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COMMENT: Alan Mulally's Ford legacy

By Dave Leggett | 2 May 2014

Mulally on the mortgaging of assets as part of the business plan: “Of course the bankers thought that was a very viable plan and thats why they loaned us $23.5 billion."

Mulally on the mortgaging of assets as part of the business plan: “Of course the bankers thought that was a very viable plan and that's why they loaned us $23.5 billion."

When I met Alan Mulally on the top floor of Ford's World HQ building in Dearborn, it was like a whirlwind had entered the room. The man's energy was pretty impressive. He was moving around rapidly, arms animated and talking constantly. There was a palpable enthusiasm and a Ford turnaround story that he was only too keen to tell to the journalist from England in the room.

It was a different experience from the one a few years earlier when I met Mark Fields, again for a one-to-one interview. Fields was also very open and relaxed, but he came across as a more measured character, polished even.

The two of them appear to have worked well together. Mulally, remember, was formerly from Boeing. While he set the controls for the overall corporate strategy, Mulally also relied on Fields, in particular, for a handle on the essentials of the automotive business. Fields was the well-travelled car company executive. They complemented each other and Fields had already put in place a turnaround strategy (restructuring under 'Way Forward') for North America (in part building on Fields' experience with Mazda). Mulally must have simply said: please carry on the good work, Mark. The leaner cost base in North America would eventually prove vital for Ford. Fields would have appeared as a 'safe pair of hands' and there is nothing in what has happened since to change that assessment. Fields has not put a foot wrong under Mulally.

And Mr Mulally made some pretty astute moves. Most importantly, mortgaging Ford assets ahead of the recession looks like stunning foresight. In reality, there was an element of luck that Ford had that large liquidity cushion when severe recession struck the industry out of the blue. However, it was certainly a financial plan that made sense in any case, to provide funds for essential investment in new product (and key technologies such as EcoBoost for engine downsizing, hybrids, SYNC connectivity). Mulally stressed the importance of Ford not taking its foot off the investment pedal, however bad the market environment looked. Ford had to stay competitive in the market at all costs, he said, understanding that cost-cutting taken too far can be counter-productive (as General Motors is perhaps now becoming only too well aware).

As GM and Chrysler hit the buffers in 2009, Ford's liquidity cushion kept it out of Chapter 11, something that played very well to both customers and employees. Ford, you see, was now morphing into a different animal and Mulally was emerging as an inspirational breath of fresh air. It was now becoming 'One Ford'. The premium brands were sold off and the focus would now be on making Ford work as a global brand, a singular brand entity with global products, global values. Alan Mulally was an adept champion for the One Ford strategy, something that sat well with being the new guy from outside the (sometimes incestuous) auto industry and without baggage. He also built an organisation that was less prone to political infighting and one where senior managers embraced a culture of openness that was absent before.

Ford started to make good progress in the North American market. Besides the marketing advantage of being able to say 'unlike some others, we are not taking government handouts', the product was now being recognised as better. Ford was coming out very well in quality and reliability surveys (Fields laid the ground work for that). Not only were Ford products seen as of much higher quality than a few years' earlier, but the seemingly inexorable advance of Toyota in North America was halted by unprecedented recalls. Toyota's share of the US market fell. Ford was one of the main beneficiaries of Toyota's woes. 

Around the world, Ford benefited from lower costs as One Ford rationalised and integrated new product development. Sales have been growing comfortably in Eastern Europe, Asia and South America as Ford developed the right models and local manufacturing footprints. Ford's resurgent bottom line pleased investors. The man at the helm was clearly steering the ship with aplomb.

But nothing lasts forever. Mulally is no spring chicken and has probably been considering how he would eventually leave Ford for some time. When a single executive is so closely associated with successfully steering a ship through severely turbulent waters, investors inevitably get jittery on the succession question. One last turnaround challenge at an unrelated company, Microsoft, undoubtedly appealed at the back end of last year. Mulally very nearly jumped ship for that opportunity, but in the end it wasn't quite right. One thing the 'will he, won't he?' media coverage of that possible move illustrated was that the speculation could quickly build and could potentially worry investors. Better, it was concluded, to get some clarity, avoid volatility and put the successor in place while the big financial picture is very positive.

And so, here we are. Mulally is off to pastures new from this summer. He leaves a company in very good shape. Mark Fields is a very able successor as CEO who has also played a key part in Ford's resurgence; he knows the car business and Ford Motor Company inside out. He has had a close relationship with Mulally since Mulally joined Ford in 2006. Fields will have learned from Mulally how to deftly communicate and motivate people, at all levels, and how Ford has been transformed into a very much better run company than it used to be. He has been an essential part of Ford's transformation under Mulally's 'One Ford' strategy and that should reassure all Ford stakeholders.

See also:

BLOG: An unusual momento from Ford's Mulally

US: Ford's Mulally hands reins to Fields on 1 July

US: Golf off Ford CEO Mulally's next-move list - report

THE EDITOR'S Q&A: Ford's Alan Mulally [full version]

Interview with Mark Fields