American Icon (27 page)
Authors: Bryce G. Hoffman
Reduce the inventory
When Mulally was finished, he grabbed another sheet of paper and outlined his personal goals:
- Clear, compelling vision going forward
- Survive the perfect storm—commodities, oil, credit, CO
2
, safety, UAW - Develop a profitable growth plan, global products and product strategy
- A skilled and motivated team
- Reliable ongoing BPR process
- A leader and leadership team with “One Ford” vision implementation tenacity
Here, on two pieces of paper, Mulally had created the framework of a comprehensive plan to save Ford Motor Company. Many of its elements might have seemed obvious to an outsider, but in Dearborn it read like a radical manifesto. And Ford’s new chief executive was ready to begin promulgating his doctrine. In fact, he had already started.
T
he day that he went to visit GM’s Rick Wagoner, Mulally sent the following e-mail to Ford’s employees around the world:
From: Alan Mulally
Sent: Friday, October 13, 2006 11:07 AM
To: The Ford Team
Subject: First Impressions
I’ve been on the job—officially anyway—for two weeks. In that time I’ve had a lot of interaction with people, but I realized there will never be enough hours in the days to see and talk to everyone. So I thought I would write to all of you with some initial thoughts and impressions.
Perhaps not surprisingly, I’ve spent a lot of time with our leadership team reviewing our plans, asking questions, and evaluating our prospects. Bill Ford was completely candid about the challenges we face, so I came into this with my eyes wide open. We have some very big decisions to make about what kind of business we need to become. And, as you well know, this is an extraordinarily gut-wrenching time at Ford Motor Company, particularly as we become smaller in some of our core areas, such as North America. Some very good and loyal people are going to leave this company between now and next summer, and that’s going to be tough on everyone.
And yet, people are the reason I’m so excited about being here. I’ve met so many Ford Motor Company employees who want to work together to help this company find its footing again
and grow. They are bursting with ideas, and they share them with me when they send me e-mails, stop me in the hallway or run into me in the cafeteria. They want me to know how great this company has been in the past, and how it turned around its fortunes just when the future seemed bleakest. Ford people know the talent that we have in our product development area, and the great resource we have in our dealer networks. And they know we can restake our claim as history’s best example of a company that enriches the lives of all its stakeholders: investors, customers, dealers, suppliers, employees, our union partners and the countries and communities in which we live.
It wouldn’t take anyone very long to realize that Ford people are winners by nature. The sense of pride in the value Ford has always created in more than a century is obvious and justified. And it is encouraging that there are so many areas of excellence we can point to within our company right now. But pockets of success aren’t enough. Not today. Not in this competitive environment. We need success across our entire enterprise. To get there, we need to have a universally agreed to and understood business plan. It needs to be a single plan, and it needs to work for the entire company. Competitors may try to “divide and conquer” us; I’m determined we are not going to do that to ourselves. So we need to set such a plan in place and ensure that everyone knows how we’re doing against it. We need to agree on the urgent issues, and we need to work together as never before to achieve our objectives.
I’ve started weekly Business Plan Reviews with the senior leadership team. Together we look at one set of data on one screen. We talk to each other with candor and respect. We are all determined to get to one plan for our company. We will all participate, and we will all support each other’s efforts to succeed. I don’t yet know everything I need to know about Ford, but I do know that this is the only way I can work.
There are lots of details to come, but I can tell you with certainty that our plan will be built around three priorities:
• PEOPLE: A skilled and motivated workforce.
• PRODUCTS: Detailed customer knowledge and focus.
• PRODUCTIVITY: A lean global enterprise.
With these as priorities we will build our business model with a clear view of our competitive environment and our own financial circumstances. And together we will answer the most fundamental questions. What are the critical elements needed for a compelling business plan? How accurate are our assumptions? How do we get losses behind us and once again create profitable growth for all?
I know that the people of Ford have been through some tough times in the past few years. I wasn’t here to share that with you, but I am here now to help move us forward. For me it is at once the most humbling and exciting prospect of my professional life. But I can tell you from previous experience that as demoralizing as a slide down may be, the ride back up is infinitely more exhilarating. And there is no better feeling than knowing that your personal contribution is helping to move this great enterprise forward again.
