Ford's Alan Mulally on China's Car Market and His Experience There
How did China become a passion?
I look forward to answering those questions. Let me ask you something. Usually, if we do a Q&A, then I will answer the questions in a shorter way. If I do it a little bit longer, then I’ve had a couple times where it just looks silly.
There’s one Q and a lot of A?
You’ve got this long answer. It’s like, “My God, what’s wrong with this guy?” How would it work for you best?
It’s OK if you go longer in an answer.
But then would they edit it down?
It’s going to be edited for space.
It’s good to edit it. I have another idea. Let me try this on you. What if I tell you the whole story? Then we can do your questions.
I started at Boeing in 1969. And in 1971, the United States started to normalize relations with China, and it was led by Henry Kissinger, and then President Nixon. On the first visit—I think the secret visit—Henry went on a Pakistani 707. And one was a Boeing airplane when President Nixon went. It’s so frigging cool.
They normalized relations, and then they wanted to get businesses working together. We, Boeing, started helping China. And then the leadership of Boeing asked me to take a lead role.
This is in the mid-’70s?
Yeah, ’70s, ’80s. And this was somebody who grew up in Kansas, right? I ended up helping them on the infrastructure, the airplane sales. And I also included them on the design of all the new Boeing airplanes.
So I get a call from Bill Ford. [Ford, the company’s chairman and CEO at the time, hired Mulally in 2006 to replace him as CEO.] I asked him, “Can you tell me about your presence around the world?”
He said, “Well, we’re primarily a truck and large SUV company in the United States, but I have been encouraging our team to start to expand. We have an operation in Asia Pacific, but it’s relatively small.” I said, “I think for this new Ford to be a major, profitably growing, successful company, that we need to serve markets around the world.” We talked about a plan. Asia Pacific’s going to get bigger. Small vehicles are going to be important.
And he said, “I think it’s absolutely right. I think this would be my dream.” And so out of that was born the plan for Ford. And look where we are today.
I’m in Chongqing, and the leadership gives me this present (he pulls out a brass statue of Sun Yat-sen and his wife), and they said, “Alan, this is the founder of modern China. And you and Ford are now doing for China what Sun Yat-sen wanted to do following World War I.” And I said, “Really?” They said, “Yeah, Sun Yat-sen, he sent a letter to Henry Ford. He asked him, ‘Would you set up operations in China?’ ” So I came home. Just feast your eyes on that.
Wow. That’s the letter.
Isn’t that cool? I come back, we go to the archives, we find this. There is a letter, just like they said. They know everything. And I get a chance to accelerate Henry’s original vision and Sun Yat-sen’s original vision.
Now can you see where you have asked one question, “What’s your relationship with China?” and then three hours later they’re going to say, “What’s wrong with that son-of-a-bitch?”
What was it like landing in China the first time?
I was in awe. I walked through the same terminal that President Nixon walked through.
How would you contrast the China you first saw with what you visit now?
It looks very similar. Everything’s bigger.
Do you find it an interesting dichotomy that the world’s largest communist government creates the world’s greatest capitalist market?
It’s fantastic. The working relationship between the party and the government is tight. They both have the same objective, to grow the economy.
Are they easier to work with than democratic governments?
They are a pleasure to work with. You’re welcomed, you’re part of the fabric. “What can we do to help? What can we do to work together?” There’s nothing like it in the world.
What have you learned about the Chinese consumer?
Chinese consumers are very discerning. They do their research. They’ll bring their mother, father, grandparents, everybody. Most of them pay cash. And they love Henry Ford.
When you first came to Ford, you went to Village Ford and sold a car. Are you going to do that in China?
I already have. I had to make sure they kept breathing when they found out who I was. I’ve given the keys to four customers, and two of them I stay in touch with.
How did you accelerate the push into China?
Think of this: You’re a U.S. large truck and SUV company, and you’re doing great. I mean, besides the fact you’re going out of business. At the end of ’06, I laid out this plan. And based on the strength of that plan and the new leadership, the banks loaned us $23.5 billion while everybody else was pulling back. And then the economy started to slow down and the gas prices went up, and we accelerated the development.
And why do you think Ford was coming from behind in China?
Because it was a large SUV and truck company in the United States. You have to have a point of view about where the customer’s going to be. What are they going to value? What size vehicles are you going to want around the world?
What do you do to prevent knockoffs and protect yourself?
Over time, intellectual property will get more valued. The best thing we can do is work with our partners, because it’s our mutual interest now, and we are a Chinese American company.
After your business life is over, do you think you’ll still visit China?
Absolutely. I love China, the most creative, fun people in the world.