MICHIGAN: Ford Motor Co’s leader made a case for significantly restructuring the 118-year-old automaker for the electric age and acknowledged the company is “under-earning” on both its electric vehicles (EVs) and internal combustion engine (Ice) models.
“We have too many people, we have too much investment, we have too much complexity and we don’t have expertise in transitioning our assets,” Jim Farley, Ford’s chief executive officer, said at a Wolfe Research auto conference Wednesday.
“This management team firmly believes that our internal combustion engine and EV portfolios are under-earning.”
The comments underscore the seriousness of Ford’s push to build out its EV business, even as the investment demands, growth strategies and customer needs diverge from those of its legacy gas-powered operations. Bloomberg reported last week that Farley is looking at ways to run the EVs and internal combustion engine businesses separately.
Farley said there are no plans to spin off either business line, reaffirming Ford’s stance. The company had previously considered such a move but has shifted focus to other ways to run the operations differently, Bloomberg reported.
The company faces pressure from Wall Street to spin off its nascent EV business to boost value by shedding legacy costs and gaining greater access to capital markets. Investors have awarded immense multiples to pure EV makers such as Tesla Inc, the world’s most valuable automaker.
Farley sought to reassure investors that he is on a push for profitability, suggesting the company may surpass its goal of an 8% operating margin. But he also acknowledged Ford still lacks the “restructuring talent” to get the most out of its EV and Ice businesses.
“Ice talent and the digital EV talent are different; you can’t ask Ice people to do certain things, it takes too long,” Farley said. “Ford will ensure we have the right structure and talent in place to compete and win.”
Ford has committed US$30bil (RM126bil) to its EV strategy through 2025 and Bloomberg has reported it will spend another US$10bil to US$20bil (RM42bil to RM84bil) by the end of the decade to convert factories to build plug-in models.
Farley has tripled production of the electric Mustang Mach-E and doubled output of its F-150 Lightning plug-in pickup, going on sale this spring.
The company plans to produce 600,000 EVs annually in two years and generate as much as half its sales from battery-powered vehicles by 2030.
Ford also is looking to wring costs out of its distribution system, which Farley said operates at a US$3,000 to US$4,000 (RM12,560 to RM16,750) per car disadvantage to Tesla, which has a direct sales model that doesn’t include car dealers.
Farley has estimated that Tesla earns more than US$10,000 (RM42,000) per car.
“To get the margins, not just the volumes, but the margins that we see at a company like Tesla we need to have real experts that can drive that scale,” Farley said.
“I can’t turn to the Ice organisation and say, ‘Go be Tesla.’”
Once the company hires the right people and restructures, Farley said he is optimistic about Ford’s growth prospects.
“When Ford executes correctly, we have upside,” Farley said. “We are a long way from peak earnings.” — Bloomberg