Editor’s Note: At CNN Business’ new live event series, The Table, we speak with transformative voices across industries about the ways in which technological disruption is changing their organization and the economy at large. Later this month, we’ll sit down with Jennifer Bailey, the vice president of Apple Pay.
In the future, cars will be electric. They will drive themselves. People who use them might never own them, but share them instead.
The auto industry is going through massive change – and Tesla and its outspoken CEO, Elon Musk, are seen as the great disruptors. But as Ford CEO Jim Hackett pointed out during a recent interview for CNN Business’ The Table with Poppy Harlow in Detroit, his company caused, arguably, the biggest industrial disruption of the entire 20th century. And he’s not about to let anyone else take away that legacy.
“I happen to compete with a rocket scientist who’s really smart, and I respect that about him,” Hackett said of Musk, who is also the CEO of spacecraft company SpaceX. “And yeah, he’s competing with the ultimate disruptor in Henry Ford.”
When the Ford (F) Model T was introduced in 1908, there were 200,000 cars on America’s roads. By the time it went out of production in 1927, there were 20 million – and about half of those cars were Model Ts.
The Model T disrupted not just the auto industry, but just about everything in America. It led to motels, parking lots, gas stations, highways and traffic jams. That one affordable, rugged machine literally altered the American landscape forever.
Next to that, Tesla (TSLA)’s impact seems modest.
Sure everyone agrees that, eventually, most cars will be electric. Tesla, just 16 years old, is already selling more electric cars than any other automaker. Even the long-established industry titans that are just now venturing into electric cars owe a debt to Musk. His company has made electric cars seem cool and desirable.
But that doesn’t mean the future of the industry lies solely in Tesla’s hands, said Hackett.
“[F]itness, as we were saying, is a compendium of things that you have to get right. It’s not just the technology,” Hackett said. “In this case, we have to have an industrial model. Ford is really good at this.”
Hackett gestured west toward Dearborn, Michigan – Henry Ford’s birthplace and the location of Ford’s global headquarters, as well as its most famous factory, the River Rouge Complex.
“[It] took 12 hours to build a vehicle before [Henry Ford] built it. It went down to 52 minutes,” Hackett said. “Today, we build an F-150 every 53 seconds.”
When it opened in 1917, River Rouge was revolutionary. Henri Citroën, Louis Renault and Kiichiro Toyoda, founder of the Toyota Motor Company, all visited Dearborn to see how Ford did it, taking lessons back to their home countries.
Tesla, on the other hand, has famously struggled to increase production at its Fremont, California, factory and, even as output has risen, quality issues remain. Despite being impressed by their practicality and performance, Consumer Reports doesn’t recommend any Tesla products because of poor reliability.
Of course, having been a disruptive force over a century ago doesn’t mean much if the industry goes on changing without you. Sears changed American retailing in the 20th century, but that hasn’t helped it compete against Amazon in the 21st. Hackett’s job is to help Ford manage the raft of changes heading the auto industry’s way today.
Ford’s profits still rely heavily on those gasoline- and diesel-powered cars and trucks being turned out one-a-minute. But Hackett knows the future will be different – and he insists that Ford will not be caught unawares.
As it works to ready itself for the future, Ford has been cutting jobs, making investments and forming partnerships. The automaker recently invested $500 million in Rivian, a Michigan-based company working on electric pickup trucks and SUVs, and the two companies are working together on a plug-in vehicle for Ford.
Similarly, Ford’s new partnership with Volkswagen will also yield two new electric models for the European market. As part of the deal, Volkswagen agreed to join Ford in investing in Pittsburgh-based Argo AI, an autonomous vehicle platform company. Earlier this year, Ford invested $1 billion in Argo, a bold move that proved the company was serious about self-driving technology.
Lyft and Uber have said their ride sharing services will someday spell the end of car ownership, but Hackett disagrees.
“Absolutely we will be selling cars, and trucks, and other kinds of products, because the future disruption is not coming from rides… We already have rides today. So, the disruption is different that’s coming,” he told Harlow.
To Hackett, that disruption will come from self-driving technology and the artificial intelligence used to make cars smarter.
He said ride sharing companies, like Uber, Lyft and China’s Didi, will use self-driving technology to make taxi rides cheaper. At the same time, a family can buy an autonomous car for their teenage daughter and feel better knowing that the intelligence within the car will reduce her chances of having an accident.
Hackett expects Ford will have fully autonomous vehicles ready by 2021 and will even be ready to start testing them on real roads without human drivers, assuming regulators will permit that.
As CEO of Ford, Hackett is operating what is essentially a family-run corporation. Thanks to Henry Ford’s deep mistrust of Wall Street, there remains a special class of Ford stock that can only be held by Ford family members. This stock represents just 2% of Ford’s shares but these elite stockholders have 40% of the voting power of all Ford stock. That family involvement, held over generations, gives Ford a longer view, said Hackett.
“Families have a longer arc and we have family owners out here,” Hackett said. “They care about the shareholder return, they care about making money, but they’re purpose driven and that’s it. We’re in service of somebody else in these jobs, not ourselves.”