In making Farley COO, Ford shows need to integrate auto, mobility goals

DETROIT — Former Ford Motor Co. CEO Mark Fields was fond of saying the automaker had "one foot in today and one foot in tomorrow."

His successor, Jim Hackett, rejected that two-pronged approach to the business, noting at his 2017 introductory press conference that "you won't hear us talking about emerging versus core." But by appointing Joe Hinrichs as president of automotive and Jim Farley as president of new business, technology and strategy last year, Hackett still effectively split the responsibilities of his top two lieutenants between today and tomorrow.

Hackett's latest management shake-up — the abrupt retirement of Hinrichs, 53, and the promotion of Farley, 57, to COO — was an admission that Ford needed a singular strategic vision more seamlessly integrating connectivity, electrification and emerging mobility services.

"It's my judgment the time is to move with urgency now to integrate and accelerate Ford's transformation into this higher-growth, higher-margin business," Hackett told reporters, calling Farley "a partner who will work together to unite the Ford businesses."

Farley's many responsibilities include oversight of product development, purchasing, manufacturing, marketing, sales, service and quality — in addition to his leadership of Ford Smart Mobility, Ford Autonomous Vehicles and the company's partnership with self-driving startup Argo AI.

"There will be no chasm in this relationship between all those capabilities, and that's the advantage we get with this move," Hackett said.

Farley's job will be to not only launch popular new products, but also to integrate new vehicle architectures with software that will allow Ford to collect data, offer over-the-air updates and better prepare for an autonomous future.

While that has essentially always been Ford's goal under Hackett, running the business along two parallel tracks proved troublesome, even with profit machines such as the F-series franchise. In a goodbye letter to employees, Hinrichs noted that Ford has missed its financial targets in each of the last four years, including a 99 percent drop in 2019 net income, and analysts were disappointed by the automaker's underwhelming 2020 outlook.

Although Hackett was hired as CEO to speed Ford's decision-making and move it away from the today/tomorrow paradigm Fields preached, the automotive newcomer said it has taken some time to learn how exactly Ford could "straddle these two eras."

"We cannot change all the vehicles at the same time, unlike a technology company," he said. "Architectures don't move that quickly. ... We're now in execution mode. What the company needs is to come together behind this vision."

Farley, a former star at Toyota Motor Corp. who previously led Ford's marketing efforts and its European business, is now in charge of executing Hackett's vision. He's the first COO at Ford since Fields, suggesting he's the likely successor to Hackett, 64, whenever the time comes.

In his most recent role at Ford, Farley focused intently on the future and how emerging technologies are transforming the industry.

During his roughly nine-month stint as president of new business, technology and strategy, Farley spent considerable time in Silicon Valley, probing the minds of leaders at tech-focused, data-driven companies. He also reached out to venture capital companies to better understand how they decide which future businesses to invest in.

"We have the new products coming, but that's not enough," Farley told Automotive News. "We now have to take advantage of these new capabilities in the products to have better experience for our customers and make sure we think ahead to have a sustainable model going forward. Our industry is changing; we all have to adjust. Can you imagine the kind of opportunity we and our customers are going to have in using, at a VIN-specific level, all that connected data to make vehicle quality better?"

Former Toyota Motor North America COO Jim Press, who worked closely with Farley at the Japanese automaker, said it was obvious from the time he met him that Farley was "destined for greatness."

"Jim has the unique ability to see around corners as he combines unmatched intelligence with an unwavering drive for perfection, product passion and strong leadership qualities," Press — who later became a top executive at Chrysler Group and is now executive vice president of the McLarty Cos. dealership group — told Automotive News. "He listens and takes actions."

Farley may have to take a number of actions to improve Ford's bottom line.

Quality issues slowed last year's launch of the redesigned Explorer and Lincoln Aviator crossovers, which contributed to a disappointing fourth quarter. Warranty costs remain troublesome, Ford's China business continues to post losses and the company has a number of costly, high-profile product launches on tap this year in North America.

Michelle Krebs, executive analyst for Autotrader, cautioned that while a clear vision and singular focus is important, Ford shouldn't forget what drives profits today.

"Too many companies have gotten wrapped up in what's way down the line and have taken the eye off the ball of today's business," she said. "The pressure from Wall Street sometimes causes reactions that are not always well thought-out."

That pressure isn't letting up.

Morgan Stanley auto analyst Adam Jonas last week said he made "the wrong call" naming Ford as his top automotive stock in August.

Ford's stock dipped this month to its lowest level in more than a year, having dropped more than 25 percent since Hackett took charge in May 2017.

Still, Jonas argued that there are reasons to be optimistic if Ford can fix some of its operational issues.

"We think this company has real potential to significantly grow profitability relative to other auto stocks," he wrote in an investor note. "Admittedly, we are not in a position to 'call a bottom' in the stock and believe the company must earn back the trust of the market by delivering results … as in not missing numbers for the rest of this year and showing a real path to improving profitability significantly heading into 2021."