Ford To Split EV Unit?

[akirby]

1 hour ago, jpd80 said:

So if Ford Model e and Ford Blue are separate business units, will Ford be game to report their respective profit/loss/ debt position each quarter…….or is this move just froth and bubble to impress Wall Street and investors. The way I see it, Model e currently has a $30 billion debt that will take years to work down, or does that become Ford Blue’s yoke of oppression?

They’ll report results separately which is why I mentioned creative accounting - shifting costs between the divisions.  Most of which is legitimate I’m sure but the accountants could get creative with a lot of the shared assets and costs.

[FordBuyer]

40 minutes ago, Twin Turbo said:

And how will CAFE rules be applied? Still across the entire range as it is now? Or will the rules be applied to each new division of the company. I can only assume the former, as with ever tightening rules, ICE would struggle.

 

Have a feeling Michigan will be saddled with the ICE business while the EV business moves south as it is already. Cold climates are not the sweet spot BEVs.

[akirby]

19 minutes ago, FordBuyer said:

 

Have a feeling Michigan will be saddled with the ICE business while the EV business moves south as it is already. Cold climates are not the sweet spot BEVs.

Please tell me you’re joking.

[2005Explorer]

2 hours ago, jpd80 said:

So if Ford Model e and Ford Blue are separate business units, will Ford be game to report their respective profit/loss/ debt position each quarter…….or is this move just froth and bubble to impress Wall Street and investors. The way I see it, Model e currently has a $30 billion debt that will take years to work down, or does that become Ford Blue’s yoke of oppression?

 

Hypothetically, if GM offered Ford $30 billion for Ford Blue, would Farley recommend that the board take it?

I don't know why GM would pay Ford $30 billion for something they already have. It's not like Ford would sell the Ford brand or dealer network, so it would be pointless.

[Tico]

This is mostly to make the investors happy. They see insane valuations of pure EV companies and want in on the action. Hopefully it will have benefits internally for Ford as well. But it is driven by Wall Street. Ford had to do something to please the investors. Hopefully the plan they have come up with actually benefits Ford products, customers and employees as well.  It is what it is. We just have to trust Farley to get it right. But as to the initial decision I don't think he had any other choice as a publicly traded company. 

[voidoid]

Sorry if this was covered already, but what happens with current Ford stock?  Would current stockholders have shares split between the two entities, or have to purchase separately, or would both entities wrap up nicely under the same F stock?  

 

(I know very little about investing, but happen to have a small holding in the Blue Oval...)  Thanks!

[akirby]

20 minutes ago, voidoid said:

Sorry if this was covered already, but what happens with current Ford stock?  Would current stockholders have shares split between the two entities, or have to purchase separately, or would both entities wrap up nicely under the same F stock?  

 

(I know very little about investing, but happen to have a small holding in the Blue Oval...)  Thanks!

 

IT’S NOT A SEPARATE COMPANY

[jasonj80]

29 minutes ago, voidoid said:

Sorry if this was covered already, but what happens with current Ford stock?  Would current stockholders have shares split between the two entities, or have to purchase separately, or would both entities wrap up nicely under the same F stock?  

 

(I know very little about investing, but happen to have a small holding in the Blue Oval...)  Thanks!

A basic explanation would be to think of it as Walmart and Sam's Club, they are separate but still operate under the parent company. 

[akirby]

Ford blue will see less investment and more focus on cost cutting and maximizing profits and will be profit driven - when products are no longer sufficiently profitable they’ll be killed outside Icon families (F series, Bronco, Explorer, Mustang).

 

Ford EV will be vertically integrated with new processes and profitability won’t be the main goal - the focus will be getting world class BEVs out the door and developing next Gen platforms.  Different processes, different goals and KPIs.  
 

It makes a lot of sense if managed correctly with the right people in place.

[rperez817]

1 hour ago, FordBuyer said:

Have a feeling Michigan will be saddled with the ICE business while the EV business moves south as it is already. Cold climates are not the sweet spot BEVs.

 

Yes sir FordBuyer. Sweet spots for BEV development, engineering, and marketing in the U.S. nowadays are California, Arizona, and Texas. Assembly operations for both vehicles and components may be more widespread throughout the U.S. though.

[rperez817]

Official Ford press release about the separation. Ford Accelerating Transformation: Forming Distinct Auto Units to Scale EVs, Strengthen Operations, Unlock Value | Ford Media Center

 

Highlights.

