Ford's Stealthy Success
Alan Mulally, CEO of the only American automaker not driving in reverse, talks to Allan Dodds Frank about when his company will turn a profit, the new Ford line, and driving to Washington.
When Ford CEO Alan Mulally unveiled a new small car in India on Wednesday, he took one more step toward his goal of returning the 106-year-old company to success by expanding small car sales in China, India, Europe—and even the United States. But while he knows numbers as well as anyone, the former Boeing executive, sitting down for an exclusive one-on-one with The Daily Beast, does not want to go near any suggestion that Ford could overtake General Motors as the No. 1 U.S. automobile manufacturer in the next couple of years.
“We are really pleased that the customers love the new Ford lineup. The customers will decide that, of course,” he said, in an interview with The Daily Beast at Ford’s Manhattan offices, of potentially becoming No. 1. “Most people believe Ford may have the greatest car, utility, truck lineup we have ever had.”
While he does not anticipate Ford will turn a profit until 2011, he said, “We see a good growing market over the next six months and year as the economy comes back.”
Mulally, after all, is at the wheel of the only American car company not driving in reverse. His counterparts at General Motors and Chrysler are working through the throes of bankruptcy, which also is unsettling auto buyers
That was clear during the Cash for Clunkers program, which Mulally said was far better for Ford than it was for Chrysler and GM. “Out of the top 10 vehicles sold, four were Fords. What is really neat is that four of the top 10 that were traded in were also Fords, because we had this tremendous base in the U.S., especially with trucks and SUV,” he said. “A lot of the vehicles that were turned in were less-efficient Fords that were purchased a long time ago.”
Enough demand remains “pent up,” Mulally said, that the end of Cash for Clunkers will not kill sales in the fourth quarter. While he does not anticipate Ford will turn a profit until 2011, he said, “We see a good growing market over the next six months and year as the economy comes back.”
According to the industry authority Automotive News, Ford's business is down less than its competitors for the first eight months of this year. Ford's sales dropped 24.8 percent for the first eight months, while GM is off 35.1 percent and Chrysler declined 39.3 percent.
Overall, for the first eight months of 2009, General Motors has 19.5 percent of the U.S. market versus 15.8 percent for Ford. That gap may narrow sharply soon, as GM liquidates Pontiac and tries to sell its Saturn line. Once GM’s dwindling supply of Pontiacs is gone and Saturn is off the books, GM will be down to 17 percent of U.S. market share—and that is presuming it can keep sales of Chevrolet and its other cars and trucks steady. Ford, with Mulally’s push to have a Ford vehicle in every segment, could easily pick up a percentage point with a few hit cars.
In the three years since Mulally left Boeing, he says: “We have really decided to focus on the Ford brand.”
The company has long enjoyed more than 25 percent of the domestic pickup truck market while limping along with little more than 11 percent of the U.S. car market, even as Mulally says it is garnering bigger market share for cars abroad.
Mulally is attacking the U.S. car market from small to large with higher-quality vehicles that also place premiums on safety and fuel efficiency, moves sure to be popular with U.S. customers concerned about saving money. “We have fixed our cost structure in the United States so we can actually make small vehicles here and make them profitably,” he said.
As part of its global rollout at the Frankfurt auto show in Germany last week, Ford showed its new C-Max minivans and announced more environmentally efficient fuel-injection engines called “EcoBoost.” In the next four years, Mulally said, most of those products will be in the U.S.
The Ford turnaround, he said, really picked up steam as looming bankruptcies and the congressional hearings last November pressured the Big Three’s CEOs.
“People really think of Ford in a different way, and it really started with the hearings, when we went back to support our competitors when our competitors were bankrupt,” he said. “We did that, of course, because if our competitors would have gone into a freefall, they would have taken down the entire supply base into bankruptcy, they would have taken Ford into bankruptcy, and they probably would have absolutely taken the U.S. economy from recession into a depression.”
In addition to the perception that Ford’s business was stronger than that of its competitors, Mulally said: “We also got this tremendous feedback that Ford cares, is part of the answer on fuel efficiency and energy independence and energy security.”
By the time of the second congressional hearing in December 2008, Mulally recalled, the importance of public perception about a $25 billion bailout for Detroit was paramount. For starters, that meant forgoing the executive jets, after Brian Ross of ABC News showed the auto bosses departing for the first hearing on company planes to travel the 525 miles from the Motor City to Capitol Hill.
Asked, “How was the ride?” Mulally laughed.
“It was a lot of fun...Of course, being an airplane person I think airplanes are terrific, too, when you have long-distance travel, I think airplanes are a very efficient mode of transportation.”
Mulally said being in the congressional hot seat gave him credibility with customers, and the five minutes he had "to tell the Ford story" to millions of customers was the sales turning point for the company.
And of the need to drive from Detroit, Mulally said: “The biggest learning there was that it is a sensitive issue and if you are there [before Congress] and you are in trouble, then you need make sure you that you address all parts of the problem...I think the second time driving there I was pleased to show everybody I understood the sensitivity, but clearly airplanes are a neat part of our economy also.”
My money says he flies next time.
Allan Dodds Frank is a business investigative correspondent who specializes in white collar crime. He also is president of the Overseas Press Club of America.