American Icon

by Bryce G. Hoffman

  Thirty more utilitarian chairs lined the perimeter of the room—ten on each wall, except for the western one, which was dominated by the projection screen. These were for guests. Each executive was allowed to invite a couple of guests to each meeting. A few were there because they needed to hear what was being discussed, but for most it was a big honor—the reward for some special service or outstanding achievement. There were mid-level managers, engineers, even a factory worker. Most looked nervous and uncomfortable as they filed into the Thunderbird Room, but Mulally quickly put them at ease.

  “We’re glad you’re here,” he said with a big smile. “We hope you enjoy the meeting, and we’d also like to hear what you think of the meeting at the end.”

  The guests served two important purposes. First, they were expected to take what they learned back to their workplaces, allowing that information and the experience of the BPR process to cascade down through the organization. Second, Mulally believed their presence kept everyone on their best behavior, just as the documentary film cameras had at Boeing on the 777 program.

  Once everyone was seated, Mulally called for the first slide. There were now 320 of them, though not every slide was shown every week. Many of them rotated according to a fixed schedule. Mulally went first, going over the agenda, explaining the point of the meeting to the guests and providing his own high-level assessment of the state of the company.

  “On plan,” it read this week. “No change.”

  Mulally went over the current cash, sales, revenue, and profit projections for the next five years. They all showed steady increases.

  “It’s going up because we’re making products and services that people want and value, using less time and resources than the competition,” Mulally explained. “That creates value for the company and all its stakeholders.”

  Then he went over the current business environment, listing geopolitical developments that might impact Ford, looking at the state of the global economy, energy issues, environmental concerns, labor issues, and top-level news about Ford’s competitors. He went over the two pie charts showing the regional distribution of Ford’s business between the Americas, Europe, and Asia and its split between small, medium, and large vehicles. These were still not evenly divided into thirds, but they were getting more balanced all the time. Mulally reminded everyone that this was the goal. He also went over the four-point plan again, just in case anyone had forgotten it. Mulally closed by listing the issues that would be discussed in that day’s SAR meeting.

  Booth was up next. He presented a more detailed report on the company’s finances. Things were looking good for the third quarter, and Ford’s cash and debt would be close to parity by the end of the year. Booth also went over the latest data from Ellen Hughes-Cromwick. The global economy continued to strengthen, albeit slowly. The car and truck market in the United States was improving, too, though demand for new vehicles remained well below historic highs. The four business unit leaders—Bannister, Fields, Hinrichs, and Odell—were each given ten minutes to go over their slides, which covered the business environment in their areas, their financial forecasts, and their progress against the plan. When they were done, the function leaders each got five minutes to present an overview of the latest data from their departments. The color-coding system was now well understood and employed by everyone. There was a lot more green these days, but still some red and yellow, too. That was okay; as long as problems were highlighted, the team could deal with them.

  When it was over, Mulally summed things up and asked if there were any more issues that needed to be added to the SAR agenda. He closed the meeting by going around the room and asking the guests what they thought of the proceedings. Most said they were reassured to see that everything they had heard about honesty and openness and working together was real.

  So were the results. On October 26, Ford posted another $1.7 billion profit for July, August, and September. The company also announced that it would pay off the rest of the money it owed to the UAW’s VEBA trust. Ford was now completely absolved of all responsibility for hourly-retiree health care in the United States. One of the most crushing burdens in business history had been lifted from its shoulders. No one inside Ford had ever imagined it would be paid off so quickly.

  Neither had anyone on Wall Street. Ford’s stock was now trading north of $14 a share. It broke $15 on November 3 and closed above $16 two days later. By the end of 2010, it was flirting with $17. The lucky few who had purchased Ford’s stock when it bottomed out at $1.01 on November 20, 2008, had now made a nearly 1,600 percent return on their investment in just two years—assuming they were smart enough to hold on to it. And the price would go even higher.

  On December 15, Morningstar Equity Research became the first agency to raise Ford’s credit rating back to investment grade. It was not one of the Big Three agencies, but they had all raised their ratings for Ford, too, and set its outlook to “positive.” The company continued to pay back the money it had borrowed. Booth, Treasurer Neil Schloss, and the rest of the Ford finance team were smiling when Mulally passed them in the hall on the twelfth floor of World Headquarters at the end of December. And with good reason. Ford had cut its automotive debt almost in half during the year, paying off $14.5 billion. It ended the year with more cash than debt.

  “Great job, guys!” Mulally exclaimed, giving them an emphatic thumbs-up. “Fabulous!”

  Over the past twelve months, Ford had invested billions around the world. In the United States, the company was hiring again—luring engineers to Dearborn from places like Silicon Valley and insourcing factory jobs that had been outsourced to foreign suppliers years earlier. Ford had passed a still-struggling Toyota to reclaim its historic position as America’s number-two automaker, and it now topped the list of car companies that suppliers most wanted to do business with.

