By on October 4, 2017

Ford Escape Titanium badge logo, Image: Ford Motor Company

After much speculation, Ford CEO Jim Hackett has finally outlined where his company’s dollars will be spent in the foreseeable future. Hackett spent his summer performing what Ford called a “four-month deep dive” into the company’s strategy and business operations to see what changes needed to be made. His conclusions? This may surprise a few readers, but Ford will continue building and selling automobiles.

Alright, that isn’t a bombshell, but the brand is trying to frame itself as the Ford you’ve always trusted while also letting everyone know it’s still a “mobility company” with its eyes fixed on tomorrow. Without the public relations veneer, that plan translates into a reduced number of production models and trims, more money for electrification R&D, less for internal combustion engines, and a significant reduction in material costs.

Hackett’s address also served to reassure the nervous shareholders who ousted his predecessor, Mark Fields. Ford’s stock declined more than 30 percent during Fields’ tenure and many complained that his vision of transitioning from a traditional automaker to a Silicon Valley look-alike was partly to blame. Hackett did everything in his power to ease those fears.

“We’re going to be in the vehicle business moving both people and goods. Some myth about not being in the car business is gone,” Hackett told Wall Street.

Of course, the current CEO is still calling Ford a “mobility company,” which is about as Fieldsian a phrase as we can imagine. So Hackett isn’t abandoning dearly-departed Mark’s vision of the future entirely. He still said the brand will make all of its vehicles smart and connected. Ford is also shifting a third of the company’s internal combustion engine expenditures into electrification.

Other changes include redirecting $7 billion of product development funds from its less popular cars to its more profitable light trucks. That means fewer available models in the future and a ten-fold reduction of orderable combinations. Cars will be the most affected by this. For example: Ford’s Fusion will go from over 35,000 combinations in its current generation only 96 in the next. But the Explorer will only see its available options halved.

ford-combo-graph

As for the nameplates we will lose in the years to come, the company wouldn’t name names. We don’t expect those to be SUVs or pickup trucks. Still, Ford did say higher-revenue subsegments of cars, such as hatchbacks or performance models, may be given preferential treatment. Hackett’s proposals are all about trimming the fat, however, so we wouldn’t hold our breath on Fiestas, Fusions, or Focuses sticking around indefinitely.

The plan also calls for a $10 billion reduction in material costs and $4 billion shaved from engineering expenses over the next five years. The relocation of capital from cars to SUVs and trucks will deliver 13 new electrified vehicle models in that same timeframe. Those models include a F-150 Hybrid, Mustang Hybrid, Transit Custom plug-in hybrid, the Ford Police Responder Hybrid Sedan, an unnamed fully electric small SUV, and whatever autonomous vehicle the company has in the works.

Ford is also looking at how to commodify connectivity and wants to provide Internet connectivity in every one of its vehicles sold in the United States by 2019. It also want to see 90 percent of its global fleet doing the same by 2020. While it’s not certain how the automaker can best profit from the technology, early indications show automakers will likely store personal data to sell to advertisers and/or provide them with in-car personalized marketing opportunities.

However, Hackett knows the core of Ford’s business is automotive. Zeroing in on its long-term goal of an 8 percent operating margin will revolve around production efficiency and sales. Hackett wants investors to know he understands the company’s strength lies in its heritage as an auto company, while underscoring just how modern it will need to be to compete. It’s not altogether different than Field’s vision for the company, but it possesses a less idealistic and more proactive element for dealing with present-day problems.

[Images: Ford Motor Co.]

Get the latest TTAC e-Newsletter!

Recommended

62 Comments on “Ford CEO Outlines New Vehicle Development Plan, Shifts Investments, Trims Fat (and Models)...”


  • avatar
    Verbal

    “…automakers will likely store personal data to sell to advertisers and/or provide them with in-car personalized marketing opportunities.”

    Oh FFS.

    • 0 avatar
      FreedMike

      youtube.com/watch?v=7bXJ_obaiYQ

      With every passing day, “Minority Report” becomes less of a sci-fi adventure, and more of a documentary.

    • 0 avatar
      DeadWeight

      Ford makes garbage, for the most part.

      Their F Series Franchise and a sprinkling of SUVs probably are responsible for 90% of their net profits.

