Bill Ford's Long, Hard Road
William Clay Ford Jr. says he never planned to run the company his great-grandfather founded a century ago. Even now, almost a year after he fired former CEO Jacques A. Nasser, Ford insists he would have preferred to remain chairman of the $162 billion Ford Motor Co. (F ) "I never really did fight for this job," he insists, saying he took it out of "a sense of responsibility."
Under Nasser, Ford had fallen into a sorry state of disrepair: Its profits, market share, quality, and morale were spiraling downward as he tried to turn it into something, anything, other than a traditional car company. Then there was the disastrous recall of Firestone tires, which damaged the company's image and cost $3.5 billion. By late October, Ford decided he had to take charge. He acknowledges that the board could have acted more quickly in mid-2001, but says they were lulled by the record $7.2 billion profits of 1999. "It wasn't a gradual decline," he says. "It was a massive implosion." Yes, it was. The company lost $5.5 billion last year, and will barely eke out a profit this year. Bill Ford has put his family name--and fortune--on the line.
No chief executive at Ford Motor has had to contend with a company in such bad shape since Philip Caldwell in the early 1980s. During Nasser's three-year tenure, he worked his way through a pile of cash. He acquired Volvo Car and Land Rover, but also squandered billions buying such tangential operations as junkyards, not to mention several e-business ventures that went bust. The company's $15 billion cash hoard had dwindled to less than $1 billion by the time Bill Ford took over, and the auto maker had little to show for it.
Of course, for that brief moment in the late 1990s, it did seem as if Ford could just keep pulling in the money. In North America, it made an average of $1,955 for each vehicle it sold. But by mid-2002, Ford was losing $190 per vehicle because of bloated costs and intense pricing pressure from General Motors Corp. (GM ), a far more efficient manufacturer.
Back in the 1980s, it took the introduction of Taurus, plus cutting billions in expenses, for the company to eventually recover. Bill Ford's five-year turnaround plan, which includes reducing costs by $4.5 billion, closing as many as six plants, and continuing to replace aging mass-volume cars such as Taurus with vehicles geared to more specific consumer tastes could put the auto maker solidly back in the black. Ford does have a few promising vehicles in the works: the overhauled F-150 pickup--Ford's top-selling vehicle--for one. And in 2004, the auto maker will launch two pivotal vehicles: the Ford Five Hundred big sedan and CrossTrainer, a car-SUV hybrid, both of which have received mixed early reviews.
The new CEO is counting on the Premier Auto Group--Jaguar, Land Rover, Aston-Martin, and Volvo--to deliver fully one-third of corporate profits by 2005. That could be expecting too much: Jaguar's all-important luxury starter car, which launched last year, is already faltering. In early September, Ford said it will halve production of the "baby Jag." If the next generation of vehicles suffers the same fate, Ford will simply limp along as an ever more distant No. 2 behind GM.
To narrow the gap, Ford needs top talent. While he has built a strong financial team, he hasn't found the right combination of people to oversee operations. Mostly, he's missing a car guru. "Ford would be hugely well-served if it had Bob Lutz or a Bob Lutz clone," says a former company executive, referring to GM's product development czar. Trouble is, there are no obvious candidates, especially now that Ford let Wolfgang Reitzle leave. Reitzle, an ex-BMW engineer who headed the luxury-car group, was Ford's most talented product manager, someone who understood auto design from the styling studio to the factory floor. But, says Ford, he wanted to be a CEO.
Bill Ford certainly didn't expect to take charge amid such turmoil and with less experience than any other Ford Motor chief executive in half a century. Although he has worked at the company for 16 years--and held 15 different jobs--he has never run an operation larger than a tiny Swiss unit. Now Ford, 45, carries the full burden of the expectations of the company's employees, dealers, suppliers, and investors--including his extended family, which still controls 40% of Ford Motor. "He has got a huge weight on his shoulders," says cousin Elena Ford, who runs the Mercury brand. Says Bill Ford: "Early on, I felt like I was trying to hold up a collapsing building with an umbrella."
