It did not take long for the first executive to “self-select” out, just as Mulally had predicted.
Anne Stevens had grown tired of bickering with Fields. She was already headed for the exit before Mulally’s hiring was announced, but this was her last straw. The highest-ranking woman in the automobile industry was determined to be CEO herself one day. She was fifty-six and already behind Fields in the queue, so she decided that was never going to happen at Ford. The automaker announced Stevens’ retirement on September 14.*
The world outside Ford was trying to figure out what to make of Ford’s new CEO as well. Holleran’s media plan had worked. The coverage of Mulally’s hiring was overwhelmingly positive. But not entirely.
“Ford and the Detroit auto industry have a history of expelling outsiders the way the human body expels foreign objects,” wrote Daniel Howes in a column in the Detroit News that appeared the following morning. “Things get all furious, nasty and infectious until the interloper leaves or is removed, while those who remain vow to ‘never again’ make the same mistake.”
After Bill Ford read it, he called and canceled his subscription. It would be months before he would renew it—or talk to Howes again.
Ford’s factory workers did not take the news well, either. The talk on the assembly line the next day was about all the machinists who lost their jobs under Mulally at Boeing.
As it turned out, they had reason to worry.
Less than two weeks after Bill Ford announced that he was stepping down as CEO, reporters were again summoned to the Glass House. This time the news was grim. But in keeping with Mulally’s new spirit of transparency and honesty, it was delivered without the customary spin. Though Fields was still sporting his infamous mullet, his usual Jersey-boy swagger was noticeably absent when he took the stage. His Way Forward plan had not worked. It had been derailed by the collapse of the truck market and rising raw materials costs. The original plan was supposed to restore Ford to profitability by 2008. Now he conceded that goal was unreachable. The company would not be able to return to profitability until 2009, and then only by making even deeper cuts.
“The fundamentals of our Way Forward plan have not changed. It’s our timetable that has changed—and changed dramatically,” said a chastened Fields. “It is now clear that we were too optimistic in January about our ability to stabilize our market share given the quicker than expected shifts in the marketplace. The simple fact is that the business model that served us in North America for decades no longer works. We must change to a new business model that delivers greater bottom-line contributions from cars and crossovers, continued leadership in pickups, new products that drive revenue and actions that more rapidly reduce costs to achieve profitability.”
With that, Fields announced his Way Forward acceleration plan. It called for shuttering two more factories, bringing the total number of plants now slated for closure by 2012 to sixteen.* In addition, all of the factories Ford took back as part of the 2005 bailout of Visteon would be sold or closed by the end of 2008. A third of the company’s North American salaried workforce would be eliminated, translating into the loss of another 14,000 jobs on top of the 30,000 already cut. Ford had reached an agreement with the United Auto Workers to offer voluntary buyouts and early retirement packages to all union members. Fields said the company now hoped to eliminate between 25,000 and 30,000 factory jobs over the next two years. Ford would also suspend dividend payments indefinitely.
“These actions have painful consequences for communities and many of our loyal employees,” Bill Ford said. “But rapid shifts in consumer demand that affect our product mix and continued high prices for commodities mean we must continue working quickly and decisively to fix our business. Mark Fields and his team deserve credit for the accelerated Way Forward strategy, which puts us on an even faster product-driven path to success. Alan Mulally’s experience in turning around a major industrial company will help guide the implementation of these measures as he assumes leadership of the company.”
Mulally had reviewed the plan with Fields and his team before the presentation. As Fields went over the details with his new boss, he wondered if it had all been for naught.
“Alan, we’re going to the board with this tomorrow. Our intent, once we get the board approval on this, is to announce it on Friday,” he said. “But you’re the new CEO. If you want us to put a hold on this and not announce it, that’s your prerogative. I’m perfectly prepared to do that.”
“No,” Mulally said. “You guys should go ahead. We’ll improve it as we go.”
However, he did make a few changes. Mulally pointed out that Fields’ plan was all about cutting costs and did little to address the more fundamental problem: Ford was not making cars that people wanted to buy. Mulally knew Ford had to stop losing money, but he also knew that was only part of the equation. It also needed to give consumers a reason to believe in the Blue Oval again. He told Leclair and Fields that he was working on a plan to radically simplify Ford’s global product lineup. Instead of spreading its new product dollars thin across scores of different nameplates, Mulally wanted to focus Ford’s investment on a few key vehicles and make those products truly world class. He explained how a similar approach had paid off at Boeing. It would work at Ford, too—but only if the company was prepared to really invest in those products. Mulally pointed out that all of the buyouts and severance packages required by Fields’ plan were going to add up, and he wanted to make sure there would still be enough cash left in the company’s coffers to pay for a showroom full of game-changing cars and trucks.
“Do we have enough money to restructure ourselves, and get back to profitability and accelerate the development of new products?” he asked.
Leclair told him the finance team was already working on a plan to ensure Ford had the money it needed. Mulally told him to aim high.
