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Mark Fields

CEO: Ford can make money on public transit

Nathan Bomey
USA TODAY

Ford is poised to reshape its business model to capitalize as cities redesign public transportation and urban development in the age of ride-hailing, self-driving cars, CEO Mark Fields said in an interview.

Ford acquired the crowd-sourcing ride-sharing van service Chariot in September.

It's a far cry from simply making and selling cars to individual customers and corporate fleets, but Fields told USA TODAY in an interview at the Detroit auto show that Ford projects 20% profit margins from these so-called "mobility services," which is about double typical North American profit margins for automakers in good times.

Fields said Ford plans to help cities design public-transit solutions and said Ford autonomous vehicles could be part of city-government ride-sharing programs. Ford plans to release a self-driving car without a steering wheel that's capable of operating in certain cities in 2021.

Some experts believe that in the future, many consumers will user their smartphones to summon self-driving cars instead of owning their own vehicles, a prospect that poses risks and opportunities for automakers. The risk is that automakers will sell far fewer cars, but the opportunity is that they can share in the new way in which its vehicles are used.

"New business models on mobility services can offer up a lot of opportunity for reoccurring revenue on, let’s say, the usage of our products, as well as new opportunities for us working with cities," Fields said. "So we think it could add a whole new element of growth to our business going forward."

Ford announced Monday at the North American International Auto Show that the company's Chariot van ride-sharing service will expand from two cities to eight after it acquired the service in September.

Ford CEO Mark Fields is warning about negative effects of car tariffs

Other moves are further out.

"I suppose if you're looking far enough out, we'll have flying autonomous vehicles,"  Ford Executive Chairman Bill Ford Jr. told a group of employees on Sunday in an event attended by a USA TODAY reporter. "Why not? We already have drones. We will have the autonomous capability. So if you're looking long term, I think that's very much a possibility."

In any case, the advent of autonomous vehicles will disrupt the business model for transportation giants like Ford.

Fields spoke to USA TODAY about how the automaker is adapting.

Excerpts, edited for clarity and length:

USA TODAY: Could we see autonomous vehicles as a public-transit solution?

Mark Fields: Particularly in dense urban areas, there’s going to be a higher penetration or growth of autonomous vehicles. Let’s say it’s in a ride-sharing or ride-hailing service.

Our view is that cities will want to coordinate all these different types of transportation options. We can be a part of helping them architect that, in addition to bringing, let’s say, a dynamic shuttle through Chariot, or bringing our autonomous vehicles or our electric vehicles.

Do you have any goals in terms of benchmarks, years by which you want to have X percent of your revenue on services versus sales of units?

We haven’t. We want to grow it. We’ve said that in these emerging opportunities around mobility services we think there’s a good opportunity to make healthy margins of 20%-plus.

Your dealership model in the U.S. today: Is it restrictive to this kind of transformation?

No, I actually think it’s a huge advantage for us. There will be a spectrum going forward where people will want to shop, buy, own and drive vehicles the way they have for many, many years. And clearly our dealers are playing an important role in that.

When you think about mobility services, autonomous vehicles, for example, up time is going to be really important. We have 10,000 distribution and service points around the world. That is a huge advantage for us that our dealers can play a very important role in.

There’s a debate on how autonomous vehicles and ride-sharing will reshape cities. Some people think it may cause people to move closer to cities, and others think maybe people will move farther out. Do you have a perspective on that?

I think it’s still too early to tell. What we do know is it could change the landscape regardless. One of the reasons that we’re engaging cities is they’re thinking about their infrastructure investments going forward.

The transportation system that served us the last hundred years is probably not going to serve us just as well the next hundred years.

We see reports of massive cost overruns with the Second Avenue Subway in New York City, the Washington D.C. Metro system breaking down, while in the city of Detroit the bus system is still getting back on its feet. Do you feel like autonomous vehicles can be a solution for some of those mass-transit problems?

I think it can be part of it. It’s just not just the silver bullet of autonomous vehicles. For every Chariot van that we put on the city streets, it (replaces) between 20 and 25 vehicles in a downtown area.

Do you view Uber and Lyft and other ride-hailing companies as competitors, partners or some combination of both?

All of the above.

They also have designs on helping cities reshape themselves.

All I know is some cities are not too happy with the taking up of what they call curb space, particularly cities that have dedicated bus lanes and things of that nature.

So that’s why I think our approach is different from some of these other companies. We want to talk with a city first, understand what their issue is and partner with them to solve those problems.

Follow USA TODAY reporter Nathan Bomey on Twitter @NathanBomey.

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