Addressing a crowd at the Wolfe Research Global Auto, Auto Tech and Mobility Conference in New York City on Tuesday, Jim Farley said he sees similarities between Ford’s present situation and that of the 2009 financial crisis that nearly sunk the Detroit Three. He feels it in the hallways of Ford’s Dearborn HQ.
As automakers grapple with a number of challenges in a rapidly changing industry, Farley, who takes on the role of Ford’s chief operating officer March 1st, outlined how he plans to deliver his mandate of a global pre-tax margin of 8 percent. For starters, there’s the issue of launches.
Things went badly when it came time to deliver the all-new Ford Explorer and Lincoln Aviator last summer, forcing the automaker into an expensive — and embarrassing — emergency fix program that saw it truck freshly minted SUVs to Flat Rock Assembly, two states away, for repair. Sales of the vastly important Explorer sank 26 percent in 2019.
That botched launch, plus high recall costs and one-time charges associated with the company’s global streamlining effort, led to a cratering in profit. Ford’s fourth-quarter earnings report earlier this month led to a stock plunge.
Yet Ford isn’t clueless in the face of crisis, Farley told the crowd. “Decisions get made quickly” in times of adversity, he said. “It’s very natural. Everyone at Ford Motor Company knows the situation we’re in.”
That said, the exec admits Ford must “fix a number of things.”
First order of business will be getting bloated warranty costs under control. Farley said the company saw $5 billion in such costs over the past year, well above previous annual tallies. Next comes product, and hopefully a more seamless introduction to market.
“We have to get our launches right,” Farley said, adding, “Not just the Explorer launch. We have about 10 global, enormously important launches. They have got to land well.”
The team tasked with bringing these products to market will need to be quicker on their feet, he said, able to identify quality problems in hours instead of months. New talent brought on board will need to be a cut above, and the focus should remain on doing well in North America before any other market.
“It’s all about North America and the recovery of China,” he said, gazing into the near future. Part of Ford’s growth plan in its most profitable region will be a stronger push for its commercial vehicle lines.
Lastly, in order to nudge Ford’s stock in the right direction, Farley wants to see milestones, concrete examples of the company’s plan coming to fruition — and he wants investors to take notice of them when they occur.
When asked about the company’s culture, Farley admitted the Blue Oval needs a “re-awakening,” but hesitated to go into specifics, claiming the culture in the Glass House is fairly good already. Having execs and managers always on the same page, working towards the same goals, is key. “There were issues people knew about that just weren’t being resolved,” he said, referring to the warranty costs. “I don’t think it’s any more complicated than that
[Sources: Detroit Free Press, Reuters] [Images: Ford]
The first video in this article from last year is eye-opening:
https://www.freep.com/story/money/cars/ford/2019/06/19/ford-executive-jim-farley-toyota/1299871001/
Let me offer a bit of advice, DON’T tease the public for years with new product, you’re just setting us up for disappointment. Create buzz a few months in advance with something new and exciting, then deliver a good product that doesn’t need ten recalls
Completely agree, they should take this to heart and cease being their own worst enemy!
They really looked promising about 15 years ago when they were making significant reliability and desirability gains, but have flittered much of that away at this point with an unfortunate series of boneheaded corporate decisions and poor attention to detail in the finished products (they REALLY bombed it with the Aviator/Explorer fiasco, which is disappointing and suggests they really haven’t progressed nearly as far from their 70s-80s low point as I had thought).
My impression is that it was rushed into production with lot of unresolved bugs and under engineered like Focus’s DCT. At Toyota they would never do that – just ask Jim. At Ford the team spent time developing next gen Ford Fusion (which was a fine car). And then suddenly they shut down the project, all efforts and sleepless nights were for nothing. It affect morale. Why would you work hard on project if it can in moment’s notice get killed for no good reason? Or management does not give enough time to properly develop and test product. All that are my speculations, I am not a Ford insider.
Ah yes – Jim Farley, the man who launched the Scion brand, which was really just a bunch of rebadged Daihatsu vehicles targeted toward younger buyers with tight finances. That didnt go well – Scion was a flash in the pan, dealers spent a bunch of money on Scion showrooms and branding, and it was all a flop.
I hope Ford can recover, but the Hackett / Farley combination doesn’t inspire confidence in most investors. Success in the car business is simple enough but very challenging to execute on – build good cars as cost effectively as possible.
This doesn’t mean contracting with the cheapest part manufacturer in China and then having them “self certify” that their products are within tolerance. That causes the car to no longer be “good”. And warranty costs go up significantly. And owners are pissed and will never buy your products again. Then warranty costs start to hit the bottom line, share prices fall, and class action lawsuits start. Ford is here now.
I’m unmoved. As a FORMER FORD BUYER AND OWNER OF OVER 37 years until last January, I can say if you want to shaft your loyal customers and abandon the affordable car market, then you don’t deserve any respect – you friggin cowards. Thankfully, Hyundai is willing to build a SUPERIOR product at an affordable price and I am very content being a LOYAL HYUNDAI buyer for the rest of my life.
I’m sick of Ford and their excuses for rushing things into production only to tell us next time they’ll get it right. My last Ford, a 1997 Escort was not spectacular in any way, but it was well built, dependable, and inexpensive. It gave me 22 years of wonderful service and gave me 178k trouble-free miles. Unfortunately it started to have elder life gremlins that just made no sense to repair at that age and at the low value the car had. I’d have definitely bought a Ford to replace it, but you screwed up the resale value on either the Fiesta or Focus with your cheap and unprofessional engineering.
I’d like to really say here what I think of Ford as a former owner, but that just wouldn’t be southern!
4 cars…2 Fords, a Nissan, and a Hyundai. Guess which one is under recall for an engine machining defect that can cause a catastrophic failure…And that on a vehicle that had been in production for many years with an engine that had as well. Yet the first year model F150 with a first year production motor has been back for potentially freezing door latches and to trim the carpet around the seatbelt tensioner, the Fiesta ST has never been back and the Nissan went back for the weight sensor on the passenger seat.
This was my second Hyundai. Combined with the other stupidity (Windshield Washer failed twice, a rear wheel bearing replacement, and one TPS sensor failure in now 47,000 ish miles, I’ll pass on the third. Our first was great though. Looks like they let quality slide though.
• Ford must “fix a number of things.”
• “We have to get our launches right,” Farley said, adding, “Not just the Explorer launch. We have about 10 global, enormously important launches. They have got to land well.”
Cue 1980’s-style montage wherein the Ford Motor Company learns in 2 months how to perfect its ~48-60 month new vehicle launch process. Soundtrack TBD (something along the lines of “You’re the Best”).
You like history? I like history. Here’s an article about Ford working to improve its launch process – an article from *2013* (seven years ago):
https://www.autonews.com/article/20130506/OEM01/305069971/ford-takes-long-look-at-launches
These issues of muffed launches and not ready-for-prime-time components were also heavily present during the Mulally era.