Ford reveals new operating structure, $3B in losses expected for EV segment

Ford (F) gave investors and analysts today a peek behind how it will reorganize its business units and report financial performance.

Dubbed a “refounded” Ford, the company stated that it will report results using the business segments Ford Blue (gas, hybrid vehicles), Ford Model e (EVs) and Ford Pro (commercial products & services), and not by regional markets like in the past.

“We’ve essentially ‘refounded’ Ford, with business segments that provide new degrees of strategic clarity, insight and accountability to the Ford+ plan for growth and value,” CFO John Lawler said in a statement. “It’s not only about changing how we report financial results; we’re transforming how we think, make decisions and run the company, and allocate capital for highest returns,” he said.

Ford says it will explain how assets are assigned and revenue and costs are reported across the segments, and will also describe accounting for products supplied between segments. Ford uses the example of how vehicles sold by Ford Pro to its commercial customers will be built by Ford Blue or Ford Model e, and how that internal transaction will be reported.

Ford says it will also recast prior financial results in order to show how the accounting will work— 2022’s results will be recast by quarter, and 2021’s results will be broken down into the full-year’s performance.

For instance, Ford revealed that for the entire year of 2022, under the new segmentation Ford would disclose that the Model e EV segment lost $2.1 billion in adjusted EBIT last year, whereas Ford Blue made $6.8 billion, and Ford Pro made $3.2 billion in adjusted EBIT. Under the old segmentation, Ford only broke out performance by regional segment, and there was no transparency into how the separate segments operated.

Though Wall Street applauded Ford’s decision to break out reporting and reorganize the company, the bigger concern now will be whether Ford can show the EV segment is growing over time, and on the way to profitability.

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To that end, Ford announced a number of new financial targets, including:

• Reaffirmed full-year adjusted EBIT of $9 billion to $11 billion – and adjusted free cash flow of about $6 billion (Ford says it will have more on this at its Capital Markets Day in May)

• Reaffirmed 10% margin target for company adjusted EBIT (earnings before interest and taxes) by the end of 2026

• New 2023 segment-level EBIT expectations:

  • a full-year loss of about $3 billion for Ford Model e;

  • about $7 billion for Ford Blue

  • About $6 billion for Ford Pro

• Ford expects Ford Model e to approach break-even status (by a revenue minus certain variable cost basis), but that will be “more than offset on an EBIT basis by higher investments in new EV products and manufacturing capacity”

• Repeat its 8% EBIT margin objective by late 2026 for Ford Model e, “which is tied to planned global electric vehicle production run rates of 600,000 units by the end of 2023 and two million by the end of 2026”

When asked about the losses expected in the Model e business, Lawler said in a media roundtable that Ford is “investing in growth,” and that means long-term investments in new vehicles and plants will weigh on Ford Model E profitability next year. Lawler also said the company would show how scale and new platforms will eventually lead to profitability, and achieve that 8% EBIT margin target.

This is breaking news and will be updated following an interview on Yahoo Finance Live in the 9am ET hour with Ford CFO John Lawler.

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Pras Subramanian is a reporter for Yahoo Finance. You can follow him on Twitter and on Instagram.

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