A U-Turn at Ford | BusinessMirror

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The abrupt departure of Ford chief executive Mark Fields, which the car giant announced on May 22, has two explanations. Investors had become restive at its performance, particularly in the past year, but Fields also was perceived to lack the drive of Alan Mulally, whom he had succeeded. In replacing him with Jim Hackett, who ran an office-furniture company before joining Ford’s board in 2013 and more recently led the company’s mobility unit, Ford hopes to conquer current problems and shore up its future strategy.

Jim Hackett, president and CEO of Steelcase Inc.

Ford’s shares have declined by nearly 40% since Fields took over. Though it made record profits in 2015 and had strong results in 2016, investors reckoned that a booming North American market, on which Ford relies for nearly two-thirds of revenues, would slow. They also disliked the fact that Fields had to invest heavily in new technologies. On his watch Ford suffered the ignominy of its market capitalization being surpassed by Tesla, a maker of electric cars which turns out only a fraction of the 6.6 million vehicles that roll off Ford production lines each year. Being slammed for running a declining firm and for hurting profits by investing in the future was a no-win situation.

Despite his relative lack of experience in the carmaking business, Ford presented Hackett as the “transformational leader” to “re-energize” the firm. After running Ford Smart Mobility, a unit overseeing driverless cars and other new technologies, Hackett may combine an insider’s feel and, like Mulally, an outsider’s ability to challenge the status quo. He promises to speed decision-making, cut bureaucracy and, less convincingly, to add a dose of “fun” at Ford.

As well as casting an eye to the future, Hackett will have to face Ford’s present ills. There is not much he can do about its lack of scale compared with the industry’s big hitters. Few carmakers are ready to risk the big mergers that would address the industry’s overcapacity.

Nor can he do much to improve a brand that lacks cachet. Ford’s foreign operations have weak returns. GM has been more aggressive, selling its European operations and shutting down in India and South Africa. To tackle overcapacity, Ford said recently, it will cut its global salaried work force by a tenth, but that may not be enough to stem losses in India and other emerging markets. A dependence on America will prove troublesome, because that market seems to have peaked.

Another task will be to set up a successor to steer the company in a few years’ time, when new technologies will have become an even more important part of Ford’s business. Jim Farley, Ford’s European boss, and Joe Hinrichs, in charge of the Americas, will take more senior roles, both in Detroit, to be groomed. If Hackett can ensure that the next change at the top occurs at a more measured pace, that will be something.

 

© 2017 Economist Newspaper Ltd., London (May 27). All rights reserved. Reprinted with permission.

 

Image Credits: Doug Mills/The New York Times, Earl Wilson/The New York Times



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