More drama at the FoMoCo

THE AUTOEXTREMIST - RANTS
FORD GOES LONG. AND WRONG.
TUESDAY, AUGUST 4, 2020 AT 02:16PM
By Peter M. DeLorenzo

Detroit. As I predicted a long time ago, Jim Farley will replace Jim Hackett as Ford’s CEO, effective October 1. This move was a fait accompli the moment Joe Hinrichs left the company in February. Thus, another transition begins for Ford, a company that has been on a roller-coaster ride since the day Alan Mulally left.

Hackett was the little-known furniture company executive and FoB (Friend of Bill Ford) who was handed the reins of the company in the wake of Mark Fields’ departure. Fields had succeeded Mulally, but it all went wrong for him in due time, so Bill tapped Hackett to run his family’s company. Now, if Bill had his druthers, Mulally would be just now getting ready to retire; he wanted the ex-Boeing executive to remain CEO basically for life. And although this was a view that was shared by many, alas it wasn’t to be. So, Bill alighted on the notion that Hackett could be "The Guy." And for some fleeting moments, Jim showed flashes that he could be "The Guy" but only intermittently. Hackett’s esoteric pronouncements (I dubbed him “Professor Moon Beam”) and his vision of the future – defined by connected cities et al. – and Ford’s role in it were all deemed well and good, but meanwhile the machine that defines Ford wasn’t being served. Hackett, by all accounts a decent, smart and well-meaning guy, just didn’t have the depth and breadth of experience to make a real difference at Ford. And his role at Ford predictably amounted to yet another transition, one that lasted three years.

So, now what? The one thing Ford desperately needs more than anything else right now is a chief executive who understands this business inside and out and can guide Ford through perilous waters. And Bill Ford has decided that Jim Farley is "The Guy." Needless to say, longtime readers of this website know that I vehemently disagree with Ford’s decision.

Farley, the former Toyota wunderkind who was responsible for the launch of the Scion brand, has developed quite the notorious reputation at Ford as one who is unfettered by rational thought and unburdened by accountability, and who has a penchant for going completely off the rails. Known for his prodigiously short attention span and burdened by an excruciatingly painful interpersonal awkwardness, Farley’s belligerent, condescending style of dealing with underlings, along with his classic “parachute in, helicopter out” M.O. that has defined bad actor executives for decades in this business became his calling card.

It gets worse. Farley has long considered himself to be “the smartest guy in the room” at Ford, much to everyone’s endless chagrin, because the reality is that he isn’t. It’s a carefully crafted facade that is hollow to its core. This was confirmed by the fact that Farley became known as "The Two Jims" because interactions with him became a meandering crapshoot, hinging upon whether people encountered the "good" Jim or the "bad" Jim on that particular day. Needless to say, when the "bad" Jim was unleashed, Farley left a trail of bad feelings and highly questionable decisions in his wake.

Now that Bill Ford has decided that Jim Farley is “The Guy,” it’s no secret that seasoned executives are cowering under their desks because an emboldened Farley, unfettered and untethered, has all the makings of an unmitigated disaster. Am I picking on Farley? Hardly. I have only scratched the surface in describing this ego maniacal character, and now that he has been given the CEO reins, he could wreak havoc on the company’s future for years.

Ford’s PR Chief – Mark Truby – who worked closely with Farley during his European stint, told me three years ago that he believed Farley would eventually be CEO. True to his word, Truby and his eager PR minions have been preparing for this day for going on eighteen months now, leaving no stone unturned in a scorched earth offensive to bury Farley’s “Two Jims” persona once and for all. This charm offensive – or should I say smarm offensive – has disgusted Ford insiders and left them in head-shaking disbelief.

In fact, reading some of these PR-abetted stories that have showed up in the media, the uninformed might think that Farley walks on water, possesses the riveting intellect that occupies a space in the stratosphere beyond mere mortals, has never put a wheel wrong in his entire career, and is now logically anointed “The Guy” as Hackett prepares to wander off into the sunset. These pieces were designed to portray a wonderfully benign Farley, an executive whose rise has no perceptible limit, and whose enduring warmth is something that people crave to bask in. This "humanization" campaign of Farley is unmitigated ********, of course – and it has nothing to do with the "real" Jim Farley – the one hordes of people at Ford have grown to loathe with a level of disgust that is palpable.

