Lightning Speed

Ford Motor Co.’s debut of the first electric pickup has been a massive hit, with sales running four times above forecasts. But can President and CEO Jim Farley and the Blue Oval team match that success as they work to electrify the rest of the vehicle lineup?
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Courtesy of Ted Gushue
Courtesy of Ted Gushue

Expectations were low when Ford Motor Co.’s product development team set out to work up a new battery-electric SUV nearly seven years ago. Intentionally so.

The Dearborn-based automaker had little success with its earlier model, the Focus EV, and sales of all-electric vehicles, in general, seemed to be going nowhere. Ford knew it needed to meet California’s increasingly strict zero-emission vehicle standards, but the plan simply called for what was derisively known in the industry as a “compliance car.”

“It didn’t have a personality. There was no swagger,” recalls one senior Ford insider familiar with the program. As planned, the all-electric SUV was likely to require hefty incentives to sell just enough of them to meet the ZEV mandates set by the California Air Resources Board, or CARB.

That idea didn’t play well with Jim Farley. Newly returned from an assignment in Europe, he was now in charge of global markets, making him one of the key overseers of Ford’s product lineup. Pressing his case with Ford’s then newly named CEO, Jim Hackett, Farley brought the project to a halt. What came next was the creation of Team Edison.

In December 2017, Ford revealed plans to move some of its high-tech operations into a century-old building known as “The Factory” in Detroit’s revitalized Corktown neighborhood. “They got together in Corktown, only a few blocks away from my great-grandfather’s old factory,” recalled Bill Ford Jr., executive chairman of Ford. But the move wasn’t about nostalgia. By stepping outside of the automaker’s main campus in Dearborn, the goal was to echo tech giant Apple’s grammatically challenged mantra, “Think Different.”

“I remember coming back from Europe,” Farley said in a podcast earlier this year, “and I said to the team, we need to get emotion. We need to put Detroit swagger in our electric car.” That wasn’t a difficult sell. The controversial step was naming the newly redesigned EV the Mustang Mach-E. There were a number of Ford insiders who couldn’t buy in. And once the project was announced to the public, there were plenty of Mustang loyalists who took the idea as an almost personal affront.

But it’s proved to be one of the best moves Ford has made in years. The Mach-E has become one of the best-selling EVs on the market. And demand for the next all-electric model in the lineup, the new F-150 Lightning, is running four times what the company initially forecast, Farley said during a late July interview.

“Just when we finished the walls” at the new Ford Rouge Electric Vehicle Center in Dearborn, “we had to knock them down,” says Darren Palmer, Ford’s head of electrification. The facility is expected to boost capacity to 150,000 F-150 Lightning pickup trucks annually when the expansion is completed. But it will soon be dwarfed by Blue Oval City, the electric vehicle production center near Memphis that Farley — now Ford’s president and CEO — announced last autumn. At five square miles, this will be the automaker’s largest manufacturing complex ever when it opens in three years.

Along with the Mach-E and Lightning, Ford has introduced an all-electric version of its popular Transit van. And that’s given the automaker a huge head start in the commercial sector, which is expected to see a rapid shift to battery power over the coming decade. Companies like Amazon Prime, FedEx, UPS, and even the U.S. Post Office see a potentially substantial reduction in energy and overall operating costs.

Courtesy of Ted Gushue
Courtesy of Ted Gushue

However, unlike rival General Motors — which has announced plans for 30 EVs by 2025 — Farley and his team have been reluctant to offer more details about what’s coming next. But, he hinted during a phone conversation, we can expect to see electric versions of all “icon” models with products like the Explorer SUV and Ranger pickup to soon follow.

What Farley has publicly laid out is a massive growth plan. Where it was just an asterisk on the EV sales charts two years ago, it’s now selling every vehicle it can build — currently about 14,000 a month. By this time next year, Farley says the goal is to reach 60,000 EVs a month. His forecast for 2026 is an annual 2 million. And that’s not a far stretch, according to John Murphy, longtime analyst from Bank of America Research. His annual “Car Wars” study, released in June, predicts Ford will capture a 15 percent share of the U.S. EV market by mid-decade, surpassing Tesla in the process.

