Jim Padilla, 55, is charged with turning around Ford Motor Co.'s struggling North American operations.
To recover from $5.45 billion in losses last year, Ford has to fix quality, launch vehicles on time, update its product lineup and repair its relationships with employees, dealers and suppliers in its core market. Padilla, as group vice president for Ford North America, began leading the North American turnaround on Oct. 30. Last month, Lincoln and Mercury operations moved to his command.
Padilla was interviewed last month in Dearborn, Mich., by News Editor Charles Child and Staff Reporter Mary Connelly.
Your critics would say you failed to engineer the costs out of the redesigned Ford Expedition and Lincoln Navigator. What is your approach to upcoming vehicles such as the Ford F-150?
We are about 100 days into the revitalization plan. There were several facets of the revitalization plan. They went at many different areas. As I look at where we are and where we are heading, I start with saying that one of our highest priorities was quality improvement.
When I look at where we are at 100 days, I would say we are in pretty good shape in terms of the improvements we have made. We have made a lot of progress.
I also take a look at product creation, launching product on time with good quality. Look at what we have accomplished this year. The (Lincoln) Town Car is out there, launched on time. The (Mercury) Grand Marquis and (Ford) Crown Victoria launched on time with good outcomes. We had significant upgrades to the (Ford) Explorer and (Mercury) Mountaineer, particularly safety elements, a lot of changes in that, on time. We're on time with the (Ford) Expedition and (Lincoln) Navigator.
That is a very important facet, getting the product out there.
The other thing we are working hard on is the revenue equation, including share and getting money out of the market. Our share has been a little disappointing this year. We have plans to address that. Part of that was affected by the nature of the fleet business right now.
Fleet is way down, and it is a big chunk of our business. We also lacked a strong Expedition because we didn't have the volume. So we are seeing some good opportunity as the year progresses with more product out there.
We also started the year short on stock. Our stocks now are in a very good position and that should aid us in terms of our share drive. We have been able to get some revenue out of the market. We have made some progress there. We've got a lot more to do.
Other aspects of the overall revitalization deal heavily with the cost side of the business. We said upfront the cost side of the business is going to take us some time to get in gear.
We do have 300 engineers working right now, feverishly. They have generated about 5,000 ideas.
Worth how much?
Worth quite a bit. It's how you load it and do it over time. We have aggressive targets. Some of the ideas can be worth a buck or two. Some of the ideas can be worth $100.
Per affected vehicle. We've got teams focused and working hard on that. Of the 5,000 ideas, 1,000 are moving forward very rapidly. Another thousand are being loaded into the implementation cycle. You don't just instantaneously say, "Go and do that." You've got to prove it out and make sure it meets our engineering standards. And if there is tooling, that takes time to get in.
How much will you net this year from that program?
I can't say how much. Every week the number of ideas and projections expands tremendously. It will be several hundred million dollars.
There was an attempt to move a lot of the vehicles upmarket in the 1990s.
But it is a different world at Ford now. You are saying it is almost too late for the F-150?
I didn't say it was too late. I said we are going to do the things that make sense.
We will re-examine every facet of the vehicle.
But a lot of the contracts already have been awarded.
But the content we can take a look at. There will be some things that we can do, and we will make progress on it.
In the past, Ford has paid for assembly tooling in some cases. You now are asking suppliers to pay these costs. You are using supplier-owned tooling.
Carlos Mazzorin (group vice president of global purchasing) has had regular meetings with suppliers. They have concerns about things like that. We are re-evaluating many of those policies. We are working closely with the suppliers to make sure we get the best business equation.
By and large, we haven't had extensive supplier-owned tooling in North America. As we look forward to future programs our policy in that regard is changing. Sometimes you can get to false economies on these things. Who can borrow money cheaply? Do we have more leverage than the supplier? Every case will be somewhat uniquely different. I think we are coming back to being a lot closer to where the suppliers are in that regard.
What is the reason behind (Vice President for North American Marketing) Kathleen Ligocki's role? What does she bring that the company didn't have before?
