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Bill Ford: 'I am determined to get us through this'

TALK FROM THE TOP

Bill Ford assumed the title of chairman and CEO at Ford Motor Co. on Oct. 30 intent on turning around the beleaguered company.

On Jan. 17, Wall Street expects Ford Motor to announce its first annual loss since 1992. Shortly before the announcement, the company will unwrap its recovery strategy, which will involve deep salaried and hourly job reductions, massive production cuts, asset sales and other stringent actions.

Bill Ford was interviewed Dec. 3 in Dearborn, Mich., by Automotive News Editor Edward Lapham and Staff Reporter Mary Connelly.

At one point Jac Nasser had a goal of overtaking General Motors as the largest automaker of the world. Is that your goal?

No, it is not. I don't think size is important. We have seen in the past that the largest companies are not always necessarily the best companies. You can't manage for market share, volume, size. Those are really a fallout of getting the product right, having the quality right. If you have great product of highest quality and you have a good distribution system then naturally things will take their course.

But if you try to pursue an objective like that, it is counterproductive. In the end, any business is about returns to shareholders. We need to manage ourselves in that way, and that doesn't necessarily mean being the highest volume car and truck company in the world.

If it happens someday, fine. But it is not a goal I have.

You want measurable goals for the company in terms of performance, shareholder value numbers, as well as what you are doing with employees, suppliers and customers.

Yes, and quality metrics as well. We complicate this business incredibly. Yet at the end of the day it is a very simple business. I've said this in the last couple of weeks. The company with the best cars and trucks wins. Period.

Now along with that there are a lot of tangential items. You have to make sure your distribution system is the best. You have to make sure your employees are motivated, that you have the best employees and that you have firm relationships with your constituents including suppliers, dealers, government, the UAW. All the partnerships that we have.

If we are building an exciting, high-quality product then we are most of the way home.

You are trying to rebuild the relationship with the constituencies you mentioned. But can you ever really establish peace with your dealers unless you abolish Blue Oval dealership certification?

I have spent a lot of time in the month I have been CEO with the dealers.

I plan to spend a lot more time with the dealers. What I am hearing on Blue Oval is that a lot of the early dissatisfaction with Blue Oval has settled down. Dealers are making a lot of money with Blue Oval. The customer satisfaction needle is moving. Is it a perfect program? Probably not. I don't think any program ever is. We will continue to listen and talk with them and fine tune if we need to. But I would say overall it is working quite well, and that is the feedback I am getting from most of our dealers.

So you are not considering abolishing it?

No, I am not. You never say never to anything because one of the things I am determined to do is to be responsive to our constituents. I don't mean letting the inmates run the asylum. I am not going to cave in to any special-interest group at any given moment. But I am going to always listen and have a dialogue. If the evidence is overwhelming to do something you can rest assured we will do it.

What is your direct involvement in putting together the turnaround plan?

First of all, I am in constant contact with (COO) Nick Scheele and Jim Padilla (group vice president of North America).

I'd say a lot of involvement. We meet on it on an extremely frequent basis. I'm not hammering out the nuts and bolts of the individual pieces. But I certainly do review all the individual pieces. Then we discuss the strategy.

My involvement is maybe more at the strategic level where we discuss what we are trying to accomplish, what we hope the business structure of this company looks like when we are finished with the restructuring and is that a sustainable business model for the ongoing years?

Now, obviously there are a lot of ideas thrown on the table when you look at a restructuring plan. I probably have not been privy to every single idea that has been thrown on the table at the mid-level of the company.

I'd say other than the relationship rebuilding I have been trying to do, the restructuring plan has taken almost all my time.

The company with the best cars and trucks wins. Obviously that includes quality. But it also points to product mix. Are you satisfied in North America with the car and truck mix or do you see the need for change?

I don't think I will ever be satisfied with anything in this company because this is not the kind of company where you could ever declare victory. It's not the kind of industry where you could ever declare victory. You are always moving at the next target.

If you look back over the last 20 years, I'd say we have the most balanced lineup today of cars and trucks than we have had over the last 20 years. We were exceptionally strong in trucks but exceptionally weak in cars. The balance is swinging back now, partly under the Ford oval and partly because of the other brands we have added.

Overall, our branded product mix is pretty good. Are there holes in our lineup? Of course there are. There always are. Are we looking to upgrade some things? Yes. But I very much like the brands that we have and the products those brands have in the marketplace.

Where would you say the holes in the lineup are?

You get to the point with all of your products where some start to reach the end-of- life cycle and competition has newer products in those segments. We are fortunate though in things like pickup trucks. We don't have the newest pickup truck. But it has been such a great product for us, and such a strong product, that it has been able to withstand an onslaught of new entries.

