F Ford Motor Company

By John D. Stoll 

Ford Motor Co.'s board is looking to steer the boss's attention beyond the company's cash cows, handing the executive a $2.5 million "strategic incentive" grant for hastening the 114-year-old auto giant's transformation.

The equity grant, vesting in 2018, lifted Chief Executive Mark Fields's awarded compensation to $18.9 million last year, up $1.5 million from 2015. The boost came in a period when Ford posted a modest profit decline and the company's share price continued to languish.

One-time awards aren't new for Ford's brass. Former CEO Alan Mulally once earned a considerable amount of stock for simplifying the company's product portfolio.

The details behind this new incentive grant reflect a board eager to change the profit equation at the Dearborn, Mich., auto maker.

In March 2016, Mr. Fields struck a deal with the board, according to Ford's proxy statement published Friday. Management would zero in on a list of growth opportunities that included supercharging the company's Lincoln brand and models for the Chinese market; cultivating a new unit pursuing so-called moonshot ideas, such as car sharing; and "developing a lean mindset."

The proposed award had a payout range of nil to $3.75 million. Mr. Fields earned two-thirds of the maximum, and the resulting $2.5 million payout helped offset the reduced performance bonus he earned last year. More broadly, the auto maker underperformed on certain metrics, such as revenue and quality.

Ford's share price has slumped during Mr. Fields's tenure, falling from about $17 when he took over in 2014 to $11.62 on Friday afternoon.

The darling of automotive stocks while Mr. Mulally was in charge, Ford shares now trade well behind those of General Motors Co. And Ford's $46.1 billion market capitalization is virtually equal to the value assigned to Tesla Inc., a 13-year-old electric-car company that is unprofitable and selling a fraction of the volume delivered by major players.

Mr. Fields's strategic incentive award comes as Ford's reliance on the North American light-truck market and its Ford Credit arm remains substantial. While Ford's China operation is growing and the company's iconic Lincoln brand is showing signs of rebirth, both businesses are far behind many rivals. Meanwhile, the development of electric cars, self-driving vehicles and mobility experiments doesn't contribute to the bottom line.

The auto maker has delivered a sharp improvement in Europe, a cutthroat market that GM is abandoning after being unprofitable there for nearly two decades. Jim Farley, Ford's Europe chief, was awarded a top-performer bonus in 2016 after the unit earned $1.2 billion.

Still, nearly 90% of Ford's $10.4 billion profit last year came from North American operations. This means Ford hasn't really changed its business model since earlier times when Ford executives were chastised for the company's over-dependence on trucks, sport utility vehicles and its auto-loan business.

Bill Ford, now chairman, was chief executive during the prior decade, when those criticisms began to emerge. Mr. Ford responded by turning over company leadership to Mr. Mullaly in 2006, ushering in an era of heightened focus on fuel-efficient small cars.

Sales of sedans and compact cars have fallen amid the gas-price swoon. In their place, Ford is selling significantly more of its profitable F-Series trucks and SUVs. It will launch a remake of the iconic Bronco in 2020.

Now Mr. Ford and the board are pushing Mr. Fields to pivot.

In the proxy, Ford cited several initiatives under Mr. Fields that led to his $2.5 million payout. Establishing a new subsidiary, Ford Smart Mobility LLC, is one of the more recognizable moves.

Tasked with identifying and developing new mobility opportunities. Ford Smart Mobility, for instance, recently acquired a ride-sharing firm. Ford is also investing in companies that develop technology needed to program and pilot autonomous vehicles.

Lincoln, once a dominant luxury brand, is laying the foundation for a comeback. Central to that push is the introduction of the brand in China, which helped increase global sales of the brand 24% last year.

Write to John D. Stoll at john.stoll@wsj.com

(END) Dow Jones Newswires

April 01, 2017 02:47 ET (06:47 GMT)

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