Alan Mulally wears his heart on his sleeve. Well, sort of. He does wear the word "Ford" embroidered on the cuff of his white dress shirts.
"My dream is you'll walk away and believe I'm about accelerating Henry Ford's original position," Mulally says.
Since taking over as CEO in 2006, Mulally, 65, has been steering the automaker's turnaround. Ford Motor Co. has reduced its debt by $10.8 billion this year and has reported six consecutive quarters of profits despite a U.S. economy that's still recovering.
Staff Reporter Jamie LaReau, News Editor Charles Child and Publisher Peter Brown spoke with Mulally at his office in Dearborn, Mich., about what's next for Ford as it closes Mercury and looks to rebuild Lincoln.
If U.S. production growth continues, will we see an increase in Ford's North American production?
Yes. Clearly, based on the strength of the market coming back and our increasing market share, you just multiply one times the other and we'll be increasing the production. But we haven't given guidance out on how much for next year.
How will you compete in Europe if competitors keep producing too much and charging too little?
They have overcapacity, and they didn't move as aggressively as the United States. Over time, economics will dominate. We've seen some of our competitors with unsustainable practices on discounting. You just can't do that because you can't stay in business. So as we go forward, I am confident the economics will take over -- the fact that you have to run as a business as you said, which is exactly what's happening in the United States.
You have a good Fiesta, soon to have a new Focus, and gasoline is still $2.85 a gallon. Are you flexible enough to make what people want to buy, independent of gasoline prices?
Oh, absolutely. Remember, our plan is a full family of vehicles. In the United States, because we were not competitive on the cost side, we chose not to invest very much in smaller vehicles, and we focused on bigger SUVs and pickups. It wasn't because there wasn't a market. It just happened that the Japanese were in that market. Well, with our transformation, our new agreement with the UAW and our new cost structure, we can make money on cars in the United States.
Let's talk about plans to rebuild Lincoln. A lot of dealers say they want to see this new lineup before committing millions of dollars to store renovations. What are they telling you?
They are excited at the fact that Ford has chosen now to revitalize Lincoln as a luxury brand. This is again a continuation of the Ford plan because the Lincoln plan includes three pieces: You've got to have dynamite luxury vehicles, and we know how to do that; you need a distribution system where you have the Lincoln stores in the right places, where the luxury customers are in the United States; and the Lincoln stores that choose to go with us on this need to take the consumer experience to a whole new level to support the luxury customers.
We're going to do it collaboratively with them, and we're going to create a great brand again out of Lincoln.
What about those dealers who don't agree to renovations, but they don't want to give up the franchise. What can you do to enforce it?
We can't force any dealer to do anything, but we can sure show them where we're going, where the market is and what the requirements are for them to participate. These are businesspeople. Their stores need to be in the right location, their commitment to the consumer experience needs to be right if they're going to be successful, and also they're going to choose to believe or not that we're going to make the cars they really do need. The neat thing is we have a track record with Ford.
How close are you on right-sizing the Ford dealership network? That's been a work in progress for a dozen years.
We're getting pretty close. We still have a few too many dealers in some of the big metropolitan areas, but we've made great progress, and we're getting really close.
Do you envision unique Lincoln vehicle platforms?
They'll be completely differentiated vehicles. This is a commitment to a completely differentiated Lincoln lineup, not a warmed-over, rebadged Ford Escape.
You're so committed to Ford that the Ford vehicles like the Taurus keep getting better and squeezing out any midrange between the luxuries.
And that's why Mercury is gone. Now, if we're going to compete in the luxury space, we're going to compete with the best in the world through Lincoln. And there's no reason technically we can't do it.
Can you give specifics as to what you want the Lincoln dealerships to offer that they're not offering now?
No, because we're just doing that with dealers now.
Do you have a vision for who the Lincoln competitor is? Is it BMW? Is it Lexus? Is it Cadillac?
The first ones, yes.
You're not equal to your main global competitors in China. What's your plan to exploit the tremendous growth of that market?
It is to accelerate the production of all of our full family of vehicles in China. Their market is growing so fast that if you have the products and services people really do want, it's not a win/lose situation because the market is growing so much.
To grow along with that market, are you going to need more partners?
We've got great partners and a long-term relationship where we've been doing well, so we're just going to expand that business together.
J.D. Power said there's too much hype surrounding electric vehicles. What's Ford's view on electrics?
We'll see more and more electrification of the vehicles. We'll see even more improvements in the internal combustion engine. We'll see more hybrids like we're seeing today; then we'll see more all-electric. Clearly, the pace is going to depend on the improvement of the enabling technology, especially the batteries and the development of the infrastructure, because they're just not economical right now.
Does Ford need a plug-in hybrid?
The progression for us right now is hybrids and then all-electric. Plug-ins are another option, but it's not that big a deal.
How much of the capital expenditure are you putting toward electrification?
We don't share the distribution of our investment in research and development. We're continuing to invest in alternate fuels and biomass fuels. We have a pretty robust enabling-technology road map.
Changing directions, does the United States need a manufacturing policy? Other countries have one, and ours seems to be whatever happens, happens.
The president asked me to be on his Export Council. They asked me to chair that, which I'm honored to do in order to look at the policies associated with manufacturing, what we can do, and also with energy linked to economic development expansion.
Does the General Motors initial public offering have any ramifications for what might happen to your stock over time?
I really like the Ford plan. We are profitably growing the company. The most important thing any investor wants to see is a proven track record of profitably growing the company based on a strong business plan.
Does it irk you that because of GM's cleansed balance sheet, they are rated higher by some of the investment raters?
We've honored all of our stakeholders, all our bondholders, all of the people that own Ford stock, because we are profitably growing now and generating free cash flow. We are accelerating the improvement of our balance sheet on our way back to investment grade.
How long do you think it will take to be investment-grade based on what they want to see?
We haven't given guidance out because all of that depends on how you use your cash over the near term and how the economy comes back.
Are you still enjoying your job? Do you have any thoughts on exiting or backing off?
I thought you were going to use the "retirement" word. I absolutely love serving Ford, and I have no plans to retire from Ford. Having said that, I serve at the board's pleasure.
Do you have a succession plan?
One of the most important things any board is responsible for is a succession plan, especially for the CEO but also throughout all of the senior team. We have a very comprehensive succession plan.