This announcement from Ford makes me fear for the very future of the company. In fact, as I’ve said previously, the company has embarked on a Highway to Hell. I think Ford has five years – tops – to make it. And I am not optimistic. At that juncture the family could very well be forced to make a deal to sell the company, or have their share significantly reduced in some sort of orchestrated takeover. That’s how dire I view this situation to be.

Yes, it’s about The Product in this business; it always has been and it always will be. And Ford definitely has some new products to talk about. “The Franchise” – the new F-150 truck – is an incredible cash machine second to none in this business and it should continue as such. And the upcoming Bronco due next spring should be – if Ford doesn’t screw up the launch – a slam dunk, grand slam, home run. (I don’t rate the all-electric Mustang Mach-E crossover nearly as highly because at this point it can only be described as a giant “We’ll See.”)

But then again as successful as the new F-150 and Bronco should be, the cash burn going on in Dearborn is unfolding at a devastating cadence. How bad is it? At one point it was estimated that Ford was losing upwards of $161 million per day. And there is no amount of “fireside chats” with analysts – something that top Ford execs have tried of late in order to persuade them that the Dearborn automaker will be okay – that can mask that fact. No matter how many cool products the company has coming, when you’re burning through that kind of cash, time is the enemy, and Ford's third quarter performance should be telling. Right now, the sands of time are whistling through the hourglass at a furious rate for Ford.

Three years ago, I had this to say about the future of Ford – projecting to the year 2030 – in a column entitled Runnin’ Down A Dream: “The VW Group long ago established itself as the largest automotive conglomerate in the world. The news? Its working agreement with the Ford Motor Company had evolved into a full takeover, as Ford’s restructuring was stalled by its perpetually late product cadence, ineffectual leadership and having pissed away billions trying to become a mobility company. And for the first time in its history Ford was no longer controlled by the Ford family, although the family still maintained a significant - but notably reduced - presence in terms of stock and influence.”

Today, I wouldn’t change anything about my prediction. Well, maybe one thing: I don’t think we’ll have to wait until 2030 to see the Ford Motor Company inexorably changed for good. The denouement will come – one way or the other – by 2025.

In The Last Worthless Evening, Don Henley sings about “Time, time, ticking… ticking away” in a wistful lament, and his melancholy refrain somehow seems sadly appropriate right about now with everything that’s going on in the world. Time is still ticking away for the Ford Motor Company, whether anyone over in Dearborn wants to admit it, or not.

As for Jim Farley being CEO? When everything is factored in, he is simply the wrong person, at the wrong time, at the wrong car company.

And that’s the High-Octane Truth for this week.

 

As someone who has never been in the corporate world, I find this kind of analysis interesting.

My assumptions would be in a corp this large, no one person, even CEO, gets to use it as their 'playground.' I would think the Board of Directors woul be able to add balance. Honestly, I figured these CEOS were more figureheads than anything else.

Guess Im wrong?

 

Ford has a pretty solid history of finding Oompa Loompas to run their business. Nasser, Ford Jr, Fields, and Hackett did the company no favors. They need to bounce Ford Jr from chairman for hiring Fields and Hackett.

I'm sure at this point they'd do their bottom line a favor and stop making anything not a truck. Maybe the Bronco will help IF they don't put their usual potato transmissions in it. It was just a few years ago that all of their products not trucks were old or built on old platforms.

This is the company that had the best selling car and suv...they mismanaged those products to irrelevance in the marketplace.

Buy a Ford car and get a free transmission with every oil change!

 

You of all people are aware of the Corporate politics having worked in Hollywood. No different in Corporate America, or Globally actually. The minute you get more than 3 people involved you have politics. Higher Education, the Military, Government, Corporations, all have their unique politics. Some worse than others. Politics is a blood sport at more places than you might imagine.

