Surprise!! Ford boss tells all
Earlier this week, the Wall Street Journal published an interview with Alan Mulally, the Chief Executive Officer at Ford who previously worked for Boeing. He was asked about his biggest surprises at Ford and named two:
First, that – when it came to cars – customers were less likely to consider Fords than other makes.
Second, that the Corporate Average Fuel Economy regulations distort the market. “The first time I heard about it was two weeks into the job. It’s on everyone’s mind.” (How, if it is on everyone’s mind, no one happened to mention it to him during the first week, he did not say.)
It is to be hoped that Mulally did not consider this interview a success, even though the Journal reporter asked only softball questions.
That Mulally was unaware of CAFE regulations when he took the job means he knew less about the car business than the average AutoWeek subscriber, less even than the average Motor Trend reader. That Ford cars were less likely to be considered than those of competitors also should have been obvious: Ford had been neglecting its car lines for years and everyone knew it. (Why wouldn’t someone buying a new car consider the Crown Victoria, the Grand Marquis, or the Town Car?) Of its family car products, only the 500 was a new car. But Ford waited so long to introduce it that they had let the market get away from them by deliberately ignoring the Taurus. Anyone who’d ever rented a car in the past decade at an airport knew that.
Mulally emphasized that since taking the job he’s talked to dealers, customers, suppliers, and all sorts of other people. He pointed with evident pride to a series of three ring notebooks on a shelf in his office in which, he said, he was keeping everything he’d been told.
None of that is particularly inspiring. Dealers, for example, are predictable: they want more of whatever is selling now, but they have no sense of what will sell three years from now. When Pontiac first introduced the GTO in 1964, dealers wouldn’t order it. They couldn’t imagine who would buy one. More recently, GM has blamed its decision to stick with a front wheel drive platform for the new Buick Lucerne line on its dealers, who ostensibly told Buick they didn’t want a rear wheel drive car.
Customers can, of course, tell you what they don’t like about you and your company’s product. But customers don’t generally know what they will want in the future, either. They probably want a fast, stylish car that will hold the family, tow a trailer, is easy to park and gets 40 mpg, city. And while you’re at it make it both a convertible and a sedan and price it under twenty grand. That’s not likely to be much help in planning your future product, either.
It’s all about what former President Bush once referred to as “the vision thing.”
To succeed in the car business, you need vision.
Lee Iacocca made the cover of Time magazine as president of Ford because he was the man who brought out the Mustang, a car that filled a huge market that no one else had noticed. Later, he took with him to Chrysler one of his Ford executives, a man who had this idea for a family car which Ford had rejected. Chrysler put it on the old K-car platform, the only one they had at the time, and the minivan was born. They still own that market.
But there’s more to the vision thing than seeing the big picture. It’s also about sensing what makes a car attractive to the buyer, and being sure that your new car has it. One of Iacocca’s last acts as Chrysler president was to sign off on the final version of the first Plymouth/Dodge Neon. The stylists had created a unique headlight design, one that almost made it seem that the car was smiling. Others thought it too unconventional. Iaccoca made them keep the design. That design became the face of the car, its most recognizable and attractive attribute, and a big factor in how well the car sold when it was introduced.
Iaccoca didn’t keep that design feature because it looked good to him. He kept it because he believed it would make the car look friendly and distinctive to propective buyers. And he was right.
Running a car company is not a beginner’s job.
The people who do it best have both talent and experience. It is unlike other businesses, even other consumer businesses. The investments involved are enormous. The fashion element means that the car which was hot today can be a dog next year, and the political uncertainties of the present day make anticipating the future doubly difficult. But anticipating it is essential, nonetheless, because the average time to bring a new car to market is three years.
Of course, experience in the auto industry is not a guarantee of success.
In this, too, Ford is Exhibit A. Jacques Nasser, when president of Ford, was beloved by the entire automotive press. Single-handedly, though, he made almost every one of the decisions that has made Ford what it is today: almost broke. He elected to spend enormous amounts of money building the “premier auto group” out of a selection of money losing foreign automakers who, when allowed the deep pockets of Ford, lost even more money: Jaguar, Aston Martin, and Land Rover. He allowed Lincoln, which not so long ago outsold Cadillac because Lincoln had invented the luxury SUV with the Navigator, to atrophy so that it wouldn’t threaten his premier auto group pets.
Nasser was also the individual who decided to ignore what made a Ford a Ford: the car for the lower priced customer. Though Ford had owned that market with the Taurus, Nasser chose to invest nothing in keeping the company competitive in lower priced cars. He saw other companies making high profits in the luxury car business and decided that was the formula for making money at Ford. In this, he forgot elemental economics, overpaying for the brands he bought and consistently forgetting that the brands he was buying were already losers in the luxury marketplace against companies which had firmly established reputations.
Worse, though, than the money wasted were the opportunities lost.
It took the Ford family way to long to fire him.
Which, of course, is the main problem: the Ford family.
The Ford family members who have controlled the Ford Motor Company since the death of Henry Ford II have lacked a clear understanding of the strengths of the company.
Henry Ford II, who took over the Ford Motor Company just as World War II was ending, wasn’t all that big on vision, either – but he was in active control and had a legendarily low tolerance for failure. He made mistakes, for sure: the Edsel, for one. But he wasn’t afraid to bail on a mistake and he had a profound distrust of the high-priced car market. (Yes, he did attempt to buy Ferrari and then create the GT40 to vanquish Ferrari at LeMans. But that was sport, as well as being a reflection of his personality. It was selling cars to the middle class that gave him the money to do it, and he knew that.)
What he really understood was what made a Ford a Ford. He’d captured the essence of that concept in the first post-war Ford, the 1949 model, and saved the company in the process.
In the Wall Street Journal interview, Mr. Mulally emphasized that he regards the business plan at Ford as something that needs to be revised daily.
He’s missing the point.
It’s not just that a business plan which must be revised every day isn’t much of a plan.
It is that Ford has always had only one business plan, one that has never failed to work, provided that the people running the company stayed true to it.
Ford is the company that is to provide the best value for the best price to the customer who is looking for both.
It was the plan that worked for the Model T (until Henry Ford forgot it), and it worked for the Model A. It worked for the flathead Ford that brought the V-8 from the luxury car to Main Street, and it worked for the ’49 Ford. It was the core reason that the Mustang was such a sensation that people lined up outside of Ford showrooms in 1964 just to look at the car. (It sold for under $2500.)
It is also the plan that has worked for Toyota and for Honda, and is now working for Hyundai.
Under Jacques Nasser, Ford abandoned that business plan.
Only in the new Mustang has it recently followed that plan.
Whether Ford has enough time and enough capital to return to make that plan work again is an open question.
But if Mulally doesn’t understand that plan, neither he nor his company stand a chance.