Ford to Focus on High-Growth Areas, Cost Cutting
By Mike Colias
Ford Motor Co. will shift about $7 billion toward the development of more trucks and sport-utility vehicles while "attacking" costs, part of new Chief Executive Jim Hackett's strategic plan for the No. 2 U.S. auto maker.
Mr. Hackett, the former office-furniture executive appointed in May, is scheduled to outline his strategy to investors and analysts in New York late Tuesday. He plans to emphasize speedier action to deploy capital in fast-growth regions and product lines while positioning the auto maker for a future of electric vehicles and connected, automated cars, according to a summary provided by Ford.
Moving capital investment to higher-margin trucks and SUVs is a response to fast-shifting consumer tastes in the U.S. market and abroad, as buyers abandon sedans for vehicles with greater utility and space. Part of the $7 billion capital reallocation includes reintroducing the Ranger pickup truck and Bronco SUV in North America and moving production of its next-generation Focus small car to China, plans that were previously disclosed.
Ford also will shift about one-third of its scheduled investment in gas and diesel engines into cars that run fully or partly on battery power. That will come on top of $4.5 billion the company plans to spend through 2020 to expand its electric-vehicle lineup.
"Capital will be allocated to regions, products and services with highest potential for growth and return," Ford said in a statement. Rival General Motors Co. won investor praise over the past few years for exiting Europe, India and other unprofitable markets while accelerating investment into potentially higher-growth areas.
Ford appointed Mr. Hackett to succeed Mark Fields, who was ousted in the spring amid a downtrodden share price and belief inside and outside the company that the auto maker lacked a clear vision. Mr. Hackett spent four months studying aspects of Ford's business to devise the plan.
The 62-year-old, who emphasized smart design during his long tenure running Michigan-based Steelcase Inc., wants to slash costs by modernizing and simplifying Ford's vehicle lineup, factories and product-development process. The company aims to cut material costs by $10 billion and engineering costs by another $4 billion over five years.
"The decision to change is not easy," Mr. Hackett said in a statement. "Ultimately, though, we must accept the virtues that brought us success over the past century are really no guarantee of future success."