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Commentary: Mulally Led Ford Seems Like A Good Risk For Taxpayers

Posted by: David Kiley on March 5, 2009


The headline of my feature on Ford Motor Co. and its CEO Alan Mulally in this week’s magazine is “Ford’s Savior?”

I wasn’t so sure about the headline, and instead suggested maybe “Ford’s Fixer,” though the problem with that phrase is the connotation “Fixer” has with someone who arranges drug sales.

But fixing Ford is what Mulally is doing.

As the story states, Ford is by no means out of the woods. Most frustrating of all is that for all the hard work Mulally is leading at Ford, it could be undone to a degree if General Motors and Chrysler go into Federal bankruptcy court. The impact on auto suppliers of such a development could so disrupt Ford’s operation that it could potentially get sucked into the hole of Chapter 11 like a lifeboat getting sucked underwater because it was floating too close to the ocean liner when it sinks.

Ford is running out of cash just as GM and Chrysler is. It just has more of it at the moment. But you have to be impressed with how Ford has struck a major agreement with the United Auto Workers union ahead of GM and Chrysler, and how it moved this week to reduce its debt by some $10 billion by offering bond holders equity and other considerations. Analysts seem to think that the bond holders will take the deal.

What is notabale with Ford these days is the orderliness with which it is restructuring. They haven’t taken U.S. Treasury TARP money as GM and Chrysler have. Yet, they are getting their restructuring moves done ahead of their crosstown rivals and ahead of the government deadlines, which they don’t even have to hit.

The orderliness is, it seems to me, due to the enormous discipline that Mulally is enforcing on the Ford operation. He is also reaping the benefits of having decided, shortly after arriving from Boeing in 2006, to focus the company around the Ford brand and get rid of the European luxe brands. He did that when there were ready buyers and the credit markets were still operating normally. He may even pull off a sale soon for Volvo, the last of the Euro brands in Ford’s stable, while GM can hardly find a buyer for Hummer, Saab or Saturn.

In my reporting, there was an aspect of Ford’s continuing story that was cut for space; that is the seemingly perfect casting of Mulally as CEO in terms of his style and skillset, as well as the way he gets along with Chairman Bill Ford.

CEOs of the past at Ford have all said that managing the relationship with the Ford family is a big part of the job, and what can make it difficult. Jacques Nasser was too much rival for Bill Ford. Lee Iacocca had his problems with Henry Ford II. Alex Trotman was at logger heads with Bill and Edsel Ford as the two men were working their way up the Ford ladder.

If there is any tension at all between Mulally and Bill Ford, they keep it to themselves, according to almost 20 interviews I did with Ford executives and staffers in recent weeks. And frankly, I don’t believe they are hiding anything. Bill Ford himself described the relationship as “easy and informal,” and described how they each busts into the other’s office when each knows the other is in. They daily bounce everything off one another from board composition to union dealings to personnel and product. They don’t schedule sit-downs. The two seem to genuinely like and respect one another as partners; not rivals, and certainly not enemies.

Bill Ford took a lot of heat for his five years as CEO for not moving the company far enough toward profitability. He was specifically criticized for generating astonishing executive churn in and just below the C-suite. Mulally has put an end to that. But Bill Ford, it seems to me, deserves more credit than he generally gets for not only tapping Mulally, a risky pick at the time, but for hanging in as executive chairman and working with Mulally to get the right things done. Bill Ford may not wind up in the CEO Hall of Fame, but he may well get to the equivalent for chairmen of the board. And if he can guide the company through the current recession/depression and keep Ford independent, his work and reputation may well eclipse that of his uncle, Henry Ford II, and his accomplishments putting the company back together after World War Two with the so called “Whiz Kids.”

As the story states, it’s hard to judge the work of Mulally and Bill Ford by conventional measures—profits and share price. Losses and the drop in share price have been gargantuan.

But to me the best indications of Ford’s progress are these: extraordinary stability in the management ranks and the retention of very good people; Consumer Reports’ latest guide recommending 70% of Ford’s vehicles, compared with 19% for GM and zip for Chrysler; and the quality and soundness of vehicles Ford has shown at recent auto shows. On top of that, dealers I have spoken with say they have never been happier with the relationship they have with Ford and the input they are being given into key decisions about marketing and products.

As the story points out, dealers were key in deciding on a plan for Lincoln and Mercury. These poor brands were neglected, starved and generally jerked around for two decades with rotating strategies dictated by whoever was assigned to running them for the 15 months the assignments generally lasted. Now, there is a locked in product and marketing strategy that a new face is not empowered to up-end. At last. Grown-ups making vital decisions.

