Ford splits into electric and gas divisions to speed transition
Ford Motor has decided that the best way to transition to electric vehicles is to change yourself first.
On Wednesday, the automaker said it has reorganized its auto operations into two separate businesses — one that makes its gasoline-powered vehicles and focuses on maximizing profits and another that expands production of electric models. Develops and ramps up and aims at rapid growth.
Ford’s chief executive officer, Jim Farley, said in an interview that the two businesses require different skills and mindsets that will conflict and hinder each area if they remain part of an organization. “You can’t succeed and beat Tesla like that,” he said.
Sales of battery-powered cars are growing rapidly, a trend that Mr. Farley and other auto executives see as the industry’s biggest disruption since Henry Ford mass-produced and introduced the Model T in 1908. Ford, General Motors, Toyota, Volkswagen and other traditional manufacturers are spending billions of dollars to design new models, build battery plants, and develop new technologies pioneered by Tesla, such as advanced driver-assistance systems and over-the-counter systems. Air Software Update.
Mr Farley said Ford will spend $50 billion on electric vehicles between 2022 and 2026. It previously planned to spend $30 billion over five years ending in 2025. The plan is to spend $5 billion on EVs this year, more than double the total by 2021.
An important year for electric vehicles
The popularity of battery-powered cars continues to grow around the world, even as the overall auto market has stagnated.
The company’s move was welcomed by Wall Street investors, who have put a hefty premium on shares of Tesla and other electric carmakers over the past two years. Ford’s stock price closed with a gain of nearly 8 percent on Wednesday.
This spring, Ford is about to begin full production of an electric version of its F-150 pickup truck and has taken reservations for more than 150,000 of them. It is also building two battery plants in Kentucky and a third battery plant and an electric truck factory in Tennessee.
Separately on Wednesday, Stelantis outlined a long-term strategic plan that called for the rapid introduction of new electric vehicles. The company, formed a year before the merger of Fiat Chrysler and French automaker Peugeot, said it would introduce 25 EVs in the United States by 2030, and by that time all new models in Europe would be electric. It plans to build two battery plants in the United States.
GM has a similar plan. It is building two battery plants, and aims to phase out the internal-combustion model by 2035.
Ford’s restructuring is one of the most comprehensive actions a traditional automaker has undertaken in preparation for the transition to electric vehicles. Mr Farley said the plan came together when he and other top Ford executives saw huge differences in the two business areas.
In building gas-powered vehicles, Ford must focus on reducing costs and generating profits to fund its EV plans. Mr Farley said that over the next four years, Ford aims to cut the cost of its internal-combustion models by $3 billion, with some of that reduction coming through job cuts.
In contrast, the electric business would have to spend heavily to develop software and technologies and accelerate production to achieve economies of scale. Ford aims to produce two million electric vehicles annually by 2026.
“For Ford to win against new players and other manufacturers, we have to be more focused than we are today,” Mr Farley said. “You can’t have people working on both at the same time.”
The EV group will be known as the Ford Model E. Mr. Farley will serve as its chairman. Former Apple and Tesla executive Doug Field, appointed by Ford in September, will lead its vehicle, software and digital systems development.
The internal-combustion business, known as Ford Blue, will be led by Kumar Galhotra, who was Ford’s president of North American operations.
Ford plans to begin breaking up the profit and loss group into two in 2023, and expects the electric business to become profitable within four years. Mr Farley said the group is likely to have between 2,000 and 5,000 employees. In addition to developing electric models, it will engineer new types of assembly lines to build them and manage the sourcing of key components for Ford such as motors and inverters and raw materials such as lithium and rare earth metals.
Mr Farley said he envisioned the two groups working closely together. The Ford Model E body engineering, stamping and components such as the seats and steering system developed the internal-combustion group. The EV unit will produce software and digital components that will be incorporated into conventional gasoline vehicles made by Ford Blue.
Mr Farley said Ford had decided to wind down the EV business because it would hinder the two groups’ ability to collaborate. “They will come to see each other as competitors, and cooperation will stop,” he said.
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