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Old 11-13-2006, 06:51   #1 (permalink)
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US:Mulally tweaks product plan to emphasize fueleconomy, reliability and quality

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Mulally tweaks product plan to emphasize fueleconomy, reliability and quality

By AMY WILSON | AUTOMOTIVE NEWS
AutoWeek

DETROIT -- Six weeks into his full-time stint as Ford Motor Co. CEO, Alan Mulally already has tweaked the automaker's product plan with a focus on improving fuel-efficiency, reliability and quality.

And he's hammering a message to Ford employees shaken by widespread buyout offers and the threat of layoffs: The company will continue to invest in new vehicles.

Ford must overhaul its product plan and manufacturing footprint in order to make money at lower volumes with a model mix that's shifting away from SUVs and pickups, he said.

Mulally acknowledged he has made product changes but didn't provide details in an interview Friday, Nov. 10, with Automotive News.

"It's not like I'm the chief designer after five weeks," said the soft-spoken Kansas native. "But we have come to an agreement that this is where we need to go. We have a lot of opportunity to reduce this complexity" from overlapping platforms and barely related business units such as Ford North America and Ford of Europe.

Mulally is racing to rationalize Ford's product portfolio on global platforms rather than the regional product structure he has inherited.

Higher fuel prices and the growing global demand for oil will shape the Ford showroom of the future.

"We're going to be in this environment for a while," Mulally said. "So clearly, designing and building cars that people really like and that are going to be useful for their lives but also continue to improve (fuel) efficiency is what I think is going to be the most important thing."

Since the former Boeing executive replaced Bill Ford as CEO in September, he has reviewed the product plans for all of Ford's brands and global operations. A high priority for the former aircraft engineer: Make product development more common and efficient globally.

'Nothing but opportunity'

"It's just nothing but opportunity because of the complexity we have and the fact that we have grown up as a regional set of Fords," he said. There's "just a lot of opportunity to leverage talent and the vehicles and the powertrains and the engines across this global Ford."

At Boeing, Mulally was a student of and advocate for the Toyota Production System.

He envisions a Ford with more models made on fewer platforms and fewer assembly lines in plants that are similar across the globe.

"All of a sudden, the utilization goes up, the commonality goes up, productivity goes up, the quality goes up," Mulally said.

But to get there, Ford needs a financing plan that will cover ongoing plant closures and employee buyouts as well as accelerated product development, he said.

That's why Ford is putting together a financing package that, for the first time, will use its automotive assets such as plants and property as security.

Mulally wouldn't say how much Ford is seeking to borrow, and he acknowledged that significant cash burn will continue.

Ford expects to have burned through about $8 billion in cash in 2006, leaving it with about $20 billion at year end. Ford doesn't expect its North American unit to turn a profit until 2009. Ford lost $7.24 billion during the first nine months of 2006.

"You want to make sure you have a robust plan and a reserve, and that's the reason we're going to get some additional secured financing," he said.

Too many dealers

Mulally also said:

Ford needs fewer U.S. dealerships. "By any metric, we have too much distribution system right now, and we have some very unhealthy (dealers)," he said.

He wouldn't say how many retail outlets should be cut or whether Ford should offer bigger financial incentives for dealers to close stores. "We just have to help them, encourage them to consolidate and get back to profitability and get their throughput up," he said. "We just have too many."

Ford must work more collaboratively with suppliers.

"With 70 percent of the dollar value of our automobiles designed and manufactured by our suppliers, there's only one way for all of us to be successful," he said.

"There's only one way to build that quality in, the manufacturability in, the reliability in. We can do that together."

Ford needs changes in the 2007 UAW contract to improve its competitiveness. All issues of the contract from work rules and health care to base wages and pensions must be reviewed, Mulally said.

He also said Ford and the UAW need to talk about whether the Jobs Bank should go away.

The Jobs Bank, a mechanism through which idled workers draw wages, "is not being used the way we all thought it was going to be originally," he said.

Ford will show some suppliers and dealers its "Showroom of the Future" during the week of Dec. 10 in Detroit.

It's a sneak peak at future models and the vision of how those products address customers' changing demands. All Ford, Lincoln and Mercury dealers are being invited, which means thousands could attend the event.
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