July 16, 2006
By Micheline Maynard New York Times Dearborn, Mich.
A fish tank as big as a flat-screen television dominates one wall of Bill Ford's office. Tulips, tired and randomly arranged, droop from vases on nearby tables. A jumble of orchids and tropical plants compete for space behind his desk, and a closet has a hidden espresso machine where Mr. Ford, the Ford Motor Company's chief executive, retreats several times a day to brew high-octane shots.
If Mr. Ford's office smacks of an overgrown boomer's pad, nearly everything else around it offers a corporate version of Miss Havisham - from the automotive giant's headquarters, built in 1956 and known locally as the Glass House, to the hallways dotted with stylized black-and-white photographs from the company's glory days decades ago.
In the executive dining room, the last of its kind at Detroit's big automakers, waitresses take orders from a multicourse menu and bring silver finger bowls between the main course and dessert. Many of the Glass House's walls, as well as the wood-paneled and softly lit lobby of the company's design center, feature portraits of Mr. Ford's ancestors, like his legendary great-grandfather Henry Ford, his grandfather Edsel Ford and his father, William Clay Ford Sr.
The answer to whether Mr. Ford's portrait will hang among them one day, and whether there will eventually even be a headquarters where such portraits can hang, now rests in his hands. He could either be the Ford that resurrects one of the biggest companies on earth, or perhaps become the last Ford to run it. Few are more aware of this than Mr. Ford himself, who, at 49, holds a daunting trio of jobs, as chairman, chief executive and, since earlier this month, chair of its executive operating committee, making him Ford's de facto chief operating officer, too.
"There's nobody that has more at stake in this company than I do," he said in a recent interview here. "Not just financially, but emotionally, and historically and everything else."
Mr. Ford's challenges are extraordinary. His company reported losses of $1.6 billion in North America last year and lost $1.2 billion worldwide in the first quarter this year. On Thursday, Ford halved its quarterly dividend to a nickel to preserve cash, and analysts expect the company to report tepid second-quarter earnings this week. Many are already forecasting a third-quarter loss. With analysts speculating that the dividend cut means that Ford's fortunes are worsening, Mr. Ford issued a statement noting that "the headwinds we faced at the beginning of 2006 have only become stronger."
As Mr. Ford tries to stem a slide that has taken his company from 25 percent of the American market in 2000 to about 18 percent now, he must preserve his family's legacy, fight off Asian automakers' ferocious assault on Detroit and somehow realize his ambition, as yet unfulfilled, to make Ford the environmental leader among American auto companies.
A casual and ebullient man, Mr. Ford personally owns 6.3 million Ford shares, making him the company's largest individual holder. The extended Ford family as a whole, which reasserted itself five years ago when it led the ouster of Jacques Nasser as chief executive and replaced him with Mr. Ford, owns 40 percent of the company's super-voting shares. Ever since Mr. Ford assumed Mr. Nasser's mantle, there have been doubts, some only thinly veiled, among analysts, investors and employees that he has the chops for the job.
When he started, his widely held image was that of a reluctant executive who would rather be practicing yoga, fly fishing or traveling somewhere with his wife and four children than be corralled in his corner office. Now, as he juggles an even more burdensome troika of job titles and responsibilities, Mr. Ford says he is energized in a way that he was not during his first years as chief executive.
"I'm just a lot more comfortable in this job," he said. "I mean, you know, to use a cliché, I think I've really grown in this job; but I think it's also because my instincts were right."
BUT while Mr. Ford has partially streamlined Ford's bureaucracy and become its public face during his tenure, some of his instincts have not born fruit. A devoted environmentalist, he still bowed early on to the wishes of Ford's entrenched middle managers and senior executives who wanted the company to keep churning out very profitable but gas-guzzling sport utility vehicles and pickup trucks during a period when oil prices were dirt cheap.
Had Mr. Ford produced more fuel-efficient vehicles like hybrids sooner, he not only would have found his company keeping pace with nimble foreign competitors like Toyota when oil prices spiked, but he also would have been able to illustrate the bottom-line merit of his environmental values. Instead, Ford, is again in the all-too-familiar spot of playing corporate catch-up.
