The question of the day – will the shake-up at Ford Motor Co. (NYSE:FC) be worth it? The company’s decision to replace CEO Mark Fields with Jim Hackett, the head of the autonomous vehicles subsidiary was not exactly a shock to Wall Street.
During Fields’ 3-year tenure, Ford shares dropped 40% and he was criticized both for failing to expand the core business and for lagging behind the competition in high-tech cars of the future.
Too Little Too Late
Fields tried to tighten the financials by cutting 1,400 salaried jobs his efforts to expand the company’s line of trucks and SUVs was seen as too little too late. Despite investments in autonomous and electrified vehicles, that are too was seen as an attempt by Ford to keep up as opposed to set the pace.
Larger automakers like General Motors Co. (NYSE:GMC) and big names in technology such as Alphabet Inc.’s (NASDAQ:GOOGC) Google have passed Ford in the testing of self-driving vehicles. This despite Ford’s promise to have a fully autonomous vehicle on the road by 2021. On top of everything else, Tesla Inc. (NASDAQ:TSLAF), which recently passed both G.M. and Ford in market cap, is bringing a mass-market model to market later this year.
Enter Mr. Hackett
Hackett, former CEO of Steelcase Inc. (NYSE:SCSB), is currently head of Ford’s unit that is developing self-driving cars. The general idea is to speed up decision-making as well as improving operations.
Ford shares were up 2.12% at the end of the trading day Monday. That said, the road to recovery will be long since as of last Friday’s close shares had fallen 37% since Fields took over 3 years ago.
The board of directors said it wanted reassurance that investments in self-driving cars, electric vehicles and ride services would pay off. "With this transition, we are moving forward with great optimism," Bill Ford said in an employee email. "We have the right team to sharpen our operational excellence, modernize our business, and develop and invent new business models for the future."
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Biting Off Too Much?
Ford may be asking too much of its company and new CEO according to some observers. The board wants to keep the company’s traditional auto-manufacturing business running efficiently while at the same time remaking itself as a high-tech provider of mobility services.
The notion of transitioning from a traditional Detroit automaker into a “mobility” company, building autonomous vehicles and entering new service spaces such as ride-hailing and car-sharing is a tall order. Hackett is seen as the guru who will lead Ford out of the wilderness while maintaining profitability. “These are really unparalleled times, “Bill Ford said, “and it really requires transformational leadership during these times.”
According to Hackett, “The way that that gets fixed is the nature of the innovation and the ideas making their way into the market. It even sounds a little corny but the stock price is a consequence of the actions we’re going to take to make the company more fit, more profitable and a more fun place to work.”