Ford's move to cut F-150 Lightning production will help the automaker optimize profitability

Published Fri, Jan 19 20243:12 PM EST

Ford 's plans to reduce production of its all-electric pickup and increase production on popular legacy vehicles will allow the automaker to secure better profits and narrow EV losses. Ford announced Friday it's reducing production of its F-150 Lightning all-electric pickup truck, starting April 1, due to slowing demand for EVs. The automaker said the Lightning cuts are being made to achieve the "optimal balance of production, sales growth and profitability." As part of the move, about 1,400 employees will be impacted as the Rouge Electric Vehicle Center in Dearborn, Michigan transitions to one shift from two. At the same time, Ford also said it will add 900 jobs and a third crew at its Michigan Assembly Plant in Wayne to boost production of its popular Bronco SUVs and Ranger pickups — both of which are traditional internal combustion engine (ICE) vehicles. In addition to those new jobs, Ford said about half the workers at the Rouge facility can apply for openings at the Wayne center. The news, which helped boost the automaker's struggling stock by 1% on Friday, adds details to last month's reports from CNBC and other media outlets that Ford was going to cut Lightning EV production by roughly half in 2024. Ford shares have fallen about 9% to around $11 each in 2024. They hit a 52-week high above $15 back in July. F 1Y mountain Ford 1 year Ford has been shifting away from EVs and putting more resources behind its legacy ICE and fast-growing hybrid businesses. Both are housed in the Ford Blue division, which drives most of the company's overall revenue. We have been supportive of this strategy to lean into strengths — especially with high-margin hybrids leading last year's sales growth with a 25.3% gain to more than 133,700 vehicles. For all of 2023, EV sales rose 17.9% to roughly 72,600 and ICE increased 5.5% to 1.79 million. Comparing electric vehicle sales to hybrids, the F-150 Lightning was the automaker's top-selling EV last year, with sales increasing 55% to 24,165 vehicles. However, the hybrid version of the F-150 sold more than double the vehicles on a 41% year-over-year increase. The company has invested billions of dollars to develop electric vehicles and expects to build EVs at a run rate of 600,000 vehicles per year by 2024. But since Ford is cutting back EV production, the automaker's goal of scaling up its EV buildout could be delayed. This is prudent. It doesn't make sense for the company to force itself to hit EV production targets when the demand for these vehicles, which it does not make money on, is not there. EVs are housed in Ford's Model e division, which lost nearly $1.1 billion in the third quarter. That was more than double the year-ago period. Ford is set to report fiscal 2023 Q4 results on Feb. 6. "I applaud this because you can't keep making trucks that don't sell," Jim Cramer said Friday. "But I thought the F-150 Lightning was doing well." Based on what the company has said and the cache of being part of the top-selling F-Series, we figured sales of the Lightning EV would have been more resilient in a market of slowing desire for electric vehicles overall. Investing in its EV future is an important long-term consideration for Ford, but in the current environment, we prefer to see the automaker allocate its money to areas where it will produce a positive return and maximize cash flow. This is where Ford's strong lineup of internal combustion engine and hybrid vehicles shines. It should be mentioned that slower EV demand is not unique to Ford. The auto industry is facing weaker demand as customers are taking their time adopting EVs, which stems from high repair costs, a lack of EV charging infrastructure, and a drop in gasoline prices. Even EV leader Tesla has been lowering prices on its models, which puts pressure on legacy automakers to match. Ford, however, is well-positioned to increase production on hybrids due to strong U.S. consumer demand for its F-150 and Maverick pickup hybrids. In fact, the Maverick Hybrid sales exceeded the F-150 Hybrid last year with a 67% increase to more than 52,300 vehicles. Ford also said the Maverick Hybrid accounted for over half of last year's total Maverick sales, including the ICE versions. (Jim Cramer's Charitable Trust is long F. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust's portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.

A Ford F-150 Lightning pickup truck is shown at the Rouge Electric Vehicle Center on April 26, 2022 in Dearborn, Michigan.

Bill Pugliano | Getty Images

Ford's plans to reduce production of its all-electric pickup and increase production on popular legacy vehicles will allow the automaker to secure better profits and narrow EV losses.