A June 30 Wall Street Journal article discussing the plans of Ford’s new CEO started with the line, “Ford Motor Co.’s new Chief Executive Jim Hackett is enforcing a ‘shot clock’ on lingering decisions at the automaker to put new plans into action faster and regain competitive footing in vital segments of the car market.” That particular line, which was based on a discussion Hackett had with analysts covering the industry, had me rolling my eyes.
Hackett, I found, hadn’t used the opportunity to add, when discussing Ford’s annual profits, that from here on it would be “nothin’ but net;” or, when it came to executives fighting over the next series of promotions, that he would be “calling personal fouls.” Let’s face it, basketball metaphors just keep dribbling out.
This article went on to claim that Ford “has been widely criticized for appearing indecisive on important technology bets, including self-driving cars and electric vehicles.” Which, considering that the column goes on to say that Hackett downplayed the importance of having a fully self-driving car by 2021, is pretty humorous. Humorous because the idea of an imaginary “shot clock” is the push to make critical decisions faster; and Hackett was in charge of Ford Mobility Decisions — including work on self-driving cars — before he became CEO. Oh, and that 2021 deadline for manufacturing those autonomous vehicles? It was put in place by his apparently slow decision-making predecessor, Mark Fields.
So, Fields set the deadline on self-driving cars’ becoming a reality when Hackett was in charge of that division at Ford; Hackett becomes CEO and puts a shot clock in place for even faster decisions — and one of the first decisions he makes is to downplay that product’s deadline. Is that confusing, or is it just me?
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The article quoted J.P. Morgan analyst Ryan Brinkman as writing in his notes that Hackett expressed astonishment at the amount of capital required by the automobile industry to function. At the risk of mixing another silly sports cliché into the column, “Time out.”
Anyone who is not aware that the automobile industry requires ridiculous amounts of working capital to exist should not be given the key to the executive men’s room. When GM and Chrysler declared bankruptcy a few years back, it was published that GM required in excess of $12 billion in the bank just to pay the monthly bills for operating expenses. Sixty years ago, when famed industrialist Henry J. Kaiser was asked what astonished him most about his small but failing automotive empire, he replied that he’d had no idea just how cash intensive the auto industry really was.
But that wasn’t even the best article on this new era at Ford. No, that would come from Fast Company’s story, headlined, “How Ford’s New CEO Plans to Beat Tesla, Uber and Google.” Hint: It’s going to take more than an imaginary shot clock.
Now this article sets the stage for the writer’s conversation with Mr. Hackett in the lead-in: “But now people are buying fewer cars and some are skipping the expense altogether.” The writer goes on to opine that “ride sharing has become a billion-dollar industry, driven by aggressive companies like Uber and Lyft.” In the spirit of correcting that piece’s author, new car sales in America have set two back-to-back records, which in reality matched similar volumes from 1999 and 2000.
Not to mention that these aggressive ride-sharing companies lost billions of dollars last year, as they have every year they’ve been around, while Detroit’s old-line industry has been setting record or near-record profits. So, before we even see Mr. Hackett’s comments, this column’s entire premise appears to be based on how the author wishes things were, instead of how they are.
Hackett was just the right person to join this fun piece. First he tells the columnist that in the future there will be one network controlling all of our transportation. Like an “electrical grid or telephone system — secure and utterly reliable.” Huh? Maybe if one replaced the word “utterly” with “mostly,” that would be a shade more accurate. But the very fact that he said that brings up a truly important question that begs to be answered.
Knowing that these grids are mostly reliable, what happens if one day all transportation is controlled like these other grids work, and it fails suddenly during a huge summer storm? Does that mean the hundreds of thousands of vehicles in motion suddenly stop operating — or worse yet, all run into each other because control is lost?
Of course, asking the most obvious question on his flight of fancy was not in the cards for this interview; instead we move onto to Mr. Hackett’s next prediction: In the self-regulating city of the future, cars may be allowed on the road only at certain times of the day; and vehicles being operated will be limited during periods of congestion. Why, even half-full delivery trucks may not be allowed on the roads by cities, not just because some company is foolishly trying to make a delivery to turn a profit. (The sarcasm is mine.)
Now, since we often have a hard time fixing potholes in some city streets within a reasonable time frame, it’s hard to believe any municipality is going to cough up enough money for this automotive vision. Not to mention the fun you’ll have telling your boss that you’ll be late for work again because your municipal system isn’t allowing your car to enter the already congested highways.
