Ford Faces Lengthy Fix-It List Amid Executive Shake-Up -- WSJ

Data : 12/02/2020 @ 05:02
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Ford Faces Lengthy Fix-It List Amid Executive Shake-Up -- WSJ

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Executive shake-up at auto maker adds to anxiety over slumping profit and share price

By Mike Colias and Christina Rogers 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (February 12, 2020).

Nearly three years into his tenure, Ford Motor Co. Chief Executive Jim Hackett's fix-it list is longer than when he took over, including assuaging employees upset by the recent departure of a veteran company executive.

When Mr. Hackett became CEO in May 2017, Ford was posting near-record operating profit but also contending with a beaten-down share price and rising investor skepticism about its growth prospects. Since that time, the Dearborn, Mich., auto maker's stock has tumbled 27%, erasing about $12 billion from the company's value.

While Mr. Hackett has tried to steer Ford deeper into potential growth areas, he has struggled with the nuts-and-bolts of making and shipping cars, analysts say. Ford's business in China is no longer generating steady profits, and in the U.S. vehicle-rollout problems and high warranty costs have taken a toll, with the company's operating profit falling for three straight years.

Last week, Ford reported disappointing fourth-quarter earnings and a lackluster 2020 outlook, leading to the stock's biggest single-day decline in nine years. Also, the auto maker shuffled its executive team, appointing strategy head Jim Farley as chief operating officer, a position just below Mr. Hackett, and announcing the departure of automotive president Joe Hinrichs.

The shake-up left many employees frustrated and perplexed by the sudden departure of Mr. Hinrichs, a manufacturing specialist who had been with Ford for nearly two decades, according to people close to and within the company.

Shortly after his exit was announced, the company's internal website was flooded with comments expressing disappointment about the move and in some cases questioning Ford's direction under Mr. Hackett, according to selected postings shared with The Wall Street Journal. Some employee comments were supportive of Mr. Farley's promotion.

In a call with reporters Friday, Mr. Hackett lauded Mr. Hinrichs's career at Ford and described him as "beloved."

"But everybody believes the momentum we're talking about building here is the right thing to do," the 64-year-old CEO said.

Mr. Hackett has said repeatedly that he isn't satisfied with the company's performance, telling analysts last week that the 2019 results fell short of expectations. Management's "execution was simply not nearly good enough," he said.

In broadening Mr. Farley's role, Mr. Hackett said, the company will be better equipped to meet the immediate challenge of making and selling cars, while also strategizing for a disruptive future of electric, driverless and connected vehicles.

"This is something that I started to work on more than a year ago...to see how a company like Ford can straddle these two eras," Mr. Hackett said of the executive changes.

Mr. Farley, 57, began his career at Toyota Motor Corp., where he oversaw the Lexus luxury brand. After joining Ford in 2007, he was marketing chief for several years and also ran the European business. Last spring he was made head of strategy and technology, charged with plotting Ford's strategy on electric cars and other long-term bets.

Mr. Hinrichs had been promoted in April to president of automotive, overseeing Ford's auto-making operations globally, including vehicle development and manufacturing. That role situated him as a co-No. 2 with Mr. Farley in what many viewed as a competition for the top job.

Ford said the 53-year-old Mr. Hinrichs is retiring, effective March 1. But people with knowledge of the situation said his company email was shut down by the end of last week after he was asked to leave in the wake of Ford's disappointing earnings report.

A Ford spokesman and Mr. Hinrichs declined to comment.

In a letter to employees, Mr. Hinrichs ticked off many accomplishments, including successfully lobbying for the reintroduction of the once-popular Bronco sport-utility vehicle and mapping out a turnaround plan for Ford's China business.

"There were stumbles, but there were many more successes," he wrote.

Before leading Ford, Mr. Hackett was CEO of Michigan-based furniture maker Steelcase Inc. When recruiting him in 2017, Executive Chairman Bill Ford described Mr. Hackett as an outside visionary who could plot Ford's future at the time when electric vehicles, in-car connectivity and the growth of ride-hailing providers like Uber Technologies Inc. are reshaping the business.

In mid-2018, Mr. Hackett outlined an $11 billion, multiyear restructuring that led to the closure of factories and thousands of layoffs, mostly in Europe and Latin America. He said the effort has eliminated layers of management to allow the company to move faster. He also has focused on more-profitable vehicles, adding to Ford's truck and SUV lineup and betting bigger on commercial vehicles while eliminating nearly all passenger cars.

But those moves have yet to translate into earnings growth.

Ford said the delayed rollout of a redesigned Explorer SUV -- the first major revision of the popular model in nearly a decade -- weighed on profit in the third and fourth quarters. It also blamed higher warranty costs, a problem expected to linger in 2020.

The company is gearing up for a busy and costly launch year ahead, including the introduction of a redesigned F-150 pickup truck, its biggest profit generator. And Deutsche Bank analyst Emmanuel Rosner said there is now increased risk without Mr. Hinrichs, who served in many manufacturing roles at Ford and had direct oversight of vehicle launches.

Mr. Hackett said the company has a "deep bench" of manufacturing expertise. "I'm really confident that we won't miss a beat."

Analysts have criticized Mr. Hackett for the slow pace of the turnaround and a lack of specifics on its progress and prospects.

Ford has missed Wall Street's earnings forecasts five of the 10 full quarters that Mr. Hackett has overseen, according to FactSet. Rival General Motors Co. has fallen short of analysts' expectations just twice in the 23 quarters that Mary Barra has led the auto maker.

Ed Wachenheim, chairman of Greenhaven Associates, one of Ford's largest shareholders, said he views the company's warranty and rollout issues as likely short-term, while continued strength in pickup trucks and the success of Mr. Hackett's efforts to stanch losses overseas should eventually pay off.

"Temporary problems do not change the long-view value of a company," Mr. Wachenheim said in an interview.

--Ben Foldy contributed to this article.

Write to Mike Colias at Mike.Colias@wsj.com and Christina Rogers at christina.rogers@wsj.com

 

(END) Dow Jones Newswires

February 12, 2020 02:47 ET (07:47 GMT)

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