Ford Rises On Plan To Carve Out ‘Model e’ Electric Vehicle Business

Ford is doubling down on its plans to compete in the electric vehicle market by creating a new business unit called Model e. The stock's rise suggests investors think it's a smart move.

Current and future battery-powered products, including the F-150 Lightning pickup truck, will be moved to the new division while the 118-year-old manufacturer's gasoline, diesel and hybrid models will be overseen by the new Ford Blue unit. Doug Field, a top engineer for both Apple andTesla, is going to be the chief EV and digital systems officer at Model e. He is in charge of developing software and embedded systems for Ford.

Model e will be Ford's center of innovation and growth, a team of the world's best software, electrical and automotive talent turned loose to create truly incredible electric vehicles and digital experiences for new generations of Ford customers.

The stock rose as much as 9% after the plan was announced.

The automaker plans to spend $5 billion in the next four years to build up its capacity to produce electric models, as well as the battery packs, motors and key components they will need. The company is racing to double production of the Mach-E, a rival to the Model Y, to 80,000 units in 2022, and boost the annual production target for the F-150 to 150,000 units from an earlier 80,000-truck goal. Ford said it has hundreds of thousands of orders for the battery-powered pickup.

Ford, which began its business over a century ago with the Model T, blocked efforts by Musk to use the Model E name for aTesla vehicle, foiling the billionaireentrepreneur's plan for a vehicle line that spelled out SEXY. The Model 3 was added late in the year. The Ford Pro unit has been the home of the three business lines under the Ford+ strategy.

The move by Ford to split up its business is radical and rational.

The plan resulted in a boost to the rating of Ford shares by the vice president of CFRA Research.

Nelson said in a research note that the move is intended to help narrow the massive valuation gap between Ford and EV pure plays, such asTesla, and help facilitate an EV spin-off if it so chooses.

Though the plan looks bold and could provide investors with more transparency into Ford's EV business growth, an equity analyst thinks that the goal of raising the carmaker is more important.

Ford set out a target for 10% EBIT margin for the entire company, up from 8%, he said in a research note.