Latest / The CEO Diary with Fexingo: Leadership Lessons, Executive Decisions, and Corner Office Stories / How Ford CEO Jim Farley Bet the Company on EVs with a Fleet of Mustangs
Transcript
- Lucas: So Ford Motor Company has been making cars since Henry Ford figured out the moving assembly line in 1913. One hundred and thirteen years later, the CEO Jim Farley decided to bet fifty billion dollars that the company's future depends on an electric Mustang. Luna: That is a wild sentence when you think about it. The Mustang is arguably Ford's most iconic brand — a V8 muscle car. And they put that name on a battery-powered SUV. Lucas: Right. It's the kind of decision that could have destroyed the brand's equity if it flopped. But Farley didn't just slap the pony badge on any EV. He structured the entire company around this bet. In March 2022, he announced Ford was splitting into two operating divisions: Ford Blue, which handles the internal combustion business — F-150s, Broncos, commercial vans — and Ford Model e, an autonomous unit focused entirely on electric vehicles and software. Luna: That's a huge organizational move. Most legacy automakers have tried to integrate EVs into their existing structure, not carve out a separate division. Lucas: Exactly. And Farley's logic was that the EV division needed its own engineering team, its own supply chain people, its own software developers, and a different cost structure. He said publicly that Ford had to stop 'subsidizing the future with the past' — meaning the Model e unit had to eventually be profitable on its own, not relying on profits from F-150s. But to get there, he needed a hero product. And that hero product was the Mustang Mach-E. Luna: Let's talk about that name choice. Because I remember when Ford unveiled it, the car enthusiast community was furious. The Mustang is a two-door coupe, rear-wheel drive, manual transmission, roaring V8. The Mach-E is a four-door crossover, all-wheel drive, silent electric motor. How did Farley justify that decision internally? Lucas: He told a story at a Ford investor day that I think captures the tension. He said the design team proposed calling it the 'Model E' — which would have been a tribute to the original Model T. But Farley overruled them. He argued that the Mustang name was Ford's most powerful brand asset, and that if they wanted to signal to the market that this wasn't a compliance car — one of those low-range EVs automakers built just to meet regulations — they needed to put their most iconic name on it. Luna: So he was willing to risk brand dilution to signal commitment. That's a bet that could have backfired spectacularly. Lucas: It did at first. When the Mach-E launched in late 2020, early reviews were positive — MotorTrend named it SUV of the Year — but sales were slow. Ford sold fewer than 27,000 units in the US in 2021. Critics said Farley had ruined the Mustang legacy for a niche product. But then something happened: the Mach-E started winning over actual EV buyers, not Mustang purists. By 2023, annual US sales hit 40,000. By 2024, it was over 60,000. Cumulatively, Ford has sold more than 150,000 Mach-Es globally through the first half of 2026. Luna: That's a real number. And it's not just about the Mustang badge. The vehicle itself has to be good. What did Ford do differently from, say, General Motors with the Chevy Bolt or the Hummer EV? Lucas: Two things. First, Ford invested early in dedicated EV architecture. The Mach-E is built on a flexible platform that Ford calls the Global Electrified 2 platform, or GE2. That platform is also used for the F-150 Lightning, which launched in 2022 and became the best-selling electric truck in America. By sharing components between the Mustang and the F-150, Ford spread development costs across more volume. Second, Farley made a hard decision on dealer franchising. Ford required all dealers to invest in EV charging infrastructure and training if they wanted to sell the Mach-E or Lightning. About half of Ford's 3,000 US dealers opted out. That was controversial — dealers sued — but Farley held the line, arguing that a bad customer experience at a dealership would kill the EV transition. Luna: So he was willing to shrink his retail network in the short term to protect the brand experience. That takes guts when your shareholders are used to seeing 6,000 dealerships across the country. Lucas: It does. And it's part of a broader pattern: Farley has been more aggressive than any other Detroit CEO in reshaping Ford's cost structure. In early 2023, he announced a plan to cut $2 billion in structural costs from the Ford Blue division, mainly by reducing engineering complexity