We still need to figure out how to be profitable making smaller cars. That's something we have been working on in this company for as long as I can remember.

Overall, we are in pretty good shape. Lincoln and Mercury are areas that we need to concentrate upon, brands we need to help shore up, and we have plans to do so.

Have you set the capital spending expenditure for product development for the next three to five years?

We are close to having that number set in stone. One of the things that is very important for us to have is stability with our cycle plan.

You start by setting the number. Then you match your product programs against that.

It is not just a number. It is what you are getting for that number, too. If you look at our capital expenditure as a percent of revenue this year, last year, the year before, we haven't deviated much.

The real issue is what are you getting for that number, and where are you allocating those dollars? Are they going to the right brands and the right products?

One of the things that was key to the European turnaround was to lock in capital spending. Figure out what the affordable number was. Lock it in. Then lock in the cycle plan shortly thereafter and don't deviate. Because what has really hurt us a lot in the last few years, particularly in North America, is there have been a lot of late changes, a lot of cycle plan flux. We need to and are going to settle that down.

Has the problem with quality primarily been on the product development side or the manufacturing side?

They are so integrated and so hand-in-glove that it is very hard to assign blame to any one area. It is clear that late changes have hurt us. We have not had smooth launches in large part because we have had a lot of late changes in the programs. Everything starts to get behind in timing. There is a real knockout effect. Part of what we are all about is to put some real discipline back into the system. So you meet your gateways. Products aren't released until they are ready to be released and late changes are resisted.

Now this is easy to say and tough to do because it is a discipline that has to be adhered to throughout the system. So it is going to take some time for us to roll this through.

But that is exactly what we are going to do. Again, I will point to Europe, which has done quite a good job of doing this. The European turnaround plan, which is working very well for us, is not rocket science. It is just adhering to the disciplines you put into place.

First, the strategy has to be sound. If the strategy isn't sound the tactics don't make any sense. But it is only 10 percent strategy. It is 90 percent execution. That means locking the cycle plan and capital spending in, resisting late changes and driving discipline through the system. We got away from that here in North America.

The Japanese automakers will tell you two years from now on Dec. 5 at 10:05 a.m. we will launch the first model coming off the assembly line. And they will stick to it.

We have to have that kind of discipline. This company didn't get stupid overnight. We know how to build great cars and trucks. We have done very, very well for the last 20 years doing so. We just took our eye off the ball. Pure and simple. We are going to get it back.

Partnerships. A partnership with Toyota maybe on the green side. Are you looking at others as well?

We always look at partnerships. This is such a capital intensive and intellectually intensive business that any time that you can find viable partners it is a good thing. Yes, we will continue to pursue partnerships where they make sense.

You won't see any grand alliance or anything. We will be opportunistic in our partnerships. Some will be hopefully long lasting and strategic in nature. Does this mean we are moving toward a long-term merger or something? Absolutely not.

It is being done on a project-by-project basis?

Yes.

Do you feel that Ford Motor Co. worldwide can pursue even more environmental goals than it has been?

Sure. People look at me and they say, 'He is the green CEO.' I guess that is what is different about me. But I am a lot more than that.

I look at the pursuit of our environmental goals simply as a reflection of where society is headed. We need to anticipate that change and help drive it. Now how do you do that? To me, it is all about the application of technology.

It is not about going out and planting trees and saving rain forests. It really is about making your products and the way you make your products cleaner by use of new technology and ones that help support the business case.

For instance, if the concepts we are pioneering at the Rouge play out, our goal is to roll that out across the rest of our manufacturing world. And the products themselves. We have an HEV Escape coming. That technology ought to be applicable to other product lines as well.

Anything we do in the new technology arena, whether on the manufacturing or auto side, should never be one-offs. They should be able to be migrated across the rest of our business.

But the important thing is the business case?

Absolutely. We won't do it otherwise. We can't. Having said that, sometimes new technology is more expensive. But the expectation is that over a life cycle that it will make business sense. Any new technology. You remember when they first came out with Pulsar digital watches? They were $2,000 a crack. Now you can get digital watches at Kmart for $10. The volume has to ramp up and the costs start coming down.

So our first HEV will probably be more expensive than all the succeeding ones. That is just the price of admission of new technology.

For instance at the Rouge, everything we are doing we expect to save us money. Some of that means you have to account for it differently. For instance, all these downstream costs that we don't currently anticipate when we do new projects. Downstream meaning fines for being out of compliance with air and water quality. Hazardous chemical handling and disposal. Landfill costs. All of those things which get to you downstream but traditionally we have not accounted for upfront. We need to now take a much more total-life-cycle look at costs and anticipate what that is and see if it fits in the business case.

