By Aishwarya Nair, Abhijith Ganapavaram and Paul Lienert
March 2 (Reuters) – Ford Motor Co (F.N) on Wednesday said it will boost spending on electric vehicles to $50 billion, up from the previous $30 billion, through 2026 and run its EV unit separately from its legacy combustion engine business, in a move aimed at catching industry leader Tesla Inc (TSLA.O).
The reorganization and additional investment comes as Chief Executive Jim Farley bets aggressively on the company’s electrification strategy.
But the company doesn’t expect to make a profit on its EV business until the next-generation models begin production in 2025, according to Chief Financial Officer John Lawler.
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.
“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 more than 7% in early trading before settling at $17.47, up 4.6%, by mid-morning.
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. read more
Reuters reported on Tuesday that although Ford was planning to run the two businesses separately, it would keep them under its corporate umbrella. read more
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.