As the entire American auto industry comes to grips with challenges that threaten to permanently eclipse its dominance at home and abroad, and as uncertainties about Ford's future stir anxieties within his family, Mr. Ford asserts that he and his company are responding to the monumental shifts that are shaking the foundations of his business.
"The world has played out like I thought it would, and it's given me not only a renewed sense of confidence but one of urgency," he said. "The question is, what are we changing into and how fast can we get there?"
Not fast enough, say some. The stark reality, which Ford as well as General Motors need to accept, analysts say, is that the companies' fates now hang in the balance.
"Both these companies could fail," said John Casesa, a veteran auto industry analyst who runs his own consulting firm. "That's how fundamental the problems are in Detroit."
A few miles east of Mr. Ford's office, dozens of visitors from as far away as Australia line up each day to tour Ford's newest assembly plant inside the sprawling River Rouge complex, whose largely vacant buildings once ranked among the biggest industrial centers in the world. They start their tour at the plant, which opened two years ago, by watching a film that depicts the life of Henry Ford and the activities of succeeding generations of Fords.
They can look out at 1,500 trees surrounding the complex or learn that the new plant's roof, covered with tough, bushy sedum, is part of Mr. Ford's goal of building a "green" factory, one that will help restore the environment rather than pollute the surrounding skies with filthy smoke as the Rouge complex once did. On an ideal day, tourists also can watch Ford workers building the big F-Series pickup truck, the country's best-selling vehicle for almost 30 years running, and the indisputable gusher in Ford's revenue stream.
Sometimes, though, tourists go home without seeing any trucks glide down the assembly line, idled occasionally because it makes no sense to ship vehicles that dealers cannot sell. Even so, Mr. Ford considers the new plant as one of his most important victories over company executives who argued that it was an expensive folly.
Completing the plant "validated" him, Mr. Ford said. "I got very little support," he recalled, "and yet I said: 'We're going to do it. We're just going to do it.' "
Mr. Ford will need that firmness of mind if he intends to preserve three things he says are of paramount importance to him at Ford: the company itself, his family's legacy and a clean environmental record. He has foregone a salary over the last year and said he intended to keep it that way until he successfully revived Ford's fortunes.
The family's financial stake in Ford, including nonvoting common stock and a more powerful and separate class of voting shares, is currently worth approximately $460 million, down almost half since Ford celebrated its 100th corporate birthday three years ago; Mr. Ford's personal stake is worth about $43 million. A combination of financial self-interest and a prized familial legacy makes Mr. Ford's tasks more personally imperative than they might typically be at other public companies in need of a turnaround - like G.M., for example, whose headquarters Mr. Ford can spy from his office on a clear day.
As Mr. Ford watches G.M. entertain a potentially historic alliance with a French automaker, Renault, and a Japanese automaker, Nissan, he says he will not rule out a similar path for his company, which already has management control of another Japanese auto company, Mazda. But Mr. Ford said he had more pressing concerns. "Regardless of any deal that we might envision," he said, "the fact is that we have to fix our North American business."
The company's North American operation is hamstrung by lackluster product lines, heavy losses that have delayed new vehicle development and, until recently, constant executive turnover that forced underlings to wait until new bosses came on board. Mr. Ford has to tackle all of these problems while overseeing a potentially backbreaking combination of jobs.
"It defies my imagination how he can get through a day with the proper amount of attention to each position," said Michael Useem, a management professor at the Wharton School of the University of Pennsylvania. "If he can, more power to him."
MR. FORD said his biggest challenge is time management, as well as a constant switching of corporate roles. In one moment, he occupies Ford's conceptual role as chairman; in the next, a strategic role as chief executive; and in the next, the nitty-gritty management role of overseeing daily operations. "I can't delegate to anybody," he said.
Why take all of that on? Because controlling those jobs is how Mr. Ford believes that he can get his own way inside an unyielding corporate bureaucracy - something that he says has not occurred earlier despite his name and apparent clout. Mr. Ford bluntly contends that managers stymied him, as both chairman and chief executive, by getting in the way of projects like the Rouge plant and a hybrid version of the Ford Escape, a small sport utility vehicle
The Escape Hybrid, which Ford began developing in 1998 in response to Toyota's hybrid plans, languished for nearly six years before reaching the market. Even then, Mr. Ford said, he had to fight with marketing officials who argued that there was no point spending much money on a vehicle that generated sales of only 20,000 units a year, despite its symbolism as the first hybrid from a Detroit car company.
