Ford Creates Electric-Vehicle, Gas-Engine Divisions in Company Reshape

Source: By Mike Colias, Wall Street Journal • Posted: Wednesday, March 2, 2022

Auto maker’s reorganization would keep both operations in-house and give them separate names and leadership structures

A robot works on a Ford pre-production all-electric F-150 Lightning truck prototype in Dearborn, Mich. Photo: REBECCA COOK/REUTERS
Ford F -4.90% Motor Co. is planning a major reorganization of its operations to create two separate divisions—one for its conventional gas-engine business and another to focus on developing electric vehicles and software, the auto maker said.

Ford plans to keep both operations in-house but give them separate names and their own leadership structures and profit-and-loss statements, it said Wednesday. The move is scheduled to be outlined later Wednesday during a press conference.

The company also raised its projection of EV production and profitability. It expects half of global sales to be electric by 2030, compared with a previous target of 40%, and it lifted its forecast for operating-profit margin to 10% by 2026, from a prior goal of 8%.

The plan represents one of the company’s boldest steps yet under Chief Executive Jim Farley to speed development of new battery-powered models. It also comes as investors are driving up the valuations of Tesla Inc. TSLA -0.70% and other young auto startups that aren’t encumbered by a legacy business and are focused solely on selling electric vehicles.

Ford shares rose about 4% to $17.44 in premarket trading. Before Wednesday, the stock was down 20% in 2022.

Mr. Farley, who took the top job in 2020, has repeatedly said the business of developing and selling electric vehicles is vastly different from its conventional gas-engine operations, requiring new technical expertise and a distinct sales strategy.

Still, Ford needs to keep churning out gas- and diesel-engine vehicles— which today deliver all of its bottom line—to boost profitability as it sharpens its focus on the battery-powered vehicles that it expects will drive growth over the next decade, Mr. Farley has said.

 

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Ford said the part of the business that will focus on electric vehicles and digital innovations will be named Ford Model e. The other side, Ford Blue, will work to improve profitability of its internal-combustion-engine vehicles.

Mr. Farley will serve as president of the Ford Model e unit, continuing as CEO. The Ford Blue business will be led by Kumar Galhotra, now the company’s president of the Americas and international markets.

The reorganization plans follow speculation among investors and media over whether Ford could spin off its electric-vehicle operations as a way to unlock value.

Mr. Farley said recently that the company doesn’t need to split up the company to emerge as a leader in EVs, but he said he would make moves internally to sharpen the focus on each side of the business.

In the past few years, many of the world’s largest auto makers have spelled out strategies to shift capital spending toward electric vehicles and digital services that they envision generating revenue after the initial sale. Ford, General Motors Co. , Volkswagen AG are pouring billions of dollars into battery plants and new electric-vehicle factories as they race to bring to market more EVs, which today account for just around 4% of U.S. vehicle sales.

Last year, Ford’s lineup included just one EV: the Mustang Mach-E sport-utility vehicle. Ford sold about 27,000 of the SUVs last year, or 1.4% of U.S. sales. In comparison, Tesla sold about 352,500 vehicles in the U.S. last year, research firm Motor Intelligence estimates. Tesla doesn’t break out deliveries by region.

Ford is adding to its EV offerings in coming weeks, including the introduction of an electric version of its Transit cargo van. This spring it is scheduled to begin selling the F-150 Lightning, the electric version of the nation’s top-selling pickup truck. Ford has said it would spend $30 billion on electric vehicles through 2025.

As the valuations of Tesla and other electric-only auto makers have grown in the past few years, investors have questioned whether traditional car companies might spin off their electric-car assets to boost their valuations.

Executives at General Motors Co. and other auto makers have said they are open to options, but that there is too much overlap between the EV and internal-combustion parts of the business to cleave off one or the other.

On Tuesday, Jeep maker Stellantis NV told investors it expects electrics to account for half of its U.S. sales and all of its European sales by the end of the decade.

 

Write to Mike Colias at Mike.Colias@wsj.com

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