"The industry is staring at tech companies coming at it," Ford's new CEO Jim Hackett told analysts in New York. "These companies are flush with cash, flush with talent and flush with computer science. But we understand the way people want to live and breathe vehicles, and that's the competitive advantage we're going to continue to own here."
Ford's strategic update Tuesday included little in the way of details on how it plans to accomplish that, but it did feature a number of broad initiatives, specifically the company's intention to build 100% of its vehicles in the U.S. with connectivity by 2019 and 90% of its vehicles globally by 2020, cut costs drastically and shift its focus from cars to SUVs and trucks, all while expanding its electrification investment and building an autonomous vehicle.
Hackett on Tuesday said the company will leverage partnerships and revamp its focus in targeted geographies, and the company revealed it is targeting $10 billion in incremental material cost reductions and another $4 billion in engineering cost reductions.
In its Tuesday release, and the subsequent meeting with analysts in New York, Ford did not make mention of potential staff reductions, a concern for Detroit unions in recent years as the industry prepares for a long-awaited down cycle, but the company did note in its presentation that it will address the need for a "fundamental redesign" of it business operations.
Ford's strategic update comes following a 100 day review by Hackett, who took over in May. The company pointed out that it aims to correct its path as it has fallen short of its 8% automotive operating margin goal, having reported a 6.7% operating margin in 2016.
To combat the fact that the company's costs have grown as fast as its revenue in recent years, Ford is launching a number of strategic initiatives, including reallocating $7 billion of capital from cars to SUVs and trucks, including the Ranger and EcoSport in North America and the all-new Bronco globally.
Ford also plans to build the next-generation Focus for North America in China, which it said will save the company capital investment and ongoing costs. That move is in clear opposition to President Donald Trump's "Made in America" ideology.
Finally, Ford is reducing internal combustion engine capital expenditures by one-third -- from $1.7 billion in 2016 to $1.2 billion in 2022 -- and redeploying that capital into electrification, on top of its previously announced $4.5 billion investment in electric vehicles.
Ford has previously committed to deliver 13 new electric vehicles in the next five years, including a F-150 Hybrid, a Mustang Hybrid, a Transit Custom plug-in hybrid, an autonomous vehicle hybrid, a Ford Police Responder Hybrid Sedan and a fully electric small SUV.
And watch out Tesla, Ford also promised Tuesday it will have the best vehicles in the autonomous vehicle segment.
"It's going to be safe, reliable, and people are going to love it," Hackett told analysts in New York. "We've got a really precious opportunity with the Ford brand, unlike anybody else. And with the things that we're talking about from this 100 day scan, I'm really confident."
Shares roses slightly on Wednesday.
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