Ford asks suppliers to help with profitability quest as EV survival depends on cost cutting
Ford is asking suppliers to help with its quest toward profitability in its electric vehicle efforts, as its survival depends on cost-cutting.
Ford has spent billions attempting to compete with industry giants like Tesla, and in Q1, it recorded a $1.3 billion operating loss for its EV and software division, known as Model e.
It responded by announcing changes to its overall expenditure, which was previously $10 billion planned for its EV unit. CEO Jim Farley said it would be “on the lower end” of $8 billion to $9 billion during the company’s earnings call.
But the cuts are not just coming internally. Ford is attempting to get cheaper parts from its suppliers, which will help the company cut costs and help its margins.
According to a memo seen by Reuters, Ford asked suppliers to reduce costs in any way possible:
“It is in our best interests that we are able to deliver affordable EV products to our customers. To ensure affordability, it is of paramount importance that our portfolio achieves further levels of material cost efficiency.”
Liz Door, who is Ford’s Chief Supply Chain Officer, wrote the words above, and also said that “Everything is on the table. Consider this a call to action.”
Ford lost over $100,000 for every vehicle it sold in Q1 and subsequently reduced its orders for batteries as it puts a real focus on saving money in any way possible. In other regions, measures are becoming more drastic.
In Europe, Ford hinted it could focus on hybrid-electric vehicles instead of pure EVs because consumers are more interested in those vehicle types.
Tesla even said in its Q1 Shareholder Deck that automakers are starting to put more energy and effort into hybrids, which has been a major pressure point of EV adoption, especially since late 2023 and into early 2024.
Ford’s European Passenger Car Head, Martin Sander, said:
“If we see strong demand, for instance, for plug-in hybrid vehicles, we will offer them.”
Ford, despite its established automotive business, is no different than the up-and-comers in the EV sector. It is doing anything it can to maintain the operation of its Model e division, which could be crucial to the company’s relevance in the coming years.
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