By on June 27, 2010


As much as it pains me to admit it, Ford is a company to be admired. When bailouts were handed around like doobies in the Summer of Love, they didn’t partake (argue that point amongst yourselves, but you know what I mean). Their cars are interesting (to say the least) and their reliability is now being thought of in the same vein as Toyota, Honda and Hyundai. All of this is down to one man, Mr Alan “I bet you wish to made me CEO now! Eh, Boeing?!” Mulally. He put forward a vision of Ford divisions and subsidiaries working together to create a global product. He pared down the extraneous brands. He put the axe to Mercury and he didn’t need a bankruptcy to do it. In short, Mr Mulally has done well at Ford. The question is how well?

Business Standard Motoring reports that Alan Mulally picked up $17.9 million in pay during 2009. In comparison, Aiko Toyoda earned less that $1.1 million (this is inferred, because he wasn’t named in a company filing to the Japanese Finance Ministry), Carlos Ghosn picked up $9.9 million, Honda’s Takanobu Ito walked away with $1.3 million. However, what makes this story interesting is that some people think that Mr Mulally’s pay packet is a good thing, something Japanese companies should emulate.

“Because of globalisation, competition is intensifying, and there is a greater importance placed on strong and decisive management,” said Katsuyuki Kubo, an associate professor of economics at Waseda University in Tokyo who specialises in compensation and corporate governance. “Without the pay incentive, Japan could lose out on competitiveness.” Active advocation of higher CEO salaries? Well, Toyota is struggling to keep their image of quality & reliability, Honda is struggling in North America due to its failing “Acura” brand. So maybe Mr Mulally is now starting to look like good value for money. Maybe that could be their next tagline?

“Buy a Ford, they’re great value for money. Just like our CEO!” Well, it’s better than “Drive one”…

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26 Comments on “Mulally, As In Moolah...”


  • avatar
    Robert.Walter

    Re. “value for money”, I never understood the redundancy in this phrase, after-all, in modern economics, in the vast-majority of transactions, is there any other kind of value?

    Re. Alan’s performance … if you were a sitting member of the Ford family, you would probably see him as worth the money, because for a long time now, none of the previous CEO’s were able to effect much more than “profitless prosperity” while setting the company up for major strategic challenges (in the event of a market switch or economic swoon)…

    Bill couldn’t fix it, and Jac, who’s dreams and ambition swallowed billions, expanded it, yet refused to consolidate and integrate it, received 23M USD in 2001 while digging the hole that set-up the company for the big Fail … Alan, who is filling the hole that Jac dug, and Billy ignored, and slowly backing the company back from the brink could, in light of this history, be seen as worth every penny… (I’m just waiting to see how the defered compensation scheme works out for him.)

  • avatar
    Dynamic88

    Compensation:

    You neglected to mention Rick Wagoner and others who took Mulally-like salaries while running their companies into the ground.

    If your theory had merit, we’d have to explain why GM didn’t get results after paying big salaries for decades.

    We’d also have to explain why the Japanese have been eating Detroit’s lunch for years w/o big CEO paychecks.

    It’s obvious to me that most large corporations are run for the benefit of management, not the stockholders.

    Ford:

    Doesn’t Ford still carry a lot of debt? They may look healthy compared to GM/Chrysler, but then who doesn’t ?

    Their cars are interesting (to say the least) and their reliability is now being thought of in the same vein as Toyota, Honda and Hyundai.

    I’m not sure how many models you find interesting, but if we’re talking about the NA market, I find very little to be interested in. Those of us who own both a Honda and a Ford do not think of them as even remotely equivalent in reliability.

    • 0 avatar
      golden2husky

      “…I’m not sure how many models you find interesting, but if we’re talking about the NA market, I find very little to be interested in. Those of us who own both a Honda and a Ford do not think of them as even remotely equivalent in reliability…”

      I would consider the new Mustang interesting, even in V6 form. The Edge and related stablemates are also interesting for the market they serve. Ditto the Fusion. Flex, while polarizing makes the cut. Truck line is at least class competitive across the board, the new Fiesta looks like a winner, hardware wise. Yes, some duds too but overall a pretty good lineup for those willing (and OPEN minded enough to look)

      Regarding reliability, the new stuff is doing very well. Will that translate to “very well” five years from now? Maybe, maybe not. Time will tell. But Honda fans can no longer rub Taurus transmission failures in Ford’s face as Honda is having just as many transmission problems now as Ford did way back then. But I have to add that my long term experience with Ford has been very good. I chuckle when people extol the virtues of reliability when they change out their cars every six years. Try doubling or even tripling that and we’ll talk. I chuckle even harder when they put on their best “Grey Poupon” voice and sniff that they can afford to to so. Well, I’ll try to keep that in mind when I am retired at 57, living 10 miles away from Breckenridge. Sacrifice now to play early later? Hell yes.

