You are using an older browser version. Please use a supported version for the best MSN experience.

Ford's new CEO has a cerebral style, and to many, it's baffling

The Wall Street Journal. logo The Wall Street Journal. 8/14/2018 Christina Rogers
a person standing in front of a building© Jeff Kowalsky/Bloomberg News

Senior executives at Ford Motor Co. have come to expect emails from their new boss, Chief Executive Jim Hackett, that include links to TED Talks and articles from Science Daily. They often come around 11 p.m., when he catches up on his reading.

The former chief of an office-furniture maker, Mr. Hackett frequently references the work of theoretical physicist Geoffrey West and uses terms such as “think phase” (a concept from his design background) and “clock speed” (a phrase from computing). In conversations, he often reaches for the nearest piece of paper or whiteboard to articulate his thinking by sketching out a diagram.

In a company long ruled by a rigid operational structure, Mr. Hackett’s cerebral, free-flowing management style has won some fans and mystified others. For investors, the question remains: What exactly is he thinking?

Ford’s finance chief, Bob Shanks, said some of Mr. Hackett’s concepts make his head hurt. “But I’m eager to understand. I’m eager to learn.” Mr. Shanks, who joined Ford in 1977, said the business hasn’t been performing at the level it should. “If someone thinks they have a better mousetrap, I’m all in.”

A number of top Ford executives have left within the past year, and many longtime employees and managers have struggled to adjust to his approach, say current and former workers. Some executives have turned to Mr. Hackett’s 28-year-old chief of staff for translations.

Mr. Hackett took over in May 2017, just when the Dearborn, Mich., car maker was in need of a turnaround. The company that invented the moving assembly line is grappling with new threats, from self-driving cars to electric vehicles to ride-hailing. Car makers are competing not just with each other but also with Silicon Valley upstarts.

Get news and analysis on politics, policy, national security and more, delivered right to your inbox

Ford’s profits and stock price are down as Ford has fallen behind rivals that have moved more quickly into new technologies and quit money-losing businesses.

Mr. Hackett’s goal is to better position the company to tackle these challenges in part by engineering a culture shift, pushing executives to be less regimented and more open-minded. He has introduced new methodologies from his previous job, including a process called “design thinking” that attempts to solve problems by getting into the mind of the consumer.

While the auto maker’s net income rose to $7.6 billion last year due to pension and tax changes, its operating profits—once among the healthiest in the industry—are on track to fall for a third straight year in 2018. General Motors Co. continues to widen its profit lead and smaller rival Fiat Chrysler Automobiles NV has said it would outearn Ford this year in Ford’s core North American market.

Many insiders, analysts and investors remain unclear about Ford’s direction, saying Mr. Hackett has been too vague. Ford’s stock price—which rose to over $17 a share in 2014—hit a five-year low last month, after the company reported a weaker-than-expected quarter and lowered its full-year guidance. Ford’s stock price closed at $9.46 Friday, down 15% since Mr. Hackett took over in May 2017.

“The consistent message I get from investors is they see Ford trying to do things, but it is taking too long and there aren’t enough specifics,” said Evercore Partners auto analyst George Galliers.

Losses are growing in the company’s international operations, including in Europe and China, and profits are under pressure in Ford’s core North American market. Ford’s net income in the second quarter fell 48% as higher commodity costs also dented the bottom line.

Recent executive departures include Ford’s top lobbyist, Ziad Ojakli, who left for SoftBank Group Corp. in July after 14 years at Ford. John Casesa, Ford’s former head of strategy, quit last fall after Mr. Hackett’s debut investor presentation left Wall Street wanting more detail on the company’s plans.

Mr. Hackett said some of the departures were retirements, and that he had asked Mr. Casesa to stay. He said Ford still has a strong team and “deep bench.”

He has urged patience, telling analysts on a recent earnings call the company is making “tremendous progress” and that he will share more information about his plans once decisions are made. He said Ford, which is undertaking a thorough redesign of the business, will be a better-structured company over time.

“Corporations tend to reward action over thinking,” Mr. Hackett said in an interview. “But the truth is…you’ll find the companies that didn’t do the deep thinking and acted quickly have to redo things.”

The core of Mr. Hackett’s plan is to make “smart vehicles for a smart world” and remake Ford into a technology-savvy provider of connected cars and transportation solutions.

Earlier this year, Mr. Hackett took the stage at the Consumer Electronics Show in Las Vegas to unveil a new service called the Transportation Mobility Cloud. The service provides software that connects cars to each other and the broader transportation network, with the aim of helping people move around more efficiently.

Under Mr. Hackett’s direction, Ford has killed off several unprofitable sedan and small-car models and reallocated spending to higher-profit pickup trucks and sport-utility vehicles. He aims to slash $25.5 billion in cumulative costs by 2022 and is leading an effort to make bigger investments in electric and self-driving cars. Ford is also forging partnerships in markets including Europe and India, where it has long struggled to remain profitable.

In July, Mr. Hackett outlined plans for a broad, multiyear restructuring that would result in $11 billion in charges. He didn’t offer specifics when pressed by analysts, saying employees, dealers, unions and others connected to the company needed to be informed first.

