Ford switches gears to focus on its key vehicles, services
DEARBORN, Mich. — Ford CEO Jim Farley says the company will stop competing in over-served market segments and instead will place big bets on connected vehicles and digital services.
The days of Ford being all things to all people are over, Farley said Monday at the company’s capital markets day event.
The company, he said, has been “stuck in a box,” with thin profit margins, weak growth and low stock valuation.
Ford will emphasize software and services as well as iconic vehicles, such as pickup trucks, large SUVs, commercial vehicles and advanced second-generation electric vehicles, Farley said.
It is eliminating waste to close a cost gap with the best in the industry with a “lean disciplined operating system” that reaches into all Ford factories, he said.
For example, by the time Ford rolls out a new version of the F-150 pickup truck later this year, it will have cut 2,400 parts from the bill of materials for the truck from the existing model, Kumar Galhotra, president of Ford Blue, the company’s internal combustion unit.
Ford’s F-Series pickups are the top-selling vehicles in the U.S. and a huge profit center for the company.
Farley said by focusing on software, services and Ford’s strengths in products, the company won’t be as vulnerable to a downturn as in the past. He said the company has let complexity “overrun our business as we tried to be all things to all people.”
Farley says Ford will be competing differently, going for tailored ownership experiences rather than “jockeying for slivers of market share” with complex vehicles in overserved market segments. He said the company will go to non-negotiated prices, working with dealers.
Farley has long complained about Ford’s high retail and warranty costs, and Galhotra said the company is making changes to reduce those to help improve profit margins.
Rather than testing the new Super Duty pickup to a particular standard, the company tested it until parts and systems failed, he said.
Now Ford is finding the eventual weak point and eliminating it, prolonging vehicle life, Galhotra said.
Ford also is focusing on reducing the number of parts in its vehicles, and on the performance and stability of parts supply companies, he said.
“We have some chronically inefficient tier one and tier two suppliers,” Galhotra said. Some have caused an unstable flow of parts, he said, adding that Ford has worked with 125 key suppliers to stabilize their operations.
“If the present supplier is not on a path to a permanent solution, we’re resourcing the business,” he said.
A study by Plante Moran released Monday showed that Ford’s working relations with parts suppliers has declined dramatically since 2020.
Ford also said its new or revamped electric vehicle manufacturing plants will be far more efficient, with nearly 30% less labor overhead than the company’s current large internal combustion vehicle plants.