What's behind Hackett's new strategy at Ford?

DETROIT — Ford Motor Co.'s stock price has tumbled into single digits, analysts have publicly questioned its communication strategies and grasp of today's industry, and its credit rating is back on the brink of junk status.

A decade after the automaker's brush with collapse, clouds of uncertainty have settled over Ford World Headquarters again. An abrupt CEO change 16 months ago — the second time Henry Ford's great-grandson has installed an automotive novice to protect his family's legacy — has done little to appease shareholders and analysts.

Outside Ford, and among some within it, there is mounting impatience with $9 shares and the vagueness of the vision that CEO Jim Hackett has articulated thus far. Up on the 12th floor, Hackett admits that some organizational changes have taken about four months longer than he would have liked. But he bristles at the notion that Ford isn't moving fast enough, the stated flaw that felled his predecessor.

"We're addressing some long-term issues, and we're going to do those in very thoughtful and orderly ways — not chaotic ways," he told Automotive News last week. "We're not in a crisis. The company's in great shape."

Interviews with a half-dozen senior executives last week revealed new details of how the company is implementing Hackett's transformation plan, which includes new vehicle architectures, redesigned product lineups, a shortened order-to-delivery process and revamped organizational structures around the globe.

"All those things are evidence of what you would do as you're trying to make a company better," Hackett said. "It's why I'm not at all reeling from the criticism, because I know what we're doing from behind the scenes."

Bill Ford, the executive chairman whose last name adorns the roof just above Hackett's office, continues to give the CEO his full-throated support.

"I don't think it's even close to a crisis," Ford told reporters last week at a 100th anniversary celebration of the automaker's storied Rouge manufacturing complex. "We're still making good profitability."

Those profits, which were absent the last time Ford needed to execute a turnaround plan, appear to be buying time for Hackett, who conceded that he needs to produce concrete results. Ford might have alleviated some of the concerns last week, at a long-anticipated investor day, but a few months ago, it canceled the event while signaling the need for an $11 billion global restructuring.

"We're worried Ford does not have a good handle on either the operational or strategic levers of the global business," Barclays analyst Brian Johnson wrote July 26 in a blunt note to clients. Last week, Johnson wrote that, even if Ford fixes or sheds the unprofitable parts of its business, "We see little earnings upside and limited potential" for the stock price to rise considerably.

Hackett said he doesn't believe the Wall Street angst is "as pervasive as represented," noting that one analyst who had been critical of him apologized in person during a visit to New York last week. He said Ford has spent the first 16 months of his tenure developing 19 "fitness projects" to improve every aspect of the business.

"There's no one I know anywhere within 12 months of a company that's this old that in that short time is giving some kind of detail that answers every single question I was facing," Hackett said.

"We're about action now," he said. "I've made it clear to my team we have to demonstrate results. CEOs' licenses are extended based on results. I'm not worried that they aren't there, because all [of] these things we've built."

Many of those decisions center on revamping Ford's vehicle lineup by cutting failing nameplates, entering new segments and investing to redesign models that are at the end of their product life cycles.

"There's nothing in this business that great, new product can't help solve," Joe Hinrichs, Ford's president of global operations, told Automotive News.

Some of the biggest product challenges have been overseas. Jim Farley, Ford's president of global markets, said the company is focused on fixing its operations in China, where it's addressing stale product with a blitz of 50 new models by 2023, and in Europe, which has become a money loser again after briefly returning to profitability.

"The work we're doing in China and Europe are key to the company's financial performance," Farley said. "These launches and the growth opportunity of improving profit really come down to those products and how they land in the market."

And while North America continues to generate the bulk of Ford's global profits, the company is trying new ways of ensuring it's giving customers what they want.

After Kumar Galhotra was promoted to Ford's president of North America in March, he took over the 11th floor of Ford's headquarters, converting executive offices into makeshift "franchise rooms" for individual nameplates. He also created meeting rooms to bring together communication, manufacturing, purchasing and customer-service teams that previously worked in different buildings.

The idea is to treat each vehicle as its own business and focus on how to make it profitable as the company strives for 10 percent profit margins in the region.

"How do we truly, as a team, drive the business?" Galhotra asked during an exclusive tour of the franchise rooms. "After a lot of thought, we settled on driving it through product lines. We're going to move fast and be clear in our objectives."

Executives said Ford wants to take a more active role with its dealers. After an April announcement that Ford would stop selling sedans in North America, members of its dealer council were upset they weren't involved in the move sooner.

Hinrichs acknowledged the process could have been more transparent.

"We could have spent a little more time explaining why we made the decision, what the ramifications of that would be and the opportunity to allocate that capital into other segments and products, especially with our dealer network," Hinrichs said. "We've listened, and we've learned from that for other announcements that we make."

Ford will get a chance to show improvement this month, when roughly 5,000 members of Ford's retail network descend on Las Vegas for the company's national dealer meeting.

Over the course of 28 hours, dealers will hear directly from Hackett about the direction of the company. They'll get to see new products, including the next-generation Escape and Explorer; they'll preview accessories for Ford's upcoming off-road utilities; and they'll get to drive vehicles such as the new Ranger midsize pickup and the GT supercar on the Las Vegas Motor Speedway.

The retail network will hear from Galhotra and Mark LaNeve, Ford's vice president of U.S. marketing, sales and service, about the go-to-market strategy for the company's newest products. Ford also plans to give dealers the first glimpse of an advertising campaign debuting in the fourth quarter.

"Our dealers are solidly behind our leadership and the company," LaNeve said. "I feel like we have solid roots to grow the tree."

Hackett, known as a big thinker who tackles problems from a high-level view, admitted his leadership style may take a while to catch on.

"My history has been that I can cause a confrontation of ideas — not necessarily people — and it takes time to work its way through," he said. "At the highest levels of the company, the temperature's much better. As you go down in the organization, there's still angst and lack of understanding, which is a test for how effective I can be in communicating and leading. I know that gestation period takes longer."

Bill Ford last week said he's pleased with his CEO's performance and decision-making speed. Asked to compare the company's current struggles with past rough periods, he said the automaker is still operating from a relatively strong financial position.

"Do we have work to do? Yes, we do," Ford said. "But we're investing heavily in the product, we're investing heavily in the future and there's really nothing we want to do that we can't do."

Hackett said he has a "quiet confidence" that every decision executives are making now eventually will help improve Ford's sagging stock price.

"There's a myth that says I'm only worried about the vision stuff," he said. "I was brought in because I know how to make the two work well — the current business and the evolving state.

"I would never make it in my last job if all I did was sit around and dream. It's about designing a business to win."