Many men have tried to improve Ford. In the modern era, few have had the luxury of sitting back and watching the hits and the money roll in. The latest man in the big Ford CEO chair is automotive industry veteran Jim Farley. Ford has a history of choosing leaders from within who climbed the ladder and arrived at the top well-versed in the company and industry. Ford has also gambled on outsiders—to both the company and the auto business—with varying degrees of success. The Blue Oval has also tapped the Ford family to run things.
Farley falls into the category of being a car and industry guy who was schooled at more than one automaker (he came from Toyota), giving him a wider perspective. And he wears the coveted “car guy” moniker in an industry where CEOs come from finance as frequently as they hail from plant floors or product development.
Farley became Ford CEO on October 1, 2020, succeeding Jim Hackett, the former CEO of Steelcase, an office furniture company. Hackett earned his limited automotive chops after he joined the Ford board, where he impressed executive chairman Bill Ford enough to press him into CEO duty in 2017 with the ouster of Mark Fields. Fields was a longtime Ford lieutenant who worked his way to the top but was unable to keep Ford stock from falling and family shareholders happy.
Hackett was tapped to lead the company through the eyes and ideas of an outsider. It is hard to fault Bill Ford for taking a chance on Hackett—the last time Henry Ford’s great-grandson picked a non-auto guy, it was Boeing’s Alan Mulally, who tackled infighting and a disjointed regional product strategy, and who kept Ford from filing for bankruptcy like its crosstown rivals. But Hackett had trouble resonating internally and with Wall Street. His vision was hard to follow at times, and even he admitted he was a late bloomer.
Farley Promotion to Ford CEO Hailed
After all that turnover at the top, many hailed Jim Farley’s promotion to Ford CEO. Wolfe Research managing director Rod Lache described Farley as “one of the most lucid executives,” a man “deeply and personally invested in the success of the business,” who brings critical clarity to the job. It was in stark contrast to criticism of Hackett for vague promises and scant details about Ford’s promised cost-cutting and transformation.
The transformation continues under Farley. Upon his promotion to Ford CEO, Farley said there was “no daylight” between Hackett’s vision for the company and his own. He would stay the course, which he helped craft, with an emphasis on commercial, electric, and autonomous vehicles. Add to all of that a 10 percent return on profitability in North America and an expansion of the automaker’s lineup of affordable vehicles after discontinuing unprofitable sedans.
Farley has been in the Ford CEO chair for only six months, but he has already made changes to the plan and started to impress outsiders. After more than a century focused on making and selling vehicles with combustion engines, Ford under Farley is speeding the transition to battery electric vehicles—playing catch-up to leaders like Volkswagen—and a greater emphasis on staying digitally connected to customers throughout the lifetime of their vehicles.
“Electric vehicles aren’t as disruptive as the electronics in them: the data experience, the digital experience,” Farley said at a recent Reuters conference. Noteworthy talk from a man who races vintage cars whenever possible, whose passion for Mustangs runs deep. But Farley is also a big-picture thinker. Inside is a data and tech nerd who is genuinely excited by the future of mobility, the electric age, and all the torque that should come with it.
Making His Mark
What ultimate stamp will Farley put on the American automaker, which turns 118 years old on June 16?
“I would be the worst person to ask [about] how to portray the extent of changes,” he tells MotorTrend. “I’m just busy doing them.”
That is the blunt Farley we know, whose creative genius is colored with impatience in the pursuit of perfection. He is known for his intensity and past outbursts of temper. He can be gruff and antagonistic one minute, emotional, caring, and your best buddy the next.
The Ford CEO bristles when asked about Dearborn’s corporate strategy and the changes he envisions. “I can recite [the Ford plan] if you’d like, and you could decide if it’s materially different than the past, but it’s not a Jim Farley plan,” he says. “I’m not that kind of person.” The CEO says he does not want to be a cultural personality at Ford. He wants to lead a team focused on delivering a plan that has become more explicit in many areas and will play out over the next few years.
