The End of Detroit (32 page)

The moves put Ford into an uproar, and on top of it, the Firestone crisis had cost the company dearly. After dozens of profitable quarters during the 1990s, Ford began to slip. Out of eight quarters in which Nasser was chief executive, Ford was profitable in only five. By 2001, the company was on track to billions of dollars in losses: It would lose $6.4 billion over 2001 and 2002, almost as much as it had earned during its record year in 1998. By October 2001, it had become clear that Nasser had to go. Though there had been rumors of nasty exchanges between Nasser and Bill Ford throughout his brief tenure—one story, which Ford denied, had them coming to blows on the twelfth floor, where the executive offices were located—the final parting of the ways was actually handled in a gentlemanly fashion. According to Ford, Nasser came to his office at 5
P.M.
on October 29 and said he had decided to leave for the good of the automaker. The next morning, a work crew arrived at his office, bearing big rolls of bubble wrap. Shortly afterward, Ford strode to the front of an auditorium in Ford’s world headquarters, to the applause of gathered employees. “We need to get our focus back on the basics of our business, back to building great cars and trucks,” he said.

But Ford didn’t seem to know where to look for help. He didn’t have his own troops to replace Nasser’s management team, a number of whom had left with Nasser or were now planning to depart. He had no go-to guy or experienced surrogate who could carry out his orders with full authority. Years before, Henry Ford II relied on a British aristocrat, Walter Hayes, for blunt direction and P.R. advice. But Hayes, sadly, died just as Bill Ford became chairman, and no one that savvy emerged to replace him. “The one thing Ford needs is individual leadership that moves the organization. It’s a huge company. As long as there is fuzzy thinking and lack of clarity, it is delaying what needs to happen,” said Jeremy Anwyl, the president of
Edmunds.com
. “I’m sure he’s committed to the company, but we’re talking about a superhuman effort. I’m not sure he’s interested in that, and if he’s not up to it, he should delegate it.” Stephen Girsky, the veteran auto industry analyst for Morgan Stanley and a longtime friend of Ford, shared Anwyl’s concern. He worried that Ford didn’t have lieutenants he could trust to get the organization in line and the company up to speed with GM and Chrysler, let alone face the challenge from its import competitors.

Those factors are a large reason why Ford has been enveloped in speculation that it is facing a significant restructuring, possibly in a Chapter 11 bankruptcy. At the annual meeting in June 2003, Bill Ford took pains to dismiss the speculation and members of the Ford family vowed they would hang on to their shares in order to prevent the restructuring from happening. In an interview with the
New York Times,
Anne Ford noted that the car business was “so cyclical. Ford was on top for so long and General Motors was not. We’ve gone through this before, so we’re all prepared. But you can’t be too prepared.” She added, “We back Billy and everything he’s tried to do.” While the Ford family’s faith is an immeasurable asset, there is never any guarantee in the tumultuous auto business that a family will always stand strong. The Ford family’s vow to keep their shares is one thing; whether they would contribute their own money to fund the company’s future is another. Witness the Agnelli family at the Italian automaker Fiat; when their company hit upon rocky times in the late 1990s, they sold a 5 percent stake to General Motors in a bid to raise much-needed cash.

As another defense, Ford officials point to the company’s hefty cash balance, which stood at $26 billion in spring 2003, and its ability to tap capital markets. But Ford needs every penny of that cash as a hedge against a swift and sudden industry downfall, because it no longer enjoys the sterling credit rating it held during its glory years in the 1980s and 1990s. In 2000, Chrysler proved just how fast an auto company could burn cash when it was caught off guard by an industry slowdown. It ran into trouble again in 2003 when it failed to offer incentives fast enough to keep pace with GM. As Ford learned with the Firestone tire situation, a crisis can knock the wind out of an unsuspecting company very swiftly, and Ford, to analysts, seems particularly vulnerable.