  The changes Mulally had wrought since his first day at World Headquarters went far beyond what anyone—including Bill Ford—had expected. Ford had been transformed from a company clinging to life on the strength of a few big trucks and SUVs to one that now made money on everything from subcompacts to heavy-duty pickups. Instead of lagging behind the rest of the industry, Ford was now a leader in technology, design, quality, and fuel economy. Farley and Day had succeeded in separating Ford from GM and Chrysler. Toyota’s own television ads now compared its cars to Fords instead of Hondas, proof that the Japanese giant now viewed Ford as a direct competitor. And Ford’s own consumer clinics now revealed that consumers were actually willing to pay more for a car with a Blue Oval.

  But the biggest changes were those that had taken place inside the Glass House. Ford’s executives no longer spent their days plotting one another’s demise or defending their turf. Instead they spent their time working together to ensure the company’s continued success. They offered one another help and sought help when they needed it themselves. They measured their success not by personal victories, but by their progress against Mulally’s plan.

  Ford still faced challenges, both at home and abroad. In Europe, it was now slogging it out for share with the rest of the world’s automakers, cutting prices to keep customers from defecting to other brands. In the United States, its voice-controlled Sync system was coming under fire from federal officials who worried it was too distracting to drivers. Sync was now part of a much more cutting-edge system that replaced many of the old analog dials and buttons on Ford dashboards with customizable computer screens and touch-sensitive controls. These efforts to keep up with the consumer electronics industry continued to attract younger buyers to the Ford brand, but they were causing real problems for older motorists who found the new interfaces cluttered and confusing. Analysts were tired of getting beaten by Ford and began to inflate their profit estimates. Though still making more money every quarter, Ford was now falling short of their marks on occasion. The company’s stock took a beating whenever it did. But these were not existential crises. They were the sorts of problems every corporation
dealt with all the time.

  On January 28, 2011, Ford posted a full-year profit of $6.6 billion for 2010. It was the most money the company had made in more than a decade. Alan Mulally and his team had not just saved an American icon; they had made Ford Motor Company the most profitable automaker in the world.

  *There would be minor variations to account for regional tastes and local requirements.

  *With Volvo gone, there was no longer a need for a European Group and responsibility for the entire region reverted to Ford of Europe.

  †That deal, which reduced Ford’s stake in the Japanese company to just 3.5 percent, was announced on November 18, 2010. Ford made about $372 million from the sale.

  *All of these leaders had a designated representative who would attend the meeting in their place if they were sick, on vacation, or traveling. If Mulally was unable to attend, Booth filled in for him and led the meeting.

  CHAPTER 21

  The Road Ahead

  The only history that is worth a tinker’s damn is the history we make today.

  —HENRY FORD

  The tidal wave that overwhelmed the American automobile industry in 2008 had been building for decades. Detroit was a fault line straining under the colliding forces of foreign competition and legacy costs, groaning under the weight of overly generous union contracts, chronic mismanagement, and insular thinking. Ford Motor Company is where the fault failed first. Fortunately, the Dearborn automaker could still do something about it when it did. Despite their persistent insistence that they were well ahead of Ford in their own turnarounds, General Motors and Chrysler were actually slower to appreciate the full magnitude of the impending crisis and the full extent of their own contributions to it. By the time they did, it was too late. The credit markets were closed and anyone with skills necessary to save a major automobile manufacturer no longer wanted anything to do with Detroit. But those who attribute Ford’s turnaround to luck or timing ignore two important facts. First, Alan Mulally had already done this before at Boeing. Second, Ford itself had done it before in Europe and South America.

  Bill Ford and Don Leclair did not begin putting together the mammoth financing package that kept Ford solvent through the lean months of 2008 because they were lucky. They did so because they knew that saving Ford would require a huge amount of cash and could see that the days of easy credit were coming to an end. Nor did the Dearborn automaker win over Toyota customers just because the Japanese giant stumbled and fumbled its stellar reputation, but because Ford’s own vehicles had improved so much that they now represented an attractive alternative. The collapse of Chrysler and GM, Toyota’s quality crisis, and the March 2011 earthquake and tsunami, which brought the entire Japanese automobile industry to its knees, certainly created huge opportunities for Ford. But the company was able to take advantage of them only because it already had the products, the resources, and the strategy in place to do so. If any of these had occurred five years earlier they might have helped, but Ford would still be a stumbling dinosaur mired in its own history.

  There are some who will point to the loans Ford received from the U.S. Department of Energy and the money it borrowed from the U.S. Federal Reserve and say the company did take taxpayer dollars. This is true, but in this sense, so did the rest of the major automakers—and not just the American companies. Japanese and German manufacturers benefited from these programs as well, in addition to receiving support from their own governments. But these were loan programs set up to address systemic problems beyond these companies’ control. What made Ford different from GM and Chrysler was that the U.S. government actually bailed those companies out—not just with loans, but with direct financial aid that they needed merely to keep the lights on. Both of those automakers died on the operating table and were revived by Washington. Ford saved itself.