To give this process momentum, Farley revealed in March plans to split Ford’s automotive operations in two. Ford Blue will focus on a lineup of vehicles using internal combustion engines, while Ford Model E will be charged with electrifying everything else. “Our legacy organization was holding us back,” Farley said during a March 2 webcast from Ford headquarters. “We had to change,” he added, calling the move “one of the biggest changes in our history.”

While this bifurcation might seem more than enough for one CEO to work on during his tenure, Farley says it’s really just the beginning of what he envisions — a re-creation of the creativity that helped Ford become the industry leader in its earliest days. “We’re in the first inning of this Ford transformation, which I see as the biggest opportunity to increase value since the Model T scaled (up)” with the debut of the moving assembly line at Ford’s old Highland Park plant in 1913.

This transformation will happen fast and at a pace much quicker than Ford has experienced in more than a century, Farley contends. He doesn’t deny that it will be “painful,” but the payoff, he promises, will be significant. Farley forecasts a large increase in sales, especially EVs, while Ford, as a whole, will see its adjusted EBIT margins climb from a reasonably solid 7.3 percent in 2021 to at least 10 percent by 2026.

That might seem hard to swallow for some industry observers and Ford investors. After all, EVs have been perpetual money-losers. The late Sergio Marchionne, the former CEO of Fiat Chrysler Automobiles (part of Stellantis today), went so far as to plead with potential customers not to purchase the company’s first all-electric model, the Fiat 500e. “I hope you don’t buy it, because every time I sell one it costs me $14,000,” Marchionne said during a May 2014 presentation to the Brookings Institution.

This is where the real transformation comes into play, Farley explains. “This transition isn’t about EVs. It’s a much bigger, much more fundamental shift … to a digital product,” he says.

Ford’s BlueCruise is one example. The “Level 2+” driver assistance system is being installed on an expanding list of vehicles, including the new Lightning. Currently, it allows motorists to operate hands-free on more than 100,000 miles of U.S. and Canadian roadways. Like GM’s similar Super Cruise technology, Ford plans to rapidly expand that mileage total while adding still more features, such as the ability to change lanes simply by tapping the turn signal.

The price for the BlueCruise system varies by model. On the base version of the Mach-E, for example, it goes for $3,200 up front. And while most vehicles will get three years of free service, owners will then have to re-up at $600 for another three years.

Compression Ratio - Away from the office, Jim Farley, president and CEO of Ford Motor Co., can be found with his Ford GT40. In July, he and his racing team had a podium finish at the Le Mans Classic in France. Above, Farley helps debut the F-150 Lightning, the first all-electric pickup in the marketplace.
Compression Ratio – Away from the office, Jim Farley, president and CEO of Ford Motor Co., can be found with his Ford GT40. In July, he and his racing team had a podium finish at the Le Mans Classic in France. Above, Farley helps debut the F-150 Lightning, the first all-electric pickup in the marketplace. // Courtesy of Ford Motor Co.

BlueCruise is just one of the many services and features that Ford plans to add to future vehicles in an era of what’s come to be known as the “software-defined vehicle.”

In fact, today’s vehicles have become computers on wheels. It’s not uncommon to have 100 or more microprocessors on board. “Once, the focus was on mechanical systems, but cars are becoming more and more complex. Consider that the Ford F-150 has 150 million lines of (software) code to make it go,” says Kristine Coogan, a managing direction with consultancy KPMG. Today, the automaker is able to update much of that code using smartphone-style, over-the-air updates. When Ford launches its next-generation electric architecture mid-decade, there won’t be a single line of code it won’t be able to refresh.