• Creates distinct electric vehicle and internal combustion businesses poised to compete and win against both new EV competitors and established automakers
• Organizes Ford to deliver for customers with the focus and speed of a startup at the leading edge of technology, supported by deep expertise in engineering and high-volume production
• Ford Blue will build out company’s iconic portfolio of ICE vehicles to drive growth and profitability – relentlessly attacking costs, simplifying operations and improving quality; will provide world-class hardware engineering and manufacturing capabilities for all of Ford  
• Ford Model e will accelerate innovation and delivery of breakthrough electric vehicles at scale, and develop software and connected vehicle technologies and services for all of Ford
• Ford Blue and Ford Model e will operate as distinct businesses, but share relevant technology and best practices to leverage scale and drive operating improvements; along with Ford Pro, all three businesses are expected to have discrete P&Ls by 2023
• Accelerates Ford+ plan to unlock growth and create value for Ford’s shareholders: total company adjusted EBIT margin of 10% and annual production of more than 2 million EVs by 2026; expect EVs to represent half of global volume by 2030

[rperez817]

1 hour ago, FordBuyer said:

I was disappointed that Biden didn't spend more time talking about Global Warming and steps to combat it last nite in speech. EV subsidies will be needed to speed up the transition, and not just for upper income people who itemize their taxes. Over last week climate scientists have been putting out warnings of accelerating warming of oceans. Here in Central FL, it will 90+ degrees for many days later this week. Already warnings for Atlantic coast and Gulf region for rising seas over next 10 years. 

 

Good points FordBuyer. The global climate emergency situation is dire as you mentioned. Ford as a company just took an important action on this issue by becoming the 1st automaker to join U.S. Department of Energy's Better Climate Challange. I put details in the Ford EV discussion thread. 

 

[FordBuyer]

1 hour ago, akirby said:

 

IT’S NOT A SEPARATE COMPANY

 

Wall Street seems to think Ford will spin off the BEV business eventually, but not short term. Farley has some time to convince the Ford family to execute it. The climate crisis is accelerating and Clay Jr. certainly believes it. So looks like Ford is going full bore into this new business model. Everyone is scrambling to get the best seat as Tesla sits at the head of the table. Farley is obsessed with Tesla. 

[rperez817]

37 minutes ago, FordBuyer said:

Everyone is scrambling to get the best seat as Tesla sits at the head of the table. Farley is obsessed with Tesla. 

 

Yes sir FordBuyer. This is one of many things that makes Farley such a good businessman. He recognizes just how far ahead Tesla is of incumbent automakers (including Ford) with BEV engineering, design, and marketing. That's why he is content for Ford to be #2 in BEV after Tesla.

 

In the past 6 months, Ford hired 2 top former Tesla engineers.

1. Doug Field, who will be leading the Model e division of Ford
2. Alan Clarke, who now has a senior engineering position with Advanced EV Development at Ford

[2005Explorer]

1 hour ago, FordBuyer said:

 

Wall Street seems to think Ford will spin off the BEV business eventually, but not short term. Farley has some time to convince the Ford family to execute it. The climate crisis is accelerating and Clay Jr. certainly believes it. So looks like Ford is going full bore into this new business model. Everyone is scrambling to get the best seat as Tesla sits at the head of the table. Farley is obsessed with Tesla. 

There isn't much reason to spin off the BEV business since the legacy ICE business probably only has 8-10 years left at most anyhow. I figure by 2030 they won't be selling any ICE vehicles except for very limited special use markets. It won't be enough to support a split-off company. Sure there will be necessary support for the ICE vehicles still on the road, but that will be more dealer focused support.

[silvrsvt]

15 minutes ago, 2005Explorer said:

There isn't much reason to spin off the BEV business since the legacy ICE business probably only has 8-10 years left at most anyhow. 

 

I think it will be at least 10-15 years...I don't see certain segments that BEVs don't do well in like heavy duty trucks transiting till the very end. Just look at the specs of the new Hummer and how much it weighs and how it will translate into a HD pickup. 

[2005Explorer]

15 minutes ago, silvrsvt said:

 

I think it will be at least 10-15 years...I don't see certain segments that BEVs don't do well in like heavy duty trucks transiting till the very end. Just look at the specs of the new Hummer and how much it weighs and how it will translate into a HD pickup. 

I agree for a very few commercial segments it might be closer to 15 years, but I doubt there will be much of a market for ICE with typical customers in the next 6-8 years. Everyone seems to want BEV when it comes to the general market. The few ICE trucks or large SUVs that Ford is still making after 2030 can simply be a very small division within Ford. There is no reason to split if off because it will soon go away on it's own.