In Hollywood, used to be the egos ran everything. Now the big corporations have taken over, many of the huge egos are gone. I'm sure you've seen your share.

But it's always about the money, no matter where you are.

 

Thats true (I was trying to block my Holywood days from my memory lol)

 

It's been very interesting reading Peter's thoughts on Fords the past few years! (Fords, as many around the Motor calls it)

I can truly relate to the "this ego maniacal character" (Farley) description, 'cause I've had a boss exactly like that (was a retired FBI bigwig).

Big fan of Peter M. DeLorenzo

 

they re just buying time till III can take over w/o wall street going nuts........

 

WSJ yesterday had an article about how Ford should go private like Dell did, so they could operate without Wall Street's influence. We'll see what the Ford Family thinks.

Ford Should Go Private to Have a Shot at Lapping Tesla
If the auto giant wants to innovate it needs to stop worrying about pleasing shareholders for a while


Ford Motor Co. chairman Bill Ford, photographed in 2017 at his office in Dearborn, Mich.
PHOTO: SEAN PROCTOR FOR THE WALL STREET JOURNAL
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By
Aug. 7, 2020 11:12 am ET


Today marks two years since that infamous Elon Musk tweet. “Am considering taking Teslaprivate at $420,” the billionaire posted. “Funding secured.”

Tesla Inc. TSLA -2.48% is still public, and it’s thriving. But there is another billionaire in the auto business who should consider the virtues of being private: Bill Ford.

The Ford Motor Co. F -1.01% chairman on Tuesday named a new chief executive, Jim Farley. I talked to multiple managers at Ford F -1.01% this week, and their goal is ambitious: They don’t just want to be Tesla, they want to lap it.

Some of the raw material is in place. Ford is a partner with Rivian, the company building battery-powered delivery vans for Amazon.com, and it has invested in robocar developer Argo AI. The new CEO is an industry lifer promising to boost profits, revenue and competitiveness.

Jim Farley, photographed in January in Wixom, Mich., was named Ford’s new chief executive this week.
PHOTO: NICK HAGEN FOR THE WALL STREET JOURNAL
Old-line companies like Ford, though, struggle to satisfy lofty goals and fickle stockholders at the same time. Wall Street’s short-termism tends to target the old and slow, not the young and nimble. Consider how an auto company few have ever heard of— Nikola Corp. —bolted past Ford in market value this summer despite never earning a dollar of revenue.


Sometimes, the answer is to take back control.

This is something Michael Dell realized after the financial crisis, when shares in his once vaunted personal-computer company were trading for the equivalent of milk money.

At that time, Dell was seen by investors as a computer maker more akin to Hewlett-Packardthan Apple; its shares curdled. The core PC business was vital, but the industry was overshadowed by smartphones. Its founder, however, believed the company could be a key player in tech-industry infrastructure.

A $24.4 billion buyout, executed with Silver Lake Partners, gave Mr. Dell total control. Being private allowed him to buy a bunch of companies and sink big investments without justifying his actions to analysts every three months. Today, the newly named Dell Technologies Inc. is worth $45 billion. It still makes PCs, but it is considered a major player in cloud computing.

I asked Mr. Ford about the Dell strategy in 2017. This was a few weeks after he replaced CEO Mark Fields with an office-furniture executive named Jim Hackett amid worries his company lacked adequate vision. Mr. Ford, a hockey fanatic, said he’d spent much of his career deferring to other executives at the company that bore his name, but he now needed to shoot for transformative goals.

“I’ve got to do this,” he said.

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He said that taking Ford private had been seriously explored, but it wasn’t necessary. The company, he said, was already guided by long-term thinking. And managers feared that Ford’s debt load would be too hefty, and the Ford Credit lending arm would be unable to tap public financing if the parent left the stock market.

In the end, Mr. Hackett’s tenure was a stinker from an investor standpoint. Shares slid amid meager profits and product hiccups. But Mr. Ford praised his outgoing boss’s willingness to challenge convention and slay sacred cows. “He cared more about Ford’s reputation than his own,” Mr. Ford said at a press conference Tuesday.

