Letter from Our President and CEO Jim Hackett

CEO Image

CEO Letter

As I write this letter, we’re all watching the coronavirus outbreak continue to evolve, threatening the health of people around the world and as a result, significantly impacting the global economy. Even as China begins to emerge from crisis, in most places conditions continue to worsen.

CEO Image

As I write this letter, we’re all watching the coronavirus outbreak continue to evolve, threatening the health of people around the world and as a result, significantly impacting the global economy. Even as China begins to emerge from crisis, in most places conditions continue to worsen.

We have taken significant actions to reduce costs and preserve cash in this unprecedented situation. These include suspending the dividend paid to shareholders, accessing our credit lines for more than $15 billion in additional cash, temporarily lowering people-related costs, and deferring a portion of executive salaries.

The actions we’re taking are wide-ranging and substantial. Our objective is to assure Ford has sufficient financial flexibility to ride out the economic and business effects of the coronavirus – so we can emerge as a stronger company.

Even as we are protecting our people and managing our business through this issue, we are also giving significant attention to the long term. We will not cancel Ford’s future.

There is ample evidence of how we are transforming our company and leading the way in this new era of smart vehicles for a smart world. We remain committed to establishing Ford as the world’s most trusted company by understanding and addressing the needs of our stakeholders as a fit, agile and accountable company.

***

While we are making real strategic progress, our financial performance must improve. Our 2019 results were short of our expectations, mostly because of shortcomings in operational execution, including higher-than-expected warranty costs and the launch of our all-new Explorer and Aviator. We usually launch vehicles very well and have corrected launch issues. In fact, we sold record numbers of Explorers in January and February of this year, which helped us retain the title of America’s all-time best-selling SUV.

While the company’s free cash flow was flat compared to 2018, our revenue and pre-tax profit fell last year. Our full-year revenue declined 3 percent and company adjusted EBIT of $6.4 billion was down 9 percent. This yielded a margin of 4.1 percent. Importantly, we generated $2.8 billion in total-company adjusted free cash flow – our primary financial measure now and going forward. Our balance sheet remained strong, as we ended 2019 with $22 billion in cash and $35 billion in liquidity – both well above our target levels.

Again, 2019 was a year of substantial strategic accomplishment, with meaningful improvements to our fitness and progress in data, connectivity, autonomy and new propulsion.

Highlights

Our goal of delivering our Creating Tomorrow Together plan can be seen in tangible, pivotal actions that are continuing into 2020:

  • Taking tough, but crucial, actions in our Global Redesign, to strengthen our capabilities and create a leading and more resilient Ford. That included reducing the size of our salaried workforce around the world, flattening the organization and working to reduce bureaucracy in the process.

    We took decisive actions in both Europe and South America to fortify and build on strengths, while addressing underperforming parts of those regional businesses which included reducing our footprints and refocusing our product portfolio. In China, we completed the build-out of an experienced local leadership team and localized the first of five products – our Lincoln Corsair.
  • Developing a fresh, more targeted vehicle portfolio that will win in markets around the world – some of which our competitors are exiting. By the end of this year, Ford will have the newest product lineup in our history. Our portfolio will include the all-new F-150 and Mustang Mach-E, followed soon after by the return of the Bronco which we will unveil this year.

    We will continue to lead with the smartest, toughest lineup of connected commercial vehicles around the world. Nowhere in our company are our missions of creating smart vehicles that are trusted to meet the needs of customers more evident than in our global commercial vehicle programs.

    Those vehicles will build on momentum created in 2019 by the new Ranger, Explorer, Police Interceptor, Escape, Super Duty and the Lincoln Aviator and Corsair launched in North America; the Ford Puma and two-ton Transit in Europe; and the Territory, the first-ever fully electric vehicle in our lineup in China.
  • Rocking the automotive industry with our reveal of the all-electric Mustang Mach-E last November. That was a major inflection point for our company as we continue to execute our plan to offer a range of compelling propulsion choices for our customers that are high-performing and good for the planet by reducing CO2 emissions.

    The Mustang Mach-E is a powerful example of how Ford will compete and win, in part, by leveraging iconic nameplates that strike at the heart of customers around the world. We will do more of that later this year when we introduce the first hybrid electric version of the storied F-150, and an all-electric version of the world’s most storied truck line will follow.
  • Establishing Ford as a true leader in connected vehicles, with beneficial implications for vehicle owners through our growing capabilities in services and customer satisfaction. Last year, 100-percent of our new vehicles in North America were shipped with standard high-speed 4G LTE modems.

    Here’s where we’re going to go next: Ford’s SYNC 4 brings new levels of intelligence and twice the computing power of SYNC 3 to help make navigation, music and connecting our vehicles to smartphones faster and easier, and also to the smarter world. It’s connected to the cloud, to combine conversational voice recognition with the power of internet search, so drivers and passengers always have access to the latest information - from the closest restaurant to the nearest electric vehicle charging station.
  • Differentiating Ford with our pragmatic approach to developing a compelling business model for self-driving vehicles with our partner Argo AI. Together, Ford and Argo have the largest urban AV testing footprint in the world, positioning Ford exceptionally well for commercialization and subsequent scaling of this technology – delivering solutions focused on moving people and goods with fleets of purpose-built hybrid vehicles in dense cities that are greatly in-need of new transportation solutions. The global partnership with Volkswagen and Argo we announced in July 2019 will further increase the scale of our self-driving ambitions and spread development costs.

We know that, in many cases, the best means to accelerate Ford’s transformation are through strategic partnerships and alliances that build on our exceptional know-how with that of other companies – generating new levels of benefits in key segments and markets, while enhancing our cost and capital efficiency.

To this end, the strategic agreements and partnerships we formed around the world this past year – with VW, Rivian and Mahindra – are advancing Ford’s leadership in electric and autonomous vehicles and creating new business models for profitable growth in emerging and emerged markets.

***

We’ve worked for nearly three years now to transform the culture of Ford Motor Company to create a fit, agile company that builds trusted, essential products that are good for the planet.

We missed our operational execution marks in 2019, but that’s behind us now. I, along with the rest of our leadership team, have taken steps to address these shortfalls to drive our return to world-class levels of operational execution.

We are totally committed to this challenge: creating a high-performing Ford Motor Company, and radically rethinking our business to perform better in the short term and win big in the long run. And to create a new business design that fulfills the needs of our customers while generating sustainable value creation over time.

That is what we will do as we Create Tomorrow Together.

Jim

Details 10/27/2019