Jim Farley, of Ford Motor Co., talks about the future of the automobile and how Ford will innovate and change demand like they did with the Model T.
Detroit Free Press
At 8 a.m. Thursday on the first day of Jim Farley stepping into his new CEO role at Ford Motor, the company announced “operational and leadership changes” designed to do what Farley has promised publicly: drive growth and speed transformation of the 117-year-old automaker.
The plan, Ford said, is to “turn around automotive operations; allocate capital to Ford’s strongest franchises and high-growth opportunities, and produce compelling, uniquely Ford electric vehicles at scale.”
First of all, Farley replaced the relatively new Chief Financial Officer Tim Stone with Ford veteran John Lawler, 54, effective immediately. Lawler will oversee the finance and Ford Motor Credit operations. Stone accepted a job at ASAPP Inc., an artificial intelligence software company.
“Stone will remain with Ford through Oct. 15 to ensure a smooth transition,” Ford said.
Former CEO Jim Hackett announced the hiring of Stone, 53, who had no automotive experience, in March 2019, despite Stone’s controversial departure from his previous employer where he reportedly went around the CEO to seek a pay raise that was denied.
Ford retained former CFO Bob Shanks on the payroll while also paying Stone. Ford explained at the time that it was to assist with transition; Stone was hired in April 2019 and assumed the job two months later. The company ended up paying the CFO and former CFO more than $8 million each that year, according to its regulatory filings. The company confirmed Thursday that the “employee adviser” role ended for Shanks at the end of 2019.
In 2019, the cumulative compensation for the six top executives at Ford Motor Co. — $70 million — exceeded the automaker’s annual net income of $47 million, a year that included pension payments, global restructuring costs, a botched Ford Explorer launch and billions in warranty costs.
This year began with disruption and factory shutdowns caused by COVID-19. But Ford has resumed full production and is focused now on launching its 2021 Ford Bronco, all-new Ford F-150 and all-electric Mustang Mach-E.
Cash is the key to survival during these uncertain times for any manufacturer, especially automakers. The company’s credit rating was downgraded in March, which has the same negative effect on a business as it does on an individual with bad credit: Getting capital can be hard. Ford executives have said the company has the cash it needs to operate at this time.
New CFO seasoned
Meanwhile, Lawler had been CEO of Ford Autonomous Vehicles and vice president, mobility partnerships, and spent much of his 30 years at Ford in finance leadership and general management, Ford said in a news release. He had a successful run as president of Ford China and served as corporate controller and CFO, global markets and head of worldwide strategy.
“John knows our company inside-out, has a clear view and great ambition for what Ford can be, and articulates what’s needed to get there,” Farley said in a statement. “As CFO, he will help assure we have the means to fund those ambitions.”
Farley acknowledged Stone’s contribution in prepared remarks.
“Tim has been a powerful voice inside the company pushing us all to persistently focus on our customers and what they want and need,” Farley said. “He also played a critical leadership role in guiding the company through the COVID-19 crisis. We thank Tim for his contribution and wish him the best.”
The company noted that Farley is the 11th CEO in Ford history.
“During the past three years, under Jim Hackett’s leadership, we have made meaningful progress and opened the door to becoming a vibrant, profitably growing company,” Farley said. “Now it’s time to charge through that door.”
Farley’s actions won immediate praise from industry analysts.
“Holy crap,” said John McElroy, host of “Autoline After Hours” and a longtime industry observer. “This is a stunning announcement and completely unexpected. Jim Farley is showing he is absolutely in charge of Ford Motor Co. and he’s not wasting any time. He’s on a mission to get this company turned around as fast as he possibly can.”
Change brings relief to those who want to see Ford succeed, McElroy said. “Jim Farley is putting his stamp down and saying, ‘I’m running the show.’ This fits with everything everyone has been saying about Jim Hackett for the last three years. The guy was not a leader. He never really marshaled the troops to follow behind him. He communicated in very ambiguous and gauzy ways that left people wondering where the company was really headed.”
The one positive legacy for Hackett, who took the helm in May 2017, McElroy said, was the introduction of “customer focused design,” of vehicles, which leans on intuitive consumer needs and building those into vehicles.
