Mulally says Ford now has competitive edge

[Ohio XB]

This is the article I mentioned in another thread. It basically states that Mulally got everything he wanted from the union and bond holders and Ford Motor Company is set.



Monday, March 30, 2009

Mulally says Ford now has competitive edge

CEO believes key concessions will allow automaker to survive industry's crisis
Bryce G. Hoffman / The Detroit News

Dearborn-- When Alan Mulally flew into town a little more than two years ago to take the top job at Ford Motor Co., many wondered what an aerospace executive from Seattle knew that Detroit's best and brightest did not.

Plenty, apparently.

Days before word that General Motors Corp. CEO Rick Wagoner was ousted by the Obama administration as part of a plan to provide GM with more federal aid, Mulally sat in his corner office on the 12th floor of Ford headquarters with a grin on his face.

Asked why he was smiling, he did not hesitate: Ford has won all of the concessions it needs from labor and investors to weather the industry's crisis -- even if car and truck sales continue to decline.

Just three months ago, Ford said it might have to join GM and Chrysler LLC in asking Washington for help if auto sales did not bottom out by May or June.

But Ford has since reached an agreement with the United Auto Workers to reduce labor costs, and Ford bondholders snapped up an offer to swap debt for equity in the company, money-saving moves that put Ford on a more level playing field with Asian rivals.

"We are competitive now," Mulally told The Detroit News in an interview Friday. "The downturn is a temporary thing. We just have to make it through it."

Analysts are predicting that March auto sales, to be released on Wednesday, will come in well below February's dismal numbers -- demand fell 41.4 percent last month compared to a year ago -- suggesting that there is no end in sight to the sales slump that has automakers reeling from Detroit to Tokyo. But Mulally said Ford has taken all the steps necessary to respond to the crisis.

Over the past month, the automaker has convinced UAW members to accept major modifications to the union's labor contract. Sources say those concessions will cut Ford's labor costs to less than $50 an hour, putting it on par with Japanese manufacturing operations in the United States. Ford also offered bondholders a debt restructuring that was oversubscribed within a couple of weeks.

"Investors jumped on the offer like it had slapped their mothers," said analyst Shelly Lombard of Gimme Credit. "Ford will shed $2.2 billion of bank debt, $4 (billion) to $4.4 billion of bonds, and $4.9 billion of convertible notes. That's $11.1 (billion) to $11.5 billion or almost a third of its $36 billion of debt. And we estimate Ford will save as much as $600 million of interest expense (annually)."

Now, Mulally says, it is just a matter of continuing to match production to the actual demand for Ford's cars and trucks.

Judging by inventory levels, Ford has been doing that. Despite the sales drop, the company ended February with 32 percent fewer vehicles on dealer lots than a year ago.

Ford could still benefit from more consolidation among its dealers and suppliers, but that is likely to occur organically given the weak economy.

"They've done what they have in their control to do, and they've done a terrific job doing it," said David Cole, chairman of the Center for Automotive Research in Ann Arbor. "There's nothing obvious left to do."

Consumers appreciate Ford's effort to save itself without government loans, Mulally said, and that is having an impact on the showroom floor. Still, some have suggested that Ford is playing a dangerous game by touting its self-reliance when the industry's recovery is far from certain.

Mulally is adamant that the only scenario that would force Ford to ask for government aid now is if the country's economic decline dramatically worsens. He is confident that the Obama administration will not let that happen.

"We have the economy on the top of the agenda, and we're moving decisively to deal with it," Mulally said. "We're not taking taxpayer money."

Cole said that message has resonated with American consumers, who mainly oppose anything resembling a bailout. But he stressed that Ford cannot begin to rebound until there is a broader recovery in the U.S. auto market.

"The problem isn't May or June anymore, it's January or February of next year," Cole said. "If things continue to be this bad for a long time, they'll be in the soup with everybody else."

bhoffman@detnews.com (313) 222-2443

[Mr Brooksy]

Sounds great to me. Well done Mulally and the team from Detroit!

[Scott]

That's a nice write up, I hope it holds water for the future. I love good Ford news but I am a little skeptical with just how much of a turn-around the company has had in such a short period of time. Time will tell but it sounds good.

[imugli]

Keep the good news coming, Steve - always great to hear it...

Now if only the Oz press would pick up on some of it and start re-publishing it...

[JG66ME]

Steve

Keep it coming.

Can you answer something for me? Whey did Ford sell of the large truck business in Europe (Iveco) and the US (Stirling). Also, why did they sell of the tractor division. Ford was the largest producer of tractors in the world and had a great product line up.

