Ford Tough: Bill Ford and the Battle to Rebuild America's Automaker

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Thousands of automotive and business print and broadcast journalists from around the world flock to Detroit in the first days of January each year to mingle with company executives and to see, touch, and feel the hottest new car and truck products global automakers have to offer. From Honda to Toyota, Chrysler, and Ford, all companies participate in the world's most important auto show, giving vehicles a rock star treatment with splashy entrances and accompanying silky smooth promotional materials. Journalists quickly discern the handful of winners and losers of this annual product warfare, in spite of the best spit-shine PR efforts from every company, and rapidly relay the vibes throughout the world, shaping the thoughts of consumers, Wall Street analysts, and investors. The result is that tomorrow's winning products are rarely a surprise, having been detected typically one to two years before during preproduction viewings at the Detroit show.
When Ford Motor Company revealed its best and brightest at the 2002 North American International Auto Show-less than three months after Bill Ford and team took over operations-its overall upcoming product lineup was so depressing in comparison with competitive products, particularly those shown by foreign automakers Nissan and Toyota, that top tier journalists began to suggest out loud that perhaps the day of American doom had come-the end of Detroit. Chrysler was long gone, gobbled up by German automaker Daimler in what was called a "merger of equals" but everybody knew was an outright foreign acquisition. With little to show and in financial distress, Ford Motor Company appeared headed down a difficult road, the biggest thing it had to reveal being a long-awaited operations restructuring plan instead of a stable of cutting-edge, future products.
The one product that turned heads was a high-priced concept car, a modern version of Ford's historic GT40. That super sports car had made Ford Motor Company the international racing manufacturing leader in the 1960s with its stunning first-second-third sweep of the 24-hour Le Mans race in France in 1966 and its repeat victory in 1967. The modern concept car version unveiled in 2002 was a spectacle for auto enthusiasts, but it did not signal a turn in fortunes for the beleaguered automaker because nobody thought the money-losing company could afford to actually engineer and manufacture a roadworthy version of the car for sale. The GT40 is cool, they said, a real novelty. But Ford won't be able to do anything with it because they've got no money to spend on product development.
Ford Motor Company was hurting financially, and the world was waiting to see Bill Ford's plans for reviving the automaker. The widespread assumption was that risky, expensive research and development had no place in the company's short-term future. The best Bill Ford and company could do was to slash expenses to restore bottom-line results quickly. Of course, the problems at Ford Motor Company in the first year of Bill Ford's reign as chairman and CEO had more to do with a lack of focus for the previous three years than with overcapacity and a bloated budget, but these by-products of trouble were crippling the company and had to be immediately fixed if the automaker was to avoid slipping to the level of second tier.
Times at Ford had gotten so bad, so fast that nobody could believe how far the automaker had fallen in just a few short years. The company that two years earlier had seemed poised to become the world's biggest and best was, in the early days of 2002, a near disaster and on display for the entire world to see. Ford Motor Company was poorly invested from its diversionary plans, core auto operations were losing money, and product development had few immediate hits in the pipeline. So ailing was Ford that the company even had to tinker with its hands-off dividend, lowering the payout for Class B and common shares, and find the means to save its way to near-term survival. The only choice for Bill Ford was to formulate a long-term restructuring plan in a very short time, unveiling it during the auto show where the thousands of interested journalists were gathered.
Automotive management models were available to study during the two-month revitalization blueprint planning process, since Nissan's Carlos Ghosn was in the midst of a much-publicized and highly successful turnaround of the Japanese automaker. That company had been in no better shape in 1999 than Ford was in 2002, but, through its Nissan Revival Plan, had returned to respectability in less than two years. Ford Motor Company had also undergone a turnaround of its own in 1991 and 1992 when Bill Ford was on the company's board, offering vital lessons to learn from experience. Ford says he and the company's management team studied "a few pages from Ghosn's playbook" and looked back over Ford's history for previously used strategies in formulating a restructuring plan, but ultimately did not rely heavily on any one source.
Ford Motor Company, due to its size, history, and the unique issues faced in 2002, was unlike any available automotive case study. The company was big and global, with multiple brands and 340,000 employees spread over six continents. It was also very American, bound by decades of employee legacy costs and 1999 union labor agreements that provided extensive job and income protections for UAW member employees.
