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Ford says it will stop competing in over-served markets, won't be all things to all people

The company, according to its CEO, has been “stuck in a box,” with thin profit margins, weak growth and low stock valuation
Last Updated 22 May 2023, 15:43 IST

Ford CEO Jim Farley says the company will stop competing in over-served market segments and instead will place big bets on connected vehicles and digital services.

The days of Ford being all things to all people are over, Farley said at the company's capital markets day event Monday.

The company, he said, has been “stuck in a box,” with thin profit margins, weak growth and low stock valuation.

Ford, Farley said, will emphasise software and services as well as iconic vehicles such as pickup trucks, large SUVs, commercial vehicles and advanced second-generation electric vehicles.

He said the company is eliminating waste to close a cost gap with the best in the industry with a “lean disciplined operating system” that reaches into all Ford factories.

Farley said by focusing on software, services and Ford's strengths in products, the company won't be as vulnerable to a downturn as in the past. He said the company has let complexity “overrun our business as we tried to be all things to all people.”

“We will focus on growth segments where we lead,” Ford Blue President Kumar Galhotra said.

Farley says Ford will be competing differently, going for tailored ownership experiences rather than “jockeying for slivers of market share” with complex vehicles in over-served market segments. He said the company will go to non-negotiated prices, working with dealers.

Ford has said it will get to a 10 per cent pretax profit margin in 2026. It reiterated 2023 full-year guidance of $9 billion to $11 billion in adjusted pretax profits.

Ford Motor Co. also said it cut deals with a number of companies to supply its rapidly growing electrical vehicle division, Ford Model e.

Ford will get more than 100,000 metric tons of lithium hydroxide from Albemarle, based in Charlotte, North Carolina. Compass Minerals International announced a multiyear deal to supply Ford with up to 40 per cent of the battery-grade lithium carbonate coming from its project in Utah.

EnergySource Minerals will supply the carmaker with lithium hydroxide from a new site in Imperial Valley, California, and Nemaska Lithium, a Canadian miner, will supply Ford with 13,000 tons of lithium hydroxide annually for 11 years.

Because the materials are coming from the US and Canada, it ensures that Ford's electric vehicles will qualify for new federal tax credits, making them more competitive.

Ford has split itself into three business units, Ford Blue for gasoline-powered and hybrid vehicles, Ford Model e for electric vehicles and digital products, and Ford Pro, the company's commercial vehicle business.

“I'm not here to tell you that we're under valued,” Farley said Monday. “You make your own decision.”

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(Published 22 May 2023, 15:43 IST)

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