Ford Says $8 Billion Cost Disadvantage Is Weighing on Profit

© Bloomberg A Ford Motor Co. emblem appears on the grille of a 2014 F-150 pickup truck on display at Uftring Ford in East Peoria, Illinois, U.S., on Saturday, Nov. 30, 2013.

(Bloomberg) -- Ford Motor Co. is less profitable than its traditional competitors because it has a cost disadvantage of $7 billion to $8 billion annually, according to its top executives.

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The automaker plans to cut those expenses by mid-decade by changing the way it engineers and builds cars so that excessive costs don’t return, Chief Executive Officer Jim Farley said Wednesday at the Wolfe Research Global Auto Conference. 

“We can cut the cost, we can cut people, we can do that really quickly and we’ll do whatever we need to,” Farley said. “My job as the CEO is to make sure, far after I’m gone, that it doesn’t grow back.”

Related: Ford CEO Hints at Job Cuts, Cites 25% More Staff Than Peers

Ford is cutting thousands of jobs in Europe and the US following disappointing fourth-quarter earnings. Farley has set a target to cut $2.5 billion in costs this year as the automaker seeks to make its nascent electric vehicle business profitable while spending $50 billion to develop and build the battery powered models. On Monday, it announced plans for a $3.5 billion battery plant in Michigan with China’s Contemporary Amperex Technology Co. Ltd.

The greatest challenge, Farley said, is changing the way the company operates in its traditional internal combustion engine business, which needs to be highly profitable to fund Ford’s electric future.

“This is really about redesigning what we do in the 120-year-old part of the company,” Farley said at the conference alongside Chief Financial Officer John Lawler. “Prejudice is so high for how we’ve done things.”

Ford’s shares fell 2% at 10:40 a.m. in New York.

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