Ford’s 100th anniversary prompts some thoughts on success and failure at the great Dearborn-based car company and some parallels with its older rival in Turin. By Karl Ludvigsen.

Ford was probably at its best when it had a successful General Motors to copy.  I’m thinking here of the post-World-War-II Ford, the one that was rescued by Henry Ford II and his “Whiz Kids” from the technological dead end to which the founder had consigned his company. In those post-war years Ford’s new management brought its products in line with those of GM, upgrading both Ford and Mercury and aligning Lincoln more closely with Cadillac.  To be sure, Ford attempted a GM-lookalike brand too far with its Edsel, trying to fill what it perceived as its Olds/Buick gap.  It wasn’t a bad idea but it was both badly executed and unluckily timed.

In those halcyon years of the 1950s and 1960s Ford could shelter under the prices set by GM. Market leader GM styled and engineered its cars and only then calculated its prices to include a profit margin. At Ford the process was reversed. It started with GM’s pricing, then meticulously and rigorously planned every cost element of its cars to generate a profit, using the tough financial controls introduced by the most self-effacing yet most powerful of all the “Whiz Kids,” its finance chief J. Edward Lundy. Embedded throughout the organisation, Ed Lundy’s troops imposed a draconian rigour on all aspects of Ford’s operations.

During these years Ford did score some product innovations of its own. GM was not at all pleased that Ford was first to market with a close-coupled four-passenger car, the 1958 Thunderbird, which seemed to ape the promising package of a previous Motorama Buick. While GM was struggling with its “mid-sized” models in the early 1960s, Ford set a clear new direction for this class of car with its 1962 Fairlane. And few new cars have been more influential than 1964’s Mustang, which established a new market segment. In the main, however, Ford tracked GM’s mainstream products closely and profited handsomely by so doing.

From the late 1970s, however, GM was no longer the car company to copy. Struggling to come to terms with the Energy Crises, GM created disarray among its model ranges and foisted bland and indistinguishable designs on its publics that lasted well into the 1980s. Ford was forced to think for itself. Under Don Petersen it broke new ground with its Taurus, a new interpretation of a car for America, and its Sierra in Europe. The late 1980s brought unprecedented profitability to a Ford that had streamlined its decision-making with the valuable help of W. Edwards Deming. In the early 1990s Ford stumbled, however, under its last finance-driven chairman, Harold “Red” Poling.

In this new era, every major top-level change at Ford brought with it new management notions. With the implementation of these new notions came debilitating delays in crucial decision-making on plants and products. None had a worse impact than Alex Trotman’s attempt to convert Ford into Toyota with his “Ford 2000” program launched in the mid-1990s. Ford’s old policy of decision-making close to the point of sale – key to many of its greatest successes and a hallmark of the Petersen era – was replaced by centralised control from Dearborn that stultified product progress. Trotman’s successor, Jac Nasser, faced an almost impossible task in having simultaneously to dismantle “Ford 2000” and to revitalise Ford’s lagging product program.

Under Bill Ford and Nick Scheele, Ford is still tinkering with its management structure. CFO Allan Gilmour has been asked to lead a study to identify what Ford would look like if it were designed from scratch to meet its current and future challenges and opportunities. Bill Ford referred to this when he said, “One of the discussions I’m having with our senior management group is what is the right profile for this company and what should the drivers be?” This summer Ford celebrates its 100th anniversary, so Gilmour’s effort would have the potential to put a new structure in place to launch the company on its second hundred. Frankly I don’t think it will much matter what structure is chosen, as long as it’s allowed to stay in place for fifty years or so to give it a chance to settle down.

Following in the wake of Don Petersen, whose tenure as chairman saw Ford acquire Jaguar, Jac Nasser made some pretty impressive acquisitions. Among them were Volvo Cars and Land Rover. The latter came about in a surprising way. When BMW was Rover Group’s owner, Ford was approached by the Germans to see whether it would like to take the British properties off their hands. Ford said no to the complete package, but admitted that it coveted Land Rover.  Later, when Rover and MG were hived off to British interests, BMW asked Ford whether it was still interested in Land Rover. This received a fast affirmative and the deal was done, to the astonishment of the rest of the industry.

In its drive to diversify into services and new-tech businesses, Jac Nasser’s Ford made some other acquisitions that raised eyebrows – British service network Kwik-Fit among them. This buying spree reminded me of the policies of the Agnelli holding companies, IFI and IFIL, in their management of the Fiat properties. In good times, when Fiat Auto was doing well, they added other companies to their portfolios, expanding into North America in medical and agricultural equipment and acquiring service companies in Italy. When times turned bad, they didn’t hesitate to sell off these properties to raise the funds they needed to keep Fiat Auto afloat. Gianni Agnelli always regarded his auto company as the one worth keeping.

After Gianni’s recent death there was reason to think that the car company was no longer sacred, that it might be speedily sold off to GM. Under younger brother Umberto, however, the family’s interests have been rallied round to back Fiat Auto and its effort to launch the new models it needs to regain viability. As in the past, non-core businesses – components and insurance – are on the block to help reduce the car company’s heavy debt burden.

Jac Nasser’s Ford buying spree seemed to have had another more ambitious dimension. There was an underlying sense that he hoped to make the markets more interested in Ford shares by giving the latter a glossy “tech” dimension with his 24/7 styling prototypes and computers for all employees. If so, it didn’t work. Neither could it have worked. With my management-consulting hat on I’ve analysed the performance of auto-company shares in relation to their acquisitions and the reactions of the market. My findings? Markets don’t like car makers to be dabbling in areas they don’t understand. They don’t accord a premium to the shares of auto companies that fool around outside their area of proven competence – think Daimler-Benz in the era of Edzard Reuter. Indeed, they may even penalise firms that don’t stick to their core business area.

Ford’s shares have certainly been punished, and for a variety of reasons. There’s talk again of tumult at the top, of unrest among Messrs Ford and Scheele and the latter’s hatchet man, David Thursfield. Perhaps the markets would rest more easy if they were aware that during some of Ford’s most successful periods – when Phil Caldwell and Don Petersen were teamed, for example – Ford’s chairman and president spoke to each other only when not to have done so would have been all too obvious.  That’s probably the secret of success at the top of a highly political car company like Ford or Fiat.