Hackett's Ford finally coming into focus

Detroit — Jim Hackett has been in this predicament before. The difference from when he ran Steelcase Inc. for a generation is that he had longer to prove he's right.

Not this time. Ford Motor Co.'s 63-year-old CEO concedes patience is wearing thin as he approaches his second anniversary atop the Glass House: Ford's stock price is stuck in neutral. Investors want answers. Industry analysts continue to question his ability to lead an automaker. Employees and suppliers seek clarity on his global restructuring and vision for the company.

"Shame on me," Hackett told The Detroit News in an interview, acknowledging his first months as CEO caused anxiety among executives. "Whatever technique I was using, I haven't really changed, but just out of the box it meant that people thought their glass was half-empty." 

Hackett's push to jettison long-standing processes and traditions that many top Ford executives spent years mastering on their way to the highest reaches of Blue Oval leadership fueled tension. The former office-furniture CEO is not one of them — one reason why Executive Chairman Bill Ford and the company's directors chose him to replace the ousted Mark Fields.

Ten ranking Ford executives, employees, suppliers and partners spoke to The News about Hackett's management style on the condition of anonymity because they were not authorized to speak on the record. They say he can be hard to understand, but concede he's driving change in the way the automaker does business at home and abroad.

Hackett and his team are executing moves across the company they hope will make Ford a long-term competitor in a rapidly changing and increasingly volatile industry. Executives describe a new cohesiveness at the top. And for some who struggled to understand Hackett's often-opaque language and vision, the future of Ford is coming into focus.

The leaders have revamped most long-standing processes. Terms like "think phase,"  alien to Ford's culture 24 months ago, now are sprinkled into conversations among top executives. Hackett concedes his push to introduce a new way of thinking centered on  methodical, logic-based decision-making may have sent the wrong message initially, straining some at the top as they tried to dissect his liberal use of lofty metaphors and continuous questions.

Change can be uncomfortable. Hackett wasn't appointed CEO to make friends, says David Cole, a longtime observer of Ford and the Detroit-based industry. If Hackett was immediately embraced at Ford, it would have meant he wasn't doing his job.

"It was absolutely necessary to have somebody who can shake up the status quo here," said Cole, chairman emeritus of the Center for Automotive Research in Ann Arbor. "He's not out to be viewed as a glorious CEO. That's not the charge Bill (Ford) and the board gave him. The charge was to initiate the kind of structural change that can ensure Ford is going to be successful long-term."

Beta-testing the future

For clues about the future of Ford, look to the 45,000-square-foot building on the corner of Michigan Avenue and Rosa Parks Boulevard in Detroit's Corktown neighborhood. "The Factory" once made hosiery, its red-brick facade almost as old as the automaker that Henry Ford founded with his Mack Avenue Plant in Detroit in 1903.

Employees here — like Team Edison, Ford's electric-vehicle team — are beta-testing Hackett's plan for the company's future, say Hackett and other Ford executives. And not just because of the sleek battery-electric SUV prototype hidden inside. The way the teams here are working is new to Ford, a nearly 116-year-old company that sometimes struggles with managing change.

On a warm morning in March, Ted Cannis (Ford's global director of electric vehicles), Hau Thai-Tang (product development and purchasing chief) and Darren Palmer (electric vehicle global product development director) explain how they led the design of Ford's first-ever fully battery-electric SUV. It's expected to make its debut this year and go on sale in 2020.

Hackett smiles as the three executives circle the prototype that borrows unmistakable cues from the legendary Mustang. Display boards more than seven-feet-tall line most of the exposed-brick walls. They're covered in colorful sticky-notes, marked print-outs and scrawled "HMW" statements.

The acronym stands for "How might we ..." It precedes nearly every answer or decision the teams here make. And those teams don't operate out of stuffy cubicles inside Ford's vast product-development operation. The roughly 300 people here are the first operating in what Hackett and Thai-Tang see as the model for the new workspace at Ford.

When the transformation is completed, Ford's Corktown campus, anchored by a redeveloped Michigan Central Depot and offices at the redesigned Dearborn campus, are expected to resemble The Factory. How Ford engineers do their work is, too.

Desks in the three-story building are all on wheels. Cannis doesn't have an office. His computer and Thermos sit next to a number of different, lower-level employees, depending on the day. There's ping-pong on the ground floor, where lunch is served by a local restaurant brought in as part of a rotation of vendors. Two employees work in separate "privacy pods." Shades are drawn to keep outsiders from snapping photos of the secret battery-electric SUV inside.

