[ad_1]
Jim Farley is not afraid to make big decisions, and the one he made about Rivian was consummate. Enamored of the electric-truck startup under former CEO Jim Hackett, Ford Motor invested $500 million in Rivian in 2019 and established a partnership for joint vehicle development. But early this year, Ford under Farley dissolved the development partnership while retaining its minor investment in the company—thereby avoiding association with Rivian’s subsequent problems, including an embarrassing attempt at price gouging and a halving of its expected output this year.
It was the continuation of a Midas touch Farley has applied since becoming Ford’s CEO in October 2020 and promptly reversed course by setting ambitious new coordinates for the company nearly across the board. “He made a really good call on Rivian,” says one admiring high-level executive at a Ford rival.
The question now: Will Farley’s winning touch extend to his biggest gambit yet? In a dramatic move early this year, Farley announced that Ford is going whole hog on making all-electric vehicles and the batteries that power them, committing the company to spend more than $50 billion on the technology over the next five years. The moonshot-type effort will include constructing major manufacturing complexes in Kentucky and Tennessee, restructuring the company into a champion of new technologies and manager of old, accelerating the overhaul of nearly all of Ford’s products, and even reimagining how Ford vehicles are sold through its dealers. The impact will be felt far beyond the company, helping reshape and refocus the entire global automotive supply chain, with knock-on effects for virtually every manufacturer in a host of industries.
“We’re building an ultra-efficient, carbon-neutral automotive manufacturing system unlike anything else in the industry, and hoping to lead a new industry in America as well [in] high-tech battery manufacturing,” Farley tells Chief Executive. His ambitions aren’t just long term but current as well. Farley says his first goal is “to become nothing less than the Number 2 producer of EVs in the U.S. within the next couple of years, and then challenge for Number 1” by going after Tesla.
Everything the 59-year-old Farley has done so far bespeaks a singular seriousness about his short- and long-term aims for all-electric vehicles. In less than two years at the helm of Ford, Farley has already rushed battery-powered versions of both the company’s most iconic nameplates, the F-150 pickup truck and the Mustang, to market. By committing to build a battery plant with SK in “BlueOval SK Battery Park” in central Kentucky, Farley completely flipped Hackett’s decision to rely on outside suppliers for batteries. Simultaneously, he rhetorically side-burnered Ford’s efforts to bring autonomous vehicles to market quickly and to proliferate “mobility” solutions overall, though he once headed those initiatives.
And most recently, Farley announced that Ford is essentially splitting into two complementary enterprises, one devoted to EVs and AVs called Ford Model e, of which he is president, and the other called Ford Blue, which will comprise the company’s efforts in legacy technologies and with its continuing vehicle lines based on internal-combustion engines.
“Ford is starting to push the boundaries of what it means to be an auto manufacturer, rather than let Tesla make all the running,” says Andy Binns, director at Change Logic and an expert on industrial innovation. “This will allow them to move at the pace of a smaller firm and regain some of the initiative they have lost to Tesla. This is the sort of ambidextrous organization that has helped other firms survive disruption.”
Wall Street likes what it sees so far. Ford’s stock price is way up—it jumped to more than $24 a share in January and, more recently, settled back to around $18, above a trough of little more than $4 at the nadir under Hackett in early 2020 and about $7 a share right before Farley took over the job. “From a leadership standpoint, he has broken through with Ford people and dealers,” says one rival automotive executive. “And I think he’s on the right trajectory.” But, notes David Cole, chairman emeritus of the Center for Automotive Research and a consort to automotive CEOs stretching back decades, “What we’re entering now is a period dramatically less predictable than in the past.”
HARD CHARGE
It’s already part of Detroit lore how legendary Ford CEO Alan Mulally himself spotted the potential in a younger Farley when the latter showed up for an interview. “I was in the outer lobby [of a private hangar at Los Angeles International Airport], and I watched Jim get out of his car,” Mulally told The New York Times in 2008. “I remember his hello, his eye contact, his questions, how articulate and genuine he was. I knew right then this was the person I wanted.”
