Last Week

Ford Looks Outside the Industry for a Lift

Sunday, September 10, 2006

The year was 2001. The family business was hemorrhaging cash, reeling from the Firestone tire debacle, and rife with internal divisions and dissatisfaction. Then he stepped in, fired the chief executive, mended fences with dealers and employees, cut 35,000 jobs, sold non-core businesses, and launched a new line of vehicles that restored respect and profitability to an American business icon.

By last week, it was like deja vu all over again. The automaker had lost more than $2 billion the previous year and was on track to lose even more in 2006. Its U.S. market share had fallen from more than 23 percent in 2000 to 17 percent, with no bottom in sight. Its stock had declined so far that there was talk of the family teaming up with private equity funds and taking it private again. And it was becoming increasingly clear that a restructuring plan that envisioned closure of 14 plants and elimination of up to 30,000 additional jobs wasn't quite enough.

So, once again, Bill Ford stepped in and fired the beleaguered chief executive -- himself. And after failing to lure two car men -- Dieter Zetsche, who had turned Chrysler around before taking the helm at DaimlerChrysler, and Carlos Ghosn, who had turned around Nissan before being asked to do it again at Renault -- Ford went outside the industry to save the family firm.

To many, Alan Mulally seemed the perfect choice. As a 37-year veteran of Boeing, he'd taken a commercial-jet division losing market share and profitability and put it back at the top of its game. He was bold enough to propose a supersonic passenger jet and clever enough to drop the project when customers showed little interest. Instead, he quickly shifted his development team to a smaller, lighter plane that has become a runaway success, putting Boeing once again ahead of rival Airbus in market share.

Mulally is an engineer's engineer known for his relentless focus, his attention to detail and his ability to rally the company around a single mission. He cut the Boeing workforce to 50,000 from 120,000, mended relations with suppliers and improved productivity. And after he was passed over for Boeing's top job last year, he turned up at the top of all the recruiters' lists when Bill Ford decided to kick himself upstairs.

Look for Mulally to cut capacity even further, sell off Jaguar, wean the company from its dependence on fuel-guzzling trucks and SUVs, and consider dropping the Lincoln and Mercury nameplates. But the real test comes next year, when he'll have to persuade the United Auto Workers union to bury cherished notions such as seniority-based pay schedules, lifetime employment and defined-benefit pensions in exchange for a call on the company's profits.

© 2006 The Washington Post Company