How new Ford CEO Mulally will save the company
Ford is in trouble. Some new models are doing well, but all their gas guzzlers are in decline big time. So CEO Bill Ford has hired his own replacement - Alan Mulally, formerly of Boeing.
What can Mullaly do to turn the company around, and why was he chosen? Bruce Nussbaum at Business Week says that Ford needs innovation in their business model, to be more like Apple and Amazon. I think he's right, but I will let those with more knowledge talk about how to improve Ford's business model (if you have ideas, please comment below).
What I will talk about is product innovation. I think Ford Motor Company has picked exactly the right person to be CEO, and here's why: the Boeing 787 Dreamliner. The Dreamliner is not just a new jet. It makes extensive use of advance carbon-fiber composite materials to make it lighter, stronger, and more efficient.
Ford needs something really innovative, not just more cup holders or higher, skinner windows. They need to build a car using similar composite materials and blow past everyone in terms of safety and fuel efficiency.
Just taking a nice, stylish mid-size car like the Ford Fusion and replacing heavy metal parts with composites could cut weight drastically. Forget about hybrids—even though I think they're wicked cool—advanced materials are the ticket.
This is not a new idea – a few engineers are trying to do something similar with the Aptera at Accelerated Composites. Mulally has the expertise and the contacts to get the materials, get the designs together, and build up to production capacity. This could even be a boon to Ford's union workers. Even though large parts of the Dreamliner are built in Japan and Europe, a lot of the composite work is being done in the U.S., and there's a lot of work to be done on scaling production techniques before China can compete on labor costs alone.
It would be a huge, non-trivial problem, with a lot of pitfalls. I certainly don't know enough to even begin listing the challenges to such a plan. But it seems obvious to me why Ford would pick Mulally after looking at the Dreamliner. I just hope it's obvious to Ford as well.
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It really doesn’t matter who they hire as the CEO, Ford like the rest of the domestic manufactures are screwed. The main problem is the legacy costs that they are dealing with. Ford hired way to many people in the past and promised them too much for their retirement. This adds a couple of thousands at least to the cost of a new car. That is the first disadvantage. Second the domestics are finally catching up to the Japanese in terms of reliability. When I was searching for a new car, I wasn’t thinking about any of the domestics because the reliability rates were percieved to be not as good. Research has shown that this is not the case (I Have a Chevrolet by the way). However perceptions are hard to break. Finally especially in Ford’s case, their product line is just crappy. Ford does make good cars. Take for example the Ford Focus, however they are really reluctant to sell these cars here. The european division of Ford are turning out excellent cars. The new focus was given a great review by the BBC motoring show Top Gear. Most of the time this program drools over the latest supercar so this was a great thing for the company. However they haven’t brought the model to this market. That’s shooting yourself in the foot. If you want to be different from the rest of the domestic marketplace, bring over some of the excellent models from the rest of the world stateside. I don’t know if this new CEO can fix the ship but it’s going to take a monumental effort to save the company.
September 7th, 2006 at 10:56 am
In part, I agree with Keith – it doesn’t matter who they get to run the company, as long as it’s not Jacques Nasser. (BTW, Bill Ford’s still sticking around as chairman of the board, so he’s not totally out of the picture). In the last several weeks, the rumor mill had Ford (the company) doing several things to turn the company around, including selling off Jaguar, Land Rover and Aston Martin; going totally private again; and asking Carlos Ghosn to join the Nissan-Renault alliance instead of GM.
Also, keep in mind that Ford’s been constructing a Way Forward plan under Mark Fields (which implicitly stated that Ford will review its management and leadership) and that a couple months ago, Bill Ford hired an outside expert simply to whisper directives in his ear. So this move does not come completely out of the blue.
If you read the press releases about Mulally’s hiring, they go on and on about how Mulally used the Ford Taurus as inspiration for his turnaround of Boeing. Most of the general public doesn’t realize how much of a company-saver the Taurus was for Ford in the 1980s. Nearly as much as the K-car was for Chrysler at the same time.
Point? Product has a lot to do with it, as Keith discussed. And image has just as much, if not more, to do with it. But how do you correct an entire nation’s worth of imperceptions? GM just made a Bold Move (sorry) earlier this week by announcing incredible warranty extensions for all 2007 models. Ford also expanded its warranties recently, but not as much. Touting the prior successes of your new CEO will help, but doesn’t directly address the problem.
I’m fearful this is simply a spit-and-shine, take-a-look-at-us-now kind of move that will have no lasting, long-term benefits.
Then again, I know more about Ford V-8 engines of the late 1960s than I do its current predicament, so what do I know…
September 7th, 2006 at 8:34 pm