Written by | Zhao Zhefeng
Edit | Yang Bocheng
After the Spring Festival, DoNews found that the most prominent shop in front of the mall changed from Tesla to Ford, and there were two new Music Mach-Es in the store. Combined with the recent restructuring of Ford's organizational structure, it is reminiscent of an interesting incident between the two car companies before.
Previously, Musk originally wanted to register the Model E trademark and eventually let Tesla form a "SEXY" product sequence. However, when it was registered, it found that the trademark had been preemptively registered by Ford. In desperation, Musk had to change the Model E to Model 3.
"Eventually, Ford killed SEXY." Musk later said.
Now, the Model e has become the name of Ford's new electric vehicle division. Obviously, Ford's ambition is not to compete with Tesla for a trademark, but to replace the latter and continue to dominate the world in the era of electrification.
As the inventor of the great automobile assembly line production model, Centennial Ford is running towards the electrification process.
At present, the world's major car companies have announced their electrification strategies, including a specific timetable for the suspension of fuel vehicles, and even Toyota, which has always been known as the "old stubborn fuel vehicle", suddenly announced an investment of 4 trillion yen last year to support its "3.5 million EV sales in 2030" plan, and released 15 electric vehicles in one go.
But in the final analysis, among the car companies that can be called global giants, only Ford has really taken the step of splitting the electric vehicle business, and has caused a lot of shock in the entire automotive industry.
So what are the prospects for Ford's split this time? What challenges will you face? What impact will it have on the automotive industry?
Reduced to a "hematopoietic tool" in the fuel vehicle sector
The incident occurred on March 2, and has been reported by the media many times before, and some basic information points will not be repeated here.
In short, after the restructuring of Ford's business, it will be divided into three major business segments, which are responsible for fuel vehicles, electric vehicles and commercial vehicles.
Among them, the fuel vehicle division Ford Blue will no longer develop new models, but will be responsible for the group's profitability, hardware engineering and manufacturing.
Ford Model e, the electric vehicle division, will create new models and will be responsible for the development of the Group's software and intelligent networking technology.
The two parties will achieve independent operation and self-financing in 2023.
Jim Farley, President and CEO of Ford, said, "This is the biggest development opportunity that the company has faced since Henry Ford launched the Model T assembly line. ”
In terms of personnel appointments, Ford President and CEO Jim Farley will also serve as President of the Electrification Division, while Kumar Galhotra, President of Ford's Americas and International Markets Group, will take charge of the Fuel Vehicle Division.
It can also be seen from the ranks of the leaders of the two departments that the electrification department will become the absolute focus of Ford's future.
At the press conference, Jim Farley repeatedly mentioned that the fuel vehicle division should strengthen the iconic product series that consumers love, rather than pushing new ones.
This sentence is very clear, which means that Ford will no longer invest too many resources in the fuel vehicle department, and its main task is to maximize profitability and "blood transfusion" for the electric vehicle division.
In the future, Ford's fuel vehicle division will become a financially driven segment. The electric vehicle division will become a technology-driven segment and gradually lead Ford's transformation into a technology company.
What are the benefits of splitting?
We analyze operational efficiency, product development, talent introduction, marketing and valuation perspectives.
First, operational efficiency:
"Business spin-offs are still relatively rare in the automotive industry, and most car companies have some teams in-house that are juggling both oil and trams," Farley said in an interview.
"We're not going to run to the fuel vehicle employees and say, let's negotiate a deal for lithium raw materials." Similarly, we will not ask designers to design electric vehicles and fuel vehicles at the same time."
It is conceivable that Many new teams will emerge in Ford's new electric vehicle division, which will emulate the flat management model of technology companies and Internet companies, thereby greatly improving operational efficiency and making rapid market decisions.
Second, product research and development:
Up to now, Ford has released 3 pure electric vehicles in the US market. They are the Mustang Mach-E, F-150 Electric Edition and E-Transit. These cars are largely based on fuel vehicles, not pure electric vehicles.
After achieving greater operational efficiency, what exactly will the new team do to improve the competitiveness of its electrified models?
We can find the answer in the pictures officially released by Ford, which seem to have little attention paid attention to, but there is a lot of key information here that explains the specific practices of its electrification division.
For example, in the second plan in the figure above, keywords such as "electrification platform", "battery", "motor", "charging and recycling system" appear.
It can be seen that Ford's electrification department will develop a new special platform for electric vehicles, rather than taking the "oil to electricity" route like existing models. Even in key components such as motors, batteries, and charging facilities, it is possible to conduct self-research.
In another image, Ford also said the electrification division's mission is to "build truly incredible smart electric vehicles." And all this is impossible to rely on the existing fuel vehicle platform to do. Ford knows that only then will it be able to compete with Tesla.
III. Talents:
After the business is split, the eviction division can act like a start-up, unconstrained by Ford's centuries-old heritage, attracting engineers and designers from companies like Tesla, Rivian and Lucid.