Farley took the helm during a trying time for the globe, with a pandemic threatening life and the economy. But as the world works to return to normalcy, Farley embraces lessons learned and unexpected developments that grew out of the troubled times. Online retail, adopted out of necessity, will continue. The prominence and necessity for delivery services will be a priority. The sprint to EVs will continue, alongside autonomous vehicle development.
Slow, Quiet, Deliberate Approach to Electrification
The new Ford CEO has fine-tuned his leadership team with a focus on electric, autonomous, and digital. It starts with the 2021 Ford Mustang Mach-E, an electric crossover with Mustang styling cues, on a new dedicated battery electric vehicle platform.
While other automakers were making grand EV pronouncements, Ford was quiet and conservative, seemingly behind the pack. Farley says Ford is as committed as the competition; it’s just not mouthing off as it pursues a three-phase transition to an electric future.
Phase 1 is early adoption, with a plan to start slowly and grow exponentially. “I don’t think it would be wise to portray extensive change at the beginning,” Farley tells us. Ford relies on suppliers for battery cells, which allowed leadership to cherry-pick the desired chemistry, density, and cost. And the first new EV out of the gate, the Mach-E, is being embraced by early adopters; models are only spending a week on lots before being sold.
Farley was a champion of the Mustang Mach-E. He was the one who suggested using the Mustang as inspiration to breathe life into the milquetoast “compliance vehicle” taking shape back in 2017 to help the fleet reduce emissions and achieve regulatory targets. But Ford kept work on its electric Ford F-150 pickup truck quiet, confirming the truck only after growing buzz about GM resurrecting the Hummer name on the 2022 GMC Hummer EV full-size electric pickup and putting motors into a Chevrolet Silverado truck. Rivian attracted attention for its 2021 Rivian R1T electric truck, which goes into production in June, and Ram was also making EV noises.
High-Volume Electric Vehicles Are Coming
Phase 2 is the transition period leading up to a kind of early majority adoption. Ford will enter this phase by offering battery electric versions of high-volume vehicles. To that end, the 2021 Ford E-Transit commercial van arrives later this year, followed by the electric Ford F-150 Lightning full-size truck by mid-2022. Ford is spending $700 million to prepare its Rouge manufacturing complex for the Lightning, plus another $100 million to retool its Kansas City plant for the E-Transit. Battery cells will still come from suppliers like SK Innovation of Korea, which is building a new plant in Georgia, but battery packs and motors are coming out of Ford plants in Michigan. During this phase, Ford is developing critical in-house expertise, the company says. Ford Ion Park, a center of excellence that will develop, test, and manufacture lithium-ion and solid-state battery cells, is a big step in this direction. The $185 million facility should be up and running by the end of 2022, and the cells and manufacturing processes it validates will be used in Ford battery cell plants we expect to see in 2024.
Phase 3 is high-volume EV assembly and sales with vertical integration of key components of the powertrain. There will be a decent portfolio of Ford electric vehicles to choose from—the next cycle of new vehicles will start in 2025, Farley says—and volumes to justify spending billions on Ford battery cell plants, software, and other key areas.
Ford will reach an all-electric lineup in Europe by 2030, but it has made no such phase-out pledges for North America. And across the pond, all commercial vehicles will have some form of electrification by 2024. Ford has partnered with Volkswagen in Europe, where a small electric car will be built at Ford’s Cologne, Germany, plant in 2023 for the European market, using VW’s MEB platform. Ford is already considering licensing VW’s technology for a second electric vehicle.
Building cells in-house is a reversal of the conservative approach in place when Farley took over as Ford CEO. But the industry is hurtling toward electrification at a pace few could imagine. Building your own cells now feels prudent; Volkswagen is building six factories in Europe by the end of the decade. General Motors recently announced a second joint-venture plant with LG in Tennessee; the first battery cell plant in Ohio will be completed next year. Tesla partnered with Panasonic to build batteries at its Gigafactory in Nevada but is working with suppliers such as LG Chem at its Shanghai plant. With two more Gigafactories under construction in Austin, Texas, and Berlin, Germany, Tesla CEO Elon Musk also wants to make his own cells in the future.
“The right time to discuss it is now,” Farley says of cell production. “Last year was too early, in five years it will be too late.”
