Ford shakes up leadership after missing 2019 earnings targets
The elevation of Ford Motor Co. strategy chief Jim Farley to chief operating officer signals growing impatience with the speed of the automaker’s restructuring, experts say, and implicitly makes him the top contender to succeed CEO Jim Hackett.
The major leadership shakeup, which includes the retirement of Joe Hinrichs, president of automotive, comes as the Dearborn automaker blamed the botched launch of its top-selling Explorer SUV for missing 2019 earnings expectations and forecasted a disappointing 2020 — signs the company is under pressure to show results from its ongoing $11 billion global restructuring plan.
"It would seem logical for Farley to be a possible replacement unless there's another Alan Mulally out there," David Cole, chairman emeritus of the Center for Automotive Research in Ann Arbor, said in reference to the former Ford CEO who came from Boeing Co. "This is just typical of the chaos of the industry today."
Farley, 57, and Hinrichs, 53, had been considered potential successors to Hackett when the former CEO of Grand Rapids-based furniture maker Steelcase Inc. came to the automaker in 2017. His appointment was perceived as a short-term move to develop a vision for an Auto 2.0 future of autonomous, connected and electrified vehicles.
"I think there's pressure on Hackett and everybody else at Ford," said Michelle Krebs, executive analyst at Cox Automotive Inc.'s Autotrader. "They announced a restructuring plan, (and) everybody's been waiting for those results. It's been a while. And there's extra pressure because we're at a point where sales are not growing."
But Hackett used a conference call Friday to reiterate he has no plans on leaving Ford soon: "I plan on staying in this job and working with Jim tightly to now realize the value that we’ve been promising."
In addition to overseeing Ford's global markets, Farley will continue to lead Ford's mobility and autonomous-vehicle ventures as he has since April. The transition, which Hackett said has been in the works for more than a year, is meant to combine under one executive the traditional auto business with the new Auto 2.0 sectors and manage them as a single business.
"It is my judgment the time is to move with urgency now to fully integrate and accelerate Ford's transformation into this higher-growth and higher-margin business, and leverage the smart, connected vehicles," Hackett said during a conference call. Farley is charged with nearly doubling global margins to 8%, the company said.
Hinrichs, a manufacturing expert, leaves as Ford expects to replace 40% of its portfolio this year. Hackett, however, said the company "won't miss a beat" as it rolls out a small off-road vehicle; the all-electric Mustang Mach-E SUV; and the redesigned F-150 pickup, including a plug-in hybrid version. Ford also will introduce region-specific vehicles in places like China.
Farley is "more of a sales and marketing guy where the other guy (Hinrichs) is basically the engineer, manufacturing guy," Cole said. "My bet would have been (Hinrichs) would be the next CEO."
A former Toyota Motor Corp. executive, Farley joined Ford in 2007 as its global head of marketing and sales. He was a key member of Mulally's team to return Ford to profitability and launched the "Drive One" advertising campaign that lasted several years after Ford was frequently switching strategies. Farley went on to lead the Lincoln luxury unit, the South American division and then the European business, which he helped turn around at least for a short period.
"We have all the foundation elements of this transformation Jim talked about," Farley said on the conference call. "Now it's go-time, execution. I'm really excited to lead the team to bring this mission toward visions to life."
The Explorer is Ford's best-selling SUV, but sales declined more than 26% last year as production problems led to vehicles coming off the line with buggy software, loose wiring and faulty seats. Ford shipped many of the vehicles 268 miles from Chicago to Flat Rock to be repaired, causing months-long delays.
"There are only three programs you don’t screw up at Ford: F-150, Mustang and Explorer," Marcus Hudson, executive director of Calderone Advisory Group in Birmingham, said in a statement. "The Explorer launch was Hinrich’s audition for the top post; his leaving speaks directly to the internal view of how well manufacturing is doing at Ford. The Explorer launch obviously didn’t go well; couple that with ongoing warranty issues which imply a drop in quality, which has a direct correlation with customer loyalty, then someone’s head had to roll.”
Hackett denied the Explorer's problem had to do with Hinrichs' departure: "The launch of the Explorer is a company issue that involved a lot of aspects, including Joe's role and others. We share that with others. This, in fact, is not tied to that at all. I want to make that really clear that we're all accountable for that performance."
Ford shares continued to fall by 1.5% Friday afternoon — more than equity indexes — after hitting a 52-week low earlier in the day before the news. The automaker's stock was about $8.12 per share, down from $9.21 prior to Ford reporting earnings Tuesday after the market closed.
Tuesday's results had led Adam Jonas, managing director of research at Morgan Stanley, to blast the Dearborn automaker a day later during an investor presentation held by General Motors Co. that highlighted its future plans.
“I noticed that you were videotaping today’s investor day; it’d be great if someone could send that tape to Ford in Dearborn," he said. "I’m serious. I’ll hand-deliver it myself to them if you don’t send it to them. Your team is really airtight. You should be very proud of this presentation you gave. ... You are executing."
Hackett praised Hinrichs' contributions to Ford in helping it to survive the Great Recession without bankruptcy or bailouts; leading the launch of Ford in China; playing an influential role in negotiations with the United Auto Workers; and representing the automotive industry's interests in trade deals such as the newly signed United States-Mexico-Canada agreement.
Additionally, Hau Thai-Tang, chief product development and purchasing officer, will take over oversight of connectivity and enterprise product-line management in addition to his current roles. Thai-Tang, 53, will report to Farley.
The leadership changes will take effect March 1.
Detroit News Staff Writer Kalea Hall contributed.