Ford will spend up to $20bn for shift to electric cars

Chief executive Jim Farley wants to challenge Tesla's dominance in the EV market

The body and chassis of a Ford all-electric F-150 Lightning pick-up truck prototype at the Rouge Electric Vehicle Centre in Dearborn, Michigan, in September, 2021. Reuters
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Ford Motor Company is planning a major reorganisation to prepare for the electric future, using Tesla’s success as a road map and increasing electric vehicle spending by as much $20 billion.

Ford will spend an extra $10bn to $20bn over the next five to 10 years converting factories worldwide to electric-vehicle production from making petrol-powered cars.

The move is part of chief executive Jim Farley’s initiative to challenge Tesla’s dominance in EVs.

Investors have bought into Mr Farley’s vision for Ford, briefly lifting the company’s market value above $100bn in January.

Ford shares rose in afternoon trading by as much as 2.7 per cent.

The new plan also includes hiring engineers specialising in areas relatively new to the company, such as battery chemistry, AI and EV software.

The company has assessed spinning off a small part of its EV business to capture some of the immense value investors are giving electric start-ups, a source said.

The move could involve lower-volume models, allowing the company to focus its efforts on mass-market EVs.

“We are executing our Ford Plus plan to transform the company and thrive in this new era of electric and connected vehicles. We would not comment on speculation,” spokesman Mark Truby said.

Doug Field, the former head of Apple’s car project, is leading Ford’s overhaul, sources said. Mr Field was also a top executive at Tesla, where he engineered the Model 3.

The new investment would be on top of the $30bn Mr Farley has committed to EVs until 2025.

Since becoming chief executive 16 months ago, he has accelerated Ford’s EV plans, including tripling output of its electric Mustang Mach-E and doubling production of the F-150 Lightning plug-in pickup truck coming this spring.

Ford also is spending $11.4bn with South Korea’s SK Innovation to build three battery factories and an EV lorry plant in Tennessee and Kentucky.

Ford headhunted Mr Field from Apple in September to bring new focus to the 118-year-old company.

He is working closely with Mr Farley to make the legacy car maker more nimble, like Tesla, by adjusting Ford’s operational and manufacturing structure, sources said.

The restructuring is a work in progress and some elements may be changed or dropped, including the EV spinoff idea, the sources said.

The Ford family, which controls the car maker through a special class of super-voting stock, would have to be convinced a spin-off is worthwhile.

Mr Farley has expressed admiration for Tesla chief executive Elon Musk and acknowledged Ford is rethinking its mission as the company prepares to produce 600,000 EVs a year by 2024.

The company, based in Dearborn, Michigan, wants to generate as much as half of its global sales from electric vehicles by the end of the decade.

“I really admire, frankly, the difficulties they [Tesla] had and the way they managed those difficulties into the success they had,” Mr Farley last week told Bloomberg TV.

“They are now making more than $10,000 a vehicle, because of their scale. I like that kind of business.”

Unlike Tesla, Ford also must manage the slow decline of vehicles powered by internal combustion engines, which now generate all of the profit necessary to fund the company’s EV aspirations.

That is an area Ford also is intensely focused on as it reinvents itself.

Mr Farley regards petrol-fuelled vehicles as a core part of the company for many years to come, and still intends to invest enough to keep it competitive with rivals, he said last week.

One way is to boost the services Ford sells to car owners, a business that could generate $20bn a year in revenue.

That could include selling drivers software to upgrade their car’s performance or enhance dashboard touchscreens.

Or it may involve getting more business in the service bays at Ford’s dealers, which see 90 per cent of owners go elsewhere for maintenance after their warranties expire, Mr Farley said.

Ultimately, Mr Farley wants even more of Ford’s customers driving EVs

Ford hopes to eventually overtake Tesla, but for now is trying to solidify its standing as America’s No 2 seller of EVs.

“What it takes to succeed in this digital, connected, electric product are talents and know-how and a way of managing the business that’s different than what we’ve done in 118 years,” Mr Farley said last week.

“It’s kind of like snowboarding and skiing. We both share the lift, but as soon as you get off the lift the intuitions are wrong between both businesses. You have to really relearn to how to get down the slope.”

Updated: February 02, 2022, 2:34 AM