The 26 Times Lucid Mentioned Quality During Its Q2 2022 Earnings Call

August 5, 2022

Lucid’s CEO Peter Rawlinson and CFO Sherry House mentioned the word “quality” at least 26 times in the earnings call. I went through the earnings call transcript provided by Seeking Alpha and I will quote each time the word quality was mentioned by either Peter Rawlinson or Sherry House.

(1) And although we continue to face supply chain constraints, the resolution of some earlier gating component supply issues allowed us to push towards increasing the production rate. And as we attempted to push forward the rate, we found that our logistics constraints prevent us from scaling meaningfully this past quarter.

For example, our ability to speed the correct part through align at the correct time and cadence. Our each car is built with thousands of parts and do this whilst maintaining a high Lucid quality build standards.

(2, 3 and 4) But in Q2, we also made a significant number of vehicles that we did not factory gate instead electing to hold them back in order to ensure that these cars met the highest standard of quality. Remember, quality must take a priority over volume as a luxury brand, and I’ll touch on quality a little bit later.

(5) In this newly created role, Steven will lead global operations, including oversight for the expansion of AMP-1, as well as future operational centers. The business leaders of supply chain, logistics, manufacturing quality will now report directly to Steven, ensuring we’re executing tight alignment across these business units.

(6) I’m also delighted to welcome Walter Ludwig, Vice President of Global Logistics to our executive team, who will be reporting to Steven. Walter brings over 28 years of automotive experience and joins us from Mercedes-Benz where he held various roles, including Head of Operations, Head of Quality and most recently, Head of Central Logistics. For the last 20 years, his main management focus has been ramping up and stabilizing the manufacturing plants in Germany, China, Russia, Argentina and the United States. Walter provides operational leadership in developing and implementing best practices in automotive logistics and parts management, material planning as well as other areas.

(7 and 8) Now moving on to the deliveries. Last quarter, I highlighted that we delivered well over 300 vehicles in the month of April. In Q2, we delivered 679 vehicles to customers. Our decision to prioritize quality had an effect on our deliveries and quality is an organizational priority. I’ve been working with the team to make sure that nothing leaves our house without meeting our high standards.

(9, 10, 11, and 12) Now we’ve also made enhancements to our quality processes that are yielding improvements. The quality of the cars that we’re factory gating now are excellent, and we are working to make sure that this excellence in quality is consistent at scale off the line. Again, quality simply must take priority over volume as we establish our brand reputation.

(13, 14, 15, 16, 17, 18 and 19) In the quarter, we aligned manufacturing quality and field quality under Nick Minbiole our Vice President of Global Quality and that is already yielding improvements. We also brought in Sun Hei Moon [ph] as Global Head of supplier quality. Sun Heijoins us from LG Electronics vehicle component solutions company, where she was the Vice President of Field Quality and of customer support, responsible for leading all aspects of field quality performance, customer support and aftermarket for products. Prior to LG, Sun Hei served as Powertrain Quality Director for General Motors, International Operations in Asia.

(20, 21 and 22) To illustrate this point, I’d like to add on to Peter’s earlier comments around the importance of quality. Getting quality right and getting it right early on in the factory helps to reduce downstream costs and improve throughput. So in addition to building the brand and customer loyalty, there is also tangible financial benefits to our quality-first approach.

(23) Bringing our logistics operations entirely in-house in accelerating access to our logistics center on-site at our Arizona factory will help to reduce complexity, cut down lead times and reduce various costs. We believe these decisive actions as well as the addition of leadership across logistics, process transformation and supplier quality will help us unlock these bottlenecks.

(24 and 25) Thank you, John. Peter here. Yes, I mean, the first question was the cars that we held back through Q2 at the factory. But we did that to really ensure that the quality was just perfect. And it was just fit and finish adjustments on what we call flush and gap, the hood to the fenders, the — just the finer points of finessing that you would expect features and the quality commensurate with our luxury automobile.

(26) And although — and many of those cars were meeting some of standards of my quality team, I took the decision that I really want to up the game here and get things right. Now we’re actually releasing a lot of those cars, we’re directing them to our service centers right now and then they’re finding themselves their way to customers having had that attendance, love and attention and care. And I think they’ll be delighted with our best efforts to make them as perfect as they can be.