  • avatar
    carguy

    Executive compensation is a lot like the pay for elected officials: everybody complains about it, but as a percentage of the budget they are in charge of, its largely irrelevant.

  • avatar
    Buckshot

    Interesting?
    That´s interesting.
    Let us see:
    Ford Galaxy: A minivan that´s nowhere near “interesting”
    Ford Kuga: A minisuv that´s nowhere near “interesting”
    Ford S-Max: An MPV that´s nowhere near “interesting”
    Ford C-Max: A compact MPV that´s nowhere near “interesting”
    Ford Mondeo: I suppose you could call it interesting in 2007, but now?
    Ford Focus: When it was launched 2004, the styling was considered conservative, and now it´s ancient.
    Ford Focus CC: Could be the ugliest car with retractable hardtop.
    Ford Fusion: If there was a 2010 Trabant it would look like this.
    Ford Fiesta: It´s a sensible small car, but not very interesting.
    Ford Ka: It looks cute.
    Ford Mustang: A nostalgic car that´s doesn´t sell good outside usa.

    • 0 avatar
      european

      +1

      was just visiting fords usa site last night.
      i didnt find anything remotely interesting.
      ford is as boring as vw. just bland overpriced
      product. nothing more. even skoda is better.
      or dacia. at least you know you’re getting cheap
      transportation with dacia. or kia or whatever.
      what do you get with the fords, i ask you?

      btw, no matter how P/Z71 is obsessively hateful
      towards ford, he is right.

    • 0 avatar

      I’ve never been much of a Ford fan either… but the fact they didn’t steal taxpayer cash to stay in business makes their product line a lot more attractive to me.

      (And on that point… what’s to debate, Cammy? GM and Chrysler needed bailout funds to stay in business. Ford didn’t. End of debate!)

      Mulally (and a few others at Ford) deserve all the credit for predicting the financial plunge, and being proactive in locking up all the PRIVATE financing they could beforehand. GM and Chrysler didn’t, and were left to suckle upon the government teat. Both still should have been allowed to die.

    • 0 avatar
      Ion

      The Mustang sells reasonably well for a car thats not really sold outside of North America. More than a handfull of companies make fortunes converting them into RHD for legality in certain markets. Same thing goes for the Vette and the Camaro, well the new Camaro atleast.

  • avatar
    stationwagon

    I think Alan Mulally is doing a great job at Ford. Even though I don’t like Ford’s products(except the mustang); the public does. I think CEO pay has more to do with luring CEOs in from other corporations, if a CEO is in a CEO dynasty or is coming from within the corporation he/she will get paid less than a CEO who had to be lured from another corporation.

  • avatar
    jpcavanaugh

    It is not so much about compensation as the fact that there is an amazingly small number of people with the skillset to run a major modern auto company, and to do it consistently well. Alfred Sloan, Walter Chrysler, Henry Ford II (maybe), Lee Iacocca. How many others make the cut of the very best executives to run a major automobile manufacturer over a long period. I am sure that there are a few names to add from Japan and europe. From here, it looks as though Mulally could make this list.

    While low pay could keep the best out of the american auto business, high pay does not guarantee top talent, as we have seen.

    • 0 avatar
      Robert.Walter

      Hank the Deuce wasn’t a very good CEO. Came in in ’45 when Ford was functionally bankrupt … in the short-term, the Company was saved by Tex Thornton & team (Whiz-kids), and in the long-term by the roots they laid down … by the tim HFII thought he was ready to run the company, he kicked out “uncle” Ernie Breech and took-over … and by the time HF2 retired in 1980, Ford was ahead of Chrysler in the rush to bankruptcy (and absent FoE revenues keeping the Company alive, would have ended up there…)

      Actually, the 3 generations of Ford-family CEO’s nearly wasted the company three separate times; HF1 in ’45; HF2 in ’80; Billy in ’08, each of them was saved by a competent executive brought 1945: Breech; 1980: Caldwell; 2008: Mulally.