More significantly, says Farley, the added software is opening up the opportunity to provide a wealth of new services and features. For example, Ford will be able to remotely improve the performance of a vehicle’s electric motors, increase range, and speed up charging. It will be able to add new safety features and stream movies and other forms of entertainment to its vehicles — something that could become quite popular as more sophisticated versions of BlueCruise are introduced and motorists don’t need to pay attention to the road anymore. While some virtual updates will be free, others — like BlueCruise — could carry a premium.

The automaker is already generating software and service revenues through its Ford Pro unit. “We’re entering the always-on digital age, and running a fleet has never been more complex. Ford Pro makes it easy for businesses to boost their productivity, with a one-stop-shop solution delivered by a brand they can trust,” Ted Cannis, CEO of Ford’s commercial unit, said in a statement last April. Ford Pro fleet customers can use computers or a smartphone to track not only the location, but the status of their vehicles. They also can monitor fuel economy or an E-Transit’s state of charge, among other things. The unit is targeting revenues of $45 billion by 2025, and much of that will come from software and services.

“We can make big money” from software-defined vehicles, Farley says, and those revenues already “are growing at 40 percent to 50 percent (annually), and the margins are much better than vehicle (sales) margins. So that’s the most important thing happening at Ford.”

The automaker isn’t the only manufacturer that sees the potential of raking in fresh profits from digital technology. During a March presentation, Stellantis CEO Carlos Tavares forecast software and data services will generate revenue of 4 billion euros, or $4.5 billion, annually by 2026, and jump to 20 billion euros, or $22 billion, by 2030.

During her own fireside chat in February, GM CEO Mary Barra cited company research showing buyers are ready to spend an average $135 a month, including $85 for subscription and other services, for the necessary hardware. Like Stellantis, GM’s software and service-related revenue could be as much as $25 billion annually by 2030.

Mention the phrase “software-defined vehicles” to CEOs at pretty much any automaker, from Mercedes-Benz to Kia, and you’ll likely see dollar signs dance in their eyes.

But will the auto industry be able to mirror the success of streaming entertainment services like Netflix? “There’s absolutely an appetite for some of this,” says Sam Abuelsamid, principal auto analyst with Guidehouse Insights. “The question is how far along consumers will go.” He calls some of the numbers from executives like Tavares and Barra “unrealistic.”

steering axis Ford will begin offering its new BlueCruise hands-free highway driving system to customers later this year after 500,000 miles of development testing and fine-tuning the technology on a journey across the United States and Canada. // Courtesy of Ford Motor Co.
steering axis
Ford will begin offering its new BlueCruise hands-free highway driving system to customers later this year after 500,000 miles of development testing and fine-tuning the technology on a journey across the United States and Canada. // Courtesy of Ford Motor Co.

That’s echoed by a study released in April by Cox Automotive. Fully three-quarters of the motorists surveyed said they wouldn’t pay annual or monthly fees for new, in-vehicle services, especially if it meant paying for features that today are included in the price of the vehicle itself. Indeed, Toyota faced a harsh backlash when it suggested it might start charging owners to use their remote vehicle start function. BMW fared no better when it announced plans to start charging to use vehicle seat-heaters — although it quickly issued a disclaimer saying that wasn’t in the works for the U.S.

Growing demand for BlueCruise, Super Cruise, and similar technologies suggests that software and data services will become a big revenue-enhancer for Ford and the rest of the industry.

From Farley’s perspective, there’s really nothing that the digital revolution won’t transform, including the retail side of the business. Carla Bailo, head of the Center for Automotive Research in Ann Arbor, agrees. “There’s going to be a dramatic shift and customers are asking for it,” she says. “The traditional dealership model isn’t very pleasant, and most people are going online to do their homework before they buy. They’d be happy to just go pick up (their new vehicle) when they’re done, or even have it delivered to their home.”

The auto industry lagged the rest of the retail sector in migrating to online shopping until the COVID-19 pandemic struck. Suddenly, with showrooms forced to close, dealers turned to remote shopping —  and that was a key reason why sales recovered far more quickly than anyone had forecast. The shift to remote buying “came on at least three years faster than I expected before the pandemic,” says Mark LaNeve, the industry veteran who retired as Ford’s head of sales, service, and marketing at the beginning of 2021.

