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Facetime July 31, 2008, 5:00PM EST

Bill Ford on Tipping Points and Thinking Small

(page 2 of 3)

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

I've been an environmentalist my whole life, and I've fought a lot of battles during 30 years at Ford. In fact, when I first went on the board, I was told I had to stop associating with any known or suspected environmentalists. And I said: "No, of course I have no intention of stopping." I was viewed as a bit of a Bolshevik throughout my whole career because I knew this day was coming. So we built the Rouge Plant, which was the greenest plant on the planet, and...we also launched the first American hybrid, the Escape. But gasoline prices were cheap, and customers were buying many more of our big F-150s than they were of our Escape hybrids. Now everyone's aligned behind this [fuel-efficiency] vision.

If oil goes down, could we see a shift back to SUVs?I don't think we'll ever see a shift back to where we were before. There may be a small drifting back, but I think this is relatively permanent because a lot of it is psychology as well. It's not just what the absolute price is. Once people have been shaken as they have been, even if gasoline comes back down to $3, people are still going to remember paying $4, and they'll be very nervous about resuming their old habits. This is a permanent shift in the marketplace.

Does Ford have enough liquidity to see it through this current crisis? Sure, Mulally comes in and leads this recapitalization and raises a lot of money, but it looks like you're burning cash faster than you can recover it in sales. How worried are you about the worsening economy thwarting the recovery plan?
Obviously, the economy is not where we need it to be, and we project a rather slow industry through the rest of the year. And it's hard to see next year with any great clarity at this point. But at the end of the second quarter we had over $38 billion in liquidity. And so, as you point out, we did go out, just before Alan got here, and borrowed a ton of money. And our timing was excellent because we did it right before the credit market closed down. And we had that in place when I was interviewing Alan.

Where is the biggest opportunity around the world?
Europe and South America are both doing phenomenally well and are very profitable. In terms of growth, it's Asia. In places like China, we're out of capacity. In India, we're growing very fast.

What do you think of the new automakers coming out of India and China?
I think they're very credible competitors. The biggest mistake we could ever make is to disregard them. We're watching them very closely.

Might we see further consolidation in the industry?
I'll never forget that the board had a presentation from an outside consultant in the early '80s who said within five years there would be four players in the world auto industry. That was almost 30 years ago. Now rather than fewer, we have many more. You've had the Chinese, the Indians, the Koreans come in, and the established brands, for the most part, have not disappeared.

Carlos Ghosn told me recently that he suspects there's going to be plenty more consolidation. Is an alliance with another automaker all that objectionable to Ford?
We've had joint ventures around the world for as long as I've been at Ford, and they are very labor-intensive, very time-intensive. You have to be absolutely clear in terms of governance and in terms of expectations, and both parties have to share the same vision. The best alliance we can have right now is with ourselves.

How much influence do [billion-dollar-plus investor] Kirk Kerkorian and his lieutenant Jerry York have on the direction of the company?
They're really supportive of what we're doing. We had a great meeting with Mr. Kerkorian and with Jerry and their team. I'm really very honored that they would find us a good investment. They obviously have ideas, and we listen to them, as we listen to all of our big investors.

So do they have any input in terms of how much fuel efficiency you should shoot for or cash levels or real specifics on the direction of the company?
No.

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