USA:New Mustang tested Bill Ford's mettle as the CEO
New Mustang tested Bill Ford's mettle as the CEO
Carmaker to report 2Q earnings today
BY JOHN LIPPERT and BILL KOENIG
Bill Ford faced a truckload of challenges when he became CEO of Ford Motor Co. in 2001, and among the most treacherous was the introduction of the redesigned Mustang sports car. It was a high-profile project, one that could help restore the automaker to prominence -- or, if it failed, upset Ford's plan to invigorate a company that was losing U.S. market share to competitors such as Toyota Motor Corp.
"If you mess up a product like the Mustang, you could ruin the entire Ford Motor Co. brand," says Barb Samardzich, 45, the company's executive director of Mustang development.
That was the prospect Bill Ford confronted. The project was six months behind schedule and hundreds of dollars per vehicle over budget, and the engineers were asking him to invest another $1 billion. He said no at first, and then decided to go ahead using cheaper parts and fast-paced development methods from Mazda Motor Corp., which Ford has controlled since 1996.
The plan worked, and the Dearborn-based automaker will start selling the new Mustang in October. The company will also introduce two sedans and a sport-utility vehicle built with Mazda's engineering methods and designs imported from Volvo AB's car unit, which the company bought in 1999.
Ford, 47, says that outcome marks a turning point in the carmaker's road back to financial health -- and in his own learning curve as manager of his family's enterprise.
"The Mustang was a good test for me in terms of my own resolve," he says. "If we didn't get a sense of discipline into our product development system, we were going to die."
The overseas designs that Bill Ford is importing into North America represent his best chance to trim manufacturing costs that average 10 percent to 20 percent more than those at competitors such as Toyota, says Phil Martens, 44, Ford's group vice president of product creation. These bloated costs are a crippling burden at a time when Toyota is clearing land in San Antonio for a pickup truck factory aimed directly at the F-150, which accounts for about half of Ford's profits.
The second-largest U.S. automaker earned $1.95 billion during the first quarter, up from $896 million a year ago, as its redesigned F-150 helped increase revenue 9.5 percent to $44.7 billion. Company officials say second-quarter operating profit may almost double from a year ago, to 45 cents to 50 cents a share or about $984 million, based on 1.8 billion shares in April. Ford is expected to report its second-quarter earnings this morning.
David Dreman, chairman of Dreman Value Management LLC, owner of 3.5 million Ford shares, says investors are still waiting to see if the company can boost profit on more than just pickup trucks.
Intensifying competition means the company's Ford, Lincoln and Mercury brands might capture only 15.5 percent of U.S. sales by 2009, down from 18.8 percent this year and 24.1 percent in 2000, says Michael Robinet, an analyst at CSM Worldwide Inc. in Farmington Hills.
At least one of Ford's competitors says the family scion isn't the right man to take on the job of turning around the company. "Ford is drifting," says Yukitoshi Funo, head of Toyota's U.S. sales arm. "There is no direction."
He hasn't shown the bold leadership that Ford has needed to weather recurrent crises in its history, Funo says.
After oil prices soared in 1979, for example, then-chairman Philip Caldwell saved Ford by cutting its U.S. workforce in half.
"Judge me by the results," Ford says. "We've had a lot of big personalities around here, some of whom delivered and some of whom haven't."
Ford and his family own 99 percent of the company's Class B shares, through which they control 40 percent of shareholder votes.
He arrived as CEO in 2001, just before the company reported a $5.45-billion loss and announced plans to close five plants in North America. "The scared-shitless days were that first year," Ford says, adding that he started to relax after his factories started building the new F-150 on time last year.
He says he enjoys himself now, especially when he can blend into crowds at auto shows to gauge customer reaction to new cars like the Mustang. "All I need to do is look in the mirror from time to time and say, `Do I think we're on the right path?' " Ford says.
The crisis Ford inherited dates back to 1997, when the company earned a record $6.92 billion, says James Womack, president of the Lean Enterprise Institute in Brookline, Mass. Jacques Nasser, then president of Ford's automotive operations, called in the spring of 1997 to ask how he could adopt Toyota's production methods in four years, Womack says.
Nasser set up five separate North American product development teams that acted as autonomous businesses, Martens says.
Nasser allowed the units to develop customized components to increase their appeal to target customers. By 1998, he was using three different platforms, or clusters of sheet metal and chassis components, for his full-size pickups and sport utilities. GM needed one platform.
Nasser intended to pass on the cost of this variation to customers, an approach that may have worked in a growing market like China, Martens says.
His approach began to fall apart in 1997, when, for the first time in 26 years, prices for new vehicles fell, according to the U.S. Bureau of Labor Statistics. Vehicle prices are 7.4 percent lower today than in 1997. They were driven down by 0-percent loans and other discounts that GM announced eight days after 9/11.
My first car was a 67 Mustang Coupe, 2nd one was a 67 Cougar XR-7, 3rd one was a 66 Mustang Coupe. Why did I get rid of these cars for ? I know why, because I'm stupid, stupid, stupid.
My next Ford.....