Does Ford’s New CEO Indicate A Change In Strategy?

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In a sudden move, Ford Motors (NYSE:F) appointed Jim Hackett as its CEO (Chief Executive Officer) replacing Mark Fields, a 28 year old veteran with the company. According to the company, the three key priorities of the new CEO would be to sharpen operational execution, modernize Ford’s present business, and transform the company to meet future challenges. Prior to being promoted as CEO, Jim Hackett was the head of Ford’s mobility division, since March 2016. As the automotive industry undergoes a significant transformation, with increased focus on clean energy vehicles, autonomous vehicles, and a shift towards ride sharing instead of vehicle ownership, Ford’s management change appears to be aimed at accelerating its strategy towards capturing these new opportunities. The company has already defined itself as an automotive company and a mobility solutions provider and is working on several initiatives in the mobility space. We believe this change in management is aimed towards ensuring that the pace of these initiatives is rapid to ensure that the company has a competitive edge in the new automobile landscape.

Increased Focus On Autonomous Vehicles

While several investors believe that Ford has not done enough to build a competitive edge towards the new automotive landscape dominated by autonomous cars, the company is investing heavily in technology to bring these cars on the road soon. Its 2021 target to launch a fully autonomous vehicle might be behind peers, but the company is focusing on Level 4 technology (fully autonomous cars) to achieve this goal, where other players are investing in Level 3 technology where regulatory approvals are easier but the vehicle is not fully autonomous. (Read Here’s Why Ford Is Investing In Argo AI).  This indicates that the future of autonomous cars is uncertain since there are several concerns around the safety of these vehicles and different technologies which can be used to make the vehicles autonomous and safe. Ford is banking on regulatory approvals and if these are received for its technology, it could put the company ahead of other players.  A new CEO who is focused on these initiatives can help accelerate the process, but a disruptive transformation of the company is unlikely.

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Other Changes Needed For Future Growth

Organizational behavior experts believe that a new CEO is not sufficient for a company’s transformation and CEOs who try to radically transform a company are most likely to fail. Further, the success of a company depends on its internal structure and market related forces, some of which the CEO cannot directly control. While its new CEO can ensure that Ford is focused on initiatives which will give it a competitive edge in the new automotive landscape, this change alone is unlikely to bring about a significant improvement in the company’s performance. As technology takes center stage in the new automotive landscape, it is challenging for a traditional automaker to compete with companies such as Tesla, Apple, and Google in the autonomous cars initiatives. Similarly, technology companies are unlikely to have the expertise to scale up manufacturing. It is likely that a combination (potential mergers) of these entities that have expertise in two different areas of the “new automobile” would be the best approach for the future.

Ford’s sudden change in CEO does indicate that the company is looking to accelerate its initiatives towards newer technologies and emerging opportunities to build a competitive edge. However, this change might not be sufficient for the company to succeed in the new landscape and several other strategic efforts by the new CEO will be required to drive growth in the long term.

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