I cannot understand why Ford let these markets go and then bought up car companies that has since had to offload.

Steve

[phillyc]

I knew about Mullaly's success at Boeing so I had faith in Mullaly soon after he started. It appeared immediately that he was about to change the culture of Ford. Much to the betterment of the company.

I personally didn't think that unloading Jaguar and Land Rover was a good idea after all the money invested and they seemed about to both turn solid.

Anyway the economy turned south and it turned to be a great decision.

Congrats to Ford, the workers and the boards for accepting his vision.

[Nikked]

Ford is creating revolution for automobile production in the US, something the company is good at...

[TUF_302]

I love reading articles that have nothing but good things to say About Ford and how its being run these days!! :

[FPV8U]

Definitly seems to be turning for the better, nice to see Ford on the positive side of the media for the first time in a long time.

[Ohio XB]

Originally Posted by JG66ME

Steve

Keep it coming.

Can you answer something for me? Whey did Ford sell of the large truck business in Europe (Iveco) and the US (Stirling). Also, why did they sell of the tractor division. Ford was the largest producer of tractors in the world and had a great product line up.

I cannot understand why Ford let these markets go and then bought up car companies that has since had to offload.

Steve

Sorry, I have no insight on these events.


GTP006, you are right to have reserved optimism. It is wise to take such news with a view of "let's see how it is in 6 months". As an employee that has watched Mulally since the day he stepped in through the door (metaphorically) I personally have less reserved optimism and accept a little more at face value as Mulally has demonstrated his ability to follow through on his statements. There's never been a guy like him here in my 16 years at Ford.

I hope this specific article gets picked up and published in as many outlets as possible. What gets me is that it puts to rest the claims of many that say "The UAW is killing them" when Mulally says "Ford has won all of the concessions it needs from labor..." and "Ford is now competitive". Hey, if the top man at Ford says all is good with the UAW who can complain? Who would know better?

As for the reporter of this article, he is probably one of the best reporters I have seen. He keeps his views neutral and just reports. He does get facts from various angles to include in his reports but that is just being all inclusive. I also have not seen him put spin on his reports. We've had a number of exchanges of emails and I've praised him for this as well.


Steve

[DoreSlamR]

The US car market is still buggered though, what with the bankruptcy of GM imminent now.

Someone had to weather the storm, sounds like Ford are gonna do just that.

[ltd]

Great news, after what Mulally did at Boeing, ford could not have a better CEO.
The only thing that GM should really hope for now is that scientists could somehow make a clone of Mulally. Luckily, this news is also making TV in the USA, you can see it here http://www.youtube.com/watch?v=f2J04bN6Ijo

[Ohio XB]

Good video. I hope more people get to see Mulally say "With the latest consessions from the UAW we are now competitive in labor costs with the foreign auto makers building cars in the US."


For me, it is different to see a CEO say that he has what he wants from the UAW rather than he got "some" of what he wanted.


Steve

[GK]

Originally Posted by Ohio XB

Good video. I hope more people get to see Mulally say "With the latest consessions from the UAW we are now competitive in labor costs with the foreign auto makers building cars in the US."


For me, it is different to see a CEO say that he has what he wants from the UAW rather than he got "some" of what he wanted.


Steve

Great article and great news Steve. I've enjoyed so much of what you've posted. You are our mate on the inside.

I certainly hope that the union bashers in your country and mine (and there are certainly some things that I do not like about unions) will give the UAW deserved credit and let them get on with the job.

Great to see that Ford is in a very good position to really benefit (and hopefully increase market share) after this downturn.

Great also to see your optimism. Is it shared by your colleagues?

GK

[Ohio XB]

Great also to see your optimism. Is it shared by your colleagues?

There are different types among the people I work with at the floor level.

There's the eternal doom and gloom people, always waiting for the hammer to fall.

There's the ones that want to believe but have been let down too many times in the past.

Then there's people like me. I like to be optimistic, but I keep a realistic perspective too, so I guess you can say "reserved optimism."

You are our mate on the inside.

Wow! I'm an honorary Aussie now, so I guess I should spell it "honourary"??



As far as the union bashers go, I conducted a bit of an experiment at another board I go to. It is a Mustang board and is mostly us old farts, so I feel at home with more people my age.

I made the same post as the one I started this one with. I waited a couple days to see what the response would be. It got over 20 views but NO ONE commented, and these guys are in the US.