So far, at least, Ford has shored up the deteriorating company surprisingly well. The quality of its vehicles has improved somewhat: This year, Ford Motor moved up two spots from dead last among the seven major auto makers in the benchmark J.D. Power & Associates initial quality survey. Ford says the launches for the year are on schedule, and there have been no major recalls. Warranty claims are down about 10%. Quarterly profits have exceeded analysts' forecasts, albeit by pennies. And the company's cash level is up to $9.4 billion--in part because Bill Ford took to the road in late January to promote a convertible preferred offering that ultimately raised $4.5 billion. The CEO also says there has been some progress in turning around Ford of Europe, where quality and productivity have improved. And even ailing Ford Motor Credit Co. looks stronger after the CEO brought in two new executives to restore discipline to its lending practices. For now, though, investors remain skeptical. Ford shares are trading near a 10-year low at $9.30.
Still, Bill Ford brings to his family's company a consistency of purpose it has sorely lacked under a series of short-run CEOs eager to quickly put their own stamp on the auto maker. "Bill is here for the long run," says Chief Financial Officer Allan D. Gilmour. If so, he stands a chance of avoiding what he calls Detroit's "collective amnesia," an unerring knack for repeating the same mistakes: letting quality slip, ignoring changing consumer tastes, allowing costs to balloon, and making unwise acquisitions. During the next auto boom, "cash will be king," Ford promises. "It's burned in my brain. It's a matter of keeping our focus when things start to go well."
Ford arrived in the corner office with an unprecedented reservoir of goodwill. Employees gave him a standing ovation when he took control last fall, thrilled to have a Ford running Ford for the first time since Bill's uncle, Henry Ford II, retired in 1980. Since firing Nasser--whose blunt-spoken manner and intense drive to remake Ford Motor top to bottom created bitter rifts--Bill Ford has been rebuilding relations with employees, dealers, suppliers, and unions. The top brass is "talking to dealers a lot more. And they're listening," says Garland (Tex.) Ford dealer Jerry Reynolds.
The strained relationship with suppliers hasn't been as easy to smooth over. "Suppliers hate the company, but they love Bill Ford," says one component company executive. That appeal is one reason why Ford Vice-President Kathleen A. Ligocki arm-twisted the new CEO into appearing as the company pitchman in a popular series of national TV ads. "He's just a normal guy...for a billionaire," she says. When Ford is in the office, he tries to eat lunch three days a week in the cafeteria. He holds meetings in small rooms so managers can't come with their entourages. And at a company bound by protocol, he encourages informal chats. "I came back from lunch one day and found Bill sitting behind my desk," recalls one executive.
Unlike other auto czars, Ford doesn't force his opinions on his staff. But he won't keep mum at crucial times either. Late last year, when senior managers presented their turnaround proposal, says Ligocki, "he was the lone person to say, `It's not enough."'
When it comes to cars, though, Bill Ford presses gently. Where Nasser and Reitzle zeroed in on every detail--the feel of a door handle, the shape of a headlamp--Ford examines the whole, says Richard Parry-Jones, head of product development. Then he's more likely to ask a pointed question about how the vehicle fits into the lineup. He prefers to send designers back to the drawing board to devise their own solutions. Ford "gives me enough rope to hang myself," says design chief J Mays. Ford says simply: "I don't dabble in things like design."
All the same, he knows Ford's car lineup needs a jump-start. The first new vehicle approved on his watch wasn't a high-volume sport utility vehicle or a high-profit luxury sedan, it was the GT40, a head-turning update of a 1960s race car. Originally intended as a concept car, the GT40 was so well received at the January auto shows that just 45 days later Ford told cheering employees, "We're gonna build it!" The GT40 should be available in late 2003. It will be a niche car, adding little to market share or profit. But Ford championed the muscle car for the excitement it could generate among drivers and employees. "It's emblematic of a high point in Ford history," he says.
