Ford To Split EV Unit?

[FordBuyer]

On 3/4/2022 at 2:27 PM, rperez817 said:

 

Good story DeluxeStang. My wife and I have attended several BEV education events like National Drive Electric Week, and let several people test drive our 2 BEV (Ford Mustang Mach-E and Tesla Model S). Some of those people, like your father, were "highly resistant" to BEV prior to experiencing one. Each one that my wife or I met personally changed their tune after test driving a BEV and chatting with us and other BEV owners.

 

J.D. Power's latest U.S. Electric Vehicle Experience Study confirms this. They said "Making the initial leap of faith into owning a BEV is proving to be very satisfying" and "once someone has purchased a BEV, they’re pretty much hooked."

 

For Ford, the biggest goals related to getting to a 100% electric future are.

• Build in-house talent and capabilities for BEV design, engineering, manufacturing, and marketing
• Expand production capacity to meet demand for BEV, including producing components such as a HV batteries and electric motors
• Accelerate the timeline for exiting the ICE age simultaneously with growing the BEV and advanced technology businesses

The separation of business units described in this thread is a great starting point to achieve all 3 of those goals.

 

 

Stellantis CEO makes the argument that separating business units creates big time HR problem. Those in the ICE unit will feel like they are on a sinking ship and act accordingly. Forget about hiring the best anymore for that unit. Especially with the way Farley talks. Why wreck the major part of your business that makes billions in profit that will be around for decades to come. So GM and Stellantis that they are not following Ford down this road. Add in soaring nickel and lithium prices with chip shortage, and all BEV goals are pipe dreams. 

[akirby]

1 hour ago, FordBuyer said:

 

Stellantis CEO makes the argument that separating business units creates big time HR problem. Those in the ICE unit will feel like they are on a sinking ship and act accordingly. Forget about hiring the best anymore for that unit. Especially with the way Farley talks. Why wreck the major part of your business that makes billions in profit that will be around for decades to come. So GM and Stellantis that they are not following Ford down this road. Add in soaring nickel and lithium prices with chip shortage, and all BEV goals are pipe dreams. 

You have all that now with people working on ICE vehicles with or without a separate division.  Outside of powertrains most of the jobs will be the same.  You manage the ICE side through attrition and early retirements and transfer most of the rest as BEVs grow.  Given that overall the expectation is the same or higher overall sales and the same or more vehicles it’s not a case of having to continuously cut back - you’re cutting one side and growing the other.

[7Mary3]

https://www.freep.com/story/money/cars/general-motors/2022/03/09/gm-not-follow-ford-dividing-up-its-ev-and-ice-units/9437857002/

 

I think Ford's strategy to split the EV business from the ICE business is based a lot on Ford's unique situation rather than the idea that EV and ISE operations are different enough to warrant such a move for any traditional automaker.  I keep thinking about Farley's comments about Ford's specific operational shortcomings a few weeks ago.  No doubt those comments were made in support of the move to separate the businesses.  Also I think the move has a lot to do with enhancing shareholder value, particularly for the Ford family. 

[jpd80]

I still wonder if the separation of EV business is more about signalling to Wall Street that Ford is changing and that it really is an opportunity to clean house again  at Ford by finding more saving to boot. see, I’m thinking that Ford is now going in boots n all with Electric Vehicles before it gets any feed back on Lightning sales in the next few years., man that’s guts.

[akirby]

I think it comes down more to how the company wants to operate internally and how they want to manage financial reporting externally.

There is no right or wrong answer.

 

The biggest advantage internally is the ability to have completely separate processes and essentially start over with a clean sheet on BEVs.  This is where new executives and outside hires will help a lot.  As an example I would expect marketing, design, engineering and manufacturing to be more Integrated for BEVs.  It also prevents ICE projects from taking resources from BEV projects.  Each can be managed separately.

 

Financially it allows Ford to shift those ICE fixed costs out of the BEV picture.  If done accurately it shows a more realistic picture of what’s happening with ICE vs BEV.  As an extreme example, if the company reported $10B profit it could be $5B each or it could be $1B/$9B.  And it allows them to be creative (within legal boundaries) as to how they account for things between the two.

[akirby]

21 minutes ago, jpd80 said:

I still wonder if the separation of EV business is more about signalling to Wall Street that Ford is changing and that it really is an opportunity to clean house again  at Ford by finding more saving to boot. see, I’m thinking that Ford is now going in boots n all with Electric Vehicles before it gets any feed back on Lightning sales in the next few years., man that’s guts.

Absolutely.  Investors will be able to see how they’re managing each business independently and that will give them more confidence especially if it shows higher margin and lower costs on ICE and proper investment on BEVs.

[Footballfan]

IMHO this "reorganization" is another shell game to appease Wall Strret.  Reminds me of hiw gm split its business into large car, small car, and truck groups.  The result: lack of resources in one area, too many on another, lack of communication between groups and a general cluster#!&$. I hope for Ford's sake it's different but I have my doubts and like gm, I see yet another reorganization a few years down the road.