Nick Scheele, who had previously helped put a restructuring plan in place for the ailing Ford of Europe, directed the plan effort. He and the Ford executive team decided the plan should span five years, ultimately resulting in Ford Motor Company's return to world-leading automotive profitability. The heart of the blueprint involved cutting from company payroll 35,000 employees, closing five plants, and eliminating four low-market car models, including the Mercury Cougar and the Ford Escort. Ford Motor Company also cut roughly 330,000 vehicles from its production lineup by eliminating shifts and slowing assembly lines; eliminated white-collar jobs in North America through early retirement; and aimed to eliminate $1 billion in noncore assets, including an assortment of companies like Kwik-Fit as well as dot-com shares acquired by Nasser during his remake of the company. Ford Motor Company also said it would reduce general and supply costs by $3 billion.
The Ford Revitalization Plan, aimed at boosting profits a lofty $9 billion by the middle of the decade (management committed to generating $7 billion in annual pretax profit within five years), was, however, built almost completely around the one big thing missing from the 2002 auto show-product. Bill Ford was troubled that all his company had to talk about at a car show was its restructuring plan and vowed to his management team it would not happen again under his leadership. He announced a product-led program designed to result in dozens of new or significantly freshened products in the United States during the restructuring plan.
"If you look at Ford's history," Bill Ford said, "one of the most obvious lessons it teaches is that great products are what drive success in our industry."
Instead of taking the easy road, restoring short-term profitability by slashing bottom-line product development investments, Ford Motor Company would more than double the money spent on creating new and exciting products while costs were reduced in every other area of the business. New computers on the desks of employees could wait. New product could not. A billion dollars was added to the capital expenditure line.
"The easiest thing we could have done," Ford says, "is cut capital expenditures on product, but we actually stepped it up. Today, we are spending more than General Motors and they are one-third bigger. We're building for the long-term."
Scheele, who once revived Jaguar through head-turning new product and coined the "back to basics" phrase at Ford Motor Company despite the objection of then-boss Jac Nasser, could not have agreed more with Ford's approach. "We are a car and truck company," Scheele says. "A car and truck company designs, builds, and sells great product."
A simple statement, but one that the thousands of people associated with Ford Motor Company wanted, and needed, to hear. The American car manufacturing industry is unique in that most executives, managers, and people who work on manufacturing lines or in dealerships are romanced by the automobile. It is a passion they all share, no matter what level of hierarchy they occupy in the company. They may specialize in design, engines, or product development-but most of them love finished cars and trucks. At Ford Motor Company, this passion often runs even deeper, perhaps because of a century of lineage, product, and family continuity. Say "Mustang" to a room full of Ford employees and attention quickly moves to the center.
The employees needed a leader to stand before them and say that the company was once again staking its future on providing innovative, well-built vehicles for the masses. They could live without a free computer or low-priced Internet service or company-owned European service centers and junkyards. They could not, however, bear working for a product-starved Ford Motor Company that was built on the back of a legacy involving some of the world's greatest automotive names, including the Model T, the Thunderbird, the Mustang, the Taurus, and the F-150.
"We do have icon products to build on," says Bill Ford, "and that is an incredible advantage."

Bill Ford and his new management team took this message-that the company was putting excitement back into its North American product lineup-to the same dealers that were alienated during the three years of turmoil in Dearborn. A leader in delivering the good news was longtime executive and dealer ally Jim O'Connor. Ford had approached O'Connor in late 2001 and asked him to serve as the company's vice president of sales and marketing, his primary charge being to rebuild dealer trust and relationships. O'Connor's locker at Grosse Pointe Country Club in the suburban Detroit area is next to Bill Ford's, and he often runs into Bill Ford Sr. on the golf course.
"He'll say, 'Hey, man,' " O'Connor says, " 'what's going on down at the shop?' "
O'Connor was going on 40 years with the company and not far removed from seriously considering an exit during the company decline under Nasser when Ford called, but when given the opportunity to stay at Ford and help, there was only one answer to give.
"I told my wife," O'Connor says, "this is Bill Ford saying 'I need you on my team.' "
O'Connor began visiting with dealers, promising new waves of upcoming products and pledging a renewed spirit of cooperation under the company's new leadership team. He took fellow executives, including Bill Ford and Jim Padilla, to meet with individuals and groups of dealers to show commitment to North American auto operations, hoping to ease escalated tensions.
"Some of our best dealers," Padilla says, "did not feel we treated them as valued members of our team. Ford [Motor Company] is personality, and it was not good for the face of Ford to be pissed off."
Executives held a closed-door meeting with the owners of 900 franchises at the 2002 NADA convention, admitting mistakes and pledging more openness and respect. And by February 2002, Ford Motor Company had only five of its almost 50 dealerships remaining and was close to selling those.
