Ford reveals radical plan to restructure automaker into three business units
Ford CEO Jim Farley is dividing up company operations, creating three separate automotive business units that include its existing commercial arm, as well as two new ones: Ford Blue, which will focus on the traditional internal combustion engine, and Ford Model e, which will develop the battery electric vehicles and connectivity, the company revealed Wednesday morning.
This step is designed to make the 118-year-old automaker more competitive against Tesla, the biggest electric vehicle competitor in the industry, as well as others, Farley told the Free Press during an interview.
Each division will have its own leadership, with the traditional vehicle skill team led by Kumar Galhotra, who has been Ford president of the Americas and International Markets Group. The newly created all-electric vehicle (EV) skill team will be led by Farley.
By making this move, Farley hopes to speed up innovation, improve quality and cut costs while also ensuring Ford's ability to deliver high-volume production that startups can't.
Here's the overview:
Ford is dividing its auto business into three separate units under the Ford automotive umbrella.
First is Ford Pro, the automaker's existing commercial arm that doesn't make vehicles but will continue to distribute them, sell them and offer services including hardware and software solutions for vehicle charging and digital support that allows small business owners to manage and maintain fleets. Ford Pro will essentially serve as a distribution and service company. Its CEO is Ted Cannis.
The second is the internal combustion engine (ICE) business called Ford Blue, which will create products for the whole company, including commercial vehicles for its Ford Pro unit, but also source and sell them to retail customers.
Finally, Ford Model e, with a lowercase "e," is a "digital electric business" that will create products for Ford Pro and for retail, and will handle the sourcing and the engineering of those electric vehicles. Ford Model e will also design the facilities for the electric vehicles and digital vehicles and provide services for ICE products, like the interior digital experience or over-the-air technology updates for the ICE vehicles.
"We have created, effectively, three separate parts of our auto business because we believe they need that focus," Farley said. "You can’t ask an electric person to work on Ford telematics for a Pro customer. You can’t ask an ICE person to work on the sourcing of raw materials for battery electric vehicles. We have to specialize now."
Farley will serve as president of Ford Model e, in addition to his role as CEO and president of Ford. Doug Field, Ford chief advanced technology and embedded systems officer with extensive experience at Apple and Tesla, will lead product creation as chief EV and digital systems officer for Ford Model e and also lead development of software and embedded systems for all of Ford.
The Model e team includes: Marin Gjaja, a former Boston Consulting managing director, who becomes chief customer officer also heading new business initiatives; Lisa Drake moves from chief operating officer of Ford North America to vice president of EV industrialization, and Darren Palmer, who moves from general manager of battery electric vehicles to vice president of electric vehicle platforms.
"Designing truly incredible electric and software-driven vehicles — with experiences customers can't even imagine yet — requires a clean sheet approach," Field said in a news release issued Wednesday. "We are creating an organization that benefits from all of Ford's know-how and capabilities, but that can move with speed and unconstrained ambition to create revolutionary new products."
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Galhotra becomes president of Ford Blue and the rest of his team will be revealed soon, a Ford spokesperson told the Free Press.
Stuart Rowley moves from president of Ford of Europe to chief transformation and quality officer focused on reduced complexity and tighter costs.
Hau Thai-Tang moves from chief product platform and operations officer to chief industrial platform officer. He will lead product development, supply chain and manufacturing engineering for ICE products and common systems across Ford Pro, Ford Blue and Ford Model e, the company said in the news release.
Rowley and Thai-Tang hold "enterprise positions that don't fall within Ford Blue or Ford Model e and each reports to Farley," a spokesperson said.
But just because these newly created divisions will be separate doesn’t mean they won't rely on each other in certain areas of common technology and materials at a scale that will help save money, Farley said.
To illustrate the company's strength, Ford will also begin tracking profit and loss (P&L) financial statements separately for Ford Pro, Ford Blue and Ford Model e. The statements will summarize the revenue and expenses for each entity.
Except for Tesla, automakers tend to fold their electric business information into the bigger operation, making it hard to track and critique.
"We are going further," Farley said. "Now, people are going to understand how profitable our EV business is. They'll know how profitable our Pro business is. They'll know how profitable our ICE business is. We'll need that inside the company, not only for focus but for accountability."
Ford's new structure is effective immediately, though it will take time to fully evolve, as "two distinct but strategically interdependent auto businesses."
