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Este informe no está disponible en español. CARIBBEAN BUSINESSA Ford In The Driver’s SeatBill Ford has firmly taken the reins of the company founded by his great grandfather. In an exclusive interview he talks about his turn-around plans for Ford Motor Co., the future of the auto industry and the importance of the Puerto Rico market.By KEN OLIVER-MENDEZ & JOSE MARTINEZDecember 13, 2001 Putting the brakes on: Ford is struggling to regain its No. 1 position in the auto industry For the first time in more than 20 years, a member of the Ford family is back at the helm of Ford Motor Co. and he has a mission. William Clay "Bill" Ford, the great-grandson of company founder Henry Ford, is leading the effort to reverse the precipitous financial slide the company has experienced over the last year. In Puerto Rico last week to announce the island’s participation in the annual Ford Environmental Awards program, Ford talked with CARIBBEAN BUSINESS about the causes of the company’s recent decline from being the U.S.’ most profitable auto manufacturer to a downward spiral, joining the rest of the industry’s money-losers, exacerbated by a recessionary economy. The affable 44-year-old Chief Executive Officer (CEO)—who has been hailed by environmentalist groups such as the Sierra Club as "an enlightened executive"—also talked about his plans for leading a company turn-around, his vision for an increasingly environmentally friendly future for the auto industry, and the importance of the Puerto Rico market. Eye of the Storm "I feel like I’m in the eye of a hurricane," Ford readily confessed to the editorial board of CARIBBEAN BUSINESS. Ford has been in the CEO position for less than six weeks. His ascension on Oct. 30, which put an end to a stormy two-year power-sharing arrangement with former CEO Jacques Nasser, comes in the midst of a hellish period for the company. The slide in the company’s fortunes began in August 2000, when Ford initiated a recall of allegedly defective Firestone tires which were principally used on the Explorer, the company’s top-selling sports utility vehicle (SUV). Since then, the company has paid $5 billion to replace millions of tires, and is currently embroiled in litigation with Firestone that has yet to be resolved. The fiasco coincided with slowing sales, shrinking market share, and the economic downturn, resulting in Ford Motor Co.’s registering two consecutive quarterly losses for the first time in more than a decade. And just last week, the company announced that it expects to show a loss of about $900 million when the fourth quarter ends on Dec. 30. Assessing the damage "Things have to stop getting worse before they can get better," Ford admitted in the interview two days after the company made its latest dismal quarterly announcements. "What we’re trying to do now is arrest the slide that we’re in," Ford said. Ford says that the Firestone issue distracted the company’s management from the basics of its business. And, he noted, in a fiercely competitive industry with little margin for error, such lapses can spell trouble in no time. "If you look at what’s happened to us over the last year, it’s clear that we took our eyes off the ball and we’re paying for it now." The CEO says that Ford North America—the heart of the company’s operations--let higher costs creep into its system at all levels, including products and overhead. In the last six weeks, Bill Ford has thrown himself into a unit-by-unit review of all of Ford’s business operations. "I’m basically going through operations, getting all the bad news on the table and rebuilding relationships with dealers, with suppliers, and with employees." Ford Motor Co. sells its products in 200 countries around the world. It has manufacturing operations in 32 countries, 345,000 employees and holds 13% of the world’s auto and truck market. "We did a lot to upset our dealers over the last couple of years, especially when we got into the dealership business ourselves," Ford admits. A saving grace for the company, he says, is the "tremendous reservoir of good will" that the company’s employees and dealers maintained. "They were just looking for a sign that this was going to get back on track." Ford says the company’s distribution network remains the strongest in North America. He also puts the downturn in perspective. "This has always been a cyclical industry." Though a lot of Ford’s management hasn’t been through a downturn before, Ford himself, while working in different capacities in the company, has gone through two recessionary periods: 1979-81 and 1990-91. The present recession has exacerbated the situation facing its credit arm, Ford Credit. "Delinquencies are up, bankruptcies are way up, and we’re seeing people just turning in their cars because they can’t meet their payments." On top of that, the current 0% financing