I was testing the desire for people to like to hate Ford, even among Ford enthusiasts. Sure enough, no one was excited or even impressed enough to post in there.

I posted again stating "See? People love to hate Ford". Finally someone posted but I think they misunderstood my second post, thinking that I disagreed with one or two of the negative things that are in that report.

So I made another post explaining what I was talking about. I pointed out that the people that wanted the UAW to have parity in wages and benefits could be happy that Ford has this now. Well, it would seem that they didn't want Ford to do what they were complaining about, they just like to be able to complain about it.

For the people that thought Ford would never be able to reach their goal of reducing their debt by 1/3, but Ford achieved this in two weeks, I thought they would be pleased. Well, now they can't complain about that either, its no fun anymore.

Then I asked, what happened to being happy to get what you desire?

I'll be going back there to see what the responses are like.


One guy did say he bought Ford stock. There's a guy putting his money where his optimism is! Then again, the bondholders happily took equity for debt at 40 cents on the dollar!


Steve

[csv8]

I read an article where FORD's future is based on the Fiesta, Focus and Mondeo range. FORD is confident their small/medium car range will get them through, the crisis.

[F6 R-Spec]

Finally i can see some SORT of light flashing at the end of the tunnel,
but i dont think it's over yet.

FOMOCO is atleast Much beter of then the rest of the us car makers.

Thank you for the good news for now Ohio XB you have made my week end. :

Cheers Mick.

[Ohio XB]

Originally Posted by csv8

I read an article where FORD's future is based on the Fiesta, Focus and Mondeo range. FORD is confident their small/medium car range will get them through, the crisis.

Yes, US auto makers have not made any money on small cars in the past. They are there to meet the overall fleet fuel mileage requirements.


Now Ford believes they can do it. The Fiesta is being built in Mexico because at the time of making a decision where to build it for the North America market they didn't think they could do it in the US and make money.

Now, with the consessions that have been won from the UAW, the new business structure, and economy of scale by building global platforms, Mulally, and others, believe it can be done in the US. Basically, it has to be done, and from what I have seen of Mulally, he gets it done. Ford couldn't have done it without him.

Finally i can see some SORT of light flashing at the end of the tunnel,
but i dont think it's over yet.

FOMOCO is atleast Much beter of then the rest of the us car makers.

You're welcome Mick.

What you said is exactly all I am looking to tout. It's not over, but man, has Ford ever taken care of business and got themselves in a great position, especially with things being as they are.


Steve

[Bossxr8]

Originally Posted by GTP006

That's a nice write up, I hope it holds water for the future. I love good Ford news but I am a little skeptical with just how much of a turn-around the company has had in such a short period of time. Time will tell but it sounds good.

This hasn't happened overnight. Mullally has been working on the turn around since he got there a few years ago. They had actually got ahead of their profit projections in the first quarter last year by making a profit, about 12 months ahead of schedule. If it wasn't for the GFC they will be doing very well.

[Ohio XB]

I have to agree with that. If the economy didn't tank we would be seeing all kinds of stuff on Ford's amazing transformation.


Actually, it all began with Ford's "Ford 2000 Plan" in late 1999. That's when Ford started making changes but they were too slow. Then Mark Fields came in 2005 when Ford 2000 wasn't making progress fast enough. Mark turned around Mazda and Ford hoped he could do the same with Ford. He started "The Way Forward" plan. It is a very good plan and is the one that is being executed today.

Once again though progress was not happening fast enough. Mark was indoctrined with the Ford culture so this was not surprising, not to take away anything from what he was able to achieve.

When Mulally came to Ford in late 2006 he grabbed the reins and took off. He basically accelerated the Way Forward Plan to make up for lost time, and I thin most people here know the rest. He knocked down walls and barriers to the execution of the plan, as well as making a few executive decisions like getting the loans needed to finance the turn around, changed the company culture, and on and on. Things that have never been done before.


Steve

[zetec]

Originally Posted by csv8

I read an article where FORD's future is based on the Fiesta, Focus and Mondeo range. FORD is confident their small/medium car range will get them through, the crisis.

Having driven and experienced all three, if that is true, their confidence is certainly well founded.

[Luke Plaizier]

We had someone at Ford Oz for awhile, that motivated the workers and inspired the company in the same way that Alan Mulally is doing for Ford US.

He was Geoff Polites. A man who earned a great deal of respect from us.

It's inspirational when there is someone at the top who you respect and are motivated to follow.


Lukeyson