Ford Ups Electric Car Commitment: Simplified Lineup, Investment Shift
Ford’s new CEO has finally revealed the company’s future strategy and it includes a commitment to electric vehicles.
Ford CEO, Jim Hackett, began his tenure back in May after the automaker displaced Mark Fields. It was Fields’ time to go for many reasons, which we won’t address here, however, some information points to his lack of commitment to future vehicles. Hackett seems to have a different mentality. He told investors this week in New York:
“Ford will prepare for disruption by becoming fit.”
In order for OEMs to weather the transition and do it right, money needs to be saved up front. Moving to electrification and eventually to pure electric vehicles isn’t easy, nor is it cheap. Hackett has established a plan to account for this. The automaker is set to cut company costs by $14 billion over the next five years to set money aside for a substantial investment in electric vehicles. Meanwhile, Hackett also aims to boost profits along the way.
The new initiative includes streamlining Ford’s current vehicle lineup. The automaker will dial back passengers cars and invest more in trucks, crossovers, and SUVs. Additionally, vehicle packages and configurations will be substantially limited. USA Today explained:
“Instead of 35,000 possible versions of the Ford Fusion sedan, for example, Ford will offer 96. Instead of 2,302 versions of the Escape SUV, Ford will offer 228.”
Of the $14 billion in savings, $10 billion will be saved in material costs and $4 billion from engineering cuts. The carmaker aims to decrease vehicle development time by 20 percent. According to Hackett, all of this will lead to 13 new electric vehicles over the next five years. He said:
“We have too much cost across our business.These are real improvements to the business.”
“We’ve not delivered on our top-line growth expectations on our target of an 8% operating margin and over the past seven years we’ve averaged a 6.1% margin and that’s simply not good enough, so that performance gap of 2 points is worth billions in value I can tell you.”
All in all, Ford’s plan shows a 32 percent reduction in ICE vehicle expenditures from 2016 to 2022. The automaker will invest $4.5 billion into electric vehicles globally over the next five years. Models slated for development include the Mustang hybrid, F-150 hybrid, a Police Responder hybrid sedan, Transit Custom plug-in hybrid, an autonomous vehicle hybrid, and a fully electric small SUV. The electric vehicle plan will also spawn a new group coined “Team Edison”.
Hackett enjoyed much success as CEO transforming Grand Rapids-based Steelcase office furniture company. He was also the chairman of Ford’s Smart Mobility subsidiary and has notable ties to Silicon Valley.