Next week, Ford Motor Company will send its Executive Vice President of Product Development and Purchasing, Hau Thai-Tang, to New York in order to make a presentation at J.P. Morgan’s 2018 Auto Conference. On the docket is a detailed discussion of Ford’s $25.5 billion targeted cumulative cost and efficiency opportunities through 2022, as well as its capital allocation strategy, which includes focusing more intently on high-margin, high-growth segments like North America’s truck and SUV markets.
Ford Motor Company has drawn criticism in the past for its lack of candor in discussing business matters, such as the $14-billion “fitness push” announced by Jim Hackett during his first strategic update session as CEO. The plan targeted $10 billion in material cost reductions through 2022, plus $4 billion in engineering cost reductions over the same period, without providing much in the way of specifics.
However, we do now know that a big portion of Ford’s savings on engineering costs are expected to result from the automaker’s transition from nine different global automotive “platforms” to just five flexible “architectures”. The move should allow engineers to reuse many modules – electrical, HVAC, driver controls, etc. – across a greater variety of different products, helping slash development time and expense. Still more cost is expected to be taken out as Ford reduces the number of different orderable combinations for myriad products; the 2019 Ford Fusion was the first product to practice that approach, dropping to just 36 possible configurations from 2,000 or so the year before.
Ford’s discussion of capital allocation plans might not contain too many surprises, as we already know that the automaker plans to allocate approximately 90 percent of its product capital expenditures on trucks, utility vehicles, and commercial vehicles starting in 2019. However, CEO Jim Hackett raised the possibility in May of dramatic changes in the money-losing European and South American markets, while the automaker is still battling for a better position in China. It’s possible we’ll learn more about Ford’s strategies on those fronts from Hau Thai-Tang’s presentation.