Mulally's Job One: Global overhaul

[nadepalma]

SOURCE: http://www.detnews.com/apps/pbcs.dll...11110404/1148/

Mulally's Job One: Global overhaul
CEO wants to use Toyota model to streamline Ford
Bryce G. Hoffman / The Detroit News



Ford Motor Co. President and CEO Alan Mulally said Friday that he plans to weld Ford's disparate regional divisions and brands into a single global operation capable of competing with the company he most admires in the world: Toyota Motor Corp.

Mulally, who joined Ford six weeks ago, delivered the message in an hour-long interview Friday with The Detroit News that covered the myriad challenges facing Ford today and his plan for reversing crippling financial losses that threaten the company's future.

The 61-year-old former Boeing Co. executive expressed optimism but did not sugarcoat Ford's problems or the need for a fundamental and far-reaching reorganization of the company.

"There's not one Ford. There's Ford of North America, there's Ford of South America, there's probably three Fords that make up Ford of Europe. There's Australia. There's China, India -- there's a lot of Fords, and they're operated very separately as business units," Mulally said. "We've got to go from where we are to leverage our global assets to compete as one company going forward."

And the clock is ticking. Mulally said the company must turn around its struggling North American operations by 2009 or risk running out of cash. To do that, he will need concessions from the United Auto Workers next year as he works to erase a $3,400 per vehicle cost disadvantage. Mulally said he is prepared to take his case directly to union workers if need be to get them on board.

Out of many comes one

While other executives have tried unsuccessfully to unravel the twisted strands of Ford's business structure, Mulally is confident he can hammer out a leaner, more transparent and focused company. In fact, if Ford was not so inefficient, he would be more worried.

"I look at that as nothing but opportunity," he said. "If you were a lean machine, doing a turnaround like this would be terrifying. But this is a very complex place, and there's a lot of opportunity to consolidate and simplify."

That means better integrating Ford's global operations and taking a hard look at its brand portfolio. He strongly hinted Ford would eventually appoint global product development and manufacturing czars.

"We are going to rationalize the brands, rationalize the product lines," he said.

Mulally also wants to find ways to build more cars and trucks off common platforms, sharing as many parts as possible while still giving consumers what they want. He pursued a similar strategy at Boeing, reducing the company's portfolio of more than a dozen airplanes to four.

Ford had already launched some initiatives in this direction, but Mulally wants to see these efforts increased and spread to all levels of the company -- starting at the top.

Ford has long been a balkanized company, plagued by infighting between different regions and business units. These turf wars have scuttled the best efforts of more than one Ford executive, but Mulally says he has found a way to cut through the ossified fiefdoms.

Every Thursday morning, he presides over a four-hour meeting with his senior staff. All of the company's divisions are represented, and each is required to give a frank assessment of their status and progress. He asks direct questions and expects clear answers. These meetings are a bully pulpit he uses to drive accountability and ensure cooperation and execution.

The Thursday meetings replace countless smaller meetings that took place every week in different parts of the company.

Mulally found Ford had no shortage of plans when he took over. There were marketing plans, manufacturing plans, sales plans and product plans. He is trying to merge them into a single overreaching plan that keeps everyone in the company on the same page.

Mulally said he does not blame Ford's employees for the company's woes. He holds management responsible. "I'm quite pleased with the talent I've found in almost every discipline," he said.

He is also quick to temper his often brutal assessments of Ford's problems and mistakes with compliments about the talent and dedication of his team.

The home front comes first

While he is thinking globally, Mulally made it clear that fixing Ford's North American automotive operations has to come first.

Ford continues to lose ground in the U.S. marketplace to foreign rivals. Over the past 12 months, its share of that market has dropped to 17.9 percent from 18.7 percent -- and that includes sales of its foreign nameplates like Volvo and Land Rover. The company's core Ford, Lincoln and Mercury brands account for only 16.8 percent of U.S. vehicle sales. A decade ago, these brands accounted for one out of every four cars and trucks sold in the United States.