Ford product has never looked better. The new 2010 Taurus, which I have not yet driven, is styled and packaged just right in my book. The Fiesta looks great in both sedan and hatch form. The Ford Fusion Hybrid is the best I have driven on the market today, even if the Toyota Prius does get higher fuel economy. Ford has always had great trucks and SUVs. Now, the cars are coming along. Finally, it looks like the same caliber of people are working on cars as have long worked on trucks at Ford.

The thing that can still be criticized from time to time at Ford is an ad campaign here and there. But even those seem to on the right track these days for the most part as Ford's ad agency finally has a steady client, not a new ad director every eight or nine months.

Readers constantly e-mail me about problems they have had in the past with Ford products. No doubt, they have. Quality, recalls and design were a problem in the last decade. But the company has moved so fast to fix them and put terrific vehicles on the road, it will be a shame for the U.S. auto industry of people’s memories are too terribly long. But it’s their money, and it’s a free country.

I can’t say this enough: Ford is not out of the woods. If the economy gets much worse, and if GM goes Chapter 11, those winds may be too fierce for Ford to withstand without taking some government money. But if it does need to take the money, the company seems like a whole lot better risk than its cross-town rivals for the tax-payer.

Reader Comments


March 5, 2009 9:03 PM

The old financial news is that Ford had mortgaged everything, including its Blue Oval icon, to secured the $25billion loan about four years ago. At its current cash burn rate, Ford will be out of cash in about two years under the most optimistic scenario. If the recession/depression last longer than two years -- and many economist think so -- Ford will cease to exist whereas GM will still own substantially all its key assets. On the other hand, Chrysler has Cerberus as the reluctant Sugar Daddy. CEO Mulally is no Savior. He has yet to make Ford profitable during his tenure. In the event the economy stays stagnant into the foreseeable two years, at most he can do is prolong the agony of death for Ford whose market share has dwindled as fast as GM's and whose F-150 cash-cow must graze on a smaller piece of the pick-up market. Given that Ford had projected a domestic auto sale about 9 million/year (BW Kiley, the brilliant prognosticater, last year predicted 11million/year, whereas yours truely predicted 9million/year)and the turbulent economy showing no sign of stabilizing from its spiral dive, without government bailout money Ford will crash and burn with or without Mulally. Like seriously injured horses, GM and Chrysler are likely to be shot to put them out of their misery as well as out of the view of the taxpayer. Unfortunately for Mulally, the several ricochet bullets will be fatal to Ford. In the end, what a sad ending for our boy-savior: Mulally is not only running out of money and time but also luck.


March 6, 2009 7:33 AM

"Quality, recalls and design were a problem in the last decade." Well said...I hope we have enough Americans who give our home teams a chance, lots of jobs riding on it.

Paul Todd

March 6, 2009 10:17 AM

This account confirms my positive opinion of Mr. Mulally and his efforts. I believe he is succeeding not because he's a genius or superhero, but because he is building an organization around discipline, accountability, and teamwork. Sound strategy and competent, capable execution are boring stuff, but those factors have made Toyota and Honda the leaders of the industry. I am pulling for Ford to join their ranks.


March 6, 2009 3:42 PM

Mulally is the guy who is trying to save the Titanic after it has hit that iceberg. He's bailing water as fast as he can, he's got the crew bailing water (instead of jumping ship), he's patching the holes, he's got the passengers lined up and orderly... but the water keeps gushing in. As Kiley said, if any car company is deserving of a bailout, it is Ford. I am eager to see what a completely unified, global Ford Motor Company can do.


March 9, 2009 3:45 AM

Send Chrysler to the bottom of the ocean. CR was right, no recommendations for this brand! And the taxpayer hands money to the inept hedgie that owns it. Nardelli is the worst. Might be an agent of the axis of evil, sent here to destroy our econ, one corporation at a time. Dick.

Hugo van Randwyck

March 9, 2009 8:16 AM

Has Ford or even GM, Chrysler looked at moving some of their health costs overseas? Have they googled: health tourism usa? Some numbers show an 80% saving, including flights. Have you asked them if they have scenarios with these savings?

auto glass repair

March 9, 2009 5:28 PM

Mulally is trying to push things the right way and i am sure he should be helping to bailout the company and its customers from another automotive doomsday

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