deals being offered by both Ford and GM have artificially stimulated the industry and pulled ahead sales that would have otherwise been made next year. Ford says the 0% financing offer, which is scheduled to end Jan. 14, has pushed inventory levels so far down that even if economic activity is slow during the first half of 2002, the company expects to spend the first half of the year rebuilding its stocks. Towards recovery Ford is now focused on the completion and implementation of a turn-around plan. "The good news is, we know how to fix this," Ford says. "It’s not rocket science, it’s attention to detail and focusing on what we do best." "2002 is going to be a tight year for us," Ford says. "We’re going to have to have our internal act together throughout the year." Ford has already announced cutbacks in employee health and retirement benefits, as well as production cutbacks at its Ford Ranger assembly plant in Edison, New Jersey. But the bulk of the restructuring plan—projected to entail cutbacks as high as a $4 billion a year—is yet to come. Ford told CARIBBEAN BUSINESS that everything is on the table, including additional staff cuts, more manufacturing capacity reductions and longer-term factory closings. He also said the plan will include ratcheting down marketing costs, which he said have soared too high over the last year. Confronted with the concerns of market analysts that the turn-around plan, which is scheduled to be announced Jan. 11, might not be aggressive enough, Ford said market watchers will just have to "wait and see." He says the company’s senior management team is determined to put together a plan that analysts will find convincing. "I know that the analysts are looking for a plan that’s credible, that can arrest the operating slide and that’s conducive to recovery within the context of the macro economic climate," Ford said. "And if they see all this, then you’ll see our stock prices rise again." According to Ford, major challenges for the company include becoming more balanced in its product mix and more profitable across geography. "We’re going to aim to bring Ford car acceptance up to the level of Ford truck acceptance," he said. "We also need to be more profitable across geography." The CEO noted that for many years, Ford has been too dependent on the North America market. "Now we’re up in the European market, and the North American market is hurting." The company is also making changes in other markets, including its new plant in Bahia, Brazil, which he expects will substantially help the Ford’s cost position in South America. Hybrids for 2003 Ford says he’s working to forge a future in which the company’s market share is steady or growing in the years ahead, and in which it is at the cutting edge in applying new technology that will result in "cleaner mobility." A key component of his plan is the launching of hybrid electric vehicles for next year’s 2003 model season. Hybrid electric cars—which combine the traditional internal combustion engine that uses gasoline with an electric motor—will enhance fuel economy by as much as double and reduce emissions. The commitment to making hybrid vehicles and other advanced technology is a growing part of Ford’s future, and stems from the CEO’s own strong commitment to the environment. "The challenge for the industry has been to deliver a no trade-off vehicle," Ford says. "We have a situation where when you ask the average person in the street, everybody says that they’re environmentalists, but then when you ask them what they’re willing to give up for that in terms of their mobility the answer is nothing: they don’t want to give up any of the size, space, comfort, range, or price that they have with conventional vehicles." Unlike Honda or Toyota, which have already introduced hybrid electric vehicles outside of their main offerings, Ford says his company is taking an approach that will be more aggressive. "We’ve decided that whenever we introduce new technology, we will introduce it to the vehicles that we sell the most of, and in our case, those are the SUVs," says Ford. "The first hybrid we’ll introduce to the heart of the market will be an Escape SUV for the 2003 model year," he says. "The acceptance of that vehicle should be very good." Ford said the strategy with the 2003 Escape—as well as with forthcoming hybrid models—is to deliver "no trade-off" vehicles that won’t compromise any of the functions people are accustomed to in conventional vehicles, but with the advantage of delivering greater miles per gallon and less pollution. "That’s why I think the hybrid technology will be particularly appealing," Ford said. Another reason is that it won’t require adjustments to the nation’s gas stations, as would necessarily be the case for other new technological applications such as fuel cell-powered cars. Ford says that current fuel cell technology is not yet at the stage