Alan Mulally, head honcho at Ford, has the most maddening mannerism. His sign-off to just about any conversation is: “You bet.”
“So you are saying that the cash burn will reduce this year?” “You bet.” “Thanks for the explanation Alan.” “You bet.” And so it goes on.
Bet there is a turf accountant somewhere amongst his ancestors.
When he is talking about Ford past, present and future the temptation is to look for the strategic gamble that he has sanctioned. Surely the reflex mannerism arises from the knowledge that he has taken a huge risk somewhere along the line?
Seems there was more than one.
The big difference between Ford and the emaciated competitors is that Ford stood away from the scramble for state subsidy while GM and Chrysler did not. It was a bold move by Ford, with a cost and a benefit: the cost was that funds had to be found elsewhere (more expensively) because all three companies were ruined equally by the sudden downturn and the associated scramble for smaller, more fuel efficient cars.
The benefit to Ford of that was car buyers imagined GM and Chrysler must be so bust that they might not be able to honour warranty. Ford by contrast looked and sounded like a going concern. That has been a major commercial advantage, and was a great choice at a time when the obvious thing to do was to line up with competitors with cap in hand.
Ford arranged a huge line of credit when times were bad two and a half years ago but not dreadful, and then steadily triggered its right to draw down when things were desperate. That was the stake money for the really big bet. It took US$10.1bn during the first quarter of this year yet still has US$21bn cash to get the company through to the market recovery.
Alan and the boys have spent hard on the One Ford plan – generating new models with platform commonality around the world and with quality bettering Honda and rivalling Toyota (according to very recent surveys). “We have taken very aggressive action on the model mix. We want to keep investing in that so that we can come out of the other end of this like a turbo-machine. We have invested in the complete model line and have not backed off one bit. It all gets better as we move to the global platforms. We could not be more pleased with the pipeline that we have as we move forward.”
Go deeper with GlobalData
It seems to have been a gamble that is paying off. Had this just been another wave of so-so cars, the weight of the debt would have been crushing.
Early proof is that Ford Europe’s first quarter market share, has risen to 9.4 percent, the highest level in nearly ten years. Progress is still needed in the US though. Market share was only 13.9% compared with 15% in the same quarter last year but because Ford has been making better cars it has found it can charge more – even in the depths of the deepest recession.
Does Mulally think he will ever have to join the queue for state cash? He pauses a moment for thought. “Only if there is widespread competitor, and therefore supplier, failure,” he says. At the moment one of his costs of operation is helping suppliers by allowing early deliveries and payments.
What would we say to Mulally now to recognise how he engineered his success relative to his competitors?
How well do you really know your competitors?
Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.
Thank you!
Your download email will arrive shortly
Not ready to buy yet? Download a free sample
We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form
By GlobalDataYou gambled well.
Rob Golding
‘Goldie’
