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    Jim Farley Tries to Reinvent Ford and Catch Up to Elon Musk and Tesla

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    On a recent Tuesday afternoon, Jim Farley, the chief executive of Ford Motor, took a spin in what could become one of the most important vehicles in the company’s 113-year history: an electric F-150 pickup truck.Sitting at the wheel of a prototype at the company’s test track in Dearborn, Mr. Farley floored it. From a standing stop, the 4,000-pound truck surged forward. “Four seconds,” he shouted when it reached 60 miles per hour. “That’s unbelievable for a vehicle of this size.”Steering the truck to a series of dips and rises in the track, he said, “Let’s see if we can get some air,” and shouted “Yes!” as the wheels briefly left the tarmac over one incline. In a final lap, he careened around a steeply banked turn and floored it again on a straightaway until he hit 99 miles an hour — just short of the track’s 100 m.p.h. speed limit.“I can’t wait,” Mr. Farley said as he stepped out, shaking his head. “I can’t wait till customers get this truck.”These are tense and exciting times for the auto industry. Driven by the dizzying success of Tesla, sales of electric vehicles appear to be on an unstoppable rise. The switch from making gasoline-powered cars and trucks to electric vehicles that emit no pollution from tailpipes will have far-reaching effects on the environment, climate change, public policy and the economy.Automakers are spending tens of billions of dollars to retool plants and are rushing to retrain workers for what may be the industry’s greatest transformation since Henry Ford revolutionized manufacturing with the moving assembly line in 1913. They are also fighting to simply catch up to the juggernaut that is Tesla.The question for Ford is whether a car guy from the Detroit area can take on Elon Musk, Tesla’s chief executive, whose company is rapidly expanding and is valued by investors at about 16 times as much as Ford.Tesla nearly doubled the number of cars it sold around the world last year to almost one million. Ford sold many more vehicles — nearly four million — but sales fell 6 percent as it struggled to get enough computer chips, batteries and other parts. Tesla has a brand that people associate with luxury and technical sophistication. Ford is viewed as a maker of large, utilitarian trucks and sport utility vehicles.“The traditional auto industry is pretty far behind Tesla,” said Earl J. Hesterberg, chief executive of Group 1 Automotive, a large auto retailer, who has known Mr. Farley for two decades. “In the past, if you were behind by a few years, the big players could catch up. But today, the speed of change is so much greater.”Auto experts say the electric F-150, known as the Lightning, must be a success if Ford is to thrive in the age of electric vehicles. Introducing this truck now is equivalent to “betting the company,” said William C. Ford Jr., the company’s executive chairman, who is a great-grandson of Henry Ford. “If this launch doesn’t go well, we can tarnish the entire franchise.”A Critical Year for Electric VehiclesThe popularity of battery-powered cars is soaring worldwide, even as the overall auto market stagnates.Going Mainstream: In December, Europeans for the first time bought more electric cars than diesels, once the most popular option.Turning Point: Electric vehicles account for a small slice of the market, but in 2022, their march could become unstoppable. Here is why.Tesla’s Success: A superior command of technology and its own supply chain allowed the company to bypass an industrywide crisis.Rivian’s Troubles: As the electric vehicle maker pares down its delivery targets for 2022, investors worry the company may not live up to its promise.Green Fleet: Amazon wants electric vans to make its deliveries. The problem? The auto industry barely produces any of the vehicles yet.The company has amassed about 200,000 reservations for the trucks, but it could still stumble. Production could be slowed by the global chip shortage or the surging costs of lithium, nickel and other raw materials crucial to batteries. The software that Ford has developed for the truck could be flawed, a problem that hampered sales of a new electric Volkswagen in 2020.Ford and Mr. Farley do have some things going for them. Unlike many other electric cars, the F-150 Lightning is relatively affordable — it starts at $40,000. Tesla’s cheapest car is the compact Model 3 sedan, which starts at more than $48,000. The Lightning has tons of storage, including a giant front trunk, which is appealing to families and businesses with large truck fleets. And it helps that Tesla will not begin making its Cybertruck until next year.And Ford is also already in the E.V. game with the Mustang Mach-E, an electric sport utility vehicle. It had sales of more than 27,000 in 2021, its first year on the market, and won favorable reviews.Production of the F-150 Lightning is scheduled to start next Monday. Competing models from General Motors, Stellantis and Toyota — Ford’s main rivals in pickups — are at least a year away. Rivian, a newer manufacturer that Ford has invested in, has begun selling an electric truck but is struggling to increase production.“If the Lightning launch goes well, we have an enormous opportunity,” Mr. Ford said.‘Jimmy Car-Car’In many ways, Mr. Farley checks most of the boxes when it comes to leading a large U.S. automaker. Like Mary T. Barra, the chief executive of G.M., whose father used to work on a Pontiac assembly line, Mr. Farley has family roots in the industry: His grandfather worked at a Ford factory. On visits to his grandfather, he would tour Ford plants and other sites important to the company’s history. As a 15-year-old, he bought a Mustang while working in California one summer and drove it home to Michigan without a license. His grandfather nicknamed him “Jimmy Car-Car.”But like Mr. Musk, a native of South Africa who was a founder of PayPal and other companies, Mr. Farley has had a varied career and been involved in creating businesses. Born in Argentina when his father was working there as a banker, Mr. Farley, 59, also lived in Brazil and Canada when he was growing up. His career started not in the auto industry but at IBM. He spent a long stretch at Toyota. He helped the Japanese automaker overcome its reputation for making boring and economical cars by working on its fledgling Lexus luxury brand, now a powerhouse.