The two-day-long September meeting was Mulally’s first opportunity to address the entire board of directors. Following the formal introduction of Mulally by Bill Ford, one board member after another told Mulally how happy they were that he had decided to join the company. But they also made it clear that they expected a lot from him. Then they asked what he thought of Ford so far.
Mulally paused for a moment before answering. Here was a chance to begin the discussion about simplifying Ford—the central theme of his turnaround strategy. At the same time, he knew he had to tread carefully, because these were the same people who had presided over the acquisition of Ford’s foreign brands and approved the hodgepodge of disparate products the company was selling around the world. Nonetheless, Mulally knew an opening when he saw one and took it.
“We have a lot of brands. We have a lot of nameplates. We’re known in the U.S. as a big truck and SUV company—and for the Mustang. We have very complex product offerings,” he told the directors. “I think there is a tremendous opportunity to simplify, consolidate, and focus Ford.”
Mulally wanted to say more but checked himself out of fear of going too far too fast. Then he noticed the smiles and nodding heads. Several of the directors agreed with his assessment. They asked what he thought of Fields’ plan.
“This is a good start,” he said. “We have the key elements in there. But we need to further develop this.”
Saving the company would require even deeper cuts, Mulally told the board. It would also require a fundamental reorganization to better utilize Ford’s global resources. He needed to come up with a new leadership structure to ensure greater accountability and force everyone to work together toward a common set of goals. And none of these steps would mean anything if the company did not accelerate the development of new products. He asked the board to pledge its support for these moves once he had worked out the details. The board agreed with Mulally’s assessment and promised to back whatever changes he felt were necessary. The directors approved Fields’ proposal with the understanding that Mulally would prepare a more aggressive plan by the end of the year.
They will back m
e one hundred percent, he realized as he left the meeting. Now I just need the support of the Ford family.
The descendants of Henry Ford flew into Dearborn on September 18 to eyeball their new CEO. They met with Mulally at Greenfield Village—the nineteenth-century fantasy town their ancestor had frozen in time and later turned into an educational theme park to commemorate the world his automobiles had left in the dust.
Mulally was so excited about meeting all the Ford heirs in person that he actually printed out a family tree beforehand and brought it with him so that he could figure out who was who. He asked the family members to autograph it for him. Touched by Mulally’s enthusiasm for Ford’s illustrious past, they obliged. But they were a lot more interested to hear what he thought of Ford’s future. They asked Mulally to explain how he had brought Boeing back from the brink, and what he thought of Ford’s chances for survival.
“I’ve been through it, and I think we can do it here,” Mulally assured them. “Here’s what we have to do: We have to deal with the reality of today and then develop a growth plan for the future.”
He told them that he was still working out the details of his plan but had already concluded that Ford needed to simplify its brand lineup and product offerings. The company needed to focus on the things its customer really wanted, not what the engineers or bean counters wanted. And Ford needed to develop a point of view about the future instead of just reacting to its competitors.
As he left, one family member after another shook his hand and told him how happy they were to have him in charge of the company.
Before heading back to Seattle to wrap things up at Boeing, Mulally sat alone in his new office at the top of World Headquarters and took in the view. To his right he could see the futuristic Ford-built tower in downtown Detroit that now housed General Motors’ world headquarters. On the horizon in front of him was the hazy outline of Chrysler’s copper-colored edifice in Auburn Hills.
“I’ve got them right where I want them,” he told a visitor with a laugh.
The men in charge of those companies were having a good laugh of their own at Mulally’s expense. The conventional wisdom in Detroit held that outsiders were incapable of understanding the complexities of the automobile business. Bill Ford’s decision to hire an aeronautical engineer to save his car company spawned plenty of jokes during those early weeks. There was a lot of snickering about flying cars and the return of tail fins. “He has no idea how we do things in Detroit” was the common refrain at Ford’s crosstown rivals, as well as within Ford itself. And Mulally knew it.
They’re right. I don’t know how they do things in Detroit, he thought. But I do know it doesn’t work.
*This was the work of Ford’s director of strategic communications, Josh Gottheimer, who learned such tricks when he was a special assistant to then-president Bill Clinton.
*Stevens would soon reach her goal, taking a job as CEO of Carpenter Technology Corporation. Three years later, she would be out of a job once again, and a year after that her face would appear on the cover of the Wall Street Journal, illustrating a story on down-and-out executives looking for work.
*Those two factories were Ford’s Maumee Stamping Plant in Ohio and Essex Engine Plant in Windsor, Ontario. The new plan also accelerated the timetable for the previously announced plant closures.
CHAPTER 5
The Revolution Begins
We do not make changes for the sake of making them, but we never fail to make a change when once it is demonstrated that the new way is better than the old way.
—HENRY FORD
When Alan Mulally returned to Dearborn the following week, he took one look at his crowded schedule and shook his head.
“That doesn’t work for me,” he said.
