Ford Motor Company: Another Turnaround?

     In The Nostalgia of Closed Stores, I gave a two paragraph summary of the general business challenge:

Business is business. It is cut and dry. Provide products and services that customers want, sell these same products at a high volume at a price higher than the cost of goods and production, and, voila, the business is profitable and can thrive and grow. Don’t do this and the opposite happens, the business loses money and will eventually have to cease operations, call it quits. 

Jim Hackett and Bill Ford

This is not a one-time deal. Businesses have to do this continually. To make it even more challenging, competitors would love to steal market share and act aggressively to do just that. Markets and the preferences of customers are always changing. So, businesses need to be aware of all this and adapt and innovate their product and service offerings to remain competitive and relevant to their customers. As a result, some businesses expand and grow while others shrink and even go out of business.

     Nowhere in that Business 101 synopsis did I ever say this was an easy thing to do. It is not easy. But, on the other hand, it is not impossible. It is not easy to do in rapidly changing retail marketplace, nor is it easy in the global automobile markets. These are both tough businesses where technology innovations and customer preferences are intertwined, complicated, and make for a changing landscape in which retail and auto businesses need to operate.
     There was a lengthy article in the August 15th Wall Street Journal on Ford’s new CEO Jim Hackett, Ford Chief’s First Task: Explaining His Vision. The header of the article states “Hired to fix the auto maker, he has confused executives and investors.” Jim Hackett was brought to turn around the storied car maker. This storied car maker is where my grandfather Levon Merian labored in the Rouge Foundry for most of his working years.  It was my first big-boy, grown-up job. Consistent with the Detroit, Motor City culture of 1976 when I started, I fully anticipated working there for 25 to 30 years and retire with a pension… which of course did not happen.
     Ford is the storied auto manufacturer started by Henry Ford who innovated the moving assembly line. It grew wildly with the famed Model T and other great products such as the Falcon, the Galaxy 500, the F-150 light truck, the Mustang, the Escort, the Taurus, and the Explorer to name a few. Of course, Ford has had its share of missteps such as the infamous Edsel and Pinto. In the 1930s and 40s, they treated their employees brutally. In the same time period, they almost went under because their financial systems never really kept up with the growth of the company. Like the other Detroit automakers, Ford was blindsided by the rising oil prices in the 1970s and the invasion of cheaper, higher quality, more reliable, and more efficient cars coming from Japan. To make that storm perfect, Ford, GM, and Chrysler were stuck in their ways, bloated with layers of management, and rarely sought out the needs and wants of their customers.
     Yet, they weathered the storms. Ford made Quality Job 1 in the 80s which culminated with the brilliantly designed and eminently successful Ford Taurus: a car that was designed incorporating the Voice of the Customer into every detail. I would argue that the CEOs from 1979 – 1993, Bill Caldwell, Don Petersen, and Red Poling, raised the company to a new level of performance and culture that would sustain them moving into the future. But, then came Trotman, Nasser, and Ford (Henry’s great-grandson) who were not able to navigate the ship as deftly as their predecessors. Bill Ford knew he needed more help and hired Alan Mulally from Boeing to replace him as CEO. He turned the company around, weathering the Great Recession without taking any government assistance as both GM and Chrysler had to.
     Here is a quote on Toyota from Alan Mulally from circa 2006 (American Icon, page 130) which I also used in a 2015 blog piece Answering Debbie: Why I am Driving a Toyota:

They make products that people want, and they do it with less resources and less time than anybody in the world. They're a magical machine. This system of continually improving the quality, putting the variations into the product line that people want and doing it with minimum resources and minimum time is absolutely where we have to go. If you look at Ford, it's the antithesis.

     Wow… that was his assessment in 2006 not 1980. I had thought in 1990, that Ford had fixed things. Clearly, they unraveled. When Mulally left Ford in 2014, I thought they had fixed things again… but this time for sure. He was succeeded by a lifetime Ford man, Mark Fields. Fields lasted until May of 2017, when he was replaced by Jim Hackett.
      Jim Hackett, started with Steelcase in 1981 and worked there until 2014. In 1996, he was named CEO at the young age of 39. After his 18 years as the Steelcase CEO, he became interim Athletic Director at the University of Michigan where he had played football. He was best known for bringing in Jim Harbaugh as the head football coach. He joined the Ford Board of Directors in 2013.
     So, two of the last two CEOs of Ford, were outsiders i.e. they did not grow-up in the auto industry. They were not lifetime Ford guys. That is astonishing for a company that size ($156.8 Billion in sales in 2017). They have to be able to create a sustainable culture to survive in the industry. That same culture should have both a sustaining product development process to develop vehicles people want to buy and to be able nurture and grow the future leaders of the company. This is simply not happening.
     In the Wall Street Journal article noted that Hackett “has introduced new methodologies from his previous job, including a process called ‘design thinking’ that attempts to solve problems by getting into the mind of the consumer.”
     Gee, it somehow all goes back to making products customers want to buy. Will Ford ever really learn that lesson?