Staying the course at Ford: when will Mulally turn up the heat?

Staying the course at Ford: when will Mulally turn up the heat?

Dearborn, Michigan: What has changed in the year sinceAlan Mulally left the Boeing Co. to be chief executive at Ford Motor Co.?

Everything, and nothing.

Since his appointment last September, making him the first outsider in recent memory to run the Detroit auto company, Mulally has brought discipline to a company known for rivalries and infighting.

An admirer of the development team that created the Ford Taurus sedan, he revived the famed nameplate, most recently relegated to a rental car. He mortgaged virtually all of Ford’s assets to amass the billions the company needs for its restructuring, and has put its British luxury nameplates, Jaguar, Land Rover and Aston Martin, up for sale.

Despite that, Mulally has not managed to dispel concerns about the future of Ford, passed by Toyota Motor Co. this year for second place in the American market. “Ford’s turnaround is still in its infancy," said Shelly Lombard, a senior analyst at Gimme Credit, which follows corporate bond markets.

Indeed, around Detroit and on Wall Street, one question is often raised about Mulally: When is he really going to turn up the heat?

It is a legitimate question in a city known for corporate drama, especially at Ford, which spawned—and spurned—such dynamic executives such as Lee Iacocca and Jacques Nasser, who ran the company like their own personal kingdoms before their respective ousters. Likewise, auto companies are predicting the weakest industry sales this year since 1998, with petrol at $3 (Rs123) a gallon (3.8 litres) in parts of the US, and a housing slump putting pressure on vehicle sales.

Yet Mulally, in an interview on Tuesday, said he had no intention of departing from the restructuring programme already in place when he arrived nearly a year ago. “I believe we have a really good plan," said Mulally, whose focus is to return Ford’s North American operations to profitability by 2009.

Nor has he brought an army of new faces with him. Unlike some chief executives, who arrive with trusted lieutenants, Mulally has brought only a single Boeing official as a consultant. Many of the executives in place under his predecessor, William Clay Ford Jr., are still with the company.

Indeed, he gave significant promotions to two Ford veterans—Derrick Kuzak, put in charge of global product development, and Susan Cischke, its senior vice-president for safety and environmental affairs, who became the industry’s first executive to gain the word “sustainability" in her job title.

The biggest steps Mulally has taken have been organizational, company officials say, from the regular Thursday business review meetings he holds with senior managers, to the emphasis he has placed on developing and marketing vehicles that appeal to consumers, rather than simply fill a void in a particular market segment.

In doing so, Mulally openly admits his model is Toyota, known much less for any executive personalities than for its conservative line-up of quality-focused vehicles and its regimented approach to manufacturing.

After just a few months on the job, Mulally flew to Japan in December to call on Toyota’s chairman, Fujio Cho, a trip that telegraphed his regard for the Japanese car maker, whose production system he emulated at Boeing when he developed the 777 jet.

“I look at Toyota and I have never seen such consistency of purpose," Mulally said. Referring to the old industry adage, “sell the sizzle and not the steak," he went on. “You don’t hear anything about the ­sizzle."

But Ford, analysts say, could badly use some in its line-up. The auto maker, which held 16% of the US car market upon Mulally’s arrival last year, took just 13.7% in July, according to statistics from Autodata Inc.

Although its Edge crossover vehicle got off to a good start when it was introduced last December, Ford is still suffering from a line-up too heavily dominated by pick-ups and sport utilities, even though Mulally says sales are now running about 50-50 for cars and light trucks.

Analysts say it will be 2011 before Ford completes a top-to-bottom makeover of its line-up, drawing from the vehicles it builds around the world. Industry publications say European cars like the C-Max, a crossover vehicle, could be headed to the US.

“There is very clearly now a priority around leveraging the products we have globally, and simplification," Kuzak said this week.

That will help Ford fill out a range in the US that currently lacks a small car to compete with gas-sipping models such as the Toyota Yaris, Honda Fit and Chevrolet Aveo, although Mulally says one is coming.

Still, Mulally is not concerned about the sales decline, which Ford had telegraphed last year, when it announced it was cutting more than 30,000 jobs and closing more than a dozen factories through 2012.

“This is not only what we expected; this is the plan," Mulally said.

Indeed, Mulally, in his carefully worded answers, seems to exude only optimism about his company.

And little wonder: He earned $28 million in his first four months on the job last year, including a $7.5 million signing bonus, and $11 million paid by Ford to offset benefits he lost because he left Boeing. Mulally’s actual salary is $2 million a year, and he has received stock grants and options.

William Clay Ford Jr. did not accept pay during his five years as chief executive, although he received $10.5 million in stock awards last year.

What has that bought Ford?

An executive who reads and promptly answers every email, sends notes of praise to journalists whose stories he likes—one was decorated with a hand-drawn heart—and has spent a year immersing ­himself in the automobile ­industry.

Cischke said she has spent hours tutoring Mulally about the nuts and bolts of corporate average fuel economy, an issue in the spotlight this summer in Washington. Kuzak, for his part, said Mulally quickly grasped the need to update the company’s line-up. “Alan is a very quick learner," Kuzak said.

“You wouldn’t be in the position Alan is in if you ­weren’t," Kuzak added.