F Ford Motor Company

By Austen Hufford 

Ford Motor Co. has named a new chief of North American operations following the abrupt departure of Raj Nair due to misconduct allegations, a move that is part of a wider reshuffling of operations by a new chief executive trying to address investor concern about the company's ability to keep up with Detroit rivals.

The Dearborn, Mich., auto maker on Thursday appointed Kumar Galhotra, 52, to head a unit that accounts for the bulk of Ford's profits. Mr. Galbotra has been running marketing and the Lincoln brand, a once-dominant U.S. luxury brand that has gained momentum in China, and takes the helm of the Ford's core business unit as profits are under increasing pressure.

Mr. Galhotra 's appointment leads a series of top personnel changes being implemented by CEO Jim Hackett in the wake of disclosures about Mr. Nair's alleged breach of company standards. Mr. Hackett is less than a year into his tenure running Ford, making a variety of management changes and ordering cost cuts.

Mr. Hackett is rushing to make Ford a more efficiently run company while also hammering out a longer-term response to driverless cars, ride-sharing services and electric vehicles. Even though Ford still posts relatively strong profits, the company is largely seen trailing its key rival General Motors Co., which has made clearer bets on autonomous vehicles and slimmed down global operations to focus on only the most profitable markets.

Ford is heavily dependent on sales of trucks and sport utilities for most of its automotive profits. That strategy is threatened as U.S.-market growth stalls and competitors, including GM, launch full-size pickup trucks.

The timing of the most recent moves is likely driven by Mr. Nair's exit, which was announced late Wednesday. Mr. Nair, 53, was ousted after an internal review based on an anonymous tip led to findings of "inappropriate behavior," the company said.

The auto maker didn't detail the nature of the allegations against Mr. Nair. Ford's one-time global product chief, who had spent his career at the company, in a statement acknowledged "regret" over his behavior.

The departure of Mr. Nair removes a rising star and respected car-engineering expert from Mr. Hackett's management bench. A top task Ford needs to accelerate is entering the electric-vehicle market with a more compelling answer to Tesla Inc.'s products and GM's Chevrolet Bolt.

Mr. Hackett took over for Mark Fields about nine months ago, handing out new assignments to several lieutenants including Mr. Nair. The company has seen a handful of high-profile exits, however, including a former head of strategy and the sudden departure of a key China executive. Mr. Hackett shuffled senior ranks as recently as October.

"It's been a revolving door at the top of Ford for the last year," Edmunds analyst Jessica Caldwell said. "The company really needs consistent, leadership in order to deliver the results Wall Street is demanding."

Ford's share price, trading at $10.67, is virtually unchanged since Mr. Hackett took over. The company has been losing ground to both of its Detroit rivals -- GM and Fiat Chrysler Automobiles NV -- in terms of operating profits, partially due to problems managing currency exposure and material costs.

The promotion of Mr. Galhotra and other appointments are designed to strengthen its automotive business, improve its operations and boost focus on emerging opportunities.

Ford said that Stuart Rowley would be chief operating officer at Ford North America; Joy Falotico will become Ford's chief marketing officer; and David McClelland will become the new chief executive of Ford Credit. John Lawler has been appointed vice president of strategy, succeeding Mr. Rowley, and Cathy O'Callaghan was named corporate controller for Ford and financial chief for global markets.

Mr. Hackett, a former office-furniture executive installed by Ford Chairman Bill Ford to sharpen the company's long-term strategy, has been touted as a visionary leader capable of navigating an industry undergoing rapid change, including pressure from Silicon Valley tech giants. Analysts, however, have said they want a clearer picture of how Mr. Hackett plans to revitalize a company that is underperforming its peers.

Ford's global profit margin fell to 5% last year, from 6.7%, for example, well behind GM's 8.8% margin.

During a conference call last month after Ford reported disappointing fourth-quarter earnings and reiterated a downbeat 2018 outlook, Morgan Stanley analyst Adam Jonas pressed the CEO to detail plans for cutting billions of dollars in costs. Mr. Hackett demurred, saying the details hadn't been fleshed out internally yet.

"That's a problem Jim," Mr. Jonas said on the call. "When are we going to be very clear and transparent?"

Write to Austen Hufford at austen.hufford@wsj.com

(END) Dow Jones Newswires

February 22, 2018 12:48 ET (17:48 GMT)

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