The process of purchasing a vehicle is undergoing the most rapid transformation since the first franchised dealers came on board more than a century ago. Tesla, in fact, has gone to an entirely factory-owned sales model. That has paid off in several ways. For one thing, studies show buyers are much more satisfied with the upstart automaker’s purchase process. Equally significant are the cost savings. The traditional franchise model is “super-expensive,” Farley says, adding as much as $2,000 to the price of a typical automobile. Just filling dealer lots full of unsold cars, trucks, and SUVs adds an average $700 per vehicle, while advertising — something Tesla eschews — “is another $500, $600, $700 a vehicle.”

Taking advantage of recent supply chain delays, the ongoing semiconductor shortage has left Ford showrooms all but bare. Farley plans to use that as opportunity to trim down inventories, even when production finally catches up to demand. Meanwhile, when it comes to marketing and advertising, he says, “You don’t need to do all that promotion. We need to get in line with Tesla.”

During his interview, Farley was quick to dismiss reports he’s looking for ways to abandon the dealership model. “We believe the franchise system will work, (but) the way for it to succeed is to have a great e-commerce platform.” This will allow customers to shape the purchase process to fit their own needs and desires, he explains, whether they want to shop at home, in the showroom, or find a blended experience.

Detroit automakers have traditionally been an insular group, and General Motors is routinely cited as Ford’s most direct competitor. But Farley dismisses what he sees as an outdated concept. To him, the real challengers are the “pure EV” companies, with Tesla at the fore, and an array of electric startups transforming the massive Chinese market. “They’re highly profitable and they don’t see themselves as just car companies. For them, it’s software and data,” as much as their vehicles. Farley is intent on learning from those new entrants, Tesla in particular.

For one thing, look for Ford to pare back the extensive lineup of vehicles it traditionally offers. “We can’t afford that anymore. Our pure EVs will be a much simpler lineup, with very broadly appealing products,” he maintains.

Alternating Current - Farley is funding the cost of introducing new EVs by using the profits from the automaker’s established products like the Explorer, Mustang, Bronco, Ranger, Maverick, and more. // Courtesy of Ford Motor Co.
Alternating Current – Farley is funding the cost of introducing new EVs by using the profits from the automaker’s established products like the Explorer, Mustang, Bronco, Ranger, Maverick, and more. // Courtesy of Ford Motor Co.

The split into Ford Blue and Ford Model E is a key step. As older workers retire, over the long term many will be replaced by those who, Farley believes, will bring to the company a very different mindset. “It’s all about talent,” he emphasizes. That starts at the top with folks like Doug Fields, who, until recently, was running the mysterious Apple car program and previously worked for Tesla. Ford will hire “the best, and,” adds Farley, “often the most expensive talent.”

His strategy for winning in the changing automotive world also requires a bit of hindsight, and Farley is turning back the clock, borrowing a page from corporate founder Henry Ford’s playbook. As he opened the massive manufacturing Rouge Industrial Center in the late 1920s along the Rouge River in Dearborn, Ford was determined to produce virtually everything he needed in-house, from glass to steel, motors, transmissions, and other components. Over the decades, Ford and its rivals have shifted to outsourcing virtually everything but the most critical components, like engines.

But, going forward, says Farley, “We’re taking in-house … the batteries, the motors, the electrical architecture, the software.” The automaker is also lining up its own sources for raw materials, including the lithium and other metals needed for batteries.

Farley is by no means the only CEO who has tried to transform Ford in recent times. Alex Trotman attempted to combine global operations into a unified “One Ford.” Jacques Nasser went on a spending spree, investing billions of dollars in luxury brands like Jaguar, Land Rover, and Volvo, as well as ancillary car services operations. Hoping to keep the company from going broke as the Great Recession approached, Alan Mulally sold off those ventures and shifted the focus to the core “Blue Oval” Ford brand. They all had various levels of success achieving long-term change.

