According to people familiar with the matter, Ford CEO Jim Farley is considering splitting the electric vehicle business and the internal combustion engine business, and even considering divesting one of the businesses. However, considering the difficulty of splitting the entire company, people familiar with the matter said that Ford may only split the electric vehicle business as a division, promoting Ford to win in the wave of electrification transformation, and the new division after the split is also expected to be listed independently.
For the Ford family, however, a spin-off can be an extremely difficult affair. People familiar with the matter said they controlled the automaker through a special category of stock and were wary of losing influence on the 118-year-old company. It is understood that the founding family, led by executive chairman Bill Ford, has three seats on the board.
The pressure from the new forces is increasing
The company is under pressure from Wall Street to divest its fledgling electric vehicle business, boost value by cutting legacy costs, and gain more access to capital markets. Investors have given very high valuations to new forces, namely pure electric vehicle manufacturers, such as Rivian Automotive (RIVN. US), although the company produces relatively few cars, its market capitalization briefly surpassed Ford's at the end of last year.
Asked about possible spin-off plans, the company said via email: "We are focused on our 'Ford +' program to transform the company and thrive in a new era of electric and connected cars." We have no plans to divest the battery electric vehicle business or the traditional internal combustion engine business. ”
In the Ford Plus program, Ford has committed to investing about $30 billion in its electric vehicle strategy by 2025 and another $10 billion to $20 billion by 2030 to convert factories into plug-in models. The company plans to produce about 600,000 electric vehicles a year over the next two years, and by 2030, half of its sales will come from battery-powered cars.
Farley said the company has tripled production of the electric Mustang Mach-E and doubled the production of its F-150 Lightning plug-in pickup, which will be available this spring.
The road to separation is probably very difficult
Earlier this month, however, Farley was asked about the subject on a corporate earnings call and did not deny the possibility of splitting the two businesses.
Farley emphasizes: "Running a successful ICE business is not the same as a successful BEV business. I'm really happy that the company is committed to running the business the way it should be," "However, the EV business is 'fundamentally different' in terms of the customers it attracts, the way its products are manufactured, and the engineering and design talent it has to hire." ”
Farley also said on the phone call: "We are not looking for compromise," Farley said on the call. "We've done incremental change, and we have a clear plan and a mindset of whatever it takes."
For the company level and the CEO's completely different attitude to the spin-off, some analysts speculate that there may be huge differences between Ford executives, the board of directors and the Ford family on the matter of the spin-off, and there is no consensus internally.
Late last year, Ford held talks with financial advisers to explore some options for electric vehicle operations, including a possible restructuring and raising private capital for it, according to two people familiar with the matter.
In addition to winning the support of the founding family, auto dealers and the Confederation of Auto Workers (UAW) must be confident that they will not lag behind other electric vehicle producers.
Ford has built the Mustang Mach-E production site in Mexico, where wages are a fraction of what is in the United States. The automaker is also building its first brand-new assembly plant in Tennessee, usa, in half a century to produce electric F-Series trucks, and the Federation of Auto Workers (UAW) says it can't guarantee it will represent those workers in the future.
Analysts say Ford needs to move away from its traditional business model to achieve "Tesla-style" profit margins. Analysts generally agree that to offset the rising cost of electric vehicles, automakers need a direct sales model, such as tesla and Rivian's model, which bypasses dealers and avoids revenue cuts. In addition, automakers need to reduce labor costs.
Morgan Stanley analyst Adam Jonas said in a note to investors: "Ford has made great progress in the field of electric vehicles. Established automakers face serious challenges posed by electric vehicles, which, in our view, will require 'unconventional' action to address. ”
There is indeed precedent for what Farley is considering. In 2017, automotive supplier Delphi Technologies spun off its internal combustion engine powertrain business and renamed the remaining company Aptiv (APTV. US), the company focuses on electronics and software for electric and autonomous vehicles, and has gained the favor of investors, and after the spin-off, it has performed well in the secondary market.
It is a must, but also a helpless
As an "all-round" automaker, Ford has more influence, and the various forces such as management and family are intertwined, and it will be more difficult to split. Some analysts believe that Ford's CEO will eventually hope that the split company will be doubly favored by investors like Tesla and other pure electric car manufacturers.
Ford has built its strength and decades of experience in working with General Motors (GM. Traditional competitors such as the US) are temporarily in the lead in the competition, but it will take time to catch up with electric car leaders such as Tesla.
Seeing the rise of new forces such as Tesla, Ford's management is well aware that if no changes are made, with the rapid development of new technologies such as AI driving technology, the Internet of Vehicles and application software, the future will be even more difficult to rival these new forces.
As Morgan Stanley analysts said earlier, 'non-traditional' actions are needed to address these challenges, but before that, how to balance the company's major forces and reach consensus on the basis of maximizing the interests of all parties is the first problem that Ford management needs to solve.