(The author is a Reuters Breakingviews columnist. The opinions expressed are their own.)
NEW YORK (Reuters Breakingviews) – Ford Motor can be its own private equity owner. The Detroit automaker said on Wednesday https://s23.q4cdn.com/799033206/files/doc_news/2022/03/Ford-Accelerating-Transformation-Forming-Distinct-Auto-Units_3.1.22.pdf that it won’t separate the ownership of its electric-car business from its internal combustion operations. However, it is reorganizing internally to split its electric and gas-guzzler units – and plans to run the latter for efficiency and cash.
The business which has lots of current earnings but an uncertain future is an obvious target for a debt-heavy financial buyer. But Ford would prefer to use the cash to fund its now-$50 billion plan to turn the company electric. To help things along, the combustion engine business will strip out $3 billion of costs within three years and be cautious on capital spending.
The plan should help Ford hit a 10% overall profit margin before interest and taxes by 2026, up from 7.3% last year. That’s still short of rival General Motors, which earned an 11.3% margin in 2021. Ford’s stock was up 5% on Wednesday nonetheless, as investors welcomed its expanded ambitions in electric vehicles and the hope of getting a clearer look at that business in future. For now buyout firms can only look on. (By Jonathan Guilford)
Follow @Breakingviews https://twitter.com/Breakingviews on Twitter
Capital Calls – More concise insights on global finance:
French tester pain helps odds of Europe mega-deal
Digital waves crash hard on Sea
Shell’s deal Down Under blows more ill wind at AGL
Target’s steady aim is underappreciated
Cerberus changes Albertsons packaging, again
(Editing by Peter Thal Larsen, Sharon Lam and Pranav Kiran)
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.