Photo: Dan Dennis
Ford reformed the 20th century with Model T, while Tesla reshaped the 21st with Model 3.
Now, Ford is transforming itself to become a company that produces gas-powered cars and focuses on battery-powered vehicles. This decision has been made possible by introducing “Model E.”
The automobile manufacturing giant is branching into two separate units. One for traditional gas and diesel-powered vehicles called Ford Blue, while another unit houses their new electric model, which they have coined Model E. In addition, Ford has already separated a unit for commercial consumers called Ford Pro.
Investors are excited about Ford’s plans to grow their electric business, with stocks climbing up on the news as investors accepted Ford’s adherence to expanding its electric business.
“Sometimes two is better than one,” pondered Bank of America, while Jefferies considered it as a “creative move.”
Many analysts felt that Ford should offshoot its electric model manufacturing into a separate company. This vision-focused and goal-oriented entity could trade stock in the valuation that Tesla and other emerging electric vehicle manufacturers benefit from.
But for CEO Jim Farley, the move doesn’t make sense at this time.
According to Farley, holding the businesses under one corporate umbrella enables them to evenly distribute technology and capital, with Ford Model E reaping benefits from the cash flow and economies of scale of Ford’s traditional business. Moreover, Ford Blue gains from the technological improvements that the more software-focused electric models unit is funding.
“Model E will nurture the talent and the culture and the intensity of a high-tech start-up,” said Farley on Wednesday. “Blue will be a profit and cash engine for the entire enterprise.”
Ford has been experiencing an increasing demand for its electric models, such as the F-150 Lightning and Mustang Mach E. Meanwhile, gas and diesel-powered models continue to earn massive amounts, particularly big trucks.
Opinions expressed by CEO Weekly contributors are their own.
