Just change EVERYTHING! The journey is the reward. Zero chance of success.
Seeking Alpha: If you are wondering why would the Ford Motor Company (NYSE:F) come out and report it is losing $3 Billion in a division while not being legally required to provide the breakdown, then welcome to "Enterprise Transformation 101." Enterprise Transformation was one of the riveting courses I took during my MBA days (don't ask me when and remind me how old I am getting). It was fascinating to learn how many companies have attempted a transformation but only a few succeeded. Successful reinvention stories include the Apple Inc. (AAPL) turnaround and, more recently, Netflix, Inc. (NFLX), while Nokia, Xerox, JCPenney, etc. lead the list of failed turnarounds.
While it is no secret that Ford has been long interested and playing in the electric vehicle ("EV") business line, the company is broadcasting to the market that it is transforming itself into a big, if not an exclusively, EV player. As examples, in the last four days, we've seen Ford announce:
it is bringing an all-electric Explorer in Europe.
it is breaking down profits (or losses) by legacy, electric, and commercial businesses.
that the EV business line will lose $3 Billion in 2023
this morning that it plans to produce 500,000 EV trucks at its Tennessee plan.
While those are explicit and clear signs of an attempt at transforming its image into a serious EV player, Ford has more challenges that the other successful transformers mentioned above faced. For one, the legacy business of Ford and the legacy of the industry it primarily operates in is more deep-rooted than Apple's or Netflix's at the time of their transformation. After all, Ford Motor Company is 120 years old. With that legacy comes the baggage of doing things a certain way, including organizational culture ("Change mindset" circle below), which in my opinion, is that hardest part of an enterprise transformation.
So, what are the steps in Enterprise transformation and why is it hard? There are many ways to explain this, as you can find on the internet, but the one below captures the essence in my opinion.
Change Mindset
Change People
Change Process
Change Technology
Change Go-to-Market ("GTM")
Change Measurement.
Enterprise Transformation (aha.io)
That these pieces are placed circularly with no arrows between them is intentional. There is no particular starting point or directional flow to an Enterprise Transformation, which leaves room for continuous feedback and improvements. Sure, one can say changing people is the key, but there is no guarantee that it is going to change or at least improve the rest of the pieces.
What Ford has done with its announcements over the last few days is addressing the "Change measurement" and "Change GotoMarket" pieces with its announcements about reporting profits (or losses) by division and focusing on more EV pushes to the market. Again, this is not to say the company is and may ever get away from its legacy business, but is a clear sign of transformation attempts.
If a company is sending the message about its changed measurements to Mr. Market, that means it is quite confident that the rest of the pieces including people, process, technology, and mindset are at least in the process of being transformed if not entirely transformed already. To that effect, I fully expect Ford to make personnel changes, including senior to C-Suite leaders if they don't align with the new image the company is striving for. If the company's job openings are any indication, this transformation will result in personnel changes (or addition) at all levels of the organization, from EV Test Engineer to Calibration Engineer to EV Site IT Manager.
Some of you may be wondering: "If transformation is all good, especially when Ford is already a well-known player in the EV space, why not be more vocal about it"? Well, the CEO has us covered with the answer. You don't want to bite the hands that feed you. While the company is excited about the EV prospects (notice how Jim Farley used the word "excitement" below. Hmm, hello Elon), they also are aware of what pays their bills and experiments, as quoted in this SA news item.
Jim Farley recently stated the electric vehicle business will produce as much excitement as any pure EV competitor. He also noted the legacy business is the profit and cash engine.
Conclusion
For those "TL;DRs" out there, the quick takeaway is that, while my doubts remain intact about the company's ability to sustain its dividend, I am now upgrading Ford Motor Company stock to a "Hold."
For those who can pay attention for a little while longer, Ford is announcing that it is not just content being a player in the EV space, but one that is even willing to go through the painful process of enterprise transformation to re-establish its image. This will be tricky as the company needs its legacy business, which quite frankly will exist in some shape or form for the next few decades at least. Cannibalization in business is an art and needs to be executed with the (patience and) precision of a needle than the power of a hammer. As a student of the market in general and business strategies in particular, I am looking forward to seeing how Ford goes about executing this transformation. The transformation may not take Ford Motor Company anywhere, no one knows for certain. But to quote the guy who led many successful transformations, "The Journey Is the Reward."