“He has what I call a restless mind,” said Jim Press, a former senior executive at Toyota and Chrysler. “His mind is never idling, always contemplating. He has a boldness that helps him push beyond what others think.”Mr. Farley has family roots in the automotive industry.Sylvia Jarrus for The New York TimesIn 2007, Alan R. Mulally, Ford’s chief executive at the time, hired him to help turn around Ford. He sharpened the company’s marketing, often making early use of Facebook and social media, and ran its European operations.Some at Ford bristled at his intensity. “Worrying about hurting people’s feelings isn’t at the top of his agenda,” Mr. Hesterberg said. “But it’s probably what’s necessary these days. The traditional auto industry is behind Tesla, and business as usual isn’t going to cut it.”In the last few years, Mr. Farley re-evaluated Ford’s strategy, visited technology companies in California and came to a realization: “They’re after our customers.”In 2018, Ford’s brain trust saw that the company was at great risk of falling behind Tesla, G.M. and Rivian in electric cars and pickup trucks. Ford decided not to build a new electric truck and its batteries from scratch as other automakers were doing, but to modify an existing F-150, buying batteries designed by a supplier. The move was risky because converting traditional vehicles to battery-powered ones can be difficult — batteries weigh more than engines and are placed under the floor rather than under the front hood.“We didn’t know how this would turn out, but we knew there would be a heavy penalty if we didn’t swing for the fences,” Mr. Farley said.Yet the Ford truck team’s first estimate for how many Lightnings it might sell was a paltry 20,000 a year. The estimate was oddly low because Tesla was achieving sales growth of about 50 percent a year and planning to build two giant factories.Cars Are About Software NowIn part because of his team’s lowball estimate for Lightning sales, Mr. Farley, who became chief executive in December 2020, said he was increasingly convinced that Ford needed to transform itself. Many auto executives acknowledge that one of Tesla’s main advantages is that it is far ahead of established automakers in developing software that operates its motors, manages it batteries, and informs and entertains drivers and passengers. Partly as a result, Tesla, born in Silicon Valley, makes cars that go farther on a full battery than cars made by almost anybody else.Tesla can also remotely update the software in all its cars, an ability that Ford and other established carmakers have only recently begun using. Most cars made by established manufacturers must be taken to dealers for even minor upgrades or fixes.It is not surprising, then, that Mr. Farley worries most about the potential for software bugs in the Lightning’s millions of lines of code.“As an automotive company, we’ve been trained to put vehicles out when they’re perfect,” he said. “But with software, you can change it with over-the-air updates. Our quality system isn’t used to this software orientation.”Mr. Farley said it was so critical for Ford to beef up its software chops that he spent months recruiting one of the top names in auto technology, Doug Field, who has held senior positions at Tesla and Apple.In an interview, Mr. Field, who early in his career worked at Ford, said he was drawn by the chance to build a technology team at a company with a century’s expertise in engineering and manufacturing. “If we can combine those, that is going to be something to be reckoned with,” he said.In March, Ford announced it was separating into two divisions — one, Ford Blue, will continue making internal combustion models, and another, Model E, headed by Mr. Farley and Mr. Field, will develop electric vehicles.So far, investors have supported Mr. Farley’s strategy. Before Russia’s invasion of Ukraine, Ford stock traded as high as $25, up more than 300 percent since Mr. Farley took the helm, but it has fallen back to about $15. Still, Ford’s market value now exceeds that of G.M., which has long been the largest U.S. automaker.Yet Wall Street still thinks that Tesla, which is worth more than $1 trillion, will dominate the industry and that companies like Ford, worth $62 billion, and G.M., $58 billion, will become relative minnows.No wonder that Mr. Farley is spending most of his days on the Lightning. Over a dinner near his home in Birmingham, north of Detroit, he pulled out his phone and scrolled through a long email he gets every evening, with updates on every facet of the launch. “Software, manufacturing, batteries, chips, body assembly,” he said, reading off the subheadings.Workers on the production line of the 2022 Ford F-150 Lightning.Sylvia Jarrus for The New York TimesOne night recently, Mr. Ford was in California when an email arrived late in the evening — from Mr. Farley, who was nine time zones away in Germany. “Jim had four or five things he wanted to talk to me about,” Mr. Ford said. “I get at least two updates a day from him.”Computer chips are a big concern. A shortage has been disrupting auto production around the world for more than a year, and outside the Dearborn Truck Plant a few hundred gasoline-powered F-150 trucks are parked and waiting for a minor but crucial component — the device that controls their automatic windshield wipers is delayed for the want of chips.Before his test drive, Mr. Farley took an hourlong tour of the Lightning assembly line, looking at how much work remains.At a section of the production line, he was shown new robotic, self-guided skids that carry the Lightning’s steel bed, or box, from one work station to the next. The skids eliminate the need for a costly and complex overhead conveyor system. Bill Dorley, the box team leader, told Mr. Farley that his crew was practically ready to go. “We just need parts,” he said.Just outside that section of the plant, heavy earth-moving machines were demolishing the concrete walls and floors of a building that was built in the 1930s to produce the Ford Model A. That space will allow the company to expand Lightning production. As Mr. Farley moved along the assembly line, workers waved and shouted greetings and sought selfies with the boss.Approaching a group of workers, Mr. Farley asked how they were doing and what they needed.Michael Johnson, who will bolt in the Lightning’s suspension system, highlighted one of the central concerns that many manufacturing workers have about electric vehicles: jobs. Because electric vehicles have fewer parts than conventional trucks, they can be made by fewer workers. Mr. Johnson was specifically concerned about a truck plant that Ford is building in Tennessee, a state that has been less welcoming to unions like the one that represents workers in Dearborn.“Is this plant going to be safe?” Mr. Johnson asked.Mr. Farley replied that the Tennessee plant would build a different truck. He added that Ford planned to start making the motors and axles for its electric vehicles, rather than buying them from suppliers. “So our own plants are going to be very busy,” he said.Ford’s future rests on that being the case. More

