Ford ready when auto demand turns around, CEO declares
Alan Mulally is chief executive officer officer of Ford Motor Co.
The former Boeing Co. executive responded that cars, which have about 10,000 parts, are indeed very sophisticated. Then he smiled and noted that a jumbo jet has 4 million parts -- and it flies.
In 2006, the year Mr. Mullally took over, the company lost $17 billion. Last year, it made $6.6 billion, its biggest profit in 11 years. Within weeks of arriving, Mr. Mulally took out a huge loan and began pushing through a restructuring that continued even as the recession sent rivals General Motors Co. and Chrysler Group LLC into bankruptcy protection.
He promoted managers who could work together and fired those who couldn't. He shed money-losing brands including Jaguar, Volvo, and Mercury. He closed six U.S. plants, cut thousands of jobs, and saved billions of dollars in engineering costs by reducing the number of models Ford builds.
Mr. Mulally, 66 and a Kansas native, still faces big challenges. Ford is struggling to overhaul Lincoln, which was the nation's top-selling luxury brand a decade ago but fell victim to underfunding and more stylish rivals. Its sales in China, the world's biggest car market, are about one-sixth of GM's. And slow growth in the U.S. is hindering a comeback in car sales.
Mr. Mulally spoke recently with the Associated Press abut the auto industry and Ford specifically. Excerpts appear below.
Q: Why aren't compaies using their cash stockpiles to hire more?
A: The consumer has pulled back. We're ready with the products and services that people really do want, but we're going to match our production … to what the real demand is.
Q: Are more fuel-efficient cars a permanent trend?
A: I sure think so. Most of us in the United States and around the world know that we are going to pay more for energy. So fuel efficiency has just continued to move as the No. 1 consideration.
Q: Take us through how, inside your company, that changes things.
A: If you look at Ford historically in the United States, we were about 70 percent trucks and bigger sport utility vehicles and made 30 percent cars. Around the world, the percentage is the opposite way. But in the United States, we are moving to a tremendously balanced portfolio of small, medium, and large vehicles.
Over the next few years, we'll be at the place where nearly 60 percent of our vehicles are small or medium-sized cars, and about 40 percent will be the larger SUVs and trucks. It really is a tremendous transformation of Ford.
Q: How do you make transformation happen?
A: Every Thursday, we're all linked up on the Internet, and in 2 1/2 hours, we go through about 320 charts. All the charts have the areas that need special attention. We review the entire operation. Every vehicle has to be best in class, quality, fuel efficiency, safety. That is benchmarked against the competition. Everybody knows everything.
Q: Some Ford workers are upset about your compensation ($26.5 million in salary, stock options, bonus and other compensation last year). What would you say to an hourly employee who asks why your pay is fair when a new hire makes less than $30,000 a year?
A: My compensation is entirely tied to the success of Ford. The vast majority of my compensation is at risk, because the numbers that you see are only realizable if we profitably grow the corporation.
I believe in it so much that most of the management team and most of the salary team -- and also our wonderful employees that are represented by the UAW -- have had profit-sharing plans.
We're continuing to talk together about how to align all of our compensation even more. Because the most important thing for everybody is that they get a chance to participate in the profitable growth that we deliver.