Inside the company, some executives have taken to asking Mr. Hackett’s chief of staff, Clare Braun, to clarify his comments or diagrams following a meeting, say people familiar with the matter. Mr. Hackett said Ms. Braun understands how he operates and often attends meetings in his place when he is unavailable.

She previously held the role of “visual sensemaker” at Ford Smart Mobility, an innovation unit experimenting with car-sharing programs, self-driving ventures and other non-transportation alternatives that Mr. Hackett ran for about a year before becoming CEO.

He called Ms. Braun a “reverse mentor because of her age,” who keeps him in touch with “how someone who is still under 30 would be thinking.”

When former CEO Alan Mulally arrived in 2006, Ford was losing money and suffering from a fractured corporate culture rife with departmental infighting.

Mr. Mulally introduced his “One Ford” plan that unified the workforce around a common mission, and began a multiyear restructuring that improved the quality and styling of Ford’s models. Under his direction, Ford grew profitable again.

By 2014, when his successor, Mark Fields, became CEO, the industry was changing faster than Ford was able to adapt. Even though the company was earning healthy profits, Ford’s board felt it wasn’t moving aggressively enough to respond to the challenges ahead and pushed out Mr. Fields after less than three years on the job.

Chairman Bill Ford Jr. turned to Mr. Hackett, whom he’d known for more than 20 years, saying the two shared similar views on how to transform the car business. Mr. Ford, a great-grandson of founder Henry Ford, has called Mr. Hackett a “visionary” and a “cultural change agent.”

Mr. Hackett, who ran Grand Rapids, Mich.-based Steelcase Inc. for two decades, was a surprise CEO pick. The former Ford board member hadn’t worked in the auto industry before joining the car company. Steelcase—from which he retired in 2014—is a fraction of Ford’s size, with annual revenue of $3 billion.

Early in his tenure, Mr. Hackett sent his senior leadership team a roughly 3,000-word email laying out ideas for the company. He talked about “fitness” and the “know-make” framework, business decision-making terms not typically used in the auto industry. Not knowing how to respond, some executives began contacting each other, trying to make sense of it, people close to the company said.

He acknowledged not everyone gets him at first, but he said employees are coming around to his way of thinking. “Things are actually gelling now in the way we’re thinking and doing,” he added. “It’s not clear to the market yet, but I see it.”

One of Mr. Hackett’s first moves as CEO was to shrink his team of direct reports from 18 to eight and cut down on the size and frequency of meetings. Mr. Hackett said he favors giving his top executives more decision-making room.

Ford global markets chief Jim Farley said his boss was an “important catalyst” behind the company’s recent move to retrench from the U.S. sedan market, but that Mr. Hackett left the final decision to him and his team.

Since he started, Mr. Hackett has pushed for connecting all of Ford’s vehicles to the internet. The company had fallen behind rival GM, which introduced built-in wireless connectivity in 2015 across most of its lineup. Ford executives dithered over the decision for years, worried the cost couldn’t be justified.

“Jim said, ‘Look, we’ve made the decision…so I don’t want you revisiting this,’ ” said Hau Thai-Tang, Ford’s purchasing and product development chief. Ford plans to connect 100% of its U.S.-sold cars by 2019.

“We tend to place a lot of emphasis on detailed historical data as a proxy for the future,” he said. “[Mr. Hackett] is saying that approach works well if the future is going to be identical to the past.”

The shift is evident on the headquarters’ 11th floor, where several months after Mr. Hackett’s arrival, a plaque dedicated to Mr. Mulally’s One Ford plan was removed from the executive’s main conference room to clear the wall for use as a workspace to map out a new strategy.

While Ford still uses parts of the One Ford plan to steer its business, Mr. Hackett said he didn’t feel the language “fit what we were trying to get across.”

The plaque has been reappointed in a common area on the same floor, a Ford spokeswoman said.

On the same floor, Ford executives have set up a series of strategy rooms, many in offices that once belonged to the company’s corporate officers.

Rather than sit through PowerPoint presentations, executives meet surrounded by walls packed with charts, diagrams and other materials outlining the strategy for various models and business units. The goal is to allow everyone to view different parts of a plan, from manufacturing to marketing, in one place and make decisions quickly, executives say.

“There is a set of what you need to know about your business always on the wall,” said Kumar Galhotra, Ford’s head of North America. “It shouldn’t be buried in your laptop somewhere that you have to go search for.”

Ford’s window for catching up with rivals is narrowing, with new-car demand in the U.S. cooling after seven years of growth. The CEO unexpectedly canceled an investor presentation in September that many analysts and investors were hoping would provide clarity on his plan. The move prompted Morgan Stanley auto analyst Adam Jonas to criticize Ford during an earnings call in July for not being more forthcoming. He also questioned whether the CEO would be sticking around.

“Whenever you do reschedule the capital-markets day, to be clear with investors, will you be the one delivering the message or will it be someone else?” Mr. Jonas asked.

Mr. Hackett responded: “Hell yes, I expect to be in front of everybody declaring where we are going and what we want to get done. So I think there should be zero question about that.”

Related video: In the elevator with GM CEO Mary Barra

 

UP NEXT
UP NEXT

AdChoices
AdChoices

More from The Wall Street Journal

The Wall Street Journal.
The Wall Street Journal.
image beaconimage beaconimage beacon