Two's Complement: Jim Farley Says Ford Remains as One
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.
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