Ford, GM & a World Turned Upside Down

Ford Motor Company under Mark Fields posts record revenue and profits in recent quarters and Fields is ousted. General Motors CEO Mary Barra presides over the company’s exit from Europe, Russia, South Africa, India and Australia and she is termed a profit-obsessed genius. Am I missing something?

I understand the automotive industry is being disrupted such that car ownership and human driving along with dealers and gasoline as a vehicle fuel will soon go the way of buggy whips. I also can see that we live in a time of so-called “fake news” presided over by a President fond of prevarication, but something about Fields’ departure doesn’t add up. Three narratives have emerged:

1. Fields lacked gravitas and/or credibility regarding the transformation of the company into a Mobility-centric operation crafted around autonomous vehicle technology;
2. Fields’ failure to do a deal with Google more than a year and a half ago led directly to his demise;
3. Fields leaked news of Ford’s planned layoffs as an effort to save his own skin at the last minute – but was found out and fired by an angry Board of Directors.

All of these explanations sound like nonsense stories either planted by unnamed interested parties grinding unknown axes or cobbled together from mere rumor. Ford under Fields was, until a minor and explained stumble in the most recent quarter, a juggernaut. The company was fielding a powerful and well-performing fleet while courting, acquiring or investing in companies (Velodyne, SAIPS, Argo, Chariot) intended to speed the introduction of self-driving Ford vehicles.

In fact, Ford and Lincoln vehicles with their Dataspeed-enabled drive-by-wire technology have emerged as ideal self-driving development mules for the likes of Elektrobit and Uber among many others. Of course, many of the decisions that went into creating the current Ford new car offering occurred under Fields predecessor Alan Mulally, but there was nothing obviously errant in Fields’ stewardship. The company’s languishing stock price rendered its own verdict: Failure.

The only thing more invested with emotion than the value of a car is the value of a stock.

Ford and GM, like most car companies, are trapped in a box. To improve profitability and shareholder value the companies must find a way to generate new sources of revenue growth or slash expenses to increase profit.

GM’s Barra has clearly elected to pursue the latter strategy, paring back unprofitable operations in order to shift resources toward building GM’s foundation for the future to be defined by mobility-as-a-service. (One has to wonder how Brazil has thus far avoided the knife. GM has internally transferred multiple Brazilian executives to keep them in the fold and keep the operation alive through the current downturn.) Ford is pursuing the same global pivot but without shuttering plants or regional operations.

In this context, one would think that Fields would be lauded, but the declining stock price is an unforgiving metric. Fields had to go.

There is a delicious irony in the fact that the princess of profit, Mary Barra, is slavishly pursuing ride hailing and car sharing opportunities with GM’s $500M investment in Lyft (kiss that money good-bye) and the introduction of Maven. Ford tested car sharing in London under the GoDrive brand and found the proposition to be unprofitable. When asked about car sharing and ride hailing at the AutomobilityLA event at the L.A. Auto Show one Ford executive said simply: “Red ocean.”

Bloomberg recently touted Barra’s profit-seeking acumen as an organization-defining proposition. The article concludes: “There’s an added benefit to chopping laggard businesses, Barra says: GM’s culture was notoriously tolerant of losers, and her recent cutting of the chaff has gotten the attention of the troops. Says Barra: ‘It has driven accountability, because the team knows we’re serious.’ “

(The Bloomberg quote reminds me of Barra’s pre-CEO comment at a New York event for leading female executives: “No more crappy cars.” The sizzle that comment suggested has turned to fizzle.)

Where profit is king, though, risk is an orphan. Ford has been at the forefront of app development and strategic investments around connected car technology. GM has been turning away entrepreneurs who fail to embrace GM’s favored approach to vehicle-to-vehicle communications: DSRC – the Wi-Fi-based wireless tech currently built into slow-selling MY2017 Cadillac CTS’s. (DSRC is the orphan at Ford.)

Ford may have failed to do a deal with Google, but that was likely because Fields said Ford would not allow itself to be treated like a handset maker. It’s clear that FCA, the most financially tenuous operator among the Detroit three, was a more willing partner for Google (now Alphabet) and its Waymo spinoff.

Ford acquired Chariot, planting its flag in shared urban transportation and opening the door to the company’s evolution into a B2C business. GM, meanwhile, appears poised to set up its own ride hailing operation in competition with Lyft – while Lyft is courting a relationship with Waymo. (GM’s $500M can’t buy loyalty, it seems.) Actually, GM and Lyft are at odds over state-by-state regulations governing the testing of automated vehicles (GM would prefer that only “car companies” be allowed to test self-driving cars) so this relationship is clearly on the skids.

For its part, Ford under Fields identified four key elements for launching transportation as a service (TaaS):

• Virtual Driving System – A hardware/software/sensor-based solution to replace the driver
• Autonomous Vehicle Platform – A platform that integrates the hardware and software with service-delivery functions
• Vehicle Management as a Service – Fleet management elements – acquisition, service, insurance, financing, maintenance, and disposal
• Volume production

Ford made great strides along this path under Fields. One of the handicaps facing Ford has been its slow adoption of embedded connectivity, unlike GM which has connected its cars in Europe, Brazil, China and the U.S.

In spite of its connectivity head start, though, GM continues to treat wireless connectivity as a source of revenue rather than the underpinning of a connected network of vehicles – shared or not. Ford has finally ingested the connectivity Kool-Aid and with the help of Chariot IP may ultimately get the jump on GM in building a consumer facing and networked transportation system.

Cheeky observers have suggested that GM’s sale of Opel is only a precursor to the company merging with FCA. I have heard kookier theories, but not much kookier than that.

As for profits and risk, Ford looks like the bold risk taker while GM appears to be beating a global retreat. Yet in spite of its boldness, Ford saw fit to change out its leadership. Hopefully that doesn’t send the wrong signals internally.

Fields’ replacement has much to be thankful for as the foundation for a TaaS powerhouse has been laid – and that foundation was put in place while maintaining Ford’s independence from Silicon Valley. In fact, Ford’s embrace of Amazon may yet pay unforeseen dividends and represents a unique path to TaaS.

As for GM, one can only hope that the organization’s embrace of DSRC and the CEO’s obsession with profit doesn’t chase away the innovators and risk takers already disrupting the automotive industry. GM was once the first stop for every entrepreneur looking to change the automotive world. Ford appears to have moved to the front of the line when it comes to innovation. Hopefully the new CEO will stay out of the way.

Roger C. Lanctot is Director, Automotive Connected Mobility in the Global Automotive Practice at Strategy Analytics. More details about Strategy Analytics can be found here: https://www.strategyanalytics.com/access-services/automotive#.VuGdXfkrKUk