Ford announced to investors today that the company will gear up for the future by focusing on what sells, and right now that means pickup trucks and sport-utility vehicles. As part of the plan, the automaker will adopt an “aggressive fitness push” to curb spending while investing in areas with the highest growth potential. Aside from the aforementioned vehicles, that also includes a much larger step into the technological realm with connected vehicles, and especially electric vehicle development.
Despite a string of years that saw record-setting profits, Ford has lagged behind many other automakers in the technical arena. The company has committed to delivering 13 new electric vehicles in the next five years, driven by a dedicated electrification team that’s been established. In addition, 100 percent of new Ford vehicles in the U.S. will be built with connectivity. On a global scale, that number will reach 90 percent in 2020.
On a less visible level, Ford will seek to reduce new vehicle development time by 20 percent, while cutting new model changeover time by 25 percent. The company says this will happen through the development and implementation of 3D printing, robotics, virtual reality, and other time saving measures.
Another time and cost savings measure will be the reduction of orderable combinations of “many nameplates.” Though Ford doesn’t offer a full list, it does cite the Fusion as a prime example with approximately 35,000 combinations of the sedan currently available. For the next generation, that number will be reduced to 96. For the Escape SUV, Ford says it will reduce the ordering combinations ten-fold.
The big news, obviously, is that the company will be focusing much more on profitable pickups, SUVs, and crossovers while cutting back on cars. Ford stops short of saying it will kill cars completely, but it’s quite likely some nameplates will disappear in the process. This isn’t surprising seeing how sedan sales have taken a serious dive among most automakers this year. Specifically, Ford plans to reallocate $7 billion of capital from cars to put towards trucks and SUVs, with the Ranger, EcoSport, and Bronco getting specific mentions.
In other words, if you're a fan of Blue Oval cars, better buy one now while you still can.
Gallery: 2018 Ford F-150: First Drive
Ford’s Future: Evolving to Become Most Trusted MobilityCompany, Designing Smart Vehicles for a Smart World
· Ford initiates aggressive “fitness” push, re-basing revenue growth assumptions and
attacking costs, while redesigning company operations for long-term success
· Capital will be allocated to regions, products and services with highest potential for growth
and return; product shift calls for more trucks and SUVs, fewer passenger cars
· Ford is accelerating work on smart, connected vehicles, including AVs and EVs and digital
services to thrive in emerging transportation operating system
NEW YORK, Oct. 3, 2017 – Ford Motor Company today is providing a strategic update to
investors, detailing plans to leverage its unique product strengths, trusted brand and global
scale to refocus and thrive in an evolving and disruptive period for the auto industry.
The investor presentation follows a four-month deep dive into Ford’s strategy and business
operations led by President and CEO Jim Hackett and Ford’s senior leadership team. Hackett
said Ford will improve its operational fitness, refocus capital allocation and accelerate the
introduction of smart vehicles and services.
“Ford was built on the belief that freedom of movement drives human progress,” said Hackett,
who became Ford president and CEO on May 22. “It’s a belief that has always fueled our
passion to create great cars and trucks. And today, it drives our commitment to become the
world’s most trusted mobility company, designing smart vehicles for a smar t world that help
people move more safely, confidently and freely.”
The full slide deck of the presentation can be found here. Ford is reaffirming its 2017 full-year
financial guidance and said its 2018 outlook will be provided in January.
Reiterating its long-term goal of an 8 percent automotive operating margin, Ford says it will
embrace the profound technological changes and new competition buffeting the industry. To
deliver, the company is expanding its scope to include vehicles and services – all designed
around human-centered experiences. The company will tap its strengths integrating hardware
and software in complex devices, its proven ability to deliver scale and the trust tied to the Ford
Specifically, Ford is:
· Accelerating the introduction of connected, smart vehicles and services
customers want and value. By 2019, 100 percent of Ford’s new U.S. vehicles will be
built with connectivity. The company has similarly aggressive plans for China and other
markets, as 90 percent of Ford’s new global vehicles will feature connectivity by 2020.
· Rapidly improving fitness to lower costs, release capital and finance growth. Ford
is attacking costs, reducing automotive cost growth by 50 percent through 2022. As part
of this, the company is 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.
· Allocating capital where Ford can win the future. This starts with the company
reallocating $7 billion of capital from cars to SUVs and trucks, including the Ranger and
EcoSport in North America and the all-new Bronco globally. Ford also has plans to build
the next-generation Focus for North America in China, saving capital investment and
ongoing costs. Further, Ford is reducing internal combustion engine capital expenditures
by one-third and redeploying that capital into electrification – on top of the previously
announced $4.5 billion investment.
· Embracing partnerships. Ford will continue to leverage partnerships, remain active in
M&A and collaborate to accelerate R&D. The company recently announced it was
exploring a strategic alliance with Mahindra Group as it transforms its business in India,
and Zoyte with the intention of developing a new line of low-cost all-electric passenger
vehicles in China. When it comes to autonomous vehicle development, the company
recently announced a relationship with Lyft to work toward commercialization and a
collaboration with Domino’s Pizza to research the customer experience of delivery
· Expanding electric vehicle revenue opportunities. The company recently announced
a dedicated electrification team within Ford, focused exclusively on creating an
ecosystem of products and services for electric vehicles and the unique opportunities
they provide. This builds on Ford’s earlier commitment to deliver 13 new electric vehicles
in the next five years, including F-150 Hybrid, Mustang Hybrid, Transit Custom plug-in
hybrid, an autonomous vehicle hybrid, Ford Police Responder Hybrid Sedan, and a fully
electric small SUV.
“When you’re a long-lived company that has had success over multiple decades the decision to
change is not easy – culturally or operationally,” Hackett said. “Ultimately, though, we must
accept the virtues that brought us success over the past century are really no guarantee of
Revamping product development, modernizing factories
At the same time, Ford is redesigning its operations to better compete in this disruptive era.
Hackett cites as a template the example of how the company reimagined the all-new 2015
F-150. Since then, the F-Series has gained market share and the average transaction price has
increased 16 percent. It has improved fuel economy and increased capability for customers,
thanks in part to a 700-pound weight reduction that helped make the F-150 the company’s most
positive contributor to CAFE standards for model year 2018. Additionally, 90 percent of the
manufacturing equipment can be reused for the next-generation F-150, reducing future capital
requirements. Finally, the innovation on aluminum and light weighting will pay off across a range
of Ford trucks and SUVs.
Other priorities include:
· Reducing orderable combinations of many nameplates, focusing on what
customers value most. Already the team has identified a ten-fold reduction of
orderable combinations in the next-generation Escape and is moving from approximately
35,000 combinations in the current generation of Fusion to 96 in the next generation.
· Rethinking product development processes and incorporating new technology. In
the next five years, Ford is aiming to reduce new vehicle development time by 20
percent, with new tools and fewer orderable combinations. Through the use of virtual
assembly lines, the company has been able to reduce new model changeover time by
· Redesigning the company’s factories of the future. Accelerating and scaling 3D
printing, robotics, virtual reality tools and big data will improve logistics and enable a
more efficient manufacturing footprint.
“We believe Ford will achieve its competitive advantage by focusing deeply on our customers –
whether they’re drivers, riders or cities – and that’s where we are playing to win,” Hackett said.