Reveals details about how reinventing the 114-year-old car company | Tech News

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A rendering of the revived Central Station.
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Ford
  • Ford has developed a massive development plan for a new-mobility corridor stretching from Detroit through its revamped headquarters in Dearborn to the University of Michigan in Ann Arbor.
  • CEO Jim Hackett is bringing his “design thinking” innovation and management approach to the task of remaking the 100-plus-year-old company.
  • Ford has bought a huge, crumbling rail station near downtown Detroit and intends to combine it with a plan to revive the city’s Corktown neighborhood to be a center of the carmaker’s Smart Mobility efforts.

Ever since Jim Hackett took over as CEO of Ford last year, the auto industry and Wall Street have been trying to figure out his plan to keep the 114-year-old carmaker relevant in the 21st century, as brash new arrivals such as Waymo and Tesla change the way we get around.

Hackett – who was CEO of furniture manufacturer Steelcase before being invited to join Ford by none other than board Chairman Bill Ford – won’t be rushed. But gradually, details of his visions for the company are emerging.

The latest involves a long-neglected train station adjacent to downtown Detroit and over a million square feet of new workspaces in the Corktown neighborhood of Motown.

“It’s a really exciting time, now that I’ve been here a little over a year,” Hackett told Business Insider. “With Bill, I get to make a statement that the strategy is taking hold.”

Hackett assumed the CEO role in May of 2017, when Mark Fields was ousted amid a lagging stock price even as the automaker was racking up quarter after quarter of profits. Tesla had passed Ford in market capitalization in April of 2017, and the Ford board wanted to drive home a new story. Specifically, the board wanted to make it clear that the automaker, founded in 1903, was a car company and a mobility company.

Ford’s CEO deals with a host of new and old rivals

Hackett at CES in 2018.

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Hackett at CES in 2018.
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CES

There was also the not inconsequential matter of Ford’s annual profits. While solid, they weren’t hitting the targets set by Fields. Crosstown rival General Motors was exiting struggling regions – GM sold Opel, its main European division, in 2017 – and investing heavily in self-driving tech, spending half a billion to acquire Cruise Automation in 2016 and later joining with Japan’s SoftBank this year to pump another $3.35 billion into the former San Francisco startup.

Ford wasn’t sitting still. It bought a majority stake in ArgoAI, a Pittsburgh artificial-intelligence firm, in 2017, to the tune of $1 billion. And it continued to stick with its own self-driving agenda, aiming for a full autonomous rollout by 2021 and acquiring both Autonomic and Transloc earlier this year to bolster is Smart Mobility division.

It helps that Ford has the best-selling vehicle in America, the Ford F-150 pickup. Moving close to a million units every year, the truck prints money and has given Hackett the cash he needs to swing for the fences. But Hackett knows that the F-Series can be both a boon and crutch. Ford can’t afford to get left behind as the transportation landscape is altered, not just in the US but globally

“We make vehicles we’re proud of, but we’re also making our system for fit and evolving our production thinking,” he said. “The cars we’re making are becoming more intelligent.”

Smarter vehicles for a smarter world

Ford is also transforming its Dearborn HQ.

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Ford is also transforming its Dearborn HQ.
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Ford

Smarter vehicles for a smarter world – it’s a guiding principle for Hackett and a clue that the onetime University of Michigan football player likes his technology with a human touch.

The massive Corktown project is now a case in point. As part of a billion-dollar-plus transformation of Ford’s Michigan facilities, including its 60-year-0ld headquarters in Dearborn, the company recently took over the dilapidated Michigan Central Station, a shuttered icon that dispatched its last train in the late 1980s.

The plan to is make it the centerpiece of a Corktown revitalization and create a new-mobility ecosystem in the Detroit area that connects downtown to Dearborn and even draws in the nearby University of Michigan campus in Ann Arbor and the Ford-supported American Center for Mobility in Ypsilanti Township.

According the carmaker, the Corktown project will also provide some residential housing, along with significant office and business spaces for other companies. Hackett will shares details at a presentation on Tuesday, June 19, with a community open house to follow on Friday, June 22, continuing through the weekend.

Ford has already started moving into the area. Its electric-vehicle group, Team Edison, has taken up residence at a Corktown facility called the Factory in May (electrification will see an $11.1-billion investment at Ford in the coming decade). The ultimate goal is for much of Ford’s new mobility initiatives – effectively, the company of the future, with 2,500 employees – to work in Detroit.

“I like our odds,” Hackett said.

“This creates tremendous momentum, and Ford’s a momentum play right now,” he added, pointing out that although he was pleased that Ford has stepped up to seize the opportunity to continue the revival of Motown after its 2013 bankruptcy, Detroit was doing fine on its own.

Why good design also needs to be good business

A rendering of what the long-unused Central train station will become.

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A rendering of what the long-unused Central train station will become.
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Ford

For Hackett, Corktown and the Central Station is a serious business investment.

“It’s one-plus-one equals three,” he said. “We need to attract and retrain talent for the kinds of design problems we face.”

Where younger, technologically skilled employees live and work matters. Hackett said that Ford has already seen the needle moving in terms of recruitment with ArgoAI in Pittsburgh, so the company wants to make Detroit seem just as appealing.

And cars increasingly aren’t just bumpers and tires and engines – they’re rolling computers that are learning to drive themselves, talk to each other, and generate enormous amounts of lucrative data that’s shared with the cloud. In fact, Ford thinks the data business could generate double the profit margins the company has historically seen on vehicles, potentially as high as 20%.

