Toyota's Loss, Ford's Gain?

Ford CEO Mulally talks about hiring Toyota marketing chief Farley to help forge the U.S. automaker into a "single global brand idea worldwide"

After searching for nearly a year, Ford Motor (F) hired the global chief marketing executive that was on Ford Chief Executive Alan Mulally's wish list from Day One of the hunt—Toyota's James Farley, who most recently was running the Japanese automaker's Lexus brand worldwide.

At Ford, Farley, who reports to the CEO, will spearhead Mulally's strategy of rebuilding Ford around the Ford blue-oval brand worldwide with a one-global-brand strategy. Ford in the last decade has strayed from its core brand while it pursued a luxury-brand portfolio that has included Jaguar, Volvo, Land Rover, and Aston Martin. Aston has been sold, and the other three are on the block.

Ford's First Head of Global Marketing

For Toyota (TM), it is the latest chapter in a talent drain from its marketing ranks. Chrysler recently plucked Toyota President of North American Operations James Press to be vice-chairman and tapped Corporate Marketing Manager Deborah Wahl-Meyer to be chief marketing officer. Both executives, along with Farley, had been instrumental over the past decade in creating a coherent marketing and brand strategy for Toyota to go along with its well-known quality and reliability.

In wooing Farley, Mulally, in an interview with BusinessWeek, said he told the 45-year-old executive, who is also credited with launching Toyota's Scion brand, that he wanted someone who knew how to galvanize Ford into "a single global brand idea worldwide," and "leverage the assets we have around the world into that idea." Farley will also lead an effort to make over Ford's marketing ranks in each market around the world. Farley is the first senior-level hire made by Mulally since the CEO arrived at Ford from Boeing (BA) 13 months ago.

It is the first time that Ford has had a global marketing executive. Previously, each business unit around the world had its own sales and marketing chief. Mulally said that Farley will work closely with Derrick Kuzak, whom the CEO named global product development chief almost a year ago.

Farley was not available for comment Oct. 11. Mulally said, though, that Farley's questions back to the CEO centered mostly around why Mulally left Boeing to run Ford. "I felt a great chemistry with him," said Mulally.

Reviewing the Current Stable

The brand realignment Mulally wants at Ford is historic in its breadth. Never before has an automotive company moved so fast and so dramatically to restructure its whole brand portfolio, which in Ford's case includes six brands. The sale of Jaguar and Land Rover are a given, and Ford expects to announce a buyer in the next month. The sale of Volvo is not certain, though it is being shopped and Mulally is known to want to off-load it. Also, Ford needs the cash that Volvo would bring to cushion its restructuring. Ford does not expect to be profitable until 2009.

Though a design engineer by training, Mulally has expressed strong opinions about marketing. He has torpedoed the "Bold Moves" brand strategy Ford created shortly before his arrival. Ford has been reviewing pitches from three ad agencies for a new brand platform. But Mulally, who was presented with the ideas last month, didn't endorse any of them. The process will start anew when Farley arrives at Ford in mid-November.

Besides the Ford brand, Farley will also be instrumental in figuring out what to do with the automaker's Lincoln and Mercury brands. Mercury has no definite product plan.

Some executives within Ford have said they would like to eliminate Mercury and create a network of Ford-Lincoln dealers. But the franchise laws protecting dealers who own Ford and Lincoln-Mercury dealerships favor the dealers and make it expensive for Ford to eliminate them to make sweeping changes to its distribution network.

From January through September, Ford's North American market share was 16%, down from 17.9% for the same period a year ago. But that reflects a deliberate and dramatic reduction in sales to rental fleets. Ford's share of the retail market stands at a little below Ford's target of 13%. The market share of Lincoln is 0.8%, and Mercury's share is 1.1%.

Launching a New Brand?

A wild card for Ford's future is whether the company will consider starting a new brand from scratch, a decision expected to be heavily influenced by Farley. Mulally is a student of Toyota, and that company has successfully launched two new brands in the last 20 years—Lexus and Scion. Ford, in contrast, has been bedeviled by trying to integrate the legacy cultures and manufacturing systems of its acquired brands. About a new brand being developed, the CEO said, "Anything is possible."

Some analysts and many Ford insiders are worried that Ford can't succeed without a legitimate competitive luxury brand to earn higher profit margins than those at the Ford brand. Toyota, for decades, was able to earn solid profits without an additional premium brand because it was a low-cost producer. Ford is one of the higher-cost auto manufacturers worldwide. "Clearly, taking the complexity out of our systems, reducing our brands and vehicle platforms, and creating bigger volume on fewer systems is key to our strategy working," said Mulally.

Ford in the late 1990s also explored launching a youth brand similar to Scion, but got sidetracked by events such as the Firestone tire recall, the ouster of then-CEO Jacques Nasser, and financial hardship that has gripped the company since 2001.

Farley was widely seen as a likely candidate to one day be Toyota's top American executive, but in going to Ford, he puts himself in the mix to succeed Mulally, 61, as CEO of Ford's worldwide operations. And just as Ford turned to Mulally, an outsider, Farley's chances look pretty good if he can carry out his part of Mulally's vision for the new Ford.

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