Alan Mulally is the President and CEO at Ford, and I came across an in-depth article about him on the freep.com site. Mulally talks about his goals and plans for Ford, and it’s a really good read if you have the time. If not, I went through and highlighted my favorite parts of the article:
Mulally’s plan for success at Ford: Keep it simple
Automaker sees global potential for Lincoln
More than four years into its turnaround plan, Ford has not only exceeded many of its own goals, it is now breaking through as a global industry leader — especially on image and quality.
Alan Mulally, Ford President and CEO
Credit has largely gone to President and CEO Alan Mulally, who believes that a big, global corporation must be guided by a clear plan with just a few basic goals.
“The more than you can have a point of view about the future and clarify what you are about … the more it just unleashes all the creativity,” Mulally told the Free Press in an exclusive interview Wednesday.
Mulally has driven Ford to simplify almost everything since arriving in 2006: communications, management, brands and even the cars and trucks sold in showrooms. By the end of this year, Ford — the nation’s second largest automaker by sales — will consist of a very simple business: Ford and Lincoln.
That has sharpened the focus for a company once consumed with eight brands, Ford, Mercury, Lincoln, Jaguar, Land Rover, Aston Martin, Volvo and Mazda.
Said Mark Fields, Ford president of the Americas: “When we walk in the door in the morning, we are thinking now about Ford and Lincoln.”
Plans for Lincoln are growing, too. “It could go worldwide,” Mulally said.
Ford still has challenges. It must catch up to rivals in Asia and pay down nearly $27 billion in debt.
But for now, Ford is on track to be solidly profitable in 2010 — a year ahead of plan, despite a tough economy.
On Friday, analysts estimate Ford will report a second-quarter profit of $1.37 billion, before special charges, which would bring Ford’s first-half profits to $3.45 billion.
Rod Lache, an automotive analyst for Deutsche Bank, said Ford’s turnaround is “the most dramatic” he’s seen. “Ford is not only profitable — I think it is actually the most-profitable mass-market automaker in the world.”
Easier choices for consumers
Just two years ago, consumers could buy a Ford Explorer in 76,000 different configurations.
Now, after a multi-year effort to simplify how Ford packages its vehicles, with different models and options, Ford has cut that number to just 1,500.
“If you roll the clock back two to three years ago….one of the things we realized is we just had too much complexity,” said Ford Division Marketing Manager John Felice.
Added Bruce Schindler, owner of Bob Davidson Ford in Baltimore: “The consumer isn’t as mixed up either.”
The push to reduce Ford’s number of orderable combinations is just one of the many ways that Mulally has reduced, streamlined and simplified the company — but a key reason, he thinks, behind Ford’s profits and market share increases.
Focus on Ford
When Mulally, 64, arrived at Ford in 2006, the auto industry outsider from Boeing found a company that he thought was far too complicated.
“We were running Aston Martin, Jaguar, Volvo, and Mazda,” Mulally said. “Now…the dealers are simplified, the suppliers are simplified and the product line is simplified.”
Mulally believes that global corporations can only make a limited number of world-class products.
That’s why one of his first decisions was to focus on the Ford brand — the only global brand that some experts said could give the once-mighty Toyota brand a run for its money.
“We divested all of the other brands,” he said, and that “unleashed everybody associated with Ford.”
Mark Fields, Ford’s president of the Americas, said the executive team embraced Mulally’s vision, in part, because it made their work more simple. In an interview with the Fee Press this week, Fields pulled out a chart showing how Ford’s U.S. market share slid from more than 25% in 1995 to 15.8% in 2007.
“That’s like a double-diamond ski slope,” Fields said. “And you know what? We’ve turned it.”
For the first six months of this year Ford’s market share increased 1.4 points to 17.5% of U.S. industry sales.
Formed at Boeing
Mulally is famously relentless about driving his “One Ford” vision home to his top leadership team, employees, dealers and even the media.
