Ford's Dej Vu Moment, Part 1

Oil prices have just hit record highs. Talk of recession is in the air. Ford’s line-up of bloated, heavy vehicles is piling-up like cord-wood on the dealer’s lots. The only car selling: its “Americanized” global compact. Ford stock is in the toilet and bankruptcy rumors are swirling. The top exec hired a year earlier is intelligent, unassuming and straight-talking. He commits Ford to building “higher quality products with stronger customer appeal… emphasizing smaller, more efficient cars.” Ford in 2008? No, it’s 1981.

Like current Ford CEO Allan Mulally, Donald E. Petersen was an atypical choice when he was promoted to the Presidency by the Ford family in 1980. An engineer, development executive and genuine piston-head, Petersen was also the antithesis of Lee Iacocca, whom he replaced. Never in modern history has an automotive CEO been so devoid of spin and hyperbole. No wonder Ford of the eighties looked to Japan for inspiration.

Petersen learned of Toyota’s use of quality guru Edward Deming. In the first coherent US automaker assault on “total quality,” Petersen adopted Deming’s techniques, and those of corporate guru Peter Drucker. As measured by owners, Ford’s vehicle quality improves 60 percent from 1980 to 1987.

The aerodynamic 1983 T-Bird launches a dynamic wave of efficient, exciting and successful passenger cars. The Turbo-Coupe has the world’s first fully computer controlled (EECV-IV) integrated turbocharged fuel injected engine. The Ranger successfully takes on the long-established Japanese compact pickups, becoming the category best seller for many years. The Fox-body Mustang’s balance of light weight and V8 power at an affordable price reinvents and dominates the pony-car class.

In the biggest single auto product gamble in modern times, Ford launches the 1986 Taurus. It leapfrogs the competition, and sets the packaging and dynamic standards for the modern US-market sedan. For sells 400k Tauruses per year, grabbing the best-seller crown from the Honda Accord by 1992. Petersen employs Japanese “just in time” production methods at Ford, and the Atlanta Taurus factory becomes the most efficient auto factory in the US (including Japanese transplants).

Petersen’s honest, cooperative, non-political management style motivated FoMoCo’s management ranks as never before. His deep experience in car development as a car enthusiast ensurfed that Ford’s products were consistently more dynamic than their competition.

In trend-setting, car-conscious California, Ford becomes the number one selling brand. The Blue Oval Boys’s passenger cars sell well in The Golden State; GM and Chrysler have already become irrelevant (except for trucks and Corvettes). Ford’s profits explode. In 1986 and 1987, Ford was the most profitable car company in the world. As its stock ascends from around $1 in 1982 to $17 in 1987, “F” becomes a Wall Street darling

But what really separates Petersen from the rest of his ilk: he maintains perspective, candor and modesty– despite the phenomenal success that was his doing. It’s a stark contrast to Chyrsler’s Iacocca, who had to be dragged out of Chrysler kicking and screaming, well past his sell-by date. And then tried to weasel his way back several more times, Petersen consciously and quietly retired two years early in 1990 at the age of sixty-three. He wanted a new management team to have a running start dealing with the clouds he clearly saw gathering on Ford’s horizon.

In an exceedingly frank and prescient farewell discussion with thirteen journalists the day before he retired in 1990, Petersen expressed grave concerns about the future of the U.S. auto industry. According to one reporter, “his terse answers were sobering. The word survival came up a lot because it’s no joke to ask how much of a home-grown auto industry will exist a generation from now.”

“Because of the deep partnerships of the Japanese companies with their suppliers, changes can be implemented predictably and rapidly. The steady loss of state-of-the-art manufacturing technology in the US manifests itself in the longer product cycles and lower real or perceived quality of the domestic automakers… There’s this nibbling away, this gradual erosion that’s occurring that nobody sees very well, I don’t think. It bothers me a lot.”

Petersen ended with a warning that “the manufacturing sector in the US is going through the same process now as the agricultural sector went through in prior generations… we have to accept that it (manufacturing) will generate a far smaller percentage of the employment of the people of the United States than it does now or did 10 years ago. There will be far fewer jobs.”

Those words spoken eighteen years ago seem remarkably prophetic (“how much of a home-grown auto industry will exist a generation from now?”) ,especially during Ford’s current déjà vu crisis. Alan Mulally has charted a very similar course for Ford’s salvation, emphasizing efficient European cars and quality. Will the same medicine save Ford a second time?