By Mike Colias
Ford Motor Co.'s Chief Operating Officer Jim Farley will take over as chief executive, succeeding the retiring Jim Hackett, who is more than three years into a turnaround effort that has yet to lift profit or the auto maker's depressed share price.
The company said Tuesday that Mr. Farley, 58 years old, will succeed Mr. Hackett, 65, on Oct. 1. Mr. Hackett will remain in an advisory role through next spring, the company said.
Ford was already struggling to revamp its money-losing overseas operations when the coronavirus pandemic forced auto makers to shut down their factories, sending Ford scrambling to borrow money as it burned through billions of dollars in cash. Ford's factories have recovered nearly to prepandemic levels, and the company last week signaled a third-quarter profit.
Mr. Farley emerged in February as the leading contender to take over, when the former strategy chief and longtime marketing executive was elevated into the chief operating officer role. His promotion coincided with the sudden retirement of Ford's president of automotive, Joe Hinrichs, who essentially had been serving as a co-No. 2 with Mr. Farley in what many viewed as a competition for the top job.
Ford Executive Chairman Bill Ford Jr. said the CEO change has been planned for some time. He lauded Mr. Hackett for revamping Ford's vehicle lineup, in part by shedding unprofitable sedans, and taking on a major revamp of Ford's business outside the U.S. through a continuing, multibillion-dollar restructuring.
"It's my belief that he still doesn't get enough for taking on the tough issues," Mr. Ford said during a media conference call Tuesday. He also described Mr. Farley as a "car guy" who understands the technological shifts disrupting the car business, from driverless cars to the influx of digital services into the cockpit.
Ford's stock was up 1.4% in early afternoon trading, to $6.78.
"We believe Farley brings a greater sense of urgency and action," Credit Suisse analyst Dan Levy said in an investor note Tuesday.
In an interview, Mr. Farley said his priorities for increasing Ford's profit in the critical North America market include the successful introduction of several new models, including the first new Bronco sport-utility vehicle in more than two decades. He also wants to reduce the cost of Ford's vehicles to boost margins while stamping out nagging quality problems that have driven up warranty costs.
"When we benchmark our competitors, we think there's a lot of opportunity for material cost reduction," he said.
Mr. Hackett, a former office-furniture CEO who had no auto-industry experience before arriving at Ford, was appointed CEO in May 2017. At the time, Mr. Ford praised him as a change agent who could guide the company's long-range strategy in an industry buffeted by disruption, from big bets on electric and driverless cars to incursions by tech giants looking to take more control of the car's cockpit.
But beyond mapping the future, Mr. Hackett has grappled with more-pressing problems in Ford's manufacturing business today that continue to weigh on profit.
Troubles have popped up in Ford's U.S. business, its main profit generator. The company stumbled last year on the first redesigned Explorer SUV in nearly a decade, one of the auto maker's most important vehicle launches in years. Quality problems on certain models also have led to higher warranty costs, which swelled to around $5 billion, roughly 30% higher than past years, Mr. Farley told analysts in February.
Mr. Hackett said in an interview that he thought his outsider perspective -- which included an emphasis on stripping out layers of bureaucracy and thinking more critically about long-term changes to the car business -- rubbed some people the wrong way during his time at the helm. He said he believed he had changed Ford's culture and that the financial results will follow.
"The test is our people, not Wall Street or even our customers," he said. "Could they walk away from a bureaucracy that everyone recognized was navigable, but really was slowing us way down?"
Ford's operating profit has fallen for three straight years, including a 9% drop to $6.38 billion in 2019, a year in which executives at one point thought they would increase earnings. Mr. Hackett said in February that he was disappointed in the 2019 results, after having signaled that was the year Ford would reverse the earnings slide.
The Dearborn, Mich., auto maker's results contrast with rival General Motors Co., which has posted better profit margins and shown greater earnings resilience during the pandemic. In the second-quarter, GM breezed past analysts' expectations, reporting a $589 million operating profit for the April-to-June period, while Ford posted an operating loss of $1.9 billion.
Investors during Mr. Hackett's tenure often punished Ford in the wake of the disappointing results. Shares had been hovering around a decade-low before the pandemic sent them down further, though they have rallied about 67% since the spring, to $6.69 at Monday's close. They have fallen 40% since Mr. Hackett took over.
To combat losses overseas, Ford is in the early stages of a multiyear, $11 billion restructuring that includes closing plants and shedding workers in Europe and Latin America. Mr. Hackett has shuffled his executive team in China, where Ford's sales have cratered more than 60% from their peak a few years ago, transforming years of steady profit into losses.
Mr. Hackett, a former University of Michigan football player who also served as the school's interim athletic director last decade, has at times frustrated investors and analysts, some of whom complained that his turnaround was taking too long to develop.
More than a decade ago, Mr. Ford and the board turned outside the company to steer Ford out of one of its darkest hours by hiring former Boeing Co. Chief Executive Alan Mulally, who helped the auto maker avoid the bankruptcy fate suffered by its closest rivals, GM and Chrysler Corp.
Over an eight-year tenure, Mr. Mulally improved profitability in part by shedding brands and simplifying Ford's vehicle lineup, while rallying employees around a "One Ford" mantra aimed at stitching together the company's fractured corporate culture.
Ford has struggled to find its footing since Mr. Mulally's 2014 departure. His successor was Mark Fields, who recorded a few years of heady profits but was pushed out in part because the board felt he wasn't moving fast enough to position Ford for the changes buffeting the car business, people familiar with the move have said.
At the time, Mr. Ford stressed the need for swift action, and drew parallels between Messrs. Hackett and Mulally, and said Mr. Hackett, who ran office-furniture maker Steelcase Inc. for about two decades before retiring, could "capture the hearts and minds of our employees."
Mr. Hackett has touted a redesign of Ford's business. Last year, the company eliminated layers of management -- including several hundred salaried U.S. job cuts -- a process aimed at speeding up the company's decision-making and vehicle development.
To lift profitability, Ford in 2018 decided to drop almost all of its passenger-car lines in the U.S. to focus investment on more-profitable trucks and SUVs.
Mr. Hackett also has pushed Ford into potential growth areas, as technology advances and consumers seek alternative ways of getting around that are de-emphasizing the vehicle-ownership business model. Ford is investing in driverless-vehicle technology with an emphasis on the commercial market, including tests of autonomous pizza and flower delivery, for example.
But some Ford executives and employees have struggled with Mr. Hackett's cerebral style, which includes a heavy dose of design thinking, a practice that attempts to solve problems by getting into the mind of the consumer.
Mr. Farley joined Ford in 2007 as a marketing executive from Toyota Motor Corp. He has said he was drawn to Ford in part because of deep family roots -- his grandfather joined the company in 1913.
He served as Ford's marketing chief for many years before overseeing a turnaround effort in Europe from 2015 to 2017. Over the past three years, he served as head of strategy and oversaw Ford's global businesses before getting promoted into the chief-operating role.
"We're committing to develop a very specific plan," Mr. Farley said during Tuesday's call.
Write to Mike Colias at Mike.Colias@wsj.com