Mon, Jan 10, 2011 - Page 11 News List

Ford hails change in culture

BREAKING THE CYCLE:CEO Alan Mulally introduced a system encouraging change and communication in a break from the infighting that once characterized Ford


In every boom cycle of its 107-year life, Ford Motor Co became complacent, unprepared for the inevitable bust in the auto business.

From the 1920s, when Ford lost its dominant position in the US because it was slow to update the Model T, to the 2000s, when it squandered billions in sport utility vehicle (SUV) profits and narrowly avoided bankruptcy, the company stuck with some strategies too long and didn’t pay enough attention to others.

“You often hear people at Ford say we can’t manage prosperity. I think it’s really quite different than that. It’s that we stop changing,” executive chairman Bill Ford told reporters in a recent interview.

Now, coming off a great past year, Bill Ford and Alan Mulally, the man who replaced Ford as CEO four years ago, say they are ready to break that cycle. Mulally has transformed the company into a simpler, nimbler organization that’s ready to react to change more quickly. Management experts aren’t so sure.

Thanks to strong new products and stumbles at rivals like General Motors and Toyota, Ford saw the industry’s biggest increases in market share. It had the best-selling vehicle — the F-Series pickup — and ended last year with its second straight annual profit. Ford’s US sales rose 20 percent, almost double the industrywide increase.

Mulally laid the groundwork. He cut brands and put in place a system that encourages managers to stay on top of market changes and other issues and communicate more openly with each other. It was a radical change at a company known for vicious infighting, where managers who pointed out problems were demonized. The healthier communication in Ford’s top ranks means it’s much more likely the company will hire its next CEO from within the company instead of turning to another outsider like Mulally.

Mulally, 65, won’t say when he plans to retire.

Management experts say it’s easy to talk about a willingness to change and much harder to do it, especially after pulling off a remarkable comeback like Mulally did after coming to Ford from airplane maker Boeing Co.

“Act two is always very, very hard,” said Joe Bower, a professor of business administration at Harvard Business School. “There are leaders who can do it, but it requires a tremendous willingness to imagine the need to rethink everything.”

Consider Ford in 2000. Flush with profits from SUVs and pickup trucks, it earned US$3.5 billion and bought the Land Rover luxury brand from BMW. Just one year later, hammered by the faltering economy and a slow reaction to a recall of Firestone tires used on its SUVs, Ford lost US$5 billion, announced a plan to cut 35,000 jobs and fired its CEO. Bill Ford held the reins until he hired Mulally.

Even now, Ford is facing some demons, including the recent recall of 600,000 Windstar minivans whose axles can break and questions from Consumer Reports, which says its MyFordTouch dashboard touchscreen is too distracting. The company says it reacted quickly to the Windstar issue and will study Consumer Reports’ findings, but believes its system is safe.

Ford and Mulally say management can respond faster to such crises because of changes Mulally made. He instituted weekly meetings with the entire 18-member executive team, ensuring that all of Ford’s leaders are constantly examining worldwide market conditions, future products and other issues. He also simplified the company’s mission, getting rid of excess brands like Land Rover, Volvo and Mercury so Ford could concentrate on its core Ford and Lincoln brands. The company is now consolidating Lincoln dealerships and trying to take the brand even further upscale to revive its flagging sales.

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