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Ford's circumstances now less dire, but stakes for the future remain high

Jun 10, 2017

It’s seldom politically correct in this town to say one of our automakers is lagging the competition. But there are exceptions — and right now Ford Motor is one of them.

The Blue Oval shocked the auto world when it replaced CEO Mark Fields a few weeks ago with Jim Hackett, the former Steelcase boss turned University of Michigan athletic director. It pulled another one when it shuffled its global leadership team in a shakeup the Glass House hasn’t seen in a long time.

What’s going on here? Plenty, and it begins with a simple sentence: profit today is not enough for tomorrow.

Credit Daniel Howes / Detroit News

Ford’s directors and the guy whose name is on the building saw sooner than most what’s worrying investors: Ford is falling behind the competition in the race for the future.

A respected Wall Street analyst this week predicted Ford’s earnings outlook could be cut in half in the next 18 to 24 months as the automaker is forced to adjust to the reality of its predicament. Namely, that its best-selling F-Series trucks produce the vast majority of its fat profits, that it’s not moving quickly enough to reshape its global footprint and get out of places where it doesn’t make enough money, and that it’s not keeping pace with rivals like General Motors.

GM's aggressively bolting unprofitable markets. Its investments in OnStar and 4G connectivity already enable it to connect regularly with 12 million vehicles to upload data it can mine to better meet customer needs, to collect 6.7 billion data points per day from vehicles built in 2014 or later, and to field the industry’s first 200-plus miles on a charge electric car selling for less than $30,000.

Ford?

Not even close.

And that’s just one company in the battle between Detroit and Silicon Valley.

The Ford directors charged with representing the financial interests of shareholders — and those of the controlling Ford family — saw this rude awakening coming because they’re in a position to do so. And they’re obligated to act.

Maybe it’s because Fields’ progress looked more like slow motion compared to GM CEO Mary Barra and her team.

Maybe it’s because GM’s Chevrolet Bolt is already in showrooms. It’s well ahead of Ford and the Model 3 from Silicon Valley’s Tesla, which is vying with GM to be America’s most valued automaker.

And Ford? Investors value it a distant third — last, actually — in a U.S. industry its founder, Henry Ford, revolutionized with the moving assembly line and his Model T for the masses.

This territory is not comfortable for Ford nor should it be acceptable.

Hotshot Alan Mulally arrived in Dearborn in 2006 to rescue Ford from itself. His industrial prescription delivered better results every quarter. It focused on common processes and suppressed infighting.

But it did not prepare the Blue Oval for the mobility and connectivity revolution that began gathering critical mass as Mulally boarded his plane home to Seattle. Want evidence? Look at what Ford is doing and what it says. The House that Alan built is necessary, but it’s not sufficient for the new world.

Daniel Howes is a columnist with The Detroit News. Views expressed in his essays are his own and do not necessarily reflect those of Michigan Radio, its management or the station licensee, The University of Michigan.