Brand clarity in the consumer's eye the most important thing: Ford CEO

In the seventh floor conference room of New Delhi’s ritzy Taj Palace, Alan Roger Mulally sports a fixed grin. It is such a constant that very few claim to have seen the Ford CEO and President ever break into a frown. In India to flag off Figo, the auto major’s first small car in the subcontinent, the 64-year-old engineer from Oakland, Calif., has reason to cheer. Since he assumed charge at Ford three years ago, he has taken the company out of bankruptcy, hawked assets like Jaguar, Land Rover and Aston Martin for $23.6 billion and skirted government assistance. Simultaneously , the engineer who spent 37 long years at Boeing got rid of the flab and integrated the car major as one company that serves customers on a single platform worldwide—a far cry from the time Ford worked in silos. That makes Ford Motor Company, the Blue Oval, the best poised among the Big Three Detroit auto majors to get back in the black by 2011, going by conservative guidance figures. The characteristic Mulally exuberance is on show as the man of the moment greets CD and pumps his fist in the air when asked about the small car and the future of Autoville. The world is getting smaller and for Mulally, there’s no denying that. “We believe that 60% of all vehicles that people purchase will be small cars, about 25% will be the medium-sized vehicles and 15% will be larger vehicles. In India, the centre of the market—70 %—is the small car. With our new launch, it (India) is clearly going to be one of the most important markets. We also plan to have Ford operations in Indiathe design, the assembly, the suppliersand will do that in integration with the Ford team worldwide,” he elaborates. But the small car from Ford has taken some time coming, with rollout speculations rife over the last one year. “Around the world, especially in the US, we were focussed on SUVs (sports utility vehicles) and trucks and we did that because we were hard-pressed to make money. The key was to have a transformation agreement with United Auto Workers (UAW) so that with our scale, we could make money on our cars.” Headquartered in Detroit, UAW is a labour union that represents workers from the United States and Puerto Rico. In all, Mulally negotiated four new agreements with UAW that brought down labour costs from $76/hour to $55/hour. The Mulally mantra doesn’t end there. A hands-on manager, he’s in office at the crack of dawn—5 :20 am, to be precise—and stays put for 12 hours each day. He also holds court with top Ford honchos every Thursday at the Thunderbird Room at 8 am sharp, in what has come to be known as the famous ‘Business Plan Review’ . His executive chairman William (Bill) Clay Ford handpicked him in 2006 after Chrysler’s Dieter Zetsche and Renault/Nissan Motors’ Carlos Ghosn turned down the offer. An aeronautical and astronautical engineer from Boeing was hardly a fit for Motown . Remember how GM hired Ron Zarella from Bausch & Lomb? He got in his packaged-goods cronies, and they were out in no time. Ford, too, experimented with some packaged goods and tech old-hands , but without success. So, their choice of Mulally, who was twice passed over as Boeing CEO, was naturally a surprise. “I’m an insider now,” he chuckles with a wink. John Parker, his exec vice president APAC and Africa, sitting by the side, adds that he was an insider within five minutes of joining the company. It was hard convincing the father of five to move with family from Seattle to Dearborn, Mich., but once in, Mulally laid to rest any speculation on his ‘outsider’ status. For him, the similarities between the airplane business and automobiles are striking. “Both are very complex products and involve high technology for safe and efficient transportation. Besides, the markets are very similar. When I say 60% of the markets for vehicles are small, it is the same for Boeing-737 s. When I say 25% of the markets are medium, those are 777s and 787s. And when I talk about the large 15%, they are the 747s. Like at Ford, when Boeing designs airplanes, it is thinking about the travelling consumer—where do they want to go and how high do they want to fly, what is the economics of it and how important is the fuel efficiency ?” Mulally says, adding that he’s honoured to have served two global icons. It was Mullaly’s clear thinking that convinced Bill Ford that he was the man who could turn around the fortunes of the first motor company in the world. Ford hired Mulally and let him loose on ‘The Way Forward’ — a restructuring plan to regain lost market share and shore up dipping revenues . Mulally’s first victory was his One Ford programme, that mimicked Toyota’s global platform and tore down the notorious Ford fiefdoms, an unheard of initiative coming from any American car major. And then there was the task of dismantling the company’s reliance on SUVs; Mulally’s praise for his Lexus LS430 before he joined Ford had earlier drawn sharp criticism. He went about launching a slew of such vehicles—the new Fusion Hybrid and the revived Taurus and the soon to be launched small-style European Fiesta. Today even as the other two Motown majors continue to struggle, Ford’s has avoided financial ruin. “We’ve raised $1.6 billion in the second quarter of this year and paid back $10 billion of our loans,” he says. The Boeing engineer also used the downturn for effective value creation. “You must deal with the current reality but also have a point of view about the future that creates value. You can always create value in the near-term and use your investments for the future but what you’re sacrificing is longterm value creation. That’s why we decreased our production when the markets tanked. That was a very tough decision because we had to reduce our suppliers, our employment and our facilities. The important thing is to size yourself to the current production and get back to profitability.” Early this year China leapfrogged the US to become the world’s largest auto market (735,000 cars were sold in China in January against 656,976 cars sold in the US in the same month); Ford, a relatively late entrant in the Chinese market, sold 172,000 of those cars in the first half of the year. It’s still a relatively smaller player there but Mulally is moving in for the kill. “The Chinese market is very similar to the Indian market. Customers want primarily small and medium-sized vehicles, the best performance, best fuel efficiency and safety . They’re also very value conscious,” he points out. He will put his One Ford strategy to test in China by using integrated global resources to pull off a coup of sorts against formidable competition from the likes of GM, Peugeot-Citroen , Volkswagen and Honda. And with the launch of Figo (‘ cool’ in colloquial Italian) in neighbouring India, he signals the way forward with yet another pump of the fist. Bring up the Nano and he’s quick to react—“ We’re not competing in the Nano market.” He does say though that he believes the Figo will change the complexion of the small car segment. “The best thing we could do is to use our scale and intellectual capability to focus on the big pieces of the market going forward,” he explains . Two years ago, Mulally sold Jaguar Cars and Land Rover to Tata Motors in what was a distress sale — the Blue Oval made $2.3 billion from the sale, considerably below what Ford paid for it under former CEO Jacques Nasser. Mulally maintains he has no regrets about his decision to sell. “The Jaguar and Land Rover are tremendous global brands but this is the toughest recession that we’ve ever been through. We’ve also invested a lot in Jaguar Land Rover. Tata Motors have a great product line and the brands have a great owner under the Tatas,” he reflects. Mulally systematically went about hacking other brands in the Ford stable, selling off Aston Martin to a Kuwait-UK joint venture in 2007, reducing Ford’s stake in Mazda and attempting an exit from Volvo.