Ford Sets a Course for Growth to Get From Now to Far

Right now, one of Ford Motor Company CEO Jim Hackett’s biggest jobs is to sell stakeholders, employees and customers on the notion that Ford is optimizing the here and now as well as overhauling its approach to the near and far future.

That was a big part of his pitch to analysts and other Wall Streeters on Tuesday as the automaker’s new-ish chief executive attempted to sell his vision of Ford’s future to one of the toughest crowds that the company has faced over the last few years: analysts and investors.

Those attending Hackett’s session in New York were informed that a big key to Ford’s prosperity is immediately boosting investments in its lowest-mileage vehicles—the hot-selling but relatively fuel-inefficient F-150, America’s most popular pickup-truck—while doubling down on all-electric vehicles, where Ford has been lagging competitors.

Ford’s new vision for the future is one of Smart Vehicles in a Smart World: “Ford Motor Company was built on the belief that freedom of movement drives human progress. It’s a belief that has always fueled our passion to create great cars and trucks. And today, it drives our commitment to become the world’s most trusted mobility company, designing smart vehicles for a smart world that help people move more safely, confidently and freely.”

So Hackett spoke of deep learning, smarter (and more efficient) factories, being more strategic and visionary, and of not just focusing on near- and longer-term innovations and mobility, but of “mobility with passion.”

Nearer term, he sees giving customers fewer options when ordering cars, but making sure they’re the right options that customers want and need the most. His tone was one of urgency, focus and pragmatism, reining in costs today in order to invest tomorrow.

At a high level, his focus is a three-pronged plan of attack:

• Initiate an aggressive “fitness” push, re-basing revenue growth assumptions and attacking costs, while redesigning company operations for long-term success.
• Allocate capital to regions, products and services with highest potential for growth and return; product shift calls for more trucks and SUVs, fewer passenger cars.
• Accelerate work on smart, connected vehicles, including AVs and EVs and digital services to thrive in emerging transportation operating system.

“Ford was built on the belief that freedom of movement drives human progress,” said Hackett, who became Ford president and CEO on May 22. “It’s a belief that has always fueled our passion to create great cars and trucks. And today, it drives our commitment to become the world’s most trusted mobility company, designing smart vehicles for a smart world that help people move more safely, confidently and freely.”

Wall Street was just relieved to hear that Hackett had a credible plan—a credibility he also earned as the company’s former head of smart mobility. They had expressed their lack of confidence in Hackett’s predecessor as CEO, Mark Fields, by driving down Ford’s stock price by nearly 40 percent. Ford’s share price has stabilized in the three months since Hackett took over the top job, and the stock rose by 0.5 percent immediately after he spoke.

“I get up every day feeling like time can be wasted here if we don’t get moving,” Hackett told investors on Tuesday at the briefing in New York. “I feel a real sense of urgency.”

It wasn’t just Ford’s share price languished under Fields. There was a distinct new loss in direction for a company that had pulled together in the wake of the Great Recession under former CEO Alan Mulally and his “One Ford” plan and vision for the future.

Fields said the company was doing all the right things to keep pace with change in the industry, but Ford fell behind in the electrification derby even though it was an early introducer of hybrid vehicles; in balancing sedans with SUVs, however, it had been a pioneer in utility vehicles; and in the race to self-driving cars.

Now, Ford will boost its investments in high-profit trucks and SUVs while de-emphasizing the car fleet that boosted the brand in the wake of the Great Recession, because car-buyers have been shunning sedans. It also makes good sense to speed up development of electric and autonomous vehicles while scaling back on improvements in internal-combustion engines, the auto industry’s endangered species these days.

And it’s hard to argue with old-fashioned belt-tightening and cost-cutting—to the tune of $14 billion over the next five years—including trimming engineering expenditures by limiting the number of option combinations that consumers can order in Ford vehicles, focusing on those options buyers value most.

“When you’re a long-lived company that has had success over multiple decades, the decision to change is not easy—culturally or operationally,” Hackett said in a statement. “Ultimately, though, we must accept the virtues that brought us success over the past century are really no guarantee of future success.”

More details on Hackett’s strategy to turn around Ford below (and in his presentation slides):

1) Accelerating the introduction of connected, smart vehicles and services customers want and value. By 2019, 100 percent of Ford’s new U.S. vehicles will be built with connectivity. The company has similarly aggressive plans for China and other markets, as 90 percent of Ford’s new global vehicles will feature connectivity by 2020.

2) Rapidly improving fitness to lower costs, release capital and finance growth. Ford is attacking costs, reducing automotive cost growth by 50 percent through 2022. As part of this, the company is targeting $10 billion in incremental material cost reductions. The team also is reducing engineering costs by $4 billion from planned levels over the next five years by increasing use of common parts across its full line of vehicles, reducing order complexity and building fewer prototypes.

3) Allocating capital where Ford can win the future. This starts with the company reallocating $7 billion of capital from cars to SUVs and trucks, including the Ranger and EcoSport in North America and the all-new Bronco globally. Ford also has plans to build the next-generation Focus for North America in China, saving capital investment and ongoing costs. Further, Ford is reducing internal combustion engine capital expenditures by one-third and redeploying that capital into electrification – on top of the previously announced $4.5 billion investment.

4) Embracing partnerships. Ford will continue to leverage partnerships, remain active in M&A and collaborate to accelerate R&D. The company recently announced it was exploring a strategic alliance with Mahindra Group as it transforms its business in India, and Zoyte with the intention of developing a new line of low-cost all-electric passenger vehicles in China. When it comes to autonomous vehicle development, the company recently announced a relationship with Lyft to work toward commercialization and a collaboration with Domino’s Pizza to research the customer experience of delivery services.

5) Expanding electric vehicle revenue opportunities. The company recently announced a dedicated electrification team within Ford, focused exclusively on creating an ecosystem of products and services for electric vehicles and the unique opportunities they provide. This builds on Ford’s earlier commitment to deliver 13 new electric vehicles in the next five years, including 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.

The post Ford Sets a Course for Growth to Get From Now to Far appeared first on brandchannel:.

from WordPress https://glenmenlow.wordpress.com/2017/10/04/ford-sets-a-course-for-growth-to-get-from-now-to-far/
via IFTTT