Jim Farley’s automotive roots run deep. Although his father was a banker — working in Buenos Aires when Farley was born in 1962 — his grandfather had gone to work at Ford in 1913. Moving frequently, the young Farley earned a bachelor’s degree at Georgetown University and an MBA from UCLA. With it came plenty of offers, ones from Chevrolet and Ford among them. But Farley initially steered clear, going to work for the legendary Formula One driver Phil Hill, who operated a classic car restoration shop in Los Angeles, where Farley got to work on some truly rare automobiles. He subsequently took a job with IBM, but, after two years, the siren song of the auto industry was too alluring. He signed on with Toyota in 1990. It was a perfect moment, as the Japanese giant was intent on giving chase to the dominant Detroit manufacturers. Farley quickly impressed his bosses and was given the chance to prove himself when, in 2003, he helped launch the Scion brand aimed at attracting the young buyers who, back then, were sidestepping Toyota. It was an initial hit, though it later faltered after Farley moved on.

In 2008, Farley signed on with Ford. He quickly proved himself a disruptor and landed one promotion after another, becoming president in February 2020. Six months later, CEO Hackett announced plans to retire, and among the several senior execs positioned to succeed him, Farley was the one left standing.

It came as no real surprise the two men were close and Farley clearly shared Hackett’s vision for a high-tech future, but what the younger executive added to the table was the ability to lay out a clear path going forward and setting marching orders.

He’s also taken a tip from Elon Musk, the Twitter-crazed CEO of Tesla. Farley is likewise fond of tweeting — and podcasting — although he’s avoided the increasingly wild and politicized bent of his counterpart. Nonetheless, the emphasis on social media has helped Ford shift itself in the public eye, both with consumers and investors, suggests Anthony Johndrow, founder and CEO of Reputation Economy Advisors. “He’s positioning the company differently, not as a company from the last century,” Johndrow says.

How much that has helped sell Mustangs, pickups, and battery-electric vehicles is uncertain, but Ford has been gaining respect on Wall Street, Johndrow adds. “It’s difficult to talk about the future when you’re a publicly traded company,” he says, “but Farley has clearly been trying to do that, to break out of the penalty box and get Ford’s stock looked at differently.”

With products such as the Mach-E, Lightning, and E-Transit gaining traction now, Farley himself acknowledges that the transition he’s laid out for Ford will take years to come to fruition. And, having turned 60 in June, it’s a question of how long he’ll be around to shepherd it through. With so many balls in the air, Farley says there’s plenty of “execution risk.”

Joe Phillippi, the head of AutoTrends Consulting, says the Ford CEO is spot-on. “Farley has a long track record with a lot of successes,” Phillippi points out, but “the proof will be in the execution.” 


Victory Lane

Main Bearings - In addition to his GT40, Farley has raced on tracks with a Ford Mustang Boss 302, a 1964 AC Cobra, and a Lola T298, among others. // Courtesy of Ford Motor Co.
Main Bearings – In addition to his GT40, Farley has raced on tracks with a Ford Mustang Boss 302, a 1964 AC Cobra, and a Lola T298, among others. // Courtesy of Ford Motor Co.

While some overworked CEOs are happy to relax by a swimming pool over the weekend, you’re just as likely to find Jim Farley, president and CEO of Ford Motor Co. in Dearborn, wearing a fire-resistant jumpsuit as he heads out on the racetrack.

And Farley may have missed his real calling, if the results of the biennial Le Mans Classic this past July 4 weekend are any indication. Driving his own 1965 Ford GT40, Ford’s leader managed to turn in a second-place podium finish. “A dream come true … Three hours of flat-out racing against some of the best drivers I know,” he tweeted after the race.

Done up in classic Ford livery, with a white stripe on a dark blue body, Farley has raced the GT40 on a number of Europe’s grand circuits, including the Goodwood Revival in the U.K. and the Spa 6 Hour event in Belgium, as well as the annual classic race at WeatherTech Laguna Seca Raceway in Monterey, Calif. He also counts a rare 1978 Lola 298 and a 1966 Ford Cobra among the vintage racers he routinely takes out on the track.

