Ford defends plan to shareholders: ‘We're simply reinventing the American car’

Ford's top executives took heat from shareholders over their plan to do away with sedans as we know them in Ford's North American lineup, as the company held its annual meeting Thursday. Critics said the plan to shelve the Fiesta, Focus and Taurus, reduce the Focus to one crossover model, and concentrate on high-margin trucks and SUVs was a shortsighted abandonment of entire market segments of affordable vehicles.

"This doesn't mean we intend to lose those customers," Ford CEO Jim Hackett said. "We want to give them what they're telling us they really want. We're simply reinventing the American car."

Ford has said SUVs/crossovers and pickups will constitute 90 percent of its North American lineup by 2020. And though only the Mustang and new Focus Active will remain, it plans to add new vehicles going forward that offer better fuel economy and utility, including EVs and hybrids. Hackett characterized the shift not as an abandonment of traditional cars but as a transformation of them.

"We don't want anyone to think we're leaving anything," Hackett said. "We're just moving to a modern version. This is an exciting new generation of vehicles coming from Ford."

It was Hackett's first annual meeting as CEO, and for the second year it was conducted online rather than in person. The change to Ford's lineup is part of Hackett's overall plan to cut $25.2 billion in costs by the year 2022.

Executive Chairman Bill Ford Jr. blamed the negative reaction to the lineup plan on media coverage.

"I wish the coverage had been a little different," he said. "If you got beyond the headline, you'll see we're adding to our product lineup and by 2020 we'll have the freshest showroom in the industry. The headlines look like Ford's retreating. In fact, nothing could be further from the truth."

While Ford was clear about its plans for the Blue Oval, it has been less clear about the Lincoln brand. Hackett on Thursday said only that the Lincoln Continental, re-introduced just two years ago, would continue "through its life cycle" — but it has been such a slow seller that rumor has Ford killing the Continental again after that, and Hackett made no mention of a new generation. Presumably the MKZ sedan will go away when its twin the Ford Fusion does, but although Ford has outlined end dates for other models, the Fusion's departure is open-ended.

The stock price has been a frustration for investors for years and has fallen 12 percent since the first of the year. Bill Ford addressed that sore subject Thursday.

"I share your frustration. The whole management team does," Ford told shareholders. "Look, we want to get the stock price moving. The business can get fitter, and it will get fitter."

Despite overall profitability, Ford's market capitalization of $44 billion trails unprofitable Silicon Valley electric car maker Tesla Inc, which has a market capitalization of $51.3 billion, a reflection of investor doubts that Ford can re-ignite growth.

But shareholders should expect "fairly large" changes in the coming year, Bill Ford told Reuters.

In addition to lineup changes and cost-cutting, Ford still faces questions about lagging performance in certain regions and calls for more details on its restructuring.

"It could be regions, it could be functions, it could be areas of emphasis," Bill Ford said in an interview on Tuesday. "We've done some big things, and we still have some big things to do."

The automaker lost $4 billion in South America from 2013 through the first quarter of this year, and its chief of global operations said in January it was "exploring every option you can imagine."

Analysts have also urged an overhaul of European passenger car operations to help Ford reach its 8 percent pre-tax profit margin goal.

Bill Ford said the automaker will be able to use cost savings to return cash to shareholders, invest in new technology and businesses and fund restructuring."We believe we can take care of all three," he said.

Voters in Thursday's meeting once again rejected an annual attempt to remove the Ford family's special class of shares.

Finally, Ford officials declined to say whether the board of directors, who met this week, had voted to buy and rehabilitate the decrepit and abandoned Michigan Central Station in Detroit's Corktown neighborhood, part of its plans to buy up other properties and create a large creative campus there.

But Automotive News reported that workers in construction vests and hardhats were spotted Thursday inside the fence surrounding the 500,000-square-foot depot.

Material from Reuters was used in this report

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By Greg Rasa