Stellantis NV CEO Carlos Tavares said restructuring Ford Motor Co. to separate the company’s legacy businesses from its electric vehicle operations is a way to impress investors — not the consumers who should be the priority.
Ford Motor Co. said this week it was creating two “separate, but strategically interdependent” businesses: Ford Blue, headquarters of the legacy business whose profits and industrial know-how will support the entire company, and Ford Model e, which will develop software, electrical and automotive talent to lead innovation and growth initiatives Ford executives believe it is essential to be competitive in the electrical and digital transformation of the automotive industry.
But such a strategy poses an ethical conundrum, Tavares said Friday during a virtual roundtable with U.S. reporters, because internal combustion engine vehicles are currently funding investments to make electric vehicles.
“If you do this kind of breakdown of ethical HR management,” he said, “you have to explain to people who work in the old world what their future will be. Their job is to fund electrification , and you’re clearly collapsing down two paths: one path that will hopefully grow profitably, and another path that will shrink and eventually disappear one day.
“So from that perspective, I think dealing with this type of breakdown creates an HR challenge. I’m confident my teammates at Ford will be able to fix it. But I think that’s the issue we should we ask.”
Tavares says he understands the appeal of the move to offer investors transparency in the EV journey and bring valuations closer to pure EV players like Tesla Inc. Ford Motor Co. shares surged following Wednesday’s announcement of the reorganization and closed Friday at $16.85, down 4.26% for the day.
“Overall it’s a nice coin, but I think it’s not the most important coin for consumers,” Tavares said, adding that it’s Stellantis’ priority.
But Ford CEO Jim Farley said Wednesday the changes relate to the products and experiences the Dearborn automaker will offer customers — and the inherited company is preventing the Blue Oval from bringing them to market.
“This change is not about the financial management of the business,” Farley said. “It’s about focus, capabilities, better products, better experiences. That’s how we’re going to win as a company.”
What matters to consumers, Tavares said, is safe, clean and affordable mobility – a goal questioned today amid global shortages of semiconductors, inflation of raw materials such as steel which he says needs more competition and a war in Ukraine which is driving up fuel prices, further disrupting supply chains and causing some automakers like Volkswagen AG and BMW.
Stellantis’ supply lines are more centered in North Africa than in Eastern Europe, he said, so the automaker has seen limited disruption so far following the invasion of Ukraine by Russia last week.
“I know that with a longer pipe, things can be discovered days or even weeks later, so I’m going to be careful here,” Tavares said. “But I’m keeping my eyes peeled. So far so good, but I see my peers have actually closed their factories, which means their pipe may have been shorter than mine.”
Stellantis also plans to shut down operations in Russia, including at its commercial van plant with Mitsubishi Motors Corp. in Kaluga outside Moscow, but the timing will be determined by sanctions affecting the ability to obtain components, Tavares said. The automaker had started exporting vehicles elsewhere in Europe last month and planned to add the assembly of transmissions and the Fiat Scudo there before the end of the year. All of its operations in the country could be at risk, he said.
“We can’t invest more, and we shouldn’t invest more right now,” Tavares said. “What we need to do is make sure we support the people, the employees, regardless of the business consequences, that’s exactly what we’ve already decided. … The business doesn’t matter. conditions in which we will return or not return, it does not count.”
What the automaker is counting elsewhere is the 40 to 50 percent extra cost that electric vehicles represent compared to their gasoline and diesel counterparts. Stellantis is taking steps to reduce expenses in order to absorb increases and avoid overpricing consumers. One area of interest is the cost of delivering vehicles to consumers, which is 30% of the cost of an automobile, Tavares said.
Automakers like Tesla that sell directly to customers have a cost structure advantage because they don’t work with independent dealerships, but also often have to challenge franchise laws. Tavares says Stellantis is considering more of a direct sales model to reduce costs associated with dealerships and make the buying process less complicated for customers.
“There’s a different distribution model that’s being discussed where we have retailers, and we’re handing over the car to the end customer in what we would call the direct sales approach,” Tavares said. “And we would have the retailers supporting the transfer, taking care of the paperwork, doing the maintenance.”
The automaker is focusing on such efforts in Europe as it eliminates the overlapping retail footprints of the merger between Fiat Chrysler Automobiles NV and French rival Groupe PSA that created Stellantis last year, but the changes could also intervene in the United States, he said.
“We’ll make sure it’s a win-win,” Tavares said. “We will see with our dealer partners in the United States how they want to solve this problem and if they want to solve it.
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