American Icon

by Bryce G. Hoffman

  “Fine,” Ford said. “You’ve got my approval.”

  He gave Fields a month to wrap things up in Europe and told him to be in Dearborn by October. Then Ford sold Hertz to help finance the big changes he hoped were coming. Ford had acquired the car rental agency back in 1994. The automaker sold it for $5.6 billion, though the deal was actually worth closer to $15 billion once Hertz’s debt was factored into the equation.

  Fields knew a lot about building brands, but less about building cars. To compensate, Ford paired him with Anne Stevens, a tough-talking manufacturing expert with red hair and an imposing stare. She was lifelong gearhead, an engineer by training who dressed as a boy to sneak into the pits at the local racetrack when she was thirteen. As a married mother of two, Stevens had to fight for every rung of the corporate ladder. She came to Ford from Exxon in 1990 and became the automaker’s first female plant manager in Europe in 1995 and its first female vice president of vehicle operations in 2001. With her promotion to chief operating officer of the Americas group, she became one of the most powerful women in the automotive industry.

  At fifty-six, she was more than ten years older than Fields and made no secret of the fact that she wanted his job. The two clashed from the start. At an early off-site briefing for senior managers, Stevens made a passionate plea to stop the backsliding on quality.

  “We’re never going to get our customers back if we can’t improve quality,” she said. “It’s the only way we can change the way people look at Ford.”

  When she finished listing all the ways Ford was failing on this front, Fields raised his hand with a smirk.

  “My name is Mark Fields and I have a quality problem,” he chuckled.

  Stevens glared at him. This was serious stuff, and she thought he was belittling it—and her. But the two managed to restrain their mutual animosity enough to begin work on a plan to salvage Ford’s North American car and truck business. Fields promised Bill Ford it would be on his desk in ninety days. With a cross-functional group of fifty managers, he and Stevens began a detailed analysis of Ford’s North American automobile business, compared it to the company’s far more successful operations in other parts of the world, and tried to figure out what they needed to do differently to stop the long decline in Ford’s home market. Key elements of the plan were lifted from the recent turnaround of Ford’s Brazilian subsidiary. Others were inspired by the progress Ford was making in Europe.

  On November 14, a company holiday, Fields and the senior members of his team came into the office and spent ten hours fine-tuning the details, agreeing on targets and gut-checking one another’s assumptions. When they were satisfied they had gotten it right, they began writing it up for the board of directors. Fields called it “The Way Forward,” borrowing the Churchillian phrase from a documentary he had watched on the BBC before leaving London. The Ford plan called for idling fourteen factories in North America, including seven assembly plants, by 2012. Closing them would require UAW approval, so that would have to wait until the next round of contract talks. Between 25,000 and 30,000 factory jobs would also be eliminated. Fields hoped to take out about half of these through attrition, the rest through voluntary buyouts that would also have to be negotiated with the union. In addition, Ford would cut another 4,000 salaried positions and reduce the number of corporate officers by 12 percent. Fields set a goal of shedding $6 billion in material costs by 2010 and aimed to reduce Ford’s North American manufacturing capacity by 26 percent over the next three years.

  But as Bill Ford had said in September, the company could not cut its way back to success. It also needed to reconnect with consumers. Using the same approach to demographic research employed by political operatives in election campaigns, Fields’ marketing task force figured out who was most likely to buy Ford’s products, who was least likely, and who was still willing to be convinced. That research revealed that most American consumers wanted to buy an American car or truck—far more, in fact, than the roughly 58 percent of them who had purchased a Ford, GM, or Chrysler product the previous year. The catch was that they wanted those vehicles to be every bit as good as the ones being sold by Japanese automakers. Ford would have to redouble its efforts to improve quality in order to meet their expectations, but Fields saw this as a huge opportunity and was determined to seize it. Rather than trying to beat the Japanese at a game they were already winning or out-Korea the Koreans, he wanted to take Ford somewhere those other companies could not follow. To do that, Ford’s products needed to do more than just say, “Made in America”—they needed to stand up and sing “The Star-Spangled Banner.” Instead of inoffensive appliances, he wanted beefy rides with in-your-face styling that were chock full of innovative features.

