Bill Ford was hurt by the board’s crisis of confidence. He could not sleep. He lay awake at night grasping for a switch that would get Ford back on the right track. He knew where the company needed to go, he just needed to find someone who could take it there. He knew he could not do it alone. In the morning, the bleary-eyed Ford would make the long drive to work, stopping at a Starbucks along the way to fortify himself for another day alone at the top. At World Headquarters, he was spending less time in meetings and more time cloistered in his office. Ford would sit for hours behind the huge burled maple desk that had belonged to his grandfather Edsel, staring out the window at the white smoke billowing out of the enormous Rouge complex. Almost eighty years after the first Model A rolled off the line, it was still turning out the bestselling vehicle in America, the F-Series pickup. But that was no longer enough.
What would Henry Ford think of his company today? Bill wondered. What would he think of me?
Bill Ford started making calls to his relatives, suggesting that the time had come to take the company private again. Several of the other Fords agreed, but once Leclair and the lawyers began studying the idea, they realized it would not work. The Fords could come up with enough cash to buy out the other shareholders, but not enough to keep Ford Credit funded. It needed access to the bond markets, and that would become far more costly if Ford went private.
Bill Ford still believed the company could be saved. Other directors were not so sure. Robert Rubin thought the underlying assumptions of Fields’ Way Forward plan were still too optimistic and began expressing serious concern about Ford’s finances. He questioned whether the automaker still had enough money left in the bank to cope with the increasingly challenging business environment. He would soon resign. Director Irv Hockaday was wary of ruling out anything.
“Bismarck’s military strategy was the simultaneous pursuit of diverse options,” he reminded his colleagues.
The other directors agreed.
“We want all options on the table,” they told Ford.
Reluctantly he agreed to begin an analysis of other alternatives.
In December 2005, Ford had hired his brother-in-law, Steve Hamp, as his chief of staff. The husband of Bill’s older sister, Sheila, Hamp had spent the last twenty-seven years at the Henry Ford Museum. He seemed more like a college professor than a businessman, but Hamp had enough management experience to deal with the minutiae that Ford found so frustrating. He also did what he could to help his brother-in-law cope with his increasingly recalcitrant executives. Now, with pressure from the board mounting, Ford asked Hamp to work with Leclair and outside investment bankers to explore the various options.
They established a high-level committee, the Corporate Strategy Leadership Council. Chaired by Bill Ford, it also included Hamp, Leclair, Mark Fields, Joe Laymon, and two other senior executives: Mark Schulz, the vice president in charge of Ford’s international operations, and his second in command, Lewis Booth, the head of Ford of Europe and the Premier Automotive Group. It also included Greg Moran, who had recently been promoted to executive director of corporate strategy.* Moran had worked for Bank One and had merger experience. Goldman Sachs and Citigroup served as outside advisers. Together they began work on Project Game Plan, a top-secret initiative aimed at figuring out what could still be done to save the company. The team looked at different finance options and tried to figure out how Ford could raise additional cash. They looked at internal restructuring moves. And they not only looked at the possibility of an alliance with another automaker, but actually began discussions with a couple of companies.
Ford’s first choice was a three-way tie-up with Renault and Nissan, both of which were now being led by Carlos Ghosn. Talks began that summer, but Ghosn was coy. He was not interested in an alliance. He wanted the whole thing. Toyota, Honda, and South Korea’s Hyundai Motor Company were all profiled, but there were no serious talks with any of them. DaimlerChrysler was deemed too much of a mess to bother with. That left General Motors. Ford already had a successful collaboration under way with GM on transmissions. Now it asked the Detroit automaker if it was open to an even broader alliance. In addition to working together on other powertrain components, Ford suggested the two companies explore the possibility of jointly developing vehicle platforms for lower-volume products like small commercial vehicles. Ford also floated the idea of combining the two corporations’ back offices, sharing information technology and perhaps even purchasing costs. GM’s response to all of these overtures was tepid. The guys in downtown Detroit were convinced they had already passed Ford, and they had no intention of helping it catch up.
Finally, the Project Game Plan team looked at selling Ford’s foreign brands. Together, these were worth billions. Proposals were presented to Bill Ford and his senior executives, but no one in Dearborn wanted to part with these prestige properties. The only one they could agree on was Aston Martin. Selling it would generate some cash, but not enough to make a difference.
By the middle of the summer, the mood was somber. The team had graphed Ford’s revenue and cash burn rate and came to a sobering realization: The lines did not cross in time. They ran various models, but none of them offered any hope of salvation.
“We are going to run out of cash in eighteen to thirty-six months,” Leclair said. “At that point, we will have to make a chapter filing.”
Leclair began preparing for that contingency. He and Hamp also began exploring the possibility of a sale to another automaker. It was not the best role for the former museum director. Hamp had little experience with the for-profit world and had no perspective by which to judge Ford’s woes. Every problem seemed like a crisis to him. Every hallway conversation seemed to darken his view of the situation a little bit more.
