Meanwhile, America was entering another recession. Ford’s sales dropped dramatically—partly as a result of the economy, partly because consumers were starting to notice that its products were slipping. Earnings were down by more than 50 percent at the end of 2000, and 2001 was looking much, much worse. As recalls and litigation ate up what was left of Ford’s cash cushion, Nasser’s spending began to look downright reckless. Even the Ford Motor Credit Company—long a reliable source of revenue for the parent company—had started to drift. In 1999, Nasser hired a hotshot banker, Don Winkler, to lead the finance company. Winkler thought the business of providing car and truck loans to creditworthy consumers was boring and vowed to turn Ford Credit into “a global auto-finance superpower.” Underwriting got fast and loose, and the number of bad loans on the company’s books began to increase at an alarming rate.
Bill Ford was no longer the only board member who was worried. When he called Hockaday again, the Hallmark chief agreed the time had come for Ford to share his concerns with the rest of the board. But Hockaday wanted to make sure the young chairman was ready. He offered to round up a couple of other sympathetic directors for a dress rehearsal.
“Don’t take me up on this offer unless you really have your facts straight,” Hockaday advised Ford. “Because if you come in with a sort of half-baked emotional presentation, you’re going to do yourself more harm than good.”
“Fair enough,” Ford said.
But he was worried someone might learn of the meeting. Ford had reason to be paranoid. At least one of Nasser’s predecessors had tapped Ford’s telephone and bugged his car to make sure he was not plotting a coup. Hockaday offered to host the meeting at Hallmark’s headquarters in Kansas City, Missouri. He even sent the Hallmark jet for Bill so the trip would not appear on the logbook of any Ford aircraft.
When Ford arrived, he found Carl Reichardt and Robert Rubin waiting for him. Reichardt was the retired head of Wells Fargo; Rubin had been Bill Clinton’s Treasury secretary. Both were directors Hockaday trusted—not only to keep quiet, but also to give an honest assessment of Ford’s presentation.
All three were stunned by what Bill Ford shared with them. He outlined all of the ways in which Nasser was damaging the company’s core business and offered plenty of facts and figures to support his claims. The other directors were deeply impressed that Ford had been able to collect so much data, especially since Nasser had refused to turn over key reports and other documents he had requested. They promised to put the matter on the agenda for the next board meeting.
In July 2001, Ford made his case to the full board in Dearborn. After hearing him out, the other directors asked Ford to leave and called in Nasser.
“You’ve got an issue here,” the board told him. “There are concerns that Bill has and has expressed to some of us, and we think that they are legitimate. We recognize that you’re the CEO, but these are concerns you shouldn’t ignore.”
Nasser remained stoic and offered no defense. The directors called Ford back into the boardroom and addressed both men together.
“You guys need to get your act together, because if you don’t, then the board’s going to have to step in and resolve the issue,” the directors warned them. “It would be better if you could work together to define your roles in a complementary way and leverage your strengths. You better give that a real hard try.”
The board granted Bill Ford more authority over the day-to-day running of the business, but Nasser refused to take his concerns seriously. The automaker’s finances continued to deteriorate, as did morale. The terrorist attacks of September 11, 2001, delivered a devastating blow to the U.S. economy in general and American automakers in particular. The decline in new vehicle sales that followed made Ford’s problems that much worse. The dealers were getting angrier by the month. The board agreed that Nasser had to go. The only question now was who would replace him.
In early October, the heirs of Henry Ford gathered to discuss the future of the company. Bill Ford stood before them and delivered a blunt assessment of the situation. Their company was in trouble. Nasser was destroying everything they and their ancestors had built. Bill told them he had looked up and down Ford’s roster and could see no suitable replacement. For two decades, they had let others run their company. Now it was time for a Ford to run Ford again. Bill Ford intended to fire Nasser and replace him as CEO. He asked for their support.
He got it.
By the time Ford’s board met two weeks later, the directors had received many phone calls from family members making their feelings clear. Now Bill Ford delivered his own pitch in person. The only way to restore trust in the company was to put a Ford back in the driver’s seat. He knew being CEO would require a huge commitment on his part, but Ford assured the directors he was willing to do whatever it took to save the company. The directors were moved by Ford’s passionate plea, but many still had doubts about his abilities. It was one thing to run down to the Rouge after an explosion. Managing the day-to-day operations of a multinational corporation was another thing entirely. But they figured he had earned the right to try.
“We were all a bit hesitant,” one director confided. “But we all wanted him to succeed.”
*The Model T was not Henry Ford’s first car, but it was his first real success—the one that propelled his company to the forefront of the automobile industry. Ford sold his first vehicle almost a decade earlier, the handmade “Quadricycle” that he assembled in a brick shed behind his home. Ford Motor Company sold its first car, a two-seat runabout, in July 1903.
*Flivver was a common slang term for an inexpensive automobile. The author Upton Sinclair first referred to Henry Ford as the Flivver King in his critical book The Flivver King: A Story of Ford-America, which was published by the United Auto Workers in 1937.
