Ford Motor Co (F.N) on Monday named James Hackett, who heads its unit developing self-driving cars, as chief executive officer, responding to investors’ growing unease about the U.S. automaker’s stock price and prospects.
Hackett, 62, a former CEO of furniture manufacturer Steelcase Inc, will take the helm in a broader shake-up aimed at speeding up decision-making and improving operations. He replaces Mark Fields, 56, who spent less than three years as CEO.
Ford shares were up 1.7 percent at $11.06 in morning trading. 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.
Now U.S. sales are slipping. The company’s profits are trailing those of larger rival General Motors (GM.N), whose shares fell 13 percent over the same period, and Ford’s market capitalization has fallen behind electric car maker Tesla Inc’s (TSLA.O).
Executive Chairman Bill Ford Jr. and the board have been unhappy with the company’s performance and sought reassurance that investments in self-driving cars, electric vehicles and ride services would pay off. The Ford family controls the automaker through a special class of voting rights stock.
Ford Jr. told reporters at a news conference that the automaker needs to make decisions faster.
“We have to modernize the business” and move “decisively to address underperforming areas,” he said.
The automaker has had a long-time “obsession with hierarchy,” he said, calling the new CEO “a cultural change agent.” Former Ford CEO Alan Mulally “really captured the hearts and minds of our employees … and I think that’s something you will see with Jim.”
Hackett, a former football player at the University of Michigan and interim athletic director, was named chairman of the Ford Smart Mobility LLC subsidiary in 2016 to focus on emerging businesses that include ridesharing and autonomous vehicles.
Ford said in February it was investing $1 billion in artificial intelligence company Argo AI to develop a virtual driver system for the automaker’s autonomous vehicle coming in 2021.
Ford Motor Executive Chairman Bill Ford (R) and James Hackett answer questions from the media after announcing Hackett was named Ford Motor Company president and CEO, succeeding Mark Fields, in Dearborn, Michigan, U.S., May 22, 2017. REUTERS/Rebecca Cook
PRESSURE IN DETROIT
The upheaval at Ford underlines pressure on all three Detroit automakers to prove they can avoid losses as the U.S. market begins to slow from last year’s record sales.
Fiat Chrysler Automobiles NV (FCHA.MI) (FCAU.N) is fighting diesel emissions-cheating allegations from U.S. and California regulators following CEO Sergio Marchionne’s failed bid to find a merger partner.
GM CEO Mary Barra is fending off attacks from hedge fund Greenlight Capital, which wants to install three 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 new scrutiny of its own plans in the region. Jim Farley, Ford of Europe chief since January 2015, will oversee all of the company’s regions, global marketing and sales, as well as its Lincoln Motor Co.
Joe Hinrichs, head of the Americas since December 2012, will manage global product development, manufacturing and labor affairs, purchasing, and environmental and safety engineering; Marcy Klevorn, vice president of information technology and chief technical officer since January, will oversee Ford Smart Mobility.
The company is also replacing its head of communications.
Ford posted a record $1.2 billion profit in Europe last year but warned the impact of Britain’s vote to leave the European Union would put a dent in 2017 earnings.
Fields, who earned $22.1 million in 2016 and had a 28-year-career at Ford, also faced a clamor for share repurchases, which boost the value of stock, 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.
Ford, who had been CEO before replacing himself in 2006 with Mulally, is the great-grandson of company founder Henry Ford.
The company has churned out strong profits on his watch, reporting a record $10.4 billion in pretax earnings in 2016.
However, investors were concerned by a weak first quarter and lower profit forecast for 2017, as well as higher costs for investments in “emerging opportunities.”
Tesla was valued at $51 billion on Friday, more than Ford’s $43 billion. The contrast shows investors’ faltering confidence that old-line automakers can make the transition to a future where software substitutes for pistons and transportation is sold by the mile or the minute.
At the same time, GM is turning up the pressure in the North American truck and sport utility business, the source of 90 percent of Ford’s earnings.
GM is gearing up an “onslaught” of trucks for that region, President Dan Ammann told Reuters last week, including a new generation of the Chevrolet Silverado large pickup that competes with Ford’s primary profit machine, the F-series line.
Ford also tangled with President Donald Trump, who spent more than a year criticizing the automaker on the campaign trail for expanding operations in Mexico.
But Trump praised Ford in January for scrapping a planned Mexican car factory and announcing plans to add 700 jobs in Michigan. Fields, who has made several trips to the White House this year, said Ford would have made the decision regardless of who was president.
(Additional reporting by Laurence Frost in Paris, Edward Taylor in Frankfurt, Costas Pitas in London, Ismail Shakil in Bengaluru, Andreas Cremer in Berlin; Writing by Nick Zieminski; Editing by Lisa Von Ahn)