Ford Shares Hit 10-Year Low, But CEO Hackett Has Chairman’s Ear
While Hackett says he has absolutely given Farley a mandate to accelerate, he also defends the approach he and Ford are taking.
(Bloomberg) -- Days after another dismal earnings report, Ford Motor Co. Chief Executive Officer Jim Hackett sent a blunt message during an internal town hall: I’m not going anywhere.
If there were any doubts in the crowd about that statement, Hackett underscored it by discussing the early retirement of Joe Hinrichs, a Ford president whom many had seen as a potential successor to the CEO. The comment was a surprising display of force from a man who had just overseen another disappointing quarter that deepened the sell-off in Ford stock during his almost three-year tenure. The reason for such confidence: Hackett, 64, retains the backing of Executive Chairman Bill Ford.
While Wall Street has never really warmed to him, Hackett has managed to nurture a close relationship with the 62-year-old great-grandson of founder Henry Ford through frequent visits to each other’s offices, where they mind meld on a digitized future of transportation in which big data drives how automakers create self-driving and electric cars. The two are inseparable, say people familiar with their relationship, who asked not to be identified describing Ford’s inner workings.
“Harmony in businesses is a good story,” Hackett said with a chuckle during a phone interview Monday. “And it doesn’t burst out of lack of accountability at all. It’s more, frankly, of a shared view of how much work we have in front of us to transform the company to be really viable for another 50-plus years.”
The elevation of Ford’s other president, Jim Farley, to COO, and the departure of Hinrichs, 53, has rocked a company struggling to find its way in an industry undergoing wrenching change. Hinrichs’s abrupt exit completes a clean break from the era of Alan Mulally, who was celebrated for keeping the carmaker out of bankruptcy during the Great Recession. Mulally was close to Hinrichs and believed he should have succeeded him as CEO when he retired in 2014, people familiar with his thinking said. Mulally declined to comment.
Farley’s Ascent
Farley, 57, will brief investors Wednesday on how he intends to speed up Ford’s turnaround and perk up the stock, which has tumbled to the lowest in a decade. The shares slumped as much as 2.1% on Tuesday to $7.41.
The hard-driving marketing mastermind -- and cousin of the late comedian Chris Farley -- is embracing the new role with his signature intensity. Jim Farley is working late into the evenings and on weekends, reviewing all of the company’s plans, say people familiar with his actions. Known as a quick study with an encyclopedic memory for data and details, he doesn’t suffer fools.
“In the context of our industry and how it’s changing, we have to accelerate,” he said in a Feb. 7 interview. “We cannot wait years and years.”
While Hackett says he has absolutely given Farley a mandate to accelerate, he also defends the deliberate approach he and Bill Ford are taking and says it’s rooted in a company still run by the founding family, which takes a long-term view.
“Others will say, well, why has it taken so long? Or why are you contemplating this so rigorously? It’s because we’re balancing the needs of shareholders versus employees, suppliers, dealers,” Hackett said. “We’re not willing to lose the hearts and minds of our people to have one quarter exceed earnings.”
Hinrichs’s Stumble
Farley and Hinrichs were elevated less than a year ago to be company presidents, with Farley focused on the future and Hinrichs on managing the automotive here-and-now.
Within months of taking on their roles, Farley won plaudits for leading Ford’s talks with Volkswagen AG that lead to a tie-up last summer to jointly develop the driverless and electric cars that Bill Ford and Hackett are so excited about. Participants on all sides of that deal, which also involved self-driving startup Argo AI, praise Farley’s mastery of the materials and his negotiating skills that helped keep the talks on track.
Fans of Farley say Hinrichs was meanwhile moving too slowly to fix what ails Ford. They point to the botched launch of the new Explorer sport utility vehicle last year that weakened North American earnings for a company that isn’t consistently making money elsewhere in the world.
When Hinrichs dispatched a vice president last year to investigate problems at Ford’s Explorer plant in Chicago, some subordinates didn’t even show up for meetings to discuss the situation, said a person familiar with the visit. For a high-ranking executive to be disrespected like that was seen as evidence that Hinrichs didn’t have full control of the situation at the plant, the person said. Hinrichs declined to comment.
The Explorer launch failures undercut Hinrichs’s reputation as a manufacturing whiz. He rose to prominence under Mulally, a fellow engineer, and won kudos for successfully overseeing the complicated launch of the aluminum-bodied F-150 six years ago. In 2018, he played a pivotal role in getting those profitable pickups rolling off assembly lines again after a supplier’s factory exploded and briefly disrupted truck production in 2018.
Mulally’s Legacy
Mulally’s legacy has grown complicated within Ford, with the company moving away from some of his rigorous practices that encouraged executives to admit mistakes and seek help fixing them, rather than let them fester. Mulally also bet heavily on small, fuel-efficient cars, which fell out of favor as gas prices abated. Hackett is pulling Ford out of the sedan market.
And the focus on Mulally as Ford’s savior is said to have irked Bill Ford, who also played a key role in securing a life-saving loan that sustained the company through the downturn that wiped out the rest of Detroit.
Hinrichs is seen as Mulally’s last acolyte in Ford’s upper management.
“Ford is now, with the departure of Joe Hinrichs, back to where it was when everything started falling apart last time,” said Bryce Hoffman, author of “American Icon: Alan Mulally and the Fight to Save Ford Motor Company,” published in 2012. “But now it’s in that position in a much more competitive marketplace and in a much more challenging business environment.”
Hackett denies that there is any reconsideration of the Mulally era within Ford.
“I’ve never heard anything but praise for Alan Mulally. He’s really highly regarded by me, by the board, by Bill,” Hackett said. “We spend zero time and stress about that.”
Bill Ford’s Silence
Bill Ford hasn’t made any public appearances early this year as Ford shares have dipped back below $8 for the first time January 2019. That month, he endorsed his embattled CEO at the Detroit auto show and appealed for patience with Hackett and his $11 billion turnaround plan. He declined an interview requested though a company spokesman.
Now that Farley has taken over Hinrichs’s duties, he is moving quickly to light a fire under his team. Farley is conducting meetings with Ford’s entire top leadership, and more executive changes are expected.
Those changes won’t include Hackett, despite some on Wall Street having openly questioned how long his tenure will last. With the executive chairman’s backing, Hackett will keep Farley waiting for an untold period to prove he’s the right pick to take over.
But Farley is clearly in ascent. Even the trait once viewed as his biggest weakness -- his hair-trigger temper -- is now being recast as just the skill needed to effect change in Ford’s hidebound culture.
“He’s pretty intense,” David Whiston, an analyst for Morningstar with the equivalent of a buy rating on Ford shares, said of Farley. “I’m glad Ford has him.”
--With assistance from Christoph Rauwald.
To contact the reporter on this story: Keith Naughton in Southfield, Michigan at knaughton3@bloomberg.net
To contact the editors responsible for this story: Craig Trudell at ctrudell1@bloomberg.net;David Papadopoulos at papadopoulos@bloomberg.net
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