Ford’s Transparency on EV Losses: A Strategic Misstep
Ford restructured its operations in 2022 by creating distinct divisions: Ford Blue for internal combustion engine (ICE) vehicles, Ford Pro for commercial services, and Ford Model e for electric vehicles (EVs). This strategic move was designed to enhance the company’s focus, agility, and innovation within each business. At the time, Ford CEO Jim Farley stated, “We are going all in, creating separate but complementary businesses that give us start-up speed and unbridled innovation in Ford Model e…”
When this restructuring was announced, I speculated that it might foster an “us versus them” mentality within Ford, particularly between the new Model e division and the legacy Ford Blue organization. More critically, I felt the restructuring downplayed the reality that Ford was still primarily an ICE vehicle company rather than an EV company. In essence, the emphasis on the Model e division seemed to obscure the fact that it was the profits from Ford’s ICE business that enabled investment in the future of EVs.
Additionally, I have never understood Ford’s approach of highlighting the significant losses within the Model e division in its financial disclosures. For example, the company’s third-quarter report revealed a $1.2 billion EBIT (earnings before interest and taxes) loss in the Model e division. Internally, it’s essential for Ford to understand the performance of the Model e business. But why share these details so openly with analysts?
Among legacy automakers, only Ford provides such specific financial disclosures related to its EV operations. Competitors like GM, BMW, and Mercedes-Benz do not separate profit and loss statements exclusively for their EV divisions. Ford should emphasize to investors that it is an automotive company—not just an EV company. For instance, in its most profitable product line, the F-Series pickup truck, Ford sells gasoline, diesel, and EV models. It’s the entire pickup franchise that drives the company’s profitability, not just its EV variant, the Lightning.
Even Apple, which recently launched its Vision Pro augmented reality (AR) glasses, does not disclose product-specific losses for this new line. Certainly, the Vision Pro team at Apple is aware of its financial performance, but Apple leaves financial analysts to make their own guesses on Vision Pro’s profitability.
Ford could benefit from following the financial reporting approach of both its automotive competitors and Apple, the world’s most valuable company.