Ford slows EVs, sends a truckload of cash to investors

DETROIT: Ford is slowing investment in new EV capacity to match slower demand following a seismic change in EV pricing over the past year, Ford executives told analysts.

The next generation of Ford EVs will be launched "only when they can be profitable," Marin Gjaja, head of the Model E EV business, told analysts Tuesday.

Ford's North American truck and SUV business - both commercial and consumer - will contribute to projected free cash flow of US$6 billion to US$7 billion this year.

Ford has committed to return to investors 40% to 50% of free cash flow.

"Whenever that (regular) dividend doesn’t reach 40-50% we will provide a supplemental dividend," chief financial officer John Lawler told reporters on a conference call on Tuesday.

Profit from Ford's Pro commercial vehicle business and Ford Blue combustion vehicle units offset steep losses from Model E electric vehicle operations.

Ford's electric vehicle operations will continue to be a cash drain this year.

Model E lost an average of more than US$47,000 per vehicle in the fourth quarter, Ford reported. The company projected a wider pretax loss of between US$5 billion and US$5.5 billion this year.

Ford is overhauling its EV strategy in response to slower adoption by mainstream consumers and the price war launched by Tesla, chief executive Jim Farley told analysts during a call on Tuesday.

Ford plans to invest in larger EVs such as trucks and vans.

A "skunk works" team is developing a low-cost small EV architecture, Farley said.

The automaker will invest more in gas-electric hybrids, which command profit margins that "are much higher than EV margins," he said.

Hybrid sales could grow by 40% next year, Farley said.

"The EV business needs to stand on its own, it needs to be profitable and provide a return" above its cost of capital independent from emissions compliance benefits, Lawler said.

Every electric F-150 Lightning Ford sells allows it to sell 12 combustion pickup trucks and stay in compliance with US emissions rules, Lawler said.

Ford Pro, the automaker's commercial business, will be a key driver of profit and potential cash returns to investors this year. Ford Pro is forecast to earn US$8 billion to $9 billion this year, up from US$7.2 billion in pretax profit last year.
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