Bill Ford on Tipping Points and Thinking Small

by Maria Bartiromo

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With cars like the hot-selling Focus, Ford hopes to build a fuel-efficient image Rebecca Cook/Reuters

Kerkorian and his team "obviously have ideas," says Ford, "and we listen to them" Kevork Djansezian/AP Photo

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After a loss as large as the one Ford (F) posted in the second quarter, you might expect the chairman of the board and the most high-profile member of the famed auto family to be crying in his beer. But Bill Ford is embracing the prospect of a more fuel-efficient Ford with gusto. He recognizes that it's a tough moment for the company and its employees as high gasoline prices dramatically change the game in Detroit. Yet he has a risk-taking CEO, Alan Mulally, in place and a new marketing whiz, James Farley, shaking up the culture. While Bill Ford says there will always be a need and desire for the company's iconic trucks, he doesn't believe that the American driving and buying public will ever go back the days when SUVs ruled. A student of Zen, he has awakened to a new future—and guess what, it's small.

MARIA BARTIROMO

Bill, the company reported the worst single quarter in history last week, a loss of $8.7 billion. What's happening, and why did we see such a loss?

WILLIAM CLAY FORD JR.

We had a good first quarter, we made money, and we thought we were on our way. Even though fuel prices were rising in the first quarter, we didn't see a big change in customer behavior. But when gas crossed about $3.50 a gallon, that was the tipping point. And, of course, we had no idea where that tipping point was going to be. Literally overnight people stopped buying trucks and big SUVs and came into the dealerships demanding the smallest and most fuel-efficient vehicles they could find, and the fall-off [in sales], therefore, was very dramatic. What you saw in the second quarter was not only the result of that but also the result of falling residual values of trucks and SUVs.

A lot of people say Mulally was the right guy to bring in, but he seems to have been surprised by the second-quarter loss. BusinessWeek reported that he was unprepared for the loss until about two months ago. Why didn't management see this train wreck coming sooner?
I think you go back to what I said earlier. It wasn't until early April that customer behavior began to change, and then the train started moving very fast.

For years the F-150 pickup was the best-selling vehicle in America, and it really did help shape the perception of the company. How do you now retool Ford's image in the mind of the buying public?
That's an interesting point because first of all, we're not walking away from the truck market. We're the best there is in the truck market, and people are still going to need trucks. But the challenge that lies before us is to reestablish ourselves in the car market. And we're doing that with the Focus—we're basically sold out of the Focus and the Fusion. So what we need to do now is to add to that [lineup of smaller cars]. But we will have a marketing challenge to get customers to understand that Ford is a fuel-efficiency leader.

On a scale of one to 10, with 10 being the most confident, how confident are you that this switch to smaller cars is going to work?
I'm very close to the 10 end of the scale because we're basically bringing over our European product, which has been very, very successful. They're extremely profitable, have won lots of awards, and are very fuel-efficient—plus they're extremely well-appointed. It's not like we have to create these products from scratch. They're there, and they're ready to come over here. These are not what you think of when you think of small cars, which we used to produce here, which tended to be stripped down and not terribly desirable.

Let me take you back to when you were CEO. When you took back control of the company, you had this vision. You said: "Look, we want fuel efficiency." But to an outsider, it seems as though the financial guys didn't buy into it, the operations guys didn't buy into it, and you caved. How come you couldn't get this switch-over done two years ago?
Frankly, the market was pulling us in a different direction. I knew this day would come.