Exclusive-Ford set to announce plans to run EV, ICE as separate businesses -sources

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[March 02, 2022]    By Paul Lienert, Ben Klayman and David Shepardson

(Reuters) -Ford Motor Co on Wednesday will announce a reorganization under which its electric vehicle (EV) and internal-combustion engine (ICE) units will be run as separate businesses in a move to fast track growth in EVs, three people familiar with the plan said.

 A Ford all-electric F-150 Lightning truck prototype is seen at the Rouge Electric Vehicle Center in Dearborn, Michigan, U.S. September 16, 2021 REUTERS/Rebecca Cook

The EV and ICE businesses will have separate names but will remain under the Ford corporate umbrella, in the same way the company operates its Ford Pro commercial business for corporate customers, said the people, who asked not to be identified.

The U.S. automaker will name executives to lead each business and Ford will also outline updated profit margin targets for the company overall, the sources said. The idea is for Ford to eventually report separate financial results for the EV and ICE businesses, one of the sources said.

Ford spokesman T.R. Reid declined to comment on the report. "We're focused on carrying out our Ford+ plan to transform the company and thrive in this new era of electric and connected vehicles," he said.

In response to reports Ford was weighing a full spinoff of its EV business, Chief Executive Jim Farley last week said the company had no plans to spin off either its EV or ICE businesses.

"We know our competition is Nio and Tesla, and we have to beat them, not match them," he said last Wednesday at a Wolfe Research conference. "And we also have to beat the best of the ICE players."

However, by separating the EV business into a separate unit, Ford would be setting the table for a possible spinoff down the road, industry officials said.

The growing preference among investment managers for companies focused on low-carbon technology has helped Tesla Inc become the world's highest-valued automaker, and led some investors and analysts to urge other carmakers to consider separating their combustion engine and electric businesses as a way to better tap into their full values.

Companies such as General Motors Co have resisted those calls, arguing that ICE profits will fund the transition to EVs.

Ford's expected move echoes one outlined earlier this month by French automaker Renault, which said it was looking at creating separate divisions for its EV and ICE businesses. It said the EV business could be focused on France, while the ICE operations could be focused outside France.

Farley also said last week that Ford's EV and ICE businesses were underperforming on an earnings basis, adding that costs could still be cut from the ICE business.

"We have too many people, we have too much investment, we have too much complexity and we don't have expertise in transitioning our assets," he said of the ICE business. "That's the simple answer. There's waste."

He also said Ford needed to add more people to improve profit margins for its EV busines, including in such areas as electrical components, advanced electrical architectures and the digital customer experience.

Candidates to run the businesses could include Ford's chief advanced technology officer Doug Field, who was hired from Apple Inc; Hau Thai-Tang, chief product platform and operations officer; Lisa Drake, chief operating officer of North America; and Kumar Galhotra, president of the Americas and International Markets, industry officials said.

(Reporting by David Shepardson in Washington and Paul Lienert and Ben Klayman in Detroit; editing by Richard Pullin)

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