How to Fix Ford

As Ford hunkers down to prepare for its revised restructuring plan next month, some experts offer advice on how to stop the tailspin

Shutter Mercury? Sell Jaguar? What can we get for 51% of Ford Motor Credit? Link up with Renault-Nissan? Or maybe Peugeot would be better? Find a new CEO? It sounds like the auto industry version of the fantasy football trading deadline. Those are some of the big plays being mulled over by Ford Motor (F) chairman and CEO William Clay (Bill) Ford Jr., who also happens to be vice-chairman and co-owner of the Detroit Lions.

Unfortunately for Bill Ford, these decisions will weigh much more heavily than armchair quarterbacking. He faces arguably the biggest crisis in his company's history. If his next moves to right the company and restore it to competitive profitability do not work, nothing short of Ford's viability as a stand-alone company will hang in the balance. "We are open to all options," Ford said in an exclusive interview with BusinessWeek. "Radical things are being contemplated."

Alas, we might finally see some gutsy action from the auto company whose advertising slogan is "Bold Moves" but whose management style has been anything but. In his first interview since Ford announced a surprise $123 million loss and subsequently hired investment banker Kenneth Leet to help stage a recovery through asset sales and further restructuring, Bill Ford talks openly about his company's need to make some major change (see, 8/24/06, "Ford on Ford").

And, boy, does he need it. Ever since the last CEO, the now-deposed Jacques A. Nasser was ousted in October, 2001, the auto maker has been struggling to get footing under Bill Ford's leadership. He launched his second turnaround plan in four years last January, and already that is being expanded and accelerated. Ford's U.S. market share is down five points to 17% this year and headed lower. Since January, Ford has lost $1.4 billion in its North American business. Says longtime industry watcher Maryann Keller, "They have finally figured out that they have no management, no product plan, and no leadership."


  Bill Ford is trying to counter the perception that he is moving too slowly while his family's 100-year-old business goes further adrift. If he makes some of these bold moves, what will the new Ford look like? We know it will be much smaller given Ford's plan to cut more than 30,000 jobs and at least 14 plants. But some brands may go away, too.

Bill Ford is noncommittal about whether he has already called Renault-Nissan (NSANY) CEO Carlos Ghosn about exploring an alliance, but Ford sources and published reports point to Ford sitting down with Ghosn after the French-Japanese company concludes alliance talks with General Motors (GM). Though Bill Ford tells BusinessWeek that he doesn't see any reason for his family to dilute its 40% voting stake in Ford, he may have to convince his clan to do just that as a prerequisite for selling equity to another auto maker or even forging a substantial joint venture.

And if Bill Ford gets his way, another executive—maybe an outsider with more operating experience—would relieve him of the chief operating officer job he currently holds in addition to his other titles, and eventually the CEO job.

For the first time, Bill Ford acknowledged that he is open to ditching some of the seven brands his company is struggling to feed. Not only might he sell British brands like Land Rover, Jaguar, or Aston Martin, Lincoln and Mercury could be shuttered. Bill Ford wouldn't discuss hard specifics yet, but says he has no prejudice or emotional tie to keeping any brands other than Ford. "The only prejudice is fixing Ford Motor Co.," he says. "Whatever it takes, that is what we will do."

While Bill Ford, Leet, and the company's board chew over their options, here are what some longtime industry watchers think should happen:

Mike Jackson, CEO, AutoNationCEO Mike Jackson of AutoNation (AN), the biggest Ford dealer in the U.S., which sells all of Ford's brands except for Aston Martin, not surprisingly has a prescription for the way Ford should look. "What Ford has to do is concentrate on brands and products that can be successfully retailed to the American consumer, not models for fleets, employees, or distressed discounts," says Jackson, formerly president of DaimlerChrysler's (DCX) Mercedes-Benz North America division. "If they can't retail vehicles to the U.S. consumer, the rest will simply not matter."

So what brands does Jackson see worth keeping? "Ford needs to decide on and realize what they are good at, and focus on only those things," he says. "The brands to go forward with and invest in are Ford, Volvo, and Land Rover. Ford is a great mass-market brand. Volvo is a clearly defined brand everybody understands that can be grown. And Land Rover is a very successful niche brand." Jackson doesn't say to outright kill Lincoln, Mercury, Jaguar, and Aston Martin. But, since he's an executive who has to sell all of them, his omission of those brands in a Ford future speaks volumes.

Ford could explore an alliance, Jackson says. But he warns that they are tricky and have only worked in a few cases. Says Jackson: "Alliances are extremely difficult and the failure rate is tremendous. The only executives with a track record for making them work are Carlos Ghosn and Dieter Zetsche."

Charles Hughes, former president of Mazda North America and Land Rover North AmericaAnother interesting voice on what the new Ford should look like is Charlie Hughes, author of the new book Branding Iron: Branding Lessons From the Meltdown of the U.S. Auto Industry. Hughes is also the former head of Mazda North America and the former head of Land Rover North America.

Hughes posits that the new Ford should consist of Ford, Volvo, and Jaguar on the theory that Ford needs three global brands to go against Toyota. Lincoln and Mercury don't qualify. And, though not in his book, he said in an interview that he also thinks Ford should increase its stake in Mazda from 37% to more than 50%, or buy the Japanese auto maker outright, close it, and fold its product and engineering into the Ford brand.

"The Lincoln and Mercury brands merely play to Ford's long-suffering strategy of badge engineering, selling the same vehicles under different names," says Hughes.

Mazda, he says, has a very good product line, engineering, and design organization. But it should be folded, he says, into the Ford brand to make Ford stronger. "The model for what I am talking about is Toyota," says Hughes. Jaguar, he says, has been hurt by mismanagement and now suffers from being book-ended by Aston Martin at the top and Land Rover. "Sell Land Rover and Aston, and put all your resources into Jaguar sedans, crossovers, and sports cars, and put real marketing dollars behind it."

Maryann Keller, Maryann Keller & AssociatesThe longtime auto industry analyst doesn't believe Ford can survive or thrive without an alliance partner. She says Renault-Nissan CEO Carlos Ghosn should drop his talks with GM and make a play for Ford. "An alliance may be the only thing left for them," Keller says. "There isn't a lot of overlap, so it makes some sense. Ford would get some management expertise."

Like other critics, Keller says Ford needs to thin its herd of brands: "Lincoln and Mercury aren't viable. The only viable brands are Ford and Volvo."

Click here to read BusinessWeek's exclusive interview with William C. Ford Jr.

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