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07.24.09

Ford's Stealth Genius

Why is the car maker’s profit way up while Boeing is caught in a quagmire with its new 787? A genius named Alan Mulally.

So how far can one guy be an alchemist? On Friday, analysts are predicting that the shares of Ford Motor could gain as much as 36 percent on the heels of an unexpected second-quarter profit of $2.3 billion. Remember, this is the one American car company that did not put its hands in our pockets. Ford’s momentum is driven by CEO Alan Mulally, fast becoming recognized as the smartest manager in the auto business.

Now move from Detroit to Chicago, where, on Thursday, Boeing revealed that their 787 Dreamliner is in such trouble that they will have to take what is euphemistically called a “forward loss” on the program. (A few weeks ago, the 787’s first flight was delayed for an unspecified time because of structural faults.) And bear in mind that Boeing has a record-busting waitlist for 850 Dreamliners.

What’s the connection between Ford and Boeing? Mulally.

If there’s one thing that’s self evident about the mess of Boeing’s Dreamliner program, it’s that it was screwed up by management decisions taken at the highest level.

There was a fateful moment in 2005 when Mulally was passed over for Boeing’s top job. His record at the company was stellar. He came from a group of engineers known as “the aeromen” who had airplanes in their blood. Mulally had been an innovator all his career, putting a personal mark on the enormously successful 777 program and—imagine this!—inspiring much of the thinking behind the 787.

Instead of choosing the aeroman, the Boeing board chose an outsider, Jim McNerney, whose résumé included Procter & Gamble, McKinsey, GE, and 3M.

And if there’s one thing that’s self evident about the mess of the 787 program, it’s that it was screwed up by management decisions taken at the highest level, including outsourcing 70 percent of production—much of it to suppliers with no experience in the advanced materials being used—and setting deadlines that were never remotely realistic. In other words, decisions signed off on by McNerney.

The 787 is a rare and classic case in American business of a brilliant concept brought low by its execution. The single most brilliant thing about it—as in every airliner ever designed—was to get the size right. Boeing was torn between a midsize airliner and a new jumbo. They created the original 747 jumbo and were conflicted about ceding that whole market to Airbus, whose A380 was sized to carry at least 100 more passengers than a 747. It was Mulally who resisted that market and, instead, chose the smaller airplane. He spotted that people (remember them, the passengers?) prefer smaller to bigger—a philosophy he’s now breeding into every Ford product. (In the meantime, the A380 program is limping along and may never see a profit.)

There are serious corporate culture issues at Boeing. A lot of the motivation for outsourcing the 787 was to curb the power of the unions at Boeing’s Seattle plants. That has backfired badly. Not only has Boeing had to draft in whole shifts of engineers on high overtime rates to fix the 787 production line, but they recently had to fork out nearly $600 million to take over a South Carolina plant from the Carlyle Group when its 787 assembly line became snarled. There was a skill shortage on the floor in South Carolina and there is, for sure, a serious skill shortage in the executive suite in Chicago.

Clive Irving is senior consulting editor at Condé Nast Traveler, specializing in aviation.