Does Ford's Alarming $19.5 Billion Charge Make It a Sell?

The automotive industry has been adapting to the shifting landscape as the Trump administration continues to remove support for electric vehicles (EVs), helping fuel a slowdown in EV demand during the fourth quarter and likely beyond. Investors have been watching these changes and massive strategic decisions, and billions of investment dollars hang in the balance. This week, Ford Motor Company (NYSE: F) announced a massive $19.5 billion charge -- but does that make Ford stock a sell right now?

Image source: Ford Motor Company.

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Explaining the charge

Before we get into what the restructuring is at Ford's core business, let's discuss another important topic for investors to understand: the $19.5 billion charge.

Ford expects to record $19.5 billion in special items related to its business restructuring and a large pullback on EV investments, mostly during the fourth quarter. That will then be followed by a $5.5 billion cash charge that will be spread out through 2027, but with the majority being paid next year. Here's what's important to note for investors: The charges will impact Ford's net results but not its adjusted earnings, or the figure Wall Street estimates are based on.

Perhaps in an attempt to offset the bad news that comes with the massive charge, Ford also announced it was increasing its adjusted EBIT guidance to roughly $7 billion this year. For context, that's roughly in line with Ford's target from the beginning of the year before the automaker lowered expectations to between $6 billion and $6.5 billion adjusted EBIT in October.

"We evaluated the market, and we made the call," Ford CEO Jim Farley told CNBC's Closing Bell Overtime on Monday. "We're following customers to where the market is, not where people thought it was going to be, but where it is today."

New business and new strategies

What does Ford's CEO mean in that quote, exactly? As most investors following Ford know, EVs have been massively unprofitable for the company, and at a time when demand is slumping, support is waning, and losses keep mounting, the automaker knew it was time to reinvest the billions it had planned for EVs into more profitable growth opportunities.

The above statement means a couple of things. For its current business, it means refocusing billions of investment dollars into hybrids, including plug-in models rather than full EVs. Ford is also canceling the next generation of large all-electric trucks in favor of smaller and more affordable EVs, largely based on its recently announced universal EV platform.

Farley went on to explain to CNBC that the market was very clear to Ford, that the very high-end of EVs -- around $50,000 to $80,000 -- just weren't selling. Now with a renewed focus on hybrids, which some investors might not know can be as profitable or even more profitable than gasoline counterparts, Ford expects roughly 50% of its global volume to be hybrids, extended range EVs, and full EVs by the end of this decade. That is a substantial increase from 17% in 2025.

Beyond adjusting its current focus, Ford also dropped the news that it would be launching a new business, including sales and service, to tap into the growing demand for battery energy storage systems (BESS) from data centers and infrastructure to support the electric grid as AI ambitions grow. More specifically, Ford will repurpose its existing battery factory in Kentucky to serve its BESS ambitions and will create a new, diversified, and profitable revenue stream for Ford. The Detroit automaker will fuel about $2 billion of investment into scaling this business over the next two years.

Is Ford stock a sell?

This $19.5 billion charge definitely isn't a reason to sell Ford stock, and one could argue the opposite. Decades ago, Detroit automakers were known for arrogance and stubbornness, and this is partly why Japanese automakers were able to quickly move in with fuel-efficient vehicles when demand was being ignored. Today, Ford's mindset is entirely different and is now adjusting its investment dollars to follow where the market is, not where it was hoped to be, and that's a significant change. The refocus is good for business, and while Ford's new BESS business is intriguing, it's unlikely to move the needle in the near term. But is Ford a sell because of this development, absolutely not.

Daniel Miller has positions in Ford Motor Company. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.