For Hackett, keeping Detroit in the mobility game and bolstering Bill Ford’s commitment to the area as the center of the transportation industry is a challenge for design thinking, the CEO’s preferred way to tackle huge issues. The urban context for the Corktown development is integral to Hackett’s approach.

“Design thinking is about addressing a number of layers in a problem,” he said, noting that the connection of smarter vehicles with a changing urban environment and the arrival of cloud computing is a rare historic opportunity.

“We can improve the environment and get vehicles to orchestrate and harmonize,” he said.

Hackett isn’t marching to Wall Street’s pace – but he presides over a powerful cash-machine

The Ford F-150 pickup truck.

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The Ford F-150 pickup truck.
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Ford

The thinking-man’s CEO that Hackett symbolizes has been frustrating Wall Street, which is having an easier time with GM’s more aggressive tactics. But Hackett isn’t just restructuring Ford – he’s redesigning the company. A paramount consideration is that the truly big opportunity will be missed, as the industry is trapped between its profitable past and a future that could, in the nightmare scenario, completely eliminate its history and give the 21st century to nimble new companies that are based nowhere near Detroit.

It isn’t enough for Ford to say that it will always have the F-150, although Morgan Stanley analyst Adam Jonas, a Ford bull, says that the pickup business alone could bring in $42 billion, with profits that would make it a Fortune 40 enterprise on its own.

“Out of all the companies under our coverage, we believe that Ford has the greatest opportunity to show it has a hand to play in Auto 2.0, particularly given that its Auto 2.0 efforts have yet to be validated externally,” Jonas wrote in an early June research note. “Its Auto 1.0 business has levels of value potentially vastly underestimated by the market.”

So Hackett knows he has the investment capital to work with and a core business that, if returned to what he calls “fitness,” can continue to thrive. That doesn’t mean he thinks he has a blank check.

“At the end of the day, we have shareholders, and there needs to be a return on investment,” he said. ” The fitness thing is about making that even better.”

Bill Ford sounded a similar note. In a statement, he called the Central Station “a powerful symbol of Detroit’s struggles and now its resurgence,” but he also stressed that “Ford’s investment in Corktown is far from symbolic.”

He added that Ford isn’t “just making a bet on Detroit” but “making a big bet on the future for Ford and the future of transportation.”

Insiders are optimistic

Internally, the company is optimistic. The teams that have already moved from Dearborn to Corktown love being in an urban setting, and while outsiders might be daunted by Hackett’s long-term thinking, insiders know that the CEO’s objectives make sense: smart vehicles for a smart world is Hackett’s version of former CEO Alan Mulally’s “One Ford” rallying cry, which got the company through the 2009 financial crisis and the meltdown of the US auto industry.

Hackett is also aware that cultural change can’t be rushed, something he learned at Steelcase, when he shifted the company (founded in 1912, just nine years after Henry Ford started his automaker) from creating furniture to rethinking the way that people work.

After looking at the plan to update the Dearborn campus, Hackett said that the company realized it needed more space. That’s when the chance to create a new-mobility corridor stretching from Corktown to Ann Arbor, through Dearborn, appeared.

The Central Station, opened in 1914, has been in a suspended state of decay for over two decades (actually characterized at times as a ruin). Designed by the same architecture firm that did New York ’s Grand Central Terminal, the structure is a symbol of America’s early 20th-century ambition and enthusiasm for rail travel, ironically later surpassed by the automobile. The Central Station is certainly big enough to handle anything Ford might throw at it: at 500,000 square feet, it consists of a soaring Beaux-Arts train station and an 18-story office tower.

Remaking that much real estate in the image of smart mobility won’t be quick.

“I like to think about it as part of our five-year-plan,” Hackett said of the overall Corktown project. “It’s going to take us about four years to get it all built, in both Detroit and Dearborn.”

Transforming Ford by transforming its culture

Ford's Corktown Factory.

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Ford’s Corktown Factory.
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Ford

But the cultural transformation is already underway. The auto industry is still a realm of corner offices and top-down management, but Hackett, with his Silicon Valley connections, wants to alter that.

Ford HQ won’t move out of Dearborn, an International-style building that’s officially known as the Henry Ford II World Center and informally referred to as the “Glass House.” It was where Ford II, “The Deuce,” reigned as Ford CEO until 1979. But a “Mad Men” type of work experience isn’t what Hackett has in mind.

“The nature of work has really changed,” he said, simultaneously avoiding taking credit for having spurred this change while at Steelcase. “People like me aren’t sitting in private offices anymore. We work in teams instead of hierarchies and need to have deep discussions.”

Deep discussions, presided over by Hackett, are what has been keeping Wall Street up at night as far from Detroit, in Silicon Valley, numerous innovators are trying to reimagine mobility at a breakneck pace. But none of the new entrants – not even Alphabet’s Waymo and CEO John Krafcik, an auto industry veteran who now oversees a self-driving effort that’s been in business since 2009 – are as complicated as Ford.

The company sold 6.6 million vehicles in 2017, in nearly every corner of the globe. It brought in $158 billion in revenue and employed over 200,000 people. In that context, Hackett is a heavyweight, while the new guys are bantamweights as best.

And the Central Station/Corktown undertaking is a heavyweight move.

“I think what’s promising about this is that there’s been no construction of this new world until now,” he said. “By anybody.”

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