Ford adjusts strategy as EV losses mount

Ford Motor Co. is refocusing its electric vehicle strategy and abandoning near-term profit expectations as losses from its Model e business unit pile up.

The automaker this week said it expects to lose $5 billion to $5.5 billion on EVs this year — up to 15 percent more than in 2023 — and no longer thinks it can reach a goal of 8 percent margins on EVs by 2026, a target it reaffirmed as recently as the middle of last year. CEO Jim Farley said Ford may delay some upcoming EVs and is assessing whether to get more batteries from outside sources after working to vertically integrate production in recent years.

In addition to a next-generation electric F-Series pickup and a three-row utility vehicle, the company is developing smaller, more affordable EVs on a new, flexible platform, Farley said. The effort is being led by former Tesla engineer Alan Clarke in California.

“All of our EV teams are ruthlessly focused on cost and efficiency in our EV products, because the ultimate competition is going to be the affordable Tesla and the Chinese OEMs,” Farley said.

The pivot comes as EV growth slows, prompting Ford to postpone $12 billion in spending and cut production of once-promising models such as the F-150 Lightning. While the company plans to continue boosting EV volume and still contends the technology represents the future, Farley said Ford is learning the demand curve differs from gasoline-powered vehicles.

Two years ago, coming out of the pandemic, he said, the company didn’t have enough manufacturing capacity and raced to build more products. After production constraints eased and early adopters bought their vehicles, remaining customers haven’t been as willing to pay such high prices.

“This is a huge moment for us,” Farley said. “What we’ve seen, because we offer everything, is that pricing quickly converged to hybrids, after any benefit from subsidies. …We’re betting that choice and flexible manufacturing is going to get us successfully through this transition.”


Farley said this week that Ford expects hybrid sales to grow 40 percent this year, after rising 25 percent in 2023. It’s cutting the hybrid variant of its Explorer and Lincoln Aviator crossovers but anticipates more volume from the Maverick and F-150.

COO Kumar Galhotra said the F-150 could become the nation’s top-selling hybrid.

Executives said Ford is in good shape despite the longer-than-expected transition to EVs because of the strength of its combustion business. That division, Ford Blue, earned $7.5 billion in 2023.

Earnings for the Ford Pro commercial unit more than doubled to $7 billion as its profit margin rose to 12.4 percent. CFO John Lawler said that business has “exceptional upside we’re only beginning to realize.”

Farley said Ford Pro brought in roughly 500,000 paid software subscriptions last year, up 46 percent. He said software and services would account for 20 percent of Ford Pro’s earnings in two years.

“Ford Pro is really a magical breakthrough for our customers, our company and, I believe, the industry,” Farley said.

In 2024, Ford expects adjusted earnings before interest and taxes of $7 billion to $7.5 billion for Ford Blue and $8 billion to $9 billion for Ford Pro.


Lawler said Ford is benefiting from selling EVs, even though they are not yet profitable. The company is learning a lot about early adopters’ buying habits, he said, and each F-150 Lightning essentially offsets 12 combustion vehicles when calculating compliance with emissions standards.

“Please make sure you’re seeing the big picture as you look at Ford and compare us to others,” Lawler said on a call with media. “I very much like where we’re at, where we’re going and how we’ll lead and win.”

Ford said it expects total EBIT of $10 billion to $12 billion this year and adjusted free cash flow of $6 billion to $7 billion.

The company expects lower pricing and higher labor costs this year from its recent UAW contract, but executives said a $2 billion cost-cutting effort will help offset those headwinds to achieve its earnings target.

For example, Galhotra said an engineering team developed a new aerodynamic design that saved $10 million on one vehicle line, and the company is removing a little-used parallel park feature to save another $10 million.

“These are the kinds of very robust ideas we have in the hopper,” Galhotra said, “along with less inflationary claims, along with a stable supply chain, that’s going to help us close that gap.”


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