Doug Field, chief product officer in the electric vehicle division, said, "We want the best talent, and I don't care if they come to work in baby bunny slippers." ”
Doug is the soul of the R&D team in the electrification department, and the Chinese people may not know much about it. But in fact, Doug is a figure across the automotive circle and the technology circle, who has served as an executive at Apple and Tesla, and led the research and development of apple Mac and Tesla Model 3, which can be described as "soft and hard". Musk once gave Doug the highest rating: "I think Doug is one of the most talented engineers in the world." ”
For Ford, to achieve the goal of "building a truly incredible electric car", it will take a completely different approach to the traditional product manager to lead the new team, starting with design and specific functional scenarios, rather than the traditional technology-oriented, which is exactly what Apple and Tesla have been doing.
Based on the above considerations, Doug is an excellent candidate to lead Ford's electrification department, and its appeal will also help Ford recruit more talents.
IV. Marketing:
Centennial Ford is facing a situation where there is no new story to tell, but after the business is split, the situation will change substantially.
In the past, the Ford brand conveyed a "tough" spirit, which was vividly reflected in classic fuel models such as the Mustang, F-150, and Explorer, but such a brand positioning was obviously not suitable for smart electric vehicles.
Therefore, the new electrification department will adopt a completely different brand positioning to reflect its sense of innovation and technology.
How to tell this story is not easy to judge at present. It may be possible to establish a new electric vehicle brand, or it may follow the Ford brand but open up new car series (such as BYD's Dynasty series and Ocean series).
V. Valuation:
Finally, and most importantly, Ford will gain a higher valuation in the capital markets through a business split, which is its ultimate goal.
After the rise of new power brands such as Tesla, investors and traditional car companies have seen the attractiveness of smart electric vehicles to capital. Tesla's annual sales have not yet exceeded one million vehicles, but the market value is already more than ten times that of Ford. Not only Ford, but all traditional car companies are red-eyed.
Therefore, in recent years, traditional giants such as Volkswagen, General Motors, and Ford have been frequently pressured by investors and financial institutions to divest the electric vehicle business and maximize value.
Deutsche Bank analyst Emmanuel Rosner predicts that once GM spins off the electric vehicle business, the market value of the split company can reach as high as $100 billion.
Just after Ford officially announced the new organizational structure, its stock price rose by more than 7% in less than 2 hours, and this is just the beginning.
Moreover, Ford is not yet the most radical strategy.
If you want to maximize the valuation, the best way is to let its electrification section be completely spun off from the parent company, completely separated from the fuel vehicle business and listed separately. This will lead to greater imagination, but it will also mean greater risk. Because this will lead to the parent company completely losing the favor of the capital market, if the development of the electric vehicle business is not smooth, it may "lose the wife and fold the soldiers".
Choosing to split the business and retain a certain correlation is a relatively safe approach, which can get more time for "obscene development", even if the electric vehicle business fails at that time, it will not collapse in the stock price, and there will be more capital if you want to make a comeback.
Just by doing so, It will be difficult for Ford to catch up with Tesla in the short term. If the electric vehicle business develops smoothly in a few years, it will be possible to make the next move.
Does it trigger the herd effect?
Usually, when the "first crab eater" in the industry emerges and succeeds, others will follow suit. After Ford makes this move, will other car giants follow suit?
In fact, for Ford, the domestic media generally has a misunderstanding, that is, it is in a hurry to dismantle the electrification department because its previous electrification transformation failed.
However, on the contrary, Ford electric vehicles do not sell well in China, which does not mean that they cannot be sold globally.
According to Ford's latest financial report, its three electric vehicles, Mustang Mach-E, F-150 Lightning, and E-Transit have reached 275,000 cumulative orders. Among them, the Mustang Mach-E also recently became the second-selling pure electric SUV in the United States, after the Tesla Model Y.
Image source: Snowball Net
At the same time, thanks to the successful electrification transformation, Ford's stock price has seen a significant recovery trend in 2021, pulling it out of the water in one fell swoop.
Therefore, Ford made this move based on active behavior with optimistic expectations about the future, rather than passive behavior in desperation.
In this regard, there is a case at home and abroad that can be referred to.
Foreign countries, not long ago also announced the split of the electric vehicle business Renault, its global electric vehicle sales in 2021 reached 137,000 units, in the traditional car companies has been a good result, which is its courage to separate the electric vehicle business out of the confidence.
In China, GAC Aeon, which is now selling hotly, was initially only a model under GAC New Energy (AION S), and later with the hot sales of this model, it gradually developed into a new brand and became independent from the system of GAC New Energy.
Then for other car companies, whether to split the business, in addition to waiting to see the progress of Ford's split, but also combined with their own situation.
If its own electrification business does not progress smoothly, it will be forced to split without core technology and explosive models, I am afraid that it will be more sinister than ji.
Here we analyze two situations.
The first is that, like Ford, only the business is reorganized, not listed separately.
As mentioned earlier, Ford's scheme, although the imagination space is small, is relatively safe. However, even with a less risky approach, it is still difficult to move forward.