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    Few Cars, Lots of Customers: Why Autos Are an Inflation Risk

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    Economists are betting that supply chains for all kinds of goods will heal, shortages will ease and price gains will slow. Cars are a wild card in those forecasts.Corina Diehl is eager for more sedans and pickup trucks to sell her customers in and around the Pittsburgh area, but as the pandemic enters its third year, cars remain in short supply and the squeeze on inventory shows no sign of abating.“If I could get 100 Toyotas today, I would sell 100 Toyotas today,” Ms. Diehl said. Instead, she said, she’s lucky to have three. “It’s the same with every brand I have.”Dealerships like Ms. Diehl’s are wrestling with inventory shortages — the result of a dearth of computer chips, production disruptions and other supply chain snarls. That’s not a problem just for car buyers, who are paying more; it’s also a problem for economic policymakers as they try to wrestle the fastest inflation in four decades under control.Car prices have helped push inflation sharply higher over the past year, and economists have been counting on them to level off and even decline in 2022, allowing the rising Consumer Price Index to moderate markedly.Rapid Car Inflation Year-over-year change in select automotive categories of the Consumer Price Index

    Source: Bureau of Labor Statistics, accessed via FREDBy The New York TimesBut it is increasingly unclear how much and how quickly car prices will slow their ascent, because of repeated setbacks that threaten to keep the market under pressure. While price increases are showing some early signs of slowing and used car costs, in particular, are unlikely to climb at the same breakneck pace as last year, continued shortfalls of new vehicles could keep prices elevated — even rising — longer than many economists expected.“We’ve stumbled into another pattern of a series of unfortunate events,” said Jonathan Smoke, the chief economist at Cox Automotive, an industry consulting firm. Shutdowns meant to contain the coronavirus in China, computer chip factory disruptions tied to a recent earthquake in Japan, the aftereffects of the trucker strike in Canada and the war in Ukraine are adding up to slow production.Mr. Smoke expects new car prices to keep rising this year — perhaps even at nearly the same pace as last year — and used cars to begin to depreciate again, but said the shortage of new cars could spill over to blunt that weakening. And used cars may not fall in price at all if rental companies begin to snap them up as they did in 2021.“If the supply situation gets worse, it’s still possible that we repeat some of what we had last year,” he said.Mr. Smoke’s predictions — and worries — are more grim than what many economists are penciling into their forecasts.Alan Detmeister, a senior economist at UBS and former chief of the Federal Reserve Board’s wages and prices section, said he expected a 15 percent decline in used car prices by the end of the year, with new car prices falling 2.5 to 3 percent.Those estimates are predicated on an increase in supply.“This is a huge wild card in the forecast,” Mr. Detmeister said. But even if production doesn’t pick up, “it is extremely unlikely that we’ll see the kind of increases we saw last year,” he added, referring to prices.Omair Sharif, founder of Inflation Insights, a research firm, said he was still expecting improved supply and slower demand to help the used car market come into balance. While used car prices may rise for a few months as households spend tax refunds on automobiles, he expects the increase to be modest in part because they already nearly match new car prices.“I would be shocked if the used car market really accelerated,” he said. New car prices are a more complicated story, he added: “There, we have legitimately serious inventory problems.”Automakers are struggling to ramp up production. Russia’s invasion of Ukraine has created shortages in electrical components needed for cars, prompting S&P Global Mobility to cut its 2022 and 2023 forecasts for U.S. production. More critically, the chips needed to power everything from dashboards to diagnostics remain in short supply. Ford Motor and General Motors temporarily shut down some U.S. factories last week because of supply issues, and the industry broadly cannot ship as many cars as customers want to buy.In cars, “production remains below prepandemic levels, and an expected sharp decline in prices has been repeatedly postponed,” Jerome H. Powell, the Fed chair, said during a speech last month. He noted that while supply chain relief in general seemed likely to come over time, the timing and scope were uncertain.Cars loaded in Kansas City, Kan., for transport to a dealership in Wichita, Kan. Automakers are struggling to ramp up production as repeated shocks rock the industry.Chase Castor for The New York TimesAnalysts had been hoping that chip shortages, in particular, would ease up, but “we’ve got at least another year, if not more,” for the supply chain to heal, said Chris Richard, a principal in the supply chain and network operations practice at the consulting firm Deloitte.While smaller electronics producers may be able to find enough semiconductors, he said, cars contain hundreds or even thousands of chips — often different kinds — and many auto companies do not have direct and close relationships with their providers.The earthquake in Japan temporarily shut down chip plants that supply the auto industry, costing a few weeks of production at one. Making chips requires neon, and much of it comes from Ukraine. Lockdowns in Shanghai may reduce chip production at some Chinese factories.At the same time, demand is booming. Ford reported record retail vehicle orders in March, including for its F-series trucks, which remained in demand even as gas prices jumped.Car buying could begin to slow as the Fed raises interest rates, making car loans more expensive, but so far there is little sign that is happening. In fact, demand has been so strong that automakers have been cracking down on dealers that charge above list price, threatening to withhold fresh inventory.“I don’t see the prices subsiding. You don’t need them to subside,” said Joseph McCabe at AutoForecast Solutions, an industry analyst, explaining that dealer costs are increasing and companies want to protect their profits. “Prices will go up, and there will be less negotiating space for consumers, because there’s high demand and no availability.”Mr. McCabe does not think that car inventory will ever fully rebound: Dealers and automakers have learned that they make more money by effectively making cars to order and running with learner inventory. If that’s the case, the permanently restrained supply could have implications for the rental and used car markets.If car prices keep climbing briskly, it will be hard for inflation overall to moderate as much as economists expect — to around 4 to 4.5 percent as measured by the Consumer Price Index by the end of the year, according to a Bloomberg survey, down from 7.9 percent in February.That’s because prices for services, which make up 60 percent of the index, are also climbing robustly. They increased 4.8 percent in the 12 months through February, and could remain high or even continue to rise as labor shortages bite.Of the goods that make up the other 40 percent of the index, food and energy account for about half. Both have recently become markedly more expensive and, unless trends change, seem likely to contribute to high inflation this year. That puts the onus for cooling inflation on the products that make up the remainder of the index, like cars, clothing, appliances and furniture.While the Fed’s policy changes could tamp down demand and eventually slow prices, policymakers and economists had been hoping they would get some natural help as supply chains for cars and other goods worked themselves out.“We still expect some deflation in goods,” Laura Rosner-Warburton, an economist at MacroPolicy Perspectives, said of her forecast. She said that she expected fuel prices to moderate, and that her call included some “modest declines” in vehicle prices.It’s not just economists who are hoping that forecasts for a rebounding supply and more moderate car prices come true. Buyers and dealers are desperate for more vehicles. Ms. Diehl in Pittsburgh sells makes including Toyota, Volkswagen, Hyundai and Chevrolet, and companies have told her that inventory may begin to recover toward the end of the year — a reprieve that seems far away.Her customers are hungry for trucks, electric vehicles and whatever else she can get her hands on. When one of her dealerships lists a new car on its website in the evening, a buyer will show up first thing in the morning, she said. Her dealerships have a backlog of 400 to 500 parts to fix cars, up from 10 to 20 before the pandemic.“It’s absolute insanity at its finest,” Ms. Diehl said. “I don’t see an abundance of inventory before 2023 and 2024.” More

