Thu, Oct 05, 2017 - Page 10 News List

Ford to trim US$14bn in costs, cuts vehicle options

SENSE OF URGENCY:CEO Jim Hackett told investors that he wants to simplify designs, speed product development and reallocate resources from cars to SUVs and trucks

AP, DETROIT, Michigan

Vehicles for sale are pictured at Serramonte Ford in Colma, California, on Tuesday.

Photo: Reuters

Ford Motor Co CEO Jim Hackett plans to cut US$14 billion in costs, drop some car models and focus the company’s resources on trucks, SUVs and electric vehicles as part of a renewed effort to win over skeptical investors.

Hackett, who became Ford’s CEO in May, met with about 100 investors in New York on Tuesday to lay out his plans for the future. He said getting the company lean and flexible will help it handle the changes the auto industry is facing, from car-sharing to self-driving vehicles, to the shift to electric cars.

“I feel a real sense of urgency for what we’re doing here,” Hackett said.

Hackett and his executive team spent the summer reevaluating Ford’s operations after former CEO Mark Fields was ousted in May. Hackett traveled to Russia and Turkey and visited North American plants and Ford’s Silicon Valley research center as part of his review.

He said he was impressed by the talent at Ford, but wants to update factories and speed product development and decisionmaking.

One of his first moves was to pare down the number of people reporting to him. Hackett has eight direct reports, compared to 18 for Fields.

Ford told investors it expects to reduce material costs by US$10 billion by 2022 through new deals with suppliers and simpler designs. The company plans to share more parts between vehicles and reduce the options available for configuring a car.

For example, customers can now order a Ford Fusion sedan in 35,000 possible combinations. Ford is reducing that to 96.

Ford also said it plans to cut US$4 billion in engineering costs through 2022 by making fewer prototypes and reducing product-development time.

It plans to cut one-third of its engine development costs and redeploy them to electric and hybrid vehicles. Ford plans to introduce 13 new electrics and hybrids over the next five years, including a small electric SUV coming in 2020.

The company plans to reallocate US$7 billion from cars to SUVs and trucks. Global demand for those vehicles is rising, and they are critical to Ford’s bottom line.

Jim Farley, head of Ford’s global markets, said Ford plans more off-road SUVs like the upcoming Bronco for North America and more low-end small SUVs and seven-passenger SUVs for China.

The automaker plans to cut some cars from its lineup, but did not name them on Tuesday.

Farley said Ford will still offer small cars, like the Focus, but will stick to more expensive — and more profitable — versions.

Ford emphasized that it is open to new partnerships, such as its recent agreement with Indian automaker Mahindra Group to cooperate on mobility, electric cars and other projects.

It is also working with the ride-hailing company Lyft Inc on self-driving technology and with China’s Zotye Automobile Co (眾泰汽車) about an electric car partnership.

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