You are here
New chief remaking Ford, but gaining little traction with investors
[NEW YORK] Eight months after taking over as chief executive of Ford Motor, Jim Hackett is still trying to accomplish one of his most important tasks: convincing Wall Street that he has a compelling plan to reinvigorate the automaker.
Mr Hackett, 62, a former chief executive of the office-furniture supplier Steelcase, has taken several shots at it. In October, he and the new team of top executives he selected appeared before financial analysts in New York to outline a plan to cut costs - improve Ford's "fitness", in Mr Hackett's words - and to accelerate development of trucks, electric cars and self-driving vehicles.
He pressed his case further this month before large audiences at the Consumer Electronics Show in Las Vegas and the Detroit car show.
But so far investors and analysts remain uninspired. The company's stock is virtually unchanged since late September, while the Standard & Poor's 500-stock index has gained 13 per cent.
"Ford is basically saying, 'We have a lot of inefficiencies, and it's going to take a lot of time to fix,'" said David Whiston, a financial analyst at Morningstar.
"I thought a lot of these inefficiencies were taken care of a long time ago. It's disappointing."
The latest disappointment arrived on Wednesday, when Ford reported fourth-quarter net income of US$2.4 billion, or 60 US cents a share. That was an improvement over a loss in the comparable period a year ago, but its adjusted earnings were 39 US cents a share, about four US cents less than analysts expected.
Profit fell in North America as sales slowed in the United States, and the company lost about US$200 million in the rest of the world. Sales in China fell 6 per cent.
The company forecast a decline in earnings this year, mainly as a result of rising commodity costs and unfavourable exchange rates. Ford also said it would have higher costs related to the introduction of new models - 23 are coming this year globally, compared with 11 in 2017.
"We need to be fitter," said Ford's chief financial officer, Robert Shanks.
In a conference call, analysts pressed Mr Hackett to talk about initiatives to improve profitability, but he declined to discuss them in detail, except to say they are "up and running".
Just a few years ago, Ford was considered the healthiest of the three Detroit carmakers, having escaped the government-engineered bankruptcies that engulfed General Motors and Chrysler. With Alan Mulally as chief executive, Ford slimmed down, focused on its Ford and Lincoln brands, and roared to record profits.
After Mr Mulally retired in 2014 and passed the baton to Mark Fields, however, Ford began to drift as new technologies started reshaping the industry; as new challengers emerged in Tesla, Google and Uber; and as a revived GM and a merged Fiat Chrysler Automobiles provided increased competition in the high-margin business of trucks and roomy sport utility vehicles. Its stock slumped, and Ford directors began wondering if Mr Fields had the right strategy.
In May, Ford's board ousted Mr Fields and called on Mr Hackett, who had previously served on the board and then joined the company to run its activities in autonomous vehicles and related efforts.
Mr Hackett took three months to dive into Ford's troubles and found that Ford was spending too much time and money developing new vehicles, and that costs for steel, other materials and components were rising. His prescription called for Ford to refocus investments on growing markets such as China and highly profitable vehicles suc has trucks and SUVs, while cutting back on initiatives in less promising areas like Europe and passenger cars.
"We are intensely focusing on fixing the fundamental health of our company," Mr Hackett said on Wednesday.
To ensure that Ford will be a player down the road, the company is also ramping up plans to introduce 40 electrified vehicles by 2022 and a driverless car for taxi fleets, ride-hailing services and delivery companies by 2021.
At the Detroit show, Ford said it planned to spend US$11 billion on electric vehicles by 2022.
But neither the plan nor Mr Hackett himself has generated much excitement. His appearance in Las Vegas, where Mr Mulally shined in the past, fell flat. At a conference known for gee-whiz demonstrations of new technologies, Hackett gave a presentation about how to rethink transportation and cities of the future.
"It was very philosophical," said Mr Whiston, who was in the audience. "He might be appealing to a nonautomotive audience, but financial analysts want more."
More troubling to Wall Street is that Ford's new strategy is likely to have little immediate impact on its bottom line.