Ford just announced that Alan Mulally will be taking over the CEO reigns from Bill Ford. The 61-year-old Mullaly comes to Ford from Boeing, where he was President of the Commercial Aircraft division.
Unless you’ve been in a cave, you know that Ford Motor Company has been in a nosedive. They’ve been losing money faster than a drunken tourist at a Vegas poker table. They’ve cut thousands of employees and announced plant closures, but the future remains bleak.
Bill Ford’s excuse for the downturn is that the company was caught off-guard by the spike in fuel costs. Ford claims that gas rocketed up without notice, and therefore sales of SUVs and trucks, the company’s bread and butter, tanked. I’ve heard better excuses from my three-year-old daughter.
The company and industry has known since Henry Ford’s earliest days of car production that fuel cost and availability were directly related to the ability to sell automobiles. There have been plenty of fuel shortages and price hikes causing periods of soft truck and car sales. I don’t think I’m the only one who remembers the 1970s.
So plainly put, Ford made a vault-full of profit on producing cheap SUVs and pickups, and wanted to milk it for all it was worth. During this time, the Taurus’ leadership position in the midsized sedan market fizzled (due to lack of attention,) and entire brands like Lincoln and Mercury were left to rot on the vine while good money after bad was thrown at Jaguar and Volvo.
Even worse, now Toyota (Tundra) and Nissan (Titan) have pickup trucks that rival the F-Series, as well as GM’s trucks, for price, value and quality.
So why was Mulally chosen to be the guy turn the tide? As a now ex-Boeing executive, he is seen as a man who understands how to streamline operations, negotiate with unionized labor and negotiate great terms with suppliers. These are all essential in Ford’s goal to significantly cut costs.
There’s absolutely no doubt that Mulally is a smart fella. He holds an MBA from MIT’s Sloan School, and that alone is good enough for some folks. The question is: does he have the right experience to help Ford, especially when what the company needs most isn’t cost cutting, it’s products regain market share by selling in a timely manner without massive incentives.
First and foremost, Mulally has worked at Boeing since he was 24, so it’s the only company he’s ever known from the inside. Although planes and cars both utilize engines, wheels and mechanics to fix them, the markets are entirely different.
During his time as President at Boeing, Mulally had just one competitor: Airbus. His customers were airlines which spent hundreds of thousands of dollars performing due diligence prior to signing deals worth hundreds of millions of dollars.
At Ford, the products compete against over forty other brands (including many under Blue Oval’s ownership.) Buyers make emotional decisions, weighing image factors higher than those often used by purchasing professionals (like total cost of ownership.)
Just to get potential customers into the dealers, Ford wields an advertising and PR budget totally unfamiliar to a life-long Boeing guy. When was the last time Boeing ran a Superbowl ad?
Mulally has no experience with a dealer network. Ford brand dealers are so poorly trained, it’s amazing that any cars are successfully sold and serviced. Dealers caused the death of the Thunderbird by maintaining as much as $25,000 on second-sticker mark-ups well after the factory shipping yards backed-up with months of inventory. Maybe with some better factory-to-dealer inventory management and some serious BMW-style training, customers won’t hate their local Ford, Mazda, Volvo, Lincoln or Jag dealer as much as they usually do.
Mulally can use his impressive aircraft business knowledge, organizational and management skills to do a little housecleaning of the rank-and-file. Maybe he should start with the ones who decided it was time to give up the midsized sedan market, as well as those that thought that buying Jaguar, Aston Martin, Volvo and Land Rover somehow made sense. Hopefully he’ll bring in some fresh talent that can maximize the value of each brand (which means probably selling Jaguar and Land Rover, reinventing Lincoln, and killing Mercury outright.)
Most importantly, Mulally has to start a culture of forward-looking innovation and design. While the “retro” look of the Mustang has pleased baby boomers, it has yet to come close to the numbers the model attained when it was a fresh design targeted directly at the core coupe demographic (single 20-somethings) back in the 1980s. The Thunderbird was a debacle, and the replica GT didn’t do much of anything for the business as a whole, other than to spotlight that some morons in the company neglected to renew and protect renew the “GT40” trade name.
Every brand needs new products – and competitive, well-built ones at that. Since, like GM, Ford makes cost-conscious cars, Mulally’s operational experience should be of great benefit here for maximizing the cost-price-value factors. Since one can count the number of products on one hand where Ford has a true competitive advantage…wait, make that no hands…Mulally has quite a bit of work ahead of him in trying to explain to a group of product managers and engineers that their babies are ugly.
At the end of the day, Mulally’s greatest competition will come from within – Bill Ford still is Chairman, and the rest of the board, company and the suppliers are still filled with thousands of lifetime Blue Oval faithful who would rather die than admit the problem is that Toyota makes better cars (and now trucks.) He’ll have to roll-up his sleeves, navigate the Michigan politics and make sure that everyone is completely committed to making every single product and brand count – or face the chopping block.
It’s a huge job. I hope Mr. Mulally is up to it. Something, however, tells me that in two or three years from now he’ll throw up his hands in frustration and grab the first 737 out of town.