Mulally’s Turnaround Gives Ford CEO Star Status at Auto Show
January 13, 2010,
Ford Motor Co. Chief Executive Officer Alan Mulally, whose company gained market share in the U.S. last year while his domestic rivals went bankrupt, is the toast of the North American International Auto Show this week.
At the opening press conference Jan. 11, Mulally walked onto a stage in Detroit’s Cobo Arena, where the rock band Kiss recorded a live album in the 1970s. On a screen above him, a globe covered with positive Ford headlines from 2009 spun while Mulally spoke of Ford’s “growth in every region around the world.” The audience filling the red vinyl seats roared.
Ford swept the show’s awards for car and truck of the year and unveiled the Focus compact. The car, which Mulally plans to sell worldwide, attracted throngs of media and auto executives. At Ford’s 54,000-square-foot exhibit, which covers almost a quarter of the convention floor, U.S. House Speaker Nancy Pelosi huddled with Mulally amid red and silver Focus models, while a velvet rope kept reporters at bay.
“We’re not talking about just surviving,” Mulally said during a Jan. 11 filet mignon dinner with reporters at the MGM Grand Detroit casino. “I came to Ford to help turn around a global and American icon.”
Mulally’s star turn comes after a year of moves that set Ford apart from its domestic rivals -- avoiding a bankruptcy and federal bailout. The company began the month by posting its first annual gain in U.S. market share since 1995 and the best sales growth in December among its peers.
Filet Mignon
Mulally, 64, came to Ford after a 37-year career at Boeing Co., where he managed development of the 787 Dreamliner. When asked at the MGM Grand dinner about watching the wide-bodied jet’s televised maiden flight last month, Mulally couldn’t speak for a bit and his eyes filled with tears.
“It’s like ingenuity at its finest,” he said, likening the 787 project to Ford’s redesign of the Taurus and Fusion sedans.
“He’s making good progress on the products; there’s a lot of buzz about the Focus,” said Jeremy Anwyl, CEO of researcher Edmunds.com of Santa Monica, California. “Mulally is relentless. He’s got a laser-sharp focus on a simple vision that he just drills into the organization.”
Investors and car buyers are responding to Mulally’s leadership, driving up Ford shares more than fourfold in the past year to the highest level since 2005. Share fell 20 cents, or 1.7 percent, at 1:10 p.m. in New York Stock Exchange composite trading. For December, the automaker reported a 33 percent sales rise, while GM’s deliveries fell 6 percent.
‘One Ford’
Three months after he arrived at the Dearborn, Michigan- based automaker in 2006, Mulally signed off on a plan to borrow $23 billion by putting up all major assets, including the Ford name, as collateral. Mulally called it “the world’s largest home-equity loan” and it enabled Ford to avoid the bankruptcies that befell the predecessors of General Motors Co. and Chrysler Group LLC last year.
Mulally instituted a plan to focus Ford on fixing its namesake brand and take advantage of its global scale to build cars to be sold worldwide. He called the strategy “One Ford” and gave his executives laminated wallet cards to drive home his tenets of working together, accepting reality and developing new models that buyers really wanted.
The CEO must still grapple with an automaker that hasn’t earned an annual profit since 2005 and lost a record $30 billion from 2006 to 2008. Though Ford earned a surprise $997 million profit in the third quarter, Mulally has said the automaker won’t be “solidly profitable” until 2011.
Biggest Challenge
Ford’s bet on small cars, bringing the Fiesta subcompact and the Focus from Europe this year, is risky because U.S. consumers have yet to embrace diminutive models like buyers elsewhere who pay more for fuel. U.S. sales of compact and subcompact cars fell 20 percent in 2009.
“There’s a tremendous amount of challenge in bringing small cars into this market,” said Rebecca Lindland, an analyst at IHS Global Insight in Lexington, Massachusetts. “You really have to push a lot of volume to make a profit.”
Mulally’s biggest challenge now may be to keep his managers grounded as outsiders deify him, said Jeffrey Sonnenfeld, senior associate dean of the Yale University School of Management in New Haven, Connecticut.
“Mulally’s biggest risk is managing expectations as people create a messianic image of him,” Sonnenfeld said. “Others can create unrealistic expectations. And he can’t let his people get caught up in the idea of infallibility.”
‘Sugar-Free Environment’
At meetings with direct reports every Thursday morning, Mulally demands attention to the auto market -- it fell to the lowest in almost three decades last year -- and to each other. He banned BlackBerrys and pounces on anyone caught texting, say Ford executives.
“It’s a sugar-free environment,” President of the Americas Mark Fields said of the weekly meetings. “He has brought us all together and he has focused us.”
The Thursday meetings “keep us humble,” said Jim Farley, global marketing chief. “Every week we’re reminded of what another competitor is doing in India and Oklahoma. It begs the question of what have you done for the company lately?”
Mulally succeeded as an outsider in Detroit because “there was no grandiosity when he came in, there was just a sense of energy and enthusiasm,” said Sonnenfeld, who runs Yale’s Chief Executive Leadership Institute. “He’s not some swashbuckling Iacocca type. He’s the ultimate team builder, fortifying the institution.”
‘Defining Moment’
Under Mulally, Ford has slashed its North American workforce in half, closed factories and converted plants from making sport-utility vehicles to building smaller autos like the Focus. He sold Jaguar, Land Rover and Aston Martin and is near a sale of Volvo to China’s Zhejiang Geely Holding Group Co.
“I would like to be remembered for contributing to refocusing Ford on Ford,” Mulally said, adding he has no plans to retire.
Mulally said he considers his “defining moment” at Ford his appearance before congressional committees in late 2008, where lawmakers derided him and his fellow U.S. auto chiefs for flying in private jets to Washington to beg for a bailout.
“This is a very personal issue for me because I was the one there, doing it,” Mulally said. Americans “want companies to be successful. We don’t want to nationalize companies.”
Forgoing federal aid attracted new buyers and gave the company credibility with Wall Street, Mulally said. He became angry when a reporter at the Jan. 11 dinner asked if Ford avoided a government-backed bankruptcy simply to prevent negative “public relations.”
Flash of Ire
“What kind of question is that?” he said, folding his arms across his chest and scowling. “We were not making a big
PR play, we were running a business. I believe the American public appreciates we are running a healthy business.”
It was a rare flash of ire from the CEO, who went on to cite Ford’s disadvantages against government-funded U.S. rivals that wiped obligations from their balance sheets in bankruptcy.
“We’re paying a little bit more interest because we have more debt,” Mulally said. “But when we get back to profitability, we’ll pay back that debt and get rid of that disadvantage.”
The company’s 7.45 percent notes due July 2031 have more than tripled in the last year to 93 cents on the dollar, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.
Mulally posted his first back-to-back quarterly profits at the automaker Nov. 2. Ford may earn $2.35 billion this year, based on the average of five analysts surveyed by Bloomberg.
After a speech yesterday at the Automotive News World Congress in Detroit, Mulally was asked for the biggest lesson he learned from the past year.
“Have a plan before the s--- hits,” he said as the audience laughed and applauded.
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Mulally?s Turnaround Gives Ford CEO Star Status at Auto Show - BusinessWeek
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