      In fact, if Ford JUST made the F Series, and abandoned every other vehicle they now make, and paid the fines to CAFE and so forth, they’d probably have double their current market cap.

      • 0 avatar
        westside auto

        Wow. Please explain ‘garbage’. Mustang, Escape, Explorer – Hardly garbage. All sell extremely well and are quite reliable. I would include Focus and Fiesta, but the DPS6 transmission can be quite buggy. I think mostly it is a problem with customers not understanding how it operates, IMHO. (I have owned two-one Fiesta and one Focus and did not have a problem with either.)

  • avatar
    spookiness

    Gray boxes for everyone!

    • 0 avatar
      gmichaelj

      Reducing the number of orderable choices makes a lot of sense.

      I believe this is what Ford did during Mullay’s term.

      At any rate, this is what Toyota pioneered out of necessity long ago. While it keeps the variation down, quality improves.

      I think you’ll still have plenty of choices.

  • avatar
    MatadorX

    “The plan also calls for a $10 billion reduction in material costs and $4 billion shaved from engineering expenses over the next five years.”

    So let’s see how we can take the automaker with among the lowest grade, least durable components in the industry, both mechanical and trim (next to VAG) and go ahead and cost cut them even further. Let me guess the 8mm Ford exhaust bolts that snap at 70k miles are too much, lets shoot for 6mm that go at 36,001 and are conveniently not covered under power-train warranty.

    • 0 avatar
      Menar Fromarz

      So, they want to get to an 8 percent operating margin. What are they now? Does anyone know?
      Thanks !

      • 0 avatar
        gmichaelj

        2nd Qtr 17 Automotive was 5.9% page 6 of the investor deck. Worse than 2016 by 1.8%.

        You might want to average the past 8 quarters or so to get a better feel for the number.

        ‘http://shareholder.ford.com/~/media/Files/F/Ford-IR-V2/events-and-presentations/2017/07-26-2017-Q2/Q2-earnings-slides.pdf_

        • 0 avatar
          Menar Fromarz

          Thanks. No wonder Fields was shown the door. Good luck to them.

          • 0 avatar
            gmichaelj

            Actually, page 4 of this presentation (yesterday’s which must be the source of this post) is even better:

            ‘http://shareholder.ford.com/~/media/Files/F/Ford-IR-V2/events-and-presentations/2017/10-03-2017/Ford-CEO-Strategic-Update-Oct-3-2017.pdf_

    • 0 avatar
      PandaBear

      This.

      I don’t mind if they combo features into packages, but reduction in material cost means they are cutting corner. I’ll make sure I’ll not buy them again. Just when you though you can trust domestic again, they pull something like this.

      • 0 avatar
        raph

        You seem to have some inside knowledge Panda? Are Ford’s material costs in line with the industry?

        The default assumption is that they are going to cut corners but as a Ford parts guy will tell you if there is one company that loves to engineer application specific parts for every damn assembly it’s Ford.

        Probably the most famous example would be their 351 Windsor, Cleveland, and Modified engines which were all concurrent designs. More recently depending on the engine plant on the MOD engines you could have two different timing chain cover and cam cover designs and I know Ford has swapped head bolt designs on the Coyote at least three times ending with a return to larger head bolts on the most current version.

        Ford just might not have the most efficient manufacturing processes in place and a big chunk of that could be bringing their design and manufacturing up to industry standard – we just don’t know?

        In some sense I can understand your ambivalence sense this all seems shades of Jac Master’s reign where it seemed all Ford cared about was PAG and SUVs/Trucks and left everything else to rot on the vine.

        • 0 avatar
          gmichaelj

          The reduction in variation I was referring to was more like you describe here – limiting the number of assemblies.

          So perhaps 3 engine choices instead of 4. For example: the current Fusion offers 2.5L and 3 turbos: 1.5L 2.0L and 2.7L.

          Would be better to offer fewer engines with good materials than to offer more with cheaper materials.

          At least that’s what I hope they are looking at.

        • 0 avatar
          anomaly149

          “We want commonality! Drive cost efficiencies! Copy whatever the last car / some european vehicle in a wildly different segment / another OEM did!”