I understand the environmental goals. At the same time vehicles are becoming heavier, CAFE is still an issue. There seems to be a disconnect.

There is clearly disconnect because the marketplace is voting one way and legislation is moving another way, at least the policy-making public sentiment is moving in another direction with things like the Kyoto protocol.

Our goal has to be to offer the public no-compromise vehicles. It is very clear. If you ask someone, 'Are you an environmentalist?' everyone says yes. Then you say to them, 'Are you willing to give up any size, performance, any range, are you willing to pay more?' The answer to all of those is typically no. Or if they are willing to pay more, it is a small premium, not a huge premium.

The trick for us is to integrate clean technology in a way that is transparent to the customer. That is tough to do. We are going to have to use lighter weight materials. We are going to have to introduce things like HEVS. We will have to continue to refine the existing technologies. What the public is doing is they are still buying bigger vehicles with more powerful engines.

That is what they are telling us they want. Our job is to deliver those vehicles in a way that the customer is very pleased by and also in a way that will help society. There is an inherent tension in the system.

One also as a company must prepare for any kind of exogenous shock that might come. If we have an oil crisis, we want to make sure that our technologies are not only competitive but leading edge so that we can withstand any kind of external event that may quickly shift the mix in this industry.

Are you ready for that? For that kind of thing?

No. I don't think of any of us are really ready for it. We are much more ready for it than we were back in the late '70s, early '80s. We have a much stronger product line from top to bottom. But there is no question that if you had an overnight shift in product mix all of us would be scrambling to try and figure out how we could handle it.

We are in better shape than we were then. Clearly we are. But are we ready for it? Probably not.

Are you mindful that that is something you need to do as quickly as possible?

Yes, we are. It is something we need to do as we war-game. But resources are finite, so we have to be very intelligent about how we apply this new technology.

Is that part of your normal product development process or do you have a special team looking at it?

It has to be part of the normal product development process. Any time you start to have add-ons you aren't successful. It already is because we are already facing CAFE and things like that. We are already having these debates within our product development arena in terms of how do we satisfy the customer and also anticipate the needs of society. And where we think legislation is going. There are all kinds of trade-offs you make at every stage of the game. We wargame this all the time.

Some Wall Street analysts question whether you are tough enough to do this job, to run Ford Motor Co. How are you going to prove them wrong?

Let's let this play out. Let them see. I have heard that about (COO) Nick Scheele, too.

We've had a couple of people say, 'Gee you and Nick are both decent guys. Are you tough enough?' Look at Nick and what he has done. Everywhere he has gone he has cut costs and taken tough actions.

Look, I am in this for my children and grandchildren. I'll be as tough as I have to be because the viability of this company over the next 100 years is what keeps me going. And I know we are not going to have 100 years if we don't get the next five years nailed down.

Just watch this space. There is nothing I can say to you that is going to convince you or any potential critics yes or no. You are just going to have to watch our actions and see.

Did the board ask you to remain as chairman and CEO for a certain number of years?

No.

At the initial press conference a couple of people said to me, 'How long are you going to do this job?' I said, 'Heck, I just got it today.' I could see a day perhaps where I was chairman again but not CEO.

But I don't really allow myself the luxury of thinking that way because we are in it now, and we're in a tough fight. I am determined to get us through this and on firm footing. What happens beyond then I don't know.

The board never discussed a timetable with me. I am sure their expectation is that one way or another I will be here a long time. But whether I am CEO for that entire time, who knows.

In some ways this couldn't come at a worse time for me. My four children are all still at home. There is nothing that I enjoy more than being with them, going to their games, hanging out with them and helping them with homework. Obviously, this job will cut into that.

But one doesn't have the luxury of timing. It came upon us fast, and the board felt that I was the best person to step in to help get this ship headed in the right direction. So I had a long talk with my family, and they agreed this is the way it is going to be.

What is Edsel B. Ford II's role? Is that going to change?

I don't know. Edsel is terrific with dealers. I will ask him to help us with dealers. He loves doing it. Beyond that I don't know. A lot of it is going to be up to him and me in terms of just sitting down and talking about what he would like to do, if anything. He just bought Pentastar Aviation, and that is taking a lot of his time. Obviously, he loves this company, too. He spent a lot of years building up terrific dealer relations, and that is something I very much want to capitalize on.

A lot has happened economically since you started the turnaround strategy. Are the goals you are trying to reach now more severe than those you originally anticipated?

Yes. First of all since we began, we've had 0 percent financing. It is absolutely clear that the business conditions have changed since we started this turnaround process.

