New Ford CEO Assessing Company, De-Stressing Employees in First 100 Days
Less drudge. More innovation. Own the problem. Find the sweet spot between volume, mix, and price when selling new vehicles. These are some of the stamps that Jim Hackett is trying to put on the Ford Motor Company in his first 100 days as CEO while he formulates a new strategy and plan for the 114-year-old automaker.
Hackett replaced the ousted Mark Fields in May. The board of directors, frustrated after three years of declining stock, tapped Hackett for the job. He was a former board member until he joined the Ford management team to oversee the automaker’s new mobility unit. Hackett is also the retired CEO of Steelcase where he made a name for himself for his ability to see the future of the furniture industry and change the strategic direction of the company to meet it.
Ford is hoping Hackett can better steer the company through the automotive waters that have become choppy with slowing sales, growing incentives, and the push for vehicles to be electric, connected, shared, and autonomous.
Today Hackett held his first earnings call as CEO. Ford had a net income of $2 billion in the second quarter, propelled by $2.2 billion in pretax profit generated in North America. He opened the call with an overview of his immediate goals.
Early priorities include maximizing revenue by finding the sweet spot between volume, mix, and price to get the best prices for new vehicles in the face of declining sales. Ford has revised down its U.S. sales forecast, including heavy-duty vehicles, from 17.7 million to 17.1 million this year and expects a further decline in 2018.
Hackett said he is working on the overall fitness of the company, taking a holistic view of the company with an eye to cut cost. Ford previously announced plans to cut 1,400 jobs, and the deadline is today for salaried workers to volunteer to take a severance. The response has been strong, but Chief Financial Officer Bob Shanks said he does not yet know final numbers which would dictate the need for layoffs. Separation costs will be reported in the third-quarter earnings.
The automaker continues to seek capital deployment opportunities, and Hackett said he will be quicker on decisions on where to play. Bloomberg said Ford is in preliminary talks to acquire Lucid Motors, which has a luxury sedan in the works.
Ford’s Mobility division is now merged with computing and is playing an increasingly important role in the company. Hackett said Ford has the talent and capability in-house, and he sees a lot of opportunity to better utilize it.
Hackett is also working to improve the culture in which Ford employees work. Ford has a history of infighting that has proven destructive in the past. It was largely curbed during the tenure of CEO Alan Mulally, but old ways crept back in under Fields, and Hackett wants to broom out the negative backstabbing.
Some steps so far: He wants executives to own their point of view as a way to clarify choices and make decisions faster. He said he has been able to clear about 30 minutes a day in corporate requirements, freeing time on the calendars of his busy executives. “That’s found money,” he said. The positive body language of the bosses then trickles down to those who work for them, Hackett concludes. Ford will never have the agility of a smaller tech company, but the goal is loosening the hierarchical stranglehold that can paralyze an organization.
Hackett and Ford Executive Chairman Bill Ford
Hackett stressed Ford is not turning its back on core segments or competencies just because it is pursuing new technology and forms of mobility. Capital expenditures will actually increase from $7 billion today to about $8 billion over the next five years, said Shanks, noting a lot of the work in mobility is not capital intensive.
Despite the push to electrification, the company will remain heavily invested in gasoline engines. Despite the move to SUVs and crossovers, Ford will continue to offer cars. But the goal is to do so in a smarter way. He cites the decision to make the next-generation Ford Focus compact car in China and export it to North America instead of building a new plant in Mexico as contributing to the $1 billion total savings to launch the new car. And Ford is introducing a new Fiesta subcompact, its best-selling car in Europe, but has not made any announcements about building or selling the small car in North America.
On a positive note, the highly profitable Ford Expedition and Lincoln Navigator go on sale later this year. New ones will fill the pipeline in the fourth quarter and really take off in 2018.
Hackett said he wishes he could speed the introduction of the Ranger pickup coming in 2019 followed by a new Ford Bronco SUV in 2020, but they can’t be pulled forward. “We have to get it right.”
Meanwhile, some of the headwinds the automaker is facing include increased commodity costs, especially steel, and currency exchanges including in the U.K. where the impact of Brexit is now being felt in lower sales and higher costs. Shanks expects about a $600 million decline this year due to Brexit.
Despite being a former board member, the new CEO is not obsessed with share price, calling it the scorecard of how well things are going, a consequence, as opposed to a sign of where the company is going. Hackett said he will work to provide the reliability and trust Wall Street seeks. He said share price, over time, will reflect what Ford has been able to get done and plans to do.
“Every day, I get up, I think about clarity and focus and delivering understanding about where we are going,” Hackett said.