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Following Ford’s earnings report, CEO Jim Hackett, CFO Bob Shanks, and other senior executives held a conference call for investors in which they explained that they expect things to improve — but not right away.
Here are three highlights from that call.
1. Ford knows it has a “fitness” problem
Hackett, who played football in college, is fond of the “fitness” metaphor to describe a business’s efficiency and profitability. Since taking Ford’s top job last May, he has made it clear that he thinks Ford needs to be spending a lot more time in the financial gym.
The problem in a nutshell: Ford’s revenue has risen nicely over the last several years, but as Hackett points out, Ford’s spending has kept pace, limiting its bottom-line gains. Reining in rising costs, focusing on higher-profit opportunities, and making the most of Ford’s vast global scale are all part of his vision for making Ford a fitter company.
2. Much-needed new products are on the way
Ford’s profitability in 2015 and 2016 was driven largely by its “crown jewels,” the F-Series pickups. Ford has lavished its huge-selling trucks with investments and updates over the last few years, and there’s no question that those efforts have paid off in a big way.
But in the meantime, other important Ford products that were once very competitive have fallen behind newer entries from rivals. Models like the Escape and the Explorer SUVs compete in white-hot (and very profitable) market segments, but they’re dated models that have lost ground to rivals over the last year.
That has been an especially big problem in China, a fast-moving market where Ford lost significant share in 2017. But as Hackett and Farley explained, that situation is set to change: Ford has a slew of new and refreshed products headed to market in 2018. Those new products should help give Ford’s sagging profit margins a boost.
3. Hackett still isn’t ready to reveal his fitness plan
Two related questions have hung in the air since Hackett took over as Ford’s CEO last May: How will he improve Ford’s “fitness,” and when will those efforts pay off?
Hackett has talked generally about his goals for Ford and has said there are six initiatives under way that he expects will yield significant improvements over time:
But much to the consternation of the Wall Street analysts who cover Ford, he hasn’t yet said what those six initiatives are, or when (and how) they’ll pay off. That’ll happen soon, Hackett said, but he sees good reasons for holding off.
Hackett closed out the call by saying that he is “really confident” that investors will be happy with the plan once it’s announced. We’ll see.
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