Does Ford Really Have a Better Idea?

The company logo shines off the chromed grille of an unsold 2010 Fusion sedan at a Ford dealership in Denver on Sunday, Aug. 2, 2009. Lured by the government's cash-for-clunkers campaign, car and truck buyers started to return to Ford Motor Co. showrooms last month, with the automaker reporting its first U.S. sales increase in nearly two years. (AP Photo/David Zalubowski)
AP Photo/David Zalubowski
Autumn is an exciting time for Detroit's Big Three, a season for rolling out their brand new cars to the acclaim of eager buyers. This autumn, however, the only U.S. automaker with much to be excited about is Ford, which leads to an obvious question: Could it be, in the words of its old ad campaign, that Ford really DOES have A BETTER IDEA? Martha Teichner presents our Cover Story:

So they really call it a face, as if it had eyes, a mouth and a nose?

"Yes," said car designer Earl Lucas, "because companies are identified by the front grille and the head lamps, and it does look like a face."

As long as American cars have existed, the many faces of Ford have been unmistakable, even when they were mistakes like the Edsel.

In 1986 the Taurus, once America's best-selling car, was actually considered bold. But that was then.

Three years ago, Lucas and his team were told to reinvent the Taurus, just as the Ford Motor Company has set out to reinvent itself.

What did the early designs look like?

"Clearly we wanted a more expressive, a more sculptural car," Lucas said. "Especially I think, the face of the car is awfully important."

If you closely at the "face" of the 2010 Ford Taurus, released last month, you'll see the face of the one U.S. car company confident enough of its survival to refuse a government bailout, the one Detroit automaker that avoided bankruptcy.

So what did Ford - one of the world's iconic brands - do that the others didn't?

To answer that question, meet Ford's cheerleader-in-chief, Alan Mulally, CEO since 2006.

"We were losing share and so we needed to develop a plan that dealt with that reality," he said.

Hiring Mulally was part of one of the biggest gambles in U.S. corporate history.

Remember when gas prices were just starting to spike? When suddenly SUVs weren't selling any more? In 2006, Ford lost $12.6 billion. Then-CEO Bill ford, great-grandson of Henry Ford, knew he had to do something radical.

"That's when I started to look around the country for somebody who had restructured a major corporation," Bill Ford told Teichner, "because it had to be big. There weren't many people like that in America - certainly were no people like that in car companies."

Alan Mulally (pictured left at a 2006 press conference) had restructured aircraft manufacturer Boeing, and gotten it through desperate times after 9/11, but he had no experience in the auto industry with its entrenched culture.

On Sept. 5, 2006, Bill Ford resigned as CEO. He stayed on as executive chairman, but Detroit was still shocked.

"It takes something for a person like Bill Ford to stand up and admit this job is bigger than they can do," said Bryce Hoffman, who reports on Ford for the Detroit News. "Naysayers out there were looking at kind of past examples and saying this is not going to end well for Ford."

But that was nothing compared to what came next: Ford borrowed $23.5 billion. "We mortgaged everything, including the blue oval," he said.

Teichner said, "You had the sense that Ford was in a lot of trouble but maybe GM and Chrysler weren't."

"I would characterize it a little differently: I would say that we recognized our problems earlier and jumped on them earlier," Ford responded, "and while it looked to the outside that we were thrashing about, we were actually starting to restructure."

The loan bought Ford a three-year head start on its Detroit rivals . . . breathing room to re-think everything about how it does business, from the cars it builds to making painful cuts, not only on the assembly line, but in the executive suites.

Bill Ford had already announced he wouldn't take a salary until the company was profitable again.

"If you grew up in our family, you would understand that being part of this company is a real privilege," he said. "And it's never been about the money. We felt this was a really important part of America and then a really important part of American manufacturing and American history, and it's worth preserving."

In 1913 Henry Ford invented the moving assembly line so that he could mass-produce the Model T. The following year he announced he would pay his workers $5 a day, more than double the standard factory wage. He said he wanted his employees to be able to afford the cars they built.

