Editorial: Ford shake-up sign of new times
It’s been a while since we’ve seen headlines around here about executive shake-ups at the top of auto companies and cutbacks of auto industry jobs.
Michigan’s bread-and-butter industry has been soaring along for the last seven years, posting record profits and sales.
But the dramatic moves at Ford Motor Co. is a reminder that this isn’t necessarily a cyclical industry anymore, but one that is in perpetual disruption. It’s also an industry that has learned the hard way about the dangers of waiting too long to respond to warning signs.
Ford first announced it was trimming a sizable chunk of its white collar workforce — some reports said up to 10 percent — in what appeared a desperate cost-cutting move aimed at driving up its wilting stock price.
That was followed by the dumping of its chief executive officer, Mark Fields, who has presided over several solid sales and earnings years after taking over from Ford’s crisis savior, Alan Mulally.
Traditionally, such drastic steps come in response to dismal financial performance.
But here’s the environment in which Ford made the moves:
■2016 net income was $4.6 billion, for an operating margin of 6.7 percent.
■Blue-collar workers claimed their second largest profit sharing checks ever, averaging $9,000 each.
■Ford finished the year with automotive cash on hand of $27.5 billion, against cash net debt of $11.6 billion. Shareholders received $3.5 billion in dividends.
■And vehicle sales, at 2.6 million, were the best in a decade, as the automaker launched 18 new products.
That reads like a solid year.
But more than any other time in its history, the auto industry and its investors are looking forward. And what it sees is dark clouds.
North American sales are tapering off, and Ford’s market share declined slightly. The Dearborn automaker has not moved as swiftly as General Motors Co. to shed less profitable overseas operations and contain costs elsewhere.
And nobody is quite certain how the mobility revolution, including electric and self-driving vehicles, will impact Ford, or any of the automakers, for that matter.
So investors have turned cool to a company they loved just a few years ago, when Mulally was at the helm. Stocks fell roughly 40 percent during Fields’ tenure.
Now there’s a new leader, Jim Hackett, a retired Steelcase CEO who was plucked from retirement once already to restore the University of Michigan’s troubled football program.
His claim to fame is hiring Jim Harbaugh to lead the Wolverines.
Hackett, who serves on Ford’s board of directors and was recently brought in under Fields to run Ford’s mobility unit, is in some ways an odd choice.
At 62, he’s the age at which most auto executives retire, not take on the top job. He spent most of his career at Steelcase, an office furniture maker, with little experience in the transportation industry.
But he has a reputation as a turnaround wizard. And although Ford would not seem to need a complete overhaul, the automaker’s owners are looking to Hackett to create a more nimble an innovative company, and one better prepared to respond to the rapidly changing automotive landscape.
They also want an executive who knows how to deliver value for stockholders. In this case, the shareholders include Ford family members including Executive Chairman Bill Ford.
Michigan needs Hackett to succeed at this assignment. Ford is one of the state’s largest employers and taxpayers, and we’ve seen what happens to the quality of life here when auto companies fall behind.