Ford Motor Co. will separate its fast-growing electric vehicle operations from its legacy combustion engine business in a historic reorganization of the 118-year-old company.

The new Ford Model e unit will scale up the automaker’s EV offerings and develop software and connected-vehicle technology and services for all of the company. Ford Blue will focus on combustion vehicles, cutting costs and simplifying operations.

Ford’s ambition will be “to become a truly great, world-changing company again, and that requires focus,” Chief Executive Officer Jim Farley said in a statement Wednesday. “We are going all in, creating separate but complementary businesses that give us startup speed and unbridled innovation.”

The automaker plans to spend US$50 billion on its stepped-up EV strategy, Farley said on a call with analysts. Ford had previously targeted US$30 billion.

The shake-up -- along with new targets for higher EV production and overall profitability -- sent Ford shares up as much as 5.4 per cent to US$17.60 before the start of regular trading.

Ford said it plans to be able to make 2 million electric vehicles annually by 2026, a big step up from the 600,000 it’s aiming for in 2024. The automaker also is now targeting adjusted earnings before interest and taxes of 10 per cent by 2026, up from as much as 8 per cent expected for this year.

What Bloomberg intelligence says...

“We assume that a potential separation wouldn’t happen until after 2026, making longer-dated issues at Ford Motor the most exposed. But Ford could consider a variety of mechanisms, including another debt tender or raising debt at the new company, as a tool eliminate longer-term debt.”

-- Joel Levington, BI credit analyst

Accelerating Ford’s transition to a battery-electric future has been a major focal point for Farley. He raised the automaker’s wager on EVs months after taking over as CEO. Bloomberg News first reported last month that the company was contemplating a further increase in expenditures toward EVs, and that Farley had wanted to wall off electric operations from Ford’s internal combustion engine business.

Farley said Wednesday that Ford “carefully” considered a spinoff as it weighed options to separate the business lines. The chosen path allows Ford to keep its combustion-engine operations as the “profit and cash engine” of the company, he said.

Implementing major structural change at Ford requires the backing of the company’s founding family, which controls the automaker through a special class of stock.

Farley has been working closely with Doug Field, the former head of Apple Inc.’s car project, on reviewing Ford’s operational and manufacturing structure to prepare for the company ramping up its EV offerings. It’s boosted output of the electric Mustang Mach-E and prepared more production capacity for the F-150 Lightning pickup going on sale this spring.

Under the new structure, Farley will also assume the role of president of Ford Model e, while Field will be the unit’s chief EV and digital systems officer. Kumar Galhotra will serve as president of the Ford Blue business.

Ford shares have soared 151 per cent since Farley became CEO in October 2020. While the stock has pulled back since mid-January, its US$66.9 billion market capitalization was slightly ahead of General Motors Co.’s at the close of trading Tuesday.

“Is this about winning? 100 per cent,” Farley said on the call Wednesday. “We want to beat the old players. We want to beat the new players.”