In the American automobile industry, Ford was notorious for its caustic corporate culture. Executives put their own advancement and the success of their own departments ahead of the bottom line. The company was divided into warring fiefdoms. Different sets of data were used to make different points to different constituencies. And the automaker consistently bet big on homerun products only to let them languish after their initial success.
Applying the same methods he had used to save Boeing after the terrorist attacks of September 11, 2001 annihilated its order book, Mulally transformed this short-sighted, cutthroat, careerist culture into a model of collaboration and efficiency. He achieved that result by doing the following:
Before Mulally arrived in Dearborn, Ford meetings were arenas of mortal combat. Executives entered them eying each other for advantage, looking for weak spots in each other’s armor, ready to drive home a shiv at the first sign of vulnerability. As a result, little was accomplished beyond self-preservation. Mulally made his weekly executive meetings a safe environment where data could be shared without blame. “So-and-so has a problem. He’s not the problem,” the upbeat CEO told the assembled executives. “Who can help him with that?”
To make sure they got the message, Mulally tied each executive’s performance to the success of the company as a whole.
At pre-Mulally Ford, the truth came in many different flavors. Different numbers were used for different audiences. Ford was also big on excuses. There was always a reason why things did not work out according to plan, but it rarely had anything to do with the root causes of Ford’s dysfunction.
In Mulally’s weekly “Business Plan Review” meetings, each executive was required to provide a comprehensive update on the progress their division or department was making against the backdrop of his turnaround plan. Because all of Ford’s senior executives were required to attend every week, any discrepancies in the data were quickly exposed. And because no explanations were allowed in these sessions, everyone had an opportunity to concentrate on the facts of the company’s performance. “There’s nowhere to hide,” Mulally told me.
It did not take Mulally long to realize that there was not just one Ford, but many. In addition to just plain Ford, there was Ford of Europe, Ford of Asia and a host of other divisions and subsidiaries. And there was little coordination, or even cooperation between its many parts.
Mulally’s first priority was to weld these disparate regional divisions together into a single, global enterprise. By doing that, he was able to create previously unimaginable economies of scale and create a multinational automotive powerhouse.
In an early meeting with reporters, Mulally was asked if he was interested in a merger. “Yes!” he exclaimed with a big grin as we all whipped open our notebooks. “We’re going to merge with ourselves.”
This might seem like a no-brainer, but in Detroit in 2006 it bordered on radical thinking. Like General Motors and Chrysler, Ford was locked into union contracts negotiated in better times that prevented it from laying off workers or closing plants. So it filled those factories with cheap vehicles and sold them at a loss.
Before he agreed to replace Bill Ford Jr. as CEO, Mulally told the great-grandson of Henry Ford that he intended nothing less than a complete, top-to-bottom reboot of the product lineup. From now on, every new Ford would be the best vehicle in its class. This product renaissance would not be cheap and Ford was running out of cash, but Mulally insisted on it. “You’ve been going out of business for 30 years,” Mulally told Bill Ford. “This is how to get back in it.”
Ford had plenty of plans before Mulally. In fact, it usually came up with a different one every year or so. And when that one did not work, it came up with another.
But Mulally’s plan was different. It was simple, consisting of just four points. You’ve just read about three of them: Coming together as a team, leveraging Ford’s global assets, and building cars and trucks that people wanted and valued. The fourth point was putting together the financing necessary to pay for it all.
Mulally kept hammering home these four points in every meeting, every town hall session, every analyst meeting and press conference. After Mulally delivered the same stump speech at the New York auto show in April 2007, I asked him when he was going to come up with something new. “But, Bryce, we’re still working on this plan,” he replied. “Until we achieve these goals, why would we need another one?”
He was right. And Ford kept working on that plan until it became the most profitable automaker in the world.
Detroit News journalist and author Bryce G. Hoffman chronicles Ford’s turnaround in American Icon, out March 13 from Crown Business.