Everyone loves a comeback story. Let’s work together to write the best one ever.
Thank you!
It was the opening salvo in Mulally’s battle for the hearts and minds of Ford’s employees. But they were not the only ones he needed to reach. Mulally also wanted to speak to Ford’s suppliers, dealers, and investors—and of course the car-buying public.
To do that, he would use the media.
O
n November 10, Alan Mulally arrived at the
Detroit News
, flashing his trademark smile at copy editors and cop reporters as he and his entourage made his way through the newsroom like a veteran campaigner looking for an endorsement. He dropped into a large black leather chair in the editorial conference room across the table from several senior editors and members of the autos team, leaned back, and started explaining how he was going to save Ford.
It would start with a global reorganization of the entire enterprise.
“
There’s not one Ford: there’s Ford of North America, there’s Ford of South America, there’s probably three Fords that make up Ford of Europe. There’s Australia, there’s China, India—there’s a lot of Fords, and they’re operated very separately as business units,” he said. “We’ve got to go from where we are to leverage our global assets to compete as one company going forward.”
Mulally wanted to weld Ford’s disparate regional divisions into a single, global operation capable of competing with the best in the world. But the corporate structure was not the only thing he wanted to streamline.
“We are going to rationalize the brands, rationalize the product lines,” he said, explaining how he had taken a similar approach at Boeing, reducing its aircraft offerings from more than a dozen models to just four. Ford could get a lot more for its money by building more cars and trucks off of common platforms and sharing more parts and components between them. Some initiatives had already been launched in this direction before he was hired, but he wanted to see these efforts deepened and expanded.
He called on the United Auto Workers to help him close a labor cost gap with Ford’s foreign rivals.
“You can’t compete with a $3,400 [per vehicle] disadvantage,” he said. “We have to deal with reality.”
Ford needed to match production to the actual demand for its cars and trucks. People in Detroit were too obsessed with market share; he pointed out that some of the most profitable car companies in the world were also some of the smallest.
“We’re not going to chase market share,” Mulally vowed. “We’re not going to put out vehicles where demand is not there and then discount and make it even worse. It’s the most important thing in the business that you always deal with the reality in the marketplace and match the capacity to demand. Because if not, it just gets worse.”
And Mulally made no secret of the fact that the clock was ticking.
“We have got to turn around North America and be profitable by 2009,” he said. “Because if not, you just keep losing cash and pretty soon you run out.”
S
traight talk like this was unheard-of in Detroit. The American automobile industry had mythologized itself for so long that lying had become a virtue. The Big Three could not fail for the simple reason that they were Big Three. In this city, two plus two always equaled five. But Mulally was not from Detroit. Bill Ford’s decision to hire an outsider to save his company suddenly made a whole lot of sense.
Mulally understood why Ford had developed the way it had. As the world’s first mainstream manufacturer of automobiles, Henry Ford’s company
had grown organically. Ford was pulled to places such as Australia and Brazil by the clamoring demand for its Model T, not pushed there as part of a corporate strategy to gain new markets. Offices were opened around the world to handle orders for cars shipped from Michigan or Ontario. These gave way to warehouses where Model Ts were assembled from parts manufactured in the United States, which in turn yielded to full-scale factories once domestic demand justified the investment.
Henry Ford tried to create some order out of this chaos in 1928 by establishing
foreign subsidiaries in the major markets. These were largely autonomous. They needed to be in a world that still communicated by telegraph and traveled by steamship. After World War II, the automaker realized that that system
no longer made sense and tried to create a more integrated global organization, but it was only partly successful. While Henry Ford II and his team managed to pull the company’s worldwide operations together on the same balance sheet, much of the decision making was still left to the regional divisions. Alex Trotman’s Ford 2000 plan had
tried to eliminate these regional organizations altogether. Trotman replaced them with vehicle centers that were given global responsibility for specific segments like small cars and trucks. But a huge amount of local knowledge was lost in the process and employees chafed at this top-down approach. It only got worse under Nasser, who ordered each of these vehicle centers to negotiate their own sourcing deals with suppliers. Instead of saving money by buying in volume, his plan
drove costs higher and further eroded Ford’s profits.