Charlie Rose Talks to Alan Mulally

The Ford CEO on the downside of not taking a bailout—and how he expects upcoming UAW contract negotiations to play out

You’ve recently received a number of CEO of the Year awards. What makes a great CEO?
It’s a little bit hard for me to answer that. But from a process point of view, I think one of the things they’re recognizing is the fact that we pulled together around a very compelling vision. We also developed a comprehensive strategy to transform Ford. And then, of course, we’ve been relentlessly implementing it. So I think that having a point of view about the future, having a vision, pulling everybody into that, and then having a comprehensive strategy in delivering are really important contributions.

Ford survived the financial crisis without a bailout. What are the consequences of being rescued for GM and Chrysler?
Well, there are some real advantages of going into bankruptcy, because they got restructured. Clearly the biggest was the debt—their debt was essentially removed. Our plan is to remove that disadvantage by repaying our debt based on the strength of our products and our profitability. This is the most exciting thing about our [July 26] earnings announcement. We’ve repaid another $2.6 billion of our loans … which means that in the last year and a half we have repaid $20 billion of the $23.5 billion that we borrowed [in 2006]. So we are getting very close now to investment grade and being on our way. Even though we were disadvantaged over the last two years, we are removing the disadvantage.

You have contract negotiations coming up with the UAW. How do you expect those to go?
We’re looking forward to it because it’s all about competitiveness. Just think about what we have done over the last five years and our agreement with the UAW in 2007 and also in 2009. We have gone from not being able to compete in the U.S. to where we are now competitive. Our cost structure, including wages and benefits, is competitive with the best in the world. Everybody now knows that we have created a growing company. We’re actually converting truck plants to car plants. We just announced that over the next two years we’re going to be adding 7,000 new jobs. They were worried about us competing. Negotiations now are all focused on competitiveness.

Do you see a strike in your future?
That’s not even in the conversations. The conversations are about how do we continue to improve Ford, because what everybody wants is for us to continue to grow and make great products and provide great jobs and great careers. That’s what everybody is aligned about.

More and more people now say American competitiveness hinges on maintaining a manufacturing base. How do we do that?
In Ford’s case it’s important that we design and make things everywhere we operate, so we use all that intellectual capability and all that knowledge around the world. It wasn’t long ago that there was a sense that maybe we didn’t need to have manufacturing as a fundamental piece of the foundation of our economy. Over the last few years, especially, we appreciate that manufacturing and design and making things and all the enabling technology and the research and development that goes with that—nearly 70 percent of R&D is associated with design and manufacturing …

Seventy percent?
… is associated with manufacturers, absolutely. It’s just a big part of the fabric of the U.S. The most important thing is that we look at … all the policies that we have to make sure we have appropriate tax structure, we have appropriate education, we have an eye towards manufacturing.

It comes back to cost structure?
That’s what we’ve done over the last contract negotiations. Everybody came to the table, moving from defined benefits to defined contribution, moving to entry-level wages that were now competitive. We did this as a partnership. That’s why we’re now making commitments to making new cars right here in the U.S.

UAW President Bob King had some harsh things to say about executive compensation at Ford.
And did you have a question?

Was his criticism fair?
In all our compensation, we’re aligning compensation with the success of Ford. So everything about my compensation and all the way through—every employee is aligned with our financial performance as a business. And we’re going to continue to do that.


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