At Ford’s Dearborn headquarters, employees have been carrying laminated, business card sized copies of the ‘One Ford’ plan since 2006.
Mulally’s ‘One Ford’ evangelism can be considered corny. But Elaine Bannon, chief engineer of the Ford Edge crossover, said the crystal clear priorities, such as improving fuel economy, make her job easier.
“It’s almost a joy. You almost take it for granted now how nice and comfortable that is when you are pushing the envelope every day,” Bannon said.
“It totally shapes how I am working and how I think about what I am doing when I am working with other people,” Bannon said.
One page plan
In 2007, Ford was making cars and trucks from 27 different platforms, a car industry term for a vehicle’s underbody. By 2012, that number will drop to 15, according to the company’s 2009 annual report.
Ford also has reduced the total number of models it sells from 97 in 2006 to an estimated 45 by the end of this year.
“You almost needed a conference room and big sheets of paper to view that product plan,” said Derrick Kuzak, Ford’s group vice president of global product development. “Now, we’re to the point where it’s a single page.”
Ahead of schedule
Ford’s progress in getting its business right was painfully slow for years.
Ford lost more than $30 billion from 2006 to 2008 as it slashed its North American workforce by 43% to 70,000 and closed 14 assembly and parts plants.
But last year, Ford reported a surprise $2.7 billion profit even as U.S. industry sales hit their lowest level since 1982. This year, Ford said it expects to be “solidly profitable” a year ahead of its own schedule.
“We have taken $10 billion of structural costs out of the business to get it back into fighting shape,” since 2005 Fields said.
As a result, analysts, on average, expect Ford to earn about $4.34 billion this year, according to Thomson One Analytics.
If that happens, it will be Ford’s largest annual profit since 1999, when gas was cheap and domestic automakers were selling profitable SUVs like hotcakes.
Third party proof
And these days, Ford seems to be topping the charts in almost every third party survey that gets released.
On Thursday, the 2010 Ford Fusion, Taurus, Flex, Expedition and Explorer Sport Trac received the highest scores in their respective segments in a study released by J.D. Power and Associates.
The Automotive Performance, Execution and Layout study measures consumers’ assessments on about 80 criteria after driving their 2010 model vehicles for three months.
Also last week, a survey by AutoPacific found that Ford emerged as the top-rated popular brand and led the industry with a total of eleven segment winners.
“Ford has been the top rated popular brand for the past three years,” said AutoPacific President George Petersoncq. “They are paying a tremendous amount of attention to detail.”
Said Fields: “We’ve made major strides over the past three to four years in term of how people view our brands.”
Looming debt
Ford’s nearly $27 billion in debt remains a challenge, however. In 2006, Ford bet its future on a $23 billion in loans, using all its assets as collateral, right down to the Blue Oval logo.
That decision gave Ford the capital to survive the economic downturn as the only domestic automaker that didn’t take emergency federal loans. It also left Ford with more debt, excluding pension obligations, than General Motors or Chrysler.
Since April, Ford has paid off about $7 billion of its debt.
Mulally declined to talk about the company’s debt last week, but he has said frequently in the past that the company will continue to aggressively pay down its debt until it is back to investment grade.
J.P. Morgan analyst Eric Selle said in a June report Ford can pay off more of its debt soon because it is business generating profits.
“We feel that Ford has the ability to reach investment grade status within the next two years,” said J.P. Morgan analyst
Pressure on Lincoln, China
Ford has other challenges too. The decision to sell all of its luxury brands puts the spotlight on Lincoln, whose year-to-date sales are behind seven other luxury brands
“We bought all those other premium brands, right? So we invested less in Lincoln,” Mulally said. “But now with those other brands gone… I think it could go worldwide.”
Ford also lags its competitors in China, now the world’s largest automotive market, where its market share is only about 2%.
Mulally, always the optimist, points out that Ford is building anew plants in Chongqing China and has aggressive growth plans.
“It’s a tremendous opportunity,” he said. “We are profitably growing in China as quickly and prudently as possible.”