It took a little bit of persuading to continue racing after he reached the executive suite at Ford. Most automakers tend to restrict the risks senior leaders take.

Hemi Head - Carlos Tavares, CEO of Stellantis, has competed in multiple road tournaments including the RCZ Racing Cup, EuroBoss, and Classic Endurance Racing. // Courtesy of Stellantis
Hemi Head – Carlos Tavares, CEO of Stellantis, has competed in multiple road tournaments including the RCZ Racing Cup, EuroBoss, and Classic Endurance Racing. // Courtesy of Stellantis

Farley had been a “gearhead,” never afraid to get his fingernails dirty, for as long as he can remember, and almost turned down a chance to work in the industry because “I was scared about going into the auto business because I thought it would ruin my interest in cars.” His first job out of college had him working at the Los Angeles classic car restoration shop run by legendary Formula One racer Phil Hill, which only encouraged Farley’s passion for motorsports.

Farley is by no means alone. While the typical senior executive might fall into the “bean-counter” category, Detroit-based General Motors Co. President Mark Reuss is another top executive who craves time on the track. Reuss previously served as the automaker’s global product development chief and still makes regular forays to the GM Proving Grounds in Milford Township to pilot new products under development. In his off time, he’s also logged plenty of laps racing.

As any racer knows, it’s a risky sport — and Reuss had an “incident” a few years back driving the pace car at the Chevrolet Detroit Grand Prix on Belle Isle. But he was back out on the circuit a year later, piloting the C7 Grand Sport pace car during the IndyCar races.

One of the most serious executive racers is Carlos Tavares, CEO of Stellantis. “Like most successful CEOs, Carlos Tavares isn’t afraid to take risks,” says David Cole, director emeritus of the Center for Automotive Research in Ann Arbor.

Constant Radius - Akio Toyoda, president of Toyota Motor Corp., often races in public road rallies, and he takes part in the automaker’s 5 Continents Drive. // Courtesy of Koji Sasahara Via AP Images
Constant Radius – Akio Toyoda, president of Toyota Motor Corp., often races in public road rallies, and he takes part in the automaker’s 5 Continents Drive. // Courtesy of Koji Sasahara Via AP Images

Tavares squeezes in about 20 track events annually. By his own count, he’s logged well over 500 races. He often downplays his skills, telling Automotive News, “You quickly discover that the limit is the driver, not the car.” Perhaps, but Tavares is a serious contender in the European touring car endurance series and has logged a long string of victories, including the Barcelona 24-hour race in 2014.

If a driver named “Morizo” ever shows up on track, here’s a little secret: that’s the nom de circuit of Akio Toyoda, president and CEO of Toyota and the grandson of the company’s founder.

Like GM’s Reuss, Toyoda has reserved for himself the title of “master driver,” the carmaker’s top test track driver. But his skills were honed relatively late, after returning to Japan at the age of 40 from a U.S. assignment. Toyota’s legendary chief test driver, Hiromu Naruse, often kidded the executive about his lack of experience. But he discovered a formidable talent after taking Toyoda under his wing.

The two began working together on Toyota’s newly formed Gazoo Racing. Still, some people inside and outside of the company fretted about the risks he was taking on the track. That led Toyoda to adopt the name Morizo — a nickname given to a green shrub used as the mascot of the 2005 World Expo in Japan’s Aichi Prefecture, where Toyota is based — before running the 24-hour endurance rate at Germany’s challenging Nürburgring in 2007. Toyoda has returned to the German track on a number of occasions, and even at 66, he continues to squeeze in time on tracks whenever possible, even though his pseudonym is now widely known.

There’s an advantage to having track cred, Toyota insiders say. It’s given the automaker more credibility while serving as a proof point for the CEO who has made a mantra of driving his product development teams to put more “performance” into their products. 

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