I was already well acquainted with Mr. Ford. I met him in 2001 as a cub reporter. He was presiding over a celebration at the historic Rouge factory. A “living roof” with trees, shrubs and grass would be installed on a new plant being built on the site.

In the years that followed, I watched TED talks, attended conferences and took notes in staff meetings (I briefly worked at Ford) where similarly sustainable goals and aspirations were outlined. Ford bought a Norwegian EV maker, introduced hybrids and, for a spell, backed away from gasoline-thirsty SUVs.

Today, however, the company’s business model is almost entirely identical to the one I studied in 2001. Why? Milking profits from trucks and SUVs is the most efficient way to tamp down investor revolts.

“We have to create shareholder value,” Mr. Ford told the Detroit Free Press this week after Mr. Farley’s appointment.

There is a reason to place a bet on the 63-year-old great-grandson of Henry Ford. Since the death of his father in 2014, Mr. Ford has been amassing the company’s supervoting Class B shares, and now owns one-fifth of the pie, compared to less than 5% in 1999 when he became chairman of the board.

Stocking UpBill Ford’s ownership of Ford’s Class Bsupervoting stock has increased in recentyears.Bill Ford’s share of outstanding Ford Class Bsupervoting stockSource: the company
%2011'15'200510152025
While Mr. Ford has grown more powerful, however, Wall Street has grown more skeptical of the company. The market value of Ford’s combined classes of stock was $64.5 billion when he took over in 1999. By the start of this year, the sum had declined by 37%. The value of a single share has been more than halved when adjusted for splits and dividends.

Today, the stock’s low price relative to its high dividend indicates investors expect little growth—increasingly a code word for innovation—in years to come. Being off the stock market would give Mr. Farley, the CEO, more margin for taking risks, fewer people outside the company to constantly answer to and time to remake Ford’s image from hackneyed metal-bender into savvy tech company. It eventually would need to be public again, to cash out private investors, but better to look more like Tesla and less like General Motors in that next IPO.

Before Ford could go private, there would be big questions to answer, including what to do with the finance company and how big of a premium current investors need. And there are cautionary tales. Remember Cerberus Capital Management’s takeover over Chrysler in 2007? It was a disaster.

Yet, David Brophy, a University of Michigan Ross Business School professor considered an expert in private-company finance, told me that going private is possible for a company even as encumbered and complex as Ford.

Buttoning UpThe value of deals taking companies privatewere increasing in the years leading to 2020.A flood of capital into private investor firmsfueled the trend.Value of go-private deals with U.S. sponsorsSource: DealogicNote: 2020 figure through Aug. 5
.billion2011'15'20020406080$100
“I’m sure a lot of people have been looking at Ford given how cheap the stock is,” he said. The Fords would need to likely find several investors from various continents to pull off a deal, which would include the assumption of $30 billion in automotive-business debt, about half of which was taken on during the first quarter to get through the pandemic.

Ford, the family and the buyout industry are all flush with cash. Money that investors have committed to private-equity funds that hasn’t yet been spent was at a record $1.45 trillionglobally as of June, excluding venture-capital funds, according to data provider Preqin Ltd. Among them are firms known for long-term thinking that would be willing to lend Mr. Ford the cash and patience he needs, Mr. Brophy said.

“If you wanted to patch the roof, this strategy would allow you to get her done and then bring it back as a new entity,” he said. “Bill Ford could be your Michael Dell.”

Write to John D. Stoll at [email protected]

 

maybe...

existing cos have a lot of legacy issues. ie. dealer networks and union relationships that they cannot jettison.

like GM in 2008. they were just full employment and finance cos masquerading as car companies.

i went to high school with alot of auto exec big wigs kids. the GM dads always seemed to be happier than the Ford dads.

 

i was not aware that bill has been accumulating the super voting stock.

that must be from family members via trusts?

i was always under the impression that it lost its super voting status when sold.

 

I met Farley once. seemed nice enough.

then a friend in the car business told me his nickname was F--k You Farley.

I guess I met him on a good day...