          “This doesn’t meet the brand DNA / theme / roadmap target / whim of XXXXXXX, change it.”

          “Why does this cost more, it’s supposed to be common?!”

          -Every. [email protected]#$. Program.

    • 0 avatar
      Guitar man

      It means they’re gonna shift compliance costs to the supplier. Which means the supplier will move production to China.

  • avatar

    I don’t like where this new Ford is going. I liked Ford when it was developing global cars like the Focus ST, Fiesta ST, Focus RS, Mustang GT, etc… Oh well they had a good run, hopefully Honda can pick up the slack since they seem to have their mojo back these days

    • 0 avatar
      woj1s

      Those are VERY low volume vehicles. I do like that they make them, I agree with you, but the Focus RS makes up 1% of all focus sales. Its all about the economy of scale.

  • avatar
    ajla

    I think I should take up smoking.

  • avatar
    APaGttH

    Ford Focus, 360 to 26 possible combinations.

    Dead model walking.

    • 0 avatar
      FreedMike

      It would shock the hell out of me if they canned the Focus. Yes, it’s not as popular as it was a couple of years back, but this year, they’re still on track to sell about 150,000 of them. They’d be stupid to walk away from that kind of volume.

      They’re probably just trying to maximize profit on a low margin product.

      But I think you can pour one out for the Fiesta.

      • 0 avatar
        DeadWeight

        Focus, Fiesta – both piles of scrap with scrap components.

        The Fusion has a good chassis and that’s about it, as it’s an unreliable turd, also.

        Ford just surrendered to Honda, Toyota, Hyundai, and even Volkswagen and Nissan and Kia.

      • 0 avatar
        danio3834

        Hackett is having his Sergio moment where he’s realizing the company doesn’t make money on the car, even at that kind of volume. No sense pouring resources into a car and building them for free. The “make it up on volume” strategy doesn’t work if you make negative dollars on each copy.

  • avatar
    Urlik

    If they want to commodify connectivity they’d be more successful buying a cell phone company. Everyone uses smart phones instead anymore.

  • avatar
    PrincipalDan

    Less order-able combos means more “packages”.

    Oh you want heated seats? That’s package H571 which cost $2,000 and has 5 other options bundled with it that you either don’t want or don’t give a f*&^ about.

    NEXT!

    • 0 avatar
      whynot

      No get it right, its Ford.

      It will be package H571 which costs $3,500, but lucky for you Ford will have a permanent $1500 incentive on the package (it will even be on the window sticker). Why don’t they just make the package $2,000 to begin with? Who knows! (ok its so they can adjust prices every model year if desired without making it look like they are doing so by just changing incentive amount)

      • 0 avatar
        PrincipalDan

        This actually makes me think of Oldsmobile in the mid 90s.

        Cutlass Ciera S or SL – take your pick.

        • 0 avatar
          FreedMike

          Or Toyota currently, for that matter.

          Oldsmobile’s problem was Old GM product and a marketing plan held over from 1970, not lack of option packages on its’ cars.

          • 0 avatar
            PrincipalDan

            No but at the time (I graduated high school in 1995) it struck me as funny that a company that was known for “order whatever you want” was reduced to – “A” or “B” – Pick one, pick one.

  • avatar
    28-Cars-Later

    Why does the Explorer still have 672 combinations, isn’t that still a tad much?

    LOL at 35,000 Fusion combinations. Kudos to those who brought it down to less than 100. Even I as a potential customer recognize 35,000 potential combos is unmanageable.

    • 0 avatar
      FreedMike

      People need to Explore the infinite possibilities of an Explorer.

      And they’ll toss in some noxious exhaust fumes for free on any of the remaining models.

    • 0 avatar
      turbosasquatch

      Right? Just cutting out the 2.5 I4 and making only one kind of hybrid Fusion takes a huge number off of that. Ford and GM are really weird about making a million different engines that all do the same thing.

    • 0 avatar
      notwhoithink

      “LOL at 35,000 Fusion combinations. Kudos to those who brought it down to less than 100. ”

      It’s pretty easy to imagine how to do this. They’ve got 6 different engine options (2.5 Duratec, 1.5 EcoBoost, 2.0 EcoBoost, 2.7 Ecoboost, Hybrid, Plug-in Hybrid). Cut that from 6 to 3 (no more Sport trim, no more 1.5L EB, no more plain Hybrid) and you’re down to 17,500 combinations.

