Ford bets $1 billion on electric future, new EV manufacturing facility in Germany

Jordyn Grzelewski
The Detroit News

Amid tightening environmental regulations driving an industry-wide shift to electric vehicles, Ford Motor Co. on Wednesday detailed a major step forward in its path to an all-electric future.

The Blue Oval pledged that almost its entire European vehicle lineup would be electric in the coming years — a commitment it plans to fulfill in part by converting its Cologne, Germany, plant currently producing internal combustion engine cars into an EV manufacturing center. The automaker plans to invest $1 billion to convert the site, and the plant's first all-electric model is slated to begin rolling off assembly lines in 2023.

Ford of Europe President Stuart Rowley in a statement dubbed the announcement "one of the most significant Ford has made in over a generation. It underlines our commitment to Europe and a modern future with electric vehicles at the heart of our strategy for growth."

Ford said its entire European passenger-vehicle lineup will be "zero-emissions capable, all-electric or plug-in hybrid" by mid-2026 and all-electric by 2030. On the commercial vehicle side — the driving force behind Ford's profitability in Europe — the automaker said its lineup will be "100% zero-emissions capable, all-electric or plug-in hybrid" by 2024. It expects two-thirds of commercial vehicle sales to be all-electric or plug-in hybrid by 2030.

Ford shares were down 0.26%, to $11.51, at market's close Wednesday. The dual announcements signal Ford's intention to push forward with a turnaround in Europe, including on the passenger vehicle side of the business that has proved more challenging for the automaker to crack.

In announcing its fourth-quarter and full-year 2020 financial results earlier this month, Ford reported that it made its highest quarterly profit in Europe in more than four years. The results come amid an ongoing restructuring that has netted a more than $1 billion reduction in annual structural costs. Those cost savings have been achieved in part by Ford reducing its employee and plant footprint in the region.

The company also announced a near-doubling of its global investment in electrification, to $22 billion by 2025; the $1 billion investment in Cologne is part of that planned allocation. That news came on the heels of crosstown rival General Motors Co.'s pledge to exit gas- and diesel-powered engines by 2035 and be carbon neutral by 2040. GM plans to spend $27 billion on EVs and autonomous vehicles through 2025.

"We successfully restructured Ford of Europe and returned to profitability in the fourth quarter of 2020," Rowley said in a statement Wednesday. "Now we are charging into an all-electric future in Europe with expressive new vehicles and a world-class connected customer experience."

Ford of Europe remains "on track" to deliver a 6% profit margin before interest and taxes, he said. Wednesday's announcement comes amid a company-wide assessment of where to most effectively allocate capital, as part of a plan detailed by CEO Jim Farley to turn around the Blue Oval's automotive operations and hit profit goals.

Ford has announced major shakeups and investments in other regions in recent months, including a restructuring of its South America operations that includes ending manufacturing in Brazil and a $1.05 billion investment in its South Africa manufacturing operations.

The investment in Cologne — home to one of Ford's largest manufacturing centers in the region as well as its European headquarters — will be used to "modernize" the site and convert it into what will be dubbed the Ford Cologne Electrification Center. Ford said it would be the company's first such facility in the region. Currently, the Cologne plant employs more than 4,000 people and builds the Ford Fiesta.

The automaker said its first European-built, all-electric passenger vehicle, which will be sold to customers in Europe, will begin production at the facility in 2023, "with the potential for a second all-electric vehicle built there under consideration." 

In a statement, Martin Hennig, who heads up Ford of Europe's workers' council, called the move "an important signal to the entire workforce. It offers a long-term perspective for our employees and at the same time encourages them to help shape this electric future."

Ford confirmed that the first all-electric passenger vehicle it's planning for 2023 is part of its strategic alliance with Volkswagen AG, under which the two automakers have agreed to collaborate on commercial vehicles, EVs, and autonomous driving. The new vehicle will be built on VW's MEB platform.

"However, while alliance vehicles will share certain technologies under the skin, Ford's first volume all-electric passenger vehicle built using the MEB technologies will look, feel and drive every inch like a Ford," Ford spokesman John Gardiner said.

Ferdinand Dudenhöffer, a professor of automotive economics at the Center for Automotive Research at the University of Duisburg-Essen in Germany, said the use of VW's technology could bring competitive advantages to Ford over its European rivals: "They are now in a position, together with VW, to be a very strong competitor to Opel, Peugeot, Citroën and Fiat."

The move on Ford's part to drastically reduce its lineup's carbon emissions comes as environmental regulations continue to tighten. Dudenhöffer noted that stronger regulations from the European Commission are slated in the coming years, making it impossible for automakers to avoid regulatory scrutiny and fees with hybrid and combustion engine vehicles alone.

Also key to its plans for the region, the Blue Oval signaled, is the incorporation of digitally-connected offerings into its commercial vehicle lineup, which leads the segment in Europe.

Ford executives have said that they see potential for lucrative new revenue streams generated by data-driven services — a direction underscored by a new strategic partnership the Blue Oval recently inked with Google. Among other areas, the two companies plan to work together on developing new tech- and data-driven offerings for customers.

Ford said it would have additional details on the Cologne site and its electrification plans to share in "the coming months."

Twitter: @JGrzelewski