Ford (NYSE:F) announced on Aug. 4 that the current chief executive officer, Jim Hackett, was retiring from the company at the end of September after 41 months in the top job. The chief operating officer, Jim Farley, will step into Hackett’s role as CEO on Oct. 1. Since the announcement, F stock has moved sideways.
Executive Chairman Bill Ford said about the hiring: “Jim (Farley) is a car guy through and through.”
I’m sure there are plenty of opinions about whether Farley’s the right person for the job. All I know is that given he’s got the second-longest tenure at Ford among senior managers, I’m curious why he wasn’t made CEO in May 2017 instead of Hackett.
Here are some thoughts.
I Never Thought Hackett Was a Good Fit
First, let me say that I’m not pretending to be an expert about the auto industry. There are plenty of good writers out there that cover Detroit, many of them with the Detroit Free Press.
However, after writing about business for more than a decade, I’ve become pretty good at spotting quality leadership. Back in 2017, I wrote about Hackett’s hiring as CEO to replace Mark Fields. I wasn’t convinced that Hackett was the right person for the job.
“Like voting in a 70-year-old president, Hackett’s hiring is going to hurt Ford stock,” I wrote on June 5, 2017.
“What Ford needs is a CEO who has more vision than just setting a goal to sell 9.4 million cars annually by 2020, something former CEO Mark Fields did in September 2014 at its annual Investor Day Presentation.”
In case you’re wondering, F stock lost almost 40% of its value since Hackett’s been in charge.
In Ford’s announcement of the change in command, Hackett explained how he viewed his time at the company.
“My goal when I took on the CEO role was to prepare Ford to win in the future,” Hackett said in a statement. “The hardest thing for a proud, long-lived company to do is change to meet the challenges of the world it’s entering rather than the world it has known. I’m very proud of how far we have come in creating a modern Ford and I am very optimistic about the future.”
So, if you’re long F stock, you believe that Hackett achieved his goal. If you’re bearish about Ford, you probably think that Hackett’s done little to restore its spot at the top of the automotive mountain.
Bill Ford’s Hirings
I keep coming back to the words of Bill Ford.
“Jim Farley matches an innate feel for cars and customers with great instincts for the future and the new technologies that are changing our industry,” Ford said in the company’s announcement.
When legendary Ford CEO Alan Mulally stepped down on July 1, 2014, after eight years as chief executive, here’s what Bill Ford had to say about Mulally and Mark Fields: “We have had very few, and maybe never, have we had a planned smooth transition,” Bill Ford said at the time. “Alan is a hall of fame CEO, and we all know that. But most hall of fame CEOs cannot let go.”
“…Mark has transformed several of our operations around the world into much stronger businesses during his 25 years at Ford. Now, Mark is ready to lead our company into the future as CEO.”
Mulally will always be remembered for borrowing almost $24 billion in 2006 to protect the company against a future recession. That move prevented Ford from entering bankruptcy, like its two Detroit rivals.
It’s but one reason he’s considered a Hall of Fame CEO. Foresight is invaluable. Fast forward to 2017 and Hackett’s hiring.
“He [Mark Fields] and I sat down Friday and really decided this was the right time for him to go and for us to have new leadership,” Bill Ford said on Hackett’s hiring. “People can speculate all they want about that. But the fact is, he is (retiring), and I feel we’ve got a great leader in Jim.”
So, now, Jim Farley is the person to lead Ford into the future. Bill Ford and the board believe that continuity is key to Farley’s hiring.
“There is great strength in continuity, particularly if you’re on the right path,” Ford said about Farley’s promotion. “Our board felt we were on the right path.”
I’ve read Farley’s background, which includes many years at Toyota (NYSE:TM), so there’s no doubt he’s got the experience and the leadership skills to deliver for shareholders.
Except Bill Ford said the same thing about Mark Fields, and Ford stock has lost 60% of its value since July 1, 2014, the day Fields became CEO.
This is looking a lot like the movie Groundhog Day.
The Bottom Line on F Stock
I’ve blown hot and cold about an investment in Ford over the past couple of years.
In early March, I stated that patient investors would be rewarded. I was primarily coming at it from the perspective of stocks trading under $10. Over the next 12 to 18 months, I thought it’s continued push into electric would pay dividends for shareholders.
Now that Hackett’s moving aside, I hope for long-suffering shareholders that this COO promotion turns out better than the last one.
On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia.