Chairman wants company to shift faster into electric, self-driving cars
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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.
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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)