Ford splits gas-powered and electric vehicle businesses but doesn’t spin them off

By Peter Valdes-Dapena, CNN Business

Ford is creating two new business units, one for electric vehicles and software and another for its traditional internal combustion vehicles. These companies will report their financial results separately from the rest of Ford but they will not be spun off as entirely separate companies.

This new corporate structure will allow investors to more clearly see the value of the two types of business, Ford chief executive Jim Farley said, but it will not enable investors to buy stock in just the EV business. Farley said he had considered a full spin-off of the electric vehicle business, but it was simply too difficult to entirely carve it out as distinct from the rest of Ford’s operations. Also, he said, there was no need to sell stock in a new company.

“We have enough capital,” he said. “We can fund this ourselves.”

Farley, himself, will lead Ford Model e, the division focused on electric vehicles, technology, and software. Kumar Galhotra, president of Ford’s international business unit, will lead Ford Blue, the internal combustion business.

Model E is a play on Ford’s famous Model T, the car that popularized automobiles in America in the early 20th century. Tesla had once wanted to use the Model E name for its own more affordable electric car — the company’s model names would have spelled out S-E-X-Y, had it been successful — but Ford presented a legal challenge, thanks to the long-running production of Ford’s E-series van. Tesla ultimately named its vehicle the Model 3, instead.

Ford hopes to create two distinct business cultures within Blue and Model e. Part of the reason for doing this, Farley said, was in hopes that software and electric vehicle experts could be attracted to the more entrepreneurial mindset of the separate Model e division. Startups have succeeded in electric vehicles, Ford executives said, by attracting people who might never have seen themselves in the auto industry.

“We want the best people,” said Doug Field, who has been named Chief EV and Digital Systems officer at Model e. “I don’t care if they come to work in bunny slippers, but we’ve got to have to have the best people.”

Ford expects half of its sales to be electric vehicles by 2030.

The two divisions will feed into one another. Model e, for instance, will develop software systems that could also be used in Ford’s gas-powered vehicles. Meanwhile, Ford Blue will negotiate with parts suppliers to purchase items that might also used in electric vehicles, like suspension or interior trim pieces. Ford Blue will also work to improve the quality of Ford’s “legacy” products, Farley said, and to reduce costs. Warranty repair costs, for instance, are currently higher than they are for competitors, he said.

Model e will work with suppliers for parts and supplies critical to electric vehicles such as components for battery packs and electric motors. The division will work deeper into the supply chain, executives said, working with suppliers to find the best components and cost savings. Model e will also work on car shopping and purchasing software.

Ford expects half of its vehicle sales to be electric vehicles by 2030.

The new divisions will begin reporting separate financial results starting with the first quarter of 2023. Ford’s commercial vehicle division, Ford Pro, will also begin reporting separate financial results at that time.

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