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    Soaring Cost of Diesel Ripples Through the Global Economy

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    Farmers are spending more to keep tractors and combines running. Shipping and trucking companies are passing higher costs to retailers, which are beginning to pass them on to shoppers. And local governments are paying hundreds of thousands of dollars extra to fill up school buses. Construction costs could soon rise, too.The source is the sudden surge in the price of diesel, which is quietly undercutting the American and global economies by pushing up inflation and pressuring supply chains from manufacturing to retail. It is one more cost of the war in Ukraine. Russia is a major exporter of both diesel and the crude oil that diesel is made from in refineries.Car owners in the United States have been shocked by gasoline prices of more than $4 a gallon, but there has been an even bigger increase in the price of diesel, which plays a critical role in the global economy because it powers so many different kinds of vehicles and equipment. A gallon of diesel is selling for an average of $5.19 in the United States, according to government figures, up from $3.61 in January. In Germany, the retail price has shot up to 2.15 euros a liter, or $9.10 a gallon, from €1.66 at the end of February, according to ADAC, the country’s version of AAA.Fueling stations in Argentina have begun rationing diesel, jeopardizing one of the world’s leading agricultural economies, and energy analysts warn that the same could soon happen in Europe, where some businesses report spending twice as much on diesel as they did a year ago.“Not only is it a historic level, but it’s increased at a historic pace,” said Mac Pinkerton, president of North American surface transportation for C.H. Robinson, which provides supply chain services to trucking companies and other customers. “We have never experienced anything like this before.”The sharp jump is putting immense pressure on trucking firms, especially smaller operations that are already suffering from driver shortages and scarce spare parts. Many can pass increased fuel costs on to their customers only after a few weeks or months.Eventually consumers will feel the effect in higher prices for all manner of goods. While hard to quantify, inflation will be most visible for big-ticket items like automobiles or home appliances, economists say.“Really, everything that we buy online or in a store is on a truck at some point,” said Bob Costello, the chief economist for American Trucking Associations.Trucks lining up on Terminal Island between the Port of Long Beach and the Port of Los Angeles.Alex Welsh for The New York TimesManufacturers are also heavy users of diesel, leading to higher prices for factory goods. Food will go up in price because farm equipment generally runs on diesel.“It’s not just the fuel we put into pickups, tractors, combines,” said Chris Edgington, an Iowa corn farmer. “It’s a cost of transporting those goods to the farm, it’s a cost of transporting them away.”At the start of the pandemic, diesel prices dropped steeply as the global economy slowed, factories shut down and stores closed. But beginning in early 2021 there was a sharp rebound as truck and rail traffic resumed. Prices, which increased pretty steadily last year, picked up momentum in January as Russia massed troops near Ukraine and then invaded. Low stockpiles of the fuel, particularly in Europe, have added to the price pressures.“Diesel is the most sensitive, the most cyclical product in the oil industry,” said Hendrik Mahlkow, a researcher at the Kiel Institute for the World Economy in Germany who has studied commodity prices. “Rising prices will distribute through the whole value chain.”Refineries, which turn crude oil into fuels that can be used in cars and trucks, have tried to play catch-up on both sides of the Atlantic in recent months. But they have not been able to make more diesel, gasoline and jet fuel fast enough. That is in part because refineries have closed in Europe and North America in recent years and more of the world’s fuels are being refined in Asia and the Middle East.Since January 2019, refinery capacity has declined 5 percent in the United States and 6 percent in Europe, according to Turner, Mason & Company, a consulting firm in Dallas.Europe is particularly vulnerable because it relies on Russia for as much as 10 percent of its diesel. Europe’s own diesel production is also dependent on Russia, which is a big supplier of crude oil to the continent. Some analysts say Europe may have to begin rationing diesel as early as next month unless the shortage eases.Diesel prices and Germany’s dependence on Russian energy were among the factors that on Wednesday prompted Germany’s Council of Economic Experts to cut its forecast for growth in 2022 by more than half, to 1.8 percent.Russian diesel has been flowing to Europe since the invasion last month, but traders, banks, insurance companies and shippers are increasingly turning away from the country’s diesel, oil and other exports.Several large European oil companies have announced that they are leaving Russia. TotalEnergies, the French oil giant, said this month that it would stop buying Russian diesel and oil by the end of the year.The market for oil and diesel is global, and companies can usually find another source if their main supplier can’t deliver. But no oil company or country can quickly make up for the loss of Russian energy.Saudi Arabia, for example, has not increased diesel exports because one of its largest refineries is undergoing maintenance. The kingdom and its allies in OPEC Plus have also refused to ramp up crude oil production because they are happy to have oil prices stay high. Russia belongs to the group and has significant sway over its fellow members.Christine Hemmel is a manager of a trucking company in Ober-Ramstadt, Germany, that has been in her family for four generations. Her family’s business has almost all the challenges that medium-size haulers have faced since the pandemic’s outbreak.The Russia-Ukraine War and the Global EconomyCard 1 of 6Rising concerns. More

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    Ford Splits Into Electric and Gas Divisions to Speed Up Transition

