F Ford Motor Company

By Christina Rogers 

Ford Motor Co. made its latest plea for investors to view the auto maker more like a Silicon Valley company, promising lofty returns on future product ventures while warning that short-term profits will be pinched by deep investment.

The Dearborn, Mich., auto maker told investors Wednesday that its new business services unit will eventually deliver 20% margins, two-and-a-half-times bigger than profits in its core auto-making unit. It updated its plans for venturing into robo-taxi fleets, electric vehicles and other transportation services like bike sharing and shuttle vans.

Ford's share price has declined while Mark Fields has been at the helm, even as the company notched record operating profits. The focus under Mr. Fields -- who took over in 2014 after Alan Mulally spent nearly a decade on initiatives that had Ford getting back to basics -- has been on winning a technological arms race with rivals including General Motors Co. and Toyota Motor Corp.

The strategy will be costly and risky.

Ford on Wednesday said profit will shrink in 2017 due to investments, but will rebound in 2018 amid an expansion of its car and truck lineup and $3 billion in annual cost cuts in a three-year span beginning in 2016. It warned in recent months that this year's financial performance will be affected by a safety recall, costs related to Brexit and a slowdown in the U.S. market.

Mr. Fields is scrambling to catch up with Uber Technologies Inc., Google Inc., Tesla Motors Inc. and other nontraditional auto companies that have lapped Ford in electric-vehicle development, autonomous-vehicle testing and services allowing customers to share rides or cars.

The company has announced a flurry of partnerships and investments this year, reflecting the company's frenzy 15 years ago during the dot-com bubble to develop a slate of new business ventures and acquire luxury and electric-car brands.

Those initiatives drained Ford's coffers and most didn't pan out. Mr. Mullaly spent several years unwinding that strategy and shoring up Ford's finances.

"The world is moving from simply owning vehicles to owning and sharing them," Mr. Fields said. "That's why we are expanding to sell more vehicles and more transportation services at the same time."

Ford didn't put a timetable on its lofty 20% margin target for new initiatives, which compares with a forecast of 8% margins in the core operation selling trucks, sport utilities and cars in markets all over the world.

The company thinks autonomous vehicles account for up 20% of total vehicle sales by the end of the next decade, and the first deployments will be in urban areas, such as New York City and Metro Detroit.

Ford plans to roll out its first fully autonomous car with no steering wheel or pedals in 2021, but only for commercial purposes. A personal-use driverless car will be available in dealerships around the middle of next decade, Mr. Fields said.

Tests of these types of vehicles indicate auto engineers still have a long way to go in making autonomous vehicles behave in a way that reflects real-world driving patterns.

Ford's recent string of announcements, which include the purchase of a van-shuttle service in San Francisco and taking a stake in laser-sensor maker Velodyne Inc., have done little to soften Wall Street concerns about a cool-down in the U.S. market. Ford's stock is down 11% since the start of 2016 despite the success of the F-150 pickup truck and the coming launch of F-series heavy-duty trucks, which are among the most profitable vehicles sold in the world.

Ford says it total operating cash flow will remain positive through 2018 and the company expects financial results to improve in troubled Russia and South America as its restructuring efforts take hold there.

Ford Chairman Bill Ford Jr., speaking to reporters earlier in the week, said the company has an advantage with 113 years of car-making experience, and Ford is examining its role in the industry's evolution.

"That conversation has really shifted in the last year," Mr. Ford said, adding that tech firms are starting to realize building a car is no easy feat.

"People from the outside looking in really underestimated what we brought to the table, particularly in terms of technology," Mr. Ford said.

Write to Christina Rogers at christina.rogers@wsj.com

(END) Dow Jones Newswires

September 14, 2016 11:07 ET (15:07 GMT)

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