Ford CEO Hackett to employees: 2019 will be turning point

Ian Thibodeau
The Detroit News
Ford CEO Jim Hackett

Ford Motor Co. CEO Jim Hackett told employees 2019 will be the year the 115-year-old automaker turns "the corner toward a really bright future," in an internal memo obtained by The Detroit News.

Hackett is in the middle of orchestrating a global restructuring that would have Ford spend $11 billion to right-size struggling business units in Europe, South America and China, cut the global salaried workforce and slash $25.5 billion from the operating budget over the next few years. Those changes are fundamental, Hackett has argued. But they're perceived by investors and industry analysts as slow-moving, and many Ford employees are not clear on Hackett's plan.

That's not a problem exclusive to Ford, Hackett wrote in the memo dated March 8 that detailed for employees what he's doing to position the company to compete with companies new to the automotive space, and why he's doing it.

"It's natural for people on the inside and outside to raise doubts and ask tough questions as they seek clarity and certainty about our future," Hackett wrote. "This is not a Ford phenomenon by the way. Many pundits dismissed Fiat Chrysler as a lost cause coming out of Chapter 11 and predicted Tesla would go bankrupt years ago."

Investment analysts and industry experts have criticized Hackett for most of his nearly two-years at the helm of Ford for lacking clarity and taking decisive actions to fix perceived problems at Ford. Hackett has insisted on calls with investors, in public talks and interviews and through internal memos that he and his team are taking actions to turn Ford around.

Adam Jonas, equity analyst with Morgan Stanley, had been critical of Hackett and Ford. He said wrote in a recent note to investors that Ford leadership seemed more "bullish" on the year-end earnings call this week, but he's still cautious because the turn-around will take time.

Hackett's note comes less than two months after Hackett in another internal note asked his employees to "bury" 2018 "in a deep grave" and focus on driving company profit-margins to double those reported last year. Friday's was the 26th in a series Hackett calls "The Huddle."

Ford weathered the Great Recession, Hackett wrote, but it didn't continue to change after former CEO Alan Mulally implemented his One Ford strategy. Mulally got Ford's North American business in shape, but from 2011 to 2018, the automaker's costs increased 19 percent when revenue only increased 16 percent.

After making cuts during the Great Recession, Ford added roughly 35,000 employees globally to meet targets that weren't achieved, Hackett wrote. Meanwhile, Ford had stale product and it fell behind on electrification and vehicle connectivity.

Now Hackett and Ford have to atone for all those misses, he wrote. By mid-year 2019, the company should know the size of the global salaried headcount reduction. The automaker in February announced plans to idle a Brazilian plant and exit the South American commercial truck business as part of an effort to correct the business there.

That came a month after the automaker announced plans to cut hourly and salaried positions in Europe, possibly exit a Russian joint venture, and potentially shutter plants in Europe. Meantime, Ford is continuing to negotiate separate partnerships abroad with Volkswagen AG and Mahindra. 

Ford is also about to hit the peak of its product cycle. By the end of 2020, 75 percent of Ford's U.S. product lineup will be replaced. The automaker also plans to debut the all-new Bronco, as well as a small, unnamed off-road utility vehicle and its new unnamed electric performance utility vehicle in that time frame.

Meantime, Hackett is pushing Ford to develop technologically advanced vehicles, which are connected to the internet, that can drive value for shareholders, he wrote. The automaker plans to launch a fully autonomous vehicle in 2021, and has multiple mobility ventures in the works, including an e-scooter company. 

Hackett closed the note by urging employees to "lean into cultural change" at Ford: "Transformation starts with the realization that, despite our history and strengths, we don't have a right to the future. We have to earn it."

Twitter: @Ian_Thibodeau