Chairman wants company to shift faster into electric,
self-driving cars
By Christina Rogers and Joann S. Lublin
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (August 9, 2017).
Two decades ago, when Bill Ford took the helm of his family's
auto company, he was ready to talk about the coming shift to
electric vehicles and the eventual demise of car ownership.
His ideas were dismissed. At one point, when he wanted Ford
Motor Co. to invest in developing alternative transportation, "the
board kind of looked at me like once again I was over my ski tips,"
Mr. Ford said in an interview.
As years went by, other auto makers and tech companies got on
board with his way of thinking. They overtook Ford in electric and
self-driving technologies, and in April, Tesla Inc., which sells
stylish electric cars, passed Ford in investor value, a dashboard
warning signaling Wall Street's skepticism about the growth
prospects of traditional car makers.
Ford was being left behind, and the man with his name on the
door, who for years had largely deferred to management, decided to
intervene.
In the past, the family heir let CEOs take the center stage. But
what was leading the industry forward -- new concepts in fuel
efficiency and transportation -- had been his focus for years.
Plus, he was changing, spurred by the death in 2014 of his father,
William Clay Ford Sr., who was a presence at the company for more
than 50 years.
His passing "made me realize it is me now," Mr. Ford said, about
securing the family's leadership. "I've got to do this."
A month after the Tesla milestone, Mr. Ford led a rare
management shake-up, people familiar with the decision said. Chief
Executive Mark Fields, a 28-year veteran, was out, and Jim Hackett,
the executive brought aboard in 2016 by Mr. Ford to run the car
maker's innovation unit, was elevated to the chief's job.
"The role we're in now requires us to stick our necks out," said
Mr. Ford, the company's executive chairman, who has taken a more
commanding role over the past year. "We've got to place bets. We've
got to have a point of view about the future."
Mr. Ford believed the company was losing direction and that Mr.
Fields didn't have a clear long-term strategy, the people said.
Executives were bitterly divided about how to make progress, they
said.
Analysts, though, are still waiting to hear from Mr. Hackett on
his broader strategic plan -- details are expected out later this
year -- and point out that Ford still faces a laundry list of
near-term challenges. Shares haven't budged since the CEO change,
and Ford said it expects pretax operating profit to fall between
16% and 25% this year.
Mr. Ford's leadership has had ups and downs. He had operational
control as CEO in the early 2000s, and worked to untangle the
complex and splintered organizational model that he inherited from
predecessors. But high labor costs and excess capacity hurt
finances, and he turned to an outsider to accelerate the
turnaround.
Ford and much of the car industry remains dependent on sales of
cars and trucks powered by internal-combustion engines and designed
to be sold for private use. That model is being upended by Tesla
and other Silicon Valley tech companies, including Uber
Technologies Inc. and Alphabet Inc. They are leading the shift to
electric vehicles, autonomous-driving cars and ride-sharing
services, which auto makers fear will reduce the need for
individuals to own cars.
A third of all cars produced in 2025 are expected to be electric
and hybrid cars, up from about 4% in 2016, according to IHS Markit,
a market analysis firm. Meanwhile, U.S. auto sales fell 3% in the
year through July; at Ford, pretax operating profit slipped 4% last
year.
Ford is now undergoing a 100-day review of all its operations,
with the goal of becoming leaner and more agile. In his first weeks
as CEO, Mr. Hackett rolled out a "shot clock" policy to enforce
deadlines to help implement plans faster.
Mr. Ford, 60 years old, has spent more than half his life trying
to push the Dearborn, Mich., based auto maker founded by his
great-grandfather to think about the environment and new forms of
transportation. He conceded his timing wasn't always right --
including during his own stint as CEO from 2001 to 2006.
In 2008, in the throes of the auto industry's collapse, the
board didn't take up his proposal that Ford invest in
nontraditional transportation businesses. He said he realized the
struggling company at that time was thinking about "the next week,
not the next 30 years." He had lined up billions in financing two
years earlier that helped keep the company afloat.
Ford came through that crisis on much firmer financial footing,
due to a restructuring led by former CEO Alan Mulally that
eliminated brands, streamlined the company's global operations and
refocused attention on the core Ford and Lincoln lineups.
