Mulally plans a U-turn at Ford

In one of his first interviews since taking over as Ford CEO, Alan Mulally spoke with Fortune's Alex Taylor in New York.

By Alex Taylor III, Fortune senior editor

NEW YORK (Fortune) -- The auto business is a product business, but you are an airplane guy, not a car guy. How can you help out in the new model development that is so vital to Ford's health.

My career has been spent developing airplanes. What I've noticed is that the process is very, very similar. It's making a judgment call about the way the world's going to develop, the consumer trends and having a point of view about that and then looking at your product portfolio and advanced technology, looking at what we can do to utilize more of our investment across the product line and then developing a product. I feel very comfortable with it.


Are decisions being delayed while you get up to speed on the business?

Boy, I don't think so. One of the first things that I noticed, Alex, was that Ford (Charts) had many separate meetings about the business: product development, quality, production, marketing and very, very, good meetings.

But what we didn't have was a business plan. And so my experience, that has been that it's an absolutely critical part of the management system to review every week what the plan is that we're on: the business environment of the customers, the vehicles, the revenues, - every part of it.

And so, we started with a business plan here. It was a little rugged at first. But, I'm including everybody. So everybody on my team worldwide is in that meeting, which starts at 8 o'clock, and getting the data to show us where the problem areas are now, so we can deal with the issues.

And so, by the way that flushes out all of the decisions that we didn't make. I think it got more engagement, really fast, by everybody, by participating in decisions that need to be made.

Ford has a reputation for being very political , very territorial. How do you propose to change that?

Starting with the business plan we view together on Thursday. You just can't hide. Helping each other, listening to each other - there can be no more side conversations. We all look at one screen. We used to have lots of screens and everybody's kind of looking everywhere. So everything is in focus, all of us together on the plan, and the status and the forecast. It's just right there. And if you're on a different planet, everybody's going to know.

Why does Ford operate so independently around the world?

I asked Bill [Ford] a lot of questions about why we haven't integrated the Ford brand. He said, they're all set up that way, they work. So even though there might be synergy or value of working together, that's hard.

So we kind of waited, and I think one thing we decided as a team is that we can't wait, we have to create and design a vital Ford Motor Company going forward.

We have wonderful assets around the world and we decided as a strategy that we are going to leverage these assets, in common platforms with the variations that the customers want

You often hear that the finance staff has a stranglehold over product development. Is that an issue you want to work on?

Absolutely not. I'm here to generate profitable growth over the long-term. Because that's what business is about. And the only way you generate profitable growth is with products and services that people want and they prefer. Every new product that we develop we need to convince ourselves that it's going to generate profitable growth.

You've been through layoffs at Boeing (Charts) - how do you avoid institutional paralysis when people sit around and worry about their future?

The most important thing is to move decisively, and respectfully. Because the most important thing is to get the decisions made so people can move on. It's important not only for people that are leaving but also for the morale of the people that are going to go forward. Move decisively and make the decisions, help everybody move on, and then really stay focused on the plan.

It's been said that Ford has a huge cost disadvantage against Toyota (Charts), as high as $3,400. How long can you stay in business without achieving parity?

I think that those numbers are about right, in aggregate, and I think that we need to move decisively to close that gap. I also think that the first part of that is restructuring ourselves to operate profitably at lower volume.

And of course, at the same time, the second priority is to accelerate our product development plan where we get a chance to evolve the designs so they are easier to manufacture and have more common parts

Because our cost structure is driven by our complexity: The complexity in the models, the complexity on the production system, the complexity on the plants.

Ford has very high capital expenditures as a result of complexity?

Absolutely. Because the capital and the engineering has got to be laser-focused now on the product and a compatible production plan that delivers the quality with the productivity.

Do you think everyone realizes how badly Ford is off?

The most important thing to me is to bring my team together about the real situation . And [at a meeting] I went around the room and - it wasn't good enough just to say it, we also had to say that we cannot go on the way we're going .

To continue to do what we've been doing is not going to create a viable Ford. You might get through this downturn one more time, but it's not going to create a viable Ford where we can profitably grow, and that's the goal.


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