“Other than that, he has been a disaster,” McElroy said. “From 2014 to 2019, the U.S. auto industry enjoyed the golden age. We have never seen so many years of back-to-back rising sales and unbelievable profits and Ford turned in an absolutely mediocre performance. Jim Hackett never got control of the company because he never understood what was going on there.”
While Hackett came from the furniture industry as a retired CEO of Steelcase, Farley has built a career in the automotive industry, going to Ford from Toyota.
Hackett, 65, continues as “special adviser” to Ford until March 2021.
Market analyst Jon Gabrielsen, a longtime critic of Hackett’s approach to running Ford, initially questioned the idea of bringing a Silicon Valley finance executive to an iconic automaker with unprecedented market challenges. He praised the pivot.
“Jim Farley began his changes with the exact right priority. In times like this, the CFO position may be the most critical role in an entire company,” Gabrielsen said.
“The auto industry and Ford itself are incredibly complex and have issues that must be understood and mastered. Experience in other industries does not translate to automotive, and even Ford-specific issues are different from other automakers,” he said. “In these crisis times, it is absolutely mission critical that Ford has a CFO that totally and completely understands the auto industry and the company itself.”
The specific choice of Lawler was noted by Joe McCabe, CEO of AutoForecast Solutions based in Chester Springs, Pennsylvania.
“Lawler brings experience in autonomous vehicles, China and Ford’s complete global strategy,” McCabe said. “Companies have to design things that are accepted in every single market. He knows the long game, not just North America. He knows how to take electrification forward.”
Ford said the changes announced on Thursday were the first in a series of expected announcements. These were noted, in addition to the departure of Stone:
Jeff Lemmer, Ford’s chief information officer, will retire Jan. 1 after 33 years at Ford. A successor, who will lead the technology and software platform, will be announced soon.
Joy Falotico, 53, who has been president of Lincoln and Ford’s chief marketing officer for nearly three years, “will be dedicated solely to further growing Ford’s luxury brand once a new chief marketing officer is named.” She will report to Kumar Galhotra, president, the Americas and international markets.
Dale Wishnousky, 57, vice president, manufacturing, Ford of Europe, will retire at the end of the year. He began with Ford in 1987. Kieran Cahill, 53, previously director, manufacturing and strategic projects, Ford of Europe, succeeds Wishnousky effectively immediately.
Ford hosted a virtual town hall meeting with an estimated 20,000 employees globally Thursday morning. Bill Ford, executive chairman of the company, introduced the new CEO and he delivered a 25-minute speech that has been described as motivational. Lawler, Galhotra and Hau Thai-Tang, Ford chief product development and purchasing officer, also spoke. Stone said goodbye to the team.
Farley told the team he plans to move with “urgency to turn around its automotive operations — improving quality, reducing costs and accelerating the restructuring of underperforming businesses,” the company said in a release.
Top priorities for growth include expanding commercial business with software services “that drive loyalty and recurring revenue streams” and adding more affordable vehicles to its global lineup, including North America, the company said.
I recently had a customer apply for credit, and their commercial credit report was UGLY. They owe everyone, and they’re past due 90+ days. They have a few big orders pending with us and I feel they have been shut off everywhere else, which is why they are pushing so hard to get our orders shipped. I called the president of the company and told him we were opening his account COD so the orders pending would need to be paid prior to shipping them out. He blew up. He said he didn’t care about the information on the DNB report and it did not relate to them. Then he screamed at me, asking if we were going to send the materials. I am not interested in acquiring another slow paying account, so I need your thoughts.
Signed, Miffed in Michigan
Control freaks, abusers of credit, and manipulators of people don’t ever question themselves. They never ask themselves if the problem is actually them, and they always say the problem is someone else. Such is the life of the slow-paying/no-paying account.
Yes, Mr. Crappy Credit Report, it is completely everyone else’s fault that your credit payment history looks like a piece of Swiss cheese: full of holes and slightly smelly. In fact, the Secret Society of Credit Managers got together last week and selected your company as THE ONE we were going to target for the month to make your professional life a nightmare. It has nothing to do with your inability to pay your invoices in a timely fashion. You, as always, are an innocent my dear customer.
