Global Courant 2023-05-22 20:17:16
Ford Mustang on display at the NY Auto Show, April 6, 2023.
Scott Mlynn | CNBC
DEARBORN, Michigan – Ford engine advocates for Wall Street at an investor event Monday, sharing details of its plan to profitably build millions of electric cars while expanding its traditional business.
Ford CEO Jim Farley began the day by discussing the company’s growth plans for its gas, fleet and electric business units.
“I’m not here to tell you we’re undervalued, you make your own decision,” said Farley.
ford said early Monday that it maintains its 2023 guidance of between $9 billion and $11 billion in adjusted EBIT and approximately $6 billion in adjusted free cash flow.
The company also announced a series of new deals for the supply of lithium products ahead of the event in support of its plan to dramatically ramp up production of electric vehicles.
Ford is aiming for an EBIT margin of 8% on its electric vehicle unit and a production rate of 2 million EVs by 2026, compared to an expected 600,000 by the end of the year.
Ford elaborated on its earnings expectations for each of its major business units, but did not announce any significant changes to its plans, which some on Wall Street criticized as ambitious, if not unrealistic.
The automaker is expected to lose about $3 billion this year on its “Model e” electric vehicle business, offset by gains in its traditional “Blue” and “Pro” fleet businesses. The company separated the companies and began reporting them separately this year.
For the first quarter, Ford said its EV business loss increased to $722 million from $380 million a year earlier. The company’s traditional auto business made $2.6 billion, and the automaker’s fleet business reported $1.4 billion in revenue.
The company expects to simplify its operations and grow margins from traditional products to low double-digit EBIT margins, up 7.2% in 2022. For example, Ford said it has removed more than 2,400 parts from its next-generation F-150 compared to the current vehicle.
For the traditional business, Kumar Galhotra, president of operations, said 8 percentage points of margin is expected to come from reductions in structural and controlled costs. That will help offset 6 percentage points in net pricing.
“Demand continues to exceed capacity for our main (combustion) vehicles,” said Galhotra. “In the next 10 months, Ford Blue will expand its capacity by more than 160,000 units.”
That increase may be surprising given that the company is investing billions in electric cars. Galhotra said while Ford expects sales of traditional vehicles to begin to decline after 2025 in exchange for electric cars, internal combustion engine vehicles will be around “well into” the next decade, he said.
It is increasingly challenging for traditional automakers such as Ford to profitably balance the shift from traditional powered vehicles to electric vehicles.
Doug Field, chief advanced product development and technology officer, said a key to this is increasing the efficiency of next-generation EVs due to enter production in 2025.
‘Different kind of income’
Field also touted a push in software and subscription revenue models, using the BlueCruise hands-free highway driving system as an example.
“As we build out our next generation of platforms, we aim to deliver (BlueCruise) to as many customers as possible,” said Field. “If you can take your eyes off the road, everything changes.”
Ford expects to build 500,000 vehicles equipped with the hands-free technology by the 2024 model year. At an expected take-up rate of 20%, Field said BlueCruise alone could bring in $200 million in revenue.
“My finance and business partners tell me this is a different kind of income,” he said. “They use these words as contributing to margins, less cyclical than car sales.”
Field said Ford’s approach to creating EVs is radically different from its traditional vehicle development strategy, emphasizing that software will define and control many new features, including features that Ford has not yet developed, but which will be introduced in the future through will add updates to existing vehicles. .
“The products we make are not living rooms,” Field said. “They are moving, working robots. And our software ambition goes way beyond how our products move, how they collect data, and how they support people who will use them for real work.
“We call them incredibly good products because the best things we’re going to make are the things we haven’t thought of yet.”
