Mulally on What’s Next for Ford
June 27 2011 by JP Donlon
Kansas native, Alan Mulally, 65, graduated from the University of Kansas, also his mother’s alma mater, in 1969 with a Bachelor of Science and Master of Science degrees in aeronautical and astronautical engineering. He received a Master’s Degree in management as a Sloan Fellow from MIT’s Sloan School of Management in 1982. He held executive positions at Boeing in his 37-year tenure there. In the early 1980s, Mulally came to former Ford CEO Don Petersen’s attention when, as Boeing chief engineer for the design of the 777, Mulally presented to Boeing’s board the technical and business case for the new airplane. Impressed, Petersen, a Boeing board director (and 1989 Chief Executive of the Year) asked Mulally to meet with Ford’s Team Taurus as it was preparing to design the new 1982 Taurus. “I invited the entire Team Taurus out to Seattle for three days,” he recalls. “We compared notes on technology, on process, and being market-driven and customer-oriented. So when Bill Ford called asking me to come to Ford, I checked in with Don with whom I stayed in close contact. It felt like I was coming home because I knew the environment.” Chief Executive caught up with Mulally during a recent trip to New York.
Having engineered a successful turnaround, you can take a well-deserved victory lap. But what about the challenges ahead? How will you turn an organization that has been, until now, geared toward recovery, focused on profitable growth?
We are moving from saving and transforming the company into an era where we are now growing the business worldwide. The future has been established by the big decisions that we have taken to refocus and transform Ford. The important, big decision was to focus on the Ford brand and focus on a complete family of vehicles made available all around the world, where every vehicle is best in class in terms of quality, value, fuel efficiency, safety and smart design, like Sync and MyFord. Going forward, we are well-positioned in most of the markets around the world. So the real key now is to stay absolutely laser-focused on this.
Despite gains in the U.S., South America and Europe, Ford’s weakness remains in Asia, specifically China, where you hold just 2.7 percent of the world’s largest and fastest-growing auto market. What’s your strategy for addressing this and Asia’s other booming market, India?
Asia Pacific is going to be a very important market for us going forward. We have a good position in India and China and throughout the Asia Pacific region, although it is smaller relative to our competitors, because up until now we’ve been focused on the Americas, Europe and also Russia. So the most important thing we do now is utilize our One Ford approach and our family of vehicles that we have designed on our global platforms to bring these vehicles into Asia Pacific as quickly as we can as we increase the production capability in each of the countries throughout the Asia Pacific region. We are now ramping up production with these vehicles to make them available to our customers throughout the Asia Pacific region.
What about the Ford brand in China and India?
It’s very interesting about the Ford brand. It’s one of the most recognizable in the world. And even though our presence hasn’t been as large in China as it is in the Americas and Europe, brand awareness is very strong. And so the most important thing we must do now is to help everybody understand that they have great choices for a full family of vehicles available now in the Ford showroom for them. The neat thing about China is that the Chinese invested very significantly in their infrastructure, especially the Internet. Most shopping is done online. So you can imagine how fast we can boost awareness of the choices Ford offers with customers in China.
So part of your go-to-market strategy in China and India is to use social networks and the Internet to advance Ford products as you did with the Ford Fiesta in the U.S.?
Absolutely. The neatest thing is the movement from paid media to earned media to social media. Increasingly, it’s more about a conversation, because information now is ubiquitous. Everybody wants to know and has access to all the information about vehicles. So for us it is about starting that conversation and making the data available so everybody can see what the options are from Ford. It’s exciting to see their response when they have this brand awareness.
And yet the Europeans seem to show no inclination to scale back their production capacity in line with demand.
It’s not only about having great products, but also running a healthy, strong business for the long term. It’s important to make a reasonable return for everybody in this business in order to have the ability to continue to invest in the future. Those that do that will get a chance to go forward. Those that do not; it’s not going to work out so well.
You describe Ford as a technology company—not just a car company. But technology is a means, not an end. How does Alan Mulally encourage innovation, not just among Ford’s engineers, but with Ford’s 163,000 employees, its suppliers and everybody else that you partner with?
