By Aishwarya Nair and Abhijith Ganapavaram
(Reuters) -Ford Motor Co on Wednesday outlined plans to run its electric vehicle (EV) unit separately from its legacy combustion engine business, in a move aimed at supercharging the new unit as the automaker plays catch-up with industry leader Tesla Inc.
The reorganization comes as Chief Executive Jim Farley bets aggressively on the company‘s electrification strategy, which helped Ford shares outperform those of rivals General Motors and Tesla in 2021.
Although the EV business, named Ford Model e, will be separated from the company’s internal-combustion engine (ICE) unit, Ford Blue, the two divisions will share technology and “best practices,” the automaker said.
The two businesses, along with commercial-vehicle unit Ford Pro, will report separate financial results by 2023, it added.
“We view the news positively as it has strong industrial logic, and it will enable investors to separately value the money-losing EV business,” Wells Fargo analyst Colin Langan said in a note.
Shares of Ford, which is targeting an annual production of over 2 million EVs by 2026, jumped 6.2% in early trading.
Farley will serve as president of the EV unit, in addition to his role as president and chief executive of Ford. Doug Field will lead Ford Model e’s product development as chief EV and digital systems officer, and Lisa Drake will head EV industrialization for the unit.
Farley’s move stops short of addressing calls from some investors who have pushed Ford and GM to spin off their EV operations as a way to better tap into the full value of those businesses.
Industry analysts, however, said that with Wednesday’s announcement, Ford would be setting the table for a possible spinoff of its EV unit down the road.
Ford said it hoped to cut structural costs of up to $3 billion in its ICE business, but did not say if that effort would involve reducing head count. He also said the EV unit will need to spend “billions” to secure critical raw materials for batteries as EV volume ramps up.
Farley said, “We need the ICE business to generate cash and the EV business to focus on innovation.”
He had previously said that his management team believed the automaker’s EV and ICE businesses are underperforming on an earnings basis.
Reuters reported on Tuesday that although Ford was planning to run the two businesses separately, it would keep them under its corporate umbrella.
Ford said it expects to spend $5 billion on EVs this year, a two-fold rise over 2021. It is also targeting an adjusted earnings before interest and taxes (EBIT) margin of 10% by 2026 versus 8% it hopes to achieve this year.
The company, which is planning to invest more than $30 billion in EVs by 2030, said it expects the business to represent half of its global production by 2030.
(Reporting by Aishwarya Nair and Abhijith Ganapavaram in Bengaluru and Paul Lienert and Ben Klayman in Detroit; Editing by Anil D’Silva and Mark Porter)
