Ford Motor GC to Law Firms: We Are Outpacing Your AI Adoption

Artificial intelligence is disrupting the market for legal services for large public companies such as Ford Motor Co. What isn’t yet clear is whether external counsel or corporate in-house teams will harness AI most effectively—not just as a tool but as a surrogate legal service provider.

I write to draw your increased attention to this shift and to solicit robust innovation from law firms as the market for legal services undergoes imminent rapid change. Our continuing in-house innovation with AI will inevitably lead to raised expectations for our external counsel—and for ourselves.

Outside lawyers should benefit from experimentation and best AI practices across multiple clients, for instance, while in-house teams enjoy greater client proximity to develop tailor-made and high-value AI tools.

AI will bring a new balance of work between outside counsel and in-house legal departments. Ford’s legal team will be looking to reward external counsel who deploy AI fastest for greater productivity.

In-House Versus External

Corporations have sound reasons for handling client needs through a combination of in-house and external counsel. It’s a balance traditionally determined by relative talent and relative cost, where cost includes both compensation and the indirect cost of managerial oversight for quality control.

Companies generally prefer in-house legal services over external counsel for the former’s intimate working knowledge of the client company and because managerial oversight is usually easier within the company. External counsel can be desirable, even at greater short-term costs, for highly specialized and consequential yet non-recurrent legal work.

AI is a new “entrant” in the market for legal services that is increasingly able to compete with both external and in-house counsel. Large language models and the products that integrate them undertake complex research tasks, advanced legal problem-solving, and sophisticated composition. They do so at superior speed and with increasingly exceptional quality. Advancements in model development make deploying AI agents across multiple workflows attractive and cost-effective.

AI agents operate without the constraints of the billable hour, fundamentally decoupling the time spent on a task from the market value of the output. What’s more, AI models scale their output without a corresponding increase in cost. AI largely replaces the law library, also at low cost, and isn’t limited to certain practice areas.

Although AI tools require human lawyers to scope issues, supply parameters, and validate outputs, this level of oversight is similar in kind (but often lesser in degree) to managing junior attorneys or outside counsel. When properly directed, AI effectively functions as a highly efficient “super associate” and increasingly a “super partner,” amplifying the capabilities of both external and in-house legal teams.

Effectively Harnessing AI

AI’s efficiency presents an existential threat to some—and an enormous opportunity for others— in the legal services industry.

For external counsel, innovative adopters of AI will be well positioned to provide their corporate clients with improved work at lower cost. Those who make the right investments—those that are simultaneously financial, technical, and cultural—will gain a larger book of business. Law firms traditionally excel at anticipating their clients’ needs and spreading best practices among their wide client base; this seems increasingly unrealistic without proactive deployment of AI.

Smaller firms, with the ability to pivot quickly, might enjoy some advantage here. They can restructure their organizational charts to integrate agents and dramatically increase capacity without increasing headcount. Smaller firms are also less beholden to the pyramid economics that underpin Big Law’s profit model—and Big Law’s historical advantages associated with economies of scale and the ability to provide “one stop” legal services may become somewhat smaller in an AI world.

Meanwhile, in-house lawyers enjoy superior knowledge of their clients’ needs, data sources, processes, and operations, positioning them to develop and continuously update tailored AI tools for their clients’ daily business. AI legal solutions developed internally may therefore serve company needs with greater continuous fidelity and efficacy, which could be a major structural advantage for in-house legal departments over external legal-service providers.

Navigating the Future

We don’t know for sure how this competition in the market for legal services will play out. But from the vantage point of one large public company, here are some early takeaways.

First, the competition among outside counsel to harness the advantages of AI seems off to a slow start, especially given the potential rewards for early movers. This kind of fundamental reorientation of the legal services market comes once in a generation and should be highly motivating for those seeking increased market share.

Second—and also puzzling, given AI’s pervasiveness—it isn’t yet clear how AI will translate into genuine rate relief from outside counsel. Most public companies continue to see standard annual rate hikes, with little to no explanation for how higher yearly rates reflect investments in law-firm infrastructure for future AI efficiencies.

In the coming months, however, we will look for—and reward—entrepreneurial approaches by external counsel both big and small to meet Ford’s legal needs with AI that brings net savings.

Third, as concerns the competition between external and in-house counsel, our internal use of AI for increased productivity so far exceeds what we have seen from external counsel. We now employ AI across the full spectrum of our legal practice areas. AI agents make entirely new legal service delivery models possible, empowering us to leverage our legal capacities dramatically.

Perhaps the advantage of our proximity to the corporate client is just too great for outside lawyers to match, or, maybe we are just more motivated to manage costs. Regardless, we will continue to invest and expand our AI capabilities in-house, even as we solicit innovation from external legal service providers and are prepared to pay for demonstrable gains in productivity.

We are likely to expand our relationships with external partners who innovate and deliver quickly, and curtail our reliance on those who lag behind. As responsible stewards of our clients’ resources, we will adjust to the new AI equilibrium in the legal-services market, even as we aim to influence it.

This article does not necessarily reflect the opinion of Bloomberg Industry Group Inc., the publisher of Bloomberg Law, Bloomberg Tax, and Bloomberg Government, or its owners.

Author Information

Steven Croley is chief policy officer and general counsel at Ford Motor Co.

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