Arrogance and Complacency Damaged Ford

It wasn't just inconsistent cars and labor costs that crushed the automaker—for years, its leadership has had a pattern of doing dumb things

by Ed Wallace

There is usually something humorous about the cyclical nature of the automobile industry—if it weren't generally so tragic. The case in point would be the problems facing Ford Motor (F). A trail of giant missteps—starting in late 1997 with the corporate consolidation of Ford dealerships in many major metropolitan areas and continuing with questionable acquisitions (such as the British car-repair chain Kwik Fit, not to mention Jaguar, Volvo, and Land Rover)—has left the company struggling to find direction. In the end, Ford will once again become a much smaller company; similar to what happened in the early 1980s.

For years, Detroit's success made its executives think they are the smartest guys on the planet. Even during the good years, there were plenty of bad ideas. What, for example, did Hughes Aerospace do for General Motors (GM) or Gulfstream for Chrysler? As I recall, six years after purchasing Hughes in 1985, the General lost $21 billion, then went through one of the most severe downsizings in American corporate history.

Similarly, only four years after Lee Iacocca purchased Gulfstream, also in 1985, Chrysler was laying off 11,000 white-collar workers, and troubling financial statements had Iacocca quietly trying to sell Chrysler to Fiat (FIA). One has to give Ford credit in that its Volvo, Land Rover, and Aston Martin purchases at least had something to do with the automobile industry.

These automotive follies always end badly. In Ford's case, for now 16 factories will be closed and 44,000 workers will lose their jobs; and this is after Ford's white-collar workforce has been downsized and may be again. These losses don't include the jobs that suppliers will have to cut, or the dealership staffs that will be reduced to match sales—or, for that matter, newspaper jobs lost when dealers buy far fewer ads than they did when their volumes were twice what they are now.

Moreover, Ford's situation is among the most tragic, in that none of the problems it faces today should ever have happened. For the fact is that, just eight years ago, Ford was on a path that could well have put it ahead of General Motors for the first time in 80 years, and it threw away that opportunity.

EXECUTIVE SHUFFLE.

Now, only days after Bill Ford told Newsweek magazine that he was not looking to replace himself as CEO, the company has done it for him; Alan Mulally, formerly No. 2 at Boeing (BA), is at the helm. Some insiders hail Mulally as one of the most competent executives in America today; some believe he is far too thin-skinned and autocratic.

And, of course, over the past week the pundits have written that an executive with an aircraft company is an inspired choice for the beleaguered Ford; others say the opposite. One writer even called the airline business every bit as competitive as the automobile industry; but Boeing's one and only strategic competitor is Airbus, and each company's government often helps it secure buyers with international airlines.

Ultimately, I have my doubts about this new arrangement, if only because the history of Ford amply demonstrates that the best and the brightest rarely last long there. Big Bill Knudsen, responsible for plant construction and manufacturing in the early days of Ford, was fired by Henry Ford with the line: "Bill, you're the best manufacturing man around—too good for me."

Ford's loss was GM's gain, as Knudsen would quickly take over at Chevrolet. Charles "Tex" Thornton brought his Whiz Kids to Ford in the days after World War II; while the team was largely responsible for Ford's success in the 1950s, Thornton quit Ford two years later for Hughes Aircraft (before starting Litton Industries).

Clearly, Ford's history doesn't suggest that exceptional executives should count on long careers with the company.