Original plans for the vehicle were thrown out — literally torn up, according to Hackett — shortly after he became CEO. Team Edison started from scratch with a Hackett-backed design method focused on developing something customers would actually love to drive. And that didn't delay the originally-planned 2020 launch.

Those processes are reaching other teams within Ford: "Change does not happen naturally," Cannis said. "It needs support from the top."

Hackett's 'base hits'

Ford employees at various ranks throughout the company have told The News that Hackett can be tough to understand. Others say he's just hard to work with. Ford suppliers aren't clear on where the automaker is heading. Investors and Wall Street analysts have seen share prices fall 17.5 percent since he was appointed CEO in May 2017.

Yet, Ford in the last seven months has announced it will cut jobs and close plants in Europe and Russia. The automaker is in the middle of a months-long process to trim its global salaried workforce by thousands. In China, the automaker has new leadership and a revamped vehicle lineup with new EVs. The automaker has clustered the rest of its global business under a new International Markets unit. Global partnerships are forming. Ford recruited Amazon.com Inc. veteran Tim Stone to become chief financial officer.

In North America, new-product launches that will replace 75 percent of the lineup are planned for the next 18 months. They include previously announced hybrid and electric vehicles, and an autonomous vehicle for 2021.

All of those "base hits," in Hackett's words, show he is doing more than his critics are willing to acknowledge, Ford executives and other experts have said. Hackett might be accused of having his head in the clouds, conceded one ranking source familiar with the situation, but the CEO has been making serious business decisions.

"As you start weaving this together, you see what they're creating is the foundation of the significant change that is necessary," the Center for Automotive Research's Cole said. "It's a work in progress."

Hackett spent most of his first year-and-a-half at the helm confusing those around him, say executives who work closely with him. The CEO, whose track record includes leading Grand Rapids-based furniture company Steelcase Inc. for 20 years, speaks in lofty metaphors with an eye on a distant, unpredictable future. He asks a lot of questions — sometimes because he doesn't know the answer and sometimes to check someone's thinking.

On weekends, he sometimes sends articles from scientific journals to those working at the highest levels of Ford and some of Ford's partner companies, one ranking source who has received the reading material told The News.

During his first months as CEO, he spent hours in meetings with Ford executives asking question after question to get through his own "think phase," a term Hackett uses to illustrate one stage of a process he's pushing his people to apply to everything from product design to the design of Ford's global business model.

He's hired consultants to help refine core processes. He tapped renowned Canadian management strategist Roger Martin to rethink the business, including a plan to drive value in the company. A team from Boston Consulting helped the automaker with its salaried headcount reduction.

Hackett also pushed teams to look to companies outside the automotive industry for inspiration, namely Quicken Loans Inc. Chairman Dan Gilbert's Rock Ventures. That created tension among Ford's executive ranks, because company officials interpreted it to mean he thought Ford's leadership wasn't capable of solving the problems it faced. 

Most of the current leaders are Ford or auto industry veterans who spent years working their way up in the company and industry that Hackett was brought in to shake up. Some felt he didn't know enough about Ford's core business to run things well. Others thought he was condescending. 

Hackett set the bar for Ford's future product and technology exceedingly high, said one ranking source who spoke with The News on the condition of anonymity. That source described Hackett as sometimes becoming stubborn on certain technology or design elements.

But strained relations among the top ranks have eased. His time as CEO reminds some of the early days of former Ford CEO Alan Mulally, the last outsider recruited to fix the automaker, one source with knowledge of the situation told The News. 

Some were skeptical Mulally, a former head of Boeing Co.'s commercial aviation unit, could save Ford in the late 2000s. His outside perspective infuriated top Ford executives during his first years. So did his airplane doodles during meetings, further evidence he was an outsider. 

Like Mulally, Hackett was named CEO to push change at the Dearborn automaker: Ford executives "still would have struggled just with this amount of change that was asked of them," said a source close to the situation. "But none of that was optional." 

Emulating Bo

A one-time offensive lineman for Bo Schembechler at the University of Michigan, Hackett stresses teamwork within the sprawling automaker. "Team V," a name Hackett gave to the top 11 executives at the company, is the leadership group he's depending on to ready Ford for the next-generation transportation space. 

Multiple executives and ranking sources say the team has adopted the method that Hackett pushes. The EV group, Team Edison, operates more like a start-up and less like a century-old company.

"We don't spend any time talking about that anymore," product development and purchasing chief Thai-Tang told The News in reference to the initial tension among executives. "Jim is an outsider. He thinks differently. He's trying to challenge us."

