- Outgoing
Ford CEOJim Hackett endured a controversial, polarizing three years at the helm of the 117-year-old automaker. - His vision was a tough sell on Wall Street, which sent the company's stock price down 40% during his tenure.
- But Hackett changed Ford's culture more than any CEO in its recent history, including Alan Mulally, who saw the company through the financial crisis.
Nobody paying attention to Ford over the past few months was surprised by the automaker's announcement on Tuesday that CEO Jim Hackett will retire in October, to be replaced by current COO Jim Farley.
Hackett was an oddball choice from the beginning. His CV included stints as the youngest chief executive to lead furniture manufacturer Steelcase, and interim athletic director at his alma mater, the University of Michigan. He was a member of the Ford board of directors, and spent just over a year running the automaker's Smart Mobility arm when chairman Bill Ford offered him the big chair.
"Was I really the right fit?" Hackett asked, recalling his appointment during a conference call following his retirement announcement. "I knew it would test the patience of stakeholders," he said. "But I knew how to get the narrative right and to address the unfit parts of the business while rekindling innovation."
Hackett's ultimate question was, "Could we withstand some static in the short term?"
"Static" was an understatement. Hackett inherited a century-old car company still heavily influenced by the founding family's ownership stake (and special voting-class stock), rescued by Alan Mulally during the financial crisis. Hackett's predecessor, Mark Fields, had solidified the balance sheet.
But Ford stood ill-equipped to capitalize on new opportunities in connected cars, electrification, and autonomy. As with other mature, multinational automakers, Ford's European operations were struggling against a flat market. It lagged behind VW and General Motors in the Chinese market. Even the cash-cow North American business had issues: It was highly dependent on profitable F-Series pickups, but weighed down by slow-selling sedans and aging SUV platforms.
Redesigning Ford for a new century
The game plan was for Farley and another experienced executive, Joe Hinrichs, to take care of the auto side while Hackett made the case that Ford was aggressively reinventing itself, inside and out — telling a skeptical Wall Street a growth story that could elevate the stock price.
Wall Street didn't buy it. Ford's stock price declined almost 40% over his tenure, but it had been sliding before he arrived. It wasn't alone: GM's stock price fell almost 30% over the same period, even as it made billions in annual profits. Wall Street had demanded a tale of growth, but even bold moves by the traditional carmakers, spending real money on self-driving startups and announcing ambitious Tesla-challenging EV objectives, failed to impress.
Externally, it looked as though Hackett had been right all along: He wasn't the right fit. Critics certainly thought so. Apart from an element of ageism — Hackett's maturity in no way affected his quite youthful enthusiasm, and he sounded at times as though he was purpose-built to bridge a gap between Motown and Silicon Valley — he didn't seem heavy-handed enough to drag Ford into its second century. The former college football player was too thoughtful, his elbows not quite sharp enough.
Hackett made more bold moves than he's given credit for
Objectively, that criticism's unfair. Hackett moved quickly to kill Ford's sedan lineup so that the factories could instead make SUVs and develop EVs. He cut nearly 20,000 positions worldwide. And when the coronavirus pandemic hit, idling plants, he moved Ford into manufacturing face masks, face shields, and, in collaboration with GE Healthcare, ventilators. He oversaw the suspension of Ford's generous dividend, preserving cash but removing a reason for fixed-income investors to hold the stock (and even see it as a bargain, given the almost 9% annual yield).
The biggest problem for any Big Auto change agent is that Big Auto costs a staggering amount of money to keep moving forward. In order for Ford to sell 5.4 million vehicles in 2019, it had to spend billions every month, bringing in well over $150 billion revenue, but posting a disappointing 6% net margin. Hackett hoped to streamline everything, but the undertaking would take at least three years and cost $11 billion, about half of which had been expended by the time he announced his retirement.
His master plan, then, was no less than to redesign Ford. And to a degree, with his thinking guided by gurus from far outside the car business, he succeeded far better than any CEO in Ford's recent history. Mulally mortgaged all of Ford's assets to ride out the Great Recession, but he also pushed the automaker to develop smaller, more fuel-efficient vehicles that consumers shunned amid a post-recessionary collapse in gas prices. Fields strove to make Ford into a car, mobility, and big data company, but he didn't reform inefficient manufacturing operations, and was slow to tackle EVs and self-driving tech.
Hackett, by contrast, appears to have changed hearts and minds.
"It's a better company since you've been here," Bill Ford told him, as Hackett recounted in an interview two weeks ago with Business Insider.
"After being in the industry for decades as a product planner, I thought I knew a thing or two," said Farley, who came to Ford in 2007 after a career at Toyota. But Hackett's guidance "forever changed us as leaders at the company," he added. "We're all in. In what you'll see in the next generation of vehicles. That was all informed by what Jim gifted us with. I can't imagine Ford without it."
Convincing Ford came first, and Hackett knew his plan would work
For Hackett, satisfying Wall Street and media besotted with Tesla's meteoric ascent was less urgent than selling change to Ford's 190,000 global employees. "I've got to get everybody in the company on board," Hackett said in an interview, looking back on his reluctance to give analysts quick answers. "That's how you lead."
He's been here before, Ford insiders indicated. The skeptics weren't keeping silent when he was modernizing Steelcase for a new world of collaborative workplaces that looked nothing like a 1950s-vintage office building.
What probably hastened his departure from Ford — which was all but set in February, when Farley became sole COO and Hinrichs was deposed — was seeing vitally important new vehicles coming out of the pipeline and headed for a COVID-19 ravaged market. The time for redesigning was over. Now Ford had to execute, with relentless focus, and do it with the core business.
In uncharacteristic fashion, Hackett allowed himself a short victory lap. "I could say with extreme confidence that this was going to work," Hackett said. "To a fault. I feel a quiet sense of satisfaction that people hung in there with me."