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To Separate The EV and ICE Operations, Ford Motor Forms Distinct ‘Model e’ and ‘Blue’ Divisions!
- Ford is reorganizing its operations to split its electric and internal combustion engine divisions into distinct corporate entities.
- The move is expected to simplify the company’s burgeoning electric car division and increase revenues.
- In a statement announcing the modifications, Ford CEO Jim Farley stated, “We’re going all in.”
- The firm intends to break out financial data for the new entities as well as its Ford+ business, offering investors a better understanding of the business.
Ford Motor Company said on Wednesday that it will reorganize its operations to split its electric and internal combustion engine divisions into two distinct groups.
The move is expected to simplify the company’s burgeoning electric car division and increase revenues. Under CEO Jim Farley’s “Ford+” recovery plan, Ford is handling its Ford Pro commercial vehicle division in a similar manner.
Ford has also increased its projected investment in electric vehicles and other technologies to $50 billion by 2026, up from $30 billion through 2025. It aims to spend $5 billion on electric vehicles this year, more than double the amount it spent in 2021.
“Today, we’re announcing one of the most significant shifts in our history,” Farley remarked.
Separating the businesses while keeping them in-house will satisfy some Wall Street analysts who have been urging traditional automakers like Ford to spin off their electric car operations in order to capitalize on the value that investors have been granting some EV start-ups.
The new electric vehicle company, according to Farley, would “create as much excitement as any pure EV rival, but with size and resources that no start-up could ever equal.” He defined the heritage business as the company’s “profit and cash engine.”
Ford opted not to spin off any of the operations because of the leverage and interconnection between them, according to Farley. He also stated that Ford did not require extra funds to support its activities.
Investors praised the ideas, driving the automaker’s stock up 8.4% to $18.10 per share on Wednesday. This year, Ford’s stock is down 12.4 percent.
Ford expects to achieve a 10% adjusted operating profit throughout the firm and build more than 2 million electric vehicles by 2026, according to Farley, who announced the new companies. By 2026, the corporation intends to save $3 billion in structural expenses.
Distinct Companies
The EV division will be known as “Ford Model e.” “Ford Blue” will be the standard operating procedure. “We will operate as separate businesses, but share important technology and best practices to maximize scale and create operational gains,” the firm added.
By 2023, Ford intends to break standalone financial results for the new entities as well as its Ford+ business, offering investors a clearer picture of the company’s activities.
“We’re going all in,” Farley said in a statement, “building distinct but complementary companies that combine Ford Model e’s start-up speed and unfettered creativity with Ford Blue’s industrial know-how, volume, and legendary brands like Bronco, that start-ups can only dream about.”
Farley was reportedly considering separating its EV and regular operations, including a potential spinoff. Ford has no intentions to split off any of the divisions, according to Farley.
Ford’s intentions mirror a similar move by crosstown competitor GM in late 2019 to largely separate its electric car and regular car engineering. GM has stated that it has no intentions to split off its electric vehicle division.
Farley stated, “Today, our corporate structure is holding us back.” “It makes it difficult for us to concentrate.” We need the ICE company to be profitable and serve those well-known brands. Our electric business, our digital business, must be focused on innovation.”
New Leadership is in Place
Jim Farley will serve as president of the Ford Model e division in addition to his positions as president and CEO of Ford, according to the firm.
Doug Field, a former Tesla and Apple executive who Ford hired last year as chief EV and digital systems officer, would oversee the development of the Ford Model e.
Ford’s Model e division will be in charge of all areas of the company’s electric car operations. Dedicated vehicle platforms, batteries, e-motors, inverters, charging, and battery recycling are among the future EV technologies, parts, and services that will be designed and created.
Model e will also provide its future electric car consumers with “simple, intuitive e-commerce platforms, clear pricing, and individualized customer service,” according to the company. The pricing issue is crucial since some dealers have pushed up prices for high-demand vehicles, such as the Mustang Mach-E electric crossover.
“In this new era of transportation, this new structure will strengthen our potential to create industry-leading growth, profitability, and liquidity,” Ford CFO John Lawler said.
Kumar Galhotra, presently President of the Americas and International Markets at Ford, will be in charge of Ford Blue, the company’s conventional business activities. He’ll also be in charge of reducing operational costs and waste, which is a key component of Farley’s turnaround strategy. “We have three major areas that we need to focus on: complexity, quality, and building costs; and nothing is off the table,” Galhotra added.