Let’s be real here: customers with negative or poor credit history ALWAYS know they have bad credit, but they always posture like it is brand new information, heard for the very first time. What? My credit is bad? No, who is reporting me that way? I want names, numbers, I dispute it. This is total BS! The list of objections goes on and on. One thing they do know, it is wrong, and you need to give them credit RIGHT NOW or they will take their business elsewhere (oh, the horror.)
Blowhards and bullies shout over the top of you and push their agenda because that’s what worked for them in the past. Their theory is “if you say it loud enough and angry enough with enough threats and forcefulness, it becomes true and others back down.”
Well, I like to throw caution to the wind and pet that kitty backwards. If you are going to come at me bro, don’t come empty-handed. You’re not the first guy to lose his stuffing at me. So, your credit report is junk. Ok, no problem. I will email you a copy and you can address it directly with the commercial credit bureau I pulled it from. Once you two have kissed and made up, I will pull a new one and if it is good, then welcome to the family!
In absence of that, let’s take a look at the trade references you listed on your credit application. I will personally call each and every one of them. Once I have made contact and have the information back, we can reevaluate. Just so we are on the same page, trade references are who you currently purchase like materials from. I do not want anyone you hire (so no sub-contractors, no contractors, no homeowners), no big box, no gas and sip, no personal testimonials.
How about some financials? I will take those. Show me what you have under the hood. Since this is a family publication, I cannot print what some of the reactions to those requests have been but most of you have pretty good imaginations and can fill in those blanks.
If someone truly believes their credit report is inaccurate, they have a normal conversation about it, in a normal tone. In this case the old adage, “the louder they are, the harder they fall” applies, so take heed.
With more than 30 years of credit management experience in the LBM industry, Thea Dudley consults with companies on a wide range of credit and financial management issues. Contact Thea at firstname.lastname@example.org.
Small credit mistakes, like paying off your credit card a few days late, aren’t a big deal.
You pay a small penalty or a bit of interest and carry on as before. A slip up like that won’t come back to haunt you the next time you apply for a mortgage.
Other mistakes though can have a significant impact, even if they seem relatively minor at the time. They can stay on your credit record for years and potentially cause you to not qualify for a mortgage or loan or have to pay a higher interest rate.
Here’s a list of five credit mistakes that you definitely want to avoid:
Ignoring your financial details.
Not being aware of what interest rates you are paying or when a temporary or “teaser” rate ends can be very costly. Carrying debt on certain accounts harms your credit score far more (credit cards) than others (lines of credit).
You need to have a clear picture of all debts that you owe, how much they are costing you and review regularly to make improvements if necessary.
Draining retirement funds to avoid bankruptcy.
While nobody wants to claim bankruptcy, sometimes it’s the right choice. RRSPs are generally exempt from bankruptcy proceedings (except for amounts deposited in the last 12 months in some provinces) and can be left there to help you rebuild on the other side of the bankruptcy proceedings.
Not checking your credit.
You can check your credit report easily and for free in Canada through Equifax and TransUnion. Checking regularly (at least once per year if not twice) will allow you to become aware of any credit issues or fraud sooner so that they can be dealt with.
Having something unexpected appear on a credit report is common for Canadians and it’s up to you to watch for them.
Co-Signing a loan.
While this might make sense on a rare occasion, it should be avoided most of the time and only be considered with extreme caution.
I realize that it can be hard for young people to buy their first home these days but if they can’t qualify on their own, they likely shouldn’t be going ahead. Not only will your co-signing reduce your own borrowing capacity, if the loan isn’t repaid it can be disastrous to your own finances.
Not carrying any credit at all.
With all the pitfalls of having access to credit, it is still a necessary evil for most people. If you elect to go without a credit card or any other credit vehicle, you won’t build up a credit score which means you won’t be able to qualify for a loan when you need one.
And don’t cancel your first credit card either. Longevity in your credit history is equally important!
Having bad credit isn’t permanent and your score can be improved over time. But like many things in life, doing so takes a little bit of time and effort. But it’s not that hard.
Just put a semi-annual reminder in your calendar to sit down and review your credit and request a report.
