Engine to engine, motor to motor: Why is Ford splitting electric and traditional car businesses?

Seeing that the trend of electric vehicles is becoming more and more obvious, Ford, the hegemony of the global auto manufacturer, has also recently decided to split its internal combustion engine and electric vehicle businesses to fight against electric vehicle stars such as Tesla.

Ford splits auto business
On the 2nd, the world-renowned automobile manufacturer Ford announced heavyweight news: it plans to split its automobile business again, into the Ford Blue division focusing on traditional internal combustion engine vehicles, and the Model e division focusing on the development of electric vehicles. The former will be composed of Ford’s current president of Americas and global markets, Kumar Galhotra, will lead the Model e, while current Ford CEO Jim Farley himself will lead the Model e.

From the first quarter of 2023, the two divisions will be financially independent, and Ford’s auto business will be divided into three parts: the internal combustion engine division Ford Blue, the electric vehicle division Model e and the commercial vehicle division Ford Pro.

Investing in the future
In addition to adjusting the structure of the department, Ford also announced that it will increase investment in electric vehicles. It plans to invest US$50 billion in the development of electric vehicles between 2022 and 2026, so that the sales of electric vehicles will account for global sales in 2026. One third and more than half by 2030.

Why is Ford breaking up the business?
However, as a key player in the global auto industry, why did Ford choose to make this decision at this time as “radical and rational” in what analysts call it?

It’s up to you to beat Tesla
Ford CEO Farley said that Ford executives have carefully studied its electric vehicle and traditional car businesses and found that these are two completely different routes, and the skills and thinking styles required by team members are different. If they continue to merge In an organization, it is bound to cause more conflict and friction, “you can’t beat Tesla this way.”

“For Ford, if we’re going to outperform our existing competitors and our new competitors, we have to be more focused than we are now,” Farley said. “You can’t ask people to focus on two different lines at the same time.”

Continue to cooperate after the spin-off, and products support each other
According to Ford’s management plan, although the two major departments will have their own goals in the future, the relationship between the two parties will not be competition, but will continue to maintain a certain degree of mutually beneficial cooperation. That’s why Farley refused to take the analyst’s advice and directly separate Ford’s electric vehicle business as a company, “and then they would see each other as competitors, and the cooperation mechanism would stagnate.”

In the future, Ford Blue will continue to improve existing products, reduce maintenance costs, and apply its existing body building technology to assist Model e in the development of electric vehicles. The in-vehicle software will also be moderately integrated with new vehicles developed by Ford Blue.

Make every effort to attract talents, “Welcome to geeks wearing rabbit slippers to work”
But for the Model e division, Farley has higher hopes for it — hoping to show the dynamism of a start-up, attracting top software and electric vehicle experts to Ford, especially people who have never thought of joining the auto industry.

“We just want the best people,” said Doug Field, head of electric vehicles and digital systems for the Model e division. “I don’t care if they’re the weirdo who wears little white rabbit slippers to work, but We have to have the best people.”

Will the talent acquisition plan come to fruition?
However, Jessica Caldwell, executive director of Edmunds, a US car valuation network, is concerned that doing so will affect the recruitment of Ford Group, especially the Ford Blue division, she said: “Compared to the more attractive future electric vehicles products, some might see the internal combustion engine sector as an outdated business.”

Michael Ramsey, vice president of the automotive division of the consulting firm Gartner, is concerned that Ford will have internal management problems in the future, because the employees of Ford Blue may have to watch the profits they earn in the future. The money-burning Model e division.

The market is still optimistic, analysts: the split will accelerate the transformation
In general, however, the market is optimistic about the news of Ford’s restructuring of the company. On the day of the announcement, Ford’s stock price rose by 8.4% to a price of US$18.10 per share .

Brian Johnson, an analyst at Barclays in the United Kingdom, said that Ford’s move will make it easier for investors to analyze the performance of the electric vehicle business, and the split should also accelerate Ford’s electrification transformation plan.

Separation is conducive to competition
Jessica Caldwell, executive director of online car valuation website Edmunds, has some doubts, but she still appreciates Ford CEO Farley’s decision: “Taking Ford’s present and future apart, Farley is equivalent to empowering different teams. Focus on your tasks.”

“It’s clear that electric vehicles are the future of the auto industry. Established automakers like Ford have to figure out how to put themselves in the best position to compete with brands that specialize in electric vehicles,” Caldwell said.

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