Innovation is one of the neatest words, but for me it starts with innovation that has a purpose. It begins with the point of view of the customer. What does the customer really want? What will they really value? Clearly, we all want safe and efficient transportation. We also want the highest quality, we want it to be the most fuel-efficient. We also want all the latest safety technology and the best value. And finally, we want smart design that works for us.
Innovation and technology must serve these pillars of what customers really want. Consider the things that we have done about safety. For example, the cross-channel alert allowing blind spot monitoring, the collision-avoidance—the roll stability control— these features plus SYNC and MyFord, hands on the wheel, eyes on the road, voice-activated, technology seamlessly connected to our digital world—all of those features not only increase safety, but make us even better drivers.
What other innovations might we see from Ford in future?
Expect to see continuous improvement of the internal combustion engine, both diesel and petrol. We’ll see more turbo-charging and direct fuel injection, which allow us to use smaller and lighter weight engines, but also provide the performance capability and the fuel efficiency that we all treasure.
Expect to see more lightweight materials, more integrated electronics, more uses of alternate fuels, like cellulosic and biofuels. We’ll see more natural gas in our cars as well as more electrification. It will expand from hybrids with more powerful batteries to all-electric vehicles.
As we develop fuel cell technology and develop the infrastructure for electricity and for hydrogen, we’ll see hydrogen vehicles where we take in hydrogen, combined with platinum, creating electricity for the battery with water coming out of the tailpipe.
When might we see something like this in a vehicle we can purchase at a Ford dealership?
You’re seeing it right now. In Ford’s case, we just announced that we’re going to be electrifying the entire Focus platform, that’s a global platform that we offer worldwide. We’re going to have 10 different top hats off that fundamental platform, so that off the same production line, one could have a petrol, a diesel, a hybrid, a plug-in hybrid with a bigger battery and an all-electric vehicle, all off the same production line. The consumer decides which vehicle and which propulsion system makes the most sense for them.
How are you a different leader from your career at Boeing?
Don’t think I’m a much different leader. I’ve been doing this for a long time and, as we’ve talked, I’ve been associated with large-scale system integration innovation, whether it’s a commercial airplane with four million parts or a sophisticated automobile with 10,000 parts—they both take a lot of talented people and a lot of different disciplines to come together to create these fabulous products. It’s all about getting people to work together on the team. What’s our plan? What’s the status against the plan? What areas need special attention? Bringing this together is something I feel very comfortable doing. I’m excited for everybody associated with Ford that we are now delivering not only strong, great products, but also a strong business in addition to contributing to a better world.
No one questions that someone like yourself shouldn’t be generously rewarded for your efforts since 2006 in turning around a famous iconic company. But you must allow that $57 million in stock is fairly generous. This begs the question, how should CEOs be fairly compensated?
Is there such a thing as some amount being “too much” for one person? The world is moving towards performance-based compensation. It must be tied to creating a profitable, growing business because then everybody benefits. Clearly, the compensation here rewards all of the leadership team based on the team creating value for the shareholders and for all the participants whether they are hourly or salaried. Compensation is aligned to a value creation for everybody. Today we’re providing great jobs and great careers for everybody. And that’s what everybody cares about.
You come across as a highly affable, good-natured fellow. Do you ever lose your temper?
No, I don’t think so. Maybe someone else might think I was a bit short, but if I ever am, it doesn’t take me very long to apologize because it really isn’t the most effective behavior. I treasure working together with talented people and holding ourselves accountable and working our way through whatever problem arises, whether we’re creating a 777 or a new Ford Explorer. Working together is the most important part and the essential behavior for a high performance team.
How do you want to be remembered when the time comes to step down?
Hmm. Legacy [pause]. I’m proud about the fact that I helped create products—commercial airplanes or the best cars and trucks—that move people and families around our world safely and efficiently. I love having contributed to making life easier, safer and more efficient, but also like creating fantastic jobs and careers for many people around our world. A strong growing business can do this as well as contribute to a better world by using fewer resources.