where Ford can launch it on a mass scale. On top of that, fuel cell-powered cars require renewable hydrogen for refueling, and a national infrastructure for fuel cell refueling stations doesn’t exist. Still, the company is aiming to introduce fuel cell-powered cars by 2004 for government fleets. In the case of government fleets, the infrastructure problem can be solved because the government will have central fuel cell refueling stations. After years of finger-pointing between major automakers and oil companies over who should go first to build the necessary infrastructure for fuel cell-powered cars, Ford told CARIBBEAN BUSINESS that his company is now working with oil companies Shell and BP Amoco--and the federal government—to see if they can together build that infrastructure. "Given the magnitude of the infrastructure and the technical issues, it’s going to be quite some time before we see strictly fuel cell-powered vehicles on a mass scale," Ford says. Fuel-cell technology also faces technical challenges. "Big fuel cells are easier to make and are now being used in bus fleets in several major cities, including Chicago and Denver," he says. "Shrinking them into passenger car size is proving to be a little bit problematic technically, and their durability in extreme cold and very hot weather is also a problem." Still, Ford is moving forward to use stationary fuel cell technology in its overhaul of operations at its flagship Dearborn, Michigan assembly plant and is also pursuing a joint venture with Daimler Chrysler and Canadian fuel cell technology leader Ballard as part of plans to "put together a platform for real-world integration of this technology." Ford is also integrating other new technology into its line-up. "Telematics is going to be the next step after we integrate electronic on-board maps into our line-up," Ford says. "We’re working on a cooperative venture with the University of Ochen in Germany on this, and what telematics is going to do is give drivers right in their vehicles real-time information on traffic congestion, the best route to take, and available parking spots once you get to your destination," Ford reveals. "It’s going to be a major enhancement to safety, because a lot of accidents are caused when drivers get distracted or panic about traffic and finding a parking spot." As far as vehicle styling trends, Ford foresees what he calls more "crossover" vehicles. He says these vehicles will combine some of the features of SUVs and station wagons, with their principle attraction being friendlier for drivers without losing the practicality of the SUV. Aiming for No. 1 in Puerto Rico Bill Ford is upbeat about Ford in Puerto Rico. In the past year, Ford has become the island’s No. 2 top-selling brand "and we’re going to be number one," says Ford. "We’ve got a terrific dealer network here and they did a great job in handling the Firestone tire replacements." In an aside on the Firestone issue, Ford confirms that top executives from his management team met with Bridgestone Firestone counterparts last week in an effort to rebuild the relationship. "We’ve had almost a hundred years of a terrific relationship with Bridgestone Firestone," said Ford, whose maternal grandfather founded the tire manufacturing giant’s Firestone unit, "but the last two years have been horrific." "I’m very open to getting this behind us and rebuilding the relationship, but it remains to be seen whether we can do it," Ford indicated. Ford says Puerto Rico is "very important" for the company. "Fords are sold in 200 countries and a very important part of our sales come from the combined strength of our smaller markets around the world." "Puerto Rico is our No. 2 market among the more than 100 small markets we have worldwide," he adds. Ford Motor Co. has 13% of the world’s automotive market share, and is projected to sell 5.5 million vehicles in 2001. Ford says 2001 revenues will surpass $170 billion. Glossary of terms Hybrid Electric Vehicle (HEV)-a car that combines a conventional internal combustion gasoline engine and an electric motor for improved fuel efficiency. HEVs release lower levels of toxic emissions into the atmosphere and can provide as much as double the mileage of a conventional car (Honda’s already released HEV, the Insight, provides 61 miles per gallon (MPG) in the city and 70 MPG on the highway). Fuel Cell–an energy conversion device that converts chemical energy into electrical energy to power an electric motor. Hydrogen is required to power fuel cells. Fuel cell vehicle emissions are virtually pollutant-free. Telematics-a mapping technology system that provides drivers with real-time information about traffic congestion, the best route to take and available parking spots at a given destination. This Caribbean Business article appears courtesy of Casiano Communications.
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