For a brief, shining moment on the morning of Oct. 30, Ford Motor Co.'s (F ) Dearborn (Mich.) headquarters felt like Camelot. Cheering workers surged to their feet as William C. Ford Jr. introduced himself as the company's new chief executive officer at a hastily arranged press conference. Amid the gloom about worsening profits and quality, the ouster of CEO Jacques A. Nasser at the hands of founder Henry Ford's well-liked great-grandson was a tonic to battered morale. And the shift in mood was almost palpable. "It was like the old Ford again," says one company insider. "People were smiling again instead of staring at the ground."
Trouble is, it's not the old Ford. The company, hailed by Wall Street just last year as the best-managed of the Big Three, is in a tailspin. Its stock has tumbled 58% since May, 1999, its 10-year high. And it has slipped 32% this year--about twice as far as General Motors Corp. (GM ) or DaimlerChrysler (DCX ). The company lost more than $1.4 billion in the past two quarters, thanks to soaring costs, falling prices, big rebates, and the Firestone tire recall. With the popularity of such mainstay models as the F-150 pickups and the Explorer SUV waning, Ford has surrendered 1.5 points of market share this year alone, slipping to 22.8% of U.S. vehicle sales. All this in an economy that's heading south.
Toughest of all will be Ford's deepest problems--quality snafus, putting the Firestone debacle behind it, a lack of exciting vehicles in the pipeline, and a brain drain. Indeed, on Oct. 31. lawyers for Explorer owners alleged that Ford withheld knowledge that the vehicle was unstable. At best, it will take Bill Ford and his new team years to reverse the damage. They are already hammering out a broad restructuring plan that Ford promises to produce by early January. Whatever shape the plan takes, it will have to tackle a big question about the future: Should Ford shrink to become stronger, as Nasser argued, or plot a new strategy for growth? "Bill is the right leader," says one former Ford manager. "But he's got a crippled company to work with."
NO DREAM. The crippled company part is surely true. Far less clear is whether Bill Ford is really the right leader. The new CEO did spend 15 years in Ford management, before leaving to assume broader board responsibilities in 1995. But he has never run anything larger than Ford's minuscule Swiss operations. No one pretends he would be running the world's fourth-largest industrial company at age 44 if his last name weren't Ford. And no one on Wall Street sees this as a dream team. Shrugs veteran analyst Maryann Keller: "You go with the best you've got."
Nor is it clear whether Ford's No. 2, 57-year-old Chief Operating Officer Nick Scheele, has what it takes to fix so large and complex a mess. Just two years ago, Scheele was running Ford's prestigious but tiny Jaguar unit. He has since leapfrogged through two big jobs, before becoming head of operations on Oct. 30. Meantime, board member Carl E. Reichardt, 70, the retired chairman of Wells Fargo & Co. (WFC ), who as new vice-chairman will oversee Ford's finances, is taking on a huge task. The job, he jokes, is akin to "a 45-year-old quarterback being asked to strap on the pads again."
EASY MANNERS. But don't write off this unlikely crew quite so fast. Any one of them on his own wouldn't be able to run the company. But Ford and team, among them, possess an impressive array of skills the carmaker will need. Bill Ford is no lightweight: He's a quick study who has run auto operations from climate control to commercial trucks and has had stints in sales, manufacturing, and labor relations. For six years, he headed the board's powerful finance committee. What's more, Ford enjoys a strong bond with the rank and file--at a company that prizes its ties to the Ford family. Ford's dealers, who bear the brunt of quality woes, also seem to have a soft spot for the new CEO. "You can't get mad at Bill Ford," says Lincoln-Mercury dealer Martin J. "Hoot" McInerney. "He's just too nice a guy."
Bill Ford's two henchmen bring their own assets. Scheele earned his stripes turning around Ford's quality-plagued Jaguar division in the 1990s. In early 2000, the 35-year Ford veteran took on the company's perennially troubled European operations, launching a $1 billion restructuring that slashed output by 17% and launched snazzy new products. The unit is expected to turn a profit in 2002. In just three months, Scheele has won a solid following among Ford's North American ranks for his candor and popular "back to basics" mantra that puts the focus squarely on making and selling cars and trucks. Signing on Reichardt, a top banker favored by investing whiz Warren E. Buffett, wowed Wall Street and gives Ford much-needed financial acumen. "It's a stroke of genius," says Keller.
Running Ford Motor is hardly a one-man job, as the new CEO hastens to point out. "I expect the three of us will have an easygoing partnership," he adds. That would be a big improvement over his strained power-sharing arrangement with Nasser, a talented but autocratic manager who hated to delegate and tried to keep his boss out of the loop. This time, Bill Ford has handpicked his team, choosing managers known for their willingness to be team players.
Indeed, just the absence of Nasser makes Bill Ford's job easier. The ex-CEO's willingness to squeeze suppliers, upset dealers, and shed experienced employees as he rushed to remake Ford as a consumer company made him a lightning rod. Several top Nasser confidants have also already gotten the ax, and others may follow. Ford really needed to see a new team to lead [it] out of the wilderness," says David E. Cole, director of the Center for Automotive Research in Ann Arbor, Mich.
The hard part is yet to come. The restructuring plan is expected to trim away $3 billion to $5 billion in costs. Shrinking the company to match its diminished market share would be the quickest way to repair Ford's finances. But insiders say Bill Ford will be less likely than Nasser to favor downsizing the company. Nor has the new team yet spelled out how it will deal with nagging problems such as quality. Last-minute glitches have delayed the launches of a series of products, most recently the eagerly awaited new Ford Thunderbird. But the choice of manufacturing boss James Padilla to replace Scheele as head of North America is seen as a step to bolster quality.
HAMSTRUNG. It will also be tough to get crowd-pleasing new cars and trucks into showrooms on a shoestring. Scheele says Ford has locked in future product plans, but insiders concede what's in the pipeline isn't exciting enough to rebuild sales. Scheele says he would like to add more car-based SUVs and other innovative crossover vehicles to the lineup, but that will take years. So will rebuilding Ford's depleted talent bank.
The most immediate challenge will be eliminating the cost of excess factory capacity. Analysts believe that Ford needs to close at least two or three assembly plants to stop its hemorrhaging. But the company is hamstrung by its 1999 contract with the United Auto Workers, in which Ford agrees not to close or sell any plants. "The contract's in cement," says UAW President Stephen P. Yokich. Still, Chrysler and the UAW worked together to devise a plan that eliminates work shifts and slows assembly line speeds at North American factories to cut output and minimize job losses. And with the good will that comes with his popularity and name, Bill Ford might be able to find some wiggle room to hatch a similar deal.
Where else could Ford economize? Analysts also suggest Ford might find it easier to unload some of the "downstream" auto-related ventures Nasser acquired now that he's gone: the British repair chain, Kwik-Fit; a junkyard business in Florida; and a slew of small e-business startups the company financed. Bill Ford will only say: "Everything is up for review--every asset, every piece of geography. We'll continue to review our mix of businesses."
Such cuts, no doubt, would provide the quickest path back to the basics, and that's exactly where the new team wants to take Ford. "It's not the Internet, junkyards, or auto parts," says Cole. "It's building cars and trucks." Now there's a novel idea.
By Kathleen Kerwin and Joann Muller in Detroit