Hamp shared his growing concern with his wife and other members of the Ford family. Many of Henry Ford’s heirs were already nervous. They had watched the value of their stock fall steadily since Bill Ford’s coup in 2001, from more than $16 a share to less than $10. The tidbits from Hamp took on ever-greater import as they circulated among the family, which was desperate for information. Some began to whisper that the situation was far worse than Bill was letting on. Others worried that he was becoming overwhelmed. In April, Ford finally decided that Padilla was doing more harm than good. He asked him to retire and added the positions of president and COO to his own list of responsibilities. It was too much. Two months later, one of Hank the Deuce’s daughters, Anne Ford, sent her cousin a carefully considered e-mail.
“The stock price is terrible,” she wrote Bill. “Maybe we ought to bring somebody in to help you.”
Anne Ford was not the only one who had begun wondering aloud if Bill was really up to the challenge of running Ford Motor Company. Some of Ford’s board members were asking the same question. They were increasingly frustrated with his lack of engagement with the day-to-day operations of the company and his inability to overcome the resistance of his subordinates. A few board members had been advised by their personal attorneys that they could be accused of neglecting their fiduciary responsibility to Ford’s shareholders if they did not begin pushing for a change in leadership. Though relations between Bill and the board remained cordial, there were some heated exchanges in executive session when the CEO was not present.
Some said the time had come to force Ford to step aside.
“He is not giving it the 24/7 effort that he promised us. He’s not involved in the operational and product meetings. And he’s been unable to resolve the internal conflicts,” said one director. “You have to have the CEO calling the shots. Bill isn’t.”
Others argued for more a respectful approach to the man who was, after all, the designated representative of the Ford family.
“At the end of the day, it’s their company,” said another. “We have to tread carefully.”
Bill Ford had accomplished a great deal since 2001. He had taken over a company that was awash in red ink and delivered three years of solid profit
ability. He had refocused Ford on its core business of building and selling cars and trucks, and had made it the first American automaker to bring a hybrid to market. He had tried to do a lot more, but had ultimately been unable to overcome decades of mismanagement and the ossified corporate culture responsible for it.
As the July board meeting approached, Hockaday decided the time had come for a fatherly chat with the company’s top executive. He had been impressed with Bill’s desire to lead Ford and had done what he could to support him. Now Ford admitted he was overwhelmed.
“No single individual can run this company effectively under the current circumstances,” he told Hockaday. “I need help. Help me get that help.”
Hockaday commended Ford for having the self-awareness and the lack of ego to admit that, but he gently suggested that Ford needed something more than a new COO. Bill agreed: The time had come to find a CEO who could save Ford from itself.
On July 12, 2006, less than five years after he had demanded Jacques Nasser’s head, Bill Ford once again stood before the company’s board of directors and delivered another emotional appeal. This time, he spoke not with the emphatic self-confidence of a rightful heir demanding his throne, but with the strained voice of a man fighting to hold on to his job and his company. When Ford took over as CEO back in October 2001, the company’s stock was worth more than $16 a share. Now it was trading for less than $7. Then Ford had been the second-largest automaker in the world, after General Motors. Now it had fallen to third place behind Toyota. Ford had promised $9 billion a year in profits by the middle of the decade. Now Ford was heading toward its biggest loss ever. There was talk of bankruptcy, of selling the company, of parting it out to other automakers or private equity firms. The story of the past five years was written on Ford’s face. His easy smile was gone. He looked exhausted. He told the directors that he was tired of showing up at each month’s board meeting just to listen to the list of the company’s problems read back to him.
“I know what’s wrong,” he said. “Help me find a solution.”
Ford asked the other directors to help him find a new CEO.
“This company means a lot to me. I have a lot tied up in it,” Ford said. “But the one thing I don’t is my ego.”
Though he knew it was coming, Hockaday thought Bill Ford’s speech to the directors was one of the most moving he had ever heard in a boardroom. No one ascends to the top of a major corporation without a healthy ego, but those in the automobile industry were oversized even by Fortune 500 standards. It took a big man to admit that he could not save his company, particularly when his name was on the side of the building. In other boardrooms in Detroit, other CEOs were adamantly refusing to admit defeat. They would stubbornly cling to power and take their companies down with them. Bill Ford cared too much about Ford to let that happen in Dearborn.
Laymon made one more stab at Carlos Ghosn. Bill Ford even flew to Paris to meet with him personally, but Ghosn again insisted on having the chairman’s title, too. He had clashed with the Michelin family when he worked for the French tire company and would only agree to come to Dearborn if the Ford family had no part in running the company.
As Ford and Laymon flew back from France, the company’s directors were going through their address books to see if they could find someone outside the automobile industry who was equal to the challenge. It would have to be somebody who had already proved he could do it—somebody who had not only run a global manufacturing enterprise, but also turned one around. The list they came up with was a short one. The name on the top was Alan Mulally.
*Ford earned $284 million from continuing operations, though it lost $980 million when the costs of restructuring and discontinued business were factored in.
*Toyota’s celebrated Prius was also a money loser from the time it was introduced, in 1997, until the end of 2001.
*In 2010, Ford actually offered only five hybrid models and sold fewer than 36,000 of them combined.
