Ford CEO Jim Farley bets on new structure, himself

DETROIT — Nearly a year and a half into the job, Ford Motor Co. CEO Jim Farley is making the kind of transformative move that ultimately could define his legacy. He's splitting Ford's vehicle business in two and putting himself in charge of the half that is expected to largely define the automaker's future.

Farley's intent is to focus his team's attention on the unique needs of each half, leading to quicker decision-making and greater profits.

"The reality is our legacy organization has been holding us back," Farley said on a conference call. "We had to change."

The idea isn't necessarily new; both Farley and his predecessor, Jim Hackett, were selected for the top job specifically to get Ford moving faster to better challenge new and old competitors. Hackett even similarly divided his leadership team between traditional manufacturing and future-focused mobility initiatives.

But Farley's changes are expected to go further.

He plans to split the talent among the various units so purchasing teams specializing in combustion vehicles, for example, aren't asked to acquire specific parts for electric vehicles they might not have experience with. Designers, he said, will no longer be asked to simultaneously work on projects with different needs based on specific powertrains.

"Ford feels its current structure cannot optimize the capability of both sides of the house," Morgan Stanley analyst Adam Jonas said in an investor note. "Too many competing objectives and complexity — needed to focus both missions."

Still, Farley wants the two divisions to work in tandem in some respects, a potentially challenging goal for a company that traditionally has struggled to break down silos and been slowed by corporate bureaucracy. He named himself president of the EV business, Ford Model e, to help ensure that happens.

"Make no mistake about it: Even though this is a big change from where we've been, we are not going to create separate brands," Farley said. "We are not going to compete with each other. In fact, that's why I'm leading the electric business as the CEO because I cannot allow any of that to happen at Ford."

The combustion business, now called Ford Blue, is headed by Kumar Galhotra, previously president of the Americas and International Markets Group.

While each side will have its own product development, sales and distribution teams, Galhotra said manufacturing and marketing likely will share responsibilities and split time between both divisions.

"We've gone through each position and talked through where it makes sense to have them dedicated to one team or the other and where we're going to have teams that serve the entire enterprise at the same time," he said.

As part of the changes, Ford is boosting its EV investment plan by $20 billion, to a total of $50 billion through 2026.

The company now expects a 10 percent adjusted pretax earnings margin by 2026, which is nearly double the 5.4 percent it posted for 2021. Part of that includes saving $3 billion in structural costs within Ford Blue.

The increased EV investment will lead to more vehicles; Ford plans to produce more than 2 million EVs by 2026, accounting for 30 percent of its global volume. The automaker expects half of its volume by 2030 will be EVs.

Wall Street analysts remain skeptical, as they often have been of the Detroit 3's efforts to keep up with a changing industry.

"While we cannot rule out a 2 million unit number," Jonas wrote, "at this stage we simply do not have confidence in the ability for Ford (or GM for that matter) to secure the materials (i.e. metals), battery machinery/manufacturing/supply chain in sufficient quantity and quality/efficacy to deliver on an EV number anywhere near this level within four years."