Ford is also distinguishing himself from Nasser when it comes to his hiring philosophy. Nasser believed in recruiting aggressively from the outside and then letting his stars do as they please; put simply, Ford does not. Indeed, he promoted Nicholas Scheele, an affable fence-mender who headed Ford of Europe, to chief operating officer. He also pulled David W. Thursfield, the driving force behind the nascent European turnaround, back to Dearborn to help accelerate cost-cutting. Ford cajoled ex-banker Carl E. Reichardt, 71, to join the carmaker as vice-chairman for financial affairs. And in May, the CEO lured back former CFO Gilmour, 68, who had retired seven years earlier. "It's harmony in the team that he looks for," says Thursfield, who is now head of purchasing and the international auto business.
But some Ford-watchers worry that not everybody on the CEO's team has the experience to turn the company around. The day-to-day burden of fixing Ford falls on Scheele, 58, whose main claim to fame was turning tiny Jaguar into a profit-maker over nine years. Heading North American operations is James J. Padilla, a longtime Ford manufacturing honcho. Trouble is, he ran manufacturing during the time that quality and productivity plummeted. Padilla says corrective measures he put in place will pay off soon. One longtime colleague believes that Ford knows he needs to make changes, but "isn't mean enough" to jettison those who are in over their heads. Ford says he only plans to do some executive "fine-tuning."
And perhaps, some suggest, Ford should have tried harder to keep Wolfgang Reitzle, as demanding and ambitious as he may have been. Reitzle surprised many when he left to become the chief executive of German forklift maker Linde. Ford says now that he regrets the loss.
Indeed, Ford admits that running one of the world's largest industrial companies has been satisfying, but not what he would call exactly enjoyable. "I can't say I'm having fun yet," Ford acknowledges. It's a sharp contrast to the relief and delight that he recalls when he left the ranks of management in 1995 to head the board's influential finance committee. Ford even professed to be "enjoying the heck out of" the chairman's job in 1999. Now, he says: "As CEO, you wake up every day knowing somebody is mad at you."
He can count some of his former environmentalist friends at the top of that list. Being green was easier when Ford was simply a corporate director, even when he was the nonexecutive chairman. Then, he often met with Sierra Club leaders. In August, the group issued a statement excoriating him for opposing tougher corporate average fuel-economy standards in Congress and for failing to improve its vehicles' fuel economy this year. And the organization will soon launch an ad campaign showcasing new technologies that Japanese companies are using to improve fuel economy in cars. "We're calling his bluff," says Sierra Club lobbyist Dan Becker. "My commitment is no less," Ford protests. "But if we don't get our business right, it won't matter what kind of social commitments we have."
Trouble may also be brewing with another constituency. Bill Ford, whose undergraduate senior thesis at Princeton University examined the formation of the United Auto Workers, enjoys a rare rapport with union leaders. In fact, he has known some of them since he was a 25-year-old member of Ford's bargaining team in 1982, when the company and the union crafted a historic cooperative pact. Lately, however, Ford's plans to shutter plants have put labor relations on shakier ground. The tensions first surfaced in this fall's talks with the Canadian Auto Workers, who are irate that Ford wants to close its truck factory in Oakville, Ont., and have announced a strike deadline of Oct. 1. "We have a very difficult issue--the most difficult ever between Ford and the union since 1945," says Buzz Hargrove, head of the CAW. "People expect more from Ford. Our members and employees really do feel part of the Ford family."
Nearly a century after Henry Ford opened the first factory in Detroit, the Ford family is counting on one of its own to revive the troubled company. So far, Bill Ford has put his name to good use by repairing relations with employees and dealers. Designing and producing cars with the impact of the Taurus or the iconic appeal of the original Mustang is another matter. That's what it will take to restore profits to Ford Motor and some of Bill Ford's joie de vivre.
By Kathleen Kerwin, with Joann Muller and David Welch in Detroit