“No way,” he said firmly. “That’s our future—building vehicles that people want and value.”
Leclair had never been particularly interested in anyone else’s opinion; now he steadfastly refused to discuss other options. He had always been pessimistic, but now he was talking openly about bankruptcy and demanding deeper cuts that he insisted were the only way to avoid it. One by one, the other top executives decided that they had had enough.
Ford Americas president Mark Fields had never gotten along with Leclair, so Mulally was not surprised when he showed up at his office door with an ultimatum.
“I can’t productively work in this environment anymore,” Fields said. “It’s either him or me.”
Mulally was surprised when Bannister told him the same thing. The Ford Credit chief had known Leclair since 1988, and they had been friends. They lived two blocks from each other and would often race to work in their Mustang GTs. Their kids went to school together. But now Leclair was second-guessing Bannister’s plan to downsize Ford Credit, and Bannister was convinced he was going too far. He reminded Mulally of their conversation two years earlier, when the new CEO had asked him to reconsider his retirement plans. Bannister had only agreed to stay because he was convinced Mulally wanted to save Ford. However, if Mulally was going to let Leclair eviscerate what was left of it, Bannister would just as soon not stick around for the last rites.
Mulally knew most of the other senior executives felt the same way as Fields and Bannister. And unbeknownst to anyone besides Bill Ford and the other members of Ford’s board of directors, Mulally had identified a replacement for Leclair more than a year earlier—Lewis Booth, the head of Ford’s European group. Mulally thought Booth would be the perfect CFO. He had a huge amount of operational experience and was known throughout the industry as a real car guy, but he also had a financial background. Most important, he was a team player who was both liked and respected by the other Ford executives. The board agreed. But Booth was also the man in charge of selling Ford’s European brands. When Mulally asked him to consider the CFO job back in 2007, Booth had asked to stay in Europe until the Jaguar–Land Rover deal was completed. Once it was, Booth had promptly turned his attention to readying Ford’s Swedish brand, Volvo, for sale. Mulally knew that, given the state of the world’s economy, that was unlikely to happen anytime soon.
The situation came to a head just before the October board meeting.
Don Leclair was right about one thing—Ford was in an existential crisis, and the board was looking for a clear plan to address it. But as the team worked around the clock to hammer out a strategy to keep Ford solvent, Leclair dug in his heels and refused to cooperate with the other executives. The night before the board meeting, they had still not reached an agreement. Leclair walked into the boardroom on the twelfth floor clutching his financial projections and glowering at the other executives. Fields and Bannister scowled right back. Mulally tried to remain positive, but he was embarrassed: His team had failed to deliver. When the board found out, the directors were dismayed. Where was the action plan they had asked for? The executives traded recriminations before being sent out of the room. When the doors closed behind them, the directors told Mulally they were disappointed. This sort of infighting smacked of the old Ford. The board told Mulally to get his team in line before the next meeting.
After the board recessed, Alan Mulally and Bill Ford walked down the hall to Ford’s office and closed the door. They knew what had to be done, but it was a difficult decision for both men. Mulally still got along well with Leclair and continued to admire his financial acumen and grasp of the business. He was reluctant to lose such a valuable intellectual asset. But he was far more concerned about the disruption Leclair was causing at the top of the Glass House. Bill Ford knew that, if it were not for Don Leclair, the automaker never would have secured the financing that was now the only thing standing between his family’s company and bankruptcy. Leclair had devoted his life to Ford and worked as hard or harder than anyone else in the building to save it. But he was dividing the company at a time when it needed to be united like never before. He had to go, and go now.
On October 10, Ford announced that Leclair was retiring at the age of fifty-six. The company also announced that Lewis Booth would replace him as CFO. The same day, the price of Ford’s stock fell below $2 a share for the first time since 1982.
Mulally did not have time to worry about that.
If we make it through this crisis, it’ll rebound, he thought. If we don’t, it won’t matter.
At the end of October, Lewis Booth sat alone at a table in the bar of the Ritz-Carlton across from Ford World Headquarters, studying his laptop screen as he nursed a pint. He was not supposed to be here. He would not even officially become CFO until November 1. But here he was, stuck on the wrong side of the pond, looking at the grimmest financials he had ever seen in his life. If there was a worse time to become the chief financial officer of a major multinational, Booth certainly could not imagine it.
Mulally had asked him to come to Dearborn early to prepare Ford’s third-quarter results. Those were due out on November 7, which also happened to be Booth’s sixtieth birthday. He had planned to celebrate it with his twin brother back in Blighty. Instead he would be here, coming to grips with Ford’s stark fiscal realities.
As a participant in the weekly BPR meetings, Booth was already well aware of the company’s financial situation. He appreciated Leclair’s focus on conserving cash and was grateful to his predecessor for having insisted on obtaining as much financing as possible before the days of easy credit came to an end. Booth was also grateful for the stellar team he inherited. He was a bit worried about his ability to master the technical aspects of his new job. But his staff made him look smart. They knew what needed to be done; he just needed to let them do it.
