< Ford CEO Alan Mulally on the State of the Carmaker

Transcript

Wednesday, January 27, 2010

CELESTE HEADLEE: So I almost feel like I should have some dramatic tympanies behind me when I ask this question, but is Ford going to be posting a profit on Thursday?

ALAN MULALLY: Well, you absolutely have the right date. That’s the date we’re going to do our fourth quarter and year end results and at that time, we’ll update our fourth quarter performance, our year end performance and also provide our guidance for 2010.

CELESTE HEADLEE: But we know that Ford earned just shy of $2 billion dollars in the first nine months of 2009, so how have you turned this around for Ford?

ALAN MULALLY: Well I think I would take us back to three years ago where we developed a point of view about the kind of company that we wanted to create with Ford. At that time we decided that we were going to focus on the Ford brand so that lead us to divest of the other brands as everybody knows and we also decided that we were going to have a complete family of vehicles that the consumers wanted in every market segment so small, medium, large cars, utilities and trucks. We also decided, Celeste, at that time every new vehicle that we designed and produced would be best in class and we defined that in terms of quality, fuel efficiency, safety, smart design that makes us even a better driver, and of course the very best value. The last big decision we made together was that we were going to use our Ford capabilities around the world to leverage all that intellectual capability to operate as one Ford so that we could serve all of our customers around the world and also I get the benefit of our scale. We went to the banks, we got the financing in place for this tremendous transformation and clearly during the worst of times, as the recession increased we had sufficient liquidity so that we could continue on our plan. We accelerated development of the new products and services that you’re seeing today and we restructured ourselves to get back to profitability as you pointed out in the third quarter. So, we’re here now as the recession starts to turn that with the products that the people really do want and value. It’s very gratifying to see the response that we’re getting for the new products.

CELESTE HEADLEE: Well, you definitely got some love from the awards at the auto show that must make you happy. I’ve been covering the auto industry from Detroit for a long time and I remember when you very first took the job at Ford and there were a lot of people that were skeptical about it because obviously there are a lot of people who feel like in order to be a good manager of automobiles, you have had to have been in the business and grown up with the business. You came in from Boeing, and you mortgaged the logo and you started selling off brands and you were doing all these things that made people scoff. So now you’re either looking like the greatest, luckiest gambler in the world or just shy of Nostradamus in terms of your prophetic abilities.

ALAN MULALLY: Well, again, I’ll always be so pleased that Bill Ford invited me to join Ford and of course, it wasn’t going so well. He wanted help and somebody that had a lot of experience in a global economy but also with engineering and manufacturing and customers and markets. We pulled together very quickly with our team around this fundamentally different strategy for Ford and everybody, everybody is so pleased that it’s all starting to work like you’re reporting today.

CELESTE HEADLEE: Let me ask you about the state of the union for the auto industry. The auto industry that used to just be the cornerstone of the American economy, not just the American economy, but the American middle class – what is the state of the union for the auto industry now? Will it ever be the cornerstone that it once was?

ALAN MULALLY: Well, I sure think so, Celeste because the automobile industry in the United States is very, very important and very large. When we look at the markets worldwide going forward, we think about 33% of the total vehicles sold will be in the Americas and about a third will be in Europe and Russia and about a third will be in the Asia Pacific region. And the United States has a very, very viable automobile industry with Ford and General Motors and Toyota and Honda and Hyundai. It’s a very, very robust automobile market. The neat thing about Ford is that with our new Ford strategy and having a vehicle in every market segment is that we are actually now growing our market share in the United States and around the world which is terrific for our customers as well as everyone associated with the automobile industry because we’re making the vehicles that people really do want and value. We’re creating a strong business. I think, Celeste, what’s neat about the US auto industry and Ford in particular is that we are part of the solution and for energy independence, energy security, national defense, sustainability – and that’s why you see us working very closely with our government leaders and our state and local leaders on continuously improving our competives in the United States. This is an important industry for all of us in the Untied States and around the world.

CELESTE HEADLEE: Well, now the auto industry is becoming a leader – they kind of had to be drug, kicking and screaming into that but it feels like, perhaps, when you talk about a viable auto industry that really what you’re talking about is the new face of the auto industry which is much leaner, much fewer dealerships, not nearly as high starting wages as we were used to – this is not the same exact auto industry which established Detroit as the richest city in the world at one point and created this very well-off middle class – this is a leaner and in some cases, cheaper auto industry.

