Ford Confident BEV Unit Will Become Profitable

Model e, Ford’s dedicated EV unit, is a start-up “embedded” within the automaker, Chief Financial Officer John Lawler says, adding the losses are typical of a start-up and are not unexpected.

Joseph Szczesny

March 28, 2023

3 Min Read
Ford F-150 Lightning 22 (2)
Ford Model e assets include F-150 Lightning BEV.Ford

Ford executives are offering a look at the company’s new organization and its earnings potential while disclosing the automaker’s fledgling electric-vehicle business lost a total of $3 billion in the 2021 and 2022 and expects to lose another $3 billion this year, underscoring the steep costs manufacturers face as they make the transition to EVs.

Ford’s disclosures are not exactly a shock. Over the past several months Stellantis CEO Carlos Tavares has underscored the enormous costs of building and developing EVs and their negative impact on earnings.

General Motors, while saying it expects to make a profit on EVs, has not offered any firm figures. GM expects to spend $35 billion on EVs through 2025. It actually has sold fewer vehicles than EV start-up Rivian, which expects to lose more than $4 billion this year even as it increases production.

John Lawler, Ford’s chief financial officer, says Ford Model e, a business unit formed a year ago to focus on electric vehicles, expects to be profitable by the end of 2023. Model E is a start-up “embedded” within Ford, he says, adding the losses are typical of a start-up and are not unexpected.

Lawler says Model e has a goal of 8% EBIT (earnings before interest and taxes) by late 2026 for Ford Model e, which is tied to planned global EV production of 600,000 units by the end of 2023 and 2 million by the end of 2026.

The contribution margin of Model e’s first-generation EVs is expected to approach break-even this year but be more than offset on an EBIT basis by bigger investments in new EV products and manufacturing capacity, Lawler (pictured, below left) says.

John Lawler - Ford CFO.jpg

John Lawler - Ford CFO_0

Ford expects EV profits to come from being able to operate at scale when the automaker has the capacity to build 2 million EVs, from improvements in the engineering and manufacturing built into the automaker’s next generation of EVs and from the development of new battery chemistry, the CFO adds.

Ford is underscoring its commitment to EVs by pushing ahead with BlueOval City, a $5.6 billion complex in western Tennessee, where the automaker plans to build its next-generation electric truck, codenamed Project T3, starting in 2025.

Designed to be radically efficient and carbon neutral, the plant on the site will be capable of producing 500,000 electric trucks a year at full capacity.

Besides Model e, the Ford reorganization has created two other distinct units inside the company: Ford Blue and Ford Pro.

Ford Blue is responsible for building the trucks, SUVs, CUVs and muscle cars that use internal-combustion engines. Ford’s ICE business was profitable in 2021 and 2022, Lawler says, adding Ford Blue is expected to continue operating profitably in the future.

Lawler says Ford Pro focuses on commercial and governmental business. He says Ford Pro also is profitable and expects to grow its revenue through the sale of subscription, telematics and charging services to commercial customers.

The changes abolish the regional model that has been a feature of Ford’s financial reporting for decades and reflect the company’s performance in different parts of the world, says Lawler.

Ford Controller Cathy O’Callaghan says the new system is easy to understand and simple to execute, so that anyone can see how Ford is generating value for customers and other stakeholders.

“This wasn’t a simple, pro forma spreadsheet exercise,” O’Callaghan says.  “It represents nearly a year of disciplined work by hundreds of Ford people to help us capture the huge strategic opportunity of Ford+ (the automaker’s growth plan) and provide unique transparency into our business.”

Ford executives reiterate there is a 10% margin target for company-adjusted EBIT by the end of 2026. This year, the automaker anticipates full-year adjusted EBIT to be $9 billion to $11 billion – and adjusted free cash flow to be about $6 billion.

For 2023, under the new organization the segment-level EBIT for Ford Blue is $7 billion, a modest improvement from last year, and approaching $6 billion for Ford Pro, nearly twice its 2022 earnings, offsetting the $3 billion loss expected from Ford Model e.

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