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    E.V. operations will focus on technology and growth while the traditional business continues to chase profits. “You can’t have people work on both at the same time,” the chief executive said.Ford Motor has decided the best way to make the transition to electric vehicles is to transform itself first.On Wednesday, the automaker said it had reorganized its auto operations into two distinct businesses — one that makes its gasoline-powered vehicles and focuses on maximizing profits and another that develops and ramps up production of electric models and aims for rapid growth.Ford’s chief executive, Jim Farley, said in an interview that the two businesses required different skills and mind-sets that would clash and hinder each area if they remained parts of one organization. “You can’t be successful and beat Tesla that way,” he said.Sales of battery-powered cars are rising rapidly, a trend that Mr. Farley and other auto executives see as the industry’s biggest disruption since Henry Ford introduced mass production and the Model T in 1908. Ford, General Motors, Toyota, Volkswagen and other traditional manufacturers are spending tens of billions of dollars to field new models, build battery plants and develop new technologies that Tesla has pioneered, such as advanced driver-assist systems and over-the-air software updates.Mr. Farley said Ford would spend $50 billion on electric vehicles between 2022 and 2026. It previously planned to spend $30 billion in the five years ending in 2025. It plans to spend $5 billion on E.V.s this year, double the 2021 total.A Critical Year for Electric VehiclesThe popularity of battery-powered cars is soaring worldwide, even as the overall auto market stagnates. Going Mainstream: In December, Europeans for the first time bought more electric cars than diesels, once the most popular option. Turning Point: Electric vehicles account for a small slice of the market, but in 2022, their march could become unstoppable. Here is why. Tesla’s Success: A superior command of technology and its own supply chain allowed the company to bypass an industrywide crisis. Rivian’s Troubles: Investors first embraced this electric vehicle maker. Now they worry it may not live up to its promise. Green Fleet: Amazon wants electric vans to make its deliveries. The problem? The auto industry barely produces any of the vehicles yet.This spring, Ford is supposed to start full production of an electric version of its F-150 pickup truck and has taken reservations for more than 150,000 of them. It is also building two battery plants in Kentucky, and a third battery plant and an electric truck factory in Tennessee.Separately on Wednesday, Stellantis outlined a long-term strategic plan that calls for rapid introductions of new electric vehicles. The company, which was formed a year ago from the merger of Fiat Chrysler and the French automaker Peugeot, said that it would introduce 25 E.V.s in the United States by 2030, and that all new models in Europe would be electric by that time. It plans to build two battery plants in the United States.G.M. has similar plans. It is building two battery plants, and aims to phase out internal-combustion models by 2035.Ford’s reorganization is one of the most sweeping taken by a traditional automaker in preparation for the transition to electric vehicles. Mr. Farley said the plan had come together after he and other top Ford executives noticed stark differences in the two business areas.In making gas-powered vehicles, Ford must focus on reducing costs and generating the profits it needs to fund its E.V. plans. Over the next four years, Ford aims to trim costs for its internal-combustion models by $3 billion, with some cuts coming through job reductions, Mr. Farley said.The electric business, in contrast, will have to spend heavily to develop software and technologies and to ramp up production quickly to achieve economies of scale. Ford aims to produce two million electric vehicles a year by 2026.“For Ford to win against the new players and the other manufacturers, we have to focus more than we do today,” Mr. Farley said. “You can’t have people work on both at the same time.”The E.V. group will be known as Ford Model e. Mr. Farley will serve as its president. Doug Field, a former Apple and Tesla executive hired by Ford in September, will lead its vehicle, software and digital systems development.The internal-combustion business, known as Ford Blue, will be led by Kumar Galhotra, who was president of Ford’s North American operations.Ford plans to begin breaking out the profits and losses of the two groups in 2023, and expects the electric business to become profitable within four years. Mr. Farley said the group would most likely have 2,000 to 5,000 employees. In addition to developing electric models, it will engineer new types of assembly lines to build them and manage Ford’s sourcing of key components like motors and inverters and raw materials such as lithium and rare earth metals.Mr. Farley said he envisioned the two groups working closely together. Ford Model e will use body engineering, stamping, and components like seats and steering systems that the internal-combustion group develops. The E.V. unit will produce software and digital components that will be incorporated into traditional gasoline vehicles made by Ford Blue.Mr. Farley said Ford had decided against spinning off the E.V. business because it would hinder the ability of the two groups to cooperate. “They would come to see each other as competitors, and the cooperation would stop,” he said. More

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    Corporations Raise Prices as Consumers Spend ‘With a Vengeance’

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    Corporate America is lifting prices and bragging about bigger profits as consumers open their wallets and spend heartily.Doughnut sellers, milkshake purveyors, tire manufacturers and rental car agencies are all discovering that something is different about America’s pandemic-weathered economy: People are willing to pay more for the goods and services they want to buy.Companies are taking advantage of a moment of hot and seemingly unshakable demand — one in which consumers are spending “with a vengeance,” to borrow the words of one executive — to cover rising costs and to expand their profit margins to prepandemic or even record levels. Corporate executives have spent recent earnings calls bragging about their newfound power to raise prices, often predicting that it will last.If it pans out, that trend that could have big economic implications.Planned corporate price adjustments could continue to boost inflation, which is running at its fastest pace in 40 years. The Federal Reserve is trying to assess whether businesses and households are changing their expectations in a way that might make rapid price gains a more permanent feature of the economic landscape.A selection of comments from recent earnings calls show just how companies are thinking about this moment..Rental Car CostsEverything related to automobiles seems to be increasing in cost, and rental cars are the vanguard of that trend. Company leaders are trying to make the profitable moment last.“The overall rent-a-car industry still has more demand than supply,” Joe Ferraro, the president and chief executive officer at Avis Budget Group, the rental car company, said on a Feb. 15 earnings call. “Given the current trends, we are cautiously optimistic about what a rebound in demand could mean once Covid is behind us,” he added.The year “2021 showed us what’s possible,” he said, noting also that he expects the first quarter of 2022 to be the most profitable in the country’s history.Understand Inflation in the U.S.Inflation 101: What is inflation, why is it up and whom does it hurt? Our guide explains it all.Your Questions, Answered: We asked readers to send questions about inflation. Top experts and economists weighed in.What’s to Blame: Did the stimulus cause prices to rise? Or did pandemic lockdowns and shortages lead to inflation? A debate is heating up in Washington.Supply Chain’s Role: A key factor in rising inflation is the continuing turmoil in the global supply chain. Here’s how the crisis unfolded.The company has realized, “especially given what we’ve been through in the last two years,” that targeting the most possible rentals — effectively competing by offering lower prices — is “not how you maximize profit,” Brian Choi, its chief financial officer, said on the call.“We choose instead to compete based on the quality of our product and our service,” he said.Tire DemandDemand for cars has also bolstered the market for tires.“It’s a really very, very good constructive pricing environment that we’ve seen right now, probably the best in recent memory,” Richard J. Kramer, the chief executive at Goodyear, said on a Feb. 11 earnings call.The company does look to its competitors as it makes its price increases — but they, too, are charging more.“There are nine competitors that we tend to track, and seven out of the nine have announced price increases in the first quarter, and one of the ones who hadn’t raised prices right at the end of last year,” Darren Wells, its chief financial officer, said on the call. Goodyear saw profit margins expand last year, driven in part by price increases.Sizing Up Beef CostsThe restaurant family that includes Outback Steakhouse, Bloomin’ Brands, is planning to raise prices about 5 percent across its brands to cover rising labor and food costs — and, by pairing that with efficiency improvements, it is managing to increase its profits.“It became clear that the 3 percent pricing we previously discussed was not be enough to offset the increased inflationary pressures our industry is facing,” said Christopher Meyer, the chief financial officer at Bloomin’ Brands, speaking of the last quarter. “Given that we had not taken a material menu price increase since 2019, we are confident that 5 percent is appropriate.”Mr. Meyer noted that operating inflation was 4.9 percent and labor inflation was 8.9 percent in the final quarter of 2021, but that the company had managed to increase its profits through improving efficiency by simplifying its menu and by cutting food waste.In 2022, he said, the company expects beef inflation “in the mid-to-high teens” and wage inflation “in the high single-digit range.”Recovering Profits in FoodShake Shack is among the companies hoping to benefit as consumers spend.Amy Lombard for The New York TimesAs beef and other food costs have increased, so have Shake Shack’s menu prices. But officials think consumers will be able to spend through the burger and ice cream inflation as virus risks fade and foot traffic picks up in the cities where its stores are located.Inflation F.A.Q.Card 1 of 6What is inflation? More

