Ford to cut costs by $14 bn; invest in trucks, electric cars

Ford Motor plans to slash $14 billion in costs over the next five years, Chief Executive Officer Jim Hackett told investors on Tuesday, adding that the number 2 US automaker would shift capital investment away from sedans and internal combustion engines to develop more trucks and electric and hybrid cars.
 

Most of those savings will not show up on Ford's bottom line until 2019 and 2020, Hackett and other Ford executives said, reflecting the industry's long product engineering lead times.

Ford will be open to more partnerships to spread the costs and risks of simultaneously developing new technology and services while churning out profit from selling trucks and sport utility vehicles in North America, Hackett said during a nearly two-hour presentation. He cited a partnership with ride services company Lyft to deploy future Ford self-driving cars, an alliance with Indian automaker Mahindra and a potential alliance with Chinese electric vehicle maker Zotye.

The automaker reaffirmed a goal of achieving 8 per cent automotive operating margins and generating returns that exceed the cost of capital. Ford will provide a financial forecast for 2018 in January. Ford Chief Financial Officer Bob Shanks said it could take until 2020 or later to achieve the 8 per cent margin goal.

Other automakers have warned that shifting to all-electric vehicles could undercut profit margins. "I don't think we should walk off a ledge where we destroy the earnings power of the company," Hackett said, saying Ford is planning for a third of vehicles to still have internal combustion engines by 2030 -the year some European governments have proposed banning petroleum fuelled cars.

Hackett, former CEO of office furniture maker Steelcase, took the top post at Ford in May after his predecessor Mark Fields was pushed out.