Wall Street rears its head following Ford shakeup
Dearborn — Ford Motor Co. fired its CEO, appointed a new one with a reputation for innovation — and Wall Street yawned Monday.
The Blue Oval’s sweeping shake-up of company leadership to foster the stock results that directors and shareholders have pushed for is a long play, industry analysts say, and investors need to see a clearer outline of the future from Ford. But on the first day of that transformation, Ford stock closed up a modest 2.1 percent on a day when market indexes were up about a half-percent. By comparison, shares of Fiat Chrysler Automobiles were up 2.5 percent on a day when nothing much happened.
Nonetheless, some analysts believe newly appointed President and CEO Jim Hackett could be the man to move the stubborn Blue Oval stock.
After three years of plummeting stock prices amid record vehicle sales and profits, Ford Executive Chairman Bill Ford Jr. sure hopes so.
“We have to re-energize our business,” Ford said Monday at a press conference announcing the ousting of former President and CEO Mark Fields, the ascendency of Hackett and the reassignment of three senior executives to create a new structure for the company.
“We need to modernize our business ... ,” he said. “The clock-speed at which the world is moving, and our competitors, not just our automotive OEM competitors, are working, really requires us to make decisions at a faster pace.”
The company named Hackett — a former CEO of Steelcase Inc. and one-time Ford director who now serves as president of Ford Smart Mobility LLC — to the helm following weeks of pressure from both directors and shareholders about lackluster stock performance. Hackett is credited for his innovation at Steelcase, and for steering the company through an industry downturn and recession. He led the transformation of the office furniture company as it moved workers out of cubicles and into collaborative work spaces.
Many investors view the nearly 114-year-old automaker as an aged manufacturing giant compared to Silicon Valley prospects like electric-vehicle maker Tesla Motors.
Ford shares slipped roughly 40 percent since Fields replaced superstar CEO Alan Mulally in July 2014. Ten percent of that slide came in the first five months of this year as the hot U.S. market shows signs of cooling, weakening Ford’s financial results and raising doubts about its management direction.
Monday’s management move was uncharacteristically swift for Ford, which indicates a new mentality inside the automaker.
“If (the stock) is the new fixation, then Jim’s got to come in and he’s got to make the stocks move,” said Karl Brauer, executive publisher at Autotrader. “It’s dropping, while other car companies are at least holding firm. I think it’s because the messaging hasn’t been convincing. (Ford) has words, not obvious action.”
Ford already has strong vehicle sales, solid profits and plans for expansion into electrification, mobility and autonomy. About the only big thing Hackett can immediately improve is the company’s voice, according to Brauer.
Hackett would agree. The new CEO said during a Monday press conference that the stock price will rise when the company presents a candid plan, and hits the benchmarks through teamwork.
“As it relates to the share price, that’s a confidence that comes after we do the things that we tell you we’re going to do,” said Hackett. “It’s a consequence. It’s not a leading indicator, it’s after we get things happening.”
The company under Fields did a poor job at effectively communicating its steps into those future fields with the news media, the industry, investors and customer, Brauer said.
Dave Cole, chairman emeritus for the Center for Automotive Research in Ann Arbor and longtime observer of the industry, said he isn’t sure what will move the meter on Wall Street.
“It’s hard to do that now,” he said. “Part of this is tied to the penalty companies like Ford pay these days for being in manufacturing … . Manufacturing in general is viewed more negatively on Wall Street than the tech companies.”
Newer companies that play more in the tech field — like Tesla — aren’t burdened with older facilities and structures that lack the glamor of the startup world. When much of a company’s valuation is based on what could be, versus what is, it can be easier to capture the imagination of investors.
“I think Ford is doing extremely well, and they’re well-positioned for the future,” Cole said. “But so many of their moves have become invisible (to both Wall Street and the media). (Tesla CEO Elon) Musk has been a headline grabber and that is what has propelled them.”
While Fields may have talked up mobility and advanced technologies, Ford has also opted to keep much of its work on driverless vehicles confidential and, as a result, reviews of Ford’s follow-through in those areas have been mixed. The company lacks a major ride-sharing partnership like the one struck by General Motors and Lyft. Its own service, Chariot, operates in just a handful of cities.
But in that arena, the company was recently ranked as tops in innovation by one industry analyst. On Monday, Hackett indicated it’s an arena where Ford is content to continue its work behind the scenes until the time is right, though there will be more transparency.
“The future is really a source of optimism for both of us,” Hackett said. “In the mean, this Rubik’s Cube is being turned around, we have just as much of an advantage in that future as anyone else. We have a right to it ... . We don’t have to cede that to anybody (including) Tesla.”
The company needs “a clearer view of the future,” Bill Ford Jr. said. “Once you have that, you can make decisions very rapidly against that clear view. I think you should expect us to start articulating that.”
The first bit of innovation could come through an attitude check.
Ford and Hackett want to follow part of Mulally’s road map and eliminate the hierarchy they see as a plague within the company. That’s a mentality Fields evidently strayed from despite having been groomed by Mulally. Ford and Hackett touched on a number of things Fields did well during his tenure, but the leaders repeated a few times Monday that moving forward, Ford will operate as a team void of internal competition or stifling adherence to departmental chains of command.
That will speed up decision-making, clarify teams and inject a bit of fun into the Dearborn-based automaker that had been spinning its wheels amid a reinvention, Hackett said.
“We’re going to be a team,” he said. “It’s the only way I’m motivated. And these guys have signed up for us to change the world together.”
Ford Motor Co. has spent the better part of a year starting in on 10-year, estimated billion-dollar facelifts of its Dearborn campuses in an effort to pull new, young, tech-minded talent to the company. Hackett and Ford’s initial goal is to shed the machismo of Old Ford that Bill Ford once likened to czarist Russia and create a modern workplace.
“If we’re going to get the best out of our employees and really have true teamwork, then we’re going to have to bend that notion of hierarchy within the company,” Ford said. “And that is very much a cultural thing. It’s hard to do. It’s existed for a lot of years, but Jim is a cultural-change agent.”
Staff Writers Jim Lynch, Melissa Burden and Daniel Howes contributed.