American Icon

by Bryce G. Hoffman

  This is a good foundation, Mulally thought.

  But he was wary. Fields and his team had let the market get away from them once. Mulally wanted to make sure they did not let that happen again. He directed the North American team to flyspeck their progress on cutting costs, boosting factory utilization, and stabilizing market share. Mulally was sure the Thursday meetings would keep them honest—and keep him up to date.

  “Deliver the plan,” he told Fields.

  Mulally was also impressed by a new approach to design and engineering that the company had started rolling out a year earlier. Ford was still developing different vehicles for different regions, but at least it had begun using a common system in each part of the world—one that promised to save both time and money. It was based on the system used by the company’s Japanese subsidiary, Mazda, but also incorporated best practices from Volvo and Ford’s North American and European divisions.

  Mazda’s system was similar to the one used by Toyota, which was widely recognized as the best in the world. At American automobile companies, design was art and engineering was science. Designers wore black shirts, Italian shoes, and sported enormous wristwatches that cost more than some of the cars they had created. Engineers favored khakis and plaid shirts with pocket protectors and wore their cellphones on their belts. The two usually met at arm’s length, if they met at all. Mazda’s system forced them to work together, often side by side in the same studio. It also gave other functions such as manufacturing, purchasing, and even sales a seat at the drafting table. The point was to prevent costly and time-consuming revisions of the initial design. When these groups worked independently, mistakes occurred. A designer who knew nothing about thermodynamics might create a great-looking grille only to discover that it did not allow enough air to flow into the engine compartment. An engineer with no knowledge of ergonomics might develop an exhaust system that worked perfectly but was impossible to install. By including people from each of these disciplines in the design process, Mazda had been able to dramatically reduce such missteps.

  The system was remarkably similar to the approach employed by Ford’s own Team Taurus, which had so impressed Mulally in the 1980s. He could not help but wonder why Ford’s product team had to relearn all this from the Japanese, but he was glad they were. The new system they had come up with also incorporated Volvo’s virtual design system, Ford of Europe’s superior industrial processes, and the more advanced computer-aided design and engineering systems used by the company in North America. The resulting amalgam allowed Ford to simulate every aspect of a new vehicle—from its ride and handling to the manufacturing steps required to build it—before work on the first prototype even started. The result was dubbed the Global Product Development System, or GPDS, and it promised to dramatically reduce both engineering costs and development times. It was already helping Ford bring new cars to market faster and for less money.

  GPDS was just being rolled out when Fields took over Ford’s Americas group in the fall of 2005. It was first used to make last-minute changes he ordered to the new Ford Fusion sedan. The first vehicle to be entirely developed using it was the Ford Flex crossover.* It was still a work in progress when Mulally arrived in September 2006, but the benefits of the new system were clear. It had already reduced the number of engineering changes required for each new part by 50 percent.† These were precisely the sort of efficiencies Mulally was looking for, and the system’s team-oriented approach matched his own management philosophy perfectly. Moreover, it used many of the same digital design tools as Boeing, which had adopted a similar system during the development of Mulally’s 777.

  Mulally was just as excited to learn about a still-secret collaboration between Ford and Microsoft Corporation that promised to make the automaker a technology leader once again. It would allow motorists to talk to their cars, and Mulally thought that was just the sort of thing that could convince consumers to take a second look at the Blue Oval.

  As Mulally studied all of these efforts, he was reminded of the old Buddhist maxim: “The teacher will appear when the student is ready.” Such efforts spoke to the untapped talent still latent in the struggling automaker. By themselves, these measures would never have been enough to save a company so fragmented by internal strife and paralyzed by its own poisoned culture. But they were all things Mulally could build on as he constructed his own plan.

  Mulally also looked to Ford’s past for inspiration. As he learned more about the automaker’s illustrious history, he became convinced that the key to Ford’s future was a return to the principles that had made it so successful in the early days, when Henry Ford was still sitting in the chair he now occupied. The company that Ford founded had changed the world and created hitherto unimagined prosperity for generations. That was the result of not one man, one idea, or one vehicle, but the work of many men and women inspired by many great ideas who had together created many great cars and trucks. Over the subsequent decades, the company had lost its way, but Mulally was convinced he could help Ford find it again.

  In between meetings, he dug through its corporate archives like a miner convinced that gold was close at hand. Mulally hit pay dirt when he came across an old advertisement Henry Ford had taken out in the Saturday Evening Post on January 24, 1925. In a style reminiscent of Norman Rockwell and Maxfield Parrish, it depicted a young, windblown couple standing atop a grassy hill, their trusty Model T visible in the background. Their children play at their feet as the man and woman gaze optimistically across rolling farmland bisected by a road filled with automobiles, to a hazy horizon over which looms the smoky outlines of Ford’s new River Rouge factory. The caption read, “Opening the highways to all mankind.” Beneath it, Henry Ford outlined his vision for the company’s future.

