American Icon (61 page)
Authors: Bryce G. Hoffman
T
he next morning, December 4, Mulally and his entourage arrived back at the Dirksen Senate Office Building for round two. This time, the room was bigger, but there were also more witnesses. Mulally, along with GM’s Rick Wagoner, Chrysler’s Robert Nardelli, and the UAW’s Ron Gettelfinger, were forced to sit and listen to a panel of pundits detail all of Detroit’s sins before it was their turn to speak. It was two hours before Mulally was asked to deliver his opening statement. But he made sure it was worth the wait.
“Since the last hearing, I have thought a great deal about the concerns that you have expressed. I want you to know I heard your message loud and clear,” he began, striking a note of contrition before launching into an eloquent speech that stood in sharp contrast to Wagoner’s excuses, Nardelli’s mea culpas, and Gettelfinger’s defensiveness.
You were clear that the business model needs to change. I
couldn’t
agree more. And that’s exactly why I came to Ford two years ago to join Bill Ford in implementing his vision to transform our company and build a greener future using advanced technology. Let me share with you what we have done to change from how it used to be doing business to how we do business now.
It
used to be
that we had too many brands. Now we have a laser focus on our most important brand, the Ford Blue Oval. In the last two years, we sold Aston Martin, Jaguar, and Land Rover, and we have reduced our investment in Mazda. And this week, we announced we are considering a sale of Volvo.
It
used to be
that our approach to the customers was “If you build it, they will come.” We produced more vehicles than our customers wanted, and then slashed prices, hurting the residual values of those vehicles and hurting our customers. Now we are aggressively matching production to meet the true customer demand.
It
used to be
that we focused heavily on trucks and SUVs. Now we are shifting to a balanced product portfolio, with
even more focus on small cars and the advanced technologies that will drive higher fuel economy in
all
of our vehicles.
It
used to be
that our labor costs made us uncompetitive. Now we have a groundbreaking agreement with the UAW to reduce our labor costs, and we appreciate the UAW’s continuing willingness to help close the competitive gap.
It
used to be
that we had too many suppliers and dealers. Now we are putting in place the right structure to maximize the efficiency and the profitability of all of our partners.
It
used to be
that we operated regionally, European cars for Europe, Asian cars for Asia, and American cars for the U.S. market. Now we are leveraging our global assets—innovation, technology, and scale—to deliver world-class products for every market.
It
used to be
that our goal was simply to compete. Now we are
absolutely
committed to exceeding our customers’ expectations for quality, fuel efficiency, safety, and affordability.
This is the Ford story. We are more balanced; we are more efficient; we are more global; and we are
really
focused.… Ford is an American company, and an American icon. We are woven into the fabric of every community that relies on our cars and trucks and the jobs our company supports. The entire Ford team—from our employees to shareholders, suppliers to dealers—is absolutely committed to implementing our new business model and becoming a lean, profitable company that builds the best cars and trucks on the road for our customers. There is a lot more work to do, but we are passionate about the future of Ford.
Mulally closed by inviting the senators to Dearborn to see what he was talking about and “kick the tires.” He was actually smiling by the time he was done. It was, many felt, his finest hour. And once he had finished telling Ford’s story, he shut up and got out of the way.
*
A
s Ford’s executives were putting together the company’s viability plan, Ray Day’s communications team had been working with Ford’s advertising agency to develop a new public relations campaign to further distance the company from GM and Chrysler and capitalize on its decision to forgo a bailout. To underscore the urgency of their mission, Day pointed to a recent
Saturday Night Live
skit that had lampooned Mulally along with other Detroit CEOs.
“We are all being painted with the same brush,” he said. “We need to tell our own story. We need to tell people that Ford is different.”
Day’s people spent their Thanksgiving holiday building an entirely new website from scratch—
www.thefordstory.com
—that included detailed information about everything Ford had accomplished in its turnaround, the proof points of its progress, product information, congressional testimony, and videos starring Bill Ford, Alan Mulally, and other executives talking about Ford’s transformation. When the site was finished, they e-mailed the link to dealers and employees, encouraging them to pass it on to their friends and customers. They also encouraged dealers to take out advertorials in their local newspapers talking about why Ford was different.
Day began coaching the other executives to make sure they missed no opportunity to underscore the difference between Ford and the other American automakers in their conversations with policy makers, analysts, and reporters. He warned them to avoid the temptation to talk smack about GM and Chrysler.
