March 17, 2014 BARRON’S 49 Other Voices Views from beyond the Barron’s staff n by Jack Falvey The Long Road Back

N 2006, FORD MOTOR WAS HEADED INTO A “The company had been doing business about saving the auto industry. long financial tunnel from which there around the world for almost 100 years, but The federal money did not might be no return. Chairman William was not operating globally,” says George have to be paid back. Ford’s I Ford Jr., his family, and the board of Sharp, Ford’s vice president of investor infor- real loans required real debt directors knew they needed a new direction. mation for Europe. Ford would try to connect service. In effect, Ford was up One of the directors, John Thornton, made an the dots in 23 countries at 77 locations, forc- against Chevy TV commercials overture to Alan Mulally, who had led Boeing ing national divisions to work all of their cars paid for by the Treasury, the back from the abyss. Did he think he could onto nine basic designs, or platforms, down Federal Reserve, and the do the same for Ford? His answer was yes. from 28. The casualties were immense: suckers who had bought GM Bill Ford said, “I have a lot of myself Jaguar, Land Rover, Aston Martin, Volvo, and Chrysler bonds. invested in this company, but not my ego; I Mercury, and thousands of flesh-and-blood Ford eventually was able to just want the company to do well. It’s not employees had to go. overcome adversity the old- about me.” So Mulally got the job. His first This was not simple. The United Auto fashioned way—with better step: a new business plan. Not the kind that Workers union had to be made to understand products. New Fords built comes out of business school; it was closer to that the company was near death. In 2006, worldwide on the nine plat- what comes out of middle school. Ford shared the fact that they were carrying forms in newly efficient facto- 40,000 more workers than were needed to ries began to make an impres- 1) Stop fighting with each other. manufacture their cars. The books were sion on buyers. Some had delightful safety 2) Tell the truth about the situation. opened to the union, and those numbers features, such as voice-activated phones and 3) Agree on one set of numbers. proved that the company was in a classic control functions. 4) Be accountable for your actions. death spiral. Labor costs were holding up What caused this success? Ford, a com- 5) Do less, better. spending on new products; without new prod- pany in which the top executives really knew Alan Mulally, imported ucts, there soon would be no company. their numbers, committed to take a high-risk from the aircraft industry Mulally directed his immediate subordi- The UAW got the message, and 38,000 leap forward with their whole product line. nates, from the chief financial officer to the Ford workers eventually accepted buyouts. They did this knowing full well that their to modernize Ford Motor, general counsel, to attend a weekly business- The reduction in force was so effective that quality ratings would tank until factories and used management principles plan review. They were to bring real numbers Ford could at last make small cars profitably workers climbed the learning curve and for their responsibilities. Few of the top guys in the U.S. The Ford Focus was built at a customers climbed the confidence curve he could have learned in knew them. They had subordinates to do those plant in Wayne, Mich. Its move to Mexico about its products. presentations. That was no longer allowed. was canceled. That process continues. Ford receives middle school to get the In most companies, such accountability— only average-quality ratings from J.D. company through the up close and personal—is rare at high levels, Ford did not do everything right. In the Power & Associates on most of its models. and it almost had never been seen at Ford. It middle of the financial crisis, the company But Dave Sargent, vice president of the financial crisis. now was required every seven days. was deaf to the power of public image. On Global Automotive Group at J.D. Power, Turning around a giant ship full of auto- Nov. 18, 2008, Mulally and other Ford execu- praises Ford for bravery: “They went early, mobiles takes time. Bill Ford and the others tives joined a formation of Gulfstream jets, they went big, and a lot of learning has come had known something was coming, but they flying with GM and Chrysler to Washington from that.” didn’t know exactly when, or how big it would to ask Congress for help. This was reported The middle-school business plan, executed be. Necessity created the timing. Ford just to the American people the next day as in the midst of a major global economic beat the global credit crash of 2008. Detroit-style arrogance. They should have downturn, seems to be working. Ford did In 2006, Ford borrowed a boatload of gone Southwest. less, and did it better.  cash. Citigroup, JPMorgan, and Goldman The car czar Steven Rattner delivered a Sachs were the leads in a $23.6 billion revolv- grim message to the executives of the three Jack Falvey is a fellow of the New Hampshire ing credit loan, collateralized with everything companies: All expenditures over $100 million Institute of Politics at Saint Anselm College, in Ford owned—including its trademark blue would require his approval. Only Ford, with Manchester, N.H., where he produces a daily oval, which could be sold to a foreign auto Mulally’s huge cash hoard, could afford to e-mail program called Investor Education maker if Ford went under. pull back. The others were too far gone. Briefs. He is also a member of the adjunct fac- The stock price was at $8.24 when Mulally Unfairly, the other two companies came ulties at Boston College and the University of arrived in 2006. It would fall as low as $1.85 back the easy way. All debts of Ford’s rivals Massachusetts, Boston. He writes from London- in January 2009 in the depth of the recession. were erased in quickie bankruptcies, and the derry, N.H., and he drives a 2013 Ford Explorer. By then, there was no more money at any government donated $60 billion of taxpayer price for car companies or almost anyone else money to them and to the UAW. OTHER VOICES essays should be about 1,000 to borrow, as GM and Chrysler found out. Never mind all the Washington rhetoric words, and e-mailed to [email protected]. d nesnGtyImages Andersen/Getty Odd