  “An organization, to render any service so widely useful, must be large in scope as well as great in purpose. To conquer the high cost of motoring and to stabilize the factors of production—this is a great purpose. Naturally it requires a large program to carry it out,” it stated. “In accomplishing its aims the Ford institution has never been daunted by the size or difficulty of any task. It has spared no toil in finding the way of doing each task best. It has dared to try out the untried with conspicuous success.”*

  This was exactly what Mulally had been looking for—a polestar to guide his transformation of Ford, a touchstone that he could return to in times of doubt. Everything came together for him in that image. He grabbed a pen and a pad of paper and began writing in his usual stream-of-consciousness style:

  Pull all the stakeholders together around a compelling vision: Opening the highways to all mankind

  Form a tight working-together relationship with Bill, the board and the family

  Respect the heritage

  Join the Ford team

  Respect and reach out to all the stakeholders

  Implement a reliable discipline and responsible business plan process

  Include everyone

  Make it safe

  Every week, every month, every quarter

  Continuous improvement

  Organize to deliver the plan—the matrix organization

  People working together

  Great products … Strong business … A better world

  The best-designed vehicles in the world

  Aggressively restructure

  Accelerate the development of new products

  Obtain financing and improve the balance sheet

  Change the culture

  Share our story

  Tell the plan

  Shape the business

  Consolidate and integrate

  Laser focus

  Divest all the non-core brands

  Complete family of small, medium and large cars, utilities and trucks

  Best-in-class

  Streamline the brands

  Fewer dealers

  Reduce the inventory

  When Mulally was finished, he grabbed another sheet of paper and outlined his
personal goals:

  Alan Legacy

  Clear, compelling vision going forward

  Survive the perfect storm—commodities, oil, credit, CO2, safety, UAW

  Develop a profitable growth plan, global products and product strategy

  A skilled and motivated team

  Reliable ongoing BPR process

  A leader and leadership team with “One Ford” vision implementation tenacity

  Here, on two pieces of paper, Mulally had created the framework of a comprehensive plan to save Ford Motor Company. Many of its elements might have seemed obvious to an outsider, but in Dearborn it read like a radical manifesto. And Ford’s new chief executive was ready to begin promulgating his doctrine. In fact, he had already started.

  The day that he went to visit GM’s Rick Wagoner, Mulally sent the following e-mail to Ford’s employees around the world:

  From: Alan Mulally

  Sent: Friday, October 13, 2006 11:07 AM

  To: The Ford Team

  Subject: First Impressions

  I’ve been on the job—officially anyway—for two weeks. In that time I’ve had a lot of interaction with people, but I realized there will never be enough hours in the days to see and talk to everyone. So I thought I would write to all of you with some initial thoughts and impressions.

  Perhaps not surprisingly, I’ve spent a lot of time with our leadership team reviewing our plans, asking questions, and evaluating our prospects. Bill Ford was completely candid about the challenges we face, so I came into this with my eyes wide open. We have some very big decisions to make about what kind of business we need to become. And, as you well know, this is an extraordinarily gut-wrenching time at Ford Motor Company, particularly as we become smaller in some of our core areas, such as North America. Some very good and loyal people are going to leave this company between now and next summer, and that’s going to be tough on everyone.

  And yet, people are the reason I’m so excited about being here. I’ve met so many Ford Motor Company employees who want to work together to help this company find its footing again and grow. They are bursting with ideas, and they share them with me when they send me e-mails, stop me in the hallway or run into me in the cafeteria. They want me to know how great this company has been in the past, and how it turned around its fortunes just when the future seemed bleakest. Ford people know the talent that we have in our product development area, and the great resource we have in our dealer networks. And they know we can restake our claim as history’s best example of a company that enriches the lives of all its stakeholders: investors, customers, dealers, suppliers, employees, our union partners and the countries and communities in which we live.

  It wouldn’t take anyone very long to realize that Ford people are winners by nature. The sense of pride in the value Ford has always created in more than a century is obvious and justified. And it is encouraging that there are so many areas of excellence we can point to within our company right now. But pockets of success aren’t enough. Not today. Not in this competitive environment. We need success across our entire enterprise. To get there, we need to have a universally agreed to and understood business plan. It needs to be a single plan, and it needs to work for the entire company. Competitors may try to “divide and conquer” us; I’m determined we are not going to do that to ourselves. So we need to set such a plan in place and ensure that everyone knows how we’re doing against it. We need to agree on the urgent issues, and we need to work together as never before to achieve our objectives.

  I’ve started weekly Business Plan Reviews with the senior leadership team. Together we look at one set of data on one screen. We talk to each other with candor and respect. We are all determined to get to one plan for our company. We will all participate, and we will all support each other’s efforts to succeed. I don’t yet know everything I need to know about Ford, but I do know that this is the only way I can work.

  There are lots of details to come, but I can tell you with certainty that our plan will be built around three priorities:

  • PEOPLE: A skilled and motivated workforce.