      Eliminate the “Platinum” trim level that nobody buys and you’re down to about 13,650. They currently have 10 color options, drop the two least popular and you’re at 10,920.

      They have a driver assist package that includes Blind Spot Warning and Lane Keeping system, amongst other things. Adaptive cruise control is a separate add-on that should be part of driver assist, as should park assist. Roll all of that into a single package instead of letting them be ordered one by one, and you can eliminate thousands of combinations.

      Instead of letting you have regular leather seats, heated leather seats, cooled leather seats, or heated & cooled leather seats, cut those in half.

      It’s ridiculous how many different options they let you select individually, and it makes it a colossal pain in the ass to find exactly the configuration you want when you’re shopping for one.

  • avatar
    Conslaw

    The current Fusion was a winner when it was first introduced. It’s now an also-ran thanks to lack of updates. The Focus was a really good car except for issues regarding its transmission (which I thought wasn’t bad), but now it is geriatric. I bought a 2013 C-Max Hybrid, but I wouldn’t buy a 2017 or 2018 – the car is basically the same except for the infotainment system.

    The bottom line is Ford saying it will cut back R&D on it’s car models – it sure seems like they’ve already done it. How much more will they cut back. This is looking like the Chryslerification of Ford.

    • 0 avatar
      28-Cars-Later

      Used saves.

      “This is looking like the Chryslerification of Ford.”

      This may be an industry thing as they position their pieces for the next five years.

      • 0 avatar
        VoGhost

        I’d advise automakers to align their product cycles with consumer expectations and the pace of change in the underlying technology. What the he11 does that mean?

        It means that the technology that underpins chassis design really isn’t changing much. Everybody has switched to higher strength steels, and every car is reasonably safe (a few econoboxes will always be exceptions). So you don’t need to re-engineer the entire platform every 5 years anymore.

        But where the technology is changing fast is the in-car electronics. And where consumers are really focusing is the quality of interior design and materials.

        So the answer is to shift to 10 year platform cycles with refreshes every 2-3 years to tweak the styling, improve interior materials and refresh the infotainment and passive safety features.

  • avatar
    michal1980

    26 focus variants? Thats not even trying. Having 2 body styles means you are only left with 13 different possibilities. Given that there will be 3 non colors for each… white,black,some gray in between. Means your down to 4 option packages.

    • 0 avatar
      FreedMike

      How many option packages are there on a Civic, or a Corolla?

      • 0 avatar
        VoGhost

        5 for the Civic: LX, EX, EX-T, EX-L and Si.

        Oh, and the Civic out-sells the Focus by a wide margin.

        • 0 avatar
          FreedMike

          Each of those is actually a separate model. If I’m not mistaken, there are precisely zero options available on each model. Want a LX with aluminum wheels and a sunroof? Nope. Want an EX with a manual? It’s not offered.

          Now, go Ford’s site and configure, say, a Focus SE and tell me how many packages and options you can add. It’s bewildering.

          A great deal of the Civic’s success over the years is due to this limiting of options – it makes them cheaper to build, and thus more profitable for Honda. Ditto for the Accord and every other car in their line.

          I don’t see this as a negative for the Focus. This may end up saving the entire line.

          • 0 avatar
            turbosasquatch

            Agreed. I love the options but I can’t imagine that people are craving the 1.0T Titanium version. Streamlining the focus and fusion is a no brainer

          • 0 avatar
            michal1980

            Civic still has a bunch of models you can order
            Just sedans:

            LX , manual or auto, or auto + Honda sense 8 colors. so 24 possible orders.
            EX, 8 colors, Honda sense, 16 variants
            EX-T, manual or auto, or auto + Honda sense 8 colors. so 24 possible orders.
            EX-L, 8 colors, Honda sense, or navi, so 24 possible orders
            EX-Touring, 8 colors.
            for a total of 24+16+24+24+8 = 96 possible orders

            PLUS Coupes, hatchbacks, SI hatch/coupe, and Type R.

            26 from ford would be a joke.

