Hackett, 65, will be succeeded by his heir apparent, Jim Farley, Ford's chief operating officer, effective Oct 1. Farley, 58, will work with Hackett on a "smooth leadership transition over the next two months," according to the company.
The leadership shakeup will make Farley the fourth CEO of the automaker since the Great Recession, which nearly bankrupted the automaker a decade ago. Ford shares jumped nearly 3% following the announcement Tuesday, but gave up about half the day's gains by afternoon trading.
Since beginning to lead Ford in May 2017, Hackett, a former CEO of furniture company Steelcase, has done little to create confidence in the automaker on Wall Street — a reason his predecessor, Mark Fields, was ousted after a less than three-year tenure.
Shares of Ford are down about 40% under Hackett. The stock, which has a market value of $26.1 billion, is down 28% in 2020.
Hackett previously had not expressed any interest in retiring. In February, amid an executive shakeup, he said, "I plan on staying in this job." He cited a close relationship with Farley that would "realize the value" the company has been promising.
Hackett said now was the right time to transition to Farley because the company has momentum from its recent product unveilings, including the Ford Bronco and a better-than-expected performance during the coronavirus pandemic.
"The wind in our sails is really starting to pick up," he told reporters during a call. "Jim (Farley) had a big role in that, and I can feel confident that the things I was asked to do have really started to take root."
Hackett has been criticized for his lack of transparency and leadership and for the execution of his multiyear restructuring plan that aimed to increase profitability by focusing on core products and all-electric and autonomous vehicles.
"Hackett had a shot. He was there for three years, not really a car guy," said David Kudla, CEO and chief investment strategist of Mainstay Capital Management in Grand Blanc, Michigan. "We struggled early on with what was his vision for the company."
Kudla, who closely follows the automotive industry, believes it's a "good move" that will better instill confidence within and outside of the company.
Hackett will continue as a special advisor to the company through March, according to Ford.
"I am very grateful to Jim Hackett for all he has done to modernize Ford and prepare us to compete and win in the future," Executive Chairman Bill Ford said in a release.
The former furniture executive won favor with Ford, great-grandson of company founder Henry Ford, because of his reputation in Silicon Valley and motivational skills.
The chairman complimented Hackett for his leadership during the coronavirus pandemic, streamlining the automaker's operations, forming a global partnership with Volkswagen. Hackett also shifted the company's product portfolio away from passenger cars, among other internal actions. During the call with reporters, Ford promised a "seamless" transition to Farley.
Hackett chose Farley over Joe Hinrichs, a longtime Ford executive who left the automaker amid the executive restructuring, as his heir apparent in February.
Farley said he's "optimistic" about the company's growth plans for its commercial lineup as well as emerging plans for autonomous and all-electric vehicles, including the upcoming Mustang Mach-E crossover.
"We need to swing for the fences," he said. "To grow and expand where we are already strong."
Farley joined Ford in 2007 as global head of marketing and sales. He has held a variety of roles since then, including head of the automaker's Lincoln luxury brand and several international operations such as Europe and South America.