James D. Farley Jr. didn’t start out at Ford, though his grandfather had worked there. The son of a banker, he earned his undergraduate degree at Georgetown and an MBA at UCLA. He went to Toyota to help launch the Lexus luxury brand and was later put in charge of the new Scion brand aimed at young buyers. It was considered a successful rollout, but Scion could never quite land that market. In any event, Farley rose to the top job at Lexus.
Taken under Mulally’s wing to join Ford as global head of marketing and communications in 2007, Farley rose steadily through the marketing ranks at Ford to the executive vice president level, then rose to COO, and got the nod for the top job after CEO Jim Hackett stepped down and rival Joe Hinrichs, a well-liked Ford lifer and manufacturing maven, retired.
The company’s EV budget, Farley says, “has big money set aside for vertical integration. We’re going deep with our supply chain, focusing on batteries, electronic components and raw materials beyond Tier 1 suppliers into Tiers 2, 3 and 4. We believe that vertically integrating battery manufacturing is going to pay huge dividends and allow us to control cost and capacity of these critical parts.”
Dividing the company, in essence between the past and the future, is another tectonic change authored by Farley. Wall Street clearly wanted Ford to spin off an “e”-focused enterprise to better accommodate growth and capital formation and recreate the automaker as a services-oriented giant, a la Apple.
Early in his tenure, Farley fed such fantasies, for example by recasting Ford’s robust commercial-vehicle divisions as a brand called Ford Pro and charging its leaders with exploiting data to create long-term relationships with customers—instead of simply selling vehicles to rental companies, corporate fleets and police departments.
But while early this year Farley stepped right up to the spinoff line, he didn’t cross it, opting instead to create two huge entities within Ford—with Ford Blue under Kumar Galhotra as president—that he hopes will synergize one another and, ultimately, build an all-electric leader.
“Ford Blue and Ford Model e are distinct businesses, yes, but they are complementary, and their strategies are intertwined,” Farley says. “They’re going to make each other better. In Ford Blue, we have the secret weapon of industrial know-how and scale that any EV startup would envy. And in Ford Model e, the top talent we’re bringing together will create cutting-edge software and embedded systems for all of Ford’s vehicles—not just EVs. These two focused businesses aren’t just going to coexist—they’re going to cooperate, they’re going to make each other better, and they’re going to be pivotal to each other’s success.”
One top-level strategist at a rival automaker is skeptical. “If you split EVs off into a completely separate company, I would have understood it,” he says. “But doing it just internally—what is the motivation of the ICE [internal combustion engine] people? You’ve given them a death sentence. How do you motivate them to work for the part of the company that’s from the past? Meanwhile, there’s a clear future for the people who work on EVs.”
Farley himself wasn’t always so bullish about EVs. In an interview a few years ago when he was head of the autonomous vehicle operation, he said, “EVs aren’t the answer.” And indeed, skepticism about Ford’s new direction isn’t as much about Farley’s particular decisions as it is about devotion to the technology in general.
Echoes Cole, “The concern about electrification is that the Biden administration is pushing the daylights out of it, but when it gets down to the average consumer—and voter—they don’t think of EVs as the future at this point.”
Indeed, the market for all-electrics remains severely limited even while sales are beginning to take off. And supply-chain difficulties for EVs could be just as complicated as for ICE vehicles, whose inherent risks are being illustrated by oil prices and hydrocarbon supplies in the wake of the war in Ukraine. “EVs need aluminum and chromium and rare earths and lithium and lead and silver and gold,” says Peter Zeihan, an author and adviser to CEOs on globalization. “You are replacing one problematic supply chain with 13 more.”
POWERING UP
Heading into the maw of this new direction, Farley recognized the importance of leading a top team that supports his aims. It includes Galhotra; CFO John Lawler, a longtime Ford exec; and Suzy Deering, the chief marketing officer, who came over at Farley’s invitation from the same job at eBay. Two of Ford’s top five highest-paid executives are newcomers: Mike Amend, chief enterprise technology officer, who joined Ford in September after serving as president of Lowe’s Online, and Doug Field, chief EV and digital systems officer for Model-E, whom Farley lured from Apple’s car project.
