Ford Motor Co. abruptly named James Hackett as chief executive on Monday, responding to investors’ growing unease about the U.S. automaker’s slumping stock price and its ability to counter threats from longtime rivals and Silicon Valley.
Ford Chairman Bill Ford Jr., whose family effectively controls the U.S. No. 2 automaker, said he wanted Hackett to speed up decision-making and cut costs, but did not offer specifics on how the new CEO should change operations.
“The clock speed at which our competitors are working …requires us to make decisions at a faster pace,” said Ford Jr., who plans to take a more active role at the company, according to a person briefed on the matter.
Ford, which announced plans to cut 1,400 white-collar positions last week, is expected to look at further significant cost cuts in the next three to six months, according to company officials, speaking on condition of anonymity as the plans have not been finalized.
Hackett known as a turnaround expert who for the past year has led the Ford unit developing self-driving cars and related projects, replaces Mark Fields who spent less than three years as CEO.
Fields’ abrupt dismissal caught nearly all at Ford by surprise, but concerns about the company’s direction have been brewing for some time.
Ford, once the most financially secure of the ‘Big Three’ Detroit automakers, and the only one not to take U.S. government money in the U.S. auto industry bailout a decade ago, reported record profit in 2015, but now finds itself under pressure on all sides as overall U.S. auto sales fall.
Rival General Motors Co. is aggressively targeting Ford’s share of the lucrative North American truck and sport utility business, the source of 90 percent of Ford’s profit.
Meanwhile, investors see Ford as a laggard in the shift toward electric vehicles, self-driving technology and ride-sharing. Ford’s $44 billion market value is below electric car pioneer Tesla Inc’s (TSLA.O) $51 billion.
Bill Ford and other descendants of company founder Henry Ford effectively control the automaker through a special class of shares, but many investors share his concern that the company is running out of time.
Ford shares closed up 2.1 percent at $11.10. At Friday’s close, they had fallen 37 percent since Fields took over three years ago at the peak of the U.S. auto industry’s recovery from the crisis last decade.
Ford Motor World Headquarters is seen in Dearborn, Michigan, U.S., May 22, 2017. REUTERS/Rebecca Cook
The automaker has tangled with U.S. President Donald Trump, who spent more than a year criticizing the company on the campaign trail for expanding operations in Mexico and exporting U.S. jobs. A Ford spokeswoman said Trump was not a factor in Fields’ departure.
Overall U.S. auto sales are slipping after a long boom. But GM has moved faster than Ford to slash unprofitable operations, and Tesla has been quicker to deploy new technology.
Bill Ford indicated the company would take more aggressive action to cut costs. “We have to modernize the business” and move “decisively to address underperforming areas,” he said.
Hackett, who overhauled furniture maker Steelcase Inc. and then turned around the ailing University of Michigan football program, becomes the latest in a line of non-family CEOs brought in with a mandate to change the management culture at one of the auto industry’s oldest institutions.
That task has frustrated many of his predecessors, including Bill Ford, who had been CEO before replacing himself in 2006 with Boeing Co. executive Alan Mulally.
The decision to replace Fields did not result from a single event, Bill Ford said.
“There is no smoking gun here,” he said. “It’s more the way we are organized, the way Jim is going to streamline the organization.”
As CEO of Steelcase, based in Grand Rapids, Michigan, Hackett slashed thousands of jobs and refocused the company on innovation.
A former Ford director and interim athletic director at the University of Michigan, Hackett was tapped in March 2016 to run Ford Smart Mobility, a unit established to oversee and coordinate forays into autonomous driving, ride sharing and other ventures.
In that role, he helped oversee Ford’s acquisition of San Francisco ride-sharing company Chariot and its $1 billion investment in Argo AI, a self-driving startup focused on robotics and artificial intelligence.
The upheaval at Ford underlines pressure on all three major Detroit automakers to prove they can avoid losses as the U.S. market begins to slow from last year’s record sales.
GM CEO Mary Barra is fending off attacks from hedge fund Greenlight Capital, which wants to install new directors and split the company’s stock. In March, GM sold its money-losing Opel division to France’s PSA Group (PEUP.PA), effectively exiting Europe in a move Barra promised would free cash for share buybacks.
The shake-up at Ford may bring scrutiny to its own plans in the region. The company posted a record $1.2 billion profit in Europe last year but warned that the impact of Britain’s vote to leave the European Union would put a dent in 2017 earnings.
Under a broader shake-up announced on Monday, former Ford of Europe chief Jim Farley will become president of a new “Global Markets” group that will include Ford’s regional sales and marketing operations around the world as well as its Lincoln luxury brand.
The company is also putting government relations and corporate communications under Ford Jr., and Hackett said the great-grandson of Henry Ford would have a higher public profile.
Fields, who earned $22.1 million in 2016 and had a 28-year-career at Ford, also faced a clamor for share repurchases at the company’s annual meeting earlier this month.
Ford said last week it would cut 1,400 staff positions in North America and Asia, a small fraction of the 20,000 job reductions some news outlets had reported were imminent.
The company reported a record $10.4 billion in pretax earnings in 2016, but investors were concerned by a weak first quarter and lower profit forecast for 2017, as well as higher costs for investments in “emerging opportunities.”