Howes: Pressure atop Ford unlikely to ease with buyouts
Ford Motor Co.’s touted transition to the auto industry’s next new thing is proving far more difficult than the brass makes it sound.
Instead of embracing the Blue Oval’s ability to generate near-record profits on pickups and SUVs, Wall Street is expressing its skepticism by pummeling Ford shares. Instead of seizing Executive Chairman Bill Ford Jr.’s vision for the mobility future and its promise to juice Ford’s profit margins and growth rates, investors are responding with a collective “show us.”
The steadily rising pressure atop the Glass House is unlikely to ease anytime soon. It culminated Wednesday with confirmation that Ford, still on track to post near-record profits, nonetheless will cut 10 percent of its salaried personnel costs in the North America and Asia-Pacific regions and offer 1,400 voluntary buyouts.
And Ford’s shares? Still trading near their 52-week low — and down roughly 40 percent from when CEO Mark Fields succeeded Alan Mulally nearly three years ago. He’s the Boeing Co. veteran credited with reviving the Blue Oval and rescuing the legacy of Bill Ford Jr. from ignominy.
How borrowing a page from the old Detroit playbook reveals a new Ford ready to straddle the present of traditional autos and the future of mobility and autonomy remains to be seen. More clarity from a management team struggling to find its voice would help, as would a crisper delineation of its strategy.
Not so far, in sharp and inescapable contrast to Mulally. He hammered his “One Ford” strategy with annoying regularity. He ordered it detailed on pocket cards he distributed like candy. He built a huge reservoir of credibility with Wall Street and Ford investors by delivering on the plan, consistently, and adjusting when conditions changed.
It was all so hokey to the serious suits in Dearborn and New York — the hayseed act by the Kansas native, the autographs accompanied by his trademark “Ford Rocks” flourish, the assiduous courting of influentials Mulally determined could be helpful in telling the Ford story. Most of it worked, and most of his lesson appears to have been forgotten.
There is, however, a fundamental difference between the challenges facing Mulally then and Fields now, who ascended to the top job in July 2014. Mulally engineered the rebuild of Ford’s core car and truck business, producing what turned out to be an earnings machine at the top of the auto cycle.
Fields is charged with maintaining that momentum amid a downshifting market cycle, even as he pushes the automaker into unknown territory labeled autonomy, electrification and mobility. That’s easier said than done, especially when a muddy strategy at a critical inflection point is complicated by an even muddier communications strategy — to the extent there is one.
Traditional automakers like Ford aren’t just contemplating a future informed by a century of experience, one promising next-generation cars, trucks and SUVs. They’re betting on an evolving, unfamiliar future they mostly don’t know and cannot predict — and expecting investors to trust them to get it right.
Based on what? More than a decade after Mulally arrived to lead a broad global restructuring of the Blue Oval’s brands, product development processes and manufacturing footprint, Ford is more deeply dependent on pickups and SUVs, booking less revenue from cars in the United States, and rethinking its presence in places like India.
Two of the nation’s bellwether industries — autos and high-tech based in Silicon Valley — generally agree that electrification, autonomy and mobility services will combine to become the next big chapter in transportation. But who gets there first in any meaningful way is likely to be shaped by their respective starting points and risk tolerance.
Modeling and forecasting the historic restructuring that Mulally engineered after he arrived in 2006 is work Ford deeply understood, even if it didn’t always execute it consistently. Modeling and forecasting the autonomous and mobility future choked with new high-tech competitors accustomed to moving faster, and sometimes failing, is largely all-new territory.
In Silicon Valley, failure is part of the high-risk, high-reward landscape of innovation. In Dearborn, failure is still just that — failure, and it’s marked by the usual zero-sum score-keeping that is antithetical to the collaboration allegedly inherent in the emerging mobility space.
Don’t take my word for it. Listen to the questions Bill Ford fielded during last week’s virtual annual meeting. They rang heavy on the rearview mirror issues of dividends, lagging share price and core automotive issues, and light on the future that Ford’s brass is trying to sell, unsuccessfully.
Kinda hard to expect investors to step boldly into the automotive future when at least a sample of them are so firmly rooted in the past. The same applies to Ford management and its directors, presiding nobly over two distinct businesses — traditional autos and autonomy/mobility — mostly headed in opposite directions.
Offering 1,400 buyouts in two operating regions, and concentrating many of them in hometown Dearborn, is a traditional response to Wall Street displeasure. But it’s not likely to be sufficient for would-be investors looking for growth, higher margins and a smarter use of capital.
Cross-town rival General Motors Co., beset with a similar prove-it-to-us burden, is responding with more purpose and communication. It’s taking risks its predecessors never would — bolting Russia, ending production in Australia, selling its European operations to PSA Groupe of France.
Expect Ford to do more because it has to. The next generation of autos-turned-mobility will be driven by a quicker competitive metabolism, and Ford will need one, too, if it hopes to compete and win.
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.