Ford Motor Co. does not plan to spin off either its electric-vehicle or legacy internal combustion engine vehicle business, CEO Jim Farley said Wednesday, even as he underscored significant differences between those parts of the company.
His comments at a Wolfe Research conference were the company's latest pushback on a Bloomberg report that Farley is looking at ways — including a spinoff — to separate the two parts of the business in a bid to boost shareholder value.
"Despite the press speculation, we have no plans to spin off our electric business or our ICE business," Farley said Wednesday. Still, he detailed the ways the company's burgeoning digital and battery-electric vehicle business is different from operations tied to the legacy business, from customer needs to product development processes to employee skill sets: "It's really more around focus and capabilities, expertise and talent."
One of the biggest changes Farley noted was the company's talent needs.
Ford, like other automakers, has been beefing up in areas such as software engineering, but Farley said Wednesday it's about the "quality" of the talent they're attempting to recruit — for both the legacy business and EVs. On the legacy side, for example, new talent may be needed to help reduce structural costs and complexities, and transition the company's industrial assets for the age of digital connectivity and electrification.
"On the BEV side, to get not just the volumes but the margins that we see at a company like Tesla, we need to have real experts that can drive that scale," Farley said. "That transition is more focus, different compensation systems, more focused objectives ... and integrating A-class talent into the company, both on the BEV and the ICE side. That's what we need to do. That's what we're doing."
General Motors Co. CEO Mary Barra, speaking separately at the conference Wednesday, also touted the Detroit automaker's recent recruitment efforts. Between 40% and 50% of the company's technical talent has been there less than five years. And GM hired 8,000 tech employees last year and plans to do the same this year, she said: "We benchmark and change our work practices as well as our compensation so we stack up quite well."
Barra, too, was asked about the potential to spin off GM's autonomous vehicle venture, Cruise LLC, something investors have put pressure on the company to do for some time.
"We want to make sure we get the technology running and then we start to roll it out, and then we'll evaluate all the business opportunities," she said. "These next couple of years as we get into the more rapid scaling, we're going to learn a tremendous amount. We want to make sure we set the business up to maximize the value creation."
Meanwhile, Farley said Ford also is finding that the customers buying its first portfolio of all-electric vehicles — the Mustang Mach-E, E-Transit and F-150 Lightning — largely are new to the brand, and have different needs and expectations than customers buying gas- and diesel-powered cars, necessitating major changes in how the automaker sells vehicles.
"The EV customers are not like our ICE customers. Our go-to-market, as a result, has to be digital, no inventory, and remote," he said. "We can bridge to it today, but we have to go much deeper."
Despite the differences, however, Farley suggested it's not as simple as treating Ford's traditional and new technology-based operations as separate entities and highlighted benefits he sees in them working together. He noted, for example, the manufacturing challenges that some highly-valued EV startups are encountering as they try to ramp up production.
"We are better at body engineering and paint than any of the startups, and they would love to have Ford's know-how," he said. "There's gifts that both sides can give each other, and we don't want to design an organization and working mechanism that is so siloed that we don't leverage each other's (strengths) — but the trick is, we have to be more focused than we've been in the past. ... So I'm not going to make any announcements today, but I will tell you it's not as simple as shirts and skins."
Meanwhile, Farley signaled the automaker may have more to say in the coming months about its strategy for shoring up supplies of raw materials needed for EV components, even as Ford has sought to secure supplies via a joint venture to produce battery cells. Especially key, he said, are lithium and nickel.
"Ford is working really hard on the right deals ... where we will not have risk on the battery capacity because of the raw material availability," he said. "Please expect to read lots more about the raw material journey we're going to be on in the coming months."
Since Farley became CEO and last year announced a turnaround plan for Ford centered on electrification, commercial vehicles and digital connectivity, the automaker's stock has been on something of a run. It was the highest-growth auto stock of 2021, though investors have cooled a bit recently amid a broader market contraction and as some investors wait to see if Ford successfully executes its plan.
But Farley on Wednesday touted the automaker's long-term growth potential: "We're a long way from peak earnings in the company. And we will put equal pressure on our BEV profitability as our ICE, and both of them will give us leverage on the upside."
