Ford replaces CEO Fields as challenges mount

May 22, 2017 10:17 AM

Ford Motor Co is replacing Chief Executive Officer Mark Fields with James Hackett, the head of the unit developing self-driving cars, the U.S. automaker said on Monday, responding to investors' growing unease over its stock price and prospects.

The abrupt departure of Fields, 56, who spent less than three years in the job, is among a series of management changes at Ford. 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.

Ford shares were up 1.4 % in early trading. At Friday's close, they had fallen 37 % since Fields took over three years ago, at the peak of the U.S. auto industry's recovery. 

Now U.S. sales are slipping, and Ford's profits are trailing those of larger rival General Motors, whose shares fell 13 % over the same period.

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.

"With this transition, we are moving forward with great optimism," Bill Ford said in an employee email that Reuters reviewed. "We have the right team to sharpen our operational excellence, modernize our business, and develop and invent new business models for the future."

Hackett, a former football player at the University of Michigan and interim athletic director, was named chairman of the automaker's 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.

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 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.

Management changes
In March, GM sold its money-losing Opel division to France's PSA Group, 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, while Marcy Klevorn, vice president of information technology and chief technical officer since January, will oversee Hackett's 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. "Confidence is created by hard currency, not proclamations that are often qualified," one investor said in a question read by the chairman. 

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.

Challenging times
Fields had outlined a variety of plans to confront challenges from technology companies such as Alphabet Inc that want to control a future of autonomous, data-intensive vehicles. 

"You have to have one foot in today ... but also one foot in the future," Fields told reporters last month. "I think investors understand our strategy."

Ford, who previously was CEO before replacing himself in 2006 with Alan Mulally, is the great-grandson of company founder Henry Ford and has warned in recent months about the dramatic challenges facing the automaker.

Ford 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." 

Silicon Valley electric car maker Tesla Inc 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 sports utility business, the source of 90 % of Ford's profits.

GM is gearing up an "onslaught" of trucks for the North American market, 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 said it would have made the decision regardless of who was president.

Fields has made several trips to the White House this year.

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