Speculators on Wall Street (where else?) have been yammering about the possibility of Ford Motor Company creating a second company for its moving-at-light-speed EV business. To that end, CEO Jim Farley had one thing to say on Wednesday:
“We have no plans to spin off our electric business or our ICE business,” he told people assembled on a finance call.
It’s no secret that Tesla’s market valuation is the envy of all other auto manufacturers. Some feel the company is exceptionally overvalued while others feel they’re simply reaping the rewards of a strong brand image in certain quarters and their push to bring EVs to the mainstream. Think of Tesla what you will – and there are many flaws – but we can surely all agree that legacy companies would likely not have been spurred to EV action quite as quickly without Musk and his merry band of engineers.
Suits in corner offices at Ford, on the other hand, feel their company is grossly undervalued, because of course they do. This has led some to believe the Glass House will cleave the business into ICE and EV companies, a notion Farley has flatly rejected. What he did say, however, is that Ford has “too many people” and a lack of expertise in “transitioning our assets” before talking about waste in the company.
Any splitting of the Blue Oval certainly raises hairs on the necks of Ford family members, who have overseen the company for well over a century. Power is nothing without control, so the saying goes, and the Ford family surely does not want to relax its grip. Separating ICE and EV programs within the company is one thing; creating two distinct entities is something else altogether.
One other tidbit from Farley’s confab caught this author’s attention. While musing about perceived weaknesses, the CEO started talking about the dealer model and how those stores are stocked with vehicles.
“The first big move is going to be to pull inventory out of the system. Whether it’s dealers or us, no one likes to have finished inventory sitting around, it is ungodly expensive and our industry has put up with it for far too long,” he said. “We’re now in our biggest market, in the U.S., one-third of our sales are basically order-to-delivery now.”
That’ll get the attention of Dealer Principals – for better or worse. Few stores relish the thought of expensive floorplans, not to mention the incredible cost of overhead involved with maintaining huge storefronts and multi-acre lots. Nevertheless, dealers like to be in the driver’s seat, and Farley’s claim that 1/3 of sales are essentially factory orders undoubtedly caused a lot of ears to perk up in crow’s nest offices across the nation.
Circling back to market valuations – that great mystery of how much a company is worth on paper – Tesla climbed above the mythical $1 trillion mark before settling near $800 million this week. Ford? Less than one-tenth that sum.
[Image: Ford]
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Next stop: Petition state legislatures for direct sales outlets.
For Tesla, this is an uphill battle they have waged – and won – in many places. But when F, GM, and STLA try this, the dealers will crumble overnight.
Tesla didn’t do direct sales just for fun. They did it to save money – same as the center screen on the Model 3. Won’t be long before the big mfrs summon the courage to cut out the middleman costs.
As for the main topic of this story – it would be bad optics for Ford to show a bad P/L for either of the EV or ICE businesses. Much better to keep that laundry in the basement.
Wouldn’t be a bad thing to have direct sales.
Here’s to hoping the dealership model dies a quick death.
I know someone who’s family owns a few dealerships, they can’t decide to take the private jet to Aspen or Laguna Beach in the summer. That’s the markup you’re paying to the middleman.
You guys whining for direct sales crack me up. It’s never going to happen. None of the domestic or foreign brands are even considering it. Give it up already. You didn’t get a pony when you were a kid. You won’t get direct, fixed price sales as an adult.
As for Tesla, once they lose first mover status after every other legacy manufacturer brings higher quality, less expensive products to market and rips a giant chunk out of Elon’s backside you can bet on two things:
1. Tesla’s stock price will look like Peloton’s — which got creamed in large part because its ridiculously expensive direct to consumer sales model blew its numbers up once the fad wore off.
2. Some toilet stain like Carl Icahn will buy a few shares then demand seats on the board to push for the retail operation to be sold off to goose the stock and raise a bunch of cash.
Instead of whining about dealers — get your fingers out of your noses and learn how to buy a car instead. Man up. Grow up. Know the market price of the car you want to buy by checking online listings nationwide. Know what incentives are available. Know your usage patterns to see if a lease will work for you — if it does then you better know how they work as well. Know the cost of money by shopping around and getting pre-qualified at a good rate if you need a loan. If you have a trade either sell your car yourself or get CarMax and Carvana quotes ahead of time so you know the dealer offer you’re getting is competitive. And, last, but not least, learn how to grow a stinking backbone so you can get tough when you want to and walk when you need to.
Why you guys are whining for higher fixed prices is beyond me. You want pay sticker? Fine. Just go pay it already and shut up while people who know what they’re doing can save thousands. Because if you think the factory is going to pass those savings from the direct model to you than you’re even dumber than I thought.
Publish financials based on a 4-way split:
• EV
• ICE F-Series
• ICE Everything Else
• Ford Motor Credit
Then try to avoid unfavorable comparisons between the second and third categories. (This is why Jim Farley uses phrases like “too many people” and ‘transitioning assets.’)
“ICE Everything Else” is why Ford dumped sedans in the US, but I suspect their SUVs do pretty well.
The Maverick, though – I believe the hybrid’s popularity is directly related to its price, and its low availability is directly related to its margins. Not to mention the fact that every Maverick sale is potentially a lost F-series sale, unless Ford believes people don’t cross-shop them. Actually, my son is cross-shopping the hybrid Maverick and the low-end Lightning.
Internally, Ford won’t be celebrating Maverick sales if the F-series slips.
Here is the problem (if there is a problem): If a U.S.-market nicely-loaded upper trim F-series does very very very well (and it does) and a U.S.-market SUV does pretty well (and it likely does) then how do we end up with not-so-great overall results [if we had a ‘normal’ year to work from which we don’t].
