Ford Creates Separate Divisions for Electric Vehicles and Combustion Engines in Major Restructure
The news: Fordwhich recently received more than 275,000 pre-orders of electric vehicles, has decided to restructure by creating two distinct poles, one for EVs and the other for thermal vehicles.
Why it’s worth watching: Ford CEO Jim Farleywho has led the company since 2020, said developing and selling electric vehicles required new technical expertise and a different sales strategy than traditional combustion engine vehicles, by The Wall Street Journal.
- the Ford model e division will focus on digital innovation and the production of electric vehicles while Ford Blue will stick to internal combustion vehicles. These divisions will have their own management and their own income statements.
- Having a separate division for electric vehicles will give Ford the ability to develop new technologies and solutions. “Our legacy organization held us back. We had to change,” Farley said.
- The restructuring ends speculation that Ford would spin off its EV division. “Startups would love to have the industrial know-how of our company,” Farley said. “Why create Model e and risk that?”
Why it might work: Ford says the creation of the Ford Model e was informed by the success of smaller, mission-driven teams that developed the Ford GT, Mustang Mach-E SUV, and Lightning F-150 pickup trucks, as well as Ford’s dedicated EV division in China.
By separating electric vehicles from combustion, Ford is making room to compete at the highest level without any crossover or baggage from its established combustion engine business.
- A division focused on electric vehicles will help attract new talent to solve various manufacturing, charging and technology issues.
- Other car manufacturers, like Nissan, Mercedes-Benzand VOLVOhas pledged to produce only electric vehicles by 2030, although Volvo has created a non-EV spinoff.
And after? Auto companies that are turning to electric vehicles are realizing that to compete with Tesla, they need to focus on the future and move away from the development, marketing and sales of legacy products.
- Ford’s restructuring is a commitment to its EV future while maintaining its current gasoline and diesel cash cow.
- It’s also a sign of a massive shift coming to the auto industry and could lead other automakers to dedicate some of their business to electric vehicles or seek partnerships that can help them stay competitive over the next decade.