Commentary

Ford Maps Out Its Fitness Plan, Mobility Push And EV Future

Ford, the “mobility” company based in Detroit, told investors in New York yesterday that it is getting fit on a diet of slashing costs while shifting into developing of connected, smart vehicles and services and reallocating $7 billion of capital from passenger cars to SUVs and trucks.

“In a long-awaited strategy update,” new president and CEO Jim Hackett “battled market perceptions that the company has been slow to prepare for a future dominated by shared, environmentally friendly autonomous cars,” write Patti Waldmeir and Peter Campbell for Financial Times.

“He said Ford would cut capital expenditure on internal combustion engines by a third, some $500 million, and redeploy that capital into electrification, on top of the $4.5 billion the company already planned to spend on electric cars.

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“Ford will prepare for disruption by becoming fit,” Hackett declared.” 

“The cost cuts include $10 billion in ‘incremental’ reductions in material costs and $4 billion in engineering cuts as the company shoots to cut vehicle development time by 20%,” reports Nathan Bomey for USA Today. “Hackett is targeting a significant cut in the number of vehicle packages available and an increase in shared parts.”

“Moving capital investment to higher-margin trucks and SUVs is a response to fast-shifting consumer tastes in the U.S. market and abroad, as buyers abandon sedans for vehicles with greater utility and space. Part of the $7 billion capital reallocation includes reintroducing the Ranger pickup truck and Bronco SUV in North America and moving production of the next-generation Focus small car to China, plans that were previously disclosed,” writes Mike Colias for the Wall Street Journal.

Hackett succeeded Mark Fields as CEO in May. Fortune’s Kirsten Korosec boils down Hackett’s plan into six bullet points. For No. 5 — “Simplify and Modernize” — she writes: “Here’s a weird and wild car fact: There are 35,000 different configurations of the current generation Ford Fusion. The automaker plans to reduce that to 96 in the next generation. Ford has already made a tenfold reduction to the number of orderable combinations in the next-generation Escape from 2,302 to 228.”

Hackett was CEO of Steelcase for 20 years until he retired in 2014. He became chairman of Ford Smart Mobility in March 2016 after a stint as interim director of athletics at the University of Michigan.

“Hackett devised his plan for transforming Ford after using most of his first 100 days at the helm to evaluate what works and what doesn't. The result is a substantial push to shift gears at a company that has a history of being slow to change,” writes Phil LeBeau for CNBC’s “Behind the Wheel.”

“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. “Ultimately, though, we must accept the virtues that brought us success over the past century are really no guarantee of future success.”

That isn’t stopping it from evoking Nineteenth Century genius as it lays out its strategy for the Twenty-First.

“The automaker is setting up an internal team named ‘Team Edison’ to study and develop fully electric cars. It will be separate from Ford's other electrification efforts, which include hybrid and plug-in hybrid offerings,” as Michael Martinez reported Monday for Automotive News.

“We see an inflection point in the major markets toward battery electric vehicles,” Sherif Marakby, Ford’s head of electrification and autonomous vehicles, told Martinez. “We feel it's important to have a cross-functional team all the way from defining the strategy plans and implementation to advanced marketing.”

“The choice of the name ‘Team Edison’ is appropriate, as Henry Ford and Thomas Edison became friends in 1896. However, the idea of a rivalry between Thomas Edison and Nikola Tesla, Tesla Motors' namesake, became popular on the internet, provoking such things as an Epic Rap Battle between the two electricity pioneers,” Wayne Cunningham tells us on CNET’s “Road Show.” 

Meanwhile, car … er, mobility, sales were up across manufacturers last month in the wake of hurricanes Harvey and Irma, Reuters’ Nick Carey reports. Ford sales rose 8.7% with F-Series pickup truck sales soaring 21.4%, “benefiting from the popularity of pickups in Texas,” where Harvey did the most damage. But analysts “warned high inventory levels and record consumer discounts remained a concern moving forward” for the industry.

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