notable advancements with our VDS and the vehicles becoming increasingly autonomous. However, development will be ongoing for the next several years prior to a full launch in 2021. We will utilize existing products in the interim as we develop dedicated AV platforms. The fleets will expand over the coming years, but I can't share precise numbers just yet.

I want to emphasize that at CES two weeks ago, we had people in autonomous test vehicles. While they expressed excitement, we had feedback about some issues, demonstrating that while we're making promises, quality performance is essential. We will need solid testing and accountability to gain public trust in the product.

Thank you very much.

Thank you. Let’s close out the call today by emphasizing key points. In 2017, when I joined on June 1st, we worked hard to reset revenue and cost expectations for that year, and the underlying work that led to the performance achieved should not be overlooked. The team did an exceptional job, and I am proud of them. Simultaneously, we reorganized the business, streamlining the leadership team. We’ve established a new winning aspiration and took critical decisions to accelerate key areas of growth. For instance, we invested adaptively in connected vehicles, autonomous vehicle strategies, and much more. You’ve heard discussions regarding fitness, and it is beginning to take root within the company. I’ll reiterate that the six workstreams are fully staffed and operational. We will share the dimensions and values of these initiatives with you this year. Our capital allocation approach is evolving as we assess market opportunities and strategies. We have shared how we’re adjusting our vehicle portfolios globally. I assure you we are expediting decision-making; there is no more waiting around. You will see us make key strategic capital allocations moving forward. Bob Shanks has prepared a quarterly strategy review with the Board that aligns with our objectives. We’re advancing our smart mobility business, and exciting updates will come from Marcy’s team. Reflecting on the time since June 1st, I’m motivated by what we’ve established, though not satisfied until we prove our points, and I am confident you'll see that. Thank you for your time today.