Ford changed leaders, but it’s still struggling
CEO shuffles ranks, unveils new vehicles, but lacks overall plan
DEARBORN, MICH. — When Jim Hackett took over as chief executive of Ford Motor, he was charged with revitalizing a company suffering from slumping profits, rising costs and an uncertain outlook.
In the 11 months since then, Hackett has shuffled Ford’s executive ranks and outlined plans to introduce new sport-utility vehicles and electric cars. Other steps in his strategy, however, have been slow in coming.
New models — including updated Escape and Explorer SUVs — are on the way, but most won’t begin arriving until the second half of 2019. The company’s stock price is still lagging. And while Hackett has vowed to cut engineering costs and improve Ford’s “fitness,” he has yet to specify how he’ll do that, what his overall turnaround plan entails and what financial targets Ford hopes to hit.
The lack of detail has frustrated Wall Street analysts, and the tension spilled into the open during a conference call in January. In the call, Hackett noted that Ford was working on six efficiency initiatives, but offered no specifics.
“When are we going to know these six?” Adam Jonas of Morgan Stanley asked. “Because I asked you a pretty straightforward question. You’re alluding to the six in your slides. You’re clearly not willing to talk about them.”
Then, with a tone of exasperation rarely heard in such calls, Jonas added, “That’s a problem, Jim.”
The slow rollout of a recovery plan has added a new layer to the challenges facing the No. 2 U.S. automaker. It has trouble on several fronts: Operations in Europe, India and South America are struggling; costs for key materials like aluminum and steel are rising; sales in China have stalled; and its model line is short on the new types of SUVs and trucks that buyers are snapping up in the United States.
In a recent note to his clients, Jonas said investors were becoming skittish about Ford and saw General Motors and Fiat Chrysler as better bets, largely because of the uncertainty of how Hackett intends to fix the company.
“Ford is seen as carrying unnecessarily high levels of risk and little transparency,” he wrote.
Ford is due to report its firstquarter earnings Wednesday and is expected to offer some new information about cost-cutting. But investors probably won’t see a full-blown turnaround plan until September, three people familiar with the matter said.
Senior executives are debating the elements of a comprehensive plan to streamline Ford’s internal operations and rebuild profitability in the company’s North American business, and job cuts cannot be ruled out, these people said. They said a key goal would be lifting North America’s profit margin to near 10 per cent by 2019 or 2020. Last year, Ford North America’s margin was 8 per cent, well short of the 10.7 per cent that General Motors achieved.
Shrinking or selling unprofitable foreign operations could also be part of the new strategy, the three people said, and the company is also discussing whether to continue selling small and mid-size cars in the domestic market. Ford currently loses money on the Fiesta, Focus and the Fusion sedan, they said.
Ford’s top executives expect to present the plan to the company’s directors at the board’s July meeting, these people said. The July gathering is typically when directors spend several days at Ford to give its business strategy a thorough review, and test-drive new models the company is preparing to introduce.
A Ford spokesperson, Bradley Carroll, declined to comment on the board’s deliberations. But he added that “the entire company is intensely focused on improving the operational fitness of the business to deliver profitable growth with improved returns.”
Hackett, 63, has signalled that he is wary of rushing into a new strategy.
“If you think too quickly, and you’re wrong,” he told reporters in March, “you get this joy of making it to market, but then you’re always correcting.”
Just two years ago, Ford was cruising at high speed. Hackett’s predecessor, Mark Fields, guided the company to record earnings in 2015 — nearly US$11 billion in pre-tax profit. Brimming with confidence, Fields approved several ambitious projects. He set off a hiring spree to stock up on software developers, engineers and other executives — talent that he believed Ford would need to compete as electric and selfdriving cars reshape the auto industry.
Ford laid out a billion-dollar plan to remake its Dearborn, Mich., locations into a high-tech, Silicon Valley-like campus. The company invested in ridesharing and other startups in a bid to turn itself into a “mobility” company. Fields and Ford’s chair, William C. Ford Jr., called on a director — Hackett — to join the management ranks and run the mobility activities. It also introduced a $400,000 super sports car, the Ford GT.
But when Fields couldn’t move fast enough to head off slippage in Ford’s profits, the board dismissed him in May and handed the reins to Hackett, a former chief executive of Steelcase who is credited with turning around the office-furniture maker.