AUTOMOBILE WEEK: Part 3 of 3 (Ford Motor Company)

Limited Edition 2008 Mustang "Bullitt"

“The key is going through this tough time and coming out with a cost structure and a model lineup that’s competitive,”

---Alan Mulally, president and CEO, The Ford Motor Company

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Bill Ford must be credited with taking on a job he really never wanted--heading up his family's namesake company. And while I am clearly no expert on any subject, one of the privileges I enjoy with my Blog Page is observing upon subjects that are of sincere concern to me. This is particularly true where the human element is involved because that is where I thrive. There are short-term opportunists and then there are the guys and gals who are "in the game" for the long haul. The latter is my style. And in the car business, the one thing I will remember about Bill Ford's tenure is a single decision he and his family made, along with their board of directors. He reached out to ex-Boeing Company and Boeing Commercial Airplane Group vice president Alan Mulally. An engineer and businessman, Mulally is responsible for orchestrating a common cockpit technology with the Boeing 757 and 767 while fending off competition from rival Airbus Industrie. If that sounds a bit like a tennis player rallying late in the game, again, I enjoy writing about those who are passionate about life. Bill Ford is passionate about Ford and he decided to challenge the way many think about another competition: the car business.

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For as long as I can remember, traditional thinking has been that whether you are in the airline industry, managing athletes, running a restaurant or leading a well known car company your choices were limited to considering only those candidates within a given business. Here is where Bill Ford recognized his own weaknesses and decided to accentuate his strengths by saving his family's company (the Ford family retains a controlling interest) and going with Mulally. Mulally has led with consensus and conviction that what has been ailing Ford for years must be put in the past tense and that Ford's survival is paramount.

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Prior to Mulally's arrival to Detroit from Seattle's Boeing Company, Ford's bread and butter consisted largely of it's international operations. Domestically, the company has coasted for years with the popular Ford Mustang and Ford Truck's venerable F-150 as its only solid stalwarts. So, Ford has really suffered from a lack of new designs for many years and this led to a shocking loss of over one-third of it's market share here in the United States. It is presently responsible for only 16 percent of all U.S. car sales. Couple this with a revolving door of executives over the past decade--including the controversial Jacques Nassar. Under Nassar as CEO, Ford affected the multi-billion dollar purchase of Volvo Cars from Volvo Group of Sweden and the ill-advised purchase of Range Rover from BMW which I'll bring up in a moment. To be fair, Nassar did consolidate Ford's one-third stake in Mazda under the Ford banner. But his questionable investments into non-core businesses included automotive salvage yard chains, repair shops, and recycling facilities that according to one Ford designer I interviewed (on the condition of anonymity) routinely lost upwards of $4 million per week before Mr. Nassar's firing was outrageous. Bill Ford, the great grandson of founder Henry Ford, sold off these risky ventures and served as President, CEO and Chief Operating Officer of Ford Motor Company from 2001 through 2006. Then he turned over the reigns to Mulally.

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Under Mulally, it's a new chapter for Ford with "actions that speak louder than words"--to coin a phrase. Among the pleasant news is his collaborative style, his consistency in weaving vision with solid pragmatism, and encouraging inclusiveness where an often antagonizing Nassar alienated Ford's supply chain network through ruthless cost-cutting. The latter earned him the nickname "Jack the Knife". Curiously, Nassar exercised a peculiar penchant for comparing Ford's progress with business models that were entirely unrelated to the auto industry such as Dell (computers) and even dot com businesses. Mulally by comparison recognized that in the 21st Century, U.S auto manufacturing firms can realistically expect to capture 20 percent of the market to remain solidly profitable. Among the unpleasant news, seven plants were shut down. Enough already! Here's the plan.

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The Plan: Overhauling the company from the factory floor on up by asking fed up employees who are "in the trenches" day in and day out for their input and then acting on it; taking additional direction from institutional investors, fed up shareholders and dealers. As my late father used to say, "Think twice and act once". Mulally salvaged the Ford Taurus and threw out the aforementioned plan to almost exclusively build trucks. In Ford's case, he is shrinking the company to achieve "economies of scale and scope". Over the past decade preceding his arrival, one-third of Ford's employees were laid off. The plan today is to rebuild after stabilizing market share and undoing senseless business deals from his predecessors as it did this past March when the company announced the sale of Aston Martin for close to $1 billion. Next came the sale of Jaguar (which cost Ford $10.5 billion in losses alone after redesigning the car) and former BMW subsidiary Land Rover to Tata Motors of India. Mulally's 22-month tenure has improved total quality control in cars and trucks by boldly shutting down production lines when a problem was discovered as was the case with Edge--a crossover vehicle. International operations have grown by 60 percent. Mulally has guided Ford with common sense to develop cars in one region and sell them globally while cutting redundant engineering costs. He is refocusing on four brands: Ford, Lincoln, Mercury and Volvo. The company has recently considered selling Volvo and is said to be re-visiting whether to retain the Mercury moniker to focus heavily on Ford and Lincoln brands. Of the "Big Three" only Ford can borrow from The Rolling Stones' song "Time Is On My Side". And that's because they are in the best cash position to continue reinventing themselves.

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Mulally grew up in Kansas. I understand he likes to use the term "way cool" a lot. That would apply to the company's final salute to legendary actor Steve McQueen with the unveiling of the Mustang "Bullitt" on the occasion of the film's 40th Anniversary release (the previous salute to McQueen was the 2001 Mustang "Bullitt"). I must say that after crawling under and around the car, it is superbly constructed.

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Ford employees have been through tremendous pain and job losses and this is terrible. However, if I were a betting man, of the "Big Three" I'd bank on Ford under Mulally. I noticed that they posted a $100 million profit in the First Quarter of this year--their first such showing in two years. Ultimately, Ford is a survivor. Let's hope they can get completely repositioned domestically for an expansion that is justifiable. I wish them well!

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