ALAN MULALLY: Well, there’s a lot of truth in that but of course the most important thing as an industry because this is business is to make sure that you do have your business as sized so that the production is meeting the current demand and that was a very important part of our plan that we brought our production down to match the current demand which was the profitability at that lower demand also then accelerated the development of the new vehicles that people really do want and value. I think you’re seeing a fundamentally different strategy as you pointed out by the Detroit companies, especially Ford.

CELESTE HEADLEE: I’m wondering what you think about the state of the union of CEOs? This is a job that you’ve held for a very long time and I’m certainly not going to cry any tears over CEOs, you know, you have a good job in a nation of high unemployment but the job of the CEO has changed. You’re at a company that was founded by the man that defined the CEO, he’s the archetypal head of the company, right? The father figure, the CEO Henry Ford. And that is not what the CEO is anymore, what is the CEO’s responsibility now?

ALAN MULALLY: Celeste, I’d go even further with your thought because I think it’s a very important thought. The most compelling thing about Henry Ford was that he had a very clear, compelling vision for the Ford Motor Company. I remember this quote by Henry in 1925, January 24th, 1925, and his quote was that the real, compelling vision for Ford was to open the highways to all mankind. So at the most fundamental level, I think that job, that contribution, that unique contribution of a CEO to formulate and articulate a compelling vision for the business is still the most important thing. It doesn’t mean that you do it by yourself but you work with all the stakeholders, you come together on what the business is really about, who the customers are going to be, what unique thing we’re going to do to serve our customers. In Ford’s case, the most exciting thing about Ford is that we are now accelerating the implementation of Henry’s original vision ‘cause you look at now at focusing on Ford, a full product line, a best in class in quality and fuel efficiency and safety, serving all the customers around the world but leveraging our size and our capability – this was Henry Ford’s original vision and we are now accelerating that vision. I think that’s a very unique, important contribution of a CEO.

CELESTE HEADLEE: But for a company like Ford, like the Big Three, or any large company – Xerox, even, Delta Airlines – to a certain extent you’re a figurehead that has to take responsibility when things don’t go right. I remember watching the footage of you going to Washington and having to answer the criticism of these congressmen who, having covered the auto industry for a long time, had not been cooperative with the auto industry before but were then harshly critical of decisions that were made 10, 20, even 30 years before you took the helm at Ford. So to a certain extent, a CEO has to take the fall sometimes.

ALAN MULALLY: Absolutely. The CEO is very much responsible for the business, where it’s going and its performance. Just the case that you mentioned, Celeste, is a very important proof point of that because at the time, this is a little over a year ago, there was very big decision for us, for me, to go back to Washington DC and testify on behalf of our competitors because they had a very good chance of going into bankruptcy which could have taken the automobile industry down and also contribute to the United States economy going from a recession to a depression. I was there to support the industry and I also support (excuse me) the US economy even though I did not need, Ford did not need the money. That is a responsibility that I took very seriously ‘cause it was even bigger that the near term fortunes of Ford. I think at a CEO level you have a tremendous responsibility to all the stakeholders associated with the enterprise – the customers, our dealers, our suppliers, all the Ford employees, the UAW, our government leaders throughout the states and the federal level. You’re absolutely right, there is a lot of responsibility but also it’s very rewarding, very satisfying, very fun.

ALAN MULALLY: Celeste, I hear that we have to go.

CELESTE HEADLEE: Can we get one more question in for you? The big question?

ALAN MULALLY: Sure.

CELESTE HEADLEE: Because you know obviously this is a look at the state of the union address that the President will be delivering and we’re asking different people, looking back what do you think is the state of the union right now? What would you say the state of our country is?

ALAN MULALLY: I think that it’s been pretty well articulated by many people that clearly living within our means, getting the economy growing again, facilitating businesses, investing, leading economic development, our trade in balance, our deficits, our choices – what we do with our precious tax payer money – I think these are all very, very important issues that everybody’s working on and I’m looking forward to hearing what the President sees for us, what the state is and what he sees for us going forward. Thanks a lot, Celeste, it was nice to meet you on the phone.

CELESTE HEADLEE: Thanks. You, too. Alan Mulally, president and CEO of Ford Motor Company.

Guests:

Alan Mulally