*This was not the result of a conscious decision by the Ford family to step back from the company, but rather the result of the simple fact that there was no Ford old enough to lead the company who wanted the job at the time. Hank the Deuce would remain a director and head of the board’s powerful Finance Committee until his death in 1987.
*The Ford F-Series, first introduced in 1948, was already the bestselling pickup in America.
*The Ford Foundation’s ties to the Ford family and the Ford Motor Company were severed completely in 1976. The automaker’s philanthropic arm is now the Ford Motor Company Fund.
†These Class B shares could be traded among the heirs of Henry Ford, but they would convert to regular Class A shares if they were ever sold outside the family.
CHAPTER 2
Broken
The internal ailments of business are the ones that require most attention.
—HENRY FORD
Cheers broke out in Dearborn as word spread that Bill Ford had ousted Jacques Nasser and was taking over Ford Motor Company. Employees actually wept in the parking lot when the Blue Oval was hoisted back up to the top of World Headquarters as a final symbol of Nasser’s undoing. Letters of thanks poured in from dealers around the country, and parts manufacturers breathed a deep sigh of relief. Bill Ford had been right. The only thing that could save the company and mend its tattered relationships with workers, dealers, and suppliers was putting a Ford back in the driver’s seat.
But not everyone was celebrating. Wall Street had long viewed the Ford family’s control of the automaker as an anachronism that prevented shareholders from realizing the true value of their investment, and analysts openly doubted Bill Ford’s ability to lead. The $5.45 billion loss Ford reported for 2001 did not help. Nasser and the September 11 terrorists were responsible for most of that, but it marked the end of nine years of steady profits and fueled fresh concern about Ford’s future. The company’s credit rating was downgraded and its stock tumbled.
Bill Ford did what Ford CEOs had always done when confronted with financial calamity. He cut and cut deep. In January 2002, he announced that the automaker would close five factories in North America and eliminat
e more than 21,000 jobs. Ford may have been a man of the people, but he had also promised to do whatever was necessary to save his company. That included reducing dividend payments, a move some in the family complained about. At the same time, Ford went after the trappings of executive excess that had come to symbolize Nasser’s regime. He fired high-priced consultants, told executives to cut back on conspicuous consumption, and replaced the filet mignon and salmon normally served at lunch meetings with sandwiches. He even got rid of some of the company’s jets. More important, he refocused Ford on its core business of building and selling cars and trucks. With the battle cry “Back to Basics,” he began extricating Ford from the other ventures that his predecessor had found so much more compelling than manufacturing automobiles. Bill Ford increased product spending, which Nasser had cut to fund his acquisition binge. He ordered a new push to improve quality. And he told veteran engineers that their experience was still valued in Dearborn. He got rid of the bankers who were running Ford Credit into the ground and replaced them with men who understood that its primary function was to support sales. He went to Wall Street and raised $4.5 billion, starred in the company’s television ads, and even tried to take on the automaker’s notoriously noxious culture.
For years, Ford had hidden its lack of product investment behind cute catchphrases like “cheap and cheerful”—Dearbornese for a bare-bones compact; “fast follower”—code for a car that was essentially a knockoff of what Ford’s competitors already had in their showrooms; and “last in, best dressed”—a rather lame excuse for being the final automaker to enter a particular segment. They were the doublespeak of a company that had learned to justify its own inadequacies, and Ford ordered them banished from the corporate lexicon.
“How do we get back to product leadership?” he asked his designers and engineers. “As long as those phrases are being bandied about, we never will.”
He knew Ford could do better. In Europe, it already was. Ford’s products were well regarded on the other side of the Atlantic and the company was even making money off them, which was more than Ford could say about most of its North American cars. Sport utility vehicles and pickups were still profitable, but everything else was at best breaking even.
“We have relied far too long on a few home runs,” Ford told his team. “We need to hit a bunch of singles, not swing for the fences. We have to make each vehicle profitable.”
By the end of 2002, Ford was back in the black.* Warranty costs were down. Ford had climbed two slots in the influential J.D. Powers and Associates initial quality survey and was no longer dead last among the world’s major automobile manufacturers. But no one was convinced that Ford had actually turned the corner. The company’s stock dropped below $10 a share for the first time in ten years that fall, and Ford’s credit rating continued to slide. Bill Ford began to feel like the Rodney Dangerfield of the automobile industry. No matter what he did, he could not seem to get any respect.
However, the skeptics were right to be wary. The company may have been making money again, but Bill Ford was struggling.
After sanctioning his coup d’état in October 2001, the board of directors had hoped that—with a little coaching—Ford would rise to the occasion and become a truly effective chief executive. To make sure that he did, the board asked director Carl Reichardt to mentor the forty-four-year-old. Even at seventy, the former head of Wells Fargo was one of the sharpest financial minds in America. He was a titan of the banking industry from the days when it could still be mentioned in polite company, a man Warren Buffett had called one of the best managers in the business. Reichardt was comfortably ensconced on a sprawling ranch in California and planned to retire from the board in six months, but he agreed to come to Michigan and serve as Ford’s vice chairman. He would get the company’s finances in order, fix Ford Credit, and try to teach young Bill how to run the company.