Then the column takes a serious turn toward the farcical. With all the solemnity of a Trappist monk’s acceptance into an ancient monastery, it explains how Hackett went to work at Steelcase in 1980 — during the era of designing furniture for the coming age of personal computing. Hackett actually compared that period of furniture evolution to the coming changes in the automotive industry. So in the era when Michael Jackson’s “Thriller” was dominating radio, Hackett described the crisis facing the office furniture industry. “Conference rooms didn’t have plugs back then — just one for the vacuum.” The reference implied that this would be a problem for the coming era of personal computing.
I don’t want to make too much of this; but, after I quit laughing, I suspected that a lack of electric outlets in a conference room was something easily solved — even “back then” — by hiring an electrician to come and install some. Only people don’t really go into executive conferences hauling their desktop computers and screens; if anything, they might carry a laptop … with batteries inside. As for designing furniture for personal computers, I purchased my first desktop in 1985 and put it on a desk at Meador Oldsmobile that Mo probably purchased in 1957, when he came to Fort Worth from Tulsa. I simply moved some papers from that corner of the desk, and the computer fit just fine. Even without being prophetic enough in 1957 to see personal computers in the future, Mo Meador did have electrical outlets put into the offices at his dealership.
As for Steelecase, one wonders how much time the company’s designers spent figuring out ways to build extension outlets and drill holes for computer cables into their furniture. Yet that’s not the worst part: Comparing something as simple as drilling a hole for a cable in a desk to creating a world of self-driving, possibly even driverless taxis, seems a seriously simplistic comparison.
But the story also claims that, while running Ford Smart Mobility, “Hackett paired Ideo designers with Ford employees starting in June of 2016 to work on projects aimed at tackling some of these problems.” Now we seriously question whether the Fast Company even uses fact checkers. The reason is that this column was dedicated to Ideo’s working on future mobility for Ford, and it ran in February of 2016. Fully four months before Mr. Hackett takes credit for introducing the two groups.
Moreover, that column was based on a New York Times article, in which Ideo’s Chicago office had tried to get to lunch the previous fall without using a car to do so. If Fast Company can’t afford an editor, its columnist could have Googled “Ford, Ideo;” that New York Times story, dated February 13, 2016, comes up in fourth position.
One wonders if at any point some of these business journalists ever look back to see if anything they’ve written in the past was proven true.
When Cerberus Capital Management took over Chrysler and installed Bob Nardelli as the company’s head, the business media couldn’t write enough gushing stories about how brilliant an idea it was to have a real outsider come into the automobile industry, shake it up and reinvent it. Many of those same business journalists had written stories just a few years earlier about how incredible it was that Daimler Benz had purchased Chrysler — how it would shake up the industry and reinvent Detroit. For the record, both of those purchases of Chrysler were decided failures.
Detroit’s profits are still being driven by trucks and SUVs. Even at Chrysler, which was dominated by hit automobiles in the 1990s, profits are driven by trucks and SUVs today.
It is untrue that people are buying fewer cars, but it is true that we are holding onto them longer.
Millions of Americans love and use Uber on a regular basis, but that company’s driver turnover is outrageous and the company bleeds billions of dollars. From a business standpoint, the only way to correct that is to raise the rates per mile and share more of that hiked rate with the drivers. That alone will ensure profits and lower Uber’s turnover. But the next law of economic capitalism is that another entity can then enter that game and try to do it better for less. As things stand, ride sharing is a newly beloved alternative form of mobility that’s speeding down the road to financial ruin, thanks to its inherent and unsustainable losses.
One should worry when American CEOs have visions of colonizing Mars while running unprofitable companies, and shareholders simply cheer them on. We should fret when automotive CEOs don’t understand heavy international consumer manufacturing and its exhausting demand for ever more capital. And shouldn’t we ignore business journalists who keep saying the future is around the corner — without the basic knowledge that, for a company to survive into the future, it can’t lose billions every year because at some point you run out of working capital?
Maybe Mr. Hackett simply made a mistake in saying he involved Ideo with Ford in the summer of 2016. Maybe he meant the year before. Could have been an honest mistake on his part. But for those who missed or can’t remember our column on what transpired when Ideo did its test on other forms of transportation — excuse me, personal mobility — here it is again.
© Ed Wallace 2017
Ed Wallace is a recipient of the Gerald R. Loeb Award for business journalism, bestowed by the Anderson School of Business at UCLA, and hosts the top-rated talk show, “Wheels,” 8:00 to 1:00 Saturdays on 570 KLIF AM. Email: email@example.com