Last month, Ford reported a $5.8 billion third-quarter loss, and more bad news is expected in the last three months of the year. Internal projections obtained by The News in September suggested the company could lose as much as $9 billion before taxes this year, though that figure now appears to be conservative.

In January, Ford announced a sweeping restructuring plan that aimed to idle 14 factories and eliminate 30,000 factory jobs and cut another 4,000 salaried positions by 2012. The plan was supposed to return Ford's North American automotive operations to profitability by 2008.

But Wall Street was unimpressed with Ford's timetable. Analysts demanded more immediate cuts, pointing out that rival General Motors Corp. had managed to convince 28,000 blue-collar workers to take buyouts between March and June. Meanwhile, gasoline prices were rising, and demand for Ford's profitable pickups and sport utility vehicles was falling fast. And increasingly desperate suppliers -- themselves reeling from rising raw materials costs -- were bucking Ford's efforts to get pricing concessions.

On Sept. 5, Bill Ford resigned as CEO and handed the company's reins to Mulally. An accelerated restructuring plan was unveiled 10 days later, with Mulally's tacit endorsement. But Ford insiders say the new CEO is already looking at additional cost-cutting moves.

"We have got to turn around North America and be profitable by 2009," he said. "Because if not, you just keep losing cash and pretty soon you run out."

Learning from the Japanese

Mulally intends to learn from Toyota's production system, which he called "the machine that changed the world."

"I'm a disciple of the Toyota production system," Mulally said, explaining that he became a student of the Japanese automaker while working as an engineer at Boeing and has traveled to Japan to study how Toyota's factories operate. "This system of continually improving the quality, putting the variations into the product line that people want and doing it with minimum resources and minimum time is absolutely where we have to go. If you look at Ford, it's the antithesis."

Analyst Kevin Reale with AMR Research said Toyota is not the only company Ford is lagging behind when it comes to global integration. GM has been pursuing a similar strategy and has a head start on Ford. What Mulally has going for him, Reale says, is experience.

"He's really going to turn Ford into a global company," Reale said. "I don't think he's going to take any prisoners."

As the head of Boeing's commercial aircraft decision, Mulally cut more than half the company's work force when its order book was decimated after the Sept. 11, 2001, attacks and went on to lead a successful counteroffensive against Europe's Airbus.

But even union leaders give Mulally grudging respect because of his honesty and candor. Now, he hopes to bring those same qualities to play in the 2007 contract negotiations with the UAW -- talks he said will be a "defining moment" for Detroit.

"It's all about competitiveness," he said. "You can't compete with a $3,400 disadvantage."

That is how much more it costs Ford to produce a vehicle than top foreign competitors, Mulally said, adding that a big chunk of that cost comes from wages and benefits.

UAW leader Ron Gettelfinger understands this math, Mulally said, but it may be tough for Gettelfinger to convince rank-and-file members to make the sacrifices necessary to make Ford competitive. Mulally said he respects the union, but will take his message to the workers if he has to.

"We are all in it together. I want the hearts and minds of all the participants," Mulally said. "We have to deal with reality."

That is exactly why Bill Ford hired Mulally, says turnaround expert John Hoffecker of AlixPartners. He said Bill Ford was smart to look outside the automotive industry. After all, Italy's Fiat SpA and France's PSA Peugeot Citrokn were saved by executives from other industries.

"There's a strong realization at Ford that they need something significantly different," he said.

Finding the way back

Part of the reality Mulally is accepting is that many American consumers have turned their backs on Ford, and he said Ford has to convince them to give its cars and trucks a second chance. How? By building great vehicles like the Ford Fusion and Mercury Milan, which were just rated by Consumer Reports as two of the best new products from any automaker -- foreign or domestic.

"We are going to have to get people back in the dealerships to try Ford again," he said. "We have to show we are a viable alternative."