Kathleen ran Mexico and did a terrific job. She has a strong strategic focus. She doesn't pretend to be the world's greatest marketer. She is very astute and strategically oriented. But she knows how to get out there and get things done. In Mexico, she did a great job building relationships. She turned Mexico into a very profitable proposition for us. She has been overseeing Mexico and Canada for us. I think it is a logical step. Kathleen will bring a lot of focus and assist Jim O'Connor on the marketing side of the equation while continuing to work on Canada and Mexico.
Does Ford's warranty cost per vehicle exceed the industry average?
I don't know what the industry average is. All I know is I see an opportunity there.
Are your warranty costs per vehicle coming down?
Over time, yes. It doesn't happen overnight.
There are several aspects when you talk about warranty. There are coverages such as three years/36,000 miles. There is what we call after-warranty assistance.
There are things related to service notifications and campaigns. Our coverages have been pretty stable. We are tending to see those come down. With all of the lemon laws and things like that everybody is being affected by some of these after-warranty assistance programs and campaigns.
(Former Ford Motor CEO) Jacques Nasser said that in 2000 recalls and late launches cost the company $1 billion. Was it a comparable figure in 2001?
I don't know. I can tell you that total service notifications and total warranty (in 2001) versus 2000 were down something like 35 percent. And we're making progress in 2002 versus the 2001 calendar year. We view that as a good opportunity.
Is there a dollar figure in savings?
I know where we want to go.
What per-vehicle figure are you aiming for?
I am not going to talk to you about it. Do I have one in mind? You are darn right I do. We are going to make substantial progress on that, and that is an implementation program. I am seeing that already on the present product.
That is also part of taking out $700 in costs per vehicle by mid-decade?
Of course it is.
There was a sense when the Premier Automotive Group was created that a lot of attention and money was going toward Premier Automotive to the detriment of the Ford blue oval in North America. Have you changed your capital spending or your product allocation resources as a result of bringing Lincoln Mercury back into North America?
We have maintained capital investment somewhere in the range of 4 percent to 5 percent of revenue. At times those things ebb and flow.
One of the principal things we need to do is have a cadence to the product delivery. Feast or famine doesn't work very well.
A good source said Wolfgang Reitzle (former group vice president of the Premier Automotive Group) left the company because of the budget cuts and because he didn't feel that he was getting the resources he needed to provide the proper luxury products.
I don't believe that. First off, Wolfgang Reitzle is a very smart businessman. Money alone won't take care of some of the things you've got to do. You've got to have adequate resources to get the product. But your product has to be sized so you can make some money. Wolfgang participated in those business discussions. As we looked at our product programs and our budget allocations, he pretty much was in line with what we had to do.
How are you approaching your job in North America?
One of the things I spent a tremendous amount of time on is the relationship issue. To me it is very, very important. This business is all about products and people. And you aren't going to get the products unless you get the people.
I am spending a lot of time meeting with an incredible number of employees. I have done about 37 town halls. I have met with over 16,000 people. My message is: We are going to improve quality. We are going to get great cars and trucks out there. We are going to get competitive costs and revenue, and we are going to build relationships. c
One of the things I like to focus on is that nobody around here should be wandering around wondering what Bill Ford thinks or Jim Padilla thinks. You work on this framework, and we will be with you all the way. We are working hard to simplify what we are doing, our processes in particular, to stabilize the environment. There has been too much churning.
We are going to standardize a lot of what we do. We made great progress with standardization in the Ford production system. We are going to do a much better job of standardizing the Ford product development system.
We are going to stabilize and standardize. We are going to set a cadence about everything we do, particularly in product development. Then we are going to sustain that.
We are spending a lot of time not only looking at what we are doing but how we are doing it. Then making sure our people understand where we are heading in all of this. The back-to-basics theme has got tremendous response.
What is an example of standardizing?
In terms of standardization, there is a way to get things done and a process you can follow on a consistent basis, and you don't have to reinvent that every time. In a factory, you see that in terms of defining a standard work element for an operator on the line. And having that work element be done consistently not only by that individual but by the person on the night shift or any individual who comes in there. We will work on that same type of standardization on the product development side.
You expect the upcoming J.D. Power and Associates quality measurements to show improvement?
Pretty substantial. More to do, but we are on the right path.