Business

<< Previous   of   Next >>   ADVERTISEMENT   CONTACT THE HERALD Mike Benbow, Business Editor benbow@heraldnet.com   Published: Monday, June 1, 2009 Alan Mulally is exactly what Ford needed By Mike Benbow If there's such a thing as a hobby stock, then Ford Motor Co. has been a hobby of mine for more than 25 years. I never actually purchased Ford stock, but I did inherit 100 shares after my dad died. At the time, I didn't think of Ford as a great investment. I've always favored mutual funds. But I hung on to the shares anyway, mostly because they were the first shares of stock I ever owned and because I found the Ford story fascinating. Launched at the beginning of the last century, Ford made motor cars affordable for more than just the wealthy. You could get any color you wanted, as long as it was black. For decades, Ford was the second largest carmaker in the world and among the largest corporations that to this day is still controlled by a founding family. Through the years, I've kept an eye on the Ford story. It continues to be an interesting one, but that's almost in spite of itself. I shudder to think where Ford would be today if Bill Ford Jr., the grandson of the company's founder, hadn't fired himself as chief executive in 2006. Ford the man shook up the industry by replacing himself with an outsider to run Ford the company. It may well be the smartest decision he's ever made. The outsider happened to be Alan Mulally, who left the Boeing Co. as president and chief executive of its Commercial Airplanes division after he wasn't selected to run the whole show. There was a lot of debate at the time about whether Mulally was the right person for the Ford job. Many critics questioned what he knew about the car industry. Turns out what he knew about business has been much more important. Of the "Big Three" automakers in the U.S., Chrysler is in bankruptcy, General Motors is expected to go into bankruptcy this week and Ford has stemmed the bleeding of its losses and hopes to be profitable -- without a public handout -- by 2011. It has done so because it has a CEO who is a business guy, not a car guy, who has quickly undone many of Ford's mistakes. For many decades, Ford was the No. 2 automaker on the world stage and was very profitable. It wasn't too many years ago that the company announced a plan to become No. 1. It started buying companies such as Jaguar, all with the idea of beating GM as the world's largest automaker. At the time, I remember thinking that if Ford really wanted a new moniker, I'd prefer most profitable. Mulally, who took over the job in 2006, dumped the bigger-is-better idea and sold Land Rover, Jaguar and Aston Martin. He cut the company's nearly 100 models to fewer than 20. Starting before Mulally's hiring, Ford has cut 50,000 jobs and closed down 17 manufacturing plants. Those are scary changes for Ford employees, but if anybody can sell them on their necessity, it's Mulally. In a recent talk about him with a retired Boeing executive, I was told that one of his biggest skills was to get workers to do what he wanted not because he said so but because he made them believe it was the right thing. Through their cutbacks, Mulally and Ford have done voluntarily what the government had to order GM to do after President Barack Obama fired its chief executive. And Ford is much further ahead at offering small cars like the Fiesta and the Focus that will help American motorists save money on gas. The decisions Mulally has made seem pretty smart in retrospect, but they're really nothing more than good business. At Boeing, Mulally was pretty skilled at cutting back sharply when sales were slow and ramping up as they grew. He understood the importance of products with cutting-edge design that gave customers features they wanted. As odd as it sounds, that's not quite how the car industry works. Mostly, companies just kept producing cars and used rebates and other discounts to make up for ebbs in the market. When one type of vehicle sold well, say a sport utility vehicle, we got a lot more of exactly the same thing. None of the car companies was ready for the recession, but Ford was certainly in a better position to take action. "You have to look at the world the way it really is and then deal with it," Mulally was quoted in the Guardian newspaper earlier this month. "I've done that a number of times, both at Boeing and here. Where you really get in trouble is if the market is dropping and the economy's slowing down and you don't take action." Dealing with reality. What a shocking concept. If Chrysler and GM had tried it, they wouldn't be dealing with bankruptcy. But then, they were run by car guys who haven't dealt with reality for quite a while. Can Mulally turn Ford around? The jury's still out, but I'm betting he does. I can see the headline now: Noncar guy saves century-old automaker without a government handout. It would be a great story. Mike Benbow: 425-339-3459;benbow@heraldnet.com. READER COMMENTS Be the first to comment. You must be a registered user and verify your e-mail address to post comments to blogs or articles on HeraldNet. To register, click here. To read other terms and conditions, click here. Log out

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