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"You can't be world-class in a bunch of things simultaneously"

In the auto industry participants typically keep production up, flood the market even during a slowdown and put a discount on the vehicles.

Alan Mulally | Print Edition: April 18, 2010

Last year, it was a tense time for all.... We had to change the business model of Ford.... There are huge strategic decisions that we made differently. In the auto industry participants typically keep production up, flood the market even during a slowdown and put a discount on the vehicles. This actually delays recovery from a recession. So, we took the first decision to make the number of vehicles that people really wanted and figure out how to do it profitably.

The second decision was that we were going to focus on Ford. Tata is a great company and they purchased Jaguar and Land Rover. We also divested Aston Martin, took down our equity in MAZDA and also have Volvo for sale, because Ford had become a house of brands. You can't be world-class in a bunch of things simultaneously. The Ford brand was 85 per cent of the business, and we were back to Henry Ford's vision of making it affordable for all of us and that unleashed the talent inside Ford worldwide.

Then, the next decision we made was no more of just being competitive. Every new vehicle that we designed and produced would be the best in class for quality, fuel efficiency, safety, smart design and value. I hope you get a chance to check out the new Figo because it is world class—inside, outside, fit and finish, drivability.

I knew that we needed to accelerate the development of new vehicles even in the toughest of times. And the most important thing was not to run out of money. So, I went to the banks with these business plans and raised $23.5 billion when the credit markets were open. We had enough to finance the plan, all the new vehicles, and have a cushion to withstand the recession and depression. And the last big strategic decision is to work together around the world; not only with the governments, the suppliers but with all our participants because we are all interdependent.

The (global platform) plan at Ford is going to actually enhance our ability to make higher quality vehicles worldwide. We all know who is going through a rough time (car recalls) right now…. I think that Toyota is a great company, they have a very proud history, they are going to figure this out very decisively and get it done.... Both the automotive and airline industry are predicated by the need to provide a safe and efficient means of transportation.

And the recall process is part of that. You find a problem, fix the issue and learn from it. It is a process that has served the industry very well and will continue to do so. The global designs are really a plus because you have less complexity. So when you do have an issue you can move on decisively. The talent and the knowledge that we have worldwide is incredible, so what we are doing is tapping into it to benefit our customers with quality, productivity and enabling technology.

That is the reason we have been able to move so quickly. The Figo is a perfect example of how to leverage our assets worldwide. It's on a global platform, it serves a number of markets. As we bring on more and more of our products to India, you'll see more and more of these level platforms that will be the same and will have the advantage of enabling technology.

With this business model...we are never outsourcing. In every place that we operate, just like in Chennai, we are expanding the entire supply base.... So, as we normally further develop our design or manufacturing capability, we are also developing our supply base. If you look at the automobile industry in India and around the world, for every automobile job we create, there are another 9 or 10 jobs that are associated with it, with the dealers, the suppliers. There's a tremendous multiplier attached.

Which is why manufacturing is going to be very noble and there are people who want to be in manufacturing. It's the most important thing that they decide and then we put together a plan that has public and private partnership to be actually able to grow manufacturing business. In it knowledge is involved, science is involved, there's engineering. In manufacturing we actually create something of value.

Henry Ford's vision was to participate in every country around the world where he was going to serve the customers with cars. But I was amazed at how independent each of his companies had become. With everyone talking about merging with each other, reporters would ask if we would merge with another company, and I'd say absolutely, we will merge with Ford. On the technology issue, we are at a really critical juncture. If you look at the technology roadmap, we clearly have a lot of room for improving the internal combustion engine, whether petrol or diesel. The next would be more hybrid cars, and then, all electricity.

But how do we generate electricity and how do we do that clean and how to use it? And we have some big decisions to make, right? Electric cars are not going to solve all the issues that we care about when it comes to sustainability. The other issue is putting in the infrastructure so that we can operate the vehicles but whether we go with electricity or with hydrogen.

Hydrogen could be the ultimate solution too with very capable fuel cells: It makes hydrogen with platinum, water comes out of the tail pipe, electricity goes over to the electric motor and you have a 100 per cent carbon dioxide reduction. But again the issue is what the infrastructure is going to be that allows all of this to be used on a big scale?

So as soon as we can get the capability, solar panels and packaging, then we can use them in cars and you always have the alternative that if the car is not shining, we can carry the batteries along. It is a real system solution there. I look forward to it and figure it out with the governments because this is an all-time public-private partnership, to create the kind of future that we all want.

Alan Mulally is the President & CEO, Ford Motor
(Based on Mulally's speech at the Conclave and an exclusive interview with
BT)

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