It was “meeting week” at Ford Motor Company, the time each month when Ford’s senior executives sat through one agonizing caucus after another, each devoted to a different issue or facet of the company’s operations. There were meetings to discuss Ford’s finances, meetings to discuss sales, meetings to discuss new products. Mulally thought about canceling them all on the spot, but decided to endure one complete cycle to better understand the pathology of Ford’s illness.
During the sessions he attended, Mulally asked probing questions and demanded yes-or-no answers. He brooked no equivocation and was not interested in the long-winded explanations that most of his managers felt compelled to offer. What he did demand was transparency and honesty. Mulally found both in short supply. It did not take long for him to realize that the truth came in many flavors at Ford.
Even when he tried to focus on the data, he found that different sources offered different numbers for different audiences. For example, when estimating demand for a new product, inflated figures were often given to suppliers to help win lower prices while a more conservative figure was offered to analysts so that Ford would look good when it exceeded their expectations. The same thing happened internally. Executives offered exaggerated sales estimates for proposed products to the finance staff in order to win approval for their programs.
Mulally was not officially due to take over as CEO until October 1, but this was just too much for him. Since Ford’s executives seemed to like meetings so much, he asked his secretary to schedule one more. When he had them all together, Mulally started laying down his law.
“There are too many meetings,” he told them. “When do you have time to think about the customer?”
Nobody answered. From now on, Mulally continued, there would be only one corporate-level meeting—his “business plan review,” or BPR. It would be held every week on the same day, at the same time, in the same place. Attendance would be mandatory for all senior executives. All would be expected to personally deliver succinct status reports and updates on their progress toward the company’s turnaround goals. This would not be a forum for discussion or debate. Any issues that required more in-depth consideration by the entire leadership team would be taken up in a “special attention review,” or SAR, immediately following the BPR. The idea was to keep the main meeting focused on the big picture. And Mulally stressed that, when there was discussion and debate in the SAR, it would be based on business realities, not politics or personality. That was the old Ford, he said. The new Ford was all about the numbers.“The data sets you free,” he said with a smile.*
Mulally had developed this business planning process at Boeing. It was based on the system the aircraft manufacturer used to manage product programs, but he had evolved it into a framework for managing the entire organization. All of the data from every business unit and function was distilled down to a set of tables, charts, and graphs and presented in a series of PowerPoint slides. Mulally was still an engineer at heart. He had approached the task of running Boeing’s commercial aircraft division as an engineering exercise. The BPR process was the algorithm he had developed to solve it. He believed the same system could be used to run any complex, global enterprise. Ford would be the test of that hypothesis. He gave each executive a set of slides from Boeing to use as templates until they understood the process and could develop their own. He told them to fill in the blanks with the real data and be ready to present it the following Thursday. And he told them to be ready for action.
“We are the decision makers,” Mulally said. “We need to make decisions and not pass the buck.”
When he was not admonishing his new executives, Mulally blew through the Glass House like a Kansas cyclone, shaking hands, memorizing faces, and leaving everything changed in his wake. He would stop people in the hallway and ask them what they did and what he could do to improve the company. Instead of eating in Ford’s famously posh executive dining room, he took his lunch in the company cafeteria. He stood in line with his plastic tray and chatted up accountants. He would sidle up to a table full of sales analysts and ask if he could join them. For Mulally, an open door was an invitation to pop his head in and see what was going on inside. More than one meeting came to an abrupt halt when
someone noticed him standing in the doorway.
“What are you guys talking about?” he would ask as he made his way around the table, shaking hands and squeezing shoulders. Mulally would listen in for a few minutes and then continue on to wherever he was going, leaving behind a roomful of open-mouthed employees.
Ford’s ranks were full of men and women who had tried unsuccessfully to draw management’s attention to inefficiencies in their departments, shortcomings in Ford’s business strategy, or ways its products and processes could be improved. Now they found somebody who was willing to listen. Mulally was inundated with e-mails but responded personally to every message. His own notes were peppered with smileys. If an e-mail really caught his eye, he might even follow up with a telephone call. These quickly became the stuff of water cooler conversations throughout the company.
One Ford engineer, James Morgan, took a gamble and showed up at Mulally’s office with an armload of engineering schematics. Like Mulally himself, Morgan was a student of the Toyota product development system. He had even written a book about it, and he wanted to show Ford’s CEO just how much Ford still had to learn. Morgan unrolled drawings for more than a dozen different hood structures on Mulally’s conference table. Mulally leaned over them, studying each one closely as Morgan showed him how each was structured in a different way. They even used different latches. Mulally may not have been a car guy, but he knew how to read engineering schematics. They told him everything he needed to know about the company’s lack of engineering discipline. He asked Morgan if there was a way to reduce this complexity. There was, Morgan told him. Mulally put him in charge of that effort and asked for regular updates.
Instead of being discouraged by Ford’s inefficiency, such discoveries actually came as a relief to Mulally.
“I look at that as nothing but opportunity,” he said. “If you were a lean machine, doing a turnaround like this would be terrifying. But this is a very complex place, and there’s a lot of opportunity to consolidate and simplify.”
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