But the underlying issues are the same. We've got to get our costs competitive. We have to make sure the product cycle plan stays intact. (Former Ford Motor Chairman) Alex Trotman used to say - and I am not afraid to steal this from him - he'd rather sell the furniture than cut into product programs. That is the philosophy we have to have as we go through this.

It is not to say that we won't as we go through the cycle plan decide that some vehicles we need to pull ahead, some we can delay. But basically we need to keep the pipeline full.

We are going to take tough actions. It won't be all rolled out at once. Some stuff will come soon; some in January; others will take longer. You have to fine-tune it as you go along, and Nick and I are both relatively new to this process. The world changes, too. We will continue to roll things out as we see appropriate.

Does that mean that while you have stated a white-collar job-cut target of 5,000 jobs by year end, you would now be looking at a larger number?

I don't know that yet. What we have to see is how many of the 5,000 come through. It is still early. It is a life-changing decision folks are making. We expect that those numbers will start to flow through as the year comes to a close. Part of it will be how many folks end up taking the package. Then we will take another look at it. I can't anticipate where that is going to come out.

Should we expect more high-level personnel changes as well? At the executive level?

No. You may have one or two people who want to leave sometime next year. I think all the news is out in terms of who is staying and who is going. I don't anticipate any wholesale changes.

So you have people where you want them?

You are always fine-tuning. But by and large, yes.

If things are more severe than you anticipated isn't the corollary that the cuts would have to be deeper?

We're talking hypotheticals. As I've always said, everything is on the table. But it is not just people. It's asset sales. There are a lot of ways to cut costs in the company, and we are really only scratching the surface. But yes, we will continue to look at the people side as well.

Do you anticipate going to the suppliers and asking for more from them?

We have no plans to do that. Carlos (Mazzorin, group vice president of global purchasing) is meeting with them. No, we have no plan to go for a big cost reduction with the suppliers at all.

You've seen the supplier surveys. Part of our job is to help rebuild relationships with the suppliers. If there are issues, we've got to get them on the table, and we need to discuss them with the suppliers. Carlos has regularly scheduled meetings. I've been talking to some suppliers. Nick (Scheele) has been meeting with them.

One-on-one with the CEOs of suppliers?

Yes.

You have repeatedly used the term 'extended Ford family' and pointed out that this is a family company. How important is that to changing the tone?

I've always said that. It is not something I am just saying now. I was saying that the day I became chairman three years ago. It is important. It is an advantage for us that other companies don't have.

How? Do you want everybody e-mailing you?

They do. And they write me letters. I think that is great. I love the interaction with our employees. I'm happiest when I am on the plant floor with employees. It is amazing to me how many people come up and say, 'I am third generation or fourth generation.' To me, it also is wonderful how many of them want their children to work here.

It is an advantage for us. People love the Ford Motor Co. who work here. I (recently) spoke to a group of retirees. The Ford executives there said, 'Even though we are retired, we will do anything we can to help you, ask anything of us that you will because we love this company. It is a special company, and we know retired executives from other companies that don't have that same feeling.'

What are you going to do with that?

If you tap into that and provide employees a strategic direction that will ensure their success they will take us to great heights. If you look at this company over its 100-year history and even if you look over the last 20 years, we have done things that other companies haven't. We have gone against the tide when other companies were struggling. It was because our people were very proud and motivated to be part of the Ford Motor Co. We got away from that a little bit. Some of that pride and some of that family feeling may have disappeared.

It is tough to do in tough times because you have to take difficult actions. Having said that, it is not impossible as long as one lays out a vision, communicates with employees and treats them fairly.

We have a lot of human resources policies that are very well thought out by terrifically well-qualified individuals. But to me at the end of the day it is a simple equation: Are you treating people the way you would like to be treated? We've got some trust to regain with our employees because we've lost a lot of that.

There is no more important task that I have than to rebuild that trust because at the end of the day if your people aren't with you, it doesn't matter what plans you have, what your capital spending is, what your new product introduction program is. If your people aren't with you, you have lost the game.

What we have here that can be a huge advantage for us is a work force that loves the Ford Motor Co. We just haven't allowed them to love the Ford Motor Co. in the recent past. We're going to get that turned around.

It's not just another nameless, faceless corporation. It really is different for us. It is different for us than almost any company out there. Also the fact that we are about to be 100 years old. Yet the family is still here. There is a sense of continuity, a sense not only looking backwards in terms of continuity and a wonderful history. But there is a sense going forward that there is going to be somebody in this job who really cares about the long-term future of this place. Come hell or high water, I am going to be here, or my children are going to be here, and that provides a sense of stability.

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