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Jewish World Review
Dec. 25, 2006
/ 4 Teves, 5767
Ford tries to outrace the repo man
DEARBORN, Mich. If Alan Mulally, Ford Motor Co.'s chief executive, is looking for fresh words to inspirit his troubled company words to replace "The Way Forward," which rang hollow as Ford slid further backward he might try: "Lay off the cheeseburgers, America you're killing yourself, which is your business, but you're also killing Ford, which is my business." That exhortation is not pithy but is oddly pertinent.
The average weight of American men (191 pounds) and women (164 pounds) has increased 25 pounds since 1960. And according to one study, in 2003 Americans' 223 million cars and light trucks burned an extra 39 million gallons of fuel for every additional pound of passenger weight. So Americans are using almost a billion gallons of gasoline more each year than they would if they were as (comparatively) svelte as they were in 1960. Because Ford is more a truck company than a car company (its big moneymakers are F-Series pickups, and sport-utility vehicles such as the Explorer are classified as trucks), it has been hit especially hard by changing consumer preferences produced by high gasoline prices. That is one reason Ford lost $5.8 billion in the third quarter.
Mulally, 61, is frequently described as having "boyish" looks and pep. But it has been only three months since William Clay Ford Jr., Henry's great-grandson, replaced himself with Mulally (Ford remains the company's executive chairman), who is going to find this an aging experience.
Already he has taken one of the great gambles in the history of American business, one perhaps unavoidable if Ford is to avoid bankruptcy. Ford has taken $23 billion in loans, most of that sum secured by almost everything Ford owns physical assets, patents, trademarks. The market value of Ford's outstanding stock is $15.4 billion. "The data," Mulally serenely acknowledges, "say we're going out of business."
Perhaps he is serene because he has seen, and seen off, conditions that were, if not worse, really bad. After Sept. 11, when the commercial airline market froze, Mulally, who then was at Boeing, oversaw the downsizing of that company's payroll from 127,000 to 52,000.
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Still, the most difficult military maneuver is a retreat under fire, because it can become a rout, and the same is true of a corporate contraction. However many people Ford hires at reduced wages to replace some of the approximately 38,000 United Auto Workers employees who have agreed to buyouts, many of them will never have built a car. This could mean quality problems, which could further depress Ford's market share, driving a downward spiral.
Mulally's vision for Ford is forward-looking nostalgia. He wants to restore Ford to the role it had in "the middle America that we grew up with." But to "spiff up the blue oval" Ford's trademark he must market cars designed on the assumption that gasoline prices "are staying up." He talks about the need to "take the hard decisions" and "rationalize our product family" with a "simplified product portfolio." He stops short of talking yet about scrapping brands. But why is the company still making the Mercury, the average age of whose buyers is 55? Perhaps because it cost General Motors $1 billion payments to dealers, etc. to eliminate the Oldsmobile brand.
Mulally says production efficiencies can solve half the company's economic problem. That will not suffice unless Ford efficiently produces exciting products. Mulally, a quick study, already has a rudimentary grasp of Detroit-speak: He says Ford must develop new products "with curb appeal the 'wow' factor."
But in 2001, with much fanfare, Ford rolled out a new version of a 1950s success, the Thunderbird. It was underpowered, handled badly and is no longer in production. Recently, the company heavily advertised the Lincoln Zephyr. But now it is called the MKZ. Why? This is the behavior of a company whose left hand does not know what its other left hand is doing.
Seventy percent of the people who go through O'Hare International Airport, Mulally says, are not going to Chicago. His point is that a snapshot of customers moving targets does not tell you where they are heading. Henry Ford, according to Mulally, said that if, when he founded his company, he had asked potential customers what they wanted, they would have said faster horses. Mulally has bet the company on its ability to develop "curb appeal" products that people do not yet know they want and to develop them before the company, which burned through about $6 billion in the last two quarters of 2006, burns the rest of its borrowed cash.
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