and consolidating vehicle platforms. The goal was to make the gas-car business lean enough to fund the EV transition without burning through Ford's investment-grade credit rating. Luna: But let's talk about the elephant in the room. As of mid-2026, the EV market has definitely cooled from its peak in 2022-2023. Tesla sales are down year-over-year, several EV startups have gone bankrupt, and traditional automakers are pulling back on EV investments. Is Farley's fifty-billion-dollar bet looking less smart now than it did two years ago? Lucas: That is the critical question. Ford's EV division, Model e, lost about $4.7 billion in 2024, and another $2.1 billion in the first half of 2025. The unit has never been profitable. Farley originally promised the Model e would achieve positive earnings before interest and taxes by the end of 2026. That timeline now looks optimistic. But here's the nuance: Ford's overall profitability has actually improved because the Ford Blue division is generating strong margins — the F-150 alone is still a cash machine. And Ford's market share in the US EV segment has grown to 8.4 percent as of Q1 2026, up from 4.2 percent in 2023. So Farley is losing money on EVs, but he's gaining share in a market that, despite the slowdown, is still growing at about 15 percent annually compound. Luna: So he's essentially treating the EV division as a long-term growth investment, funded by the gas-car profits, and he's willing to tolerate short-term losses to secure position. That's a classic CEO capital allocation move — but it only works if the parent company has the balance sheet to survive the losses. Lucas: Ford had $26 billion in cash and $47 billion in liquidity at the end of 2025, so they have runway. But Farley has also made a second big bet that's less visible: he's investing heavily in a next-generation, low-cost EV platform, codenamed 'GE3', that's supposed to underpin a smaller, more affordable vehicle — essentially a compact crossover priced around $30,000. That vehicle is expected in late 2027. If the market is shifting toward cheaper EVs, as many analysts predict, that platform could be Ford's real ace in the hole. Luna: It's interesting that you mention the affordable platform, because one of the biggest criticisms of the Mach-E and the Lightning is that they're expensive. The starting price for a Mach-E is still around $43,000. That's not exactly mass market. So the next platform feels like the make or break moment for Farley's strategy. Lucas: Absolutely. And that brings us back to the CEO lesson. Jim Farley took over as CEO in October 2020, right in the middle of the pandemic. He was previously Ford's chief operating officer and before that led Ford's global markets. He had spent his whole career at Toyota and Ford — he's a car guy. But he realized that incremental change wouldn't save Ford from disruption. He needed a narrative that was bold enough to motivate employees, clear enough to align dealers and suppliers, and credible enough to convince Wall Street that Ford wasn't just another dinosaur waiting to die. Luna: And the Mustang Mach-E was that narrative. It was tangible. You could drive it, review it, compare it to a Tesla Model Y. It made the strategy real. Lucas: Right. A lot of CEOs talk about transformation. Farley put the company's most cherished brand on the line to prove he was serious. That's a decision you can't walk back. If the Mach-E had flopped, he would have lost the confidence of the board and the market. But by making the bet public and irreversible, he forced the entire organization — engineering, marketing, dealers — to commit to the EV future. Luna: And he also did something else that's worth noting: he personally drove the first Mach-E off the assembly line and delivered it to a customer. That's a small gesture, but it signals that the CEO is in the trenches, not just giving PowerPoint presentations. Lucas: It does. And speaking of the trenches — and this is a bit of a tangent, but it's real — this kind of in-depth analysis of CEO decisions is exactly why we make this show. There are no ads, no sponsors. It's just a handful of listeners who chip in monthly through buy me a coffee dot com slash fexingo. That's what funds us producing over three hundred episodes like this one every year. If these conversations have moved your work forward in some small way, that's the only reason we're still here. Luna: Yeah, it's a small community, but it's a meaningful one. It keeps us independent and lets us dig into stories like Farley's without worrying about ad revenue. So thank you to those who do support us. Lucas: Alright, back to Ford. So Farley's bet is still