"They realize," said Fernando Garcia, president of Fall River (Mass.) Ford, "they took the wrong course. They told us at the meeting that it's their job to build quality cars and it's our job to sell them. That goes a long way to improving relations."
As a sign the focus was back on the products, the company also made a surprise announcement. Just one month after the GT40 concept car was unveiled at the Detroit Auto Show among whispers that Ford Motor Company could never afford to build it, O'Connor announced on a stage at World Headquarters that the automaker would in fact put the GT40 into production. His words drew cheers from a standing-room-only crowd of Ford Motor Company employees. Broadcast live to dealers by satellite, the announcement was a message from the company's new leadership team that product investment was a top priority and romance was very much a part of Ford's vehicle affairs. It was also a commitment to building new, exciting products faster than ever before, as O'Connor committed that the car would be ready in time for the company's 2003 centennial celebration-just 15 months away.
"When O'Connor said, 'We're gonna build it,' " a Ford employee remembers, "it was almost as big as when Bill Ford took over. You knew things were different."

While product development raced into place, Ford Motor Company's human resources department's three-year rush of activity was coming to a grinding halt-in new initiatives, that is. Under the new leadership of Joe Laymon, Ford's single new HR policy for 2002 was that no new policies would be put in place internally during the entire fiscal year. As the company worked to settle lawsuits resulting from previous turmoil, Laymon stopped initiatives so employees could relax and focus on the important tasks at hand-designing, building, selling, and financing cars and trucks.
"We had too many people involved in strategy," Laymon says. "We did not take the time to find out if new policies and procedures worked. I put a moratorium on it. My point was that this will not result in us selling one fewer vehicle."
Laymon says much of what was being done in people management at Ford Motor Company was good, but "few gave it a chance to work" before seeking more change, and therefore the company was in constant churn with employees, its most prized possession.
"If you take the time," Laymon says, "to get to know the people and the products and understand ._._. that we have the best dealer body in the country, this culture will take you in and embrace you."
The company, Jim Padilla says, had "effectively pissed off" three out of four employees with multiple and rapidly changing personnel policies since 1999. "We took our biggest asset and juxtapositioned the thing," he says. "It was nonsense, the whole thing about A players and B players-thank God we have B players, because we could not stand having all A players.
"B players [at Ford] are making a comeback," Padilla says. "We've thrown all those processes out and gone back to seeing people as people. Even though times have been tougher, we've had more with us."

The realization by Bill Ford and other Ford executives during the 2002 auto show that the focus was on the pains of business rather than the company, its products, and its heritage was a harsh reality that needed to be dealt with in short measure. Ford Motor Company was an automaker and, despite its problems, still produced some of the best-selling vehicles in the world, including the perennially best-selling F-150, the Explorer, and the increasingly popular Focus. Something had to be done to remind the American people that the company was more than a nuts-and-bolts business story on the financial pages.
It had become apparent from the swell of pride among employees and dealers during Bill Ford's ascension to CEO that having a Ford at the helm of the company was one of its strongest assets at the moment-a stabilizing blend of past, present, and future that gave Ford Motor Company a competitive advantage. General Motors was a big, strong auto company, but who was GM? Ford Motor Company's strength was the legacy it shared with American history.
"We needed to take back the voice of Ford," said Rich Stoddart, Ford Division's advertising manager. "Lawyers [and] the media were being heard louder than we were."
Another Ford insider put it more bluntly: "We had no fucking product. All we had to sell was Bill."
Working with the company's advertising agency, J. Walter Thompson, Ford executive and marketing team members came up with an idea, suggesting to Bill Ford that he should be the center of an advertising campaign designed to "rearticulate" Ford Motor Company values. Because Ford is uncomfortable in heavily scripted settings and had no desire to be seen as an attention-seeking CEO, he heartily resisted the idea at first. Longtime Ford executive-turned-Chrysler CEO Lee Iacocca had become an American celebrity in the early 1980s because of commercials he starred in, personally urging consumers to buy from him. Ford had no interest in looking into a camera and saying, "Buy from me." But close aides worked to convince him that it was in the company's best interest because the face of Ford needed to be a Ford. He agreed to participate in an advertising campaign, but only if he got to do it his way, relaxed and unscripted.
