Ford CEO: Recovery is slow but 'on right track'

[September 24, 2011]  NEW YORK (AP) -- At his first press conference as CEO of Ford, Alan Mulally was asked how he could run such a complex company with no experience in the car business.

The former Boeing executive responded that cars, which have around 10,000 parts, are indeed very sophisticated. Then he smiled and noted that a jumbo jet has 4 million parts -- and it flies.

If there were doubters when Mulally joined Ford in 2006, there aren't many now. The year he took over, the company lost $17 billion. Last year, it made $6.6 billion, its biggest profit in 11 years. Within weeks of arriving, Mulally took out a huge loan and began pushing through a restructuring that continued even as the recession sent rivals General Motors and Chrysler into bankruptcy protection.

Behind his sunny demeanor and fuzzy red sweater vests, the 66-year-old Kansan had the steel to rein in the bureaucracy and infighting at Ford. He promoted managers who could work together and fired those who couldn't. He shed money-losing brands like Jaguar, Volvo and Mercury. He closed six U.S. plants, cut thousands of jobs and saved billions in engineering costs by reducing the number of models Ford builds. Instead of making regional versions of a Focus, for example, Ford now designs one version for the world.

Mulally still faces big challenges. Ford is struggling to overhaul Lincoln, which was the nation's top-selling luxury brand a decade ago but fell victim to underfunding and more stylish rivals. Its sales in China, the world's biggest car market, are about one-sixth of GM's. And slow growth in the U.S. is hindering a comeback in car sales.

Mulally spoke with The Associated Press about the economy, the car industry and his management style. Excerpts appear below, edited for length and clarity.

Q: What are your biggest worries about the economy?

A: We're generally on the right track, but it is going to be a slower recovery than we've ever had before. The private sector leading us out of this recession is the most important thing.

Q: President Obama called you when he was on Martha's Vineyard. Did he ask for advice on the economy?

A: What he wanted to know, because we interact with so many customers, (was) how consumers (are) feeling about everything. They're looking for both near-term action on jobs and the economy, but they're also looking for longer-term solutions on our debt, on our budget deficits, our trade imbalances. They're looking for more clarity on where the United States is going, so that they can plan their near-term actions against the long term.

Q: Why aren't companies using their cash stockpiles to hire more?

A: The consumer has pulled back. We're ready with the products and services that people really do want, but we're going to match our production of goods and services, cars and trucks, to what the real demand is. We're very disciplined about that. The worst thing you could do is make more than what the market wants, which our industry has done sometimes in the past. The demand is still very, very low.

Q: Is it a permanent trend that people want more fuel-efficient cars?

A: I sure think so. Most of us in the United States and around the world know that we are going to pay more for energy going forward. There will be ups and downs but, in general, it is more expensive to find oil and bring it to market than ever before. So fuel efficiency has just continued to move as the number one consideration. It doesn't make any difference whether it's a new Ford Fiesta or an F-150 (pickup truck), the customers want the most fuel-efficient vehicle.

Q: Take us through how, inside your company, that changes things.

A: If you look at Ford historically in the United States, we were about 70 percent trucks and bigger SUVs and made 30 percent cars. Around the world, the percentage is the opposite way. But in the United States, we are moving to a tremendously balanced portfolio of small, medium and large vehicles. Over the next few years, we'll be at the place where nearly 60 percent of our vehicles are small- or medium-sized cars, and about 40 percent will be the larger SUVs and trucks. It really is a tremendous transformation of Ford.

Q: How do you make (transformation) happen?

A: Every Thursday, we're all linked up on the Internet and in two and a half hours, we go through about 320 charts. All the charts have the areas that need special attention. We review the entire operation. You can't fool anybody. Do you have a compelling vision? Do you have a comprehensive strategy to deliver that vision? And are we going to work together to relentlessly implement that? When you do that, it's like everybody is involved. We have a laser focus now. Every vehicle had to be best in class, quality, fuel efficiency, safety. That is benchmarked against the competition. Everybody knows everything.

Q: Some Ford workers are upset about your compensation. (Mulally made $26.5 million in salary, stock options, bonus and other compensation last year). What would you say to an hourly worker who asks why your pay is fair when a new hire makes less than $30,000 a year?

A: My compensation is entirely tied to the success of Ford. The vast majority of my compensation is at risk, because the numbers that you see are only realizable if we profitably grow the corporation. And that's the way it should be. I believe in it so much that most of the management team and most of the salary team -- and also our wonderful employees that are represented by the UAW -- have had profit-sharing plans. We're continuing to talk together about how to align all of our compensation even more. Because the most important thing for everybody is that they get a chance to participate in the profitable growth that we deliver.

Q: Would you say there's a problem in this country because of the gap between what the richest make and what the middle class is earning?

A: I really believe in capitalism and I think it has served the United States fantastically. It's so important that we just take stock about what is right about America. We're going through a rough patch. We're fixing some issues associated with a couple of really big bubbles that we all created, starting with all of us living beyond our means. We're straightening that out right now. It's going to take a little while but we can do it. But what's really right is the economic model and capitalism and us holding ourselves accountable for making products and services that people really do want. And the market gets to decide who's successful, right?

Q: (Tell us) more about you personally and also you in the workplace, your management style.

A: I have always wanted to contribute to something that was meaningful and that helped people. I found my dream at Boeing. I love airplanes and I love design. I also felt like what I was really doing was providing safe and efficient transportation and helping people get together around the world. I don't have to be the smartest or the brightest. I love working with a lot of talented people to do something that you can't do just by yourself.

How do you bring everybody together around doing something? You need a compelling vision, a clear strategy (and) relentless implementation. I just love seeing people get a chance to perform and do something in a meaningful way. I think everybody needs to be included. I've found that when everybody knows what the plan is and they know what the status is, and everybody is helping each other, magic things happen.

Q: Tell us about some of the people you've learned from.

A: So many people I've learned so much from, starting with my mother, (who taught me to) contribute to something important, treat others the way you want to be treated and that the purpose of life is to love and be loved, in that order.

[Associated Press; By DEE-ANN DURBIN and TOM KRISHER]

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