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This is about having "startup speed and unbridled innovation," Farley said, that take Ford beyond the award-winning Mustang Mach-E and Ford F-150 Lightning being launched in coming months.
The creation of Ford Model e was inspired by the success of small teams that developed the Ford GT, Mach-E SUV and Lightning pickup.
"Ford Model e will be Ford's center of innovation and growth, a team of the world's best software, electrical and automotive talent turned loose to create truly incredible electric vehicles and digital experiences for new generations," Farley said in a news release Wednesday.
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Meanwhile, the Ford Blue team "will be hellbent on delivering leading quality, attacking waste in every corner of the business, maximizing cash flow and optimizing our industrial footprint," Farley said in the release.
Ford Blue will strengthen the F-Series, Ranger and Maverick trucks, Bronco and Explorer SUVs and Mustang with investment in new models. Ford also plans to invest in brand new ICE vehicles, such as the truck fleet, but Farley declined to go into detail now.
With transition comes change in staffing. What about buyouts or layoffs?
Ford plans to roll out to its global team the fact that the company is growing, Farley told the Free Press. "There are going to be areas where we'll have to get our structure costs down. I'm not going into specifics but, generally, this is a growth story for Ford. Will some areas be adjusted? Our business is always that way. But we're not going to make any specific announcements."
Super Duty remains key
"I'm not going to go into specifics but we're not going to stop investing," Farley said. "It's still going to be 50% of our volume by the end of the decade. And those customers, like Super Duty, if you're hauling a horse trailer in northern Michigan, an electric vehicle won't work on an 800-mile trip. We're going to have a very vibrant ICE business that will continue to be more profitable. Over time, its volume will start to fall off. But we think there's a lot of growth opportunity."
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The lucrative ICE business funds the high costs of research and development establishing a battery electric business for all automakers.
"We're going to have dozens of new electric vehicles that no one has ever seen before. We're working on them now. And that's why we're setting up battery plants," Farley told the Free Press. "This team is working on, not only the development of the vehicles and the platforms — the braking systems, the battery systems, the inverters, the motors — but they're also working on sourcing all of those."
Ford is planning to get new products to market by 2026, not 2030, Farley said. "We want to give people the idea that we're moving quickly."
Car dealers here to stay
Beating Tesla in customer experience long term is the plan, and car dealers will play an essential role, he said.
"We’re committing to the dealer model," Farley said, which is not how Tesla operates.
"We’re not keeping dealers in the mix 'for the moment.' We are betting on dealers for the long term," he told the Free Press. "I want to make that really clear. I’m not mincing words. We will have new standards and a new experience. But we learned a lot by watching Tesla."
While Tesla customers like the digital experience in the first few years, they eventually have problems such as nonworking doors or accident damage or issues related to an over-the-air update, and providing consumers with the ability to speak with real people in person can be really good — and yet Tesla doesn't offer dealership support, Farley noted.
"Just like your Target experience is different than your Amazon experience, but Target didn’t go away when Amazon became the dominant retailer, they just had a change," he said. "Circuit City went away, and lots of others went away, because they didn’t change. ... We believe in a superior customer experience. I don’t want to mince my words. We are betting on the franchise model."
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As for a possible Genius Bar-style help desk for EV customers, like what Apple provides for its clientele, Farley said everything is on the table. It's likely going to be a WebEx style option that allows for direct interaction.
Despite the big announcement, all operations will remain under one umbrella company with its world headquarters in Dearborn, Farley told the Free Press.
'We're not moving anywhere. This is our home. We have people coming from all over the world, including the West Coast of the U.S. to move to Michigan to be part of this transformation at all levels," he said. "We ain't going anywhere. Will we open a bigger office in Tel Aviv (Israel) or in Palo Alto (California)? Yeah, probably. But that won't change our headquarters."
In fact, he said, in addition to investing in Corktown, the company is spending "billions" revamping its physical presence in Dearborn — the largest investment since the 1950s.
There is no plan to establish a presence in Kentucky or Tennessee that's any different from other Ford plants, such as Kansas City Assembly in Claycomo, Missouri, Farley said, swatting away rumors of a potential move inspired by the recent battery investment.
The electric business may also have a presence in Southern California and possibly China, because growth is expected, Farley said. "There will be more jobs and more growth for the company. We're going to have new expertise areas or hot zones for talent and know-how based around the world, as we do today. But the headquarters, nothing is changing about Ford Motor Co. Dearborn is our home."
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