Last week, global automotive manufacturer Ford Motor Company announced a senior operations management leadership change which from our Supply Chain Matters lens, provides a barometer to the transformational challenges facing many global automotive manufacturers.

Ford announced that Jim Farley will be appointed as chief operating officer and taking over broader responsibilities from retiring president of global automotive operations, Joe Hinrichs.

 

Botched New Vehicle Introduction Process

The announcement came after the company reported what was considered as a disappointing quarterly financial performance and profitability outlook.  Ford CEO Jim Hackett directed attributed a 15 percent decline in quarterly vehicle sales to a botched launch of the automaker’s new and flagship 2020 Ford Explorer SUV.

The vehicle itself is manufactured at Ford’s Chicago assembly plant, with the newest generation Explorer transformed from a front-wheel, to a new rear and all-wheel drive platform. This product transformation has been described by Ford as the most challenging in the company’s history.

The Chicago facility reportedly was given 31 days for production re-tooling while factory workers were trained at an offsite facility to get acquainted with changed assembly and quality control processes.  Complicating this introduction process was a decision to build multiple models and trim levels all at the same time of market introduction. The closely related premium market 2020 Lincoln Aviator SUV is also produced in this same facility. At one point in the production ramp-up, a reported 2500 vehicles had to be shipped to the nearby Flat Rock Michigan assembly plant for added quality inspections.

Most of the vehicle’s issues have reportedly been resolved by Ford, but the financial impact and market visibility was not ideal.

New product introduction shortfalls are not unusual to Ford or to certain other global automotive brands. In 2012, we called Supply Chain Matters readers attention to a botched introduction of the then newly designed Ford Escape SUV.  The difference is the higher and more complex stakes that industry players must now manage.

 

Management Change

Hinrichs is a 19-year Ford veteran has a resume that includes multiple plant level and multi-divisional level operations leadership assignments. In addition to U.S. assignments, there were roles involving Asia Pacific, China and Canada operations leadership. In April, he was appointed to the leadership role for Ford’s global-wide automotive operations that included manufacturing, procurement and supply chain activities. Hinrichs academic experience included and undergraduate degree in electrical engineering and an MBA degree from Harvard University.

Farley’s management background includes multiple leadership assignments among the automaker’s Americas, Europe, Middle East and Africa business units as well as global marketing leadership roles involving Ford and Lincoln brands. He most recently served as Ford’s President, New Business, Technology and Strategy, since May 2019. Within this role he was tasked in leading Ford’s strategic transformation to higher growth and margin businesses by leveraging smarter, connected vehicles including autonomous driving vehicles. According to his newly revised corporate biography, Farley oversaw corporate strategy, global data insight and analytics, global partnerships, research and advanced engineering along with Ford Smart Mobility and Autonomous Vehicles programs. His academic background includes an undergraduate degree in economics and computer science, and an MBA with finance concentration.

In this new chief operations officer role reporting directly to CEO Hackett, Farley will reportedly oversee all of the automaker’s global markets and automotive operations, including new product development, purchasing, manufacturing, quality management labor relations, marketing, sales and service, in addition to his prior roles related to advanced technology transformation. His executive bio further indicates leading Ford’s drive to strengthen automotive operations and deliver “sustainable global EBIT margin of at least 8 percent.

If you have not guessed by now, this new role is one of positioning of a candidate for potentially the next CEO of the company.

Ford All-Electric Devlopment

Sign of Implications for Industry Transformation

Within the industry-specific umbrella of our recently published Ferrari Consulting and Research Group’s 2020 Predictions for Industry and Global Supply Chains, we specifically mention the global automotive and truck manufacturing customer demand and supply networks unique multiyear opportunity and challenge related to the complex transition toward developing and producing more electrically or hybrid powered vehicles, with built-in intelligence, on board advanced and autonomous capabilities. Most of this technology transformation is highly expensive, and now includes multiple automotive brands teaming-up to share investment costs and risks, in order to speed-up required time-to-market.

Global unit demand is now on the decline while the strategic transformation requires an unprecedented number of new model vehicle introductions in the coming three to five years. A strategic transition to re-architected vehicle designs and components that fuse hardware and software operability will determine the future players.

Leadership changes involving senior operational executives are not a new phenomenon, especially in the light of visible botched product launches or manufacturing or supply chain focused snafus.

From our lens, executive leadership changes such as the one evolving at Ford are an indicator of what wide-scale and complex business-wide transformation requires in the new era of individual transportation powered by the most sustainable, safe and advanced technologies.

Change involves revised thinking, measured risk, an innovation-based culture involving enterprise wide, global and inter-brand and technology start-up collaboration directed at a common goal.

Ford’s latest senior operations change is likely one of many others to come across this industry.

 

Bob Ferrari

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