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    CPI Inflation Climbed 7.5 Percent in January, the Fastest Rise Since 1982

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    Consumer Price Index data showed prices climbing faster than expected, picking up across a broad array of goods and services.

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    Year-over-year changes in the Consumer Price Index
    Seasonally adjustedSource: Bureau of Labor StatisticsBy The New York TimesA key inflation measure released on Thursday showed that prices are climbing at the fastest pace in 40 years and broadening to touch nearly every corner of the American economy, heightening the risk that they will stay elevated for longer and that policymakers may have to react more aggressively.Markets tumbled after the government released Consumer Price Index data for January, which showed prices jumping 7.5 percent over the year and 0.6 percent over the past month, exceeding forecasts. More worrying were the report’s details, which showed inflation moving beyond pandemic-affected goods and services, a sign that rapid gains could prove longer lasting and harder to shake off.Investors speculated that the hot inflation would spur a decisive reaction from the Federal Reserve — possibly a big interest rate increase at the central bank’s next gathering in March, though few Fed officials have signaled comfort with such a large move. Making money more expensive to borrow and spend could weigh on demand, slowing the economy and tamping down prices.Wall Street is now anticipating that interest rates could rise to more than 1.75 percent by the end of the year, up from near zero now, and the possibility of a more forceful Fed reaction sent a key bond yield above 2 percent for the first time since July 2019 and deflated stock prices.Most economists still believe inflation will cool by year’s end, as automobile prices climb at a more moderate pace and as supply chain problems hopefully ease. But high and widespread price increases portend trouble for a White House that is struggling to convince voters that the economy is strong, and for a Fed that looks increasingly at risk of falling behind the curve.“It was more than expected, and it was broad-based,” said Priya Misra, head of global rates strategy at TD Securities, adding that she now expects price gains to slow less drastically this year. “We’ve gotten used to these big headline numbers, but every aspect of ‘transitory’ you can push back against now.”Economists thought price gains would fade quickly in 2021 — making now-infamous predictions that inflation would prove “transitory” — only to have those projections proved wrong time and again as booming consumer demand for goods collided with roiled global supply chains that could not ramp up production fast enough.High inflation has been a political liability for the White House, as rising prices have eaten away at household paychecks, leaving consumers feeling pessimistic.Amir Hamja for The New York TimesLately, it is more than just shortages of goods at play. Price gains are increasingly hitting consumers in hard-to-avoid ways as they show up in necessities: January’s inflation reading was driven by food, electricity and shelter costs, the Bureau of Labor Statistics said.High and broadening inflation has become a political liability for President Biden, as rising prices eat away at household paychecks and detract from a strong labor market with solid wage growth. That has left consumers feeling pessimistic and has all but killed Mr. Biden’s chance to pass a sweeping climate and social policy bill given lawmaker concerns about rising prices.Understand Inflation in the U.S.Inflation 101: What is inflation, why is it up and whom does it hurt? Our guide explains it all.Your Questions, Answered: We asked readers to send questions about inflation. Top experts and economists weighed in.What’s to Blame: Did the stimulus cause prices to rise? Or did pandemic lockdowns and shortages lead to inflation? A debate is heating up in Washington.Supply Chain’s Role: A key factor in rising inflation is the continuing turmoil in the global supply chain. Here’s how the crisis unfolded.Ryan Sweet, an economist at Moody’s Analytics, estimated that inflation was costing the average household $276 a month, compared with a more normal rate of inflation, which had been hovering just around 2 percent before the pandemic.“While today is a reminder that Americans’ budgets are being stretched in ways that create real stress at the kitchen table, there are also signs that we will make it through this challenge,” Mr. Biden said in a statement. He emphasized that wages grew more quickly than prices last month — though in general they have not kept up with price gains over the past year.The White House has introduced policies that might help to ease inflation slightly — discussing plans to help place military veterans into the short-staffed trucking industry, for instance — but the Fed is primarily in charge of slowing down demand to keep prices under control. Fed officials have already shifted away from trying to foster a quick economic rebound and toward bringing inflation down. After Thursday’s report, investors expected the Fed to withdraw economic support even more quickly. Markets braced for a half-percentage-point increase in the federal funds rate at the central bank’s meeting next month — double the usual increment.The inflation reading sent stocks down and government bond yields up. The S&P 500 dropped 1.8 percent, while the Nasdaq composite fell 2.1 percent. The yield on 10-year U.S. Treasury notes rose 0.1 percentage points, to about 2.03 percent, the highest level since November 2019.James Bullard, the president of the Federal Reserve Bank of St. Louis, fretted about the January inflation report in an interview with Bloomberg News and suggested that policymakers should be open to both a bigger-than-normal rate increase and to increasing rates in between officially scheduled meetings.“You have got the highest inflation in 40 years, and I think we are going to have to be far more nimble and far more reactive to data,” said Mr. Bullard, who has at times espoused bold stances that are not followed by his policymaking colleagues.The Fed generally moves borrowing costs in between meetings only at stressed moments and in emergencies, as was the case when it cut rates to zero between planned gatherings in March 2020.Inflation is abnormally high relative to the central bank’s goal: The Fed aims for 2 percent inflation on average over time, defining that target using a different but related inflation index that is also sharply elevated.And it increasingly appears to be driven less by the pandemic and more by a strong economy. Price increases in 2021 came heavily from roiled supply chains that sent new and used car prices and furniture costs up sharply. Those continue to be a big factor elevating overall inflation, but other areas are also fueling the rapid rise.