    • 0 avatar
      jpcavanaugh

      Robert, I sat and dithered for several minutes about whether HFII should make the cut. I think that you helped me to decide. I guess that HFII’s contributions were all in hiring top managers. And as with Billy Ford, It should at least be credited him (at least in his younger years) that he knew what he didn’t know and picked top talent to do the job.

    • 0 avatar
      geeber

      Henry Ford II’s chief contribution to the Ford Motor Company was the restructuring Ford’s European operations. Prior to the late 1960s, Ford of England and Ford of Germany essentially operated as independent units. He appointed an executive with the specific task of merging the two operations into one unit that would serve all of Europe. This was a smart move that boosted Ford’s European business. When the North American operations began gushing red ink in 1980, it was Ford of Europe that helped keep the company afloat.

      He was less effective in North America for two reasons. One, he couldn’t understand that his personal taste in vehicles may not have been shared by large segments of the market. While the Continental Mark III was a huge success, not everyone wanted to drive one (or a smaller clone). He disliked smaller cars and preferred to focus on larger, more profitable segments.

      Two, he gave too much power to Finance, led by Ed Lundy. Product development and quality suffered greatly in the 1970s because of constant penny-pinching at the corporate level.

      Given his contributions to Ford’s European operations, and his early willingness to appoint competent people and listen to them (Ernie Breech and Lee Iacocca, in particular), I can’t rate his tenure as a failure. His problem was that he stuck around for too long, although part of this was because he was reluctant to turn over complete control to Iacocca (and for good reasons).

      As for his nephew – he did try to right the ship, but soon found that the corporate inertia and infighting were too much for him. He was willing to replace himself with someone who could get the job done and attack what was really hindering Ford – its poisonous corporate culture. So he gets credit for recognizing the real problem with the company, and being willing to step aside and let someone else attack it.

      Given that two problems with many CEOs are their enormous ego and unwillingness to admit that they need help, he should be recognized for being humble enough to realize that he was in over his head and he needed to give the job to someone else.

      I would still include Henry Ford II on a list of great automotive industry CEOs. In 1945 he was faced with a complete mess and had the good sense to realize his limitations and hire the right people to save the company. If it hadn’t been for the artificial stimulus provided by World War II defense spending, Ford would have likely collapsed around 1944. As one person put it, in 1945 the Ford Motor Company wasn’t dying; it was already dead, and rigor mortis had set in. He revived an essentially dead company.

      He made Ford of Europe into a powerhouse, and also had the good sense to listen to the right people at critical times. As I said above, his chief problem was that he stuck around for too long.

      To jpcavanaugh’s list of great automotive executives I would add George Romney and perhaps George Mason (of Nash).

    • 0 avatar
      educatordan

      “To jpcavanaugh’s list of great automotive executives I would add George Romney and perhaps George Mason (of Nash).”

      +1 Those guys need to be recongized too. They did quite a bit with the little they were given.

  • avatar
    mtypex

    Cammy,

    Acura is not a failing brand. Entry-level luxury has been a difficult market in the past few years.

    • 0 avatar
      tbp0701

      I’m not sure it’s failing, but it’s shifting wildly. YTD through May, its truck sales are nearly equal to car sales, and that’s where it’s been increasing, while car sales continue to lag. It’s at least a brand with an identity crisis, but the same can be said for Honda in general.

      Ford, however, seems to finally be finding its identity. Maybe it’s slogan should be, “Ford: we don’t suck. And this time, we’re not just saying that.”

      Edit/add. As for Mulally, I’m interested to see how Ford will continue in the near future. I suspect that much of its current success was its access to expertise at Mazda, Volvo, Aston Martin, and several other brands. Now that it no longer has much of this, I’m wondering if Ford will continue to be as impressive.

    • 0 avatar
      rnc

      “suspect that much of its current success was its access to expertise at Mazda, Volvo, Aston Martin, and several other brands. Now that it no longer has much of this, I’m wondering if Ford will continue to be as impressive.”