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[DanCBJMS1988]

Finally, he sees the light that a lot of us have seen for so freakin' bloody long! FoMoCo has always denied the best to Americans and even when they do they water it down. This bringing Ford into one global unit really makes sense to me. Now I wonder if he'll follow through on it. Hopefully, he will.

[hunchman]

global shmobal ..........build cars people want and problems are solved

[4gm]

Integrating Ford's global operations?

Appointing global product development and manufacturing czars?

Finding ways to build more cars and trucks off common platforms?

Mulally might as well say he plans to copy GM's turnaround plans.

[TiburonJT]

Originally Posted by 4gm

Integrating Ford's global operations?

Appointing global product development and manufacturing czars?

Finding ways to build more cars and trucks off common platforms?

Mulally might as well say he plans to copy GM's turnaround plans.

Ford and GM are doing a lot of what other auto companies have been doing successfully for a while.

[iam3rdpwrn]

Buy Ford stock. He'll bring them back. It'll be ugly, but Ford will survive.

[Mikkoo]

Originally Posted by 4gm

Integrating Ford's global operations?

Appointing global product development and manufacturing czars?

Finding ways to build more cars and trucks off common platforms?

Mulally might as well say he plans to copy GM's turnaround plans.

GM's model for turnaround is worth copying. They are ahead of schedule. Just look at where their stock is now. If your smart, start buying some Ford shares while they are still under $9.00 per share. By the time the company turns profitable you'll be looking at least $20.00+ per share.

[LAMRONH]

Hint: Use 500 for minivan platform.
Hint: Build lots and lots of 3.5s.

[Butz]

Yes a global overhaul, hopefully this means sharing platforms and technologies with european Fords and coming up with a brand new RWD platform that can underpinn the next generation Falcon, Mustang, Crown Victoria replacement, etc..

Ford has the resources they just need to make good use of it globally.

[4gm]

GM's plan is worth copying. My point really was to say that Mulally should give credit to GM for providing him with a blueprint for how to turn Ford around. It can be argued that some things, like sharing parts and commonizing global platforms, are obvious for any car company, but when you start talking aobut possibly appointing "product czars", you're obviously talking about GM.

[mgescuro]

Originally Posted by Butz

Yes a global overhaul, hopefully this means sharing platforms and technologies with european Fords and coming up with a brand new RWD platform that can underpinn the next generation Falcon, Mustang, Crown Victoria replacement, etc..

Ford has the resources they just need to make good use of it globally.

What it should mean is that the reknowned Euro Ford Focus shouldn't be dumbed down for the US Ford Focus.
Hopefully, he doesn't lose the brand distinctions in the process. I quite enjoy how Volvo has stood on its own and capable of generating profits.

[2b2]

Originally Posted by 4gm

...when you start talking aobut possibly appointing "product czars", you're obviously talking about GM.

Agree but

- That means better integrating Ford's global operations and taking a hard look at its brand
portfolio. He strongly hinted Ford would eventually appoint global product development
and manufacturing czars. -

^^Those are the writer's words, not Mulally's.

From something I read a while ago about either the C1 or EUCD development, I believe they'll use more of an AllStarTeam approach - with the 'players' changing from project to project. Might be splitting hairs but I doubt we'll see anyone (or group) with influence equivalent to Bob Lutz's at Ford.

[chevyman62]

Is it me or is the way the Japanese do it sound an awful like....um...HENRY FORD!
O that's right, Ford went to Japan to help rebuild after we bombed them.

Hmmmm....so are they doing it the Japanese way or their way?

[1931Chevy]

Muullaly dont have to copy GM since when he was at Boeing he did the same thing he will do at Ford and is to incorporate all the global resources under one roof

[1931Chevy]

http://www.detnews.com/apps/pbcs.dll...611110409/1148
On coping with a changing auto industry :
"The No. 1 thing we have to do is we have to deal with this reality. This is not new news that the automobile industry is shrinking. It's been going on for four years. Nothing has changed. So we are at a defining moment. Are we going to embark on a transformation of the product line and the production system and create a viable company going forward?"

