From red ink to glory: The '80s story
And it all happened so quickly. After setting a U.S. sales record in 1978, Ford saw its volume plunge more than 45 percent in the next three years. Its market share dropped from 25.5 percent to 19.7 percent in the same span. The red ink came in a flood: $1.5 billion in 1980, another $1 billion in 1981, and $658 million the next year.
Dealers were going broke. Nine parts and assembly plants had to be shuttered, including the massive Mahwah, N.J., complex with its 3,700 workers. For the first time, Ford cancelled its quarterly dividend.
Ford had no intelligible future product plan. In showrooms, the colossal Thunderbird was ridiculed by Ford's own people, and a leading industry analyst called it the worst car in America. Court trials over the Ford Pinto's fiery gasoline tanks commanded headlines. Fords, Lincolns and Mercurys piled up on dealers' lots, while Americans hungry for quality and fuel economy lined up for Japanese imports before the cars left the ship.
Much of the old guard was gone. Lee Iacocca, a colorful hero of the 1960s, had been booted in 1978. Edward Lundy, a reclusive CFO and longtime financial pillar, retired in 1979. Henry Ford II called it quits in 1980.
Meanwhile, Iacocca was luring his old Ford friends to join him at Chrysler Corp. Young managers left Ford for the promise of Nissan and Toyota and other Japanese importers. So, too, did some veterans. One of them, Marvin Runyon, waved good-bye after more than 35 years at Ford assembly plants. He then moved to Tennessee to become Nissan's first U.S. manufacturing chief.
All this came against a backdrop of recession, soaring gasoline prices and sky-high interest rates.
"It was tough,'' says Gordon MacKenzie, a genial Kalamazoo, Mich., native who was handed the reins of Lincoln-Mercury in June 1980, at the age of 58. "There were some people singing hymns over the division.''
They were not songs of hope. MacKenzie took over as Lincoln was nose-diving its way to a two-year, 63 percent drop in sales.
The story goes that one day, in the privacy of a Glass House elevator, Henry Ford II apologized to successor Philip Caldwell for all of the problems that were left to him.
But Caldwell should have been thankful. Had so much not soured so quickly, Caldwell and his new team might never have gone to such extremes to fix the company. Those measures did more than save Ford; they paved the way for a stunning streak of success later in the decade.
European profits and flair
European profits kept Ford afloat during those dark days of the early 1980s. But Europe played another, more profound, role. Many American executives had been posted there in the 1970s. The European experience heightened their awareness of driving dynamics - refined power, crisp steering, taut suspensions - and sculpted designs with wheels pushed to the edges of the car.
They would bring a German flair to the car that embodied Ford's comeback, the Taurus. (See story on Page 242.) Caldwell, a former head of Ford of Europe, bet the company when he got the $3 billion Taurus/Sable program approved in 1980. And he handed the development to two key players - project leader Lew Veraldi and designer Jack Telnack - who had worked together in Europe on the successful Fiesta.
Their careers had taught them to keep their creativity in check. Bold ideas rarely survived the frowns of Ford bosses. But on the Taurus, it was the bosses who often did the prodding. Caldwell urged Veraldi to create a car that delivered what people weren't getting in their cars. Caldwell pushed Telnack to stretch with his design.
It would prove to be a long wait for the Taurus and Sable to debut, in late 1985. Other changes came more quickly.
From the start, Caldwell made quality his No. 1 objective. That was a risky move; it's much easier to preach quality than it is to deliver it, and Caldwell couldn't afford any false promises. But Ford backed the crusade with more than lip service.
In 1980, the company was desperate to bring the fuel-efficient Escort to the market quickly. But Ford bosses delayed production until quality bugs could be worked out. A year later, the Mahwah plant had a better cost record than some other Ford plants. It logically would have been spared by North American chief Red Poling, a notorious cost cutter. But Mahwah's quality record doomed the plant.
The cultural transformation went deeper than that. President Donald Petersen became a disciple of W. Edwards Deming, the American quality guru who had been shunned by corporate America and revered by the Japanese.
The language of Ford suddenly was peppered with strange new initials and phrases. Manufacturing efforts became governed by SPCs - statistical process controls. The "concept to customer" philosophy meant cars no longer would be designed to meet the needs of the company. In the "best in class" system, Ford engineers broke a vehicle down into pieces, analyzed competitors' parts and developed their own to be better.
The Mission Values and Guiding Principles (MVGP), adopted in 1983, were distributed on thousands of laminated cards and defined what the 80-year-old company was all about. ("Our people are the source of our strength." "As our products are viewed, so are we viewed." "Quality comes first.")
There would be other firsts from this era. The Q1 program forced suppliers to meet minimum quality standards. Ford began initiatives to promote minority suppliers. In 1982, Ford struck its first profit-sharing deal with the UAW.
Some of the programs would endure. Others would quietly fade. But their collective impact was to say the company knew what it was, where it was going and how it would get there.
A defining moment
MacKenzie recalls a defining moment in one of Caldwell's quarterly meetings with Ford's worldwide management team. The chairman flashed a slide showing that nasty line of red ink.
"Well, gentlemen," MacKenzie recalls Caldwell saying, "You're looking at the same numbers I'm looking at. And the only ones who can fix it are in this room. So let's get going."
The point, says MacKenzie, was this: "We had to pull out of this thing, but we had to do it together.''
Fix it they did. From the depths of 1982 came record profits in 1983 and 1984. Things got better still. The Taurus and Sable were huge successes. They led to a winning streak marked by more earnings records, including a landmark $3.3 billion in 1986. With that, Ford outearned General Motors for the first time since 1924.
The ride wouldn't last forever. Quality would slip. Heroes would be tarnished. Egos would rise and mock Ford's once-celebrated team spirit. But for one breathtaking stretch, Ford reached a state of glory that could scarcely have been imagined in the darkness of the early 1980s.