When Alan Mulally came to FoMoCo, his strategy was simple. Quite literally. “One Ford.” Jaguar? Out. Land Rover? Out. Volvo? Out. Mercury? Out. Aston Martin? Out (but we’ll keep a small stake, just in case…). It’s all about “Ford.” And it’s worked. Ford is flying high and is closing in on GM in the US market. But there’s one thing that stops Ford flying even higher. It’s that millstone around their neck, called debt. And lots of it. About $27.3b in the most recent quarter. Some economists believe that is what is depressing Ford’s stock price. Well, it seems Mr Mulally is going to have a laser focus on this problem.
The Wall Street Journal reports that Mr Mulally wants to pay off Ford’s debt (not personally, but corporately) by 2011. My goodness! He’s going to tackle Mount Everest?! “We plan to get rid of the net debt in 2011,” said Alan Mulally, “we will already be firmly profitable this year with a positive cash flow in the auto business…In 2011, we will do even better.” Honestly, you turn a company around and soon you’ll start believing your own hype.
Mr Mulally then turned his focus to Ford Europe, one of the crown jewels in the Ford crown. In the huge poker game he is playing with other car makers in the European market, Mr Mulally thinks the others are bluffing. Supposedly, Mulally does not want to increase Ford’s market share in Europe just for the sake of it. “In Europe…some competitors do it because they have a surplus of production capacity, but they will not be able to do it for long,” said the Ford CEO. You mean, Ford backed-off from Europe’s largest brand? Or could Mr Mulally be having a sly dig at Vauxhall/Opel? No, not Mr Nice Guy? Doesn’t he know who owns them…?
UPDATE: Since writing this article, the WSJ have changed their article. It appears that the original story from Il Sole 24 Ore “misrepresented” Alan Mulally’s comments. Ford is aiming to have more cash than debt by 2011. The new article posits that Ford need $5.4b to have enough cash to cover existing net debt. Unfortunately, it doesn’t end there. Ford still need that cash to invest in new projects, new factories, keep current operations going, etc. Same goal, same mountain to climb, different angle.