Ford's Hackett Calls for Sweeping Changes in Vehicle Development, Investment
Jim Hackett: "We must accept the virtues that brought us success over the past century are really no guarantee of future success." Photo credit: Rex Larson
-- Ford Motor Co. CEO Jim Hackett on Tuesday outlined sweeping changes that include reallocating $7 billion from cars to SUVs, crossovers and pickups, speeding vehicle development, slashing costs by $14 billion and building Internet connectivity into Ford's full U.S. lineup within two years.
The updates are designed to improve Ford's competitive fitness, a term Hackett has used to describe how the automaker must evolve to stay ahead of its competition.
"When you're a long-lived company that has had success over multiple decades the decision to change is not easy -- culturally or operationally," Hackett said in a statement. "Ultimately, though, we must accept the virtues that brought us success over the past century are really no guarantee of future success."
Hackett's goals include aggressive cost-cutting. He plans to slash internal combustion engine capital expenditures by one-third and redeploy that money to electrification efforts. The company said Monday it would dedicate a team to expanding the number of fully electric cars Ford would offer.
Overall, Ford plans to reduce the rate of its automotive cost growth by half through 2022. It plans to cut $10 billion in incremental material costs and reduce engineering costs by $4 billion over the next five years.
Ford said it's reallocating $7 billion of capital from cars to light trucks. Earlier this year, Ford decided to move production of its next-generation Focus sedan from North America to China, saving money.
The automaker did not say whether it planned to kill any specific car nameplates. It did not say it would exit any vehicle segments, but rather that would continue in a more focused, reduced manner.
It also plans to simplify what vehicles customers can order. Ford said the team has identified a tenfold reduction of orderable combinations in the next-generation Escape. In addition, it's moving from 35,000 combinations in the current Fusion to 96.
Ford plans to add Internet connectivity in every one of its vehicles in the U.S. by 2019. By 2020, 90 percent of Ford's new global vehicles will feature connectivity, it said.
Ford said it was reaffirming its long-term goal of an 8 percent automotive operating margin as it looks to boost profitability. It also reaffirmed its financial guidance for 2017 of a $9 billion pretax profit.
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