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Ford CEO Farley Says Vertical Integration Will Increase

For a very long time, automotive manufacturers have relied heavily on third-party suppliers for many of the components that go into vehicles. However, the ripple effects of the pandemic shed some light on why relying on many other companies for critical parts like semiconductor chips or raw battery materials isn’t always a good thing, and as such, Ford CEO Jim Farley has been adamant that the company needs to increase its use of vertical integration – either by purchasing companies that secure those raw materials used in EV production, or perhaps even start its own operations in that regard. While speaking on the automaker’s recent Q3 earnings call with investors, Farley once again touched on this subject, too.

“On vertical integration, this is the most fundamental change,” Farley said. “We are in-sourcing batteries, inverters, scaling production over drive units and gearboxes and designing and producing unicastings in-house at Ford. In addition, on our next-generation utility vehicles, vertical integration will increase by nearly 50 percent. This level of integration allows along with the new zonal electric architecture and designing in-house modules, and battery cell to structure will allow us to significantly reduce material cost.”

Ford certainly isn’t alone in this endeavor, as many other automotive manufactures are increasing the vertical integration of their respective businesses. For example, Volkswagen recently announced that it will soon build its own EV drive units in-house – something Ford is already doing at the Van Dyke Electric Powertrain Center and Halewood Transmission Plant. Tesla is also beginning to use a giga press machine to build massive pieces of a vehicle’s underbody, which helps save time and cuts down on the costs associated with manufacturing, and just last month, Ford purchased one of these giant machines, too.

IDRA GIga Press

Such moves are believed to be critical for automakers as they aim to substantially cut costs in terms of EV manufacturing, which will help bring prices down to the point where they’re more in line with their ICE counterparts. As such, Ford expects its second-generation EVs to be big profit generators, thanks to these methods and increased simplification.

We’ll have more on Ford’s strategic plans soon, so be sure and subscribe to Ford Authority for ongoing Ford news coverage.

Brett's lost track of all the Fords he's owned over the years and how much he's spent modifying them, but his current money pits include an S550 Mustang and 13th gen F-150.

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  1. Martin Scott

    Vertical integration… not the best idea in the world when it comes to building most complicated projects but sometimes the absolute best route when the product is new or radically different. Most of the tier 1 part’s manufacturers don’t have either the experience or real world time tested parts available for full scale manufacturing. For instance, Bosch has real world automotive experience with motors where as Magna bought a company with that product and experience. Others tier 1s developed motors on their own therefore no real world “million mile” experience. A motor is only one component, a major one but one all the same. Hundreds of parts and systems are needed and time is of the essence. In the future the tier 1s will specialize and will be the leaders in both development and cost.

  2. Racer76

    Nothing like closing the barn door after the horse is already out! Farley just loves the photo ops. So he just wants to increase doing business with the enemy. Remember those empty chip plants they used for parking lots while waiting for CHIPS. Nafta and greedy unions caused all the loss American manufacturing. Signing a bad union contract was a bad idea.

  3. Ray

    Now that it’s “after covid” this Ford CEO wants to be responsible for everything down to, what, even mining for aluminum ore? Maybe buy a couple rubber tree farms for the tires? 15 years ago “after the recession” Ford couldn’t sell their parts plants fast enough, even though they still use the parts made, just made by a different company, in the same buildings.
    2 points;
    1) Ford is good at designing and assembling cars but they suck at making radios; let some1 else specialize in parts because whatever covid problems they had, will now be directly Ford’s problems, with less experience even in good times.
    2) there’s always “the next crisis” and booklet of buzz terms like “vertical integration” for the CEO to try to talk the problem away.

    Bottom line, Farley can buy his battery plants and steel foundries all day long and think it’s a new idea to try to own the whole process chain, from dirt to truck sales, but when the next set of problems inevitably crop up, these “vertically higher” work groups will just get sold off again

  4. RacerRandy

    Mr. Farley, you can’t have it both ways…..trying to build vertical integration (again) into Ford while reducing content from your product line will result in higher cost vehicles and lower market share.

    Let’s remember why the Big 3 moved away from vertical integration years ago: higher labor costs. You can’t make parts in UAW represented plants for the same cost as nonunion plants, especially if most of those nonunion plants are offshore.

    In addition, you can’t expect the American auto/truck buyer to continue to pay higher prices for vehicles that have less content.

    The average age of vehicles on the road today is 12.5 years, the highest ever. Why? The cost of most new vehicles is more than the average American can afford.

    Maybe your focus should be in building the highest quality vehicles in America and treating your suppliers as true partners?


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