Ford has named the head of its driverless cars division as its chief executive in a sudden regime change, as the company that pioneered the assembly line looks to the next stage of the industry’s evolution.

The Detroit-based carmaker said Mark Fields, who has run the company since July 2014, was retiring with immediate effect amid an overhaul of senior management.

Fields will be replaced by Jim Hackett, who runs the smart mobility unit that houses Ford’s autonomous vehicle projects and is close to the executive chair, Bill Ford Jr.

Ford Jr, great-grandson of the company’s founder Henry, said Hackett was a “transformational leader” who would modernise the business by exploring areas such as artificial intelligence, robotics and 3D printing.

He and Hackett also emphasised the need to make decisions faster, with Ford Jr hinting at more centralised control as he referred to “breaking the hierarchy down”.

Despite posting a pre-tax profit of $10.4bn (£8bn) last year, the company has fallen out of favour on Wall Street and its stock has declined by 37% during Fields’ tenure.

This year it was overtaken in stock market value by newcomer Tesla, which specialises in electric cars and is testing driverless vehicles, as investors focus on the future of transport.

The 114-year-old company has also been outpaced by traditional rivals such as General Motors, which posted rising first-quarter profit this year, while Ford’s earnings slumped.

Ford Jr said the decision that Fields would retire was reached on Friday but admitted there had been discussions for some time.

Fields, whose pay deal last year was worth $22m (£17m), is in line for a payoff worth $14.3m, a sum he would not have been entitled to had he left the company under circumstances other than voluntary retirement.The choice of Hackett as his successor indicates a firmer commitment to driverless vehicles from the company whose founder introduced the assembly line production method that dominated the 20th century.

In February, Ford announced a $1bn investment over five years in the artificial intelligence software company Argo AI, as part of its attempt to make driverless cars a reality.

It hopes to have a driverless car on the road by 2021, and aims to capitalise on its progress in the emerging field by licensing the technology to other companies.

Analysts say the appointment of Hackett suggests Ford wants to burnish its reputation among investors by showing that it can embrace technological change more quickly than it has done.

“If we’ve learned anything from the phenomenon of [Tesla chief executive] Elon Musk, it’s that Wall Street likes a tech/innovation guy,” said Jessica Caldwell, senior analyst at Edmunds.

“Putting the head of their mobility division at the helm indicates Ford is trying to send a strong message to stockholders that the company intends to be a dominant player in the future of mobility.”

Hackett was cagey about whether Ford might tweak its planned $4.5bn spend on electric cars and $1bn on autonomous vehicles, one of the only questions he did not answer during a lengthy press conference about his appointment.

The 62-year-old does not bring a wealth of technological expertise to the role, having previously spent 30 years with office furniture company Steelcase, followed by a spell as interim athletic director at the University of Michigan.

But he has been credited with a free-thinking approach in both positions and was described by Ford Jr as a “futurist” who was well connected in Silicon Valley.

As chief executive of Steelcase, he moved the company away from traditional office equipment, tailoring new products towards a growing trend for open-plan working.

At the University of Michigan, he won praise for convincing former San Francisco 49ers coach Jim Harbaugh to take on the university’s underperforming American football team, the Wolverines.

How soon will we see driverless cars on the streets?

Developing driverless – or autonomous – vehicles is a nascent but fast-growing industry, with Ford expecting to roll out a driverless car by 2021 and some analysts estimating there will be 10m cars with some form of autonomy by 2020.

That’s not much in the context of more than 1bn cars worldwide, but represents rapid progress from a standing start just a few years ago. In the US, the race pits traditional auto firms such as Ford and General Motors against technology-focused newcomers, such as Uber and Google, through its Waymo spinoff company.

Also in the running is Tesla, led by futurist billionaire Elon Musk, an auto firm that bridges the divide between Detroit and Silicon Valley by specialising in electric and autonomous cars.

While Ford’s management shake-up might suggest it is lagging behind, a study by Navigant Research recently put the company top of the pile among firms working on the technology.

Despite the high-profile nature of efforts by technology firms, the study’s top six rated firms were traditional carmakers, with Ford followed by General Motors, Renault-Nissan and Daimler.

The UK has started laying the groundwork to become a testing bed for the technology, with MPs consulting on a regulatory regime designed to ready the country for a driverless future.

Opinion is divided about when the first consumer models will hit the streets, despite some rumours suggesting Tesla will release a model with a level of autonomy by 2018.

Sceptics have pointed to uncertainty around the regulatory regime governing matters such as insurance, while the technology has not been without some concerning teething problems.