When Mr. Fields took over in mid-2014, Ford was solidly
profitable but needed to switch gears to better prepare for its
future. The company pivoted from Mr. Mulally's laser focus on core
business efforts, turning its attention to "mobility," a term Mr.
Ford started using nearly 20 years ago that describes new forms of
transportation.
Mr. Fields, who had been groomed for the top job for years,
struggled. Projects appeared disjointed, without a clear path to
profitability, and shares tumbled 40% during his tenure.
Mr. Fields didn't respond to requests for comment.
Mr. Ford turned to Mr. Hackett, a longtime office furniture
executive and member of the Ford board whom Mr. Ford had helped tap
to lead Ford's Smart Mobility alternative transportation unit a
year earlier. Ford started the group after the company's talks to
build self-driving cars with Alphabet fizzled.
"Jim always made me think," demonstrating depth he rarely
encountered in the car business, Mr. Ford said. "So many people I
meet in this job I hear the same thing over and over again."
The mobility unit is working with a bike-sharing firm in San
Francisco and is crunching data on how people in various settings
get from Point A to Point B. It purchased Chariot, an app-based
shuttle service that plots out routes based on user demand, which
has a growing presence in San Francisco, New York, Seattle and
Austin.
In the interview at the Dearborn headquarters, Mr. Ford
described Mr. Hackett, who helped transform office spaces away from
cubicles into flexible, open plans during nearly 20 years as CEO at
Steelcase Inc., as a like-minded ally in the quest to reinvent the
car business.
"We're just very much in sync," Mr. Ford said. "I never have to
wonder, and he doesn't have to wonder, what the other guy is up
to."
Ford's sales of hybrid and electric vehicles grew 17% last year
-- the genre made up 3% of company sales -- and Ford plans to roll
out 13 more electrified vehicles in the next five years, including
hybrid versions of its Mustang sports car and top-selling F-150
truck.
The auto maker said earlier this year it will invest $1 billion
in artificial-intelligence startup Argo AI to develop
autonomous-driving technologies. Ford said it plans to put a fully
autonomous car on the road by 2021 for commercial use.
Mr. Ford said that when he took over as chairman in 1999, 20
years after joining the company as a product planning analyst, the
culture was "hierarchical, almost militaristic."
The rigid style once made Ford a leader in an industry dictated
by long development cycles and intense capital needs, but
eventually made it too insular and slow to compete with fast-moving
technology companies.
In June, Mr. Hackett took Mr. Ford and the senior management
team to Steelcase to learn about how the retailer grew from an
old-line seller of office furniture into a service-oriented
business that helped clients rethink office spaces around
technology and modern work habits.
"He just wanted us to get out of our mind-set here, to ask a lot
of what-if questions away from Ford," Mr. Ford said.
As part of the management shuffle, Mr. Ford has become a more
visible steward of the company. He attends and weighs in at
meetings to discuss strategy.
He has direct responsibility for communications and government
relations -- he worked to defuse President Donald Trump's criticism
of the company's plans to move production of the Ford Focus to
Mexico. Ford now plans to move the car's production for the U.S.
market to China.
Last fall, Mr. Ford met with a small group of dealers at a
restaurant in Dearborn, to talk about Ford's push into new
ventures, such as ride-sharing and autonomous cars. Dealers were
nervous the company was shifting too much attention away from its
core business. Some were alarmed when Ford introduced only one new
model at the Detroit auto show in 2016 -- an annual event typically
dominated by unveilings of the SUVs and pickup trucks that deliver
the bulk of Ford's profits -- and instead focused on mobility
ventures. Ford didn't unveil new models at the 2017 show.
Mr. Ford, standing in the middle of the group, reassured them
this wasn't the case.
"It was a very frank discussion to let the dealers know where
all this is going," said Jim Seavitt, whose Ford dealership is
located a few miles down the road from Ford's headquarters. Mr.
Ford assured the dealers that new models were coming and that Ford
was still focused on producing vehicles they could sell, said Mr.
Seavitt, who has sold Mr. Ford Mustang sports cars over the years
and recently delivered to him a new GT supercar.
