Ford Motor Chief Executive Officer Jim Hackett laid out an ambitious plan to Wall Street last week, aimed at refocusing the company as the automaker tries to stay relevant in a changing automotive and technological landscape that pits it against traditional foes such as General Motors and Toyota and upstarts such as Tesla and Google.
The company plans to reduce the number of Ford models but it did not say how many or which ones. And it intends to substantially ramp up its shift away from gas engines into electrification and connected cars, as well as autonomous cars.
The plan also calls for Ford to cut material costs by $10 billion and engineering expenses by $4 billion over five years, shift $7 billion of capital costs from cars to SUVs and trucks, embrace partnerships such as its recently announced alliance with India’s Mahindra Group, and deliver 13 new electric vehicle models in the next five years.
In his remarks, Hackett also pledged to reward the company’s investors, saying “we are all about creating value for shareholders.”
“We’ve not delivered on our top-line growth expectations on our target of an 8% operating margin and over the past seven years we’ve averaged a 6.1% margin and that’s simply not good enough, so that performance gap of 2 points is worth billions in value I can tell you,” he said, acknowledging a concern that had plagued his predecessor.
And Hackett doubled down on the company’s heritage as an auto company.
“We’re going to be in the vehicle business moving both people and goods. Some myth about not being in the car business is gone,” Hackett said, while noting that the vehicles the company produces will be smart and connected.
Product of 100-day review
The plan follows a 100-day review of Ford’s culture, plans and inner workings after Hackett’s elevation to the CEO post in May.
Akshay Anand, executive analyst for Kelley Blue Book, noted that Hackett and his team are preparing for the future, but he said that the company faces a tough test.
“Ford’s biggest challenge may be delivering shareholder value and gains in a time where many other company stocks have been booming,” Anand said in a statement.
Michelle Krebs, executive analyst for Autotrader, said Hackett and his team “are beginning to paint a clearer picture of where Ford is going,” such as through investments in electric and autonomous vehicles.
But she noted that “straddling the now and the future will be tricky, especially in terms of profitability.”
Hackett was named to replace Mark Fields after the Dearborn automaker watched its share price suffer despite profits during Fields’ tenure. Hackett, who was credited with transforming Grand Rapids-based Steelcase when he was the CEO of the office furniture company, was chairman of the Ford Smart Mobility subsidiary before his promotion and was highly regarded for his ties to Silicon Valley.
Those connections are expected to be key as the automaker competes to bring autonomous and electric-vehicle technologies to market. As part of that effort, Ford has created a group called Team Edison to focus on developing “uniquely Ford and human centric” battery electric vehicles.
The company plans to invest $4.5 billion and introduce 13 new electric vehicles globally in the next five years, including the F-150 hybrid, Mustang hybrid, Transit Custom plug-in hybrid, an autonomous vehicle hybrid, Ford Police Responder hybrid sedan and a fully electric small SUV.
Team Edison is led by Ted Cannis, who will report to Sherif Marakby, Ford’s vice president of autonomous vehicles and electrification.
DETROIT FREE PRESS/TNS