Mulally vows to 'follow the processes' to avoid more launch recalls
Photo credit: Joe Wilssens
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Editor's note: An earlier version of this story gave the wrong dollar amount for Ford's 2006 loan.
DETROIT -- Ford Motor Co. needs to stick to its processes and learn from its mistakes as its volumes increase if it wants to avoid further recalls similar to the four that plagued the launch of the 2013 Ford Escape, CEO Alan Mulally told reporters following a speech at the Automotive News World Congress.
As production has sped up to keep pace with three straight years of U.S. sales increases, "the thing we learned is we've got to follow the processes," he said today.
One of the Escape recalls resulted from a software glitch that caused engine overheating. Ford learned there were a couple of software modes that needed to be added to testing procedures, he said.
"We'll fix the process," he said. "All those are lessons learned in continuous quality improvement."
Lessons from Boeing
In a free-wheeling, spontaneous and occasionally humorous presentation to the Congress, Mulally recounted the well-known story of how he brought processes and accountability to Ford when he arrived from Boeing Corp. in 2006.
Mulally referred to Ford's "gut wrenching restructuring" and got a laugh when he said: "We borrowed a small home-improvement loan of $23.5 billion dollars. Then we had to take down production to match real demand."
"The second part was we really accelerated development of the vehicles you're seeing from Ford today. We borrowed a little extra money for that. We were able to go through this recession and not access precious taxpayer money."
Asked how he got all of Ford's employees to dedicate themselves to his global One Ford plan, Mulally joked, "with my sparkling personality."
Achieving a loss
"I remember the first estimate of profits I saw at September 2006 was a $17 billion loss and we achieved it," he said with a laugh. "That was an incredible accomplishment. We all knew this was not sustainable. You can't lose $17 billion a year and stay in business that long."
More seriously, Ford executives learned to admit mistakes once they realized there would be no culture of blame, but rather one of cooperation in fixing things.
The new, process-driven culture has led Ford back to profits.
"Financially, we're back to profitability. We have terrific margins appropriate for the business. We have repaid all the $23 billion. We have now returned to investment grade," Mulally said.
"We are now competing with the best companies in the world operating in the United States," he said.
Hiring again
Before the recession, Ford was shipping more and more jobs overseas because it couldn't profitably build vehicles in its home market. Now it's a new day, he said. "We can also make smaller and medium-size vehicles in the United States and make them profitably," Mulally said.
Last Friday, Ford said it plans to hire 2,200 salaried workers this year in the United States as it continues to beef up payrolls to handle rising sales and production in North America.
The hiring surge is the largest increase in salaried workers in more than a decade, the company said.
Ford declined to disclose its current U.S. salaried headcount, but said it ended 2012 with 28,000 white-collar employees in North America, with most of them in the United States.
Ford's North American salaried payrolls hit a recent low of 25,000 workers in 2009.
You can reach Bradford Wernle at bwernle@crain.com.