  It is also easy, and not necessarily incorrect, to say that Alan Mulally saved Ford Motor Company. But the truth is more complicated than that. One could just as easily say that Bill Ford saved the company by having the humility and self-awareness to step aside and make way for someone who could do what he had been unable to, or point out that Mark Fields put together the Way Forward plan that provided the framework for Mulally’s own restructuring of Ford’s North American automotive operations, or credit Don Leclair for having the foresight to pursue the financing package that paid for it all. All of these things are also true. Ford was not saved because a hero rode into town on a white horse. But if he had not, Ford would not be here today. Certainly not the proud, profitable, and independent automaker that has become a symbol of American resilience and resourcefulness for the second time in a century.

  While many of the pieces of Ford’s turnaround were already in place, the company’s own culture was preventing them from being implemented with the speed and scope necessary to effect real change. Fields’ plan may have been fundamentally sound, but it did not go far enough fast enough, and he lacked the gravitas and experience necessary to make it work. Derrick Kuzak knew what needed to be done to transform Ford into a world-class automobile manufacturer that took full advantage of its design and engineering resources, and he was already pushing the company in the right direction with the new Global Product Development System. But Ford would have run out of time and money before it got to where it needed to be if Mulally had not been there to put the pedal to the metal. Leclair understood how precarious Ford’s position had become and had put together a financing plan to buy the company enough time to fix itself, but he never could have sold it to Wall Street. The big banks no longer trusted anyone from Dearborn. Bennie Fowler was making progress on quality in North America, Tony Brown was trying to make things right with the suppliers, and Ford’s labor team—Joe Laymon, Joe Hinrichs, and Marty Mulloy—were making real progress with the United Auto Workers. But all their efforts were still stuck in the muck of infighting and turf warfare that had held the company back for so long. No one inside the Glass House could figure out how to extricate themselves or the company from this miasma, nor could they bring themselves to take a hard and unflinching look at the full gamut of problems Ford faced. At best they were just trying to stop the bleeding.

  Mulally ripped off the bandage, cauterized the wound, and cured the disease. Only an outsider could do that. But not just any outsider: It had to be someone who understood the complexities of global manufacturing, labor relations, and heavily engineered products. Chrysler’s experience with former Home Depot CEO Robert Nardelli was a cautionary tale about the perils of putting someone with no manufacturing experience behind the wheel of major automobile company. Nardelli believed he could switch suppliers of stamped steel components as easily as he had once changed plywood vendors. He was wrong, and his mistake created major problems not only for Chrysler, but for a number of other automobile manufacturers as well—including Ford.

  Mulally knew enough to avoid such blunders. He combined in one person an exceptional engineering mind with exceptional financial acumen. His experience as an aeronautical engineer taught him the importance of shedding weight and streamlining the edges to make planes lighter and faster. He applied that same approach to the automotive business and made Ford soar. Mulally also brought a relentless determination to Dearborn that had been lacking at the top of the Glass House. He had not been nursed on the mythology of the American automobile industry. Ford’s executives, like those at General Motors and Chrysler, could not see beyond their own shared experience. The cyclical nature of the business was internalized. They took it for granted that every success would be followed by failure. It became a convenient excuse. They tinkered with the spark plugs and tightened the belts because none of them believed it was possible to tear apart the entire motor and rebuild it.

  But that is exactly what Mulally did—and he got all of them to help him do it. His disciplined approach cut through the company’s caustic culture and forced everyone to march in the same direction. He was tough when he had to be, but Mulally’s primary means of motivation
was a shared vision—a vision of what Ford had been and could be again. He taught the other executives how to make decisions based on data instead of boardroom politics. And once he had, most of the decisions that saved Ford were made by the team as a whole.

  “We were not organized for success,” Chief Technical Officer Paul Mascarenas told me. “Alan changed that with One Ford.”

  Other men and women have taken broken corporations, fixed their flaws, and set them back on the road to success, but few have had as good a time doing it as Mulally. He led Ford through one of the most painful and far-reaching restructurings ever and guided it through the global conflagration that was the Great Recession with the same goofy grin on his face that he had when he walked in the door. I once asked his media handler, Karen Hampton, if she had ever seen him stressed. She laughed, and told me about the day in 2008 when she had come into Mulally’s office and found him staring out the window, squeezing a stress ball.

  “Oh no!” she exclaimed, pointing to the rubber ball. “If you’re stressed, we must be dead!”

  Mulally started laughing.

  “Don’t worry,” he said. “I hurt my wrist playing tennis.”