Ford Facing $3 Billion in Losses on EV Business for 2023

March 3, 2023 | Industry News

Well, this might not shock you, but Ford Motor Co. anticipates a $3 billion loss in its electric vehicle (EV) division this year, even as profits increase in its internal combustion and commercial vehicle divisions.

Ford expects its Model e division will lose $3 billion in 2023 as the automaker continues to ramp up production of its three EVs.

The automaker said Thursday losses from its Model e EV division will grow by 43% in 2023 from $2.1 billion in 2022. It lost $900 million in 2021. The loss stems from the automaker’s efforts to raise production of its Ford Lightning and Mustang Mach-E EVs while developing its next-generation cars on a dedicated EV platform.

A Blue Oval transformation 

“It’s not only about changing how we report financial results; we’re transforming how we think, make decisions and run the company, and allocate capital for highest returns,” said Ford Chief Financial Officer John Lawler. “We’ve essentially ‘refounded’ Ford, with business segments that provide new degrees of strategic clarity, insight and accountability.”

Ford is the second-largest manufacturer of EVs in the U.S. market, one that’s radically changed its corporate structure. By dividing the 120-year-old carmaker into three divisions — Model e for electric vehicles, Ford Blue for internal combustion engines, and Ford Pro for commercial trucks and vans — Chief Executive Officer Jim Farley is drastically restructuring the 120-year-old firm.

But the change in reporting means that Ford will no longer break out results by region, a dramatic change.

Ford CEO Jim Farley is using profits from Ford Blue to offset Ford Model e losses. However, he wants $2.5 billion in Ford Blue cost cuts in 2023.

“This wasn’t a simple proforma spreadsheet exercise,” Ford Controller Cathy O’Callaghan said. “It represents nearly a year of disciplined work.”

The numbers that help

Like many upstart EV manufacturers have learned, you have to lose money in the EV space before making money, something Rivian, Lucid and Lordstown Motors are in the process of learning. 

But Ford Motor Co. has an advantage over its upstart rivals: its old-tech internal combustion business. Known as Ford Blue, it’s estimated to post earnings before interest and taxes (EBIT) of $7 billion, up from $6.8 billion in 2022, while Ford’s commercial unit, Ford Pro, is anticipated to report an EBITA of $6 billion this year, up from $3.2 billion in 2022. Ford has already stated its intention of spending $50 billion to develop EVs through 2026 with the expectation of reaching an EV EBIT margin of 8% and a company-adjusted EBIT margin of 10% by that point.

“By changing our organization and how we’re reporting financial results, we’re operating with increased focus, speed and accountability,” CFO Lawler said to reporters.

Ford plans to be at a 600,000-unit run rate for its EVs by the end of this year and 2 million by the end of 2026.

Old school tech funds the new

This is the first time Ford has broken out the numbers for its different lines of business. The numbers reaffirm what investors have long suspected; the company’s gasoline-powered vehicles bring in the bucks and help fund development of EVs and mobility ventures.

While Ford Blue and Ford Pro are both consistently profitable, Ford Model e is anticipated to be breakeven by the beginning of 2024. Nonetheless, Farley remains critical of Ford Blue’s efficiency, and expects to slash $2.5 billion in expenses from the division this year. But the picture is brighter for Ford Pro, where a new Ford Transit van is expected to fulfill pent-up demand. In all, the company reiterated its guidance of full-year EBIT of $9 billion to $11 billion and $6 billion in adjusted free cash flow.

By the end of this year, the manufacturer hopes to be able to produce 600,000 EVs annually, rising to 2 million by the end of 2026.

The news sent Ford (NYSE: F) shares up 1.83% to $11.68 in early trading.

More to come

On Tuesday, May 2, Ford is expected to release its first-quarter financial results.

Next, on May 22, Ford executives will provide updates on the company’s expanding software and services business, strategic potential, and progress. They will also go in-depth on their plans and key performance indicators for each of their business sectors.

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