Ford expects the EV business unit to lose $3 billion this year

    Any question as to which business sector is and isn’t profitable at Ford is no longer a mystery.

    Ford lost about $3 billion over the past two years on its electric vehicle and digital services business, a unit now known as the Model e, and is not expected to be profitable until late 2026 (on an adjusted basis that includes costs such as removes taxes) with an 8% pre-tax profit margin, the company said Thursday. Meanwhile, the commercial and traditional internal combustion engine business units were profitable enough to offset the losses incurred from making and selling electric vehicles.

    In other words, profits generated from the sale of internal combustion engine trucks, cars and SUVs have and will help fuel Ford’s push toward electric vehicles.

    Ford lifted the hood Thursday on how the restructured 119-year-old company will operate and, most importantly, report its financials. Earnings reports, which Ford has adjusted for 2021 and 2022, are no longer broken down by region. Instead, financial reports, which include revenues, gains and losses, margins and adjusted earnings, will detail three global business segments, including EV and digital services, traditional internal combustion engines and commercial vehicles.

    And while Lawler stressed to that this isn’t just an accounting exercise, the numbers do provide new insight into the company’s financial strength.

    “If we just did business as usual, I think we felt like the company wouldn’t change enough, the dynamics within the company wouldn’t have changed,” Lawler said in a recent interview explaining the decision to restructure. explained. “It’s about focusing. It’s about speed and responsibility. And I don’t think we would see the clock speed increase.”

    Last March, Ford announced plans to restructure and split the company into three segments: Ford Blue for its internal combustion engine and hybrid vehicles, Ford Pro for its commercial operations, and Ford Model e, which will offer electric vehicles, advanced driver assistance systems and digital services. includes. The recently restructured company and accompanying financials also break out of Ford Credit, the company’s financing arm, and Ford Next, where its longer-term pre-revenue businesses such as the newly formed Latitude AI sit.

    The result? For now, the EV and digital services sector, which Lawler says should be considered a startup, is unprofitable, while the other two are gaining ground, based on adjusted revenues.

    To summarize, Ford reported in February that it earned $10.4 billion on an adjusted basis for all of 2022. Ford’s net income on adjusted earnings before interest and taxes in 2021 was $10 billion. On Thursday, Ford released revised earnings, showing the Model e unit lost $900 million in 2021 and $2.1 billion in 2022.

    Meanwhile, Ford Pro saw profits jump from $2.7 billion in 2021 to $3.2 billion in 2022. Ford Blue brought in the bulk of the profits, with $3.3 billion in 2021 and a jump to $6, 8 billion by 2022.

    The automaker predicted that its Ford Blue unit will reach $7 billion in profits by 2023 on an adjusted basis. Ford Blue will approach $6 billion in profit, almost double its 2022 revenues. And Model e, its electric vehicle and digital services unit, is expected to lose $3 billion in 2023, a loss driven by a number of capital projects, including the construction of new factories, such as the $5.6 billion BlueOval city complex in Tennessee.

    The company reiterated that Ford Model e will be profitable before tax with an 8% pre-tax profit margin by the end of 2026. That milestone, which is linked to the planned production rate of electric vehicles of 600,000 units by the end of 2023 and two million by the end of 2026.

    Ford also confirmed that it expects full-year adjusted EBIT to be $9 billion to $11 billion and adjusted free cash flow to be approximately $6 billion.

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