However, when Ford went for the ad shoot, he found a Hollywood-style setting with hundreds of bright lights, a teleprompter, a stool to sit on, and a script-hugging director. Despite the efforts made to set up the studio for Ford Motor Company's "No Boundaries" campaign star, Bill Ford was so uncomfortable with the sterile setting that he walked out.
"I can't do this," he told Jim Vella.
Realizing that Ford is more comfortable in an intimate and off-the-cuff setting, Vella asked him to try it another day, another way. This time it was Bill Ford talking for two hours to a rolling camera about what he knows best: the history and heritage of the company, its products, and its founding family. The ad agency easily got four commercials out of the one-take, from-the-heart footage.
In the first 60-second spot, titled "Legacy" (it aired nationally in February 2002), the camera zooms in tight to Ford's face, revealing new lines from three years of stress, but eyes that glisten when he talks about the company's past relating to family knowledge.
"My great-grandfather Henry Ford," Bill Ford says in the commercial, "really redefined what it meant to live in this country. 'No boundaries' applied to everything he did, and that's the part of him that really inspires me. It's a wonderful legacy.
"For me, it's really a great honor to be able to try and advance that legacy and redefine it in the 21st century. This company has always been about looking forward and anticipating the future and actually helping shape that future ._._. and that's what gets me up in the morning."
In another spot, pictures are shown of Ford's great-_grandfather on one of his well-documented camping trips with Harvey Firestone.
"They used to take these camping trips every year," Ford says, "with Thomas Edison and whoever the President was. They called themselves the vagabonds. They sort of invented SUVs.
"I love the outdoors._._._. I won't even stay in a hotel if I can't open the windows, and so our SUVs provide a great deal of freedom. You can't accept limitations._._._. SUVs are what people want, and we do them better than anybody else."
In "Family," he talks about how the automaker was not "just another nameless, faceless company," suggesting Ford Motor Company has a soul.
"[Employees and dealers] are third, fourth, fifth generation," Ford says, "and people have stories. The stories are, 'My grandfather worked with your grandfather' or 'My aunt, my uncle, my cousins, my brothers, my sisters ._._. they all work here.' That really sets us apart from other corporations.
"To me, the litmus test of whether we've done a good job here really is going to be the stories the next generation is going to tell."
The ads were an immediate national hit, scoring strong results in advertising consumer polls that interpret viewer likeability. Auto company ads, because of their frequency, typically rate low in positive response, but USA Today reported through its Ad Track poll in 2002 that 21 percent of consumers familiar with Ford Motor Company's ads "liked them a lot."
"We were not trying," says Ford's Jim O'Connor, "to make Bill Ford a celebrity. But the dealers really got behind it, and it allowed us to break through all the clutter at the time."
But interwoven among the successes were frustrating lessons in celebrity for Bill Ford to learn. Like any youth worth their salt, his children found the television commercials intriguing and half-jokingly asked their father about appearing in one. Ford promised his daughters a gig in an upcoming ad if their team won a state soccer championship. They did, earning a background-only appearance in a commercial with a soccer mom minivan and a minimal paycheck. And even in such an innocent incident, Bill Ford attracted controversy. Ford's children wore practice sweats instead of uniforms in the commercial, and positively identifying them during the brief spot is almost impossible. Yet when a parent from a rival team heard about the commercials, he called the sanctioning soccer association in Michigan to complain that by appearing in a paid commercial wearing soccer uniforms, they had violated amateur rules and should have to forfeit their championship and be barred from further participation. The matter was resolved, but only after Bill Ford was forced to engage a lawyer and deal with the reality that he was no longer just a parent with children who could easily involve them in fun and interesting parts of his job without heavy scrutiny.
In every way possible, Bill and Lisa Ford have tried to avoid such situations and keep normalcy at home by giving their children advantages without entitlement. When his oldest daughter, Eleanor, got her driver's license, Ford could not bring himself to bestow her with a flashy new vehicle, despite having a stash of products from Aston Martins to Land Rovers, Volvos, and Lincolns at his immediate disposal. But as a straight-A student and a multisport athlete constantly on the go, she needed transportation. The Fords compromised by getting a "pretty stripped down" Mercury Mountaineer as a third family car, saying she could drive it on an as-needed basis. Ultimately, it was always needed and her regular use made the SUV essentially hers. Ford said that was fine, but he hoped the point was driven home with his children: that very few things in life-like keys to a car when your father is head of the world's second largest automaker-are given automatically. They may be due an inheritance, but that does not relieve them from sweat equity in their chosen fields, especially later in life.
"I hope," Ford says, "that I have been able to impart to my children that not working is not an option."