Attaching legendary nameplates to new electric vehicles “was a decision that took buy-in from the whole team,” Farley explains. Ford started developing the Mach-E about five years ago, under Hackett, “and made the controversial decision to make it a Mustang about two years in,” or just before he became CEO, Farley says. “It was important that we designed a car that sparked an emotional response, not a generic economy car.”
The decision contrasts with those of other automakers, which so far have hesitated to attach all-new battery technology to their consistent sellers. GM, for instance, called its first modern EV the Chevrolet Bolt when it debuted in 2016, and it has turned out to be an ill-fated model hobbled by problems with under-hood fires. Similarly, Volkswagen’s new all-electric SUV is called ID.4, and the new EV line being fielded by Mercedes-Benz this year is called EQS.
But while the Mustang Mach-E has little to do mechanically with the traditional Mustang, it is already outselling Ford’s fabled muscle car. The Lightning is indeed an F-150, being built in The Rouge not a few hundred yards from where the conventional F-150 is still assembled—but with electric propulsion and wild new features such as an onboard generator with enough juice to power a house. It’s “the first electric pickup to hit the market,” Farley notes. “I think we can all agree that the electric revolution hasn’t started until this segment is addressed.”
It won’t be easy. As one critic in the industry points out, “The vast majority of pickup buyers are in the suburbs or are rural, not in cities, and they’re not going to change” from gasoline power. “I don’t see a big move in regard to EVs.” And the only way that Ford is creating the cash flow and profits to fund its electric revolution is through continued strong sales of diesel and gas-powered F-150s, as well as big SUVs such as Explorer, and new hits such as the Ford Bronco compact SUV and the Ford Maverick midsized truck.
Ford is counting on F-150 Lightning sales to take off when the new model becomes available to consumers this year and help bring the company neck-and-neck with Tesla, which has steadily pushed back the expected debut of its pickup truck to 2023.
Tesla is “a strong competitor, and we’re learning a lot from them,” says Farley, whose frenemy repartee with Tesla CEO Elon Musk on social media is being closely followed. “But there isn’t just one path to excellence in EVs, and we have a lot of strengths,” Farley notes, including knowledge of commercial customers.
“We’re focusing on our own strategy: combining 120 years of manufacturing knowhow and scale with dynamic new EVs our customers love, cutting-edge embedded software and dramatic investments in sustainable manufacturing.”
PLUGGING IN
Farley is also resolute on moving from competition for early adopters and other fringe customers to the mainstreaming of EVs, something he’s especially mindful of from his days at Toyota when the company couldn’t get its target market to buy Scions. That requirement is one reason Ford and its dealer council will launch “Electric University,” a multi-day training initiative that will amount to a crash course on all things EV for salespeople, service technicians and parts-department staffers.
“As we enter the second and third innings, we’ll have to do three things to drive EV adoption,” he says. “First, continue making must-have battery-electric vehicles. Second, make them affordable. Third, make owning one easy. Consumers are smart. They know these vehicles offer all sorts of benefits that go beyond their ecological impact—from their superior performance to the way they solve everyday problems and offer unexpected new features.”
Already, Farley has made company chairman and family scion Bill Ford Jr. as comfortable as he has been since Mulally, freeing his boss to work on legacy projects such as Ford’s $950 million reconstruction of the old Michigan Central train station near downtown Detroit into a multipurpose campus that will house the company’s future technology workforce.
“Our team is crystal clear on the opportunity of this moment,” Farley says. “This is Ford’s biggest chance for sustainable growth since Henry Ford scaled the Model T. This will impact us all, and we’ve committed to one another as leaders of this company. We’re going to change how we show up, how we develop ourselves, and raise our expectations of what excellence looks like.”
[ad_2]
Original Source Link