“Don’t gloat,” Day said. “If they ask you about what’s going on with them, just say, ‘I can tell you about Ford.’ ”
Bill Ford did a masterful job of doing just that on
Larry King Live
later that month, turning every question about why the American automobile industry deserved a bailout into an opportunity to remind the host and his viewers that Ford was different.
“Our plan is working. Our market share is picking up. I believe we’re headed exactly where the country wants us to go,” he told King. “We’re not asking for any federal money. We’re trying to pull ourselves up by our bootstraps and make it on our own.”
B
y the time the second hearing recessed, it was clear that General Motors and Chrysler were going to get something, but it was not at all clear what.
On December 10, the House approved $14 billion in
emergency funding to keep the two automakers afloat until the incoming Obama administration could figure out a more permanent solution. It was supposed to keep their lights on until the end of March. But the Senate rejected it the next day after the UAW refused to accept wage concessions that were part of the compromise deal. With concern over the fate of GM and Chrysler now threatening to make the already dire economic situation in the United States worse, President Bush reluctantly stepped up and wrote a check.
“In the midst of a financial crisis and a recession, allowing the U.S. auto industry to collapse is not a responsible course of action,” said a visibly frustrated Bush when he announced his decision on December 19. “It could send our suffering economy into a deeper and longer recession, and it would leave the next president to confront the demise of a major American industry in his first days of office.”
The president gave GM and Chrysler a $17.4 billion loan
*
and told them they had until March 31, 2009, to put together comprehensive restructuring plans that proved they could become viable companies. If they could not, they would be forced to file for Chapter 11 reorganization. Bush also demanded “meaningful concessions” from “management, labor unions, creditors, bondholders, dealers and suppliers.” The terms were somewhat vague, but it was a long list. The government ordered caps on executive compensation, an end to bonuses for the top executives at both companies, the immediate sale of all corporate aircraft, and strict limits on expenses. GM and Chrysler were required to trade two-thirds of their debt for equity and extract
painful concessions from the UAW. They had to get the union to agree to end the jobs banks, align wages and work rules with the Japanese transplants, and restructure their VEBAs to allow the two companies to cover at least half of their outstanding obligations with stock instead of cash. GM and Chrysler were also required to demonstrate their ability to meet the government’s tough new CAFE requirements and begin manufacturing green vehicles in the United States. Finally, both automakers had to seek the government’s approval for any expenditure of $100 million or more.
There was no mention of a line of credit for Ford. However, after studying the terms Washington was imposing on GM and Chrysler, no one in the room was keen to join them on the dole. But many thought it would sure be nice to have Uncle Sam pointing a gun to the head of the bondholders and the UAW and demanding concessions on the company’s behalf. Mulally told them to get over it.
“We, through our own wits, have to participate in this historic restructuring of American automobile industry that the government is leading at GM and Chrysler, and we have to make sure that we are not disadvantaged in the process,” he said before breaking out in a smile and waving his copy of the terms sheet in the air. “And we have their plans!”
*
The terms of the 2007 Ford-UAW contract required Ford to establish a temporary asset account with $2.3 billion in marketable securities. In January 2009, Ford replaced those with a promissory note that matured on December 31, 2009, and paid the VEBA 9 percent interest.
*
The CEOs of General Motors and Chrysler also prudently elected to drive this time.
†
That would prove far easier said than done. Given the state of the economy, there were few buyers for a fleet of used corporate jets. As they sat in Ford’s hangar waiting for one, the company still had to spend a considerable sum maintaining the planes. And because Ford’s security people would not countenance Mulally using a commercial carrier, the company had to spend even more money chartering jets whenever he traveled. Because Edsel Ford owned the local charter company, the company paid a premium to use a service from out of the area. In the end, Ford’s jet costs actually went up substantially as a result of the debacle, and dozens of Ford transportation employees lost their jobs. But at least Congress and the media were satisfied.
*
It was the same story the next day at the hearing before the House Committee on Financial Services, but by then Ford was barely part of the debate.
*
The money would come from the TARP fund that Secretary Paulson had fought so hard to prevent the automakers from accessing. This was partly to ensure that the Democratic Congress released the other half of the $350 billion authorized for the fund. In fact, $4 billion of the $17.4 billion short-term bailout would only be given to the automakers if those monies were released.
By Their Own BootstrapsThen why flounder around waiting for good business? Get the costs down by better management. Get the prices down to the buying power
.
—H
ENRY
F
ORD