Second page, third column from the right here:
https://tinyurl.com/24y39c6j
• From a sales volume perspective, we have some heavy hitters and we have everything else. There is a lot of everything else. In the ‘car’ business [ha] everything else still requires messy capital-intensive things like dedicated stamping dies. Is the problem everything else? I don’t know.
Page 12 here:
https://tinyurl.com/yc2nfbew
• Take the third line divided by the first line. Is the problem Ford Credit? No, the problem is not Ford Credit (and never ask this question again – it makes us look stupid). [Ford Credit is not the problem and will never be the problem unless interest rates increase which of course will never happen.]
• Is the problem things like train stations? No, not really – none of that is big enough to be a real problem.
• Is debt a problem? Nevermind let’s don’t answer that.
Scroll to page 3 and scan the table at the top of the page.
• Is the rest-of-word outside North America a problem? Well it ain’t great if we look at full-year EBIT margin. But in terms of absolute EBIT it’s all very nearly a wash.
“Rest-of-world” (blame my latest replacement laptop keyboard which has an overly-sensitive llllllll key right there on the home row)
I am surprised someone who appreciates well built things isn’t running an IBM Model M or even an F.
My AT model F is pushing 40 and still rock solid.
I despise modern keyboards. Even modern mechanical ones. LED keys are the computer equivalent of start/stop on cars.
Replacement laptop keyboard…. You wouldn’t be a Mac user would you? I’m on my third on my company provided MacBook.
My experience with the System/360 (punch cards) was ok I guess, but COBOL is… suboptimal. IBM is the devil, and your keyboard sucks.
Steve Jobs was a long-haired hippie college-dropout drug user.
My home laptop is nothing special, but I have made some Millennium Falcon-level tweaks/modifications/repairs/reinforcements and would like to hang onto it for awhile longer.
At my last corporate job (Finance), I had three company-issued laptops, two real keyboards and a couple of large monitors on my desk (5 screens total). I could do email/coding/whatever on the one machine while the other machine ran my code and the third machine did a long involved calculation on another ‘system’ built by the ‘professionals.’
The IS/IT department kept trying to take away my ‘extra’ laptops (stupid unimaginative conformists). [Yes I’m special – make a damn exception.]
The vast majority of IS professionals are terrible at their jobs.
Bonus: I could actually do most of my job as well or better from home (avoid the slackers in the office) but management wanted to fight me on that.
Completely disagree about the Maverick sales. Many of us who ordered a Maverick would not be buying an F series. That is like saying those who buy Hyundai Accents would be customers for a Genesis sedan if the Accent didn’t exist. No I would not buy a Ford and I was not going to buy a Ford or GM but the Maverick I am buying. I would have gotten a Santa Cruz. F series sales will only slip at the expense of Ram not Maverick. Ram has been more aggressive in their marketing and sales and has taken the No 2 spot from Chevy. Ram will expand their production when the shortages easy and Ford will be caught flat footed if their new business model is customer orders with customers waiting indefinitely for their new trucks. Customers will get impatient and go to Ram.
if you NEED an F150, you will buy one. theyre going to be picking up sales from chepskates who want a versatile new vehicle with a warranty and 40mpg.
ballers will settle for nothing less than a F350 diesel king ranch
The problem with direct sales is how are you going to test drive EVs, how delivery will happen? Does EV require service by trained technician? Probably not that much. I think EVs will be similar to HVAC systems so you may not need dedicated dealer but small family owned company serving several manufacturers and some other company which maintains fleet of EVs from various automakers to test drive, compare and choose EV before filling order on cell phone.
I test drove a Model 3 at Tesla store, and they can also take your trade, and service their cars.
The difference is that Tesla owns the local store, and so it can manage costs better.
As long as you can have direct sales then this is not a problem. Having a place to test drive and service an EV doesn’t mean there needs to be the traditional dealer franchise. Nothing is carved in stone that this system cannot be changed.
One-third of Tesla value is hype which Wall Street thrives on. Also, Tesla doesn’t have legacy costs like pensions and medical plans for retirees which drag on GM, F, & STELLA. Moving to EVs will cost billions. Getting them ironed out while relying on ICE cash flow precludes any type of split.
From what I’ve seen, STELLA has a runaway hit with its completely new Fiat 500 EV; all rave reviews. Ford goofed with the Mach E; should have been marketed as a new type Taurus/Explorer of the 21st century, not a sudo Mustang. Ford is relying on the Maverick to clarify the message. Quality & reliability are the big question with the Cadillac Lyriq. Hope the current track record isn’t inductive of the future.
Once the big three move past 50% EV, Tesla will be at a cross roads. Move upscale with premium only models or develop a tiered system (luxury versus every man EV). At that point, Tesla will lose much of the hype and luster as mentioned above while battling it out for market share like the rest of the pack.
I am interested in the Cadillac Lyriq but quality and reliability are my main concerns along with will Cadillac be around and even if they are will they drop this model after a few years. My wife and I like the Lyriq and it appears that GM will price it competitively but we will wait to see what happens with the Lyriq. The Lyriq is more appealing to us than Tesla and the Mach E.
The big 2.5 should set up tracking stocks for their electric operations. Same company. Separate books. Separate valuations.
By the way, here’s a chart of global EV sales over the last 11 years. There’s a definite pattern…
https://images.hgmsites.net/hug/global-ev-sales-and-market-share-2010-2021-from-iea-report_100829030_h.jpg