      I think the exact opposite is true (there is a reason those companies were for sale in the first place), Outside of Mazda which provided much needed engineering/production knowledge in the 80′s(Ford sold it’s stake once mazda was receiving more from the relationship than Ford). The others drained billions and billions. The sold brands look good now b/c Ford left JLR and Volvo with new cars/engines/transmissions, etc).

  • avatar
    twotone

    I’ve never bought a Ford. I did very well with their stock over the past 1 1/2 years. Same for Apple — never bought their products but like their stock.

    Twotone

  • avatar
    SomeDude

    I don’t think that executive pay is that important. Quality, on the other hand, is crucial. Once you start cutting corners and counting beans, you’ll end up joining the Toyota/GM club… Soon to welcome its new member, Honda. I recently drove a year-old TSX and I couldn’t believe I was driving an entry-level luxury car built in Honda’s flagship facility in Japan. The build quality was just plain lousy.

  • avatar

    For an exec of an American carco in the position F has been, Big Al has pretty much danced on the head of a pin.

    He’s worth it.

    .
    Now if the guy would just hire One freaking competent designer; -at all, then maybe they’d have something.

    Perhaps they’re turning over a new leaf with the 2012 Focus.
    -We’ll see…

    .
    ++At least Saab figured out how to hire someone like Jason Castriota

  • avatar
    Steven02

    I don’t know anyone who thinks of Hyundai being on par with reliability to Toyota and Honda. Ford is making strides, but isn’t quite there yet perception wise in NA.

    • 0 avatar
      educatordan

      Hyundai’s 10 year warranty on power train has helped preceptions of quality for the typical American consumer. My personal perception of them is of having Toyota level quality.

    • 0 avatar
      Steven02

      A 10 year non-transferable power train warranty doesn’t mean much to me. Did it help Dodge when they offered their lifetime non-transferable warranty?

      Besides, the power trains in most vehicles are pretty solid these days. If it isn’t, most likely it is due to poor maintenance. If you want a vehicle that’s power train isn’t going to fall apart for 10 years, I would say pick the cheapest one you can find and maintain it. This isn’t the 80s anymore.

    • 0 avatar
      Robert.Walter

      My sister and husband are on their 3rd Hyundai Santa Fe … 1st was so great, they dumped their GM car and bought a 2nd, turned-in the 1st w/200k miles under C4C, and bought a 3rd. So far, happy with 3rd and 2nd is still going strong.

      In the case of my sister, she doesn’t speak JDP-IQS, and based on her sample size of 3, will tell you that her Hyundais are on par with TMC and HoMC quality, after all, she has never had problems with her Hyundais.

      Which begs the question: “When you are so happy with cars like this, one has to ask, is there no benefit to incremental better quality?”

      Seems Hyundai is in the big leagues, and more or less at parity, now and riding a virtuous cycle.

      There is also prologue to this experience … today, they have the means to afford a wide variety of cars, but seem to be converted Hyundai loyalists … but years ago, she was a poor student-waitress, and scraped together the coin to buy a new Hyundai Excel … she drove that car for several years, and after she got married gave it to my starving-artist sister … both performed regular maintenance and oil-changes on the car, and neither had problems with the car … sure, it felt cheap inside, and tinny, and some little plastic interior fittings broke as the car aged, but that little red car soldiered on – reliably and cheaply – until something broke in the engine around 200k and 10 years old … and it was scrapped… Both agree, in terms of styling, interior design, and material-quality, today’s Hyundai has nothing in common with the old Hyundai except the name, and value.

  • avatar
    Steven02

    Robert,
    3 vehicles does not a brand reputation make. I have owned several cars from different automakers. Not really having problems with any of them. It doesn’t mean that as a brand, they are all on par with Toyota and Honda. Hyundai has improved, but they aren’t there yet.

    http://businesscenter.jdpower.com/news/pressrelease.aspx?ID=2009043
    http://businesscenter.jdpower.com/news/pressrelease.aspx?ID=2010034

    This isn’t IQS data either.

  • avatar
    daga

    He’s worth every penny, but that doesn’t change the facts that the mortgage-everything loan was the ex-CFO’s baby, not his. I recall that he came in after that ball was rolling (then either he or the Fords fired the CFO…). They’ve done great, but they only missed being in the BK lineup because of that decision to borrow as much as they could in 2005 or 2006, not because of the strong leadership of Mulally. This site, of all places, should at least report that accurately. That piece reads like a USA Today story.


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