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Dive brief:
- Ford is delaying construction of one of its Kentucky battery plants, executives announced during a Announcement of results for the third quarter on Thursday.
- The move is part of a larger delay in investing in electric vehicles worth $12 billion as the automaker navigates a “more challenging” electric vehicle market, CFO John Lawler said during the call.
- The second Kentucky factory had been scheduled to begin production in 2026, but Ford and SK On executives have not specified when the plant will open now, Ford spokesman TR Reid said in an email. Ford’s other factory in Kentucky is still on track to open in 2025, Reid confirmed.
Diving knowledge:
Ford’s latest delay in its electric vehicle investment follows the company’s recent tumult in navigating the ongoing United Auto Workers strike and a slowing electric vehicle market.
While Ford and the UAW reached a tentative agreement to end the strike earlier this week, the more than six-week work stoppage has already caused financial damage to the automaker. Lawler noted on the call that the strike resulted in a roughly $100 million loss in EBIT and cut roughly 80,000 units from production.
Ford also lost $1.3 billion on its Model e EV startup during the quarter, “reflecting continued investment in our next-generation products and a more challenging market for our Gen 1 products,” Lawler said .
“Given the dynamic environment for electric vehicles, we are being cautious with our production and adjusting future capacity to better match market demand,” the chief financial officer told investors, adding that the company he has also taken out some of his own Mustang Mach-E production
Ford first announced plans for the Kentucky plants in 2021, with $5.8 billion in planned investment between the two factories.
The announcement to delay the project comes a month later Ford stopped construction at its $3.5 billion Michigan electric vehicle plant, halting work “until we are confident in our ability to run the plant competitively,” Reid told The Detroit News at the time.
As automakers grapple with the added costs of making electric vehicles, Ford is among those scrambling to cut both production and consumer costs.
“Dynamic changes in the market, prices, adoption rates [and] Regulations are forcing us to further reduce the cost of our electric vehicles,” CEO Jim Farley said on the third quarter call. “The key levers to deliver this competitive cost structure are scale, vertical integration and batteries”.
Farley noted that the company is contracting battery production and inverters, as well as improving its focus on the less expensive lithium iron phosphate battery model.
The automaker is also pushing to source components more strategically and cooperate better with suppliers in reducing costs and streamlining downstream supply. “We weren’t really going in to redesign the parts and take the complexity out of the suppliers’ manufacturing system,” Farley said.
Ford is now working to reduce the number of parts in some of its models. On its F-Series trucks, Farley said the company has reduced parts complexity from 1.4 billion combinations to less than 1,000.
“It will be a battle between managing the front line as best as possible, adjusting the supply products relative to demand so we can balance pricing from that standpoint and then work like crazy to put every cost reduction we can into this first-generation vehicle to the bottom line,” Lawler said.