  Fortunately for Fields, the company had brought in an Englishman to lead a reimagining of Ford’s North American product lineup two years earlier. Though he favored tweed suits and ordered his beer by the pint, Peter Horbury shared Fields’ vision of what Ford should and could be.* His designs were inspired by things like Conestoga wagons and U.S. Navy fighters. He was determined to capture the American zeitgeist in sheet metal. And he had the ideal flagship for the new Ford—a crossover utility vehicle called the Edge—nearing completion in his design studio.

  Fields called this new approach “Red, white and bold.” He ordered blue rubber bracelets imprinted with the slogan and passed them out to the other members of his team. He made it clear that these were not optional fashion accessories. Soon they were being distributed throughout the company. Fields was big on slogans and symbols and vowed not to remove his bracelet until Ford’s North American business was profitable again.*

  Fields presented his plan to the board on December 7, 2005. He began with an overview of the current business environment, followed by his best guesses about how it would evolve over the next ten years. In retrospect, his assumptions were shockingly naïve: oil prices would remain low except for occasional, temporary spikes; industry volumes in the United States would remain stable at around 17 million units through 2010; there would be moderate growth in the small-car segment, and a gradual shift away from big SUVs to the emerging crossover category. Reality would prove far more harrowing, but at the time these conditions were seen as “challenging.” He told the board Ford’s biggest challenge was winning back customers.

  Fields devoted a big chunk of the meeting to his demographic profiles and brand metrics. The marketing mumbo-jumbo left some board members rolling their eyes, but they got the basic point: Ford needed to stand for something again, and that something was America. Ford also needed to concentrate its investment on those segments where it could really compete and build more products off fewer platforms. That would allow the company to spend more on bodies and interiors, focusing on those parts of the product that the consumer could see and touch and worrying less about what was underneath the skin. By way of example, Fields showed the directors how Ford could build six new cars and crossovers for North America off a single Volvo platform.† This was the same approach Toyota used, and it was part of the reason why the Japanese automaker’s material costs averaged more than $1,000 per vehicle less than Ford’s. At the same time, Fields proposed eliminating aging vehicles like the Freestar minivan and Crown Victoria sedan, and replacing them with new subcompacts and crossovers, which were lacking in Ford’s North American lineup.

  “We need to stop planning products to fill plants,” he told the board. “We need to match production to the actual demand.”

  Fields also wanted to roll back incentives, offer clearer pricing, and take other steps to boost the residual values of Ford’s vehicles. This would allow the company to offer lower lease rates and make its products more competitive with the imports. Fields closed by going over the specific goals of his Way Forward plan, promising to return the North American automotive business to profitability by 2008 and showing off sales forecasts that projected annual volumes of more than 2.5 million vehicles by 2010.

  The board was impressed. F
inally, someone was willing to make the deep cuts many of them had long felt were necessary. They commended Fields on his plan and told him to execute it as quickly as possible, because Ford was running out of time.

  The formal announcement of Fields’ Way Forward plan was delayed until late January 2006 because the company was worried that the grim details of job cuts and plant closures would overshadow important product unveilings it had scheduled earlier that month. But with Bill Ford and the rest of the board behind him, Fields was eager to set his plan in motion. He sounded the first bugle call at the Los Angeles Auto Show on January 4. In a speech to the world’s automotive press, he promised that Ford had learned the lessons of its past mistakes and knew it needed to “change or die.” Four days later, Fields was back onstage at the North American International Auto Show in Detroit, this time unveiling Horbury’s new crossover, which embodied what he was now calling “bold, American design.” With an athletic stance and an enormous chrome grille, the Ford Edge certainly did that.