For these car giants, which have existed for decades or even hundreds of years, they have an entangled network of interests within them, and any big move similar to business splitting is a tug-of-war for them.
For example, Ford, as a family-owned enterprise, the family members led by executive chairman Bill Ford are certainly more conservative in their approach, while non-family members are more inclined to aggressive strategies, which will cause a long-term game between the two sides.
In addition, it is said that the Ford family only has 3 seats on the board, so splitting the business means that its voice may be further diluted.
Therefore, Ford may have long planned to build a new electric vehicle company and go public independently, so that it will have an order of magnitude valuation with Tesla in the future. At the same time, Wall Street, which shouts the slogan of "maximizing value" all day long, must also hope that Ford can act quickly and continue to pressure it. But in the process, it will certainly encounter all kinds of obstacles from the Ford family.
Now, each side is taking a step back. Instead of forming a new company, the existing business is split. While reducing risks, we will increase the upper limit of the company's development and promote the transformation process.
And why the Ford family will agree, most likely because Ford's current electric vehicle business is still developing well. In addition, Doug's addition may also increase the confidence of the Ford family.
Farley also said that Ford's "separation of oil and electricity" was inspired by successful cases in some projects. For example, the company's Edison team carefully built the Mustang Mach-E.
Although this is only a "scene" in front of the media, the successful experience of the past has indeed added a strong chip to its negotiations with the Ford family.
Similarly, large multinational car companies such as Volkswagen, GM, and Ford have a lot of say in the trade union, for example, in Volkswagen's previous reform process, Diess spent a lot of time negotiating with the union and even playing games. For a company with hundreds of thousands of employees, any reform is bound to be difficult, and how to weigh the interests of all parties is the most difficult problem to solve.
The other is to go public alone. Needless to say, even if the interest struggle within the group is not considered, for the sake of the development of the enterprise itself, the leaders will not rush to act.
Therefore, for traditional car companies that have always been conservative in their playing style, they will most likely wait until the time is ripe and weigh the interests of all parties before making big moves such as business splitting or even independent listing.
Moreover, if Ford's business split does not achieve good results, other car companies will be more cautious about such operations.
There is a risk of "double imbalance" in the sales structure and within the company
What challenges will for Ford face in the future?
The first is whether its strategy of "fuel vehicle business transfusion for electric vehicle business" can be implemented forever?
From Ford's 2021 financial report, its EBIT was $10 billion, although it doubled year-on-year, but more than 70% of it was contributed by the North American market, and other major regions were "dragging their feet".
In Europe, Ford sold 890,000 units in 2021, down 12.6 percent year-over-year and with an EBIT loss of $154 million.
In the Chinese market, Ford sold 650,000 vehicles in 2021, an increase of 5.1% year-on-year, and lost $327 million before interest and tax.
Looking at the composition of Ford's sales in North America, more than 40% is contributed by pickup truck models, but such models are unlikely to have too high sales in other regions, and Ford does not have a good response to the decline in the European and Chinese markets. Considering that the development of electric vehicles requires huge funds, if you only rely on the North American market for blood transfusion, I am afraid it is not a long-term solution.
In addition to the dilemmas in Europe and China, another challenge for Ford is that the split could throw ford an internal imbalance, especially when it comes to talent introduction.
Jessica Caldwell, executive director of insights at Edmunds, said, "This may make the fuel vehicle division less attractive to talent." Some might argue that the fuel vehicle business is no longer alive compared to the more futuristic electric vehicle division. ”
The above concerns are not unreasonable, if we refine the classification of positions within the car company, we will find the seriousness of the problem.
For management, design, marketing, sales, public relations, and other positions that can quickly switch between fuel vehicles and electric vehicles, business splitting will not affect the long-term planning of job seekers to a large extent.
But for engineers, it's a different story.
There are many automotive practitioners working for OEMs or suppliers around me, and in the past two years, it is obvious that with the arrival of the wave of electrification, everyone has begun to transform their business. For example, "from internal combustion engine engineer to three-electric system engineer", "from chassis engineer to software developer", etc., such phenomena have become common in the automotive industry.
For young technicians with long-term career plans, it is certain that the sooner they transition, the better. Therefore, after Ford's business is split, the attractiveness of its fuel vehicle division for engineering and technical personnel will be greatly reduced.
epilogue
In general, after Ford's business split, there is still a disconnected relationship between fuel vehicles and electric vehicles, interdependent but also containing each other.
On the bright side, the company will receive a higher valuation and be closer to a "new power" car company in the overall way of operation, and the addition of talented engineer Doug has also added a guarantee; the challenge is how to reverse the decline of the European and Chinese markets, and solve the problem of talent introduction in the fuel vehicle sector.
Only when the electrification business is going well will It be possible for Ford to completely separate the electric vehicle division, and then its valuation will be really on par with Tesla.
For other car giants, the biggest significance of Ford's move is to have an object that can provide reference for their subsequent decisions.