What Tesla and other carmakers can learn from Ford
JIM FARLEY relishes a challenge. In January Ford’s boss, an enthusiastic amateur racer of historic cars, made his professional debut on the track in a powerful modern Mustang GT-4. Yet the risks of tearing round a circuit are nothing compared with manoeuvring Ford, which on June 16th will celebrate 120 years in business, through a new age of carmaking. Ford, like other legacy firms, is trying to reinvent itself to compete in an era of electrification and software-defined vehicles. It faces established rivals as well as newcomers, foremost among them Elon Musk’s Tesla. Amid this packed grid, Mr Farley is charting a singular racing line.
Established carmakers have long been written off by investors as clunkers, characterised by low growth, low margins and an unmatched ability to destroy shareholder value. Between 2014 and Mr Farley’s taking the wheel in October 2020, Ford’s market capitalisation shrivelled by three-fifths, to $27bn. After a euphoric spike in early 2022, when it hit $100bn on enthusiasm about the company’s electric plans, it is back down to $55bn. But as befits a racing driver, Mr Farley is undaunted. He has reorganised the company into three units, focusing on electric vehicles (EVs, in which Ford plans to invest $50bn between 2022 and 2026), on high-margin petrol-driven ice cars and on Ford’s world-beating commercial-vehicle business. He thinks that Ford can boost operating margins from 6.6% in 2022 to 10% by 2026 and turn EV-related losses, which are forecast to reach $3bn in 2023, into profits.
Mr Farley’s plan hinges on learning a thing or two from the disrupters, whose contribution to the industry he is quicker to acknowledge than most other car bosses are. “Tesla has influenced a lot of our thinking,” he admits. Most important, he has a clear idea of where emulating rivals plays to his company’s competitive advantage and, critically, where it does not.
2023-06-13 13:40:43
Source from www.economist.com