It's Hackett's maize-and-blue coming through. The former Michigan athletic director credited with wooing Jim Harbaugh back to Ann Arbor, Hackett says he's trying to emulate Bo, the coach he idolizes. Yes, Schembechler would yell and scream, Hackett said, but people didn't understand how often the coach would pull back. 

Hackett doesn't yell. But he admits he was tough on those at the top: "I have to adjust backwards a little bit," he said. "I was more intense than I have been the last few months."

That may be because his method is starting to take hold. Development times have been slashed. Decisions are made more quickly. Prototypes cycle rapidly, and they're often made from inexpensive cardboard rigs, Styrofoam and tape in addition to traditional clay or metal models.

In March 2018, Team Menlo — one of the small groups working on pieces of Ford's new electric vehicle who take their name from Thomas Edison's Menlo Park labs — redesigned in just three months the vertical touchscreen planned for the center console. Teams used a quickly built prototype to show customers what the screen would look like with a center-mounted dial.

Their shortcut? A prototype using half a Keurig coffee pod and some paper print-outs. They then let consumers interact with the new design, which the team eventually adopted. That process would have taken a year or longer under Ford's old operating structure.

"That's when I knew we were going to be fine," Hackett said.

Deliberate discretion

Hackett and Ford have yet to garner much confidence from Wall Street. The company's stock price hovers around its lowest point in a decade, despite comparatively healthy profits from its SUV range and F-Series pickups. 

Morgan Stanley analyst Adam Jonas and others prod Hackett for details and clarity on nearly every quarterly call — and Hackett has repeatedly declined to give much of either. They have criticized Ford's reliance on the F-Series to generate most of its profits, a longstanding criticism from time to time echoed by Executive Chairman Bill Ford. 

But Deutsche Bank Research in February counseled investors to buy Ford stock based on budding global partnerships, new products coming to market and restructuring moves the automaker is making in Europe, South America and elsewhere in the North American salaried ranks.

And even Jonas has started to come around.

"We would still say Ford is clearly the most unloved US auto (company), but we have noticed a change in tone that is starting to give the company the benefit of the doubt," Jonas wrote in a note to investors Monday. "Piecemeal progress with restructuring, incremental headlines around VW cooperation and the hiring of a new tech-oriented CFO have captivated investor attention … for good reason."

Hackett defends his discretion with Wall Street, calling it deliberate. He wanted to understand and right-size the business — get his entire plan in place — before he told anyone outside the company specifically what he was doing because he wasn't appointed CEO to deliver a short-term bump in the stock price.

"You prosper if you get it right," Hackett said. "You don't worry about the wrong things. The stock is a consequence of method and strategy."

One constant: change

Still, time is running short for Hackett. He had 20 years to change Steelcase, a Grand Rapids-based office furniture giant with global reach. He's older now. Competition is intense. And he's wrestling with a rapidly changing industry turbocharged by new technology that threatens to leave behind any company not prepared for the future.

That's why he calls 2019 a "year of execution."

"If you get the license to do method and change, and it takes too long, that license is yanked," he said. "We passed that threshold in '18. We can't have poor performance from here on out.

"I don’t want to leave the impression that I’m leaving. I just don’t think that I have an evergreen time to get as far as I need to get. I’m trying to think of it that I’ve got to hustle — not because I’m leaving. Because I’m older."

Part of that means getting the rest of the company on board. Employees are worried about ongoing layoffs.  One mid-level Ford engineer who spoke on condition of anonymity said others in areas of the company that are currently hiring want more clarity from the top. 

Meantime, Hackett has recently found friends in the dealer body. Those who were initially frustrated with Hackett's decision to ax sedans now see value in his product plan. That came clear in October during Ford's "Inside the Oval" event in Las Vegas, where he finally got some of the nation's Ford dealers to understand the bigger picture.

"Any time there's change, there's concern," said David Fischer, chairman and CEO of The Suburban Collection and owner of three Ford dealerships. "He didn't come out swinging. But you can see what they're beginning to do."

Another piece of the plan is to make sure there's a succession plan in place for whenever Hackett departs. He says there are good candidates within Ford's executive ranks, declining to share names.

"We're not done yet," Hackett said. "I've got a really good team that is shaped now. They've taken on some very difficult questions that have been around much (longer) than the Fields era. They were 20-years-ago kind of problems."

Enabling Ford to change quickly when it needs to is a big piece of that.

 "If we're successful," he said, "you'll have to do this again."

ithibodeau@detroitnews.com

Twitter: @Ian_Thibodeau