In his younger days, Mr. Ford would often shy away from the
spotlight, viewing himself as a good soldier for the company, an
acquaintance said. As he gained management experience, he spoke
with more authority, and came across as particularly passionate
"when he's talking about something of importance to him like the
environment and mobility," the person said.
"Bill may be quiet, he may be modest, but he will step up
without fear of consequence or risk when he feels it is important
to do so," said Irv Hockaday, a former Hallmark Cards Inc. CEO who
served on Ford's board from 1987 to 2013.
The Ford family holds a separate class of stock that gives the
members 40% of the voting power at the 114-year-old auto maker. Mr.
Ford himself owns 17.7% of the supervoting shares.
He has had an operational role at Ford for decades. Shortly
after taking the chairman's role in 1999, he rushed to the scene of
an explosion at the River Rouge factory complex in Dearborn, that
killed six employees and injured more than a dozen. A gas buildup
in a six-story boiler resulted in the explosion, which started
several fires in the plant, state investigators said.
Mr. Ford rejected the advice of executives handling the
response, who were worried both about danger on the scene and the
legal implications for the company, according to a person familiar
with the incident. Instead, he won the respect of factory workers
by speaking to them and emergency personnel on the scene, and by
meeting with families and attending funerals of victims.
Ford settled with government officials and offered settlements
to the families affected.
As a young executive Mr. Ford spent time studying Toyota Motor
Corp.'s manufacturing techniques and focus on efficiency and
precision.
Later, he spent a decade on the board of eBay Inc., when the
online retailer was scrambling to respond to new e-commerce rivals.
"He understood that Silicon Valley was doing something different,
and that old-line companies were being disrupted," said Meg
Whitman, who was chief executive when he joined the board in
2005.
Mr. Ford and then-CEO Jacques Nasser showed off Th!nk electric
cars at the 2000 Detroit auto show. Ford had purchased a Th!nk
stake as a nod to the belief the auto industry would go electric
but sold it in 2002 after failing to have much impact.
Mr. Ford ousted Mr. Nasser in 2001, after leadership blunders,
including the mishandling of a tire recall, sank Ford's financial
results and hurt employee morale.
Mr. Ford continued to push for more fuel-efficient cars, and
Ford in 2004 was the first U.S. auto maker to put a hybrid, a
version of the Escape, on the market. He also increasingly spoke
out about the problems of traffic congestion in the world's major
cities.
In 2009, a year after the board ignored his idea to invest in
nontraditional transportation, he separately launched Fontinalis
Partners LLC with colleagues to provide seed money to companies
such as ride-hailing service Lyft Inc. and self-driving software
firm nuTonomy Inc., two tech startups edging in on established auto
makers.
"Usually our business plans and time horizons [at Ford] were
five years out," said Mark Schulz, a former Ford executive who
helped co-found Fontinalis. "Bill would always be looking at what
happens in 10 years or 20 years."
In recent years, General Motors Co. and other auto makers have
raced past Ford in launching long-range electric cars, such as the
Chevrolet Bolt, which can be driven more than 200 miles on a single
charge. Ford has said it doesn't expect to have a long-range
electric car out until 2020.
GM also started Maven, its own car-sharing brand, and bought a
$500 million stake in Lyft.
Toyota and Nissan Motor Co. offer strong-selling electrics and
hybrids, some of which are priced for entry-level buyers. Nissan
plans to unveil a redesigned electric Leaf next month.
Tesla, which is a fraction of Ford's size, launched the Model 3,
a cheaper electric sedan that Chief Executive Elon Musk views as
akin to the Model T, which Henry Ford designed to be affordable to
the masses. As of Monday, Tesla's market cap was $59.3 billion,
compared with Ford's $43.4 billion.
Mr. Ford said he still had a long way to go. "I feel I can and
should provide a long-term view for the company in the way the
management can't, " he said, pointing to his role in the founding
family and in the boardroom. "When we need some course correction,
I will stand up and be counted."
--John D. Stoll contributed to this article.
(END) Dow Jones Newswires
August 09, 2017 02:47 ET (06:47 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
Ford Motor (NYSE:F)
Historical Stock Chart
From Mar 2024 to Apr 2024
Ford Motor (NYSE:F)
Historical Stock Chart
From Apr 2023 to Apr 2024