When the venerable US carmaker Ford celebrated its centenary in 2003, the young Californian entrepreneur Elon Musk was busy with completely different things. He was looking for partners who shared a vision that had been floating around in his head for a long time – the development and construction of mass-market electric cars. We all know how the story went on: Today, Musk’s e-car group Tesla is worth more than 880 billion dollars on the stock exchange, while Ford is worth just over 70 billion, even though the old top dog is still four times as many Cars sold like the impetuous rival. What may seem paradoxical to some unbiased observers is only logical from the point of view of stockbrokers: one company is the future, the other the past, and the money is distributed accordingly – a problem that all established car manufacturers in the world are confronted with.
In search of a similarly high stock market reputation and more favorable financing conditions, Ford boss Jim Farley is apparently thinking about a fundamental restructuring of his group, including splitting it into two companies. At least that’s what the usually well-informed US news agency Bloomberg reports. With such a construction, one company would be responsible for the construction of electrically powered cars, the other for the production of cars with combustion engines. If you applied the model to the financial sector, one company would be the Good Bankthe other the bathroom bank, which will turn the legacy of the group into money, but will eventually stop operations. Other large companies have also split up in the past after the business areas had become too complex or priorities had changed. Recent examples include Siemens and Daimler.
According to Bloomberg, Ford CEO Farley is having various models examined, including the actual sale or IPO of one of the two divisions, or an internal division of the divisions under some kind of Ford holding company, with the latter appearing more realistic. But no matter which variant he chooses in the end: it will not work without difficulties.
Company heirs, unions and politicians will follow Farley’s course with eagle eyes
First of all, there are the heirs of the company founder Henry Ford, who still have three seats on the group’s board of directors, with Bill Ford as the chairman of the board and continue to have a decisive influence on the fate of the company via a special share structure. They should have little interest in losing that influence. Even a division of the divisions within the group would not be easy, because in some factories cars with both electric and petrol engines are built. Many engineers are also involved with both techniques. In addition, Ford is increasing sales of electrically powered cars, sport utility vehicles and pick-up trucks. Gasoline sales will still make up the lion’s share of sales for the rest of the year.
Nevertheless, major shareholders are calling for reforms because even newcomers like the electric car manufacturer Rivian can now compete with Ford in terms of market value. The rivalry is almost more painful for Ford than that with Tesla, because Rivian delivered just over 1,000 cars last year. At Ford, on the other hand, it was 3.9 million. But above all: Rivian primarily builds pick-up trucks, i.e. large, heavy, often four-wheel drive cars with loading areas. The company is thus attacking its much larger rival on its very own territory, because Ford’s F-150 has so far been the best-selling pick-up truck in the USA.
Ford itself said in a written statement that it has no plans to spin off the construction of electric cars or combustion engines into a new, independent company. However, that doesn’t have to mean anything, because Farley himself had recently indicated several times that he did not intend to make any compromises in the future strategic orientation of the group. If you want to successfully build electric cars, you have to adapt to a “fundamentally different” business than in the past when it comes to building the car, the way you inspire customers and the question of which engineers and designers you actually need he when presenting the latest business results. Triple steps are no longer enough, Ford will rather “act decisively and at the same time display a whatever-it-is-necessary-gets-done mentality”.
However, the Ford family and shareholders are not the only ones wanting to have a say in the change: the powerful UAW auto union, thousands of dealerships and politicians will also be watching Farley’s next move closely.