And there is another reality at play. The American marketplace has never been kind to No. 2 companies in any industry. They face problems from above them and beneath them. They must deal, first, with the difficulty of competing with their industry’s largest player, which by nature has more resources, and second, with the constant nipping at their heels by smaller and sometimes wilier players. In the airline business, United Airlines was forced into bankruptcy in late 2002; it was not as broad or efficient as the biggest carrier, American Airlines, and significantly, it had high costs that made it impossible to fend off attacks from nimble, low-fare airlines like Southwest and JetBlue. The retailing industry’s second-biggest company, Kmart, also had to file for Chapter 11 protection in 2002, unable to battle the strength of Wal-Mart and fend off the rivalry it faced from well-defined smaller players such as Target and Kohl’s. In the movie business, the huge studios can occasionally console themselves with monster hits, but the vast majority of Academy Awards go each year to Miramax, the leading independent studio, which is able to put together beautifully written scripts that appeal to today’s most talented stars. In all those industries—airlines, retailing and entertainment—there are lots of choices, and simply being a big player is no protection.

At its heart, Ford’s revitalization campaign is based on the slogan “Back to Basics,” and its executives talk of 50 new models that it plans to introduce in the United States over the next five years, from cars to crossovers to more luxury cars. Yet consumers will have to be convinced that these models are right for them, because plenty of auto companies, from Toyota and Honda to Hyundai, offer good, basic vehicles. The market is not crying out for more choices. “From an economic standpoint, Ford could go away, and the marketplace wouldn’t miss them,” Anwyl said. That would have been hard to imagine in the 1980s, when cars like the Taurus were admired for their styling and quality, and in the 1990s, when Ford’s SUVs and other truck models were flying out of showrooms, many at sticker price or more. For many years, Ford was considered on a par with Toyota, in part because of its corporate slogan, which pledged, “Quality Is Job One.” But it would be hard to make that same assertion today. The company lost endless amounts of goodwill over the past few years with substandard quality, the Ford Explorer situation aside. The old jokes about what the letters in the name Ford stand for—“Found On Road, Dead”—aren’t funny to owners of the small Ford Focus, a European-rooted car that has been recalled more than a dozen times in the past four years, or to buyers of the first Ford Escape sport utilities, which suffered five recalls in its first month on the market. By 2003, Ford, once the industry’s best-built brand, had been eclipsed by a flood of competitors on quality surveys, including Korea’s Hyundai. And as the Ford Thunderbird proved, the company had trouble getting the quality right on one of its showpieces.

The excitement that surrounded the T-bird when it debuted as a concept car in 1999 seemed exactly in line with the new era that had begun at Ford, where just months before Ford and Nasser had taken charge. The industry vibrated with speculation that the pair was intent on making Ford the biggest American company within a few years. Its rising market share had surpassed that of GM, whose share was sinking. The T-bird was just the kind of vehicle that would set Ford apart, with its heritage as a sports car, its instantly recognizable name and especially the pretty styling that the concept car displayed.

But the T-bird didn’t fly the way Ford expected. Two more auto shows and three agonizing years would pass before Ford got the vehicle to dealers. By then, the excitement that Ford had fanned so successfully with the original concept car had died out. Ford dealers had waiting lists for the T-bird but had a terrible time filling orders. Production was delayed several times, and when Ford’s Wixom, Michigan, plant finally began building the car, it had to shut down the assembly line when it discovered that an engine fan could catch fire. The experience was particularly upsetting to customers who had bought their cars through the Neiman Marcus Christmas catalogue, which made it the featured vehicle in its 2000 Christmas Book. Though they had not been given a firm delivery date for their cars, many were under the impression that the Neiman Marcus T-birds would be the first that Ford built. Some were still waiting for their automobiles in fall 2001, after dealers had received their regular allotment of T-birds, and several dozen didn’t have the cars when the next Christmas catalogue was published. (Neiman Marcus made sure that it had the complete supply of its next Christmas car, the Lexus SC 430, on hand before they went on sale.)

Once it went on sale, the T-bird received mixed reviews. Though raters liked the car’s appearance, they were disappointed by its lack of power and its soft handling. Ford had been trying to capture the boulevard ride that the early T-birds had boasted. But by 2002, T-bird had lots of competition from other two-seaters, such as the SC 430 and BMW’s Z-3 sports car. Because it was competing with those fast cars, customers had certain expectations. People getting behind the wheel of a T-bird wanted to punch the accelerator and go. Instead, the car floated down the road, certainly in keeping with the easy ride that Ford intended but not what consumers wanted. Ford insisted that a more powerful engine was coming. But the T-bird never recovered from the bungled launch. By the winter of 2003, a row of brightly colored T-birds sat, covered in snow, out in front of Varsity Ford, the big Michigan dealership that was among the largest in the country. By that spring, only a year after the T-bird’s debut, Ford had bowed to the inevitable and offered rebates on a car that had once been its prize and subsequently said it would be discontinued, although it said it planned to revive the T-bird name again in the future.

