Ford, Fields and the inside story of new CEO Jim Hackett

By Christopher A. Sawyer
The Virtual Driver

(May 28, 2017) When I awoke last Monday morning to the news that Ford Motor Company wou
ld announce the “retirement” of company CEO Mark Fields later that day, my mind snapped back to the Ford press conference at this year’s Detroit auto show. It was, in a word, a disaster.

A quick overview of the 2018 F-150 followed by a fleeting look at the yet-to-arrive Ranger pickup, and a closeup of the also yet-to-arrive Bronco SUV’s nameplate. Wow. Color me unimpressed, and concerned at the slow pace of new vehicle launches at Ford.

Sure the Mulally era move to aluminum for the F-150 had siphoned off a lot of money that could have been used to launch new vehicles, but what had Ford done with the money it did have in the bank? The answer came when Fields predicted Ford would make a 20% return on its mobility investments — a wet dream considering its European ride sharing service had exactly zero customers in its first six months of operation according to press reports.

Soon I was turning to my Cars in Context TV co-conspirator, John Clor, and saying something along the lines of, “Well, Mark isn’t long for this world, is he?”

Yet, to hear the pundits and analysts tell it, you’d think that Fields hadn't pushed Ford far enough fast enough along that long autonomous road to Utopia, where every car is electric, and every driver is freed from the task of driving. The only problem with that scenario is that Ford is one of the leaders in the so-called mobility race. It may not have a self-driving system like Tesla’s Autopilot on the market right now, but it has all of the pieces in place to move in that direction quickly, and on a scale and at a profit level of which Tesla can only dream.

It also has a place out in Palo Alto, California whose sole focus is studying and creating multimodal urban travel solutions.

Tesla is the darling of Wall Street. Elon Musk — who was just an investor in Tesla before he took control — is hailed as the new Henry Ford, and the one who will drive us to a clean, green future. The only problem with that is Wall Street analysts know precious little about the auto industry and its buyers, and the hype behind Tesla (a company that has been profitable for a total of two quarters in its 14-year history) is based on them not wanting to miss a ride on the next Apple or Amazon.

New Ford CEO Jim Hackett and Bill Ford, executive chairman of Ford Motor Company at press conference

Some of this hype also is driven by auto writers who breathlessly await the electrified future, while an even larger amount is pushed by the car companies themselves as they try to reassert their relevance in a financial market dominated by technology stocks.

Ford, which has no clear, concise story to tell Wall Street (or for that matter, auto writers and the general public; a good reason for also “retiring” the head of PR) is one of the biggest offenders. One more thing. Ford’s pre-tax 2017 profits are projected to be $9 billion. That’s $2 billion more than Tesla’s total revenue in 2016.

Then there’s the debt load Ford is carrying. Most Wall Street analysts take a look at the company’s total debt, divide that by its equity, and come top with the debt-to-equity (D/E) ratio. Anything over one means debt far exceeds equity. Ford’s D/E ratio is three to four times that of GM. Except that Ford Credit, the most profitable part of the Ford Motor Company, adds to that debt load by making loans to consumers and dealerships which also brings in revenue.

Unfortunately, that isn’t measured by the D/E ratio. Exclude Ford Credit, however, and Ford’s automotive debt is at decade low levels. It still needs to do more to catch up to GM’s automotive debt, though cutting the salaried workforce is a short term (and short-sighted) fix.

New Ford CEO Jim Hackett has been sold as a turnaround specialist and a forward thinker who will unlock Ford’s potential. How exactly? In some autonomous/electric future that will take decades longer to arrive than the hype would have you believe? Or perhaps they mean in the manner he pushed Steelcase to regain its top slot in the office furniture trade.

Yeah, about that. During Hackett’s 18 years at Steelcase, stock price fell by more than 55%, and — according to Reuters — delivered a total return, including reinvested dividends, of negative 22.3%. In addition, the same report states the company, on both a price and total return basis, underperformed its main competitors by substantial margins on a cumulative basis. But he’s loved and known by the folks in Silicon Valley, and apparently that’s all that really matters.

Which brings us to Ford’s real problem: It has the oldest fleet of cars in the industry, no modular platform(s), and a growing aversion to taking risks. In the weeks before he was fired — sorry — before he retired, Fields was quoted as saying that the car market is basically dead, and Ford should shift its priorities to making more SUVs. Not only did this sound like Sergio Marchionne’s recent pronouncements on the same topic, it was nearly as silly as an earlier Fields plan.

Back in the dark days before Alan Mulally, Fields and the stunningly incompetent Elena Ford hatched a plan to increase the desirability of Ford’s milquetoast product line by tying them to its most popular car and truck models, the Mustang and F-150. It even got as far as the the Interceptor Concept sedan being referred to as the “Mustang Interceptor” in preliminary materials. (Personally, I was looking forward to the Mustang Focus station wagon.)

Lincoln, on the other hand, would be given the “Mark” (“Mk”) designation formerly used on the brand’s Continental coupes. To make them more “European,” they would be followed by a letter, as in Mk Z, Mk X, etc. This lack of focus and aversion to risk nearly killed the company. Now it hopes more crossovers and the like will save it from itself. How exactly?

If we’re honest, the Mustang is a fat, expensive performance car aimed at a demographic that is aging rapidly. Where is the sporty, beautiful, expensive looking, economical, reliable and quick B/C-sized car that will take its place with Millennials? Why is the Focus nearly as old as Methuselah? Where are the updates for the rapidly aging Escape? What, if anything, will replace the Ford Flex and Lincoln MKT or, for that matter, the Taurus? And what about the Bronco?

Word is that it’s a Ranger-based four-door SUV nearly identical to the Australian Ford Everest. How about a modified T4 Troller (in both two- and four-door body styles) that doesn’t sail so closely to the new Explorer instead? Further, if Ford really wants to get into the electric vehicle trade, how about negotiating a deal with VW to use its new modular electric vehicle platform?

2017 Ford Everest

With plans to build more than a million EVs in the next decade, VW will be looking for partners to keep unsold units from piling up on dealer lots. And we haven’t even gotten to Lincoln yet. It still can’t decide on whether it will build a world-class rear-drive platform at a time when Hyundai’s Genesis is in its second generation. As for its use of Ford platforms under its bread-and-butter cars, at least make high-performance all-wheel drive standard across the board and come up with a cool single word name for it. By the way, “quattro” is taken.

As you can see, the list of troubles is long, and has little to do with not moving quickly enough to grab pole position in an electrified autonomously driven future that may never arrive. While Mark Fields may not have been the right guy to lead the organization, it’s painfully clear that it’s time for Bill Ford to take Jim Hackett with him to the perennially underperforming Detroit Lions and rebuild that organization, while Joe Hinrichs reboots the product development, marketing, and public relations functions without the family’s interference. Anything less won’t do.

The Virtual Driver