Mr. Ford contends that projects like the hybrid Escape will move more swiftly with his own handpicked team members in place, the most crucial of whom is his new chief of staff, Steven K. Hamp, his closest friend, brother-in-law and determined gatekeeper. "He has probably voiced every frustration you can imagine to me with respect to this company," said Mr. Hamp, who previously ran the world-famous Henry Ford Museum and is married to Mr. Ford's sister, Sheila.
Associates say Mr. Ford endured years of condescending behavior by subordinates who considered his wealth and interest in social causes no match for the years they had toiled in the company's trenches, even though Mr. Ford himself spent more than 20 years in a variety of lower-level jobs. They also say that other executives, who spent as much time managing their careers as they did managing the company, saw Mr. Ford as a roadblock to the top and tried to undermine him. Yet, others see these complaints as excuses for actions that Mr. Ford did not take.
"I don't think Ford has suffered from a lack of talent the past 15 years," Mr. Casesa said. "The issue is strategy and implementation, rather than the people involved."
EARLIER this year, an entire table of Mr. Ford's relatives - his cousins Edsel B. Ford II and Elena Ford, and Edsel's son, Henry Ford III - looked on during a luncheon at the Detroit Athletic Club as Mr. Ford was named automotive executive of the year. Despite the united front, Mr. Ford acknowledges that family members are concerned about Ford's declining fortunes, and its stock price, which, at $6.38, is cheaper than a pound of coffee at Starbucks, where Mr. Ford could once escape anonymously during the workday. (Having relocated his family from tony Grosse Pointe a few years ago, he still drops in to local coffee shops in the college town they now call home, Ann Arbor.)
While declining to speak for the family, Mr. Hamp also acknowledged its apprehensions. "They're very intelligent people who have observed this company for a long time; they recognize the challenges that this company faces," he said. "They have, it's fair to say, as many concerns as anyone else - board member, investor, employee."
Those concerns helped convince Mr. Ford to take on the job of chief operating officer, and Mr. Hamp helps him decide which meetings and projects deserve his attention. Mr. Hamp said he encouraged Mr. Ford to remember that "we need to go faster, we need to make decisions more quickly, we need to cut costs and we need to do those things that are a part of an organization that needs to fix its problems."
Mr. Ford is stressing that same message to his executive team. This spring, he took a dozen of Ford's most senior executives to a Michigan resort for a combination Big Chill-style bonding and brainstorming weekend, intended to lay the groundwork for his assumption of greater operating duties. The executives cooked a salmon dinner together, with Mr. Ford, a vegetarian, in charge of the brown rice. They spent hours talking about his turnaround plan, called "the Way Forward," which he rolled out at a splashy news conference in January and which calls for the company to close two dozen plants and eliminate 30,000 jobs through 2010.
Mr. Ford vowed to slow and then reverse the company's market-share slide and to return to profitability by 2008. Yet much about his approach remains unclear, particularly where his devotion to the environment is concerned. Although Ford has promoted its commitment to hybrids in television commercials featuring Kermit the Frog, last month it backed off plans to build 250,000 hybrid vehicles a year by 2010. Instead, Ford said it would double the number of flexible fuel vehicles it produces, to two million a year by 2010, while continuing to develop hybrid vehicles.
It was the second time during Mr. Ford's tenure in the senior ranks that the company had reneged on an environmental promise. In 2000, when he was chairman, it pledged a 25 percent improvement in the fuel efficiency of its S.U.V.'s by 2005. But the effort was set aside in 2002, because Ford did not have the technology to achieve it, Mr. Ford told shareholders in an environmental report.
"He held himself out as the great green hope," said Daniel Becker, director of the Sierra Club's global warming program. "The fear is that he will turn into the great green hoax."
Mr. Ford, accustomed to such criticism, says the company needs to keep its options open. Technology is developing so rapidly, he says, that hybrids may not be the way to go, even though Toyota, the acknowledged leader in hybrid development, plans to have one million hybrids on the road by the end of the decade. Green debate aside, however, it will not be hybrids or fuel-efficient vehicles that end Ford's slide: it will be an overall fleet of attractive, reliable cars that can battle Toyota and other auto companies for buyers.
