Ford CEO Plays "How Low Can You Go?" With OPM
When Fortune magazine asked Ford CEO Alan Mulally about his employer's health, he “ignored the industry convention of talking up future models as a source of improved profitability.” Instead, Big Al focused on how much money the automaker has in the bank. That Ford obtained said cash by borrowing it makes his claim more than a bit disingenuous. As a general rule, healthy automakers rely on selling cars and trucks to generate operating cash. Yet Mulally reckons a bird in hand is better than one in the bush— no matter how you captured it. When a reporter from the Detroit Free Press asked Mulally if he’s willing to draw “a line in the sand” to prevent further sales losses, the Ford CEO was adamant: “Absolutely not.” Translation: Ford is ready to play “How low can you go?” Before contrasting Ford’s woes with the relative success of Audi, the article raises a salient question regarding Ford’s strategy. “If you work at Ford, what kind of incentive is it to be told that the company is trying to reach the bottom but doesn't know where the bottom is?” A psychologist would say you must experience the depths of despair to enjoy the highs of ecstacy. Is this also true for a corporation?
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P71_CrownVic: “I think “Big Al” needs to go back selling airplanes…” But it was veteran car guys that got Ford in its current mess in the first place.
There are is one very big parallel between the large aircraft business and the car business: You succeed when you build a product that everyone wants. The Boeing 787 is the most successful (measured by orders before first delivery) commercial transport aircraft ever, by a very wide margin. Why? The airlines that ordered it will benefit from lower operating costs and an improved product (customer comfort). Boeing also correctly gauged the change in the way airlines will be operating in the near future. As hub airports fill up, the inevitable trend will be toward more non-stop flights between city pairs. The 787 is specifically designed to operate in this environment. Aside from the initial novelty, who, in their right mind, wants to be stuffed into an A-380 for 8 to 12 hours with 550 other people after having suffered through one or more connections to get to the big bird? I don't. The big question is how to apply the same sort of realistic look at the future of the market so as to provide the right products that will sell at good margins. It's likely that it's much tougher in the auto biz...
Didn't Robert McNamara pass away a few weeks ago?
"But it was veteran car guys that got Ford in its current mess in the first place." Most of Ford's problematic management culture belongs directly at the feet of the meddling Ford family heirs.