Ford Motor Co. looks set to reorganize its 118-year-old Company by separating its legacy car models run on combustion engines from its new and fast-growing electric vehicle business.
The newly set up Ford Model e unit will step up the carmaker EV line-ups and develop software and related technology and services for the entire Company. Ford Blue focuses on Combustion engine vehicles, streamlining operations, and cutting costs.
What the plan is all about?
In a statement Wednesday, CEO Jim Farley said that the Company’s ambition once again becomes a great, world-changing Company.
As per Bloomberg News, the carmaker plans to invest $50 billion in its intensive EV strategy. The investment will be spread over 2022 to 2026 after it has targeted $30 billion for 2021 to 2025.
Ford’s shares rose by 7.3 % to $17.92 in New York, the biggest intraday gain two months after the Company set new targets for higher EV production and profitability.
Ford has increased its target from the earlier 200,000 vehicles’ annual production to 2 million units by 2026. It also projected adjusted earnings before interest and taxed at 10 % in 2026, up from the earlier projection of 8% for this year.
In a note to its clients, John Murphy, an analyst with BofA Securities, said that the split in the Ford manufacturing unit ensures better allocation of financial and human resources. This move also enabled Ford to attract more talent required for EV business and gain capital at a lower cost, including green bonds. Murphy has put a buy rating for Ford Stock.
Bloomberg Intelligence expects the potential separation to happen not till 2026, which makes the long-term issues exposed. However, Ford can consider various mechanisms, including raising debt at the new company as a tool to eliminate longer-term debt.
Farley has majorly focused on accelerating the transition of Ford to an EV future. He raised the bets on the carmaker EV goals after the Chief Executive Officer. Bloomberg News had earlier reported that Farley wanted to separate Ford’s combustion engine business from the EV operations and increase the expenditure towards EV.
Ford requires the approval of the Company’s founding family that controls the Company through a special category of shareholding for any significant structural change in the organization.
Farley has been working with the former head of Apple Inc., Doug Field, on reviewing the Company’s manufacturing and operational setup for ramping up its electric vehicle production. The Company has increased its Mustang Mach-E electric model and is preparing for more production capacity of its F-150 lightning pick up, which is expected to be sold this spring.
The restructured organization will have Farley as the President of Ford Model e, while Field will be the EV Chief and digital systems officer. Kumar Galhotra will be the president of Ford Blue e-business.
