Failed execution, culture weigh on Ford performance, shares
Howes: Failed execution, culture weigh on Ford performance, shares
Daniel Howes, The Detroit NewsPublished 10:41 p.m. ET Feb. 26, 2020 | Updated 11:18 p.m. ET Feb. 26, 2020
When historians record the six years since Alan Mulally retired as CEO of Ford Motor Co., the chapter could be entitled “A Chronicle of Wasted Time.”
Here was COO-designate Jim Farley using a Wednesday presentation to investors to deliver a message as bracing as a bucket of ice water: “I can see it on the face of my colleagues, and it takes me back to about 10 years ago” — to the Great Recession, to the dark days before the Mulally way led the Blue Oval from a wilderness largely of its own making.
Ford Motor Co.’s COO-designate Jim Farley, left, and CEO Jim Hackett introduce the 2020 Explorer SUV. (Photo: Daniel Mears / The Detroit News)
Wasted time, indeed. Instead of using some of the best years since the 1960s to retool Ford thoroughly for today’s and tomorrow’s automotive world, Farley is telegraphing a reality that is proving easier to understand than to do. That is, strategic realignment of the past few years under CEO Jim Hackett means almost nothing without the action to achieve it.
And if there are two words that encapsulate Ford’s recent performance, underscore investor impatience and explain the Dearborn automaker’s woeful share price, they’re “failed execution.” The question is whether Farley, once a rising star at Toyota Motor Corp., is the guy to increase the collective metabolism of yet another Ford turnaround.
“Ford people are good in crisis,” a source familiar with Farley’s thinking texted this week. That’s true, but it signals a deeper problem that has vexed at least the past five CEOs to lead the automaker. Instead of using in good times the same discipline needed to navigate bad times, Ford’s culture tends to follow grace under pressure with complacency.
The net results too often are lower margins and botched launches, rising warranty costs and declining retail market share, products ill-suited for developing markets and business units whose profitability relies almost exclusively on, say, large F-Series pickups and midsize SUVs.
In his pitch to investors, Farley touted the “family” working inside the Blue Oval, a mythic extension of the founding Ford family that regards the automaker’s employees as an extension of their own lineage. Maybe so. Or maybe that kinship, spared the pitiless rigors of bankruptcy reorganization, is a big reason the Ford team repeatedly struggles to overcome its bias for complacency.
A “new” Ford tempered in bankruptcy might not have that tendency. But as everyone around here knows, Ford is the only automaker in this town that “didn’t take the money” — a theoretically noble ideal whose legacies since have included higher debt levels and a dubious sense of urgency.
“The company shrank dramatically in the crisis and it almost added all the cost back,” Hackett said in an interview nearly two years ago. “We had a chance to come back and have scale advantages, but we let that slip away.”
We’re now a decade removed from the taxpayer-financed bankruptcies of General Motors Corp. and Chrysler Group LLC. Generally speaking, their ignominious bailouts fueled a sort of “never again” mentality among executive decision-makers determined to reckon — and act — with competitive pressures as they are, not as they want them to be.
“Imagine the whole industry goes bankrupt at that same time, and out of that is birthed more fit competitors,” Hackett told me 18 months ago. “They are there now. All of them are much better than back in the day because of the bankruptcy, because of all the restructuring they had to do. What’s worse than GM going bankrupt is GM coming out of it and the kind of competitor they became.”
That’s truer today than the day he said it. As much as this town’s automakers hate comparisons to each other, the simple fact is that GM’s strategic execution, solid financial performance and cohesive senior management team tend to make Ford’s look, well, less so. And that is not lost on sharp-eyed investors, as the performance of Ford shares amply demonstrates.
Farley is setting the right tone. He’s stressing urgency, demanding execution, warning of the enormous costs for botching launches of high-profile products like a new F-150, a revived Bronco SUV and an all-electric Mustang Mach-E. In short, Ford simply cannot afford to repeat last year’s flawed launch of the iconic Explorer SUV.
And Ford deserves credit for attacking trouble spots in its sprawling automotive business: restructuring its troubled European and South American businesses; shifting its North American product portfolio to higher-margin pickups and SUVs; streamlining its product development processes that too often produced the wrong vehicles for crucial markets.
All of it and more — the redesign of the European business, a revival in China, headway with Mahindra Group in India and Volkswagen AG on EVs and autonomous vehicles — must be delivered before investors believe in the Blue Oval again.
Understanding that reality is not the same as delivering it. Farley calls it “go time,” and he’s absolutely right.