Pace of EV Market Makes Decisions Easier
Farley enjoys a clarity brought about by how quickly the EV market is developing, Ford chief product platform and operations officer Hau Thai-Tang says. With less uncertainty today, the new CEO does not need to hedge his bets. He has the freedom to allocate resources to speed up the launch of new vehicles, battery cell production, and other initiatives to be a leader in the EV space knowing the scale will be there to justify the capital spending. It is a license to be more bullish, aggressive, and ambitious.
Farley says the real acceleration in products and spending begins in 2023, with the continued electrification of Ford’s most recognizable vehicles and new nameplates to come. We await details but assume this encompasses the Bronco family, smaller pickups, and more SUVs, including luxury crossovers wearing the Lincoln badge.
The shortage of semiconductors in recent months, forcing plants to stop production and leaving partially finished vehicles on lots awaiting chips for critical systems, has only heightened the need to integrate key parts of the supply chain. It also reinforces the competitive advantage of controlling the supply chain.
Politically, Farley has called on the U.S. government to support domestic battery production and charging infrastructure development to help drive demand for electric vehicles, and to address the semiconductor shortage.
New Business Model
The transition from internal combustion to battery electric vehicles also allows for the rollout of a new business model.
“We’ve been competing the same way for over 100 years,” Farley says. “It has been a transactional business: buy parts, make vehicles, sell them.” He wants a longer contract with the customer and to be in the services business. Digital services present new revenue sources.
More than 130,000 commercial customers subscribe to Ford Commercial Solutions, paying $10 a head for vehicle data to better manage their fleets and their business. Subscriptions are growing by 20–30 percent a quarter.
On the retail side there is also great potential to offer subscriptions and new capability. The F-Series and Mach-E were designed to receive future over-the-air updates, such as BlueCruise, Ford’s Level 2 hands-free driving assist system. Ford thinks customers will pay handsomely for new features that improve their vehicles; if 25 percent of customers pay an extra $50 per month for something, it produces big profit, Farley notes.
New vehicles have high-speed modems and subscription services not offered before, like a sophisticated navigation system in a Bronco that goes from street to trail and back, or Mappo, an app integrated into Ford’s Sync 3 and Sync 4 that provides 20,000 cultural references based on books, movies, and music across the U.S., Europe, and Asia for tidbits about each area on your travel tour.
Over-the-Air Updates Are a Game Changer
Many of the over-the-air updates will be quality fixes to maintain customer satisfaction and loyalty; others will be new content and features. Ford will charge for some of them, but others will be free, Farley tells us.
Over-the-air software updates release the automaker from the obsession with having every feature available on a new vehicle from Job 1. Following the Tesla model, vehicles can ship with capability that is activated later via an over-the-air software update. Farley says the Mach-E and F-150 just received an upgrade, with another major one coming later this year. Smaller software updates are sent out every four weeks.
Connected car data is worth billions, and Ford is building most of its own software. There are 15,000 software engineers and growing at Ford working in connectivity and data analytics. This is an area Farley gets geeked up about. He says the future is as much about features and connected services as the vehicles those offerings are in. And electric vehicles unlock greater opportunity. “There is all sorts of functionality on the software side that you can’t get in a non-electrified vehicle,” he says.
Ford is concentrating on data platforms for commercial vehicles, which account for about a third of Ford’s business globally. Electric commercial vehicles are a priority and area of concern because they need a better network of charging stations; Farley feels retail customers have a better charging network than commercial consumers do. Ford is also working on an automated delivery business, using an electric, autonomous van it is developing, as part of a full delivery ecosystem.
Farley rules the roost at a time when Ford has a lot of hot products on the road or in the pipeline. The new, and delayed, 2021 Ford Bronco has enough orders that it will be sold out for a long time. Farley knows this is special, and all the planning in the world cannot guarantee new vehicles will resonate when they finally hit the market. It is his job as Ford CEO to ensure smooth launches and production of quality vehicles, all while flipping the switch to a new era of electric vehicles. He will use vision and data to back his decisions and tweak his strategy. And maybe, if even for a brief moment, he can be among the few leaders able to watch surefire hits and profits roll in.
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