Compilation / Zhang Gull
Edit/Windsor
Design / Zhao Haoran
Source/ Bloomberg, by Keith Naughton, Edward Ludlow, David Welch
As the strongest player in the field of electric vehicles, Tesla has been one of the focus topics inside and outside the industry by doubling the market value of many established car companies. As the electrification transition becomes imperative, automakers and suppliers are also rethinking their fuel vehicle businesses.
It is reported that Ford Motor is studying the feasibility of "going light" - to divest its electric vehicle business from the century-old traditional fuel vehicle business, trying to win more attention and attention from investors like Tesla and other pure electric brands.
In February 2021, Ford announced that it would abandon gasoline and diesel-engined cars and SUVs in its European product line by 2030; in May last year, Ford again said it would accelerate this pace.
Sources who are more familiar with the spin-off discussion said Ford CEO Jim Farley wants to split Ford's electric vehicle business from the fuel vehicle business, or even split one of them directly. If all-electric car companies are eventually able to operate independently, they could generate huge gains — Tesla's market value is currently close to $1 trillion.
After The Pengbo News Agency reported on the plan, Ford's stock jumped. As the broader market slid, gains narrowed, closing at $18.04 on the New York Stock Exchange on February 18, up 2.62 percent.
Control of the Ford family
However, everything seems to be in the initial stages of conception, and only the ideal is full. Ford said it did not intend to break up the company, and the most Farley could do was probably spin off the electric vehicle business internally as part of a broad restructuring that would give Ford the greatest advantage in the current electrification.
Right now, the company is under pressure from Wall Street to spin off its nascent electric vehicle business, increase value by moving away from legacy costs, and gain greater access to capital markets. Investors have paid huge attention to all-electric car makers, and in addition to Tesla, Rivian is also one of the most convincing examples, although it currently produces relatively few cars, but its market value briefly surpassed Ford at the end of last year.
Asked about the potential spin-off possibilities, Ford replied via email: "We are focused on our Ford+ plan, transforming the company, and thriving in this new era of electric and connected cars." We have no plans to spin off the electric vehicle business or the traditional fuel vehicle business. ”
Current market capitalization of major car companies (Source: Bloomberg)
Split feasibility
Earlier this month, however, Farley did not deny the possibility of spinning off the two businesses on the company's earnings call.
"Running a successful fuel vehicle business is not the same as a successful pure electric vehicle business." Farley said, "I'm excited that the company is committed to the operational development of these businesses because it's the right direction. The customer base that the electric vehicle business can attract, the way the product is manufactured, and the engineering and design talent that must be hired are fundamentally different from the fuel vehicle business. ”
Farley said by phone: "We are not seeking compromises. We have made enough gradual changes and now have a clear plan, a directivity to action, and a mentality at whatever cost. ”
Late last year, Ford held talks with financial advisers to explore further possibilities for the electric vehicle business, including a potential restructuring and convening private fundraising for it, according to sources. Farley wants to maximize the value of Ford's electric vehicle business, and his thinking is constantly changing, from initially considering small spin-offs, to fully splitting, and now to internally splitting.
However, even internal splitting can be complicated. At a car company, where some engineers and factories create and manufacture both types of cars at the same time, separating engineering and operations is not an easy task. Even if everyone favors a true spin-off, managing this complexity will be a onerous task for the future.
Ford has pledged $30 billion in its electric vehicle strategy by 2025 and could spend another $10 billion to $20 billion by the end of the century to retrofit factories to make plug-in models.
Farley has tripled production of the electric Mustang Mach-E and doubled the production of the F-150 Lightning Plug-in pickup that will be available this spring. The company plans to produce 600,000 electric vehicles a year over two years and aims to achieve half of total sales of battery-powered vehicles by 2030.
In the current structure, Ford cannot obtain the financing that Tesla and other pure electric vehicle companies can obtain, because banks and investors prefer pure electric brands. A purely pure electric vehicle business could help Ford raise capital and accelerate listings, giving investors the opportunity to value their EV segment.
Senior Technical Supervisor Doug Field▼
The sources also mentioned that Farley was working closely with Doug Field, Ford's senior technical director hired in September. Field, who previously served as apple's auto project leader and also served as Tesla's chief engineer, will take up senior positions in the new entity.
If Farley and Field choose to split out completely, their jobs will become difficult. In addition to winning the support of the founders' families, car dealers and the Federation of Auto Workers must be reassured that their close cooperation will not be affected.
Analysts say Ford needs to move away from its traditional business model to achieve profit margins that rival Tesla's. Farley estimates that Tesla's profit margins can be as high as $10,000 per vehicle. To offset the high cost of electric vehicles, automakers need a more straightforward sales model, like Tesla and Rivian, bypassing dealers and their revenue share. At the same time, labor costs need to be reduced.
Morgan Stanley analyst Adam Jonas said in a note to investors in November: "Ford has made tremendous progress in electric vehicles. Established automakers face serious challenges from electric vehicles, and in our view, 'unconventional' actions will be needed to address them. ”
Ford already produces the Mustang Mach-E in Mexico, where wage costs are significantly lower than in the United States. It also opened its first new assembly plant in half a century in Tennessee to produce electric F-Series trucks. And the new plant can't currently guarantee that workers from the Auto Workers' Union will be hired, which means wage costs could be lower.
What Farley and Field are thinking about is actually a precedent in the industry. In 2017, automotive supplier Delphi Technologies Plc spun off its fuel vehicle powertrain business and renamed the remaining company Aptiv, which focuses on electronics and software for electric and autonomous vehicles. After the split, Aptiv began trading at a larger price-to-earnings ratio.
Although as an established car company with a strong brand reputation, Ford has the capital, time and experience to open up more room for improvement, in the position of CEO, Farley seems to be more inclined to make a final decision and accelerate the transformation.
In his view, "this is Ford's cultural change, an important step in the 'variation'.""