Key challenges for Jim Hackett
Ford Motor’s (F) new CEO (chief executive officer) Jim Hackett is joining the company at a time when US auto sales have been declining for several months. That will increase Hackett’s challenges and won’t give him much room to experiment with new ideas.
Now let’s take a look at what challenges Hackett and his new leadership team could face initially at Ford.
In the first quarter of 2017, Ford’s operating margins fell in nearly all its major markets, including Europe, Asia-Pacific, the Middle East, and North America. Higher contributions and structural costs along with negative sales volumes have taken a toll on the company’s operating profits in the last few quarters.
Ford’s consistently weakening profit margins have become a matter of concern for its investors in the last year. So Ford’s new leadership team may need to take careful but immediate steps to revive the company’s profitability.
Optimum utilization of F-Series strengths
Among all the vehicles offered by Ford, the F-series truck has a special place in the US auto market. The F-150, its heavy-duty, full-size pickup truck, has been the best-selling vehicle in the United States for more than three decades.
Recently, Ford launched the F-Series Super Duty truck, which could help the company boost its margins going forward. That’s because heavyweight vehicles (VCR) such as trucks have higher margins than cars.
Also, the US demand for trucks and utility vehicles has outperformed the demand for cars in the last couple of years. In 2016, 820,799 F-series pickup trucks were sold in the United States with a year-over-year rise of 5.2%. However, translating these higher F-Series sales into higher profitability could be a challenge for Ford’s new leadership team.
In the last year, mainstream automakers, including Ford, General Motors (GM), Toyota Motor (TM), and Fiat Chrysler Automobiles (FCAU), have speeded up their autonomous vehicle development programs. In 2016, Ford’s then-CEO Mark Fields promised that the company would start mass production of SAE level 4 autonomous vehicles for ride-sharing services.
Hackett’s previous position with the company was chairman of Ford Smart Mobility, which could increase investor expectations for activity in vehicle automation.
In the next part of this series, we’ll see what Wall Street analysts are recommending for Ford stock after the recent leadership changes.