In a 111-year-old former train station in Detroit, Ford (F) CEO Jim Farley is charting a path for the auto giant’s next 100 years.
Just don’t expect it to have electric trains.
“The building has really been revitalized physically, but what’s important is that there will be software people here, the future of our professionals and our EV business will be down here,” Farley told me in a new episode of the podcast “ Opening Bid” from Yahoo Finance. (video above).
We’re in the middle of Michigan Central Station, in Detroit’s Corktown neighborhood. The station was built in 1913 and ran trains for about 75 years before officially closing in 1988 due to declining ridership — a byproduct of Detroit’s manufacturing decline.
The 42,000 square meter building, decorated in the architecture of the early 20th century, was abandoned until 2018. Under the leadership of Executive Chairman Bill Ford, Ford purchased the building and several surrounding sites for $90 million, with the vision of re-establishing Detroit as an epicenter for high-tech jobs.
Nearly $1 billion in renovations later, the revamped Michigan Central Station is now the center of a new mobility innovation district.
The central building will house Ford employees working on autonomous vehicle projects. Google (GOOG, GOOGL) also signed on as a founding member of the district in 2022.
Google will share its cloud technology for the site’s various mobility projects. The company will also offer workplace development training to local high school students and job seekers.
Over time, Ford envisions the mixed-use site will include hotel and retail options to attract essential technology talent to the rebuilding city.
Farley says the development should help the company attract the best and brightest people to develop autonomous and electric vehicles.
The reopening comes at a critical time for Ford and the race car-driving Farley, who will reach his four-year milestone as CEO in October.
Ford’s shares have fallen over the past two years as the company faces issues such as quality control, a slowdown in the EV market and losses in the EV sector. Under Farley’s watch, Ford debuted the Mustang Mach-e SUV and the Lightning F-150 pickup to compete in an EV market led by Tesla (TSLA).
He also partnered with Tesla to allow Ford EVs to charge at Superchargers using adapters. That partnership spawned a relationship with Musk, who Farley says recently texted to ask for more charging adapters.
“I think there is mutual respect,” Farley says of his relationship with Musk.
According to data from Yahoo Finance, Ford’s shares are down 14% over the past two years, lagging the S&P 500’s 28% gain. Shares of rival GM are up 12% in that period, buoyed by buybacks of equities and aggressive cost cutting.
Farley has changed as market conditions have evolved.
The company said in April that it would delay the release of its three-row electric vehicles from 2025 to 2027. It is also delaying production of electric vehicles at the massive BlueOval City EV campus in Tennessee from 2025 to 2026.
In October 2023, Ford postponed $12 billion in planned EV spending, including the construction of a new battery factory in Kentucky. But the company promised to make more hybrids to bridge the gap during the EV transition.
A more cost-conscious Ford is starting to appear on the company’s balance sheet.
In April, Ford’s full-year operating profit rose to the upper range of $10 billion to $12 billion. The adjusted free cash flow guidance was increased to $6.5 billion to $7.5 billion – previously the range was $6 billion to $7 billion.
“If Ford can continue to perform in the coming quarters, the stock should benefit from positive EPS revisions and an increasingly compelling case for multiple expansion following last year’s resegmentation – all anchored by strong B/S and improved FCF conversion,” said Citi analyst. Itay Michaeli wrote in a recent customer note.
Still, the EV division will likely be the one driving the stock story, although the story hasn’t been bullish.
The Model e division (Ford’s electric segment) lost $1.32 billion on sales of $100 million in the first quarter (down 84% from last year). The number of vehicles sold for the division fell 20% year on year as consumers moved away from electric vehicles despite price cuts.
The Model e division is on track for $5 billion in operating losses this year.
Farley says he has a date in mind for electric vehicle profitability, but declined to share it.
“We wouldn’t allocate capital if I didn’t think it was profitable,” he said.
See what Ford’s longtime rival General Motors is up to in a recent episode of Yahoo Finance’s “Lead This Way.” CEO Mary Barra says she’s not shying away from electric cars.
Brian Sozzi is editor-in-chief of Yahoo Finance. He is also the host of the “Starting bid” podcast. Follow Sozzi on Twitter/X @BrianSozzi and further LinkedIn. Tips about deals, mergers, activist situations or something else? Email brian.sozzi@yahoofinance.com. Are you a CEO and want to join Yahoo Finance Live? Email Brian Sozzi.
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