In October they are forced to half dividend. On the 17th October Ford posts its first consecutive quarterly loss in a decade. (BBC News Ford chief Jacques Nasser ousted).
Though overwhelmed by the situation Bill Ford does his best to improve their financial situation and succeeds for a short while. But Ford's true "revitalization" would only be brought about by the CEO who came after Bill Ford, Alan Mulally (who is the present CEO).
Ford Motor Company started the last century with a single man envisioning products that would meet the needs of people in a world on the verge of high-gear industrialization. Today, Ford Motor Company is a family of automotive brands consisting of: Ford, Lincoln, Mercury, Mazda, Jaguar, Land Rover, and Volvo. The company is beginning its second century of existence with a worldwide organization that retains and expands Henry Ford's heritage by developing products that serve the varying and ever-changing needs of people in the global community."(Ford Motor Company)
Q.2 to what extent are Ford's current (future) cash problems the result of a weakness of competences or poor product positioning, and can Mulally's new initiatives solve Ford's problems?
Ford's current cash problems are indeed strongly connected to the poor decisions the former CEO's at the company have taken. They have focused for a long period of time all their resources, both financial and the ones involved in the actual production process, in trying to increase the level of sales for their trucks, light trucks and SUV's, all of them having been successful in the past. However, when it became obvious that these models were not among their customers' favourite ones anymore and that the market had changed, they should have moved their focus towards producing new-models and fuel efficient cars, that were in high demand.
The first person in a long time to understand the changes that needed to be done at the company with respect to the products in turned out was Alan Mulally (who is currently CEO at Ford Motor Company).
Ford's preliminary financial results for the first quarter of 2007 are indicative of an improvement in executing the four priorities they have: "restructuring the company, accelerating product development, funding our plan and working effectively as one team," said President and Chief Executive Officer Alan Mulally. "I am pleased that the basics of our business are improving, but we still have a lot of work to do. Our first quarter results came in somewhat stronger than expected, but there are many uncertainties going forward. We remain focused on improving our quality, productivity and business performance," Mulally added. Ford had a first-quarter revenue of $43 billion, which represented an increase from last year's $40.8billion." The increase primarily reflected mix improvement and favourable currency exchange, partially offset by lower volume."(Ford Motor Company Press Release, April 2007)
But how did Mulally manage to improve the situation at Ford? His predecessor had been Bill Ford, who had become head of the company in 2001.
When Bill Ford became CEO of Ford Motor Company in 2001 he had to face an almost tragic situation. The company had registered huge losses, especially on the international markets. His goal was to somehow obtain profit again. In order to achieve that they "had to restock the product pipeline" which they successfully did thus managing to obtain a profit in 2005. But it soon become obvious to Bill Ford that he was not the right person to turn around this company. "It was clear to me we need someone with a skill-set to take us further. Each person's skill-set doesn't fit every company at every time." But with regard to what the "skill set" of the person he wanted, as CEO should be, he had no doubt: "I wanted someone with major turnaround experience. And who was ready willing and able. it's all to the good of Ford Motor Co. I feel good I could attract Alan here." Thus in September 2006 Alan Mulally became Ford's new CEO.
The characteristics that Bill Ford expects from his successor include his being a "tough-minded, tightly-focused operations chief." Some received Mulally's appointment as CEO rather skeptically. Their uneasiness may be justified if Mulally's background (working experience) were to be taken into consideration. He has formerly worked at Boeing where he was twice overlooked as a possible future CEO. Furthermore, not only is he completely inexperienced with regard to the auto industry, but he has also decided to work for a company that is currently dealing with major restructuring. When faced with such questions from the media he answered in a most witty and interesting way, stating that for him both Ford and Boeing are of iconic significance for the United States and that he is fully confident that the U.S. can indeed compete "in the design and manufacture of sophisticated products" with the world leaders in these domains.
Undoubtedly there are also people optimistic with regard to the beneficial changes the Mulally's becoming CEO at Ford may bring about. Among his supporters is Earl Hesterberg (former marketing chief at both Ford Europe and Ford North America and now CEO of auto retailer Group 1 Automotive) who believes:" Turning it over to an outsider and getting a fresh perspective are both good things. An outsider may have more success in aggressive cost cutting, but at the end of the day, Ford needs to revitalize its product offering and brand image." And Mulally can be just the person that the company is in need of right now. In 2006 just after being chosen as CEO he is known to have declared: "I think it will be fun. Automobiles are fun and exciting. We need them. They are a part of our lives." His commitment to his new job and his enthusiasm for being a part of Ford's transformation are obvious and may enable the auto giant to win back some of the competitive advantage they have been unsuccessfully striving for, so far.
But how will he be able to do that after all?
In an interview published in Business Week magazine, new CEO Alan Mulally and (now) Executive chairman Bill Ford; have revealed the ideas they want to implement in order to improve Ford's position on the capital market.
They are looking for ways to improve and boost the company's balance sheet. "Ford has solid liquidity, but its falling market share and costs of incentives, plus the pending buyout of some 30,000 employees will bring about a significant decrease in the company's cash." (Business Week an Interview with Bill Ford and Alan Mulally (7th September 2007)).
Another important thing they shall have to deal with is the large number of brands the company has bought throughout the years. These brands have been as successful as forecasted and have not brought about the major increase in profits that many had expected. They have proven to be quite an uninspired and not thoroughly thought trough investment. Perhaps the marketing research department at Ford were not as efficient and professional in their data gathering and analysis as they could have been. That may be why Mulally and Ford have decided to "focus the company on a smaller number of brands. Ford and Volvo brands are givens. But Ford must soon decide what brands out of Lincoln, Mercury, Land Rover and Jaguar it will go forward with. There's mounting consensus on Wall Street and within the company that management attention and capital are spread too thin. " (Business Week an Interview with Bill Ford and Alan Mulally (7th September 2007)) in addition to the above-mentioned changes, lower variable costs are also taken into consideration. "By some estimates, Ford spends some $800 a vehicle more for parts and components than for example, Renault." (Business Week an Interview with Bill Ford and Alan Mulally (7th September 2007)) However, though cutting costs is an understandable and much-desired goal for many companies, they must manage to do it without affecting in any way the quality of their products. After all, customers have certain expectations with regard to what a specific brand must offer and what it stands for and are not all content when these expectations are not met. Thus Ford shall also "focus and enliven the company's brand strategies and marketing to create more trust and desire for the brands the company retains." (Business Week an Interview with Bill Ford and Alan Mulally (7th September 2007))
It has been observed that the divisions of manufacturing and engineering at Ford are responsible for the annual creation of over 2000 products that do not fulfil the company's required quality standards. Thus, the last but one element on Mulally's list of future changes at Ford, is to improve the efficiency and productivity of those two departments so as to insure that in all of Ford's worldwide plants only the best vehicles are being produced.
And finally perhaps the most important challenge they are currently facing is to "stop the disastrous…