GM Has A Better Chance Than Ford
January 23 2006 by Herbert Shuldiner
Although Ford and General Motors still produce more than one-third of the vehicles sold in the U.S., some industrial obituary writers have declared them unsalvageable. Joseph Phillippi, a veteran automotive analyst, suggests that GM may have slid so far down a slippery slope that CEO Rick Wagoner’s plan to trim 30,000 employees isn’t enough. Are Ford and GM destined to end up in the scrap yard of discarded brands?
I’m not that pessimistic. They can survive as full-line vehicle manufacturers, albeit smaller. But the chief executives of Ford and GM can’t save their way back to profitability even with draconian personnel reductions and plant closings. What’s needed is a total refocusing of philosophy to be leaner, more flexible producers with shorter model cycle times.
Most observers credit Wagoner with possessing the leadership qualities needed to get the job done. But Bill Ford has yet to inspire confidence in his ability. When he became chairman, Ford was flush with cash. But the cash was squandered. Jacques Nasser, who reported to Bill Ford, invested in Internet companies, auto repair businesses and other non-core assets-with the exception of purchasing Volvo Car for $6.5 billion. While Nasser’s other investments resulted in losses, Volvo remains profitable.
But Ford’s purchase of Jaguar, which happened before Bill Ford and Nasser took their posts, has turned into a sinkhole, sucking in massive infusions of cash. Ford recently earmarked another $2.2 billion for Jaguar. Even that might not be enough.
Although Nasser became the scapegoat for Ford’s distress, none of the blame stuck to Bill Ford’s Teflon-coated suit. But what has he accomplished since Nasser’s departure in 2001? His team has not stopped Ford’s car operations from losing money, nor have they developed an attractive portfolio of products that can be sold without costly discounts.
Wagoner has surrounded himself with capable marketing and manufacturing executives. He hired industry icon Bob Lutz as the new product guru. Lutz’ impact on GM products is now being felt.
Bill Ford has no Bob Lutz. Oddly, he appointed his cousin, Elena Ford, to be product development chief. Elena Ford has a reputation as a tireless worker and is credited with forestalling Ford’s plans to kill the Mercury brand. But her ability to create a new generation of world-class vehicles remains unproven.
Bill Ford also elevated his brother-in-law, Steven Hamp, a curator at the Henry Ford Museum, to be his chief of staff, a critically important position. The apparent nepotism angered many; several key executives have left recently.
Bill Ford also has been distracted by outside issues, such as a flap over the company withdrawing its advertising from gay publications and criticism from environmental groups. These issues have taken time away from Bill Ford’s most pressing need: to get the car brands profitable again. In addition, he has not found an executive who can stop the losses at the company’s Premier Automotive Group, which includes Jaguar, Volvo, Aston Martin and Land Rover. Mark Fields failed to make it profitable. Yet Bill Ford elevated him to be chief of Ford’s North American operations.
In short, Bill Ford has yet to recruit able managers who can maintain Ford’s brand. Many in Detroit suggest that the fourth-generation Ford to head the company needs to replace himself if the institution is to survive. His family controls about 40 percent of Ford’s voting stock. But family loyalty may have its limits if the stock continues to plummet. It’s going to take more than family pride to save their investment.