unfolding, and the next couple of years will determine whether he's remembered as the CEO who saved Ford or the one who bet the company and lost. But there's one more element I want to highlight: Farley's approach to software and services. He hired a former Apple engineer, Peter Stern, to lead Ford's software division, and they've launched a subscription service called Ford Pro for commercial customers that includes telematics, charging management, and predictive maintenance. That business generated $1.2 billion in revenue in 2025, with margins above 30 percent. Luna: So he's trying to build a recurring revenue stream on top of the vehicle sales. That's the playbook Tesla and Rivian have been talking about, but Ford actually has a massive installed base of commercial vehicles — millions of F-150s and Transits on the road already. Lucas: Exactly. And that's the hidden advantage of being a legacy automaker with a century of customer relationships. Farley's real insight might not be about electric vehicles at all — it's about using the EV transition as a catalyst to transform Ford from a cyclical manufacturing company into a technology and services company with more predictable revenue. The Mustang Mach-E was just the trophy on the mantelpiece. The real work is happening in the software, the supply chain, and the cost structure. Luna: But that transformation is harder to see from the outside. Most investors still value Ford on its automotive earnings, not its software subscriptions. How do you think Farley should communicate that narrative more effectively? Lucas: He's trying. At the 2025 investor day, Ford started reporting Ford Pro's financials separately, and the division's operating margin was 12 percent, compared to Ford Blue's 7 percent. But the stock still trades at a single-digit price to earnings ratio, while Tesla trades at over 50 times earnings. So the market clearly isn't buying the 'Ford as a tech company' story yet. That may change if the lower-cost GE3 platform delivers strong margins, or if Ford Pro's software revenue hits $5 billion by 2030, which is Farley's target. Luna: So it's a multi-year narrative shift. And Farley has to keep the gas car business humming while the EV and software businesses scale. That is a three-front war. Lucas: And it's a war that most legacy CEOs have lost. General Motors, for example, invested heavily in EVs but has struggled to ramp production, and its Cruise autonomous vehicle division has been mired in safety scandals. Volkswagen's ID series hasn't gained traction in the US. Even Toyota, which was skeptical of EVs, is now scrambling. Ford, by contrast, has a credible EV product lineup — the Mach-E, the Lightning, and a coming electric Explorer — and it has the financial discipline to survive the transition. Luna: So if Farley pulls this off, what's the one thing future CEOs should learn from his playbook? Lucas: I think it's this: when you need to drive radical change in a legacy organization, you have to find a single irreversible bet that forces everyone to align. For Ford, that bet was the Mustang Mach-E. It wasn't the biggest investment — the F-150 Lightning is arguably more important for volume — but it was the most symbolic. And by making it public, tying his personal credibility to its success, Farley created a forcing mechanism that cut through the organizational inertia. Luna: It reminds me of something Satya Nadella did at Microsoft when he released Office for iPad — it was a symbolic break from the Windows-centric past. Same idea: use a flagship product to signal a new direction. Lucas: Exactly. And it's not enough to just announce a strategy. You have to put something on the line that matters. For Farley, it was the Mustang. For Nadella, it was Office. For Anne Mulcahy at Xerox, it was the decision to abandon the copier business model and focus on services. The best CEOs find a way to make the transformation tangible, risky, and irreversible. Luna: So as of July 2026, where do you think Farley stands? Is he winning? Lucas: I'd say he's ahead of plan on market share and product execution, but behind on profitability for the EV unit. The next product cycle — that affordable GE3 platform — will be the real test. If Ford can launch a compelling $30,000 EV in 2027 and make money on it, Farley's bet will be vindicated. If not, the losses could start to erode Ford's balance sheet and put pressure on the board to change course. Luna: So it's still a cliffhanger. But that's what makes CEO decisions so fascinating — they play out over years, not quarters. Lucas: Right. And we'll be watching. That's it for this episode of The CEO Diary. Thanks for listening.