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Ford Is Preparing Big Changes

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Ford Is Preparing Big Changes

Ford (F) – Get Ford Motor Company Report There should be some big announcements coming soon. The established automaker is taking important steps to solidify its roadmap.

On March 2, CEO Jim Farley announced a major restructuring that would split Ford’s auto business into two distinct divisions.

Activities related to internal combustion or gasoline vehicles, including iconic models such as the SUV Bronco Sport, F-150 and Mustang Ranger, became part of a division called Ford Blue.

The operation of battery electric vehicles, in a division called the Ford Model e, is seen as Ford’s long-term future, with more models to come with the introduction of vehicles such as the Ford Mustang Mach-E, F-150 Lighting pickup, and more .

The company has an ambitious goal of producing 2 million electric vehicles by 2026. By 2021, it has sold just 27,140 electric vehicles in the United States.

Farley said the Ford Blue will remain Dearborn’s financial engine in the medium term. He also said the company needs to cut $3 billion or more in operating costs by 2026.

Ford said the cost-cutting was not arbitrary, but strategic, with the aim of making businesses more competitive from now on.

Thousands of layoffs are underway

A source told TheStreet that this cost reduction will result in thousands of paid jobs being cut. Bloomberg News reported 8,000 layoffs, mostly at Ford Blue, but also across other salaried businesses across the company. Layoffs could begin this summer.

“We do not comment on speculation about our business,” spokesman TR Reid said in an emailed statement.

“As we’ve said many times, to transform our Ford+ and usher in an exciting and disruptive new era of electric and connected vehicles, we’re reinventing what we do and empowering all of our automotive business units and the company as a whole. modernization of the organization.

“We’ve set clear goals for our cost structure so that we’re lean and fully competitive with the best companies in the industry,” Reid added, without confirming or denying reports of imminent layoffs of thousands.

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Sources told TheStreet that cost cutting should involve the entire company. In addition to automotive operations, business support functions, finance, human resources, communications, legal and commercial will all be affected.

Farley wants the entire company to rethink what it’s doing, prioritize what’s important and find more efficient ways to do things, the sources said.

The source added that the idea that Ford Blue alone is the automaker needs to be more efficient and more cost-effective is wrong. For example, Ford believes its warranty costs are too high relative to its competitors.

Announced July 27

Ford’s future depends on the widespread adoption of electric vehicles in the coming years, with the cost of assembling these less polluting vehicles soaring due to surging raw material prices and supply chain disruptions.

Farley told Bernstein’s strategic decision-making meeting last month that electric vehicles are now much more expensive to make than those powered by gas engines.

Ford’s Mustang Mach-E electric SUV starts at about $43,895, about $25,000 more than a comparable Ford Edge gasoline SUV, the CEO said. The battery alone costs $18,000, and the charger adds another $3,000.

On top of these costs, Ford, like most companies, faces rising labor costs.

“We have too many people,” Farley said at the Wolfe Research Automotive conference in February. “This management team strongly believes in our [internal-combustion-engine and battery-electric vehicle] Portfolio returns are insufficient. “

There is a belief within Ford that the company can sit somewhere between a startup/disruptor and a traditional automaker to differentiate the company in the industry.

Ford has industrial and engineering capabilities, as well as large-scale manufacturing capabilities that some startups don’t.

The company plans to continue investing in its internal combustion engine business around its signature product. But it will do so selectively because it believes its long-term future has to do with zero-emission electric vehicles.

Ford CFOs Farley and John Lawler are likely to give more color to the layoffs during the company’s second-quarter earnings call, the sources said. Ford will report its second-quarter results on July 27.

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