Ford's lineup includes two hits: the Mustang and the Fusion, one of three midsized cars that the company rolled out in the last year. Thanks to this pair, Ford's car sales are up this year even though its overall sales and market share are down from 2005, continuing a decline that began around the start of the decade. Ford's overreliance on pickup trucks and S.U.V.'s has hurt it. The latest version of the Explorer, long its best-selling sport utility, made its debut last fall just as gas prices began soaring; sales of the vehicle have slumped.
Consumers, meanwhile, are clamoring for fuel-efficient small cars, but in the United States Ford does not sell anything smaller than the Focus, leaving a missing rung at the bottom of its product ladder and another gap in its pro-environment philosophy. To jump-start things, Ford executives say, they have to develop vehicles they can sell without discounts and which buyers will load with expensive options like navigation systems and powerful engines. The Way Forward pins Ford's hopes on innovation, which Mr. Ford says is exemplified by cars like the Escape Hybrid, the Fusion and the Mustang.
But most of Ford's new cars are less distinctive. Embracing a trend started by Toyota in the mid-1990's, Ford is rushing to bring out more crossover vehicles, like the Edge, an S.U.V. built on a standard automobile platform. Analysts say those vehicles are by nature utilitarian and likely to inspire little lust in buyers' hearts.
"There is no evidence of a huge product offensive," said Stefano Aversa, chief operating officer at Alix Partners, a firm that specializes in corporate restructuring. "I'll be pleasantly surprised if I see 10 new products. I don't see any of them coming yet."
Ford also has to overcome a reputation for turning out merely serviceable products, said Brian Moody, a road test editor at Edmunds.com, a Web site that dispenses car-buying advice. Vanilla-flavored cars might work fine for Toyota, which honed its reputation for quality over decades, and a conservative approach might have been acceptable in an earlier era, when Detroit companies dominated the American market, he said. But with Detroit's market share reaching all-time lows, Ford needs to exceed customers' expectations in order to keep up with Japanese and Korean carmakers, which are increasingly attracting Ford's loyal, largely middle-class customers.
"If the car isn't good, if the truck isn't good, people aren't going to buy it just because it's a Ford," Mr. Moody said.
FORD needs to act quickly on its vow to innovate. Toyota blew by DaimlerChrysler this spring to claim the No. 3 spot in American auto sales. Next in Toyota's sights is Ford. True innovation, as illustrated by vehicles like Toyota's popular Prius, is an elusive goal in an industry that typically needs more than three years to bring its cars to life. That may be more time than Mr. Ford has - and he is battling a culture that still clings to some vestiges of its more prosperous past.
Insiders have often likened Ford's middle management to a marshmallow: push on it and it dents; after a short while it just springs back into shape. To be sure, Ford managers have also had to endure a barrage of improvement efforts through the years, from the quality-focused teachings of Dr. W. Edwards Deming, to Six Sigma quality-control methodologies to globalization plans. Hoping to avoid the flavor-of-the-month trap, Mr. Ford says he is examining all aspects of the way Ford operates, "everything from small things like how we're going to treat each other in meetings to very big things like what about the trappings of our job?"
Analysts say frills like Ford's executive dining room send messages that the Way Forward plan, with its focus on doing more with less, is for the grunts only, while top executives, whose Glass House offices are reached by climbing a curved staircase behind a security guard, still enjoy creature comforts.
"There should be signals," Mr. Aversa said. "When things go well, you can take your time and plan for the long term. But when things go rough, you have to execute and do things with a sense of urgency."
Last week's dividend cut may be one such signal, but whether the Way Forward is the plan and Mr. Ford the right executive to carry it out remain topics of debate among analysts. "Either you intensify this plan and look at the whole business model brutally or you get someone else to do the job," Mr. Casesa said.
For his part, Mr. Ford said he heard the clock ticking, aware that his family's legacy was in danger of slipping away with every passing second. "I'm impatient, too," he said. "I have no patience for wasting time."
Yet another $.02 worth from a proud owner of a 1970 Mach 1 351C @