This year alone, Ford Motor (F
) lost $1.4 billion in the first half, with deeper losses coming after the company cut its fourth-quarter production by 21%—the deepest cut in 25 years—because of falling demand for its profitable pickups and SUVs. The CEO is likely in a few weeks to announce a faster schedule of cutting assembly plants and widening a buyout offer to hourly and salaried employees to reduce headcount faster. Debt-rating agencies have punished Ford's and Ford Motor Credit's credit ratings, increasing its cost of borrowing when it can least afford it, and they're poised to send Ford debt deeper into "junk" status.
The CEO recently hired investment banker and mergers-and-acquisitions specialist Kenneth Leet to advise the board of directors on major strategy shifts, including alliances with other auto makers and perhaps sales of assets, which include brands such as Jaguar and Land Rover and the Ford Motor Credit and parts businesses.
Facing such a hostile climate, Bill Ford for the first time, in an exclusive interview with BusinessWeek's David Kiley, acknowledged that the company is willing to cut some of its brands and is looking for strategic alliances with other carmakers. He also insisted that his family isn't contemplating ceding control of the company any time soon. Edited excerpts of their conversation follow:
Are you, like GM, also interested in forming a possible alliance with Renault/Nissan? There are reports you have called Renault/Nissan CEO Carlos Ghosn for a sitdown.
We are no stranger to alliances, but I wouldn't want to comment on anything in the future. Naturally, when you look at the possible collaborations in our industry that are being talked about, we look at how those alliances might affect us. Let me assure you, we're not sitting on the sidelines waiting for things to happen. There are a lot of players out there gaming these things out, and we are, too. If we find someone with common interest, and it's good for all of us, we would look at that.
Have any auto makers proposed an alliance with Ford yet? How do you feel about the prospect? Do you have a preference toward an alliance that would result in another company with an equity stake in Ford? Or just joint-venture?
No auto maker has approached us yet. And no, I don't have a preference [to one kind of deal vs. another]. But we're open to all options. I have had a number of people propose virtually every auto maker to me as a potential alliance partner. The GM-Nissan-Renault discussions have gotten everybody in the industry thinking we ought to be talking to somebody.
I bet every car company has a war room on this. There are two kinds of alliances: one in which two companies with a lot of overlap eliminate duplication, and another in which you have full-blown sharing of vehicle platforms. No alliance will deliver everything. We have to approach each opportunity with the idea of…O.K., what are we getting out of this? Expanded manufacturing footprint? Platform sharing? Geographic coverage? Is it all those things?
[Alliances] take a long time to work through. And often, when you look at them in the beginning, the perceived advantages look easy on paper. Sometimes they're difficult to capture in reality. I listen to every [alliance idea], because we truly are looking at everything. We have been strategic in our alliances—like an engine-sharing deal with PSA, a transmission-development deal with GM (GM
), and our one-third stake in Mazda—because we have gotten something good out of each one.
Are you considering selling off or folding perennially problematic brands like Lincoln and Jaguar?
We haven't concluded what we are going to do yet…but [our turnaround strategy] certainly doesn't preclude that.
Outsiders are suggesting that maybe Ford should just be a three-brand company, perhaps pared to just Ford, Volvo, and Land Rover. What do you think?
Business as usual isn't the model for us to have going. I'm not ready to get into the specifics yet, but yes, we're looking at radical changes.
Do you and your family have emotional prejudices about these brands?
No. The only prejudice is to fix Ford Motor Co. Whatever it takes to do, that is what we will do.
Does the sense of urgency mean your family is considering reducing its control of 40% of the voting shares of Ford?
I don't know why we would do that. That's never been brought up. We have been part of this company for 100 years. We've been there in good times and bad times. And that issue has never been raised. I'm not sure what it would accomplish.
Some industry experts and analysts assert that family control makes it harder to attract top executive talent and potential alliance partners.
We have alliances with Peugeot and with General Motors. We have a big alliance with Mazda. In no case was the family an impediment. In some cases, I think [partners] look at it as an advantage. They see it as stability.
I have brought in a lot of talent over the years, so I don't see [family control] as a stumbling block to hiring the best people. Depending on what people are looking for, they might well see it as a positive.
Have the nonfamily board members suggested to you that diminishing family control is something to consider?
No. Look, whatever is required for the recovery, the family will not stand in the way. All our net worths are tied up in this. The family will not be a limiting factor to any plan that moves us forward. It doesn't matter who we have an alliance with, or what our share price is. One thing that will never change is we must fix the North American business. Our family will always do what's right for the company.
Are you the right one to fix Ford?
One thing I have always said is that I'm not hung up on my own title. I'll always look at talent that can help us move forward. We need somebody, and I'm that somebody for right now. I've been part of this company since the day I was born. All I care about is getting it on the right track. We need somebody, and I'm that somebody right now, who knows how to get our manufacturing footprint right, our employee count right, the product development right, and we have a big labor contract up for renewal. Those are the areas I'm focused on.
Ford is the king of pickups. But your passenger car lineup is thin. How did it get that way?
We underinvested in cars in the '90s. We know more about the truck market than anyone else. Our product plan, when we roll it out, won't be a situation when we launch a car and then abandon it, as we have done in the past. Even if we had a good launch, we took way too long to change and upgrade the product. And we let it die on the vine. [Vehicles like the Focus, Freestar minivan, Taurus, and Lincoln Continental are all examples.] That's not going to happen any more.
The truth about the auto business is that it takes years to bring new product to market, and there's little you can do to move the ball financially in the short term. Is the revised restructuring plan mostly meant to convey action—that you are digging deeper and faster to really change the company?
There's a large element to that. People need to see that we're attacking what we can attack. It's not just costs. It's also product. Most people focus on that we are too big and our costs are too high. It's about cutting costs. But it's very much a product-focused plan. We had already begun to diversify away from large SUVs and trucks well before the oil price spike. But we have to see how my product programs can accelerate and pull forward.
Have you lost time and opportunity in five years because of changing people too often? You've had three product heads and three or four North American chiefs, depending on how you define jobs. Could you be bringing the Fairlane crossover faster? A small car faster? Settled on a Lincoln rear-drive or front-drive strategy faster?
You're right. We have had three COOs including me now. When I came in, we had a management team that wasn't functioning well together. And it has taken time to get the right combination together.
I feel good about the current team—Mark Fields in North America, Mark Schultz in Europe. The turnover is why I took over as COO. I wanted to dive in and didn't want any filters getting in the way of hastening the streamlining of our global operations. Getting our manufacturing footprint, labor relations, product development, and supplier base all in alignment with the new plan, that's how I've been spending my time. I've gotten very close to the operations. Do I wish I had this group in place all along? Yes, in a perfect world.
Corrections and Clarifications
"Fixing Ford is now Job One" (News & Insights, Sept. 4) stated that Ford Motor Co. has racked up $9 billion in losses and restructuring charges since 2001. It should have clarified that the losses and restructuring charges are for its North American business.