On Ford's management team :
"When you do turnaround like this, it's important that you have the talent in all the disciplines and I am quite pleased with the talent that I've found in almost every discipline."

On the challenge of executing such a major turnaround :

If you were a lean machine, doing a turnaround like this would be terrifying. But this is a very complex place that has a lot of opportunity to consolidate and simplify."

On whether Ford will cut brands :
"I'm assessing that. I don't want to say I've concluded that. Clearly one of my highest priorities is to evaluate the product portfolio and the product plans within each of the brands and make an assessment about that going forward."

On whether there will be a global restructuring of Ford :
"There's no plan to do that tomorrow. But we have got to leverage and simplify and use the resources we have around the world."

On bringing in outside talent :
"I've put together a lot of teams over the years. The most important thing is to come together on a plan, decide together who wants to go forward on implementing that plan. After you get going and I get an assessment then we all decide together whether we need more talent. It's a good team. I don't see a need right now to go outside."

On 2007 contract talks with the UAW :
"My approach is working together again. By that I mean that we get together on what the real realities are and what needs to be done and it's all about competitiveness. The way I've approached it is to go to the employees. The union is the institution. They're representing the employees, I'm representing the employees. The people that are going to decide about our future are the employees at Ford. And they're going to decide with their vote. And they're intelligent, they're smart, they know the business realties. The most important thing is that we ensure that everybody knows what the situation is. This is a business, and if we don't increase our competitiveness and get this turned to profitably grow, it can't be OK -- for anybody."

On UAW President Ron Gettelfinger:
"I know Ron pretty well. He's a terrific leader. He knows the business realities. He knows this industry has been going down for a long time. And there's nothing that says it's changing. So I think it's really critical, the negotiations next year, and I'm going to approach it in this working together way with Ron, but also with our employees and with our suppliers."

On his willingness to force a showdown with the UAW :
"You have to do what you have to do for the business."

On what he hopes will come out of Big Three CEOs' meeting with President Bush next week :
"A deeper understanding of the situation we're in and an appreciation that we're dealing with this reality. We're not looking for a bailout. We're trying to take some great companies and make them viable and turn this around and there's a few things we can do together."

On his approach as an outsider :
"I'm certainly not from Detroit and the automobile industry, but I'm a business person, I'm a designer, I'm a working together person. I deal with reality and I'm true north. I don't have any other agendas. I came here to take a really important industry and turn it around. Not just for a couple of years, but to make it viable. To make the kind of changes that are needed. My intentions are pure."

On matching vehicle production with consumer demand :
"We're not going to chase market share. We're not going to put out vehicles where demand is not there and then discount and make it even worse. It's the most important thing in the business that you always deal with the reality in the marketplace and match the capacity to demand. Because if not, it just gets worse. That's the highest priority."

On Toyota :
"I'm a disciple of the Toyota Production System from my Boeing background. Arguably in every parameter that you can look at, the Toyota Production System is the finest product system in the world for designing and manufacturing products. They make products that people want and they do it with less resources and less time than anybody in the world. They're a magical machine."

On winning back customers :
"We have an opportunity to get some polish out and really shine up the Blue Oval. We are going to have to get people back in the dealerships to try Ford again. We have to show we are a viable alternative."

On the cost disadvantages that are eroding Ford's competitiveness :
"There comes a time when we have to do something!"

On Thursday morning executive meetings :
"You can't hide, you can't escape. You would look like you didn't get the memo. It's powerful stuff."

On his approach to facing the company's challenges :
"Who I'm really talking to are the employees of Ford. They didn't do anything wrong. The situation is the situation and management is absolutely responsible for a business. So what I need, what I want is, I want the hearts and minds of all the participants."