DETROIT — After nearly three years into Jim Hackett’s tenure, the Ford Motor Co. CEO’s sweeping fitness plan has yet to produce the positive financial results he has promised, and the automaker served notice last week that its turnaround remains at least another year away from bearing fruit.
Amid a growing sense of urgency within the company, Hackett last week again shuffled his senior leadership team, promoting Jim Farley to be his COO — and heir apparent — while parting ways with a seasoned manufacturing guru and dealer ally in Joe Hinrichs.
The executive shake-up, coming as Ford enters a crucial stretch of high-profile product launches, followed another round of dismal financial results that prompted Ford’s stock to drop the most in nine years.
Hackett has indicated that his restructuring efforts would take time, but even he has been critical of the financial results produced during his tenure. Net income dropped from $7.7 billion in 2017, a performance he labeled unsatisfactory, to a “mediocre by any standard” $3.7 billion the following year, before plunging 99 percent in 2019, to just $47 million. “Simply not nearly good enough,” Hackett concluded after a fourth quarter in which General Motors weathered a lengthy UAW strike and still outperformed Ford.
“Not OK,” CFO Tim Stone said.
Now Ford is tasked with navigating numerous product introductions, including the next-generation F-150 pickup coming this year, without the aid of Hinrichs, who was instrumental in launching the aluminum-bodied F-150 in 2014 and helped minimize the damage from a 2018 supplier fire that crippled F-150 production for a week.
“Those new products don’t just blossom overnight,” said Bob Tomes, owner of Bob Tomes Ford in McKinney, Texas. “Joe had a lot of input into Ford’s direction, and he was a very capable person.”
Under Hackett, Ford has slashed jobs globally, revamped its product portfolio and changed its management structure in an effort to build a more lean, quick-thinking company. It has leaned into mobility ventures and autonomous vehicle technology in the hopes of being a leader in the future and developing a higher-margin business.
“We’re now in execution mode,” Hackett said. “What the company needs is to come together behind this vision.”
Hackett is targeting 8 percent operating margins on the company’s global automotive business and 10 percent margins in North America, or roughly double what the company has achieved recently. Meanwhile, Fiat Chrysler Automobiles posted a 10 percent North American margin in the fourth quarter.
“Jim Farley is the right person to take on this important new role,” Hackett said. “Jim’s passion for great vehicles and his intense drive for results are well known. He also has developed into a transformational leader with the imagination and foresight to help lead Ford into the future.”
Farley, 57, who joined Ford in 2007 from Toyota Motor Corp., will retain his roles as head of Ford Smart Mobility, the company’s autonomous vehicle unit, and of Ford’s partnership with Argo AI, an autonomous technology company in Pittsburgh. Ford is preparing to launch an autonomous vehicle for commercial businesses next year.
“We have all the foundational elements of this transformation,” Farley said. “Now it’s go time.”
Hinrichs, 53, had been Ford’s top operations executive since 2017 — when Hackett took charge as CEO — after five years as president of the Americas. He is well respected in Ford’s factories and among dealers and was seen by many as a likely successor to Hackett. He has had broad authority over Ford’s automotive operations, including product development, and helped the automaker come to terms on a new four-year labor contract with the UAW.
Hackett called Hinrichs a “really good friend and accomplished global leader” who was “instrumental” in helping Ford survive the Great Recession and also played vital roles dealing with labor, manufacturing and trade.
“To a person, he was beloved,” Hackett said. “Joe’s going to have a wonderful career. But everybody believes the momentum that we’re talking about building here is the right thing to do.”
Ford’s disappointing 2019 earnings were a result in part of the botched launch of the redesigned Explorer crossover, one of the company’s most profitable nameplates, but Hackett said Hinrichs’ departure was “not tied to that at all.”
Hinrichs also holds Ford’s seat on the board of directors at electric vehicle startup Rivian. A Ford spokesman said no decision had been made on replacing Hinrichs in that role with another executive. Ford invested $500 million last year in Rivian and plans to use its technology for an upcoming Lincoln EV.
Still, many dealers said they were generally upbeat about a chance to work more closely with Farley, whom they credit with positive changes to Ford’s Europe operations.
“Jim’s a great innovator,” said Tomes, the Texas dealer. “He’s a great hands-on person. I think it portends a positive, upbeat future for Ford, its products and its dealer body.”
Ford is working to improve its results even as the auto industry is bracing for a possible downturn or recession in the coming years. U.S. new-vehicle sales are expected to fall below 17 million this year for the first time since 2014, even as rising transaction prices help pad revenue and profit.
“There were those that thought 2019 wouldn’t be a good economy, but it was, and [Ford] only did OK in North America,” David Kudla, CEO and chief investment strategist with Mainstay Capital Management in Grand Blanc, Mich., told Automotive News. “They have to make hay and execute now and take advantage of the good economy because we know we have some leaner times to come.”
Analysts grumbled, and Ford stock tumbled, after executives warned of financial headwinds in 2020 from upcoming launches, including the F-150, the revived Bronco SUV and the new Mustang Mach-E electric crossover. Ford’s projections of $2.4 billion to $3.4 billion in adjusted free cash flow and adjusted earnings of $5.6 billion to $6.6 billion fell short of analysts’ expectations.
“We’re looking at guidance … that doesn’t give you a warm, cozy feeling,” Kudla said. “I’d like to think they’re setting Wall Street up for an underpromise, overdeliver earnings surprise. That kind of guidance is disconcerting.”
Investors, who chided Hackett in his early days at Ford for providing scant details of his turnaround plan, again criticized him last week for a lack of transparency about the company’s expectations this year.
“Not quantifying, that makes it very challenging for us to really assess what you’re facing,” Rod Lache, an analyst with Wolfe Research, said on Ford’s earnings call. Morgan Stanley analyst Adam Jonas, who has publicly sparred with Hackett on past earnings calls, echoed Lache’s push for details.
“We are certainly used to management teams giving their best guess, particularly at a time when there is so much pressure and when the stakes are so high,” Jonas said.
A day later, after GM executives spoke at an investor day held by that automaker, Jonas took another dig at Ford.
“I noticed that you were videotaping today’s investor day. It’d be great if someone could send that tape to Ford in Dearborn,” he told GM CEO Mary Barra and others. “I’m serious. I’ll hand-deliver it myself to them if you don’t send it to them. … You are executing.”