Ford Will Cut Traditional Cars By One-Third, Redeploy Capital To Electric, Self-Driving

Putting their money where they think the future is.

But will the technology strategy convince business partners and customers? JL


Patti Waldmeir and Peter Campbell report in The Financial Times:

Ford w(ill) cut capital expenditure on internal combustion engines by a third, and redeploy that capital into electrification, on top of the $4.5bn the company already planned to spend on electric cars. (It) will also reallocate $7bn of capital from cars to more profitable sport utility vehicles and trucks, a move likely to the eliminate some car models. Ford will focus not just on self-driving cars for ride hailing but for moving goods and service delivery.
Ford’s new chief executive Jim Hackett promised to cut $14bn in costs and divert investment from traditional cars and internal combustion engines to develop more trucks and electric cars.In a long-awaited strategy update to analysts in New York, Mr Hackett battled market perceptions that the company has been slow to prepare for a future dominated by shared, environmentally-friendly autonomous cars.He said Ford would cut capital expenditure on internal combustion engines by a third, some $500m, and redeploy that capital into electrification, on top of the $4.5bn the company already planned to spend on electric cars.
 The Detroit automaker will also reallocate $7bn of capital from cars to more profitable sport utility vehicles and trucks, a move that is likely to lead to the elimination of some car models. Ford did not identify any nameplates that would disappear.Some jobs are likely to be lost and some factories could close, according to people close to the company.  Jim Hackett has made known his aim to renew a focus on innovation © BloombergThe Detroit carmaker said it will cut automotive cost growth by 50 per cent by 2022. That includes cutting the costs of materials by $10bn and saving $4bn on engineering costs compared with its previous plans by increasing the use of common parts across all vehicles. The new Ford chief, who was previously head of the futuristic Ford Smart Mobility division, replaced Mark Fields unexpectedly in May amid sliding profits and share price performance, and concerns that Ford lags behind rivals in the race to develop electric and autonomous vehicles. On autonomous cars, “it’s more important to be ahead than to be first”, Mr Hackett said. Ford will focus not just on self-driving cars for ride hailing, as many rivals are doing, but for moving goods and service delivery as well. “Hackett and his team are beginning to lay out a clearer plan of where the automaker is going with its current product portfolio — more utilities and fewer cars — and with future technologies like electric vehicles and autonomous vehicles. Maintaining profits while straddling the present and the future will be tricky,” said Michelle Krebs of Autotrader.comFord reaffirmed its 2017 full-year financial guidance, which called for a drop in profits, and said it would provide its 2018 outlook in January. Mr Hackett laid out his vision for how the 114-year-old carmaker can make enough money from the brutally competitive business of selling cars to invest the sums needed to compete in a world increasingly turning against internal combustion engines. Investor concerns have weighed on the carmaker’s share price for months. Its stock had fallen 1 per cent over the past year compared with a 32 per cent rise for GM over the same period, and was little changed in after-hours trading after Mr Hackett’s update. Ford’s North American automotive profits were down 19 per cent to $2.2bn in the second quarter.At a time when most major auto companies are rushing to cement partnerships with technology companies, Ford said it would be open to more such arrangements but gave no details. Last month Ford signed a deal with Lyft to help deploy self-driving cars and in February it invested $1bn in Argo AI, an artificial intelligence business. It has otherwise mostly shunned the collaborative deals made by other carmakers. Last year Ford said it would introduce 13 electrified models by 2020 as part of a $4.5bn investment, including a small fully electric sport utility vehicle, but GM on Monday said it would have at least 20 fully electric models by 2023, and VW has committed to 50 battery models by 2025. Ford said its focus was on making electric vehicles profitably, not on the number of models.