Ford to cut $14B, bets on electric
Automaker says its transformation will include fewer models
Ford Motor will slash $14 billion in costs over a five-year period and invest heavily in electric cars as the company’s new CEO aims to boost profits and position the company for the future.
Ford CEO Jim Hackett on Tuesday outlined his long-anticipated comprehensive strategy to remake the company after taking the reins in May.
His plan includes a dramatic simplification of Ford’s vehicle lineup, including a reduction in passenger cars and investments in pickup, crossovers and sportutility vehicles.
“Ford will prepare for disruption by becoming fit,” Hackett told investors at an event in New York.
The cost cuts include $10 billion in “incremental” reductions in material costs and $4 billion in engineering cuts as the company shoots to cut vehicle development time by 20%.
Hackett is targeting a significant cut in the number of vehicle packages available and an increase in shared parts.
Instead of 35,000 possible versions of the Ford Fusion sedan, for example, Ford will offer 96. Instead of 2,302 versions of the Escape SUV, Ford will offer 228.
Optional upgrades, such as special paints, interior trim and infotainment systems, have dramatically increased the number of vehicles available from Ford.
The company is also expected to reduce car sales, with fewer options available on small cars such as the Fiesta subcompact and Focus compact, for example.
“We have too much cost across our business,” Hackett said. “These are real improvements to the business.”
The company plans to cut spending on traditional internal combustion engines by 32% from 2016 to 2022 and increase spending in electric vehicles by an unspecified amount.
The electric-vehicle plan includes the formation of a new group called Team Edison.
Hackett, facing pressure to bolster profits, warned that it would take more than a year for the changes to boost the bottom line.
With a company as old as Ford — like furniture maker Steelcase that Hackett led as CEO for years — “the decision to change isn’t easy,” he said.