        • 0 avatar
          Ce he sin

          I’ve always been intrigued at how popular Hondas are in America but not elsewhere. Where I live the Focus outsells the Civic by very nearly ten to one and that’s not a ratio that shows any signs of going Honda’s way any time soon.

          • 0 avatar
            nvinen

            They’re reasonably popular in China and Australia too. I saw a lot of different brands in China while I was there last year but definitely a lot of Toyotas and Hondas. Popularity is waning in Australia but there are still quite a few Civics, Accords and CRVs on the roads.

            I like Hondas, I’ve owned two and my sister has one (on my recommendation) but I’ve switched to Ford since they offer better drivetrains and now my wife and I both own one. I probably won’t buy another if they aren’t available in a decent choice of colours, though. I’m sick of dull (non) colours.

          • 0 avatar
            Guitar man

            There are hardly any Hondas in Australia, mostly the HR-X.

            Corolla, Mazda3 and i30 make up about 90% of the small market. Most of the rest is GM.

        • 0 avatar
          michal1980

          I lost my message. But he civic sedan has about 96 different orderable variations.

          Between colors, transmissions, and models.

          And that’s not counting the hatchback, coupe, SI, and type r.

          To have 26 orderable focus is a joke.

      • 0 avatar
        Richard Chen

        via toyota.com/corolla

        L: nope
        LE: Entune+GPS+moonroof package
        LE Eco: nope
        SE: Entune+GPS+moonroof package
        SE 6MT: nope
        XLE: Entune+GPS package
        XSE: Entune+GPS package

        IM: manual transmission available

        • 0 avatar
          michal1980

          But it means you cant have things like a sedan, hatchback, st, and rs.

          Just that is 4 models. 4 colors is 16 variants.

          Corolla:
          L: 4 colors
          LE: 8 colors in black/brown int, 7 in gray, 1 in tan. + package
          LE Eco- 3 colors in int1, 2 in int2
          SE: 9 colors in Int1, + 2 int2, int3 = package + package
          se MT, currently 2 colors, others listed out of stock
          XLE: 6 colors, + 1 package, 1 color forces package
          XSE: 8 colors + package, 1 color forces package.

          So
          L = 4
          LE = 30 = 16( color x pack, int1) + 14 (color x pack, int2) + LE eco =5
          SE =23 = 18 (color x pack int1) + 4(color x pack, int2) + 1 color,pack/int3
          SE MT = 2 color
          XLE = 13 = 12 (color x pack, int) + 1 (color,pack)
          XSE =17 = 16 (color x pack) + 1

          So that gives you 4 +30+23+2+13+17 = 89.

          and some options show out of stock.

  • avatar
    turbosasquatch

    I see the trims being cut and all I can say is good. The Fusion has 6 different engine options alone! Ford has so many engine and transmission options that they would be wise to start cutting out the excess and overlapping ones.

    The 2.5 and the 1.5T are the same output, why make both? Why have a 2.0L in the focus when it could have the 1.5T? How many people actually bought the 1.0T focus in the US?

    This looks like a lot of streamlining which has been desperately needed by Ford for years

  • avatar
    stingray65

    They need to follow the electronics industry practice of making the same product but selling it under different model numbers and prices, with differences mostly based on superficial differences in appearance and differences in speed and features that are determined by the disabling or enabling lines of code in the operating system to create faster and slower printers, CPUs, etc. BMW probably does it best in the auto industry, with 316, 318, 320, and 323, 330, etc. all variations of the same 2 liter 4 cylinder with differing output figures mostly based on computer code to vary turbo boost and fuel delivery schedules. Their 3 liter 6 is also offered with various computer controlled outputs, and is just the 4 with 2 extra cylinders, so can share a lot of the same machining and assembly operations and parts to get bigger economies of scale. BMW also strongly encourages the purchase of option packages rather than individual options by providing “value” pricing on the packages, which provides the illusion of customization with the reality that most dealers/consumers will choose the packages that simplify inventory and manufacturing to keep costs down. Now if they could do something about the model proliferation they would be even further ahead, but Ford is seemingly moving towards this simplification process.

  • avatar
    ajla

    One good way to reduce build combinations would be to replace the 5.0L in the Mustang and F-150 with the 6.2L.

