To Ford Motor Company, it must have felt like salt on a hemorrhaging wound.
Last month, Tesla became the world’s most valuable automaker. Never mind that Ford saw record profits last year and that Tesla manufactures a fraction of the vehicles that Ford makes.
The plucky upstart automaker headed up by Elon Musk, a dedicated visionary often compared to Ford’s own founder, Henry Ford, was winning the stock market. For years, the general public had been besotted by Tesla and its gauzy promises. As a journalist who has covered the car industry for over a decade, the first brand people ask me about is almost always Tesla. Sure, there are legitimate criticisms on the viability of Tesla’s business plan and whether it can deliver the Model 3. But while traditional automakers publicly roll their eyes, privately they are scrambling to alter that perception and to keep up. Ford is at the top of that list.
Ford has spent the last two years declaring itself a mobility company. It announced it would bring a self-driving car to the market in 2021. Last fall, it offered journalists rides in its self-driving car on the company campus. It touted its investments in the LIDAR developer Velodyne, and then in February, a billion dollar investment into Argo, a producer of self-driving AI. But the math and the campaign for public perception haven’t swayed investors.
Ford’s wan stock price was the end game for its CEO Mark Fields last week. A so-called mobility company that makes most of its money selling full-size pick up trucks and SUVs wasn’t moving the needle. And talk wasn’t cheap. Spending in flashy ways wasn’t producing results to keep up with the pace of innovation happening in real time.
Tesla’s Autopilot system is already in the marketplace while Ford has Sync, a connectivity system essential to its future that has not wowed critics. Meanwhile, Ford’s crosstown rival, GM, has the fully electric Chevy Bolt and Maven, a car-sharing program available to consumers, that have added buzz. Then in January, Waymo showed up at the North American International Auto Show in Ford’s backyard, armed with miles of self-driving data. And then there were outside forces, like a presidential administration that insists American carmakers needed to go back to old ways of doing business by lowering emissions standards, a blow to Ford’s electric car strategy.
Ford also has to answer to its 200,000 employees. Last week, the company announced layoffs of 10 percent of its workforce, a move that doesn’t inspire confidence. Ford’s effort to be seen as a company steeped in a dreamy vision of the future wasn’t working out. Ford needed a new game plan.
So what did Ford do? It opted to shake things up. Today the Detroit automaker announced that it has parted ways with longtime executive and CEO Mark Fields and selected Jim Hackett as the new frontman. It’s a move designed to send a message to investors and the broader public about Ford’s willingness to make hard changes. Hackett, previously headed up Ford Smart Mobility, the arm of the company dedicated to building its autonomous driving program, and before that spent two decades as CEO at Steelcase, a furniture company. He also resurrected the University of Michigan football program and brought in Jim Harbaugh (which means something to Michigan folks, who take sports success seriously.) The Ford family, also owners of the Detroit Lion NFL franchise, wants to show that it’s still in the game. Both Bill Ford and Edsel B. Ford II serve on the Ford Motor Company board.
Bill Ford, the executive chairman and great-grandson of Henry Ford, has been conducting his own deep dives into tech culture. He was an early proponent of green cars, served on the eBay board for a decade, and founded the venture capital firm Fontinalis. At a press conference held this morning, Bill Ford commented on how Silicon Valley leaders reacted when Hackett entered the room. “Everyone of them walked up to Jim and gave him a hug. To hear the leaders out there talk about him, shows the breadth of the leader he is.”
In the past Ford has turned outside the company to great success. During a bad business cycle in 2006, it was former Boeing chief Alan Mullaly who veered Ford back on track and helped the company weather the 2009 recession. Bill Ford said he wouldn’t compare the two leaders, but still at the press conference he couldn’t resist. “They are different leaders for different times,” he said, and then added, “Alan really captured the hearts and minds of our employees, and made them feel that we could win and that they could have fun on the journey, and I’ll think we’ll see that with Jim.”
What Ford really craves is Tesla’s magic. Tesla is the proverbial underdog that keeps hope alive, though it has yet to produce a mass market car. Elon Musk’s every move is fascinating and his cryptic Tweets are news worthy. Making and selling cars for Ford is not enough. To keep up, Ford needs Silicon Valley. That’s why Tesla’s valuation, as lofty as it seemed, stung.
"Given how rapidly the transportation sector is expected to transform in the next decade, Ford can't afford to be behind the eight ball when it comes to emerging technology,” said Jessica Caldwell, Edmunds Executive Director of Industry Analysis. “If we’ve learned anything from the phenomenon of Elon Musk, it’s that Wall Street likes a tech/innovation guy. Putting the head of their mobility division at the helm indicates Ford is trying to send a strong message to stockholders that the company intends to be a dominant player in the future of mobility."
What’s not clear is if putting Hackett in charge is a Hail Mary to assuage investor worries, or if Ford is doubling down on the existing playbook to dig deeper into Silicon Valley circles and further tech company partnerships. Or maybe it’s a bit of both. To play in the self-driving game, Ford needs to do more than spend money. The real investment is in recruiting and retaining top talent that won’t get bogged down in company politics. It’s learning to make hard changes not just from the top down, but from the ground up. Let the draft picks begin.