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    Year-over-year changes in the Consumer Price Index
    Not seasonally adjustedSource: Bureau of Labor StatisticsBy The New York TimesRent of a primary residence, which counts for a big chunk of overall inflation and tends to respond more to economic conditions than to one-off trends, climbed 0.5 percent in January from the prior month, a slight acceleration. Other shelter costs rose at a steady but notable pace.“Low vacancies and the end of rent moratoriums are expected to continue to push rents higher in the year ahead,” Diane Swonk, chief economist at Grant Thornton, wrote in a note after the release.As costs for shelter and other services pick up, policymakers are hoping that supply chains will start to catch up. That could allow prices for goods to moderate or even fall — taking pressure off overall inflation.Inflation F.A.Q.Card 1 of 6What is inflation? More

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    How The Trucker Protests Are Snarling the Auto Industry

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    Blockades of U.S.-Canada border crossings could hurt the auto industry, factory workers and the economy, which are still recovering from pandemic disruptions.After two years of the pandemic, semiconductor shortages and supply chain chaos, it seemed as if nothing else could go wrong for the auto industry and the millions of people it employs. But then came thousands of truckers who, angry about vaccine mandates, have been blocking major border crossings between Canada and the United States.With Canadian officials baffled about what to do, the main routes that handle the steel, aluminum and other parts that keep car factories running on both sides of the border were essentially shut down Wednesday and Thursday.Ford Motor, General Motors, Honda and Toyota have curtailed production at several factories in Michigan and Ontario, threatening paychecks and offering a fresh reminder of the fragility of global supply chains and of the deep interdependence of the U.S. and Canadian economies, which exchange $140 million in vehicles and parts every day.No one knows how this is going to end. The protests are expected to swell in the coming days and could spread, including to the United States. Canada’s transport minister has called the bridge blockades illegal. Marco Mendicino, Canada’s minister of public safety, said on Thursday that the Royal Canadian Mounted Police, the national force, was sending additional officers to the Canadian capital, Ottawa, and to Windsor, Ontario. The mayor of Windsor has threatened to remove the protesters. But those statements have seemed to have little impact. Gov. Gretchen Whitmer of Michigan pleaded with Canadian officials to quickly reopen traffic.“They must take all necessary and appropriate steps to immediately and safely reopen traffic so we can continue growing our economy,” Ms. Whitmer said in a statement on Thursday.The chaos is already starting to take an economic toll. The pain is likely to be most acute for smaller auto parts suppliers, for independent truckers and for workers who get paid based on their production. Many of these groups, unlike large automakers like G.M., Ford and Toyota, lack the clout to raise prices of their goods and services. Companies and workers in Canada are more likely to suffer because they are more dependent on the United States.The longer crossings between the countries remain blocked, the more severe the damage, not only to the auto industry but also to the communities that depend on manufacturing salaries. Workers at smaller firms typically receive no compensation for lost hours, said Dino Chiodo, the director of auto at the giant Canadian union Unifor. Workers who have been sent home early because of parts shortages will spend less at stores and restaurants.“People say, ‘I have $200 less this week, what do I do?’” Mr. Chiodo said. “It affects the Canadian and U.S. economy as a whole.”Auto factories and suppliers in the United States generally keep at least two weeks of raw materials on hand, said Carla Bailo, the president of the Center for Automotive Research in Ann Arbor, Mich. If the bridges remain blocked for longer than that, she said, “then you’re looking at layoffs.”The blockades came after a demonstration in Ottawa that started nearly two weeks ago. The protests began over a mandate that truck drivers coming from the United States be vaccinated against the coronavirus and have grown to include various pandemic restrictions. Some have demanded that Prime Minister Justin Trudeau resign. The truckers have been joined by various groups, including some displaying Nazi symbols and damaging public monuments. Police in Ottawa said on Thursday that the protesters and their supporters, including some in the United States, had almost overwhelmed the city’s 911 system with calls.The crossing that has the auto industry and government officials most concerned is the Ambassador Bridge, which connects Windsor and Detroit. It carries roughly a quarter of the trade between the two countries, which has been relatively unrestricted for decades. While food and other products are also affected, about a third of the cargo that uses the bridge is related to the auto industry, Ms. Bailo said.The blockade has been felt as far south as Kentucky, where production has been disrupted at a Toyota factory, the company said on Thursday. The shutdown at the border also will prevent manufacturing at Toyota’s three Canadian plants for the rest of the week, a spokesman for the automaker, Scott Vazin, said.Demonstrators blocking access to the Ambassador Bridge in Windsor. The bridge accounts for roughly a quarter of the trade between the United States and Canada.Nathan Denette/The Canadian Press, via Associated PressG.M. said it had canceled two shifts on Wednesday and Thursday at a factory in Lansing, Mich., that makes Buick Enclave and Chevrolet Traverse sport utility vehicles. The company also sent workers from the first shift at a plant in Flint, Mich., home early. Ford said Thursday that plants in Windsor and Oakville, also in Ontario, were running at reduced capacity.Shortages of semiconductors and other components have not been all bad for giant automakers, creating scarcity that has driven up prices of cars in the last year. Ford and G.M. both reported healthy profits for 2021. And the economic damage will not be severe if the bridge and other crossings reopen soon, industry experts said.But the last two years have shown that, because supply chains are so complex, problems at obscure parts makers can have far-reaching and unpredictable impact. Last year, Ford had to shut down plants for weeks at a time in part because of a fire at a chip factory in Japan.“If it stretches on for weeks it could be catastrophic,” said Peter Nagle, an analyst who covers the car industry at IHS Markit, a research firm.Mr. Nagle said the bridge blockade was worse than the semiconductor shortage for carmakers. They “were already running pretty tight because of other supply chain shortages,” he said. “This is just bad news on top of bad news.”The auto industry operates relatively seamlessly across Canada, the United States and Mexico. Some parts can travel back and forth across borders multiple times as raw materials are processed and are turned into components and, eventually, vehicles.An engine block, for example, might be cast in Canada, sent to Michigan to be machined for pistons, then sent back to Canada for assembly into a finished motor. The blockades have stranded some truckers on the wrong side of the border, creating a chain reaction of missed deliveries.The slowdown in Canadian trade will disproportionately affect New York, Michigan and Ohio, said Arthur Wheaton, the director of labor studies at Cornell’s School of Industrial and Labor Relations. At the same time, he added, the protests were “certainly raising concerns for all U.S. manufacturers.”“There is already a shortage of truck drivers in North America, so protests keeping truckers off their routes exacerbates problems for an already fragile supply chain,” Mr. Wheaton said.Carmakers had hoped that shortages of computer chips and other components would ease this year, allowing them to concentrate on the long-term: the transition to electric vehicles.A larger fear for many elected officials and business executives is that the scene at the Ambassador Bridge could inspire other protests. The Department of Homeland Security warned in an internal memo that a convoy of protesting truckers was planning to travel from California to Washington, D.C., potentially disrupting the Super Bowl and President Biden’s State of the Union address on March 1.“While there are currently no indications of planned violence,” the memo, which was dated Tuesday, said, “if hundreds of trucks converge in a major metropolitan city, the potential exists to severely disrupt transportation, federal government operations, commercial facilities and emergency services through gridlock and potential counter protests.”Mr. Chiodo, the Canadian union leader, said that “the people who are demonstrating are doing it for the wrong reasons. They want to get back to the way things were before the pandemic, and in reality they are shutting things down.”The scene in Ottawa remained a raucous party Thursday, with hundreds of people on the street, many wearing Canadian flags like capes. The song “Life Is a Highway,” by the Canadian musician Tom Cochrane, pumped from loudspeakers set up on the back of an empty trailer that had been converted into a stage.But there was a thinning out of protesters — with some empty spaces where trucks had been the day before.Johnny Neufeld, 39, a long-haul trucker from Windsor, Ontario, said the vaccine mandate would spell the end of his job transporting molds into the United States since he had chosen not to be inoculated out of fear the shots had been developed too quickly. He got his first ticket from the police Thursday morning, a fine of 130 Canadian dollars (about $100) for being in a no-stopping zone.“This is a souvenir,” he said.Dan Bilefsky More

