Ford plans to catch up with Tesla’s capitalisation by spinning off its electric cars business to unlock hidden value

Ford’s CEO wants to wall off EVs from its internal combustion engine (ICE) business and has even considered spinning off one or the other, sources said

Splitting the company may prove too difficult, so Ford may simply separate the EV business internally as its own unit as part of a broad reorganisation

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An assembly worker of Ford Motor works on an F-series pickup truck at the Dearborn Truck Plant in Dearborn, Michigan on January 26, 2022. Photo: Reuters

Published: 12:44pm, 19 Feb 2022Updated: 4:50pm, 19 Feb 2022

Ford Motor is looking at ways to separate its electric-vehicle operation from its century-old legacy business, hoping to earn the sort of investor respect enjoyed by Tesla and other pure-play EV makers.

Chief Executive Officer Jim Farley wants to wall off Ford’s electric operations from its internal combustion engine (ICE) business and has even considered spinning off one or the other, people familiar with the effort said. A spin-off could generate the kind of earnings multiples that have given Tesla a market value approaching US$1 trillion.

But splitting the company, which Ford says it isn’t planning, may prove too difficult, so Farley instead may simply separate the EV business internally as its own unit as part of a broad reorganisation that seeks to give Ford an edge in the electric age.

A spin-off could be a tough sell to the Ford family. They control the carmaker through a special class of stock and are leery of losing influence over the 118-year-old company, said the people, who didn’t want to be identified revealing internal deliberations. The founding family, led by Executive Chair Bill Ford, has three seats on the board.

Ford’s chief executive Jim Farley poses with the all-electric Ford F-150 Lightning pickup truck during the unveiling at the company’s world headquarters in Dearborn, Michigan on May 19, 2021. Photo: Reuters

The company faces pressure from Wall Street to spin off its nascent EV business to boost value by shedding legacy costs and to gain greater access to capital markets. Investors have awarded immense value to pure EV makers, such as Rivian Automotive, whose market value briefly topped Ford’s late last year despite producing relatively few vehicles.