The last thing people need is a new CFO coming in and saying, “Fuck me! Have you seen how bad the company’s financials are?” he thought. I’m the oldest member of the senior leadership team next to Alan. I need to set an example.
So Booth cultivated an air of calm confidence. A few weeks after he arrived, he called his new team together.
“I believe in the plan, and I believe we are going to get through this,” he told them. “Trust us. We’ll find a way.”
The room looked like it belonged at some NASA facility. The walls were covered with computer printouts, each one a dark mass of data. Every few minutes, someone would enter the room with a new bundle and begin replacing old charts with new ones. When they did, men and women stood before them, eyeing the numbers nervously, pointing here and there with pens and shaking their heads. But this was not Houston or Cape Canaveral. It was Conference Room 3B007 in Ford’s redbrick Product Development Center—the secret headquarters of Project Quark.
By the fall of 2008, the Detroit Three were not the only ones struggling to stay in business. Most of their suppliers were also on the brink of bankruptcy. Several had already crossed it. And the failure of either GM or Chrysler would push many of the rest over the edge. Without parts, nothing else Ford did would matter. Its factories would wheeze to a halt, and even Alan Mulally would be unable to jump-start them.
To make sure that did not happen, Vice President of Global Purchasing Tony Brown proposed setting up a cross-functional team to monitor parts manufacturers, prevent supply chain disruptions, and accelerate Ford’s effort to shrink its supply base. He code-named the effort “Project Quark” after the family dog in the movie Honey, I Shrunk the Kids. Mulally did not get the reference, but he got the point. The team would include representatives from all of Ford’s business units and all of its departments. Human resources would be there in case Ford needed to assign some of its own employees to help a supplier sort out its problems. Treasury would be on hand to authorize loans or other financial aid. IT would manage the computer system the team would use to monitor Ford’s business partners. Communications would be ready to manage the public relations fall
out from a supplier bankruptcy or parts shortage. And legal would be there to make sure everybody played by the rules. It would be a perfect example of Mulally’s matrix organization in action.
“Let’s do it,” Mulally told Brown. “I want regular reports every Thursday.”
Ford was now three years into Brown’s supplier consolidation campaign. Since the end of 2005, the company had been working its way down its long list of suppliers, deciding which ones to keep and which ones to let go. Now that effort shifted into high gear. The Project Quark team set up its war room in the Product Development Center and began a detailed analysis of each of the more than 2,000 suppliers that fed Ford’s factories. Scientists from Ford’s advanced engineering and research division developed sophisticated software to track and analyze each supplier in real time. The walls were soon covered with printouts listing each company, its financial condition, the plants it supported, the specific parts it provided, and all of its other customers. These were broken down by percentage of the supplier’s total business so that the team could see at a glance which ones were most dependent on other automakers. The team created a risk profile for each supplier, based primarily on how much of its business was with Chrysler or GM and how much was with Ford’s stronger foreign competitors. Priority was given to those companies that were heavily dependent on work from Chrysler because it was seen as the most likely to fail first. Ford tried to end its relationship with these suppliers as quickly as possible. But Ford also weighed the complexity of the products each company provided. It was relatively easy to find another company to make plastic trim; it was a lot more difficult to find another supplier for exhaust systems.
Similar rooms were set up at Ford’s regional headquarters in Europe and Asia, each reporting back to the main team in Dearborn.
Together, they pared the list down to 850 suppliers that Ford wanted to keep. Making sure these companies survived the current crisis became Project Quark’s top priority. But that did not mean Ford could simply sever its ties with the rest.
Switching automotive suppliers was not like switching paper vendors. The components these companies provided were often highly engineered and involved proprietary technology. Extricating Ford from these relationships required a carefully coordinated strategy. If the company in question was in relatively good shape, Ford might simply continue with them until the vehicle they provided parts for was due to be replaced or refreshed, then switch to another manufacturer. The team’s task became a lot more complicated when it was dealing with suppliers that had not made the cut and were also on the verge of collapsing.
All of this work had to be conducted in the utmost secrecy. If a bank learned that Ford was planning to ditch a particular supplier, it might call that company’s loans. Other automakers might take their own business elsewhere. Or the supplier might retaliate by withholding parts before Ford was ready to make the jump to its competitor.
The real heavy lifting came when a supplier ran out of cash. If the company in question was already marked for elimination, Ford would usually try to shift its work to another manufacturer and let that supplier go bankrupt. If Ford could not—or if the company was one that Ford had committed to for the long haul—the Project Quark team had to figure out a way to keep it afloat. In many cases Ford would provide direct financial support in the form of early payments or outright loans. Sometimes things got ugly. Though automakers usually owned the tools and dies used to make parts for their vehicles, suppliers had been known to refuse to turn these over when a company canceled its contract, and making new ones could take weeks. So Ford would sometimes order duplicate tools made ahead of time if it thought that might happen. In a few cases, Ford was forced to make “hostage payments” to suppliers that, as a last desperate gamble, refused to ship Ford’s parts unless they received cash.