  • PRODUCTS: Detailed customer knowledge and focus.

  • PRODUCTIVITY: A lean global enterprise.

  With these as priorities we will build our business model with a clear view of our competitive environment and our own financial circumstances. And together we will answer the most fundamental questions. What are the critical elements needed for a compelling business plan? How accurate are our assumptions? How do we get losses behind us and once again create profitable growth for all?

  I know that the people of Ford have been through some tough times in the past few years. I wasn’t here to share that with you, but I am here now to help move us forward. For me it is at once the most humbling and exciting prospect of my professional life. But I can tell you from previous experience that as demoralizing as a slide down may be, the ride back up is infinitely more exhilarating. And there is no better feeling than knowing that your personal contribution is helping to move this great enterprise forward again.

  Everyone loves a comeback story. Let’s work together to write the best one ever.

  Thank you!

  It was the opening salvo in Mulally’s battle for the hearts and minds of Ford’s employees. But they were not the only ones he needed to reach. Mulally also wanted to speak to Ford’s suppliers, dealers, and investors—and of course the car-buying public.

  To do that, he would use the media.

  On November 10, Alan Mulally arrived at the Detroit News, flashing his trademark smile at copy editors and cop reporters as he and his entourage made his way through the newsroom like a veteran campaigner looking for an endorsement. He dropped into a large black leather chair in the editorial conference room across the table from several senior editors and members of the autos team, leaned back, and started explaining how he was going to save Ford.

  It would start with a global reorganization of the entire enterprise.

  “There’s not one Ford: there’s Ford of North America, there’s Ford of South America, there’s probably three Fords that make up Ford of Europe. There’s Australia, there’s China, India—there’s a lot of Fords, and they’re operated very separately as business units,” he said. “We’ve got to go from where we are to leverage our global assets to compete as one company going forward.”

  Mulally wanted to weld Ford’s disparate regional divisions into a single, global operation capable of competing with the best in the world. But the corporate structure was not the only thing he wanted to streamline.

  “We are going to rationalize the brands, rationalize the product lines,” he said, explaining how he had taken a similar approach at Boeing, reducing its aircraft offerings from more than a dozen models to just four. Ford could get a lot more for its money by building more cars and trucks off of common platforms and sharing more parts and components between them. Some initiatives had already been launched in this direction before he was hired, but he wanted to see these efforts deepened and expanded.

  He called on the United Auto Workers to help him close a labor cost gap with Ford’s foreign rivals.

  “You can’t compete with a $3,400 [per vehicle] disadvantage,” he said. “We have to deal with reality.”

  Ford needed to match production to the actual demand for its cars and trucks. People in Detroit were too obsessed with market share; he pointed out that some of the most profitable car companies in the world were also some of the smallest.

  “We’re not going to chase market share,” Mulally vowed. “We’re not going to put out vehicles where demand is not there and then discount and make it even worse. It’s the most important thing in the business that you always deal with the reality in the marketplace and match the capacity to demand. Because if not, it just gets worse.”

  And Mulally made no secret of the fact that the clock was ticking.

  “We have got to turn around North America and be profitable by 2009,” he said. “Becau
se if not, you just keep losing cash and pretty soon you run out.”

  Straight talk like this was unheard-of in Detroit. The American automobile industry had mythologized itself for so long that lying had become a virtue. The Big Three could not fail for the simple reason that they were Big Three. In this city, two plus two always equaled five. But Mulally was not from Detroit. Bill Ford’s decision to hire an outsider to save his company suddenly made a whole lot of sense.

  Mulally understood why Ford had developed the way it had. As the world’s first mainstream manufacturer of automobiles, Henry Ford’s company had grown organically. Ford was pulled to places such as Australia and Brazil by the clamoring demand for its Model T, not pushed there as part of a corporate strategy to gain new markets. Offices were opened around the world to handle orders for cars shipped from Michigan or Ontario. These gave way to warehouses where Model Ts were assembled from parts manufactured in the United States, which in turn yielded to full-scale factories once domestic demand justified the investment.

  Henry Ford tried to create some order out of this chaos in 1928 by establishing foreign subsidiaries in the major markets. These were largely autonomous. They needed to be in a world that still communicated by telegraph and traveled by steamship. After World War II, the automaker realized that that system no longer made sense and tried to create a more integrated global organization, but it was only partly successful. While Henry Ford II and his team managed to pull the company’s worldwide operations together on the same balance sheet, much of the decision making was still left to the regional divisions. Alex Trotman’s Ford 2000 plan had tried to eliminate these regional organizations altogether. Trotman replaced them with vehicle centers that were given global responsibility for specific segments like small cars and trucks. But a huge amount of local knowledge was lost in the process and employees chafed at this top-down approach. It only got worse under Nasser, who ordered each of these vehicle centers to negotiate their own sourcing deals with suppliers. Instead of saving money by buying in volume, his plan drove costs higher and further eroded Ford’s profits.