DETROIT – Ford Motor said this month it will reorganize operations to separate its electric and internal combustion engine businesses into different units within the automaker.
Key points
Ford will reorganize operations to separate its electric and internal combustion engine businesses into different units within the automaker.
The company expects the move will streamline its growing electric vehicle business and maximize profits.
“We’re going all in,” Ford CEO Jim Farley said in a statement announcing the changes.
The company plans to breakout financial results for the new units as well as its Ford+ business by 2023, giving investors greater transparency into the operations.
The company expects the move will streamline its growing electric vehicle business and maximize profits. It’s a similar strategy to how Ford is operating its Ford Pro commercial vehicle business under CEO Jim Farley’s “Ford+” turnaround plan.
Ford also upped its expected investment in EVs and other technologies to $50 billion by 2026, up from a previously announced $30 billion through 2025. It plans to spend $5 billion on EVs this year, double its 2021 total.
“We’re announcing one of the biggest changes in our history today,” Farley said.
Separating the operations but keeping them in-house goes halfway to appeasing some Wall Street analysts who have been pressuring legacy automakers such as Ford to spin off their electric vehicle operations to capture value that investors have been awarding some EV start-ups.
Farley said the new EV business will “produce as much excitement as any pure EV competitor, but with scale and resources that no start-up could ever match.” He described the legacy business as “a profit and cash engine” for the company.
That leverage and interconnectivity between the two are why Ford decided to not spin off either of the operations, Farley said. Ford also does not need additional capital to fund the operations, he said.
While announcing the new businesses, Farley said Ford plans to generate 10% adjusted operating profit across the company and produce more than 2 million electric vehicles by 2026. The company plans to cut $3 billion in structural costs by 2026.
Distinct businesses
The EV business will be called “Ford Model e.” The traditional operations will be “Ford Blue.” The company said they will “operate as distinct businesses but share relevant technology and best practices to leverage scale and drive operating improvements.”
Ford plans to breakout financial results for the new units as well as its Ford+ business by 2023, giving investors greater transparency into the operations.
“We are going all in, creating separate but complementary businesses that give us start-up speed and unbridled innovation in Ford Model e together with Ford Blue’s industrial know-how, volume, and iconic brands like Bronco, that start-ups can only dream about,” Farley said in a statement.
The move follows Bloomberg News first reporting that Farley was evaluating whether to separate its EV and traditional businesses, including a potential spinoff. Farley last week said Ford had no plans to spin off either of the operations.
Ford’s plans follow a similar move by crosstown rival General Motors in late 2019 to largely split up its engineering of EVs and traditional vehicles. GM has said it does not have plans to spin off its EV business.
“Today, our corporate structure is holding us back,” Farley said. “It does not allow us to focus. We need the ICE business to be cash generating and serving those iconic brands. We need our electric business, the digital business, to be about innovation.
New leadership
The company said Farley will serve as president of Ford Model e, in addition to his roles as president and CEO of Ford.
Former Tesla and Apple executive Doug Field, who Ford hired last year, will lead Ford Model e’s product creation as chief EV and digital systems officer.
The Ford Model e-business will be responsible for all aspects of the automaker’s electric vehicle operations. That includes designing and creating future EV technologies, parts, and services such as dedicated vehicle platforms, batteries, e-motors, inverters, charging, and battery recycling.
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