Hiring a new CFO is tough, but GM and Ford are doing their best to make the process easier by bringing in two different people with contrasting backgrounds. When it comes to driving success for both companies, however, those experiences may cancel each other out somewhat.
The “challenges faced by ford motor company” is a challenge that both General Motors and Ford are facing. The two companies have different backgrounds, but they are working together to face the challenges of their industry.
Many of the difficulties that GM and Ford confront are similar, such as chip shortages and supply-chain interruptions. The automakers, on the other hand, chose finance heads with wildly varied backgrounds to assist them negotiate what is shaping up to be a watershed moment in the industry.
Ford appointed a 30-year Ford veteran with expertise in operations, Asia, and self-driving technologies to CFO in October 2020. A few weeks later, GM appointed Paul Jacobson, the former chief financial officer of Delta Air Lines Inc., to head its finances.
The two CFOs are devoting billions of dollars to revamp their firms to fit with evolving consumer needs and industry trends little over a year into their posts. Tesla Inc., a competitor, is the industry leader in electric car sales in numerous areas. The company’s market value is over $960 billion, much above that of GM and Ford, which each have a market capitalization of roughly $80 billion.
Today, we’ll look at how GM’s finance chief is approaching the issues ahead, and tomorrow, we’ll look at how Ford’s CFO is approaching them.
General Motors is adopting a long-term approach.
Paul Jacobson, GM’s Chief Financial Officer, spoke to investors in early October.
General Motors/Jeffrey Sauger photo
Mr. Jacobson said that one of GM’s most important goals is transformation. The manufacturer of gasoline-powered automobiles wants to expand into the electric vehicle market and generate recurring income via subscription services, insurance, and other items. GM hopes to introduce self-driving vehicles on American roads in the future.
This necessitates a shift in mindset across the organization. “We wanted to develop the expression ‘disciplined optimism,’ since it’s all about decreasing costs and boosting efficiency in a classic industrial organization,” he added. In the context of technology developments and new business models, the mindset of “every dollar spent is a dollar squandered” doesn’t function well, he added.
Mr. Jacobson’s promotion to GM came as a surprise. The executive had been the company’s CFO since 2012 and had worked with Delta for over 25 years. Mr. Jacobson said he had done “all I ever envisaged, dreamt about” at Delta and that he would be leaving in February 2020.
Due to the coronavirus epidemic, it was postponed for a few months, but then Mr. Jacobson departed for good. Dhivya Suryadevara, GM’s finance head, departed the business in August 2020 to join Stripe Inc. as CFO. Mr. Jacobson was soon summoned by the automaker.
Changes may already be seen. Mr. Jacobson and Chief Executive Mary Barra established lofty sales and profit targets for GM, which went beyond the typical five-year scopes used by many automakers. Instead, the corporation set goals for 2030, including tripling revenues to $280 billion a year, up from $140 billion on average over the past five years, and increasing margins to around 12 percent to 14 percent, up from 7.9% last year.
According to a GM spokeswoman, the company also aspires to be carbon neutral by 2040 and has set a goal of using solely renewable energy in its U.S. plants by 2025. Mr. Jacobson said that the corporation must ensure that “not every choice is made through the prism of some short-term KPIs.”
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Analysts say that, in addition to long-term goals, GM delivers monthly updates to investors and Wall Street, communicating more than in prior years. According to experts, management is marketing to investors the idea that GM will become a technology firm that also sells automobiles in the long run.
“It’s critical to me that people understand the company’s fundamental worth,” Mr. Jacobson added. GM is highlighting a number of active initiatives, including its attempts to establish a North American supply chain for batteries and other components for electric cars, upcoming model releases, and ambitions to rapidly develop its new companies.
GM’s stock has risen about 50% since the start of the year, closing at $58.41 on Tuesday, down 1.25 percent from the previous day’s finish.
Analysts applaud the corporation for having such long-term objectives. “It’s a hazardous proposition for a corporation to do that,” said Philippe Houchois, an investment bank analyst at Jefferies Group. “However, it is quite useful since it helps you to plan.”
From the ignition to the brake system, a contemporary automobile might include over a thousand semiconductors. As the worldwide semiconductor shortage worsens, automakers ranging from GM to Tesla are being pushed to alter output and rethink their whole supply chain. Sharon Shi (illustration/video)
GM raised its guidance for adjusted earnings before interest and tax in 2021 to around $14 billion earlier this month, up from its previous range of $10 billion to $11 billion at the start of the year, as it benefits from strong pricing, cost controls, and the fact that some of the semiconductor shortages were not as large as initially forecast.
According to the CFO, the business aims to finance its investment plans, which total $35 billion by 2035, using internally produced cash. Mr. Jacobson stated at a recent investor conference, “There’s money in the account, the checkbook is open.”
GM plans to spend billions on electric cars, including a joint venture with LG Energy Solution, a subsidiary of LG Electronics Inc., to establish a battery-cell plant. The automaker is also considering converting existing factories to create electric automobiles. Its Orion assembly factory in the Detroit suburbs will become a center for electric pickup truck production.
The LG relationship is an example of how GM, like its competitors, is seeking for new ways to collaborate with component suppliers. The automaker has formed partnerships with some of the industry’s biggest brands, like Qualcomm Inc. and NXP Semiconductors NV, to co-develop and manufacture computer chips. Despite this, Mr. Jacobson expects a shortage of semiconductors to persist until 2022.
By 2025, GM wants to sell more than 30 distinct electric vehicles throughout the world. Mr. Jacobson drives a fast blue Corvette convertible and makes advantage of the car’s Super Cruise feature, which enables him to drive hands-free. He said, “I was thinking, ‘OK, what do I do with my hands now?’” He takes advantage of his newfound freedom by keeping time with music.
Part two on Ford CFO John Lawler will be published tomorrow.
Nina Trentmann can be reached at [email protected]com.
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