[7Mary3]

So, first order of business for 'Ford Blue' is to cut $3B out of the budget?

[rperez817]

1 hour ago, 7Mary3 said:

So, first order of business for 'Ford Blue' is to cut $3B out of the budget?

 

You are correct 7Mary3, Farley made it clear that cost cutting is the primary goal at this point for the Ford Blue division. Associated goals such as improvement in quality and reduction in complexity go hand in hand with containing costs.

[jpd80]

9 hours ago, akirby said:

Absolutely.  Investors will be able to see how they’re managing each business independently and that will give them more confidence especially if it shows higher margin and lower costs on ICE and proper investment on BEVs.

It may also help to show what parts of the ICE business are strongly profitable  and what parts are nice to have but make little profit beyond self funding development and production costs. 

[bzcat]

23 hours ago, akirby said:

I think it comes down more to how the company wants to operate internally and how they want to manage financial reporting externally.

There is no right or wrong answer.

 

The biggest advantage internally is the ability to have completely separate processes and essentially start over with a clean sheet on BEVs.  This is where new executives and outside hires will help a lot.  As an example I would expect marketing, design, engineering and manufacturing to be more Integrated for BEVs.  It also prevents ICE projects from taking resources from BEV projects.  Each can be managed separately.

 

Financially it allows Ford to shift those ICE fixed costs out of the BEV picture.  If done accurately it shows a more realistic picture of what’s happening with ICE vs BEV.  As an extreme example, if the company reported $10B profit it could be $5B each or it could be $1B/$9B.  And it allows them to be creative (within legal boundaries) as to how they account for things between the two.

 

You are completely right.

 

It's more or less a financial reporting change. Like how Ford Credit and Ford Mobility are reported as a different segment than the automotive operations now. Ford is basically saying ICE and EV business are fundamentally different and they want the results to be comparable separately to their respectively peers:

 

ICE vs. other legacy OEM car companies

EV vs. other nascent EV start ups

Ford Credit vs. other consumer financing companies

Ford Mobility vs. other autonomous driving start ups

 

They are not splitting the company. All four segments are still part of Ford Motor Company. Ford is going from 3 segments to 4 segments on its financial statements. You can see how Ford reports right now with 3 segments:

 

https://www.sec.gov/ix?doc=/Archives/edgar/data/0000037996/000003799622000013/f-20211231.htm 

 

The next time they file a 10Q or 10K, they will show 4 segments. That is it.

Edited March 11, 2022 by bzcat

[akirby]

19 hours ago, Footballfan said:

IMHO this "reorganization" is another shell game to appease Wall Strret.  Reminds me of hiw gm split its business into large car, small car, and truck groups.  The result: lack of resources in one area, too many on another, lack of communication between groups and a general cluster#!&$. I hope for Ford's sake it's different but I have my doubts and like gm, I see yet another reorganization a few years down the road.

This is very different.  In the GM case the products, resources and markets were pretty much the same.  With Ford they’ve essentially stopped most development outside of top hat and other minor updates and platform tweaks.  Most new things will be BEV oriented and they’re using this opportunity to change the vehicle development process.  Different goals and targets.  Burying the BEV results in with the ICE results presents a blurry picture for investors and executives to some degree and makes it harder to change the old processes.  You manage a shrinking but still lucrative business differently than a growing business and the competition is completely different.

[Chrisgb]

On 3/4/2022 at 10:39 AM, Fordowner said:

Though what happens with people who live in situations that don't provide access to a plug for your car to charge overnight?

I think much the same thing that happens in other areas of the economy: technology creep.

Look at  the lodging industry as an example. In the 19th century, a hotel had one or two shared bathtubs per floor, you often shared a room (even a bed in some cases) with a stranger, wood or coal heat. Then came private baths, daily linen changes, electric lighting, in-room radios, phones, air conditioning, hair dryers, pools, exercise rooms, color tv, satellite tv, wifi, free wifi etc. As people raised their standards, the industry provided better and better amenities. The same goes for multi dwelling housing. As EVs become more prevalent, people looking for multi unit housing will be looking for a place that has onsite vehicle charging, or convenient public charging nearby. If Complex A doesn't offer it and Complex B does as an included or extra cost feature, they will attract more clients,  just like people wanting to be on a transit line or have a garage upgrade today.

Edited March 12, 2022 by Chrisgb

[FlyHighCrue]

On 2/21/2022 at 11:38 AM, FordBuyer said:

 

Instead of a spin off, it could be a separate division within the company. A third division after Ford and Lincoln. Something that dealers would have buy into to participate. More than a sub brand lime Bronco. Sounds to me like Farley doesn't want to mix BEVs with ICE models. Separate sales and service centers. 

This was my exact thought when I first read the article. I have strong doubts that Ford is splitting up its company.

[jpd80]

1 hour ago, FlyHighCrue said:

This was my exact thought when I first read the article. I have strong doubts that Ford is splitting up its company.

It plays well to Wall Street without busting up the company, their analysts and investors can see break out of metrics that are important to them without disruption to Ford’s existing production processes.