Posted on: August 27, 2017
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Ford CEO Jim Hackett speaks in San Francisco
Kelly Sullivan / Getty Images
Ford knows it needs to change. So much so that when it recently held a symposium on the future of urban transportation in San Francisco, the automaker didn't display a single car.
The setup may have seemed odd, but these are strange times for Ford. Ride-hailing, and the autonomous vehicles that once seemed like science fiction, are now real forces with the potential to do to Ford and its peers what the internet did to newspapers. Just as the internet made it unnecessary to pay for a paper subscription, ride-hailing services offer people a convenient and affordable alternative to car ownership. So Ford must develop a new playbook, and sometimes that means leaving the car at home.
“We get to author a lot of new technology, technology that my father never would have imagined possible, said Ford CEO Jim Hackett told the crowd at the symposium. “I am for the new technologies.” Ford named Hackett, a turnaround specialist, its CEO in May after the company’s stock dropped 40% over a three-year period.
Many experts believe the “new technologies” may well sever Ford’s relationship with its customers; In a future world where self driving cars can be summoned via smartphone, they say, the prospect of owning one’s own car, and being responsible for its upkeep, will be far less appealing than it is today. Eventually, the Wall Street Journal wrote, car ownership may become the equivalent of owning a horse: “a rare luxury.”
The end of car ownership likely wouldn’t be a fatal blow for Ford, since someone still has to make the cars, and tech companies like Apple have struggled to make their own. But it very well could make it more difficult for the company to sell its highly profitable, status symbol vehicles, and it would shift economic power into the hands of ride hailing networks like Uber and Lyft that can operate with any style of car, as long as it meets a basic standard. “If you look at any value chain, where ultimately are you deriving value? It’s at the end,” Ford’s City Solutions VP John Kwant told BuzzFeed News. “That revenue is paying for everything else previous to that, whether it’s the manufacturing, the design, the parts, the supply.”
If ride-hailing becomes that “end,” or the predominant way people access cars, Ford’s core business would be threatened. And the ride-hailing startups that have become Ford’s rivals are salivating at the possibility. “We know where the passengers are and where the demand is going,” Lyft president John Zimmer told BuzzFeed News last December, explaining why he thinks Lyft, not companies like Ford, will be the “end.” Keen to this challenge, longtime Ford competitor General Motors invested $500 million in Lyft last year.
Ford isn’t standing still. Last September, the company paid more than $65 million to acquire the shuttle service Chariot — “an extension of our value chain,” Kwant said — which picks up and drops off riders in four US cities, competing with Lyft and Uber. Ford also announced plans to invest $1 billion in Argo AI, an autonomous driving technology company. And if you walk the streets of San Francisco, you’ll see hundreds of “Ford Go Bikes” lining the streets, a bike share similar to CitiBike’s in New York except that Ford’s version is not simply a branding exercise. The company is attempting to understand how people get around in cities, which are where people are likely to phase out car ownership before those living in suburban and rural areas will.
Ford doesn’t appear ready to write off its traditional business of selling cars to consumers, either. Hackett, for instance, described a robot cars as “agents" that might be able to to go out into the world and complete tasks on our behalf (food pickup, anyone?), rather than staying parked without a human behind the wheel. “It can go somewhere and do something, it can be your delegate,” he said. That model sounds like one where ownership could persist, and Kwant said there's no reason privately owned vehicles and shared models can't operate alongside each other, with higher end vehicles still serving the shared model, like Uber Black today.
Though the symposium in San Francisco is a sign Ford knows where the future is heading, the hard part will be making the moves necessary to compete in that future word. In 2011, Ford executive Chairman Bill Ford delivered a TED talk outlining his vision for the automotive future. In it, he described an app where you push a button to summon a car that takes you where you need to go. Ford never launched that app, but Uber raised its Series A funding the same year. And six years later, Uber’s valuation is nearly $70 billion, compared to Ford’s $43 billion market cap.
Newspapers once faced a similar situation. In 2011, they saw online readers exceed print for the first time, yet they continued to devote the majority of their resources to the “paper,” which was still bringing in the cash — much like cars meant for private ownership are for Ford today. By 2012, Pew found newspapers knew they needed to change, but entrenched newspaper culture stood in the way, holding back companies that sought to prepare for the future. The newspaper companies sank, with a few notable exceptions. Ford faces a similar battle.
“It’s a journey and it’s not an easy one,” Kwant said. At the very least though, Ford showed up in the backyard of its would-be disruptors, trying to find the answers to the questions facing its business. “To ignore the fact that in urban settings fewer and fewer people are going to own vehicles,” Kwant said, “is to ignore reality.”
Likes Posted on: October 17, 2017
Likes Posted on: October 17, 2017