Ask most people where they would go for a loan, and the answer is usually their bank. But what about when the banks can’t – or won’t – lend?
The commercial disruption and consequent financial ramifications, first of the financial crisis and now more dramatically COVID-19, have challenged the banks’ primacy in the lending arena. As a direct result of the financial crisis in 2008, regulators sought to build up bank liquidity and limit leverage.
Basel III was introduced which required banks to maintain appropriate leverage ratios, sufficient levels of reserve capital and introduce countercyclical measures. These requirements are assessed on an annual basis and revised to minimise the risk of system-wide shocks and prevent future economic collapses.
What did this mean for borrowers? Loans were more difficult to secure, requirements on collateral became stricter and other terms and conditions became more restrictive.
Hit from all sides
In 2020, Basel III ratios for banks were revised upwards again (meaning more capital was required against risk-weighted assets), COVID-19 was announced a pandemic by the WHO and global financial markets crashed. Consequently, banks have been driven into preservation mode as they wrestle with lower profits due to the introduction of interest rate cuts and higher cost of risk with a deterioration in asset quality.
In addition, most commercial banks across the Gulf have rationalized their balance-sheets to focus on assets deemed safer based on the sector, business model and the maturity stage. As such, there has been an increase in lending to government/government-related entities and large-cap corporates, thus reinforcing the challenge of accessing finance from banks for many small, medium and mid-cap businesses.
Developers left with little
The real estate sector is a prime example of where we are seeing a significant liquidity issue, as banks shy away from financing any except government-backed assets. Developers are unable to unlock funds as usual from their existing projects to recycle into new ones.
The bond way
The second port of call is usually debt capital markets, i.e. issuance of bonds or sukuks which can be listed and/or traded over the counter. There are many advantages for companies to raise a bond, including more flexible terms and non-amortising structures. That said, it is a long process, with an operating history of three years preferred. Ratings are required and financial information about the company must be disclosed publicly.
Specialist advisors and investment banks assist companies in issuing bonds, but it is a long process and is subject to investor demand at the time of issuance.
So where do businesses turn now? Step forward alternative finance. Simply put, it enables businesses to access quick, efficient, and flexible private debt from a source outside the traditional banking and capital market structures.
What is stopping businesses from taking advantage of such attractions? Misperceptions remain, with many business owners mistakenly viewing it as more expensive. And many view it as riskier and only for ‘bad credit’.
In fact, alternative finance providers are typically well-established financial institutions with the ability to quickly assess an opportunity, consider individual requirements of borrowers, and provide a bespoke solution that gives borrowers the flexibility they need while still protecting the interests of the lender.
These advantages enable businesses to access capital often far more quickly than via traditional methods and without some of the restrictive requirements, including tailored covenants and non-amortizing structures.
A deal which Shuaa completed in Dubai’s hospitality sector is a case in point. With a project already 85 per cent complete, the developer needed further funding – which the senior lender was unwilling to provide.
Getting a project to ready status
Due to leverage covenants, the developer was unable to raise debt from other sources, and because the asset was under construction the developer was unable to raise equity at an acceptable valuation. Shuaa was able to fulfil the complex requirements of the transaction through a preferred equity instrument, with a minimum return payable at maturity, thus allowing the project to complete without any impact on their existing bank facilities and no dilution for shareholders.
The hotel commenced operations shortly after our investment, and the owners were able to refinance the entire capital structure, repaid the existing debt, redeemed the preferred equity and released some cash to the shareholders.
So, businesses can find that alternative finance in fact represents an ideal funding instrument: quick and more flexible than bank debt without the complications of issuing a bond. Meanwhile, for investors, it offers the potential to participate in interesting business opportunities at a lower point on the risk curve than equity with attractive returns.
All of which makes the “alternative” a viable and appealing option. As the youngest and now third largest asset class in the private capital universe, global private debt assets under management (AUM) have consistently grown and expected to reach 41 trillion by 2021. The alternative is playing an increasingly important role on the global stage to cater to an ever changing environment.
The expectation is that the trend will continue, particularly in markets such as the GCC.
– Natasha Hannoun is Head of Investment Solutions at Shuaa Capital.