For Hinrichs, CEO road runs through China
Making Ford a player would boost chances
 | "It's the most complex job I've ever had," Joe Hinrichs says of his current assignment. |
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DETROIT -- Some industry handicappers put Joe Hinrichs second in line behind Mark Fields to succeed Alan Mulally as CEO of Ford Motor Co. But it’s possible the youthful president of Ford’s Asia-Pacific and Africa region already has the most important job in the company.
It’s Hinrichs’ task to fulfill Mulally’s ambitious goal of increasing sales in the region to 20 percent of Ford’s overall revenues by 2020, from 7 percent in the first quarter of 2012. If he succeeds, he could zoom past Fields for the top job. But the job will be difficult.
Ford has lagged behind its global competitors in China, the world’s largest auto market.
“China is the most complex place I’ve ever done business in,” Hinrichs says. “But we get a lot of help” from Ford’s global team.
Adam Jonas, auto analyst for Morgan Stanley in New York, says Ford has its work cut out in China.
“Ford’s nowhere in China right now, which is a problem because they call themselves a global car company but they have an almost irrelevant share in the world’s largest car market,” Jonas says. “China is going to be 35 percent of global car sales by mid-decade. Yet China accounts for well below 10 percent of Ford’s global volume.”
Last year Ford’s market share in China was a skimpy 2 percent, compared with 13 percent for Volkswagen Group and 7 percent for General Motors. Over the next 10 years, Jonas says, “That is the single biggest challenge facing the company.”
Hinrichs is undaunted.
In a recent session with journalists at Ford World Headquarters, he shared his vision of the company’s future in the world’s most dynamic region.
To catch up, Hinrichs is pumping up Ford’s lineup in China and across Asia, adding factories to build vehicles and signing up dealers to sell them, all at a breakneck pace.
He’s frank about the challenges he faces. Consider the headache of simply hiring enough people. Ford wants to double the size of its Chinese work force. But finding enough qualified engineers and other white-collar professionals -- even as other automakers seek to hire those same workers -- is a major undertaking.
China’s attrition rate is 10 to 11 percent a year because of rampant job-hopping. So “on average, every 10 years you’ve got a new work force,” he says. “People stay, but you have to deal with adding people on a regular basis just to keep up.”
“Chinese people are wonderfully talented,” he says. But they expect to receive promotions “faster than we typically would expect an individual to in the United States or Europe. They go home every Chinese New Year and tell their family how they’re doing. The family wants to see a different title on the business card” every year.
If Hinrichs, 45, can meet Ford’s goals, he could end up with a new title on his own business card. Most industry handicappers place him second in line behind Fields, 51, Ford’s president of the Americas, to succeed Alan Mulally as CEO.
Ford Chairman Bill Ford Jr. told shareholders at the annual meeting this month there’s no timetable for Mulally’s departure. So it could be some time before a successor is chosen, which could give Hinrichs more of a chance to prove himself.
Half the world
For now, Fields has North America humming, while Hinrichs is trying to jump-start Ford’s business in a region that covers half the world.
From his office in Shanghai, Hinrichs oversees 21 direct reports. Besides China, his territory covers 11 time zones from South Africa to New Zealand and encompasses such other high-growth markets as India, Indonesia and Thailand. “It’s a complicated structure,” he says.
Ford lost about $100 million in the region in the first quarter, partly because of spending on expansion there. Ford is building eight plants in the region and will introduce 50 new-to-their-market vehicles and powertrains there by mid-decade.
But the action-oriented executive, a native of working class Fostoria, Ohio, about 40 miles south of Toledo, relishes the task.
“When do you get a chance to be part of this -- the largest industrial expansion since the late ’50s and World War II?” he says. “That keeps you going. It’s a lot better than restructuring.”
Hinrichs knows restructuring. In the depths of the 2009 crisis that nearly brought down the American auto industry, Hinrichs was instrumental in negotiating concessions with the United Auto Workers that helped Ford stave off bankruptcy.
Before that Hinrichs negotiated operating agreements with UAW locals in 2006-07 that gave the company the right to make Ford production workers perform a wider variety of tasks and allowed the plants operate at lower cost.
Hinrichs, a manufacturing expert who had been GM’s youngest plant manager at age 29 before coming to Ford, enjoyed an excellent relationship with then-UAW President Ron Gettelfinger and the union’s leadership.
Inside Ford, Hinrichs is known as an approachable, likeable executive with a no-nonsense approach to solving problems.
‘A genuine opportunity’
Michael Dunne, president of Dunne & Co., a Hong Kong firm that researches the industry in Asia, sees an opening for Ford. About 75 to 80 percent of Chinese consumers are “first-time buyers, and those who have bought before demonstrate very low levels of brand loyalty,” he says. “These distinctive customer traits give Ford a genuine opportunity to take market share as its new products hit the market.”
Ford says it will introduce 15 vehicles in China by 2015, spending $4.9 billion to fulfill that ambition.
Ford is addressing the complex demands of the Asian markets with its One Ford global product-development plan, which calls for 85 percent of its global sales volume to come from just five global vehicle platforms and four regional platforms.
But mixing and matching those platforms across Asia’s diverse markets is no easy task.
For example, the Ranger small pickup, built on a One Ford global platform, is Ford’s biggest seller in Thailand and is sold elsewhere in southeast Asia as well as Europe.
But it’s not sold in China. Also not sold there is the Figo small car, built on the global B-sized platform, which recently debuted in India.
Hinrichs says One Ford enables Ford to meet the divergent requirements of Asian markets by developing localized bodies and interiors -- what Ford calls “top hats” -- to be built on its global platforms at minimal expense.
“There’s no way we’d have money in Asia-Pacific and Africa to be investing in our own products. But we have enough money to justify tapping into the global platforms and doing top hats with a different cost base” and product attributes that meet each market’s needs, he says.
Central to the plan is a doubling of the size and staff of Ford’s Nanjing product development center.
The expansion will put Nanjing on equal footing with Ford’s other major Pacific Rim product-development locale, Broadmeadows, near Melbourne, Australia, and will help Ford develop products especially for China.
For example, Nanjing could help to design one content-rich Focus for wealthy customers on China’s east coast with features such as Sync voice recognition in Mandarin, and a more basic version for the western provinces, where incomes and expectations are lower.
Vehicles developed in his region could be sold around the world, Hinrichs adds, particularly when the high volumes of Asian markets can help cover those development costs.
“It offers up the potential for Ford brand to grow even more around the world,” he says. “We can go into new segments we haven’t been in before because we have the opportunity to do so, largely driven by opportunities in Asia-Pacific.”
You can reach Bradford Wernle at bwernle@crain.com.
