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This Week is Showtime for Ford's New CEO

By John Rosevear - Oct 1, 2017 at 7:05AM

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Jim Hackett will present a new strategy for Ford to investors on Tuesday. Here's what to expect.

It's time for Ford Motor Company's (F 0.75%) new CEO to share his vision and plan for the Blue Oval. 

Jim Hackett, who took Ford's top job in May, is expected to present his plan for the company to analysts in a "strategic update" scheduled for Tuesday, Oct. 3, after the market closes.  

Ford's board of directors ousted former CEO Mark Fields and installed Hackett in part because directors were unhappy with the Blue Oval's sagging stock price. Tuesday's update is a big opportunity for Hackett to convince Wall Street that he will take Ford on a more promising path. 

Here's a look at where Hackett is coming from, and what he's likely to say. 

Setting the stage: Why Hackett was chosen as CEO

Shortly after his appointment, Hackett said he would use his first 100 days as CEO to scope out the state of Ford's business and prepare a plan to lead it forward. The plan is expected to be a revised and possibly accelerated version of the plan that Fields put forward about a year ago. 

Hackett is shown before a white backdrop with a blurred blue Ford logo.

Ford CEO Jim Hackett. Image source: Ford Motor Company.

Simply put, Fields' plan called for maximizing the profitability of Ford's existing business while making aggressive investments in self-driving technology, electric-vehicle drivetrains, and alternative business models centered around the idea of shared mobility. 

It was a good plan, with a flaw: Fields and his leadership team did a good job of communicating how much those new-tech efforts would cost, but they weren't clear about the upside, how and when those new technologies and business efforts would pay off. 

The obvious contrast is with old rival General Motors (GM 0.83%). GM CEO Mary Barra has pushed aggressively into those same new technologies and business models -- while simultaneously rethinking and revamping GM's existing business, and delivering clear expectations around profitability for both. 

Barra and her team evaluate challenges and opportunities through the lens of return on invested capital. If GM can make more money elsewhere, it won't hesitate to cut low-margin lines of business -- such as its European operation, which GM sold earlier this year

So why is Hackett in charge now? Hackett joined Ford after retiring from Steelcase, the office-furniture company he led through a high-tech transformation, at the invitation of Rxecutive Chairman Bill Ford. Hackett's first role at Ford was to lead the subsidiary created to house its future-mobility businesses. 

In retrospect, it seems likely that Bill Ford brought Hackett into the company as a backup CEO in waiting, a proven leader of high-tech transformations who could step in if Fields, a Ford lifer, could't get the job done to the board's satisfaction.

Now he's up. What will he do?

How Hackett's priorities might translate into plans

Shortly after he took the top job, Hackett said he will emphasize three priorities in his leadership of Ford:

  • Sharpening operational execution across the global business while decisively addressing underperforming parts of the business.
  • Modernizing Ford's business, using new tools and techniques to unleash innovation, speed decision-making, improve efficiency, and more.
  • Transforming to meet future challenges and ensuring the company has the right culture, talent, strategic processes, and nimbleness to succeed as society's needs and consumer behavior changes over time.

On the first bullet point, I expect Hackett to take a page from GM, making decisive moves to cut or change products or business units when he feels that Ford can get a better ROIC elsewhere. Ford's decision to import the next-generation Focus to the U.S. from China -- and apparently, to eliminate the slow-selling Fiesta from the U.S. lineup entirely -- might be an early hint of the kinds of things Hackett has in mind. 

I expect we'll hear more about the philosophy behind such an approach, though Hackett may not get into specifics around the moves Ford is considering. 

To the second bullet point, Hackett has already revamped Ford's senior-management structure in an effort to simply reporting lines and decision-making. I expect we'll hear more about how he plans to "unleash innovation" and "speed decision-making" at the rank-and-file levels of Ford.

A Ford Fusion with visible self-driving sensors is in a suburban driveway. A woman holding a boxed pizza is walking away from the car.

Under Hackett, Ford has recently expanded its self-driving test program to include, among other things, pizza delivery. Image source: Ford Motor Company.

The third bullet point could be especially interesting for investors. There have been hints that Hackett has already begun accelerating Ford's self-driving research and electric-vehicle plans. And just this past week, Ford and Lyft announced a partnership in which Ford will test its prototype self-driving cars in service with the ride-hailing company, which, in addition to a robust test for its autonomous-vehicle systems, will be an opportunity for the Blue Oval to learn more about the business of ride-hailing. 

Expect Hackett to give a lot more detail about his plans on all of those fronts.

The upshot: Hackett has a big chance to move investor perceptions

Hackett's real mission is to transform Ford into a company that will be profitable for decades to come. But in the near term, his mission is arguably to convince investors that he's the guy to lead Ford through that transformation, that he "gets it." To do that, he'll have to at least outline a detailed, credible plan that will keep Ford healthy and profitable amid (and after) the expected huge wave of technological disruption. 

Will he be able to pull that off? His resume, and the moves he's made so far, inspire confidence. That's why he has the job. But it's still early days for this CEO who spent most of his career in a very different business. Your humble Fool will be listening in on his presentation by telephone: We'll find out if he's "got it" on Tuesday. 

If he does, Ford investors will have reason to cheer. 

John Rosevear owns shares of Ford and General Motors. The Motley Fool owns shares of and recommends Ford. The Motley Fool has a disclosure policy.

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