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Ford announces a historic restructuring as it pivots to an electric future

COLMA, CALIFORNIA - JANUARY 05: The Ford Bronco logo is displayed on a vehicle at Serramonte Ford on January 05, 2022 in Colma, California. Ford announced a 17 percent drop in year-over-year sales in the month of December. Truck sales fell over 15 percent while SUV sales dropped 11 percent. (Photo by Justin Sullivan/Getty Images)
The Ford Bronco logo is displayed on a vehicle in Colma, Calif., on Jan. 5. The American automaker is splitting its auto business into two units.

Ford's Model T reshaped the 20th century. Tesla's Model 3 is transforming the 21st. Now, meet "Model E" — part of Ford's big plan to bridge its gas-powered past and its battery-powered future through a major restructuring of its business. Ford is splitting its auto business into two separate units: Ford Blue, for traditional gas- and diesel-powered vehicles, and Ford Model E, for new electric models. The automaker has already split off a unit for commercial customers called Ford Pro.Wall Street responded positively to the restructuring of the company, with stocks moving up on the news as investors welcomed Ford's commitment to growing its electric business."Sometimes two is better than one," Bank of America mused in a note, while Jefferies called it a "creative move."

Ford wants the two new units under the same umbrella

Some analysts had been pushing Ford to spin off its electric vehicle production into an entirely separate company — one that is future-focused and growth-oriented, and could trade stock in the eye-popping valuations that Tesla and other new electric vehicle startups are enjoying. But Ford CEO Jim Farley said that doesn't make sense at this time. Keeping the businesses under a single corporate umbrella allows them to share technology and capital, he says, with Ford Model E benefiting from the cash flow and economies of scale of Ford's traditional business, while Ford Blue gets to piggyback off the technological innovations that the more software-focused electric vehicle division is investing in. "Model E will nurture the talent and the culture and the intensity of a high-tech start up," Farley said on Wednesday. "Blue will be a profit and cash engine for the entire enterprise."

Keeping a firm foot on its gas-powered past

Ford has seen strong demand for its electric offerings, like the F-150 Lightning and Mustang Mach E. But it also continues to make enormous profits off traditional gas- and diesel-powered vehicles, particularly large trucks. The company has committed to massively increase its electric vehicle production. Ford says it will build more than 2 million electric vehicles per year by 2026, which will represent about a third of the company's global output. And at the COP26 climate convention last year, Ford even signed on to a pledge to shift toward exclusively zero-emission vehicles by 2040. But unlike some rivals, Ford is not fully committing to entirely phasing out gas-powered vehicles. Farley told investors there are some trucks and SUVs where he doesn't think electric vehicles are a good fit. "Although maybe the volumes go down ... I think we'll see a really revitalized [internal combustion engine] business," he said. The entire auto industry is pivoting toward electric vehicles, but companies have wildly varying timelines for transitioning away from traditional vehicles. Copyright 2022 NPR. To see more, visit https://www.npr.org.