Home » Mainstream Business News » Ford CEO faces first big test as he meets with investors
Jim Hackett, Ford CEO:

Ford CEO faces first big test as he meets with investors

By Dee-Ann Durbin


DETROIT- Ford Motor Co.’s new CEO says the company plans to cut billions in costs and focus its resources on developing trucks, SUVs and electric vehicles as part of a renewed effort to win over skeptical investors.

Jim Hackett, who became Ford’s CEO in May, is meeting with around 100 investors in New York Tuesday afternoon to lay out his plans for the future. Hackett and his executive team spent the summer reevaluating Ford’s operations after former CEO Mark Fields was ousted.

Ford says it can reduce material costs by $10 billion by 2022 through new deals with suppliers and less complexity in its designs.

The company plans to share more parts between cars and reduce options. For example, customers can now order a Ford Fusion sedan in 35,000 possible combinations. Ford is reducing that to 96.

Ford also says it will cut $4 billion in engineering costs by making fewer prototypes and reducing product development time.

The company plans to reallocate $7 billion from cars to SUVs and trucks, including a new Bronco SUV. That’s in recognition of rising global demand for SUVs. Ford plans to cut some cars from its lineup, but didn’t announce those cars Tuesday.

Ford also said it’s open to new partnerships, such as its recent agreement with Indian automaker Mahindra Group to co-operate on mobility projects, electric cars and other areas. It is also working with ride-hailing company Lyft on self-driving technology and talking to China’s Zotye Automobile Co. about an electric car partnership.

Ford hired Hackett, in part, to turn around its share price, which has languished below $15 for the last two years even as rival General Motors Co. saw its shares rise above $40, their highest level since GM’s 2010 IPO. Ford sunk below Tesla Inc. in market value earlier this year, even though the automaker earned $4.6 billion in 2016 and Tesla has never made a full-year profit.

Investors want Hackett to articulate bold plans for the near-term and the future, says Brian Johnson, an analyst with Barclays.

In the short term, Johnson said, Ford needs to get leaner and meet its financial targets. Over the long term, it should consider new moves, like forming a new electric car brand or pairing with another automaker to jointly develop engines. Ford also needs to cement itself as a leader in new mobility projects, like self-driving shuttles or car-sharing services, he said.

“In the past few years, Ford simply hasn’t had a compelling narrative that investors could latch onto,” Johnson wrote in a recent note to investors.

Hackett, the former CEO of office furniture company Steelcase Inc., joined Ford’s board in 2013. He briefly led Ford’s mobility unit before being tapped as CEO to replace Fields, a company veteran.

Hackett said in May that Ford does a lot of things well, but struggled with handling complex strategy decisions. One of his first moves at Ford was to pare down the number of people reporting to him in order to speed decision-making. Hackett has eight direct reports, compared to 18 for Fields.


error: Content is protected !!