SAME AS IT EVER WAS.

By Peter M. DeLorenzo

Detroit. Admittedly, it is exceedingly difficult to write about this business in the midst of this war going on in Ukraine. The images of entire families lying dead in the street are horrific, and reminders that this is an ongoing human tragedy with no end in sight. It is sobering and heart wrenching.

I do have a few comments this week, however.

I have been inundated with requests to comment on the Ford “Plan” for survival going forward. The Detroit Free Press did its usual level best to lay out the Ford “Plan” to the tune of a 3,000-word cover story that ran this past Sunday, with Ford’s “I’m a genius, just ask me” CEO fully basking in the glory of his anointed sainthood. Basically, the “Plan” has the company splitting into three factions – one focused on ICE Legacy vehicles, another on EVs and one more on commercial vehicles. The CEO, of course, will be leading the charge on the EV side of the business, because that’s where The Future lies, and where the credit will accrue and how his legacy will play out. The angle in the Freep story was that there was not even a wisp of a downside with this move to internally diversify the company, and that His Highness will prove to be nothing less than the card-carrying savior of the company.

That’s all well and good. But the reality is that any plan has its holes, downsides and “what if shit goes wrong?” potholes lying ahead on the drive to The Future. And Ford’s “Plan” is no different. In fact, I’m reminded of that famous Mike Tyson quote: “Everyone has a plan ‘til they get punched in the mouth.”

No matter the upsides delineated in Ford’s “Plan”: All you need to know is that it is a “beautiful” plan and that things will work out swimmingly. The profits will roll in and all of the employees in the “Blue Group” (the ICE vehicle specialists) will revel in their assignment and double-down on their “team player” lot in life.

Real life, however, doesn’t work that way.

There are a few problems with the glowing assumptions emanating from Dearborn. First of all, Ford is still the most siloed automaker in the world. There are fiefdoms within fiefdoms, and the inertia that is part and parcel of the way that company works has absolutely zero to do with the CEO’s “vision.” What does this mean? It means that the most dangerous mistake that analysts can make is to assume that the stated marching orders emerging from the Ford C-suite will be embraced in full and that everything will be just fine. I can promise you that will not be the case. There will be resentment and agitation from the ICE group toward the EV Group, you can count on that. And that’s just the beginning.

Secondly, what has changed with this plan, exactly? The ICE machines are Ford’s lifeblood, no matter how glowing the predictions are about the company’s EV future. And that’s likely to be the case until further notice. The “e” group’s existence is solely dependent on the continued sales – and profits – of Ford’s ICE machines. But how long will that continue? Or can it continue? With a worldwide shortage of supplies of raw materials – and chips – coming under newly intense pressure due to the Ukraine situation and threatening to be a factor through 2023, ICE vehicles from all of the manufacturers will continue to be susceptible to the vagaries of intermittent supplies and other challenges. 

So, in order for Ford to get to that “Shining City on the Hill” and the future promised by millions of Shiny Happy EVs of all stripes and segments dotting the landscape and boasting their blue ovals, the ICE vehicles will have to pull their weight indefinitely, and that fundamental transition to The Future will have to occur seamlessly with no hiccups or disruptions. But this business flat-out doesn’t work that way, especially at Ford, where botched launches and crushing warranty costs are standard operating procedure. Combine that with a maliciously incompetent purchasing department and an IT function that still operates with Stone Age-like precision, at best, and you have a continuing recipe for disaster, despite the visionary protestations from the CEO.

It’s no surprise that Ford dealers are split into two schools of thought about the “Plan.” On the one hand, you have dealers who are blind acolytes of the CEO, and who see nothing but a spectacularly rosy future for everyone concerned. I term this the “What, me worry?” faction, and they remain giddy in their relentless naivete. On the other, you have the seasoned railbirds at dealers who have been through these “visionary” bouts before. They understand how these things really work, and they know that promises and “plans” tend to get lost in the realities of the market. This is the “It’s a giant we’ll see” faction, and their perspective is nothing to sneeze at or ignore. 

So, Ford’s “Plan” is just great – on paper. But the “Plan” will not determine the company’s future. It’s the internal flotsam and jetsam generated by the “Plan” among the siloed forces at odds with each other, and the pressure from outside disruptive forces beyond the company’s control that will determine the company’s future. 

In other words, the same as it ever was. 

And that’s the High-Octane/Electron Truth for this week.