*Ford was criticized for the expensive move at the time, but it probably helped save the company. General Motors tried to leave its former parts subsidiary, Delphi Corporation, to its own devices and was still grappling with the fallout years later.
*Prior to coming to Dearborn, Horbury had been responsible for transforming Volvo’s lineup from a series of boring boxes to exemplars of austere Scandinavian design—a feat that earned him wide acclaim in automotive circles worldwide.
*Fields kept his promise, even though “Red, white and bold” had long since gone the way of “Cheap and cheerful.”
†These included the vehicles that would become the Ford Flex, Taurus, and Explorer; the Lincoln MKT and MKS; and a Mercury that was later killed. All of these were, in fact, built off the same D3 platform Volvo had designed for its XC90.
*The Detroit News had actually revealed most of the details in a story that ran the same day Fields presented his plan to the board back in December.
*Jim Padilla came to one meeting, but relations between him and Bill Ford were increasingly tense, and he was not invited to the next one.
CHAPTER 3
The Man on the White Horse
Coming together is a beginning; keeping together is progress; working together is success.
—HENRY FORD
As the head of the Boeing Company’s Commercial Airplanes Group, Alan Mulally had spent the past ten years fending off one disaster after another while somehow managing to transform its divisive culture into a model of corporate collaboration. Under his leadership, Boeing had survived an unrelenting assault by Europe’s Airbus Industrie, a difficult merger with rival McDonnell Douglas, and the collapse of sales that followed the terrorist attacks on New York and Washington, D.C., in 2001. Mulally turned what could have been a fatal blow to the aerospace giant into an opportunity to fundamentally transform the company into a leaner, more profitable enterprise. By 2006, Boeing’s commercial jet division was well on its way to record sales, revenue, and earnings. Mulally credited it to a team-based approach he called “Working Together.” And he had learned many of its principles from Ford Motor Company.
Mulally’s success at Boeing was already making him something of a corporate celebrity, but he hardly acted the part. He looked like an older version of Richie Cunningham, the wholesome protagonist on the television sitcom Happy Days. Mulally had the same reddish-blond hair, the same pointed chin, and the same gee-whiz grin—only Mulally’s suggested he knew more than he was letting on. It was the only hint that there was more to him than his aw-shucks, backslapping demeanor suggested. It was as though he had an ace up his sleeve that he was only barely managing to conceal. Otherwise he came off like an overgrown Boy Scout, seasoning his conversations with words like neat, cool, and abso-LUTE-ly. While most high-level executives favored tailored suits and expensive cuff links, Mulally’s trademark couture at Boeing was a red Windbreaker. His idea of dressing up was a blue blazer and tie. Instead of an expensive Montblanc pen, he used cheap retractable ballpoints he could buy by the box. He drew a smiling jumbo jet under his name whenever he signed anything.
The Seattle Times called him “Mr. Nice Guy.” Mulally’s lack of pretension was evident in his dealings with other people. At formal events, he showed little interest in the rich and powerful, preferring to mingle with those less interested in comparing résumés or other measurables. He asked more questions than he answered and seemed genuinely interested in what people had to say, be they world leaders or waitresses. Mulally made a point of remembering something about everyone he met and would often astonish underlings by recalling some scrap of information about their lives they had shared with him months or years before. He was also big on hugs, and had even been known to plant pecks on the cheeks of both men and women when he was in a particularly exuberant mood. All of this made Mulally adored by subordinates. It also kept his rivals off balance. They could never quite figure out how much of it was an act. And Mulally liked to keep it that way.
The truth was that Mulal
ly’s character was an odd mix of guilelessness and relentless determination that was born of an austere childhood and a lifelong desire to write his name across the sky. Mulally’s interest in aviation was not the product of the usual schoolboy fascination with flight, but an attempt to lash himself to something really big and important that would take off like a rocket and leave his humble beginnings in Lawrence, Kansas, lost in a plume of prairie dust.
Mulally’s parents met at a USO dance there in 1943. A month later they were married and his father was on his way to the Pacific. Mrs. Mulally followed him to his base in Oakland, California, when she found out she was pregnant. Alan was born there—the first of four children, and the couple’s only boy—but returned to Kansas with his mother a few days later. His father joined them there after the war, taking a job as a postal worker. The Mulallys were not poor, but they were far from well-off. Alan grew up in a series of small ranch homes, a somewhat nerdy kid with a crew-cut and off-brand jeans who dreamed of bigger things. He used to sit in one of the front pews at the Plymouth Congregational Church so that he could study the pastor and learn the secret of his sway over the congregation. As a child, Mulally delivered the local newspaper and TV Guide. As soon as he could afford it, he made a down payment on his first bicycle at Montgomery Ward so that he could take on longer routes. It cost $57 and Mulally rode back to the store every week to make a $1.25 payment. In high school he upgraded to a motorcycle and started a lawn-mowing business, building a trailer for his bike so that he could tow his equipment. Instead of football, he went out for gymnastics. It did little to improve his social standing on campus, though he finished second in the state. But Mulally continued to search for something bigger and more important.
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