Quality takes toll on Ford exec bonuses

DETROIT -- Ford Motor Co. fell short of its internal quality targets in 2016, meaning executives lost out on hundreds of thousands of bonus dollars.

The automaker's top brass achieved 52 percent of the quality goals its board of directors set in 2016, down from 118 percent in 2015, according to its annual shareholder proxy statement released last week.

Ford measures quality in three ways: things gone wrong at three months of ownership, customer satisfaction at three months of ownership, and warranty spending per business unit. Each of those three metrics is recorded for Ford's five business regions: North America, South America, Europe, Middle East and Africa, and Asia Pacific.

Ford hit 41 percent of its goals for things gone wrong, 27 percent of its customer satisfaction goals, and 88 percent of its warranty goals.

Ford declined to break down each segment performance across the company's individual business units. It did say that its North American performance on things gone wrong was similar in 2015 and 2016, but the company set more stringent targets for itself last year.

Part of the miss stems from a $640 million warranty hit Ford took in the third quarter for a recall of 1.5 million vehicles with faulty door latches.

The Ford brand ranked 15th out of 29 brands in Consumer Reports' annual owner satisfaction study.In that study, 72 percent of owners said they'd buy a Ford again. Lincoln ranked 12th, with 73 percent of owners saying they would buy the brand again. The survey focused on the 2014-17 model years.

The quality shortfall drove down Ford's overall performance measurements -- used as the basis for executive bonuses -- to 76 percent in 2016, down from 113 percent in 2015.

Management achieved 8 percent of their targets for automotive segment revenue and 82 percent of Ford Credit pretax profit goals. They exceeded expectations for automotive operating margin and operating cash flow.

The missed expectations were costly. CEO Mark Fields, for example, made a $2.7 million incentive bonus from hitting 76 percent of Ford's total goals. He could have earned $864,000 more if the company reached 100 percent.

Fields' total compensation was $22.1 million, which included a $2.5 million equity incentive grant for the progress he's made expanding the company's alternative mobility services. (For details, see chart).

Joe Hinrichs, president of the Americas, would have made an additional $255,120; Executive Chairman Bill Ford would have made an additional $240,000; President of Europe, Middle East and Africa Jim Farley could have made an additional $222,000; and CFO Bob Shanks could have earned an additional $207,360.

The compensation committee of Ford's board of directors has set 2017 targets, which will be disclosed in next year's proxy.

Ford's annual shareholders meeting will be May 11, but this year it will be virtual. Normally the meeting has been held in Delaware, where the automaker is incorporated.

Bill Ford said in a statement that the virtual meeting "will enable us to increase shareholder accessibility, while improving efficiency and reducing costs." Shareholders will be able to listen, vote and submit questions from any location with Internet connectivity.

On the agenda again is a shareholder proposal to end Ford's two-tier class stock system, which allows family members to maintain control of the company.