Ford has announced a new strategy to investors that will see the auto giant leverage its unique product strengths, trusted brand and global scale to refocus and thrive in an evolving and disruptive period for the auto industry. The shift will include greater focus on accelerating the introduction of smart vehicles and services.
The investor presentation follows a four-month-deep dive into Ford’s strategy and business operations led by Jim Hackett, Ford’s new President and CEO, and the company’s senior leadership team.
“Ford was built on the belief that freedom of movement drives human progress,” said Hackett. “It’s a belief that has always fueled our passion to create great cars and trucks. And today, it drives our commitment to become the world’s most trusted mobility company, designing smart vehicles for a smart world that help people move more safely, confidently and freely.”
In addition to cutting material and engineering costs by $14 billion over the next five years, Ford will begin allocating capital where it can win in the future. The company will reallocate $7 billion of capital from cars to SUVs and trucks and has revealed plans to build the next generation Focus for North American in China, saving capital investment and ongoing costs. Ford will also reduce internal combustion engine capital expenditures by one-third, redeploying that capital into electrification on top of the previously announced $4.5 billion investment.
Hackett also identified connected, smart vehicles and services, as well as electric vehicle revenue opportunities as key elements to Ford’s future strategy. By 2019, the automaker intends for 100 percent of its new US vehicles to be built with connectivity. Similarly, aggressive plans have been announced for China and other markets, as 90 percent of Ford’s new global vehicles will feature connectivity by 2020.
Ford recently announced the creation of its own dedicated electrification team, focused exclusively on creating an ecosystem of products and services for electric vehicles and the unique opportunities they provide. The move builds on the company’s earlier commitment to deliver 13 new electric vehicles in the next five years, including the F-150 Hybrid, Mustang Hybrid, Transit Custom plug-in hybrid, an autonomous vehicle hybrid, Ford Police Responder Hybrid Sedan and a fully electric small SUV.
To accelerate R&D, Ford will continue to leverage partnerships, such as its recent strategic alliance with Indian multinational conglomerate Mahindra Group which aims to transform its business in India, and Chinese auto manufacturer Zoyte with the intention of developing a new line of low-cost all-electric passenger vehicles in China. In regards to autonomous vehicle development, Ford recently announced a relationship with Lyft to work toward commercialization and a collaboration with Domino’s Pizza to research the customer experience of delivery services.
Within the next five years, Ford is aiming to reduce new vehicle development by 20 percent, with new tools and fewer orderable combinations. Through the use of virtual assembly lines, the company has been able to reduce new model changeover time by 25 percent.
“When you’re a long-lived company that has had success over multiple decades the decision to change is not easy — culturally or operationally,” Hackett said. “Ultimately, though, we must accept the virtues that brought us success over the past century are really no guarantee of future success.”
“We believe Ford will achieve its competitive advantage by focusing deeply on our customers – whether they’re drivers, riders or cities — and that’s where we are playing to win.”