Ford Set to Shift $7 Billion Toward Trucks and SUVs -- WSJ
04 October 2017 - 6:02PM
Dow Jones News
By Mike Colias
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (October 4, 2017).
Ford Motor Co. will shift about $7 billion toward the
development of more trucks and sport-utility vehicles while
"attacking" costs, part of new Chief Executive Jim Hackett's
strategic plan for the No. 2 U.S. auto maker.
Mr. Hackett, the former office-furniture executive appointed in
May, outlined his strategy to investors and analysts in New York
late Tuesday. He emphasized faster action to deploy capital in
regions and product lines with solid growth potential while
positioning the auto maker for a future of electric vehicles and
connected and driverless cars.
Moving capital investment to higher-margin trucks and SUVs is a
response to fast-shifting consumer tastes in the U.S. market and
abroad, as buyers abandon sedans for vehicles with greater utility
and space. Part of the $7 billion capital reallocation includes
reintroducing the Ranger pickup truck and Bronco SUV in North
America and moving production of the next-generation Focus small
car to China, plans that were previously disclosed.
Ford also said it would shift about one-third of its scheduled
investment in gas and diesel engines over the next five years --
about $500 million a year -- into cars that run fully or partly on
battery power. That will come on top of $4.5 billion the company is
spending over five years to expand its electric-vehicle lineup.
The Dearborn, Mich.-based auto maker appointed Mr. Hackett to
succeed Mark Fields, who was ousted in the spring amid a
downtrodden share price and belief inside and outside the company
that the auto maker lacked a clear vision. Mr. Hackett spent four
months studying aspects of Ford's business to devise the plan.
The 62-year-old is out to prove to Wall Street that Ford has a
plan to take on Tesla Inc. in electric cars and deep-pocketed tech
giants like Google's Waymo unit in driverless technology while also
fending hard-charging traditional rivals like GM, which many
analysts believe has a lead in advanced technology. Ford is
investing $1 billion in startup Argo AI to develop
autonomous-driving technology, which executives said is on track
for commercial deployment by 2021.
Mr. Hackett, who emphasized smart design during his long tenure
running Michigan-based Steelcase Inc., wants to slash costs by
modernizing and simplifying Ford's vehicle lineup, factories and
product-development process. The company aims to cut material costs
by $10 billion and engineering costs by another $4 billion over
five years.
"Ford will prepare for disruption by becoming fit" in operations
and capital allocation, Mr. Hackett told investors. That should
give Ford "the time, resources and flexibility to evolve," he
said.
Executives said they would move quickly to shore up low-margin
or unprofitable parts of the business, as GM has done in recent
years by exiting Europe, India and other money-losing markets. Ford
Global Markets Chief Jim Farley said the company will be "looking
very carefully at the actions we have to take" in South America and
Europe, including potential partnerships in those regions.
Ford also reaffirmed 2017 financial guidance it gave in July and
said it would provide a new 2018 forecast in January. It previously
had said it expected to grow pretax profits in 2018.
On its vehicle lineup, Ford plans to "double down" on its F
series line of pickup trucks, Mr. Farley said. The trucks already
fuel the bulk of Ford's global profits. The company also wants to
build on its U.S. lead in commercial vehicles, such as cargo vans
and large service trucks, Mr. Farley said.
Ford will add new SUVs across global markets, including more
rugged, off-road entries in the U.S. -- where Fiat Chrysler
Automobiles NV's Jeep brand now dominates that category -- as well
as larger SUVs in China and other developing markets. Ford won't to
walk away from small cars in the U.S., as FCA has done, but it will
pursue more-profitable niche segments, such as sportier versions of
the Focus, executives said.
Overall capital spending -- previously pegged between $8 billion
and $9 billion annually through 2020 -- won't increase and could
decline from that level as those dollars are spent more
efficiently, Ford said.
Write to Mike Colias at Mike.Colias@wsj.com
(END) Dow Jones Newswires
October 04, 2017 02:47 ET (06:47 GMT)
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