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Ford Restructures Business With Its EV Split Up

Ford announced yesterday it would be splitting up internal combustion engines (ICE) and electric vehicles (EVs) into two separate units.

Ford (NYSE: F) has raised the stakes for electric vehicles (EVs) once again, upping its global sales projections from 40% to 50% by 2030, as well as increasing its EV investment budget to $50 billion through 2026.

This time Ford decided to split autos into entirely separate units though too; Ford Blue, for internal combustion engines (ICE), and Ford Model E, for EVs and connectivity. 

The best of both worlds.

Some investors are after hyper-growth, some are after stable, almost guaranteed sales with a secure dividend. More often than not, investors are sacrificing either growth or cash flow when adding to their portfolio additions. Well, now they’ll be getting both in Ford.

Break-ups like these have actually proven to increase shareholder value and market returns the majority of the time, as managerial teams can give their sole focus to one unit which often operates very differently. The two segments will require different funding and will report wildly different margins as operations bloom, so all in all, the move makes sense.

Ford will maintain its traditional ICE segment, while still investing in the unit considerably — Jim Farley made no mistake letting investors know that. Let us not forget, Ford’s F-Series, Explorer, and Escape models are among the top 25 best-selling vehicles in the U.S., having sold more than one million units during 2021, accounting for roughly a quarter of total sales worldwide. But, “Ford Blue is going to be the profit engine” used to drive growth in EVs according to Stuart Rowley, Chief Technology and Quality Officer.

Ultimately, EVs can’t exist without ICE just yet. Ford has shown strength in its core model, but not at the expense of innovation, and this could be the deciding factor to see it hike to the upper tier of the EV chain.

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