Having failed to lure Renault-Nissan boss Carlos Ghosn, Ford chairman Bill Ford has taken an altogether different option for the CEO position. He’s poached Alan Mulally, president of Boeing’s commercial airliner business, and tasked him with stopping the rot at the second-biggest US automaker, writes Mark Bursa.
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It’s a balanced risk – on one hand, Mulally admits he has little experience of the car business. On the other hand, he’s well versed in the management – and the successful turnaround – of monolithic US businesses. And he’s an engineer – so transitioning from “plane guy” to “car guy” might not be difficult. “Clearly, the challenges Boeing faced in recent years have many parallels to our own,” Bill Ford said.
On the face of it, Mulally’s track record at Boeing is good. He’s launched a new airliner, the 787, which has been an instant hit in the market, securing more than 400 sales already. When he took over in 1998, Boeing was getting a hiding in the market from its archrival, Airbus. This year it’ll sell and build more planes than the European consortium. Yet Mulally was passed over for the Boeing group CEO’s job – because at 61 he was deemed too old. Boeing has a mandatory retirement age of 65 for its senior bosses.
Earlier, Mulally was the project manager behind the 777 long-range twin-jet, a very successful product. Mulally turned to the car industry as part of the development process for this aircraft, referring in particular to Ford’s Taurus, a hit car at the time, and the last US-brand car to top the US sales table.
Arguably Mulally paid more attention to the Taurus programme than Ford did. Much was made in the early 1990s of the fact that the Boeing 777 cost less to develop than the US$6 billion Ford spent on its original Mondeo – the “world car” that wasn’t.
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By GlobalDataAnd while Mulally introduced lean manufacturing methods gleaned from the Taurus programme, Ford came up with the flop second-generation Taurus – its “catfish” face made the Scorpio look sensible. In the mid-‘90s, Taurus duked it out with Toyota Camry and Honda Accord at the top of the car sales league. But sales of the second version went into a tailspin, and now it’s gone from the range.
How did Mulally manage to turn round Boeing? By playing it safe, while its main rival lost the plot. The 787 is an ultra-conservative product dressed up as hi-tech. And while it uses a lot of hi-tech materials such as carbon-fibre composites, and uses weight-saving fly-by-wire technology, it’s really nothing more than a replacement for the 200-250 seat Boeing 757s and 767s that have now been in service for close to 20 years.
It’s been designed with a lot of input from airlines – as a result, it’s designed to be cheap to run and maintain. The airline business is highly competitive and cost control is paramount. Indeed, the 787 was given the go-ahead instead of another Boeing project, the Sonic Cruiser, an almost-Concorde that would have been more expensive to build and operate – but would have offered much greater speed. But in the airlines’ mind, speed counts for nothing against fuel economy and low maintenance costs.
Meanwhile, Airbus, Boeing’s rival, had taken its eye off the ball. Most of Airbus’ efforts have been applied to the A380, the spectacular “super-jumbo” 550-seater that has grabbed headlines over the past couple of years. But Airbus has run into problems with the aircraft – it’s tried to hustle it into production by carrying out testing at the same time as manufacturing – but this has caused major delays to the programme.
A380 sales have stalled at around 160 – break-even is more than twice that level – as the A380’s appeal is limited to very long-haul trunk services. It’s no use at all on high-capacity services such as the North Atlantic route, where smaller aircraft running higher frequencies dominate. The huge A380 takes so much longer to board and disembark. And with four engines, it’s burning more fuel than a twin-jet. One-nil to Ford.
As a result, Airbus has neglected its planned rival to the Boeing 787, the A350. This was initially little more than a heavily facelifted version of its existing A330. The market was unimpressed, and at the Farnborough air show in July Airbus announced an expensive redesign. But this has delayed the programme – it won’t be in service till 2012, three years later than the 787. Two-nil to Ford.
So is Mulally a visionary or a safe pair of hands? And how does his experience of fending off a single competitor, with a single brand, relate to the car industry? And specifically, to Ford?
Some of Mulally’s skills are transferable. The automotive and aerospace supply chains are similar, and Mulally was praised at Boeing for his “firm but fair” dealing with unions. He’ll need those skills in dealing with the UAW. Ford still has huge problems in terms of headcount reduction, pensions and healthcare costs, and Mulally will need all his guile and personal skills to sort out this ongoing problem.
In the short-term, he’ll be tasked with implementing Ford’s “Way Forward” plan – which involves closing 14 plants and shedding 30,000 jobs by 2012 – in addition to the 35,000 lay-offs and five closures already achieved.
Mulally took the knife to Boeing after orders dried up in the wake of 9/11 – resulting in a leaner company today. At Ford he will have the power to choose what stays and what goes, Bill Ford said. Mulally will work on the turnaround with Mark Fields, Ford’s president of the Americas.
Product development will be come more customer-focused. Listening to customers – albeit very different customers – has been a cornerstone of the Mulally modus operandi. So car buyers and Ford dealers can expect to be asked for more feedback.
The biggest question is bound to rest on how Mulally will tackle Ford’s brands, especially the beleaguered PAG division brands. In the airliner business, the big brand is king. Automotive brand and model proliferation will be an eye-opener for Mulally, so Jaguar, Land-Rover and Aston Martin are bound to come under even greater scrutiny.
Turning Ford round will be harder than turning Boeing round. The market is more competitive – so even if one key rival shoots itself in the foot, there will be others waiting to pounce. Mulally will look to develop products that people want. At Boeing, he copied Ford. At Ford, he’ll look to competitors, other industries – and Boeing.
“Just as I thought it was appropriate to apply lessons learned from Ford to Boeing, I believe the reverse is true as well,” Mulally said. Don’t bet against the Taurus making a comeback.
Mark Bursa
