Ford CEO tells employees: ‘Time to bury’ 2018, focus on doubling profit
Carmarker is restructuring its global operations, including recent plans to make job cuts in Europe
London — Ford Motor CEO Jim Hackett told employees late on Thursday that the number two US automaker would not accept the 2018 “mediocre” results and said the company was aiming to nearly double its annual operating profit. Hackett made his comments in an e-mail to employees that was seen by Reuters.
Ford is restructuring its global operations, including recent plans to make cuts in Europe. It also has announced an alliance in commercial vehicles with Germany’s Volkswagen , with plans to jointly develop electric and self-driving vehicles, in moves meant to save billions of dollars.
Ford announced its fourth-quarter results on Wednesday, reporting a 2018 operating profit of $7bn with a profit margin of 4.4% , down from 6.1% in 2017. Ford said last week that its target for operating margin was more than 8% .
“2018 was mediocre by any standard,” Hackett said in the e-mail. “Yes, we made $7bn last year. But think of it this way: this represents a 4.4% operating margin, about half what we believe is an appropriate margin. So we are aiming for much closer to $14bn.”
Hackett did not give a timetable for hitting the $14bn target. A Ford spokesperson said Hackett was simply doing the math to show employees how the margin target translated to overall profit.
Hackett, who has been on the job for 20 months, also said that it was “time to bury the year  in a deep grave, grieve over what might have been and become super focused on meeting, and, in fact, exceeding this year’s plan.”
Ford did not provide Wall Street with a specific financial forecast for 2019. It simply said it had the potential to improve earnings and revenue.
That was in contrast to Ford’s larger US rival, General Motors , which on January 11 forecast higher 2019 earnings that far surpassed analysts’ estimates.
Hackett also said in looking at Ford’s 2018 results: “I become mad for a short time. Likely mad at myself, but also because I know we are better than that. ... I know that our competition hasn’t been better than us by magic.”
He said Ford had been considering moving up its time frame to electrify its product portfolio since he took over and asked how the company could learn from the trends it missed in China, the world’s largest auto market, where it is losing money.
Meanwhile, Ford said on Thursday it faces a bill of up to $1bn if Britain leaves the EU without a deal, comprising World Trade Organisation tariffs and the impact of a weaker pound.
The impact of Brexit on Ford, based on internal calculations, would be in the range of $500m to $1bn depending on a variety of factors, Ford said. Sky News earlier on Thursday reported the hit could be $800m.
Car makers and other manufacturers, including Airbus earlier on Thursday, warned about the toll a no-deal Brexit could impose, including higher tariffs, disruption to supply chains and threats to jobs.
Britain is due to leave the EU on March 29, and with Prime Minister Theresa May failing to win support for her negotiated deal, companies are increasingly worried about the possibility of a chaotic Brexit.
Ford CFO Bob Shanks on Wednesday declined to say what the financial impact of a no-deal exit could be, but said Ford was already planning for it.
“We clearly have already started to work on the eventuality of there being a hard Brexit,” he told reporters. “We’re certainly hoping that does not happen, but we can’t wait. We’re actually incurring costs, doing things now to prepare for that, so there will be an impact. It's a material impact,” he added.
Last week, Shanks said a no-deal exit was unlikely, but if it occurred it would be “catastrophic”.
Ford estimated last March that a hard Brexit, which would see WTO tariffs of 10% on imports and exports and lower levels on components, would cost it up to $1bn per year.
Ford, the top-selling car brand in Britain, operates two engine plants in Britain, its third-largest market, and the destination for roughly one in three cars made at its German Cologne plant.
Ford, which employs 53,000 people in Europe, on January 10 said it would cut thousands of jobs and look at plant closures in Europe as part of its plan to return to profit in the region. The carmaker employs about 13,000 people in Britain.