*

Ford pivots to hybrid three-row SUVs, resulting in costs

of up

to $1.9 billion

*

Ford delays next-generation electric F-150 truck to 2027,

adds

electric van

*

Ford exec says EV pivot is necessary for future

profitability

*

Analysts question Ford's slow pivot and lack of flexible

product

plan

By Nora Eckert

DETROIT, Aug 22 (Reuters) - At a packed investor day in

Dearborn, Michigan, last year, Ford Motor ( F ) executives

lauded their forthcoming three-row electric SUV, which they said

would be rolling off assembly lines in 2025.

"We call it a personal bullet train. It's beautiful and it's

unlike anything in the segment so far," Doug Field, Ford's head

of EVs, and a former executive at Apple ( AAPL ) and Tesla

, said at the May 2023 event.

Fifteen months later, the personal bullet train was officially

derailed on Wednesday as the U.S. automaker killed it before it

even launched, a sign of the industry's deepening retrenchment

on EVs as consumers have been slower than anticipated to jump on

board battery-powered technology.

"The reality is that the market changed," Marin Gjaja,

Ford's chief operating officer for its EV division, told Reuters

on Thursday. "As we saw the growth and adoption rate fade, we

were furiously trying to catch up."

Ford executives said they would instead focus on hybrid

three-row SUVs, one of the most prominent EV product pivots to

date - and one that could cost the company up to $1.9 billion.

Removing a significant vehicle from Ford's EV future, one that

executives had promised would differentiate the company in a

crowded field, also means leaders will have to refresh their

pitch to investors about how they will turn around the

automaker's slumping stock.

"You've been in that box with all of us and it's now time to

break out," Ford CEO Jim Farley told investors during the May

2023 event, referring to the company's stock valuation, after

touting the three-row SUV. Ford shares have fallen 25% from

their July peak this year, and are down about 5% from the 2023

investor day.

But Gjaja said Ford's pivot is a sign the company is making

the hard decisions necessary to produce profitable EVs,

something he said is a challenge even for EV giants like Tesla

.

"The real question here is, how do we create enough scale

with the right products, with the right features and offerings

that can get us to a scale level where we can be profitable on

both the vehicle side and on the software services," Gjaja

said.

On Wednesday, Ford also said it planned to push back another

much-anticipated vehicle, the new electric version of its F-150

truck, until 2027, two years after it was initially intended to

launch. It said it will add an electric van to its future lineup

as it doubles down on its strengths: pickup trucks and

commercial vehicles.

Ford will provide an update on its EV plans in the first

half of 2025.

Some industry observers wondered why it took the automaker

so long to switch gears.

"The criticism Ford will have to face is why its product

plan was not more flexible from the beginning, why it has been

slow to implement these changes, and why investors will need to

wait for a comprehensive update until next year," Bernstein

analyst Daniel Roeska said in a research note.

'STARTING TO SEE THE FRUITS'

With the EV truck delayed, the three-row SUV killed and Ford

facing EV losses of up to $5.5 billion this year, investors are

eagerly awaiting Ford's affordable EVs from its "skunkworks"

team, made up of more than 100 engineers and software

specialists based in California.

Farley has said he is staking the company's future on this

group's success. The first such product will be a midsized

electric pickup, Ford said Wednesday.

"The progress they've made in two years is nothing short of

breathtaking, and we're starting to see the fruits of that,"

Gjaja said. Still, buyers will have to wait more than two years

before that model rolls off assembly lines.

Ford's decision to shift into building three-row hybrid SUVs,

instead of EVs, is providing some reassurance to analysts about

its near-term strategy. The automaker and many rivals are

increasingly leaning in to hybrid technology that combines an

electric motor with a gasoline-powered engine as a bridge to

EVs, and Farley has said hybrids will likely be a significant

part of Ford's portfolio in the future.

The $1.9 billion hit on the cancellation of the three-row

SUV will sting, but many analysts said Ford ultimately made the

right call.

"There's no sense making what's potentially already going to

be a $1.9 billion hit an even bigger number by sticking with the

vehicle even though you know you don't have a path to

profitability with it," Morningstar analyst David Whiston said.

Still, Ford's crosstown rival General Motors ( GM ) is

standing by plans to begin production of an electric three-row

SUV this year - the Cadillac Escalade IQ, which Whiston said is

a result of GM's earlier start into building ground-up EVs.