Kumar Galhotra, who runs Ford Blue, plans major cost cuts
Ford Motor Company today announced the separation of its conventional automobile manufacturing business from its electric vehicle (EV) operations. The conventional business of the Michigan-based company, which makes vehicles powered by gasoline-based internal combustion engines (ICE), is named Ford Blue and the electric vehicle unit Ford Model E. They will operate as two separate businesses with their own profit and loss statements.
Ford Blue will invest in new models of Ford’s F-Series, its bestselling vehicles in the U.S. for the past 40 years, Ranger and Maverick trucks, Bronco and Explorer sports utility vehicles and Mustang cars. “We’ll pair these great products with a simple, connected and convenient customer experience that earns higher loyalty. We are going to be hyper-competitive on costs and make quality a reason to choose Ford,” said Kumar Galhotra, 52-years-old, who was named the President of Ford Blue, in a statement.
While run separately, the two businesses will support each other. Ford Model E will lead on creating new shopping, buying and ownership experience for its electric vehicle customers that plans to include simple, easy to use e-commerce platforms, transparent pricing and personalized customer support. Ford Blue will also adapt these practices to serve its customers.
Ford, like GM, Mercedes Benz, Toyota and other traditional auto makers, is trailing Tesla and other new companies in the race to make electric vehicles and in investor appeal.
In 2021, Austin, Texas based Tesla delivered 936,000 electric vehicles globally and earned $6.5 billion in operating income on $54 billion of revenues. Rivian, an Irvine, California-based venture backed by Amazon founder Jeff Bezos, produced only 1015 vehicles in 2021.
Last year, Ford sold 3.2 million vehicles around the globe and earned an operating profit of $4.5 billion on $136 billion in revenues. The sales include 27,000 EVs sold in North America, the second largest sales in the market after Tesla.
Yet, based on expectations of surging, future volumes of highly profitable EV vehicles production investors give Tesla a market value of $910 billion and Rivian $47 billion, while Ford is valued at $72 billion.
Investors know that typically long-established companies find it difficult to create and promote entirely new products which will compete and hurt sales of their existing products. The senior management, especially of large public companies, seek to maintain the revenues and profits of traditional products in order to satisfy investors as well as meet their bonus targets.
Also, often the managers of the subsidiary, tasked with launching an entirely new and competing product, do not get the full funding they need, are unable to pay relatively higher wages than at the parent company to hire good talent, and are unable to make quick decisions, necessary in a rapidly evolving new market, due to long entrenched bureaucratic procedures. So, it is not surprising that Ford has separated its conventional and EV businesses.
Earlier, Ashwani Kumar Galhotra was president, Americas & International Markets Group, at Ford, responsible for the profit and loss of the business units. In 2014, he was named group vice president of global operations for Lincoln, Ford’s luxury brand.
Prior to Lincoln, Galhotra was vice president, Engineering, responsible for the engineering of all cars, trucks, SUVs and crossover vehicles for Ford and Lincoln brands.
In 2009, he became vice president, Product Development for Asia Pacific and Africa, leading a team that developed Ford’s plan to bring more than 50 new vehicles and powertrains to those markets.
Since joining the company in 1988, he has served in various positions in product development and product strategy. Between 2005 and 2008, he was assigned to Mazda’s headquarters in Hiroshima, where he was responsible for program management and product planning worldwide.
Galhotra, who grew up in Punjab, India, earned a bachelor of science in mechanical engineering from the University of Michigan.
In 2020, Galhotra was paid salary, pension and stock compensation totaling $8.5 million. He owned Ford stock worth $10 million.
By 2026, Ford Model E is projected to produce more than two million EVs annually. This will likely hurt sales of Ford Blue’s conventional vehicles, an operation run by Galhotra. Apparently to deal with the resultant drop in revenues and maintain profit margins, he is planning to cut up to $3 billion in annual costs at Ford Blue by 2026. The business, Galhotra stated, “will be an engine of cash and profitability for the whole (Ford) company.”
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