Can Mullaly save FORD?

[ArcAngel]

How GM should be run!!

Fixing up Ford
If business were politics, Detroit would be the Middle East. So how is an outsider like Alan Mulally finding solutions? And why does he seem to be enjoying himself?

(Fortune Magazine) -- Alan Mulally is in my face - again. In fact, he has barely left it for the past two hours. He has taken me through the thick loose-leaf binder he assembled for my interview and shown me another five binders filled with interviews he did upon taking the CEO job at Ford, along with research material and personal notes.

He has given me his opinion on all the stories I've written about Ford (F, Fortune 500) since he took over and, for good measure, the stories I wrote about Boeing back when he worked there. The man is relentless and demands all my attention. He won't let up until he has turned all my "nos" and "maybes" into "yeses."

Call it the Mulally method: this good-natured but relentless insistence on following what he has determined to be the correct course of action. My immersion is taking place around a conference table in his office on the 12th floor of Ford Motor Co.'s world headquarters in Dearborn, Mich.

Mulally is sitting so close, he could be in my lap. The office decoration is sparse, but Mulally likes the 180-degree view; Ford's historic River Rouge complex is visible on the horizon, and he says he can keep an eye on General Motors (GM, Fortune 500) and Chrysler from here too. Not that Mulally has much time for window gazing. He's on a crusade to save Ford Motor.

Now he's showing me the corporate mission statement he wrote and had printed on plastic cards and distributed to employees. And here is the hand-drawn diagram he's created just for me (with my name in a cloudburst!) to explain what it all means. In case I hadn't noticed, Mulally says, "I went to a lot of work for this." Trust me, Alan, I noticed.

All this attention is wearing me out - but not Mulally. In the midst of history's second-worst auto depression, Mulally seems to be ... enjoying himself? This is a man who lives less than three miles from his office, arrives there each morning at 5:15 a.m. for a 12-hour workday, and does so with smile. At 63, he still gets enthusiastic about tackling big jobs. "I've always wanted to do something important, and it had to be in a big organization," says Mulally.

You would think once in a lifetime would be enough for the aeronautical engineer in charge of developing the 777 airliner at Boeing (BA, Fortune 500). But here he is, doing it all over again: "What gets me really excited is a big thing where a lot of talented, smart people are involved," he says. Mulally once asked his mother, now 90, "Why am I this way?" She replied, "You've always been this way."

Mulally's being "this way" has, at least for now, kept Ford ahead of GM and Chrysler in the fight for survival. Unlike its traditional rivals, Mulally's Ford insists it has enough cash to ride out the economic downturn and does not want the government loans that the other two companies have accepted.

Ford's financial independence is largely due to a new operational discipline that Mulally has installed, as well as some timely strategic moves he initiated. So while GM suffered the ignominy of seeing the Treasury Department's auto task force depose chairman and CEO Rick Wagoner, and Chrysler has declared bankruptcy, Ford stands alone as an independent company and, potentially, a Detroit survivor. "Alan was the right choice [to be CEO], and it gets more right every day," says executive chairman Bill Ford, the man who hired him.

Ford Motor is still losing money, like nearly every other automaker, but it shows signs of recovery. In the U.S. its market share of retail sales to individuals (as opposed to wholesale sales to fleet customers) has gone up in six of the past seven months. It has negotiated four new agreements with the United Auto Workers, bringing its hourly labor cost down from $76 an hour to $55 an hour and, Ford says, promising to make it competitive with Toyota (TM). While GM and Chrysler are hoarding cash, Ford actually laid out $2.4 billion in March to pay down $10.1 billion in long-term debt. Its share price has increased nearly fivefold since hitting a low in November.

'Pretty relentless'
Mulally, who was hired as CEO in September 2006, hasn't engineered, designed, or built any cars. But he has devised a plan that identifies specific goals for the company, created a process that moves it toward those goals, and installed a system to make sure it gets there. Mulally watches all this with intensity - and demands weekly, sometimes daily, updates. "Alan's style is pretty relentless," says chief financial officer Lewis Booth, a 31-year Ford veteran. "He says, 'If this is the reality, what are we going to do about it?' not 'We're going to work our way through it.'"

The Mulally method has pointed Ford to some smart strategic moves. Sensing a recession in 2006, Mulally decided to borrow $23.6 billion against Ford's assets. Piling on more debt wasn't an easy call, but the extra cash meant that Ford could say no to government loans when sales fell apart last year. Mulally is moving to integrate the company globally, despite several failed attempts in the past. In 2010, Ford will be selling small cars in the U.S. that were developed in Europe. Mulally persuaded Bill Ford to dispose of Jaguar and Land Rover and focus its resources on the Ford brand, and by moving quickly he managed to sell them to India's Tata in 2007 when there was still a market for makers of luxury vehicles. He took longer to untangle Volvo from the rest of the company, but he has now put that up for sale too.

