GM and Ford, Driving to Beat Tesla, Turn on Each Other

Source: By Mike Colias, Wall Street Journal • Posted: Monday, June 20, 2022

Detroit’s greatest rivalry is intensifying in the race to dominate in electric vehicles; Silverado vs. F-150 Lightning

Ford F-150 Lightning, left, facing electric Chevrolet Silverado.

Ten miles away at Ford  Motor Co.’s headquarters, executives were plotting a pre-emptive public-relations strike, said people familiar with the plan. The day before Ms. Barra’s presentation in January, Ford said it would double factory capacity for its F-150 Lightning electric truck, citing overwhelming demand. Ford shares surged 12% that day.

Within days, in private meetings with investors, Ms. Barra was facing questions about why Ford’s truck would beat GM’s to market by a year. “They want to better understand the portfolio of EVs that we have coming,” Ms. Barra said of the meetings, adding that the topic didn’t dominate the conversation.

The Ford-GM rivalry—one of the business world’s fiercest for a century—is taking on an urgent new dimension as the companies enter the electric age. Each is under pressure to show Wall Street it can close the gap on Tesla Inc., which has been cementing its EV dominance through profit and sales growth.

Ms. Barra and Ford CEO Jim Farley have said they intend to seize the U.S. sales lead from Tesla, which sold about 13 times as many EVs as both Detroit companies combined in the U.S. during the first quarter, according to sales figures and estimates from research firm Wards Intelligence.

GM plans to flood the market with a few dozen EV models across a wide price spectrum. Ford plans a narrower range of models but has emphasized speed to market.

GM’s Ms. Barra, 60, an electrical engineer who spent much of her career inside GM’s factories, has assembled the building blocks needed to produce EVs of all shapes and sizes. Each model will use a common set of battery cells, motors and other internal guts developed in-house—an approach that GM executives say has taken longer but will allow GM to reduce costs and put out many EVs in rapid succession.

‘Fast forward to this time next year, we’re dominant,’ says GM CEO Mary Barra.Photo: jeff kowalsky/AFP/Getty Images

Ford’s Mr. Farley, 60, spent many years as a marketing executive and wants to offer EVs in categories where Ford already leads, such as pickups and vans for business customers. He expects the Lightning’s head start to help establish Ford as a go-to EV brand for truck buyers. He is also getting help from former Tesla executives and recently divided Ford into two organizations to sharpen the focus on EVs.

“This will make for a great business-school case study someday,” said Barclaysanalyst Brian Johnson, about the dueling business models. Ford has generated consumer enthusiasm and an early EV sales lead, he said, while GM appears better positioned to scale up output in coming years.

GM’s early edge

For years, Wall Street gave GM the edge over Ford on its EV strategy, encouraged by GM’s decisive move into electric vehicles. In 2017, Ms. Barra said she saw an all-electric market as inevitable. GM subsequently outlined plans to spend $35 billion on her in-house EV and autonomous-car development strategy.

Investor enthusiasm around GM’s EV moves helped its shares gain 20% from 2017 through 2020, compared with a 28% decline in Ford’s stock. Ford “is perceived by many investors to be lagging behind, particularly when compared to closest peer, General Motors,” J.P. Morgan said in an October 2017 research note. “Investors want to see Ford make faster progress.”

Ford turned the tables last year, outselling GM in electric cars in the U.S. with strong demand for its Mustang Mach-E. GM’s EV sales took a hit after it stopped selling its lone in-production model, the Chevrolet Bolt, to fix batteries that led to some car fires.

In trucks, Ford took a quicker route to market than GM by modifying its internal-combustion F-150—its bestseller—to run on batteries. “We said, ‘Look, what’s the scrappiest way to get in market with an electric F-150?’ ” Mr. Farley said.

The Lightning has generated buzz with features such as a large “frunk”—a front trunk—and the ability to power a home during a blackout. The pickup’s rollout, which began last month, should give Ford a sales lead for at least a few years in all-electric pickups, according to forecasts from research firms LMC Automotive and AutoPacific Inc.

