Ford Cutting Costs, Increasing EV Investment

Ford is cutting costs, and sending some of the savings into EV development.

Ford CEO Jim Hackett told investors one Tuesday that Ford has plans to cut $14 billion in costs over the next five years. That means the automaker will be open to more partnerships that share the costs and risks of new technologies and mobility services.

Hackett referred to current partnerships with Lyft – for developing ride sharing and self-driving cars – and Mahindra – an Indian automaker that partners with Ford on mobility, transportation infrastructure, and connected vehicles – for examples of the cost sharing.

Of the $14 billion in cost cuts, Hackett said that $10 billion will come from material costs and $4 billion will come from reducing engineering expenses.

But $500 million of those cuts will get put into EVs. Ford is planning to cut internal combustion engine spending by a third by 2022. that $500 million will be put into expanded development of hybrid and electric vehicles. That’s on top of the $4.5 billion in spending on electrification already announced. Ford had already promised 13 new electric or hybrid cars by 2022, but did not say if this extra investment would increase that target.

Jim Farley, head of global markets for Ford, told investors that the company was looking to build sustainably profitable electric cars in segments where the brand was already strong. That means places like North America, where SUV revenues are healthy.

In low profit operations like Europe and Latin America, Ford could look to partnerships for EVs, or possibly skip them altogether.

SEE ALSO: Ford Starting New Team Edison To Develop EVs

Despite the cuts, Ford isn’t planning to walk away from the internal combustion engine anytime soon.

“I don’t think we should walk off a ledge where we destroy the earnings power of the company,” Hackett said.

He added that Ford is planning that a third of vehicles will still have internal combustion engines by 2030. That’s the year when some European governments have proposed to start banning gas-powered cars.

Hackett said that Ford is looking to reduce the time it takes to engineer a new car by 20 percent. Electric vehicles can lead to that short engineering time, but also to smaller factories. Joe Hinrichs, president of global operations, said that EV factories can have an assembly area that is half the size of gas cars, and that also requires half the capital investment and 30-percent fewer labor hours per car.

Ford is also looking at upping in-car connectivity. By 2019, the automaker plans to equip all U.S. models with built-in modems. It plans to have mobile internet connections in up to 90 percent of global vehicles the year after.

Adding modems and mobile internet connections improve the connectivity of the car. It can lead to more apps and features that require a data connection. Things like Wi-Fi hotspots for drivers, but also simplified over the air infotainment system updates, communications with other cars, and features that let owners lock and unlock their car remotely.

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