Assembling the rest of the team proved a challenge—and an urgent one, considering that many of Nasser’s top executives had followed him out the door, either on their own or with Bill’s boot close behind. What was left of Ford’s bench was pretty weak. There was still plenty of talent inside the company, but much of it was buried beneath a thick layer of executives who were more adept at advancing their own careers than running a car company. They tended to view their high positions as rewards for long service and worried more about enjoying their perks than about the problems facing Ford.
Bill Ford did the best he could. He found an able enough president and chief operating officer in Sir Nick Scheele, a likable Brit who had managed to do what many thought was impossible—make Jaguar profitable, at least for a while. Queen Elizabeth II knighted him for his effort to save the beloved British brand. As head of Ford of Europe, Scheele commenced a promising restructuring and put together a product team that was actually creating some world-class cars. His work on the other side of the Atlantic was far from complete, but none of it would matter if Ford’s North American business continued to decline. Ford put an unlikable Brit, David Thursfield, in charge of the company’s international operations. The iron-fisted cigar chomper was known for his cutting comments, but he also knew how to cut costs. Ford gave North America to Jim Padilla, an amiable Detroit native who was obsessed with quality. Padilla had a mind for manufacturing but quickly found himself out of his depth when he strayed too far into other aspects of the business.
It was not the strongest team, and Ford knew it. Thursfield and Padilla were soon locked in mortal combat, each convinced that the other was elbowing in on his turf. When one walked into a room, the other left. Soon, lower-level executives were choosing sides and conspiring to undermine the other’s efforts. European cars were tweaked so that they could not meet U.S. safety requirements without expensive engineering changes, and cutting-edge technology developed in America was kept from the team in Europe. Scheele at least remained a trustworthy adviser and could be extremely effective when he was focused. Unfortunately, that was not always the case.
Ford got more help a few months later, in May 2002, when Allan Gilmour agreed to come out of retirement and replace Nasser’s chief financial officer. Gilmour had already put in thirty-four years at the company, and Bill had worked for him before he retired as vice chairman in 1995. Convincing Gilmour to come back was not easy. After his retirement, he had come out of the closet—a move that proved particularly shocking in an industry that still considered machismo a job qualification. But Gilmour hoped to help his former protégé figure out how to run the company. The board hoped that he, along with Reichardt, would teach Bill how to do it on his own. Both men admired Ford’s vision. They wanted to help him realize it. When big decisions were required, they walked him through the various options but tried to leave the final choice to him. But Bill Ford preferred to defer to their experience.
When Ford did make decisions, he had a tough time getting his subordinates to implement them. They would agree with whatever he suggested, then do whatever they wanted. If Ford pressed them, they offered complicated excuses that he lacked the data to refute. But he rarely challenged them. Ford preferred to avoid confrontation. He had promised the board that he would do whatever was required to turn the company around, but after a year as CEO, the burden of leadership was weighing on him. Ford was still interested in the big picture, but he had tired of the details of managing the company’s day-to-day operations.
“I can’t say I’m having fun yet,” he acknowledged in an October interview with BusinessWeek.
Bill Ford knew he needed help, and he knew he was not going to find it inside the company. He asked his director of human resources, Joe Laymon, to start looking outside the company.
Joe Laymon was not a typical HR director. He did not spend a lot of time thinking about new ways to track mileage expenses or morale-building exercises. Laymon was an African American, and his father was a migrant farmworker, moonshiner, and civil rights activist from Mississippi. Laymon had picked his share of cotton before earning a master�
��s in economics from the University of Wisconsin in Madison. He went to work for the United States Agency for International Development in Zaire, then took senior positions at Xerox and Eastman Kodak before arriving at Ford in 2000. There he soon became one of Bill Ford’s most trusted advisers—and his feared enforcer. Laymon was something of a latter-day Harry Bennett who, like his legendary predecessor, also ran Ford’s internal security force. Unlike the brash Bennett, Laymon was a soft-spoken man whose friendly demeanor masked a calculating ruthlessness that other executives roused at their own peril.
“Joe Laymon is a master of the dark arts,” one told me. “He knows where all the bodies are buried because he put most of them in the ground himself.”
Laymon was also a master strategist who knew what motivated people and how to use that knowledge to his advantage. And he was fiercely loyal to Bill Ford.
In 2003, the two men began putting together a list of possible candidates to lead the top-to-bottom restructuring that Ford now needed to save his company. Their first choice was easy. If the automobile industry had ever bred a rock star, it was Carlos Ghosn. His father was Lebanese like Nasser, but his mother was French and he had been born in Brazil. He joined Nissan Motor Company as chief operating officer in 1999 after France’s Renault SA bought a controlling stake in the Japanese automaker, which was then deeply in debt and losing money. Ghosn promised to resign if he could not turn it around. A year later, Nissan was profitable again and Ghosn was promoted to president. He became CEO a year after that, and Nissan became one of the most profitable car companies in the world.
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