The Ford F-150 Lightening has generated buzz with features such as a ‘frunk’—a front trunk.Photo: David Paul Morris/Bloomberg News

GM executives say their Chevrolet Silverado, scheduled for spring 2023, will have a longer driving range and faster charging than the current version of the Lightning. GM executives see Ford’s EV sales lead as fleeting, saying they have a head start on the industrial heft needed for large-scale EV production.

A new GM factory in Ohio is set to start churning out battery cells this summer, for example, more than two years before the scheduled start of Ford’s own battery output. “If you fast forward to this time next year, we’re dominant,” Ms. Barra said. “If the conversation is just about Silverado vs. F-150, that’s a pretty narrow view.”

A Ford spokesman said that “Customers are smart, and we trust them to discern true innovation versus future hype,” and that “We are happy to leave the old-school approach of flooding the zone with 10 mildly different mid-size SUVs to others.”

Ford’s market valuation in December eclipsed GM’s for the first time in more than five years. Both stocks are down more than 40% this year amid investor concerns about inflation and higher commodity costs. GM’s market valuation is about $48 billion and Ford’s is about $45 billion.

GM and Ford are placing the majority of their capital expenditures on electric vehicles, a technology that today accounts for less than 2% of their U.S. vehicle unit sales.

Ford and GM face threats beyond each other and Tesla. Startups such as RivianAutomotive Inc. and Lucid Group Inc. are targeting profit centers such as pickups and luxury cars. Apple Inc. and other big tech companies are expanding their in-vehicle digital offerings. Volkswagen AG, Hyundai Motor Group and other traditional rivals also are going hard into electrics.

‘We said, ‘Look, what’s the scrappiest way to get in market with an electric F-150?’ ’ says Ford CEO Jim Farley.Photo: nic antaya/Shutterstock

But Tesla remains Target No. 1, and the pickup-truck market offers GM and Ford a chance to close the gap. Both got EV trucks to market ahead of Tesla’s futuristic-looking Cybertruck, which Tesla has said will arrive next year. Ford and GM executives believe their experience and brand loyalty in pickups—by far their biggest moneymakers—will give them an edge.

GM executives say they have the scale to offer models across a wider price spectrum than Tesla’s, expanding EVs to a broader base of potential customers. GM next year plans to launch a Chevy Equinox SUV priced around $30,000, an affordable part of the EV market that company executives say Tesla and other auto makers are ignoring. Tesla CEO Elon Musk in January said the company is no longer working on an $25,000 EV that it had planned, instead focusing on other projects.

Ford will offer more choice than Tesla eventually, Mr. Farley said. Ford’s commercial customers—such as contractors and ranchers—are a loyal contingent more likely to trust Ford than newer brands when testing the market for plug-in trucks, he said.

Tesla didn’t respond to requests for comment.

Tesla has said its Cybertruck, above, will arrive next year.Photo: Nic Coury/Bloomberg News

Century-old rivalry

The GM-Ford competition heated up in the 1920s. Ford became the world’s largest car maker by churning out inexpensive black Model T’s. GM’s strategy to offer more choice—brands, models features—helped it overtake Ford. Since then, they have battled over vehicles from family sedans and sports cars to pickups.

In the late 1990s, GM released the EV1, a small car stuffed with nickel-based batteries. In 2010, GM’s Chevrolet Volt, a plug-in hybrid, drew a cult customer base. The Chevy Bolt, introduced in 2016, was the industry’s first affordable, long-range EV, automotive reviewers say, and won Motor Trend’s car of the year award.

GM’s EV efforts sometimes faltered. The EV1 never took off. The Volt fell short of sales targets, and GM phased it out. The Bolt has been badly outsold by Tesla’s similarly sized models.

By 2017, GM executives had concluded they needed to be more aggressive in advancing the technology, said Doug Parks, GM’s global product chief. Rather than modifying a gas-engine layout, engineers began tinkering with a system of large pouch-style battery cells they could stack like Legos under the vehicle floor. That allowed for more batteries and longer driving range.

The plan to focus first on Cadillac EVs changed during an early 2019 meeting in GM President Mark Reuss’s office with Ms. Barra and Mr. Parks. The subject was Rivian, which weeks earlier revealed a pickup and SUV. “All right,” Mr. Reuss recalled saying, “we’re going to make the super truck.”

