Ford CEO Mark Fields is trying to navigate his company through an era of upheaval in the auto industry. Cars are no longer merely steel on wheels. They're mobile computers that can respond to voice commands, serve as a hub for digital entertainment and drive themselves.
Fortune spoke with Fields recently at Ford's Silicon Valley lab, an office that opened earlier this year as a beachhead for innovation. He's hoping that having workers on the ground in the heart of the tech industry's capital will help the company identify and adopt new technology more quickly. Ford (f) is facing a stiff challenge to keep up from the usual auto making suspects plus newcomers like Google and Tesla. Even Uber, the ride hailing app, is a threat if people stop buying cars and use its service instead to be driven where they need to go.
The following is a Q&A with Fields that has been edited for length and clarity:
Q: How important are self-driving cars to Ford?
They’re important. But it’s more important to think about self-driving cars more holistically. We call this Ford Smart Mobility. It’s not only about autonomous vehicles, it’s about the connected car, it’s about mobility and ride sharing. It’s around the enabling technologies for the retail experience. All these things are connected. You can’t have an autonomous vehicle unless you have a connected car, and visa versa. You can’t have ride sharing without having the connection. They’re all intertwined.
Q: Is it important to be first? Ford isn’t really seen as being in the lead on self-driving cars.
It’s not the No. 1 thing that drives us. I think the No. 1 thing that drives us, and it gets back to our DNA as a company going back to our founder, Henry Ford, is around innovating to make things accessible to everyone -- not just the rich. Even now, semi-autonomous features are the building blocks for full autonomy. When you look the breadth of semi-autonomous features that we have in our vehicles, we’re in a leading position there. With everything from our Fiesta all the way up to our Lincolns -- customers can get a lot of these features. So as we go forward, we’re going to make sure that we continue to build on that legacy and push ourselves to make sure it's accessible and affordable – not necessarily being the first.
Q: Are you considering partnering with Google, which is only a few miles from here, or other companies on self-driving cars?
When you think about some of these enabling technologies, we have to ask ourselves some very important questions like what do we want to develop as our own core competency? Who do we want to partner with? We’ve done that throughout our history as a company. Where it makes sense, we’ll work with others.
Q: You talk about selling autonomous vehicles to the masses, but the components cost thousands of dollars extra. How do you get to the price where the average person can buy a self-driving car?
You innovate. In Silicon Valley, there’s Moore’s Law (the axiom that microchips will get more powerful and less expensive). I don’t know what the law is for the automotive industry. We’re always looking for ways to increase performance and capabilities and decrease cost. There are cameras, radars, and 3-D mapping. When you look at the cost of cameras, it's coming down significantly. When you get to autonomous vehicles, you’ll need much more computer processing capability in the vehicle. The cost of microprocessors is continuing to go down. Also, scale is important, and as a company, I think we have pretty good scale.
Q: How much of a challenge is Uber under the theory that fewer people will need to buy cars in the future?
We’re looking at some of these societal trends around mega cities with more than 10 million or more vehicles – the congestion, the air quality implications, and the growth of the middle class around the globe. Of course, the first thing they want to do is buy a car, which increases the congestion even more. We’re looking at that as an opportunity in two ways: One is to sell cars to people who want to own them. Two is to provide mobility experiences to people who otherwise we are not serving today. We’re doing these 25 experiments around the world right now – we’re about halfway through them – to understand what are some of the mobility issues [Editor's note: the experiments include a car sharing service, a commuter shuttle service, and technology that spots open parking spaces]. Then we're asking ourselves: How do we help solve some of these societal issues?
Q: How are those experiments going? And are you really interested in getting into those businesses?
It may seem far-fetched from a traditional automaker. But we’re asking our people to challenge and question tradition. That’s extremely empowering to the organization. This is a culture of innovation. We as a senior team need to allow it. Not all of these experiments will succeed. But that’s okay, because we are looking to learn from them. Some may go on to the next step and ultimately become some kind of service or product.
Q: How much do the high valuations of tech companies dissuade you from making tech acquisitions?
Any company needs to be always on the lookout for technology that makes sense. It gets back to what I mentioned earlier: Making decisions about what’s core for us versus who do we want to go out and partner with. In some cases, we have made acquisitions. We bought a company called Livio about two years ago (a developer of in-car connectivity software), because we thought that was core for us. But I think also you have to be wary of it. Because what can look like a really cool technology this month, may look like something else in six months.
Q: How much to you pay attention to the really far-out tech beyond self-driving cars?
In our business, you have one foot in today – making sure you’re running your business, meeting your sales forecasts, meeting your quarterly earnings – and also one foot into tomorrow: 10, 15 years down the road. We have a very disciplined process. That’s one of the reasons we’re here and growing. Some of these unique technologies are being born here today as we speak and will be born six months from now. That’s why it’s important for us to be part of this community.
Q: Ford’s is facing a tough challenge in China. General Motors and Volkswagen sell a lot of cars there. How is Ford going to do better?
We’re doing very well now in China. We’ve had record market share. In the first quarter this year, our share was 4.5%. Clearly that's not as large as some of our main competitors who are in the 10% or 11% range. But that’s up from almost 2% a couple of years ago. In the first quarter, we went from No. 8 in the passenger vehicle segment to No. 5. We were in Shanghai last week introducing our Taurus. We were not in the full-size segment – that’s a big segment in China. Now we’re going to be there. We now have a full lineup of SUVs. We’re expanding our manufacturing capability. We’re expanding our dealer network, particularly in the Tier 3 through 6 cities, where a lot of the growth is coming from.
Q: Ford is pushing to make Lincoln a global luxury brand. It's not the first time. Similar efforts have ebbed and flowed over the years.
It’s flowing now.
Q: Why is this time different?
The reason it’s different this time is that we understand the strategic importance of the luxury market. The luxury market is maybe 9.5% or 10% of the global industry. When you look at the profitability, it’s about one-third. So it’s very compelling. There are a lot of good competitors in the luxury segment. We thought long and hard about how do we differentiate Lincoln in a relevant way. At the same time, we have to understand that we are one of the smallest luxury players. So how do we turn that to our advantage and give that customer personal service? When you look at our dealerships in China, which we get to start from a clean sheet, it’s like walking into a high-end boutique. It's not one of these large factory-type things like a bakery where you take a number.