As the T-bird roiled, so did Ford’s management ranks. Far more than GM, so prescribed in behavior as to rival the Pentagon, Ford has always been a company where individuality pays off. When other auto executives seemed drab bean-counters, Ford always had somebody fun to watch within its senior ranks. And, perhaps because of the cult of personality that surrounded its executives, Ford also always seemed to be the most susceptible to management gurus and the flavors of the month that they touted as the way to prosperity. In the 1950s, the Whiz Kids took charge under Henry Ford II, himself an industry legend for his flamboyant lifestyle. In the 1960s and 1970s, Lee Iacocca provided the catalyst for both Ford’s success, with cars like the Mustang, and high drama, when he was fired in 1978 by Henry Ford II, who famously said, “Sometimes you just don’t like somebody.” In the 1980s, Ford brought in W. Edwards Deming, the aging quality expert who had studied Japanese plants after World War II and came up with a set of 14 points that a company’s management should follow to get the most out of its employees. Simultaneously, Ford’s chief executive, Donald Petersen, received vast attention for returning Ford to industry prominence with the Taurus and its other top-quality cars. But Petersen, and then Trotman, and later Nasser all left because of unsettled circumstances and clashes with the Ford family.

In previous times, Ford simply picked up and went on under whoever the new chief executive was. But the brain drain that occurred when Nasser left meant Bill Ford had to rely on a team of elder statesmen whom he nicknamed his “grumpy old men.” They included Carl Reichardt, the retired chief executive of Wells Fargo, who agreed to serve as vice chairman in charge of Ford Financial Services, and Allan Gilmour, who had retired as Ford’s chief financial officer in 1994 but returned at Bill Ford’s request to once again serve as CFO. Another such senior executive was the chief operating officer, Nicholas V. Scheele, who had run Jaguar, and to whom fell the day-to-day responsibility of leading the turnaround effort.

Scheele, an ebullient British executive who had been knighted by Queen Elizabeth, loved to expound about the wonders of Ford’s vehicles, and he could spin marvelous yarns about the car business. But throughout 2002 and 2003 he was rumored to clash with David Thursfield, the taciturn, no-nonsense head of Ford’s international and purchasing operations, over the pace and form of the revitalization plan. Thursfield could be as chilly in demeanor as Scheele was warm. (When he cut his finger to the bone over Christmas 2002, Thursfield darkly joked that in the view of some of his colleagues, he was “too mean to bleed.”) Thursfield, who had directed a restructuring at Ford of Europe in the late 1990s, reportedly wanted to push Ford faster to achieve its cost-cutting targets; Scheele argued for a more measured approach. While waiting for direction, Ford’s market share continued to slip, with the company losing another 1.5 percentage points in 2002. There were times when it seemed as if GM, sensing weakness at its rival in Dearborn, was deliberately bombarding the market with incentives in a bid to push Ford over the brink. GM executives denied that that was their aim.

But the incentives at GM and the management turmoil at Ford diverted press attention away from Ford’s efforts in the marketplace, where it will have to prove that its comeback strategy is sound. The first and most important test came in 2003 with the new F-series pickup trucks. Along with them, Ford planned to introduce the Freestar minivan, a replacement for the Windstar; the Freestyle sport wagon, its competitor for the Pacifica; and the new Ford 500 family sedan, which would replace the Taurus. There will be another generation of the Mustang and a revival of the Ford GT, a limited-edition sports car drawing on Ford’s 1960s racing heritage. But it isn’t clear whether they will be enough to fend off GM, Chrysler and the numerous imports, and help the company boost its share. The deluge of coverage leading up to the Ford centennial questioned whether they would. “A Century at Ford, But Will It Be a Happy Birthday?” asked the
Financial Times
. Meanwhile,
Newsweek
depicted Bill Ford as a conflicted CEO who had turned to sleeping pills and tranquilizers to ease his worries about the company. The denouement came from
The Economist
, which in the week of the Ford centennial displayed a rusted Ford pickup on its cover.