Those moves have helped Ford separate from GM and Chrysler, and Mulally is pumped. "As we come through this, we're going to be a turbo machine on the other side," he says. He has promised that Ford's core North American operations, as well as the entire company, will turn profitable by 2011. It had better, because it can't keep losing money indefinitely. Ford recorded a loss of $14.7 billion last year and another $1.4 billion in 2009's first quarter. If the U.S. and the rest of the global economy continue to slump, Ford's survival could be endangered. "The test of Ford's liquidity will be how low vehicle sales go this year, when they recover, and what levels they recover to in 2010 and 2011," writes analyst Shelly Lombard of Gimme Credit.

Besides, Ford hasn't always handled prosperity well. It boomed in the mid-1980s on the strength of the Taurus, pickup trucks, and Lincolns, only to be laid low by the recession of 1990-91. Then it squeezed record profits out of Expeditions, Lincoln Navigators, and pickups - all built on the same platform - in the middle to late 1990s. But a binge of overseas acquisitions, combined with laxity in operations, brought it limping into the 21st century. When Mulally arrived in September 2006, Ford was known mainly for its pickup trucks and the Mustang, and the company was on the verge of collapse. It lost $12.6 billion in 2006 and another $2.7 billion in 2007.

Now, if the economy recovers on schedule, Ford is in a position to thrive. To meet stricter government fuel-economy standards, it is introducing a line of more efficient, smaller-displacement engines with turbocharging, and it will start rolling out electric vehicles in 2010. A healthier Ford will be able to scoop up business from GM and Chrysler as those companies shed brands and models. Goldman Sachs's Patrick Archambault sees Ford picking up 25% of the sales the two companies lose, equivalent to 1.35 points of market share.

So how does an industry outsider like Mulally come into a company as large as Ford - with its 205,000 employees, multiple product lines, and international operations - and straighten it out?

To people like me who follow the industry and find its inner workings infinitely complex, the success of a non-auto person is surprising and, frankly, a little discomfiting. Mulally, after all, was so removed from Detroit ways when Ford hired him that his personal car was a Lexus.

Although there are similarities between building airplanes and making cars - heavy R&D, complex manufacturing, supplier relations, a unionized workforce - there are crucial differences too. Mulally had no experience in mass marketing or dealer relations. Although he has weighed in on model names, brand streamlining (he is allowing Mercury to wither away), and product complexity (he was flabbergasted to hear that engineers had created 132 different center consoles for the Navigator), he leaves product decisions to the professionals.

The story of how Mulally revived Ford's best-known sedan is a quintessential demonstration of the Mulally method - analyzing a situation using accepted facts and then winning over support through persistence. Here's the story, told by Mulally:

"I arrive here, and the first day I say, 'Let's go look at the product lineup.' And they lay it out, and I said, 'Where's the Taurus?' They said, 'Well, we killed it.' I said, 'What do you mean, you killed it?' 'Well, we made a couple that looked like a football. They didn't sell very well, so we stopped it.' 'You stopped the Taurus?' I said. 'How many billions of dollars does it cost to build brand loyalty around a name?' 'Well, we thought it was so damaged that we named it the Five Hundred.' I said, 'Well, you've got until tomorrow to find a vehicle to put the Taurus name on because that's why I'm here. Then you have two years to make the coolest vehicle that you can possibly make.'?" The 2010 Taurus is arriving on the market this spring, and while it is not as startling as the original 1986 Taurus, it is still pretty cool.

More here:

http://money.cnn.com/2009/05/11/news...tune/index.htm

[Mr. Wyndham]

You might be surprised how well "GM is run" given the circumstances. They're not identical companies so one size doesn't fit all: exhibit A; the loans.....

I like Mullaly. I also Like Fritz. I think they both want the same things, but were handed different decks. Give this whole thing 3-6 months...we'll see where the Industry stands. Needless to say, it won't resemble anything like it did a year ago....

[ArcAngel]

Originally Posted by Dragoneye

You might be surprised how well "GM is run" given the circumstances. They're not identical companies so one size doesn't fit all: exhibit A; the loans.....

I like Mullaly. I also Like Fritz. I think they both want the same things, but were handed different decks. Give this whole thing 3-6 months...we'll see where the Industry stands. Needless to say, it won't resemble anything like it did a year ago....

That is the truth my friend

[Design1stCode2nd]

Fritz is a hand groomed lackey of Wagoner. Mullaly is cutting through the red tape and getting things done. Huge difference.

[ArcAngel]

Originally Posted by Design1stCode2nd

Fritz is a hand groomed lackey of Wagoner. Mullaly is cutting through the red tape and getting things done. Huge difference.

I agree completely. Fritz is just wagoner lite. I have sao it before

[Crowley]

Good read .. thanks !

Crowley

[ArcAngel]

No problem bro!

[DGthe3]

Perhaps the most important bit from that article:

Sensing a recession in 2006, Mulally decided to borrow $23.6 billion against Ford's assets. Piling on more debt wasn't an easy call, but the extra cash meant that Ford could say no to government loans when sales fell apart last year.

Mulally, through a combination of foresight and luck, allowed Ford to avoid the situation that GM and Chrysler currently find themselves in.