A Pivot, And A Hedge

ROMULUS, MI – FEBRUARY 13: Ford CEO Jim Farley pats a Ford F-150 Lightning truck before announcing at a press conference that Ford Motor Company will be partnering with the world’s largest battery company, a China-based company called Contemporary Amperex Technology, to create an electric-vehicle battery plant in Marshall, Michigan, on February 13, 2023 in Romulus, Michigan. Part of a multi-billion dollar investment, the battery plant will provide approximately 2,500 jobs. (Photo by Bill Pugliano/Getty Images)

Getty Images

Ford Motor Company stunned the U.S. automotive sector this week with its announcement that it would sustain $19.5 billion in special charges in what the Wall Street Journal described as “Detroit’s Biggest EV Bust.” Ford CEO Jim Farley did his best to put a positive face on the financial carnage, rolling out a hybrid-centric strategic pivot that he claims is “gonna be better for the company’s profitability, shareholders and a lot of new American jobs.”

Farley and his management team, of course, are responsible for adopting the strategic approach which produced multi-billion-dollar losses in recent years. It was a response to the Biden administration’s efforts to force automakers to make battery electric vehicles the central focus of their model lineups whether U.S. consumers wanted to buy them or not.

Beginning in 2021 and bolstered by hundreds of billions of dollars for EV subsidies contained in both of President Joe Biden’s crowning legislative achievements – the Infrastructure bill of 2021 and 2022’s Inflation Reduction Act – the Biden program ensnared carmakers in a carrot-and-stick approach. The subsidies were the carrots, with stick made up of a raft of heavy-handed command-and-control regulations invoked by the EPA and other federal bureaucracies.

Ford’s Pivot To Hybrids

“It’s a bold new plan designed to accelerate America’s transition to all electric vehicles on the road, to developing a charging infrastructure, and to grow American jobs through clean manufacturing,” then- Senate Majority Leader Chuck Schumer said in March 2021 in an effort to help the Biden White House build public support. “And the ultimate goal is to have every car manufactured in America be electric by 2030, and every car on the road be clean by 2040.”

Seeing the handwriting on the wall, Ford, GM and other big domestic car companies jumped in with both corporate feet, rolling out steady streams of announcements of major, 10-figure investments in new plant and equipment and establishment of supply chains needed to help meet the aggressive Biden EV goals. As Farley admits, his company’s decision to focus on high-priced electric versions of existing models like the F-150 Lightning pickup (which will now be cancelled in the revised plan) and the Mustang Mach e proved a failure, resulting in an escalating series of annual losses for its Model e EV business unit.

In 2022, Model e’s loss came to $2.2 billion. That rose to $4.7 billion in 2023, $5.1 billion in 2024, and another $3.6 billion across the first three quarters in 2025. Thus, even before this week’s announced $19.5 billion in write-downs, Ford had already incurred $15.6 billion in electric vehicle losses with this year’s 4th quarter loss still to be recorded. Biden’s EV dreams had already proved a manifest failure even before Donald Trump defeated Kamala Harris last November to win a second term in office. Now, as Trump has gone about reversing the Biden-era regulatory regime and ending the costly IRA subsidies, the dream is dead in the water.

For carmakers who had based an entire corporate strategy on a set of policies which have now mostly disappeared, the need to execute a strategic pivot is obvious. But, as Ford’s announcement demonstrates, it will involve enormous cost and risk in the months and years ahead. Corporate management teams must also try to gauge how aggressively they can safely respond to this latest sea change in federal policies while also hedging their bets in case voter attitudes shift again and elevate another Democrat to the presidency as soon as 2028.

Both the required pivot and a very real hedge can be seen in the revised strategy Farley touted in an interview with CNBC. “We’re going to build up our whole lineup of hybrids,” Farley said. “These really expensive $70k electric trucks, as much as I love the product, they didn’t make sense. But an EREV that goes 700 miles on a tank of gas, for 90% of the time is all-electric, that EREV is a better solution for a Lightning than the current all-electric Lightning.” That new focus on hybrids and EREVs – which include a gas-powered generator that recharges the battery while the car is running – is the pivot.

Ford’s Hedge Against Future Policy Shifts

The hedge comes in the company’s intent to continue producing battery electric vehicles, or BEVs. The Biden government wanted pure electric vehicles and discouraged the making of too many hybrids and other semi-electric technologies in order to have its way. Ford’s plans to keep making the Mustang Mach e while also introducing an array of new, cheaper BEV models is a clear hedge against the advent of yet another major policy shift coming as soon as four years from now.

But a BEV at any price remains a BEV, with all the limiters to consumer desirability that have plagued that type of car since it was first introduced to the market in the mid-1890s. Car buyers remained concerned, for example, about range limitations that pop up whenever the weather conditions are less than ideal. The industry is still plagued by periodic stories of EV batteries spontaneously combusting and sinking freighter ships or burning down homes. Owners of electric vehicles must play far higher rates for car and even homeowner’s insurance than drivers of traditional internal combustion engine (ICE) vehicles.

The EREVs and hybrid cars which form the centerpiece of Ford’s revised electric strategy solve for the range limitation issue. But even they are subject the other issues that affect BEVs.

Fortunately for Ford, its huge losses in its Model e division have been more than offset by strong demand for its lineup of pickups, SUVs, and other traditional ICE vehicles, enabling Farley and his team to at least report quarterly and annual profits. It’s a real testament to the attractiveness of the company’s model lineup that its sales stayed strong even during the four years of high inflation, during which the entire federal government and the industry itself invested so much time and policy bullying to convince drivers to move to electric models.

Ford’s revised strategy strives to account for all the pressures and factors at play, some of which agitate in favor of its staying invested in the electric market at least through the next presidential election. It is seemingly a sensible approach, but it does raise valid questions about the wisdom – or lack thereof – of the federal government trying to force companies to risk tens of billions of dollars in capital to make and try to sell products that most consumers simply do not want to buy.