For some time, Wall Street has been pressuring legacy automobile giants like Ford and General Motors to spin off their electric vehicle operations in order to fetch the same level of valuation achieved by Tesla, Rivian and other pure-play electric carmakers. While such a move would make a lot of sense given that both Ford and GM have invested heavily in EV efforts, Ford has no reorganization in the plan, its CEO Jim Farley said this week.
“Despite the press speculation, we have no plans to spin off our electric business or our ICE [internal combustion engine] business,” Farley said during a virtual automobile conference hosted by Wolfe Research on Wednesday.
“It’s really more around focus and capabilities, expertise and talent. Those are key for Ford and this is what we’re working on,” he added.
Farley’s comments came after Bloomberg reported last Thursday that the CEO was exploring ways to separate Ford’s EV effort from its internal-combustion engine business. After Ford said in a statement that a spinoff of either operation is not in the plan, Bloomberg reported, citing people familiar with the matter, that Farley might consider splitting the two businesses internally. The report sent Ford stock to jump more than 5 percent the next morning.
Farley may have teased the possibility of reorganization by saying that running an EV business is “fundamentally different” than running an ICE one during Ford’s fourth-quarter earnings call earlier this month. “I’m really excited about the company’s commitment to operate the businesses as they should be,” he told investors.
Ford has committed $30 billion to its EV effort through 2025 and plans to spend another $10 billion to $20 billion by 2030 to fund the goal of generating half of its revenue from electric vehicles by the end of the decade. The company’s first car built on the Ford+ EV platform, Mustang Mach-E, is quickly gaining popularity and rated better than Tesla’s Model 3 by some reviewers. Its first electric pickup, the 2022 F-150 Lightning, whose gas version is the best-selling vehicle in the U.S., is set to go on sale this spring.
Still, Ford’s market cap lags far behind that of Tesla and many EV startups when factoring in the number of cars produced. Ford is currently valued at $66 billion, less than one-tenth of Tesla and in the same range as Rivian ($53 billion) and Lucid ($40 billion). Both Rivian and Lucid have delivered few cars to customers and have yet to start volume production.
“We have no plans to spin off our battery electric-vehicle business or our traditional ICE business. We’re focused on carrying out our Ford+ plan to transform the company and thrive in this new era of electric and connected vehicles,” Ford said in a statement to Observer.