The Project Quark team met every day, often gathering before 7 A.M. and working late into the night. The situation was so fluid that they briefed Brown two or three times a day. They were constantly war-gaming a series of scenarios, updating them throughout the crisis as the situation evolved and new data became available. These included the collapse of Chrysler, the failure of GM, and a decision by Toyota or Honda to close one or more of their U.S. factories. Other gambits included a move by GM to close or sell its Opel and Vauxhall subsidiaries in Europe. Brown’s team tried to predict how each scenario would impact each of Ford’s suppliers and recommended specific actions that would be necessary to support those deemed worthy of saving.
From the beginning, Brown knew that Ford could not prop up the global automotive supply base on its own. He reached out to other manufacturers for help. General Motors refused. It claimed that what Ford was proposing violated U.S. antitrust laws. GM was also a lot more concerned about saving itself. Chrysler was more receptive, but it was losing people so fast that Ford had a hard time even knowing whom to talk to in Auburn Hills. But the American automakers were not the only ones who were worried, and Ford soon found some unlikely allies on the other side of the Pacific.
Thanks to globalization, all of the world’s automakers had become mutually dependent on a complex web of suppliers that fed one another across oceans and national boundaries. Ford bought parts from members of Toyota’s keiretsu partners, and those suppliers bought components from American parts manufacturers like Delphi, which also supplied Toyota’s plants in the United States. By late 2008 that web was in danger of collapsing, and everyone in the industry knew it. The fear was as palpable in Tokyo and Nagoya as it was in Dearborn and Detroit.
Both Toyota and Honda were just as concerned as Ford about the impact that the failure of GM or Chrysler could have on their suppliers, as well as about the growing number of parts producers who were already in trouble. When they heard about Ford’s effort to support its suppliers, they wanted in. So Brown forged a tripartite alliance with Ford’s archrivals to prevent a cascading collapse of the entire automobile industry.
All three companies agreed to coordinate their efforts to support the suppliers that were critical to each of them. In many cases, they agreed to share the cost of keeping a particular supplier in business. At times it got down to real horse-trading. Ford might agree to keep doing business with a parts manufacturer that was vital to Toyota in exchange for Toyota maintaining its relationship with a supplier that was critical to Ford. All of these deals had to be carefully vetted by Ford’s antitrust attorneys. The Japanese did not have to worry about this to the same degree; their system allowed far more latitude in relations between competing companies.* Ford, Toyota, and Honda even sent a letter to the U.S. Treasury Department explaining how interconnected the automotive supply base was and urging the federal government to take concrete steps to protect it. They persuaded Nissan to sign it, too.
A year earlier, this would have been unthinkable. It was like Protestants and Catholics coming together to work on a downtown redevelopment plan for Belfast. These companies had been trying to kill one another for the better part of forty years. Industry veterans like Bill Ford had a hard time stomaching it, but Mulally was thrilled: It was his working together philosophy taken to its logical extreme.
One day that November, a junior manager in Ford’s communications department went to the supply cabinet, looking for some paper clips. There was just one box, and when she opened it, it had just one paper clip in it. She grabbed it with a frustrated sigh and marched to the nearest administrative assistant.
“We’re out of paper clips,” she said curtly.
The woman looked up from her filing.
“I know,” she said.
“Well, are you going to order some more?”
“I can’t,” said the secretary. “You’ll have to get approval from Ray Day.”
“You want me to ask the vice president of communications to buy paper clips?” the manager asked incredulously. “You’ve got to be kidding!”
“I’m sorry,” the younger woman said evenly. “But there’s a new policy. All office suppl
y requisitions require the approval of a vice president.”
The older woman shook her head and went to Staples.
Meanwhile, at Ford Credit, a group of employees were standing around a dying philodendron, plucking brown leaves from its stem. One man poked his finger in the soil and shook his head.
“It’s bone dry,” he said. “Nobody’s been watering it.”
Another administrative assistant came over with a bottle of drinking water and emptied it into the sere soil.
“They’ve canceled the plant service,” she said. “We have to water them ourselves.”
Similar scenes were playing out across the company as fall turned to winter in Dearborn. Employees who had been working amid empty cubicles found their departments consolidated with others so that entire floors—and in some cases, whole buildings—could be closed off and shut down. Lights were turned out, instead of left on all night long. Thermostats were nudged down, even as the first snowflakes began to fall outside. Trips were canceled, as travel was restricted to essential business only. They even stopped washing the windows. At every level of the company, managers were being told to find ways to save money. They required little convincing. The newspapers told the story every morning: The American automobile industry was collapsing.
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