Ford admits it’s losing billions as heavy investment in electric puts brakes on profit
Ford’s electric vehicle business has lost three billion US dollars (£2.44 billion) before taxes during the past two years and will lose a similar amount this year as the company invests heavily in the new technology.
The figures were released on Thursday as Ford rolled out a new way of reporting financial results.
The new business structure separates electric vehicles, the profitable internal combustion and commercial vehicle operations into three operating units.
Company officials said the electric vehicle unit, called Ford Model e, will be profitable before taxes by late 2026 with an 8% pretax profit margin.
But they would not say exactly when it is expected to start making money.
Old firm, but start-up mentality
Chief financial officer John Lawler said Model e should be viewed as a start-up company within Ford.
“As everyone knows, EV (electric vehicle) start-ups lose money while they invest in capability, develop knowledge, build (sales) volume and gain (market) share,” he said.
Model e, he said, is working on second and third-generation electric vehicles.
It currently offers three EVs for sale in the US: the Mustang Mach E SUV, the F-150 Lightning pickup and an electric Transit commercial van.
The new corporate reporting system, Mr Lawler said, is designed to give investors more transparency than the old system of reporting results by geographic regions.
The carmaker calculated earnings for each of the three units during the past two calendar years.
Model e had pretax losses of 900 million dollars (£732.22 million) in 2021 and 2.1 billion dollars (£1.71 billion) last year, and it is expected to lose three billion dollars (£2.44 billion) this year.
In the past two years, Ford has announced it would build four new battery factories and a new vehicle assembly plant as well as spending heavily to acquire raw materials to build electric vehicles.
By the end of this year, the company, based in Michigan, expects to be building electric vehicles at a rate of 600,000 per year, reaching a rate of two million per year by the end of 2026.
Is electric the future of the firm?
Ford Blue, the unit which sells internal combustion and gas-electric hybrid vehicles, made just more than 10 billion dollars (£8.14 billion) before taxes during the last two years.
Ford Pro, the commercial vehicle unit, made 5.9 billion dollars (£4.8 billion) during those years, the company said.
For this year, Ford expects Ford Blue to post a seven billion dollar (£5.7 billion) pretax profit, modestly better than last year.
Ford Pro is expected to earn six billion dollars (£4.88 billion) before taxes, nearly double its earnings last year, Mr Lawler said.
Ford will present the new structure, announced last March, to analysts and investors on Thursday.
Other business units include corporate, Ford Credit and Ford Next, a new business incubator.
Mr Lawler said the company is changing the way it does business, not just doing an accounting exercise.
“After 120 years, we’ve essentially re-founded Ford,” he said.
“We’re embracing technology and competitive disruption in our industry, fundamentally changing how we’re thinking, how we’re making decisions and how we’re running the company.”
Press Association – Tom Krisher, Associated Press