Blog: Dave LeggettDoolally to Mulally

Dave Leggett | 26 July 2010

We were reminded late last week that Ford Motor Company is still on a roll, its latest financial results confirming that it is one of the industry's better performers.

Running a car company to turn a profit is no mean feat. There are obviously plenty of plates that have to be kept spinning, but at the heart of the business is the requirement to make cars that people want to buy from a brand that has a good reputation.

If your product is marked out as relatively good, people will pay a little more for it. If the product is merely acceptable  - let's say it meets minimum market requirements but is nothing special – it becomes a commodity proposition. You are then in to incentives territory to move the metal on price and the brand suffers over time from the message that the manufacturer offers big discounts to secure sales; it's a modus operandi rather than a selectively employed tool and the brand is devalued as a consequence.

Turning things around is not easy; that's an understatement, I know. The time-scales are long and patience is needed to keep doing the right things – such as continuing to invest even when cash is tight.

As I recall Mark Fields telling me a few years ago, Ford has had to wrestle with a 'perception gap' in the North American market that meant there was a long lag between actually improving the product and the market believing that the product had improved.

The big achievement for Ford in recent years has been to make the transition – turnaround even - from appearing to be an old-style-Detroit-dinosaur in decline, to appearing to be a stand-out American corporation with a promising future. Some big calls went the right way – like the decision to mortgage assets in 2006 which meant that Ford did not have to file for Chapter 11 when the US market crashed in late 2008. Cars are now being developed that can be made and marketed across the globe. Jettisoning superfluous brands has also been an important positive, providing new focus to the whole company.

Toyota's headline grabbing quality troubles have probably given the blue oval an additional tail-wind, too.  

There is still a pile of debt to be repaid and there are concerns over the strength of the US economy and vehicle market. But Ford's management has turned the oil tanker around and got it pointing in the right direction. Staying out of Chapter 11, getting independent recognition for quality improvements and making products that people actually want to buy are all contributing to a renewal of the Ford brand in its home market. There's also the perception that Ford is being run by competent managers led by Alan Mulally and that it took someone from outside the industry to see what was wrong and devise a workable strategy to put it right.

And just as the negative stuff can sit around in people's minds for years, the positive stuff and brand turnaround associations will now be firmly embedded in the marketplace 'perception'. It's a pretty good foundation to build on.

GOLDING’S TAKE: Little sign of incompetence at Ford; roll on GM's H1


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