Ford's business will gradually transition from its internal combustion vehicles to battery electric vehicles, but combustion vehicles will continue to grow for the next few years, CFO John Lawler told Cheddar News.
"Over time, we do see the transition between internal combustion engines — gas vehicles — to [battery electric vehicles] but that's going to be over time," he said. "We still see growth for [internal combustion engine] businesses over the next few years."
That optimism comes in spite of a $2.1 billion loss that Ford's electric vehicle division reported in 2022. The company anticipates the segment will lose an additional $3 billion in 2023, as it works toward profitability in 2026.
Lawler joined "Wake Up with Cheddar" after the automaker announced a major change in the way it reports financials. Instead of reporting geographic results, the new format will break out financials for three customer-facing groups. "Ford Blue" will include its traditional gasoline, diesel, and hybrid vehicles like the F-150 and Mustang. "Ford Model E" includes all electric vehicles, and "Ford Pro" includes commercial vehicles and fleets. The company is framing this shift as a whole new Ford.
"What we've done in creating Ford Blue, Ford Model E, and Ford Pro is far more than an accounting exercise. After 120 years, we've essentially refounded Ford," Lawler said on a call with the press on Wednesday evening.
Following the change, Ford also reviewed what 2021 and 2022 financials would have looked like in the new format. Whereas the Model E segment lost about $2.1 billion, Ford Blue and Ford Pro brought in $6.8 billion and $3.2 billion, respectively.
Lawler justified Model E's losses as par for the course for electric vehicles, describing the segment as a "startup that was buried inside of Ford Motor Company."
"Like all electric vehicle startups, you lose money at first as you're building scale, as you're designing your products, as you're growing and building share," he said.
The company's path to achieving 8 percent EBIT margin by 2026 in the Model E segment will be facilitated by scale and design efficiency for things like batteries, Lawler said. The company also plans to shave about $3 billion in structural costs from the company's balance sheet by 2026. Lawler said reducing design complexity and increasing reuse and commonality would be "some of the main levers" to cut those costs.
Ford was one of the biggest producers of electric vehicles in 2022, second only to Tesla. In spite of all the buzz around EVs, Lawler emphasized that Ford is still focusing on all three of its segments.
"Right now all three businesses are growth businesses," he said.
David Stryzewski, CEO of Sound Planning Group, joins Cheddar News' Closing Bell, where he says that some of the major stock positions are getting the most lift to the upside as the major indexes climb higher to begin the week.
Despite challenges like inflation, labor and product shortages, and the Omicron variant, holiday sales saw record levels of growth this year, according to a new report from Mastercard SpendingPulse. The group reports on national retail sales across all payment types, finding that holiday sales rose at the fastest pace in 17 years this year. Mastercard senior advisor and former chariman and CEO of Saks Incorporated Steve Sadove joined Cheddar News' Closing Bell to discuss.
Keith Fitz-Gerald, chief investment officer at Fitz-Gerald Group, spoke to Cheddar about the growing competition for Tesla's electric cars in China as tech giant Huawei enters the race. "There's a lot of legacy worry, but that does not discount the possibility that Elon might have a contender on his hands," he said about the sometimes troubled telecom company. Fitz-Gerald also gave a nod to two other local rivals, Nio and XPeng, noting the latter as having something of an edge with its CEO He Xiopeng being lauded by Chinese state media.
Ariel Kaye, founder and CEO of home goods business Parachute, joined Cheddar to discuss the company's sales success over the holidays as it navigated supply chain issues. She also expects a strong showing in 2022 with the continuation of 2021 trends. "The hybrid work model is going to be here for a long time," Kaye said. The business, which currently has 12 physical locations, plans to expand to 30 brick-and-mortar shops by the end of 2022.
Nikola announced that it delivered its first electric semi trucks last week, sending the embattled EV company's stock soaring. There is a lot of competition in this space, though, said Lauren Fix, an automotive analyst with Car Coach Reports. While every country has companies racing to dominate the electric trucking industry, she explained, a shortage of graphite, used in batteries, and a dearth of convenient charging stations will still keep growth slow in 2022. "You really have to be very careful when you're investing in this marketplace," Fix said. "That's great that [Nikola was] able to deliver one, but can they deliver more?"
It looks like the supply chain didn't steal Christmas this year after all. Retail sales jumped 8.5 percent between November 1 and December 24, compared with the same period last year, according to a report from Mastercard. That's the strongest growth in 17 years. Jharonne Martis, director of consumer research at Refinitiv, joined Cheddar to discuss how retailers were able to do so well despite inflation, supply chain issues, and the COVID-19 omicron variant but gave a subdued outlook for the retail sector at the beginning of 2022. "Consumers are not just completely isolated from the inflation issues," she said. "This is definitely going to continue into the first half of the year, as per our IFR data."
Hotel cancellations are on the rise ahead of the holidays as the omicron variant spreads around the world. Online hotel search site Trivago noted a 35 percent jump in cancellations since November. Axel Hefer, managing director and CEO at Trivago, joined Cheddar to discuss this worrying trend. Hefner said it is important for both travelers and businesses to watch how the 2021-2022 winter travel season unfolds as it will help them prepare for next year as the pandemic will likely be ongoing.
