Howes: Bill Ford spies ‘revolution’ coming for auto biz

Daniel Howes
The Detroit News

Bill Ford Jr.’s used to taking shots.

He got whacked repeatedly for touting environmentalism in the global auto industry before environmentalism was cool. That prompted rivals to wonder whether the scion of America’s preeminent industrial dynasty was becoming unmoored from the realities of the family business.

He got criticized for his tenure as CEO, a situation he and Ford Motor Co.’s directors addressed a decade ago with the appointment of Alan Mulally as his replacement. The former Boeing Co. engineer led a remarkable turnaround financed with private capital — not taxpayer money.

And Republican Donald Trump rarely misses an opportunity on the presidential campaign trail to trash Ford Motor’s decision to move small-car production to Mexico. It’s a move the guy with his name on the building says he personally explained to the New York mogul, who evidently chooses to ignore the details lest they muddy his message.

But Ford’s executive chairman is taking a shot of his own on the emerging mobility space. It’s a multitrillion-dollar global business that promises to transform personal transportation and the auto industry as surely as his great-grandfather’s Model T changed the way people live, work and play and where they do it.

“Everything is changing,” Bill Ford said at last week’s World Mobility Leadership Forum. “We have to be incredibly open-minded, incredibly nimble and open to anything. The rate of change just keeps multiplying exponentially. This notion of being thoughtful but also being quick is really taxing to most companies.”

Ford is no exception. To hear the chairman tell it, the Blue Oval (and such rivals as General Motors Co.) want nothing more than to revolutionize the business Henry Ford built. It wants to listen to the transportation needs of everyday customers, to offer customized solutions, to demonstrate the values of humility and collaboration in an industry seldom associated with either.

It wants to work more intensively with municipal governments. It wants to show that what works in New York or Paris may not in Mumbai or Shanghai. It wants to prove to skeptical investors that a cornerstone of the Old Economy can tend to the core car and truck business even as it tries to expand its reach into mobility ... and in the process, expand its profit margins.

“In time, if we do this right, we will be less capital-intensive,” Bill Ford said. “We will be less revenue-dependent on fixed-cost investment.”

And if they do it wrong, or fail to exploit huge opportunities in the mobility space of ride-sharing, self-driving cars and transportation services, Ford risks being relegated to utilizing excess plant capacity to assemble other people’s technology — a place it decidedly does not want to be because of the negative long-term implications for growth and value creation.

Done wrong or incompletely, the net effect would be lower profit margins, lower share prices, lower market capitalization and irrelevance. Those and more are what Ford and GM are desperately trying to avoid in their continuing campaigns to prove their ability to generate higher margins on lower fixed costs.

In two words: build value. Understand that the recent and not-so-recent past of mediocre product, operating losses and capital destruction remain bitter lessons for investors large and small. Understand that hugely profitable years selling cars, trucks and crossovers in North America are no guarantee of future success in a tech-driven mobility world where barriers to entry are as small as a single idea executed and properly scaled.

Detroit’s mobility mobilization is beginning to generate positive byproducts. The expanding presence of both companies in Silicon Valley, and their aggressive efforts to stake claims in the space through work in their respective hometowns, are attracting a new generation of talent that probably wouldn’t consider work inside of the walls of this town’s cornerstone automakers otherwise.

GM CEO Mary Barra says visits to the automaker’s career website jumped 20 percent after the Detroit automaker announced its investment in Lyft Inc., the San Francisco ride-sharing company. Moves like that, and Detroit’s emergence as a cool and more affordable stop for millennials, are beginning to change the image of an industry long considered to be more staid than it is.

The ability to “make a vehicle with quality and in high numbers” is proving “a lot tougher” to outsiders, Bill Ford says. So instead of buying (at least so far) automotive assets carrying lower market valuations, high-tech players with the notable exception of Tesla Motors Inc.’s Elon Musk are opting to partner with the likes of Ford and, especially, GM.

The test will come when the market downshifts substantially, profits shrink and the mobility opportunities remain. That’s when we’ll see just how nimble Ford and its industry rivals really can be.

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Daniel Howes’ column runs Tuesdays, Thursdays and Fridays. Follow him on Twitter @DanielHowes_TDN, listen to his Saturday podcasts, or catch him 3 and 10 p.m. Thursdays on Michigan Radio’s “Stateside,” 91.7 FM.