Farley predicts OEMs to fail amid electric transition

Ford CEO says it is the firm's Pro division, rather than its skunkworks project, that will mainly safeguard the OEM's future

Farley predicts OEMs to fail amid electric transition
Unsurprisingly, Farley sees Ford as unlikely to fall victim to any consilidation wave

Ford CEO Jim Farley has predicted that major automakers will collapse as the electric transition unfolds, as he tells analysts that his firm has had to "totally change the design standards for our EV components" as part of its so-called 'skunkworks' project.

When asked by analyst Toni Sacconaghi at the Bernstein Strategic Decisions conference if he anticipates "consolidation through people dropping out of the industry", Farley answered strongly in the affirmative.

"I do not think everyone makes it through," he says. "The most interesting case studies there are the ones in the short run are the all EV brands who do not have a nice profitable business where the capital markets they are facing a lot more challenging access to capital."

But Farley's confidence that Ford will come through this challenge, despite some ominous predictions from industry commentators that legacy manufacturers like the Detroit incumbents could be among the firms most likely to fall by the wayside, is in fact not based on the OEM's EV products themselves, but rather, Ford's Pro business which props up its loss-making Model e division.

"I think [EV makers] have to get fit because they do not have Pro. I have this amazing business called Pro. I wish everyone would value it like it deserves to be valued. But they do not have that opportunity.

"I think what you will see is companies either moving off their internally developed Gen 1 EV platforms because there is a new standard, and it is more fit or they will have, like Ford has done, a skunkworks team that tries to take advantage of that opportunity and build the fitness in the company," he continues.

And despite Ford itself being a prominent example of the drawbacks for OEMs of relying on hastily made first generation EVs, Farley cites the cases of "what happened with Mazda, after what happened with Kia" as valuable learning points for the company.

But the CEO says that Ford EV products will soon speak for themselves, after management repeatedly mentioned the need for Model E to "stand on its own" on the company's most recent quarterly call.

Farley told analysts that "it turns out we were maybe smarter than we actually intended to be with our skunkworks".

"It was actually required for fitness for cost to use a completely different supply chain, to totally change the design standards for our EV components, to go to vertically integrate and make the sourcing decisions to a lower part of the supply chain," Farley says.

Not all-in

But after Ford shelved $12bn of EV investment last year and began talking of matching production to demand, the progress with the skunkworks project has not stopped Farley from wavering in the firm's commitment to a solely BEV future.

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When asked about whether Ford's hybrid plans should be viewed as compliance-related stopgaps, the CEO stated that "I think we should stop talking about it as transitional technology on the powertrain side".

Farley also urged that developments in the EREV space in China indicate that "partial electrification is becoming more a bigger part of the solution".

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