That was just the beginning. For decades the United Autoworkers Union won hefty contracts from Ford and the other U.S. car manufacturers. Autoworkers helped to define the prosperity of the American middle class - that is, until the Japanese began to outsell Detroit, and companies like Toyota built non-union plants in the United States.

Those high wages and life-long benefits for which UAW members fought so hard were one big reason why Detroit couldn't compete, couldn't make a profit. Today, collective bargaining is about negotiating cutbacks - the UAW willingly joining U.S. automakers in their battle just to stay in business.

Since 2001, Ford has shed nearly 145,000 jobs, more than a third of its workforce. Since 2003, it's closed 17 plants, with more to come.

UAW president Ron Gettelfinger said, "Ford, if you look, when you start looking at Atlanta, you look at Wixom, you look at Norfolk, Edison, Lorraine, Wayne, there's a lot of assembly plants that have closed down, and that's very dramatic.

"It's hard on families, it's hard on communities, it's hard on states, reduces the tax base, puts a lot of people in the unemployment lines, all those things are very difficult and very challenging for us," said Gettelfinger. "But we've stepped up. We tried to find a way to help ease the pain, if you will, by offering buyouts."

And wage concessions. And reduced benefits. The union has taken over retiree healthcare. At the beginning of restructuring, Ford's labor costs were $70-80 an hour per worker for combined wages, benefits, and retirement costs, Now, Ford says, they're almost down to Toyota's $50 an hour.

Of course, there's still the problem of building cars people want to buy, and making money doing it, especially given the recession. Ford's most profitable vehicles are still heavy-duty pickups, fully loaded, which (according to some estimates) can make the company as much as $24,000 each. Compare that to small cars, like the Focus, which only make hundreds.

"The Ford Motor Company was more an umbrella for many auto companies, like Aston Martin and Jaguar and Land Rover and Volvo and a very strong relationship with Mazda," said Mulally. "I think 97 different name plates."

Now there are fewer than 20. All those non-Ford brands under the umbrella are going or gone, part of Mulally's strategy for turning the corporation around.

Ford is also bringing models to America that were originally designed for Europe, where high quality, fuel-efficient, even luxurious small cars have long been in demand.

Mark Fields, Ford's president for the Americas, predicts that 3 million people in the U.S. will buy small cars within the next three years.

He showed us the Ford Fiesta, launched in Europe and China over the past year. "We'll be launching it here in the U.S. in the first half of next year," he said.

"And the technology in the Fiesta, you couldn't find in a large car probably five years ago: the navigation system, the high end audio system, the temperature control system, all those things customers, these days, don't want to compromise on."

Ford's overseas car customers also had their own colors: "This is a color we have in Europe, it's called squeeze," Fields said.

"Squeeze?" asked Teichner.

"No, don't ask me how we developed the names for the colors, but yeah, we call this squeeze on the Fiesta."

Part of Ford's great gamble is that Americans are ready to go green. Coming soon: an entire showroom of new designs and technologies, including a plug-in electric vehicle by next year.

The good news: The Focus and the Ford Escape were on the cash-for-clunkers top ten sellers list.

But here's the bad news: Ford is still losing money - although it's losing less money every quarter - and it's not losing as much as GM and Chrysler.

"That's the new math of the American automobile industry," said journalist Bryce Hoffman. "The right way to look at Ford is that it is doing a better job of navigating through this storm, and it has a better chance of emerging from this as a viable company."

And probably as the largest U.S. automaker (though not as big as Toyota) surviving with no government bailout obligations, Ford expects it will return to profitability by 2011.

"It was very important for us to make it on our own," Bill Ford said. "We've struggled. We took on a lot of debt to do it. We hear from people all the time that they like the fact that we are digging ourselves out of the hole ourselves, and that we're doing it kind of the old-fashioned way."

For more info:
Ford Motor Company
United Auto Workers
The Detroit News (Automotive Section)