[rperez817]

49 minutes ago, 2005Explorer said:

There isn't much reason to spin off the BEV business since the legacy ICE business probably only has 8-10 years left at most anyhow. I figure by 2030 they won't be selling any ICE vehicles except for very limited special use markets. It won't be enough to support a split-off company. Sure there will be necessary support for the ICE vehicles still on the road, but that will be more dealer focused support.

 

You are correct 2005Explorer that Ford's legacy ICE business has less than a decade of life remaining. However, the separation of BEV/advanced technology operations that Ford announced last night followed by the likely full spinoff of that business in a few years is still beneficial because it provides Ford the "clean slate" mindset it needs to succeed in the automotive industry of the future.

 

About Ford's ICE business not being enough to support a split-off company by the end of this decade, that's a valid point. If there are any remnants of the ICE business beyond parts/service support for dealers still alive by say 2026 or 2027, private equity or hedge fund firms can gut it as fuzzymoomoo mentioned earlier in this thread.

Edited March 2, 2022 by rperez817

[akirby]

37 minutes ago, 2005Explorer said:

I agree for a very few commercial segments it might be closer to 15 years, but I doubt there will be much of a market for ICE with typical customers in the next 6-8 years. Everyone seems to want BEV when it comes to the general market. The few ICE trucks or large SUVs that Ford is still making after 2030 can simply be a very small division within Ford. There is no reason to split if off because it will soon go away on it's own.

I think you’re overestimating BEV demand in general for reasons we’ve been through over and over.  ICE and BEV are going to co exist for quite some time.

[akirby]

17 minutes ago, rperez817 said:

 

You are correct 2005Explorer that Ford's legacy ICE business has less than a decade of life remaining. However, the separation of BEV/advanced technology operations that Ford announced last night followed by the likely full spinoff of that business in a few years is still beneficial because it provides Ford the "clean slate" mindset it needs to succeed in the automotive industry of the future.

 

About Ford's ICE business not being enough to support a split-off company by the end of this decade, that's a valid point. If there are any remnants of the ICE business beyond parts/service support for dealers still alive by say 2026 or 2027, private equity or hedge fund firms can gut it as fuzzymoomoo mentioned earlier in this thread.

You don’t spin off the BEV business.  You spin off the legacy ICE business but only after you’ve drained every drop of profit and there is nothing of value left.  And that’s not happening any time soon no matter how many times you repeat it.

[rperez817]

13 minutes ago, akirby said:

ICE and BEV are going to co exist for quite some time.

 

For vehicles in operation, yes sir. However, for new vehicle sales, the ICE age is coming to an end within the next 15 to 18 years maybe even sooner.

[FordBuyer]

43 minutes ago, rperez817 said:

 

For vehicles in operation, yes sir. However, for new vehicle sales, the ICE age is coming to an end within the next 15 to 18 years maybe even sooner.

 

If climate scientists are to be believed, probably sooner. I don't think we have 20 years to figure this out. However, private business will need big time government help to pull this off be it auto or power plant emissions. Big Supreme Court case coming down on whether EPA can regulate emissions. 

[silvrsvt]

20 minutes ago, FordBuyer said:

 

If climate scientists are to be believed, probably sooner. I don't think we have 20 years to figure this out

 

They've been saying that for the past 40 years....

 

Plus who knows, we might have done something already that can't be undone...it is what it is. 

[rmc523]

25 minutes ago, FordBuyer said:

 

If climate scientists are to be believed, probably sooner. I don't think we have 20 years to figure this out. However, private business will need big time government help to pull this off be it auto or power plant emissions. Big Supreme Court case coming down on whether EPA can regulate emissions. 

 

Weren't we supposed to be underwater 20 years ago?

[7Mary3]

I think this is the first major step towards spinning the ICE business off as a separate entity.  If you look at how Daimler-Benz and VW Group recently spun off their heavy truck businesses they did it in much the same way, initially reorganizing them as separate business units and later creating IPO's.  Won't happen tomorrow but unless something changes it's on the horizon.  I also think the Ford family is behind this, seeing the potential to unlock the EV business' potential value.  

 

I find it interesting that Ford seems to be under a lot more pressure than VW, Toyota, or even GM to spin its EV business off.  I wonder if it is because of Ford's well known fiefdoms and internal power struggles Wall Street thinks that Ford may be unable to manage the growth of their EV business.  Farley seems to be acknowledging that Ford will not be able to make the transition with their current talent pool.