Ford CEO says the carmaker is 'under-earning' on EVs and petrol models

MICHIGAN (BLOOMBERG) - Ford Motor Co's head has made a case for significantly restructuring the 118-year-old automaker for the electric age and acknowledged the company is "under-earning" on all its vehicles.

In a scathing assessment reported by Bloomberg, Ford chief executive Jim Farley said: "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 was speaking at a Wolfe Research auto conference on Feb 23.

"This management team firmly believes that our ICE (international combustion engine) and BEV (battery electric vehicle) portfolios are under-earning," he added.

The comments came even as Ford - like several other vehicle manufacturers - is beefing up efforts to ramp up its electric vehicle (EV) business, even as the investment demands, growth strategies and customer needs diverge from those of its legacy ICE operations.

Mr Farley recently said he was looking at ways to run the EV and ICE businesses separately. But he said there are no plans to spin off either business line.

The company had previously considered such a move, but has shifted focus to other ways to run the operations differently.

It faces pressure from Wall Street to spin off its nascent EV business to boost value by shedding legacy costs and gaining greater access to capital markets. Investors have awarded immense multiples to pure EV makers such as Tesla, the world's most valuable automaker based on stock price.

Mr Farley sought to reassure investors that he was on a push for profitability, suggesting the company may surpass its goal of an 8 per cent operating margin.

But he also acknowledged Ford still lacks the "restructuring talent" to get the most out of its EV and internal combustion engine businesses.

"ICE talent and the digital BEV talent are different. You can't ask ICE people to do certain things, it takes too long," he said. "Ford will ensure we have the right structure and talent in place to compete and win."

Ford's shares are down nearly 20 per cent this year, compared with an 11 per cent decline in the S&P 500.

The company has committed US$30 billion (S$40.5 billion) to its EV strategy through 2025 and Bloomberg has reported it will spend another US$10 billion to US$20 billion by the end of the decade to convert factories to build plug-in models.

Mr Farley has trebled production of the electric Mustang Mach-E and doubled output of its F-150 Lightning plug-in pickup, going on sale this spring.

The company plans to produce 600,000 EVs annually in two years and generate as much as half its sales from battery-powered vehicles by 2030.

Ford is also looking to wring costs out of its distribution system, which Mr Farley said operated at a US$3,000- to US$4,000-a-car disadvantage to Tesla, which has a direct sales model that does not include car dealers.

He has estimated that Tesla earns more than US$10,000 a car.

"To get the margins, not just the volumes, but the margins that we see at a company like Tesla, we need to have real experts that can drive that scale," he said. "I can't turn to the ICE organisation and say, 'Go be Tesla.'"

But once the company hires the right people and restructures, he is optimistic about its growth prospects.

"When Ford executes correctly, we have upside," he said. "We are a long way from peak earnings."