The 5.5 Billion Reasons Why Ford Just Made a Smart Decision for Investors

The 5.5 Billion Reasons Why Ford Just Made a Smart Decision for Investors

It’s easy for companies to make dramatic statements and commitments about their future strategies, but when new information becomes available, they must be just as willing to adjust their commitments. This is the scenario Ford Motor Company (NYSE:F) is faced with its electric vehicle (EV) strategy in Europe, where it has already made a rather dramatic statement.

But here’s why he has 5.5 billion reasons to change that strategy, and it looks like he has.

A dramatic commitment?

In 2021, Ford announced its goal of selling only electric vehicles in Europe by the end of 2030. This was ambitious compared to the European Union’s goal of only allowing the sale of electric vehicles after 2035.

But with new information available, businesses must remain flexible to maintain the health of their operations and bottom lines. This new information includes higher interest rates and slowing demand for electric vehicles, among other variables.

Ford appears to be keeping that commitment and now admits it will continue to sell vehicles with internal combustion engines after 2030 if demand exists. According to Automotive NewsMartin Sander, head of Ford’s passenger car business in Europe, said: “If we see strong demand — for example for plug-in hybrid vehicles — we will offer them.”

Why is this good news?

Ford’s withdrawal from its European EV focus is good news, as the biggest drag on the company’s profits is undoubtedly its Model e unit, which is its EV division. This unit is expected to lose $5.5 billion in 2024.

A source told Bloomberg that Ford lost more than $100,000 per electric vehicle in the first quarter, more than double the loss from the previous year. That’s a high price to pay just to sell electric vehicles in today’s tough and competitive market.

In addition to rolling back its goals in Europe, Ford is doing other things to reduce those losses. Even though it has reduced vehicle costs, the price war triggered by You’re here’The country’s aggressive pricing tactics have largely offset gains from cost reductions.

Ford also adjusted plans for its electric vehicle battery plant in Marshall, Michigan, and it will now be much smaller than initially thought. He also cut spending on electric vehicles, delayed the arrival of new electric vehicles, reduced prices and other measures, for a saving of about $12 billion.

What it all means

Perhaps the biggest takeaway is that management is no longer as arrogant and stubborn as it was in past decades, when it ignored trends and stayed in its own lane. Rather than repeating those error-filled years, management is now clearly willing to change its approach to respond to the market, and that’s great news.

These $5.5 billion in losses are reason enough to slow down its approach to electric vehicles and rely on its traditional business and its growing commercial business, Ford Pro, until the time is right to inject resources into the sector. the future of electric vehicles. And all of this should be good news for investors.

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Daniel Miller holds positions within Ford Motor Company. The Motley Fool ranks and recommends Tesla. The Motley Fool has a disclosure policy.

The 5.5 Billion Reasons Why Ford Just Made a Smart Decision for Investors was originally published by The Motley Fool

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