  • avatar
    Prado

    I guess I will be the contrarian and say that significantly reducing and limiting build combinations is a bad move. It is one of the few competitive advantages Ford has over the segment sales leaders. I would say it is the primary reason why I bought a Fusion a couple years ago. I was able to get one with the options that truly mattered to me without having to move up to the high end trims like the competition from Toyota, Honda and Mazda would have required.

    • 0 avatar
      DweezilSFV

      Prado: plus a golden opportunity for the rags to whine there’s no standard heated, cooled, vibrating, tickling seat available in the base model. Or make snarky comparisons to the competition. Manicures being done right now before claws hit the keyboard for the savagery.

  • avatar
    zip89123

    Whether there are 36,000 or 6 combinations it won’t matter if Ford builds a POS. A higher quality vehicle will sell itself most of the time. Myself, I chose a Fusion over a Camry because I cannot get a Camry packaged the way I want, whereas Ford was very accommodating so Ford got my dollars. A comparable Camry would have cost me almost $8000 more OTD. I shopped both and pocketed the difference.

  • avatar
    Big Al from Oz

    I have mentioned the difference I noticed between Mazda and Ford in decision making.

    Ford has more red tape involved when an engineer needs to make a decision that affects the bottom line.

    I had a simple issue with my Ford built Mazda and the BT50 engineer came out an had a look at my vehicle.

    He explained to me he had the capacity to decide then and there what is required for my vehicle, but the same problem on a Ford Ranger required the information to go through to Fisherman’s Bend, Melbourne, then on to Dearborn and back.

    There are a lot of industries and institutions with similar processes that require a re-think. I do believe it is driven by the high up management not trusting the decisions at lower levels.

    Well, maybe Mazda have a better recruiting process than Ford.

  • avatar
    Jerome10

    Fusion is poor quality? Consumer Reports rates it 4/5, same as Accord and Mazda6, better than Malibu and Sonata, and behind Camry and Optima. Certainly not anything that sends vibes of “junk” to me.

    Unfortunately simpler is probably better overall despite enthusiasts liking to tailor to exactly what they want. The fact is that most car buyers wander in off the street with little research, want a car with X, Y, and Z, they run the monthly payments (loan length and interest rates don’t matter…only the payment does), and they drive it off the lot.

    Ford will sell more cars, at higher margins, when consumers can find what they want, on the lot RIGHT NOW, with lower production costs, and before they can go home, do research, and ponder the purchase.

    Just how it is now. Cars are appliances.

    • 0 avatar
      ajla

      JD Power are the people that would rate something ‘4/5’, CR either uses dots or a 100 – point scale.

      But either way, the Fusion is mid pack in CR as you wrote. However, the Fiesta and Focus are rated worse than a Fiat. In fact the Focus was the second lowest rated vehicle there was (The Escalade pulled out an incredible score of ‘3’ for the worst score).

      oi66.tinypic.com/18iwqq.jpg

      • 0 avatar
        danio3834

        JD Power uses a Problem Per 100 vehicles methodology which is the type of measurement most automakers use. They might dumb it down to smaller denominators in certain publications but that’s the core of the data.

  • avatar
    John

    A “mobility company”? So they are going to manufacture electric carts for lazy people to use in WalMart?


Back to TopLeave a Reply

You must be logged in to post a comment.

Recent Comments

  • geozinger: Fnck. I’ve lost lots of cars to the tinworm. I had a 97 Cavalier that I ran up to 265000 miles. The...
  • jh26036: Who is paying $55k for a CTR? Plenty are going before the $35k sticker.
  • JimZ: Since that’s not going to happen, why should I waste any time on your nonsensical what-if?
  • JimZ: Funny, Jim Hackett said basically the same thing yesterday and people were flinging crap left and right.
  • JimZ: That and the fact that they could run on gasoline, which was considered a useless waste product back in the...

New Car Research

Get a Free Dealer Quote

Staff

  • Contributors

  • Timothy Cain, Canada
  • Matthew Guy, Canada
  • Ronnie Schreiber, United States
  • Bozi Tatarevic, United States
  • Chris Tonn, United States
  • Corey Lewis, United States
  • Mark Baruth, United States
  • Moderators

  • Adam Tonge, United States
  • Corey Lewis, United States