Ford Underwhelms Wall Street as CEO Has More Convincing to Do

Posted October 05, 2017

Hackett's strategy also called for Ford to further transform into a mobility company rather than one focused exclusively on producing cars.

Amid the changes the vehicle giant is making are reallocating $7bn of capital from cars to SUVs and trucks and reducing spending on combustion engines and redeploying that into electrification.

The company says its vehicles will get smarter, with 90 percent of its global vehicles getting modem connectivity by 2020.

Hackett said the decision to change was "not easy - culturally or operationally", adding "I feel a real sense of urgency for what we're doing here".

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Those connections are expected to be key as the automaker competes to bring autonomous and electric-vehicle technologies to market. Hackett indicated $7bn (£5.3bn) would be committed towards the latter categories, which proved to be some of the company's most successful products past year and were the main driver of growth in sales in the North American market.

'The world's impression of Ford is that they are behind on a lot of these technologies, ' Emmanuel Rosner, an analyst with Guggenheim Partners, said in an interview. The company plans to reduce cost growth by half through 2022, in part by reducing engineering costs by $4 billion by "increasing use of common parts across its full line of vehicles, reducing order complexity and building fewer prototypes".

The company plans to reallocate $7 billion from cars to SUVs and trucks.

Acknowledging Ford had "fallen short on key targets", the new CEO promised to deliver profit margins of at least 8%, up from the current 6.1%, a figure he said "simply (is) not good enough".

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Ford stock closed at $12.34 Tuesday, up 2%.

On Monday, General Motors unveiled plans to roll out 20 new entirely electric vehicle models by 2023, with two of the new EVs coming out in the next 18 months. The company plans to introduce 13 new electric vehicles around the world over the next five years, including an F-150 hybrid, Mustang hybrid, a hybrid autonomous vehicle, hybrid police sedan and a fully electric small SUV.

Signs are growing that Ford is preparing a major electric-car development effort.

Mr. Hackett, who emphasized smart design during his long tenure running Michigan-based Steelcase Inc., wants to slash costs by modernizing and simplifying Ford's vehicle lineup, factories and product-development process.

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There's echoes of Ford from a decade ago, when Alan Mulally was in charge-namely a plan to reduce the number of combinations customers can have for a vehicle.