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    G.M. Cancels Shifts at Michigan Plant Over Canada Protest Disruption

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    General Motors is the latest automaker to suspend production because of protests at a crucial Canadian border crossing that have disrupted supply chains already in turmoil because of the pandemic.G.M. said it had canceled two shifts on Wednesday and Thursday at a factory in Lansing, Mich., that makes sport utility vehicles. The plant depends on components that normally travel across a bridge between Windsor, Ontario, and Detroit that was closed by truck drivers and far-right groups angry about vaccine mandates and demanding the resignation of Prime Minister Justin Trudeau.Ford Motor and Toyota have also shut down some operations because factories could not get parts manufactured in Canada.The shutdown at the border will prevent manufacturing at Toyota’s three Canadian plants for the rest of this week, Scott Vazin, a spokesman for Toyota Motor North America, said Thursday.As long as the shutdowns are short lived, the impact on automaker sales and worker livelihoods should be limited. Companies are likely to make up for any lost production by running extra shifts or other measures.“A couple of days shouldn’t be that significant,” Mr. Vazin said. “We’re certainly hoping the blockade ends.”Said Deep, a spokesman at Ford, said Thursday morning that the company was running its plants in Oakville and Windsor, both in Ontario, at reduced capacity.“This interruption on the Detroit-Windsor bridge hurts customers, autoworkers, suppliers, communities and companies on both sides of the border that are already two years into parts shortages resulting from the global semiconductor issue, Covid and more,” Mr. Deep said. “We hope this situation is resolved quickly because it could have widespread impact on all automakers in the U.S. and Canada.”John Bordignon, a spokesman for Honda Canada, said Thursday morning that the company’s plant in Alliston, Ontario, had temporarily suspended one production line Wednesday evening but was back online on Thursday.The company will continue to monitor the flow of goods between Canada and the United States, and further disruptions were “certainly possible,” he said.Protesters challenging Canada’s vaccine requirements and other pandemic restrictions began cutting off traffic Monday on the Ambassador Bridge, the vital span that connects Detroit and Windsor.The bridge accounts for roughly a quarter of the trade between the United States and Canada. Trucks carry an estimated $300 million worth of goods across the bridge each day, about a third of which are related to the automobile industry.Companies have begun rerouting shipments to alternative crossing routes, like the Blue Water Bridge, which links Port Huron, Mich., and Sarnia, Ontario. But a new blockade on Wednesday on a route to that bridge, as well as a surge of diverted cars and trucks, slowed traffic there.The closings are likely to lead to losses for other industries, as well. On Wednesday, Jen Psaki, the White House press secretary, said that the Biden administration was tracking potential disruptions to agricultural exports to Canada.Gretchen Whitmer, the governor of Michigan, said in a statement on Thursday that the blockade was putting the state’s economy at risk.“The blockade is having a significant impact on Michigan’s working families who are just trying to do their jobs,” she said. “Our communities and automotive, manufacturing, and agriculture businesses are feeling the effects.”Carmakers worldwide have struggled with shortages of semiconductors and other parts that severely curtailed production and sales. They had hoped that the flow of components and materials would start to return to normal this year.Ford said last Friday that it would be forced to shut down some production lines and reduce work hours at plants across North America this week because of chip shortages.Most carmakers operate on a “just-in-time” system that dispatches parts and materials to their factories as they are needed. The system has helped manufacturers reduce costs.But it has also left companies vulnerable as the pandemic closed foreign ports and factories and overloaded shipping companies, warehouses and truckers.David C. Adams, the president at Global Automakers of Canada, which represents Toyota and Honda, said auto facilities typically had about two days of inventory on hand. “Then things start to become problematic in terms of having enough parts to keep the lines running.” More