Ford's new strategy: focus shifts to SUVs, trucks and EVs

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Jim Hackett (left) and Bill Ford Jr.

Jim Hackett (left) and Bill Ford Jr.

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After taking over the CEO position at Ford in May, Jim Hackett immediately set to work on a 100-day review of the company to develop a strategy to address the massive forces afflicting the automotive industry, namely automation, electrification and falling demand for traditional passenger car models.

Hackett on Tuesday presented his 5-year strategy which attempts to improve the “fitness” of Ford in this changing landscape. It calls for tighter growth assumptions, substantial cost reductions, and a new focus for product strategy.

Hackett’s strategy also called for Ford to further transform into a mobility company rather than one focused exclusively on producing cars. In a statement, he said he wants Ford to become the “world’s most trusted mobility company, designing smart vehicles for a smart world that help people move more safely, confidently and freely.”

In terms of product strategy, the focus is clearly on SUVs, trucks and electric cars. Ford will reallocate $7 billion that had been earmarked for traditional passenger car models to focus on these growing segments. The automaker will also speed up the development of vehicles by around 20 percent via new tools such as virtual reality and big data.

Ford also said there will be less nameplates in the future, though the company hasn’t said which existing nameplates will be axed. Ford said the number of options would also be streamlined, focusing on what customers value most.

Ford Ecosport

Ford Ecosport

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As for new models, we already know a new Ranger pickup truck and related Bronco SUV are coming. There will also be a new Ecosport SUV for North America and an electric SUV promising 300 miles of range. All models are due by 2020. Crucially, Ford has established a dedicated team to rapidly expand the number of electric cars it offers. Ford also said its future cars will also be connected.

Ford is still committed to self-driving car development, as originally outlined under former CEO Mark Fields. Ford will launch a fully self-driving car by 2021. That's right, no steering wheel, brake pedal, or gas pedal. The catch? You won’t be able to buy it. It will be used for a self-driving taxi service along predetermined routes. That’s because it's only going to feature Level 4 self-driving capability. It will be able to handle set routes on its own but that’s it. You need to reach Level 5 self-driving capability for there to be no driver and the car able to drive anywhere. Fields a year ago said such technology won’t be ready until about 2025.

While all this is happening, Ford will be undertaking substantial cost cutting measures. Ford said it is “attacking” costs, reducing automotive cost growth by 50 percent through 2022. As part of this, the company’s targeting $10 billion in incremental material cost reductions. The team also is reducing engineering costs by $4 billion from planned levels over the next five years by increasing use of common parts across its full line of vehicles, reducing order complexity and building fewer prototypes. Further, Ford is reducing internal combustion engine capital expenditures by one-third and redeploying that capital into electrification—on top of a previously announced $4.5 billion investment.

Finally, Ford will also scrap its mostly go-it-alone strategy under Fields’ reign and be more active pursuing mergers, acquisitions and joint ventures. We’ve already seen this with the recent formation of partnerships such as the one with Mahindra in India, with Zotye in China, and with Lyft in North America.

Ford is wary of a number of risk factors that could end up throwing a spanner in the works, some of them quite substantial. The list is a lengthy one and includes geopolitical events as well as the threat of another global final crisis and the credit-related issues that could result.

 
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