DETROIT (AP) — Ford Motor Co.'s electric vehicle business has lost $3 billion before taxes during the past two years and will lose a similar amount this year as the company invests heavily in the new technology.

The figures were released Thursday as Ford rolled out a new way of reporting financial results. The new business structure separates electric vehicles, the profitable internal combustion and commercial vehicle operations into three operating units.

Company officials said the electric vehicle unit, called “Ford Model e,” will be profitable before taxes by late 2026 with an 8% pretax profit margin. But they wouldn't say exactly when it's expected to start making money.


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Chief Financial Officer John Lawler said Model e should be viewed as a startup company within Ford.

“As everyone knows, EV startups lose money while they invest in capability, develop knowledge, build (sales) volume and gain (market) share,” he said.

Model e, he said, is working on second- and even third-generation electric vehicles. It currently offers three EVs for sale in the U.S.: the Mustang Mach E SUV, the F-150 Lightning pickup and an electric Transit commercial van.

The new corporate reporting system, Lawler said, is designed to give investors more transparency than the old system of reporting results by geographic regions. The automaker calculated earnings for each of the three units during the past two calendar years.

Model e had pretax losses of $900 million in 2021 and $2.1 billion last year, and it is expected to lose $3 billion this year. In the past two years Ford has announced it would build four new battery factories and a new vehicle assembly plant as well as spending heavily to acquire raw materials to build electric vehicles.

By the end of this year, the company based in Dearborn, Michigan, expects to be building electric vehicles at a rate of 600,000 per year, reaching a rate of 2 million per year by the end of 2026.

Last year, the pretax profit margin for Model e was minus 40%, Lawler said. To get to a positive 8% by the end of 2026, the company expects economies of scale — spreading costs over more vehicles sold— to be worth 20 points of the improvement. Design and engineering improvements will bring 15 points, battery cost reductions 10 points and 3 points will come from other areas including federal tax incentives and raw material price reductions.


Wells Fargo analyst Colin Langan calculated that Ford would need $15,000 in cost savings per vehicle to get to an 8% profit margin. He asked what gives Ford confidence it can reach that number. “It just seems like quite a big number,” he said.

Lawler replied that Ford is looking at a whole new way of designing vehicles, focusing on energy efficiency, including aerodynamics. “Every decision is about optimizing energy efficiency so that we can get the smallest battery possible to hit the range target that we have for that vehicle,” he said.

Ford also will simplify its manufacturing process, maximizing common parts in next generation of EVs, saving over the current generation of repurposed internal combustion vehicle underpinnings. “There is a significant amount of opportunity in there to identify efficiencies and drive those home,” he said.

Ford's disclosure of the losses shows “ugly industry truths” that only Tesla is making a profit on electric vehicles, CFRA analyst Garrett Nelson wrote in an investor note.

“EVs are likely to be a material drag on near- and intermediate-term earnings,” he wrote. He maintained a “buy” opinion on Ford shares but cut his one-year share price target by $1 to $16.

Ford Blue, the unit that sells internal combustion and gas-electric hybrid vehicles, made just over $10 billion before taxes during the last two years. Ford Pro, the commercial vehicle unit, made $5.9 billion during those years, the company said.

For this year, Ford expects Ford Blue to post a $7 billion pretax profit, modestly better than last year. Ford Pro is expected to earn $6 billion before taxes, nearly double its earnings last year, Lawler said.


Ford was to present the new structure, announced last March, to analysts and investors on Thursday. Other business units include corporate, Ford Credit and Ford Next, a new business incubator. Shares of Ford slipped 0.5% Thursday.

Lawler said the company is changing the way it does business, not just doing an accounting exercise.

“After 120 years, we've essentially re-founded Ford,” he said. “We're embracing technology and competitive disruption in our industry, fundamentally changing how we're thinking, how we're making decisions, and how we're running the company.”

Copyright 2023 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed without permission.

Can't lose when the government will bail you out.

You mean from the never ending fund called the US taxpayer?

Osky

If they went to hybrids instead of straight to EV type vehicles the transitions would have been smoother you would think. Now forcing the average person to go straight EV it might turn into a running not running vehicle for those that can’t afford repairs like a new battery. You know it’s going to be a mess when the Government is so heavily involved.

X actly

More "go woke, go broke"?

Some guys I know with some insight into the energy industry did some quick math and concluded that if the US were to flip the fleet to all electric, it would take roughly 10X the generating capacity US has now and likely 100% of that would have to be nuclear. That, plus entire electric grid would have to be rebuilt to handle the load. Don't see any of that happening anytime soon.

As it stands now, going electric is same as running 90 miles an hour down a dead end street.

Having said that, if you accept that world stockpiles of oil and gas are finite, there will come a day of reckoning, so a long term permanent solution has to be worked out. Hopefully it is not the Richmond Valentine / Thanos solution where most of the world's population gets snuffed.

You have to find a loss somewhere to offset profits used to be the employee's

I'll start paying attention to EV's when they make a 4x4 truck capable of doing what an internal combustion engine 4x4's can do. Also, they must have a range of 350 miles or so, during the winter, with the lights on and all accessories running, and I must be able to refuel/charge in 10 minutes or less.
Oh, almost forgot, they must be affordable too.

The government doesn't have any money, it has to take it from us.

Heard from a ford salesman that the price on f-150’s went up $12,000.00 from last years model. Hopefully my 2019 holds up, I maybe driving it to my grave!

The government will have a token fleet of them and exempt themselves every chance they get when they can. This might be their biggest blunder but they don’t care they will make a buck either way or raise taxes to cover the issues they create.

Yup. Now be a good boy and pay up.

The last "Model E" Ford produced and put big dollars into was the EDSEL. Proudly named after Henry's son.

And be able to plow snow all day at zero degrees. I added another requirement for you, one that I require. OH, and haul a loaded horse trailer up and down the Rocky mountains here where I live.

Politicians forcing pension funds too invest into the whole “green agenda” is an apocalyptic mistake


Folks will go off the deep end when retirement funds begin going broke

Go woke,go broke!!

Look no farther than current events in France

It’s not about the environment never was it’s about forcing norms to fit what they are already heavily invested in to make them richer even if they know it’s a fool’s errand they have nothing to lose. No matter what way it goes they won’t lose they are steering the ship so every direction they make money one way or another.

When it starts to falter the subsidies kick in for another chance to make even more. That’s how you become a millionaire in DC today

Don’t worry, Ford will take the taxpayer funded bailout this time around.

One thing is though last year and this year the car companies will make pretty good money on selling gas powered vehicles because people are buying them to push off having to buy electric the next few years will be a different story, until people have to buy electric because of no other alternative.

Just think , all you need is one holdout , say like Toyota. If you have ICE vehicles for sale and nobody else does, you can make a killing.