  “You are going to see a lot more products like Edge from Ford—products that have a very clear point of view,” Fields promised. “It’s these sorts of products that will make Ford America’s car company. That’s what’s driving our way torward—a retaking of the American marketplace—and it starts today.”

  The wraps came off the rest of the Way Forward plan two weeks later.* On January 23, Bill Ford and Mark Fields revealed the details in a speech broadcast live to Ford offices around the world.

  “We all have to change, and we all have to sacrifice,” Ford told his employees. “The Way Forward contains some strong medicine for our North American business. But it also contains the vision and strategic focus to rebuild the business.”

  Ford went on to list the things he would no longer tolerate at the company.

  “Here is what we will not stand for: incremental change, avoiding risk, thinking short-term, blocking innovation, tying our people’s hands, defending procedures that don’t make sense, and selling what we have instead of what the customer wants,” he said. “In short, we will not stand for business as usual.”

  It was powerful stuff, but it was lost in the details of Ford’s epic downsizing. The Detroit News summed up the prevailing reaction with a one-word headline the following day: “Painful.”

  UAW president Ron Gettelfinger called the Way Forward “devastating news for the many thousands of hard-working men and women who have devoted their working lives to Ford” and promised a showdown with the company when the current contract expired in 2007. Ford’s stock leapt more than 5 percent on the news, but many Wall Street analysts remained skeptical. They were still not convinced Ford was cutting deep enough.

  Once again, they were right.

  By the time Fields’ Way Forward was announced, oil prices were back on the rise. By April, the average price of gasoline in the United States was approaching $3 a gallon for the second time in less than a year. As it did, the moderate shift away from trucks and SUVs that Fields had predicted in November became a panicked exodus. Since those were the only vehicles Ford sold in North America that were actually making any money, the rapid shift became an existential crisis for the company. In the United States, Ford’s sales fell 7 percent year over year, but that was only because of strong demand for its new mid-sized sedans. Ford’s truck sales dropped 15 percent, while sales of its once-popular Explorer were down a staggering 42 percent.

  When Fields and his team saw those numbers, they knew the Way Forward plan was in trouble. They had factored in the possibility of gas price spikes, but never imagined they would begin three months after the plan was announced. The decline in demand was worse than their worst-case scenario. Prices of raw materials, such as copper and aluminum, were also rising far faster than expected, magnifying Ford’s losses. For years, Ford and the other domestic automakers had forced their suppliers to absorb these cost increases. As a result, many of them were now on the verge of bankruptcy and had no choice but to raise their prices as well.

  “If this trend continues, we’ve got a problem,” Leclair warned Fields.

  In May, it did, despite the launch of an aggressive new marketing blitz. Built around yet another slogan—“Bold Moves”—it was an attempt to strike an emotional chord with consumers and convince them that Ford had found itself again. Because most of Ford’s products were still pretty boring, the original plan called for a series of headline-grabbing moves that were actually bold. Ford’s advertising agency had come up with a long list of them, including lifetime warranties and carbon offsets for every vehicle sold, but Leclair had rejected all of them as too costly. With no actual bold moves to tout, all that was left was a bunch of television ads showing people jumping off waterfalls, riding bulls, moving to New York, and doing other daring deeds. The whole thing fell flat and left dealers fuming.

  June brought more bad news as pickup and SUV sales continued to plummet, taking Ford’s stock price and credit rating down with them. Ford was now trading for less than $7 a share, and its bonds were deep into junk territory. The board of directors cut dividend payments in half. The outside directors also cut their own compensation.

  In July, Toyota outsold Ford in the United States for the first time ever. By then, Fields had reassembled his Way Forward team and begun work on an even more aggressive downsizing plan. They spent the summer locked in lengthy meetings trying to figure out what else they could cut. More factories would need to be closed, more jobs would need to be eliminated, and Ford would have to abandon its pledge to return its North American automobile business to profitability by 2008. Even with another round of cuts, that was no longer possible. Instead of coming up with another catchy slogan, they simply called the new plan the “Way Forward Acceleration.” Most people referred to it a little more ironically as “Way Forward II” and whispered that “Way Forward III” was already being discussed at the top of the house.

