Ford Motor Co’s CEO Jim Farley issued a challenge on Thursday to Wall Street: to ignore Tesla Inc (TSLA) and concentrate on his legacy automaker’s Pro business unit instead. This area combines traditional fleet management services and commercial operations with emerging telematics services for businesses that provide connectivity services such as logistics.
Pretax earnings at Ford’s traditional “Blue” business and losses projected for its Model e electric vehicle business are anticipated to total $8-9 billion this year, respectively.
It’s a business
CEO Jim Farley urges investors to place less focus on Tesla’s Full Self-Driving Autonomous Driving Beta than on his legacy carmaker’s Pro business unit. This encompasses traditional fleet and commercial services as well as emerging telematics, logistics and connective operations for business customers – pretax earnings from this division are projected between $8 and $9 billion this year.
Farley told a Wolfe Research conference on Thursday that Ford’s Pro unit is undervalued within Ford.
He compared Company’s business to that of Deere & Co, when its shares rose 235% within seven years. Even though consumer EV demand has been slower than expected, fleet customers are adopting all-electric vehicles more quickly than anticipated by Ford.
It’s profitable
Ford Pro business unit includes Ford’s traditional fleet and commercial operations as well as emerging telematics, logistics and connectivity services for businesses worldwide, making it profitable in every region it operates in. Ford Blue business unit sells iconic gas-powered vehicles which also remains profitable across its global operations.
Farley compares Pro business’s growth potential with that of Deere & Co DE seven years ago when its pretax earnings more than doubled and its stock soared 235%. Farley contends the Detroit automaker’s Pro business is currently undervalued within their organization.
CFO John Lawler of the company reported that its electric vehicle production division has been losing money; however, CFO Lawler noted that future versions may be less costly and more energy-efficient, potentially helping this division turn a profit. Furthermore, Lawler noted that cost cutting plans would accelerate this year while continuing to invest in products and services.
It’s growing
Ford CEO Alan Mulally is playing up the fact that while consumer adoption of electric vehicles (EVs) may be slower than anticipated, fleet customers have taken to them faster than anticipated – which helps explain why Ford has been able to keep prices affordable in an otherwise price war-plagued global market.
Ford is making progress on expanding their electric vehicle manufacturing capacity. Lawler stated that the Dearborn company has not suspended construction of Blue Oval City, its Kentucky EV campus; while Michigan battery production continues apace.
Investors were warned not to focus on Detroit automaker FSD driver-assistance systems, and instead consider their “Pro” business which includes traditional fleet and commercial sales as well as emerging telematics, logistics and connectivity operations for businesses ranging from local plumbers and electricians to large corporations. By 2025, revenue from nontraditional subscription services such as telematics is expected to hit $2,000 per vehicle annually or $167 monthly for Pro unit subscription services.
It’s undervalued
Ford’s electric vehicles have made an impressionful mark in the marketplace, yet its market cap pales in comparison to Tesla (TSLA).
Ford stock saw an unexpected boost today after CEO Jim Farley pledged that Ford’s next-generation of electric vehicles (EVs) will become profitable within one year after being put on sale, and promised that gas cars like Mustang Mach-E and Bronco SUVs would still remain available as aids for customers making the switch from traditional to electric ones.
Investors have become concerned over automakers’ ability to keep demand steady as the macroeconomic environment fluctuates; and even though the UAW strike may be over, higher wages could put strain on margins and investment plans. Ford is an excellent example of an automaker with the flexibility needed to optimize profitability as its industry shifts toward electric vehicles; Tesla and GM have been slow to adapt quickly enough.
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