GMC Hummer electric vehicles on the Detroit production line in November.Photo: Emily Elconin/Bloomberg News

GM engineers began sketching plans for a pickup with 1,000 horsepower, more than double that of a typical pickup. In early 2020, GM revealed the electric GMC Hummer in a Super Bowl commercial with NBA superstar LeBron James.

In 2017, Mr. Farley was running Ford’s business in Europe, where governments were aggressively pushing green-energy cars. He didn’t think Ford was moving fast enough on EVs, he said.

Mr. Farley, who races vintage cars including a 1965 Ford Cobra, returned that year to Dearborn to run Ford’s global markets. He was irritated, he said, to discover that Ford had a fully electric vehicle under development without his knowledge and thought the prototype design was dull. “It looks like a Prius. That’s a joke,” Mr. Farley recalled saying when he saw the EV prototype. “What are we doing?”

The team began to redesign the vehicle—later named the Mustang Mach-E—which delayed it by several months.

F-150 strategy

In late 2017, the idea of an electric pickup was floated to Mr. Farley by Bobby Stevenson, a longtime auto analyst and portfolio manager at Franklin Equity Group, according to the two men. Mr. Stevenson, an early investor in electric-bus startup Proterra Inc., encouraged Mr. Farley to visit its factory to see the feasibility of converting internal-combustion city buses to EVs.

“I thought, ‘Well, if the buses go electric, then the F-150 is going to go,’ ” Mr. Farley said.

Ford’s Lightning team decided to price it low, starting at $39,974—less than many gas-powered trucks, said Darren Palmer, vice president of Ford’s global EV programs. The team hoped that would nudge GM lower than it wanted in pricing the electric Silverado, people familiar with Ford’s thinking said.

GM months later would undercut Ford by $74, starting the Silverado at $39,900. A GM spokesman said the Lightning price didn’t affect the Silverado’s pricing.

Mr. Farley became Ford’s CEO in October 2020 and the next May outlined a new strategy calling for a $30 billion EV investment, similar to GM’s spending target. About one-third would go toward three new battery factories in Tennessee and Kentucky and a new EV-truck plant near Memphis.

A Ford F-150 Lightning prototype at the Rouge Electric Vehicle Center in Dearborn, Mich., in September.Photo: REBECCA COOK/REUTERS

Throughout 2021, the waiting list for the Lightning grew along with Ford’s share price, which rose 136% for the year, according to FactSet data. GM’s shares rose 42%, but it suffered a setback after recalling all 142,000 Bolts it had produced to replace potentially faulty battery cells and pausing Bolt production and sales for months.

This year, Ford and GM executives have been sniping at each other’s electric trucks and broader EV strategies. “The Silverado has got 400 miles of range, which they don’t have,” Mr. Reuss told The Wall Street Journal in January.

The next day, Ford’s Mr. Farley told the Journal that the specifications GM released for the electric Silverado implied it would be able to haul less weight in its bed than Ford’s comparatively tiny gas-powered Maverick pickup. “That’s not built Ford tough,” he said.

After Ford’s pre-emptive strike on the electric Silverado unveiling, GM in April reciprocated: On the morning before a Ford event to celebrate the Lightning, GM said it would eventually release an all-electric Corvette.

Mr. Farley said he respects GM but pays more attention to Tesla. He has recruited several former Tesla executives, including Doug Field, who oversaw the Tesla Model 3 development. Mr. Farley has said he needs talent from outside Ford to develop EVs and digital features faster.

GM says it plans 30 new EV models in North America by 2025, ranging in size and price from the recently launched $100,000-plus Hummer to a compact Chevy Equinox SUV that would start around $30,000.

GM has been striking deals with suppliers to ensure it will have an adequate flow of batteries, electric motors and other EV components. It is building a factory to process material used in cathodes, a main battery component, in Canada with a Korean supplier. “We’re ready to make cells,” Mr. Reuss said. “I’m not sure Ford’s ready to make cells.”

Ford said it has secured enough batteries from outside suppliers to meet demand until it begins producing battery cells in 2025.

Ken Jackson, a retiree near Portland, Ore., said he has put deposits on a Lightning, a Hummer and an electric Silverado, in hopes of landing one to use on his small farm.

“Whoever can put the thing in my driveway first,” he said, “is going to get my money.”

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

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