  As they struggled to go further faster, Fields began running into the same old brick walls that had held back change for so long at Ford. Entrenched executives gave superficial support to his turnaround efforts but often conspired against them whenever his plans ran counter to their own aims. Ford’s rigidly regionalized corporate structure made it impossible for Fields to address issues globally. Fields thought his mandate from the board would prove unassailable. When he realized how wrong he was, he appealed to Bill Ford to make good on his promise to protect him. But Bill Ford had not been able to protect himself. Meetings became tense as tempers flared, and the worsening business environment only served to fan the flames.

  It all came to a head during an off-site meeting that summer. The company’s top executives had cloistered themselves in a conference room at the Henry Ford Museum so that they could work on the accelerated restructuring plan without interruptions. Fields had been fighting with Leclair ever since the CFO vetoed his Bold Moves initiatives. Now Leclair was insisting on even deeper cuts to Ford’s advertising budget. Fields refused.

  “There’s no other alternative,” Leclair insisted. “You’re going to do this.”

  “When you run the fucking business, you can do it,” Fields fired back. “But you don’t run it. You’re the CFO. So, I’ll take your counsel, but that’s it.”

  “You’re going to do this!” Leclair shouted.

  Fields leapt out of his chair screaming, “I’m tired of this bullshit!”

  He was halfway across the table by the time Bill Ford grabbed him.

  “Cut it out!” Ford demanded.

  Scenes like this hampered Ford’s progress on the Way Forward II plan. So did the chronic lack of honesty inside the company. The plan’s goalposts kept moving as Ford’s position in the market deteriorated.

  “The budget changed constantly,” recalled one executive. “Nobody knew where the money was. Nobody knew how much spending was actually going on. Everyone was trained to pad their budgets and their projected expenses so that they could line them up at the end of the year.”


  As truck sales continued to tumble, Fields began putting together the biggest production cut in two decades. It called for a 21 percent cut in fourth-quarter factory output, as well as additional cuts to third-quarter production. Ten factories would be idled for extended periods, and some 30,000 workers would be temporarily laid off. However, by the time the cut was announced in September, it was clear that far deeper cuts would be necessary.

  Though Fields kept talking about matching production to the actual demand for Ford’s cars and trucks, it was now evident that neither he nor anyone else at World Headquarters had the stomach to actually do it. He and his team had tried to take an unflinching look under Ford’s hood, but they still suffered from the same failure of imagination that had plagued Detroit for decades. Fields knew that Ford needed to change or die, but he was unable to recognize how deep and sweeping those changes needed to be. Ford did not need bold moves. It needed a top-to-bottom revolution.

  And Detroit was not a place that bred revolutionaries.

  The board of directors had already decided it was time to consider other options. Earlier that year, they asked Bill Ford to begin exploring mergers with other automakers and consider selling portions of the company to the private equity firms that were beginning to make discreet inquiries. TPG Capital, then in the middle of a buyout binge, was one of them. So was Jacques Nasser’s new employer, One Equity Partners, the private investment arm of JPMorgan Chase. The directors also asked Ford to begin looking at bankruptcy.

  For most companies a Chapter 11 filing might have been the next logical step, but Ford’s situation was unique. The arcane ownership structure Henry Ford II had created to guarantee his family’s continuing control of the company after it went public in 1956 would never survive bankruptcy court. The Ford family would lose their shares along with the other stockholders and would never be able to regain control of the automaker once it emerged from reorganization. The family would not support a Chapter 11 filing, and their ownership of the supervoting Class B shares gave them veto power over any such move. In fact, any merger, sale, or voluntary liquidation of the company required a separate vote of the Class B shareholders.