Trotman’s Global Gambit
With Ford 2000, a global restructuring that aims to give the No. 2 automaker global agility and lowest cost, Ford Chairman and CEO Alex Trotman fashioned an interesting paradox: If the initiative succeeds, Ford could become the most profitable carmaker, but, if he retires at 65, Trotman won’t be around to take the credit.
September 1 1996 by JP Donlon
When Alex Trotman took the wheel of Ford Motor Co. as chairman and chief executive in November 1993, he was understandably ebullient. With improved after-tax profits and strong vehicle unit sales growth, the 93-year-old automaker was pulling vigorously out of a slump. The first foreign-born executive to run a major
In December 1994, Trotman unveiled Ford 2000, a global initiative that sought to remake the company by tearing up its regional structure in favor of one based on an integrated set of processes across product development, manufacturing, supply, and sales.
Plagued by world overcapacity and mature markets in
Under Ford 2000, Ford’s North American and European operations and their respective components operating units are grouped into a single unit, Ford Automotive Operations. Five vehicle program centers-one in
For Trotman, the stakes are high. “Ford 2000 is more important than the doubters could have imagined,” explains Furman Selz’ Maryann Keller, a longtime auto industry analyst. If Trotman succeeds, Ford could be a big winner as the industry consolidates. If he fails, it will be one of the most expensive re-engineering lessons ever.
Earlier this year, Trotman’s dream hit a few potholes-including a 22 percent drop in profits in 1995 over 1994, to $4.1 billion; a full-point drop in
The question is whether the recent slow down represents a speed bump or a real road hazard to the future fortunes of the world’s second biggest auto producer. Pointing to its surprisingly strong 21 percent second-quarter earnings increase over the same period last year, Trotman asserts that the company is delivering on its promises.
For his part, Trotman isn’t the typical Detroit-in-denial-of-anything-amiss car man. Born in
“Alex is an unusual character,” observes Keller. “When the filmmaker of ‘Roger & Me,’ challenged each CEO of the Big Three to change the oil on one of his company’s vehicles, Alex actually did it.” On what Ford vehicle? The Explorer, of course-his favorite model.
DRAINING THE OCEANS
The auto industry sells about 50 million vehicles a year, and world production capacity is about 70 million. How will future consolidation affect Ford?
You’re touching on one of the biggest issues facing the industry: a huge and growing overcapacity. The Koreans are adding capacity vigorously, and they will continue to do so. If you cut through the analysis, it’s all about scale: scale of operations in product development, manufacturing, purchasing, and technology. Companies will search for efficiencies in speed, fixed cost, material cost, inventory, you name it.
There will be continuing rationalization of suppliers, which will be halved 10 years from now. We’ll almost certainly see a similar rationalization in the distribution end of the business, in the number of dealers.
Ford is a large company, and our challenge is to achieve the efficiencies that exist within our organization. With Ford 2000, we are really merging with ourselves, finding efficiencies as we drain the oceans between various parts of the Ford Motor Co., minimizing duplication and, in the future, eliminating it.
Do you think there’ll be far fewer car-makers globally?
I think there’ll be fewer boardrooms, but an increased number of brands. Customers like choice. So even if there is rationalization of corporate entities, there won’t be any inclination to drop brands on the floor.
How has the Ford 2000 initiative fostered changes?
It’s hard to put together a global cycle plan-a plan for a new product, new facilities, and resource allocation-without having a truly global organization. We have attempted to achieve that kind of unity by using central staffs, and they’ve all failed over 20 or 30 years.
Ford 2000 mandates the execution of the global cycle plan. It reduces duplication and waste. And it provides our customers around the world with more product than we could provide under the regional format and at a capital investment over a five- or six-year period that saves $11 billion over the previous combination of regional plans.
Some savings already have flowed to the bottom line, but we’ll really start to see the large savings by the end of ’97, ’98, ’99. We will be able to make a purchase order for 1 million or more of some widget to fit a single design, as opposed to two different designs at half a million each. The leverage from that capability is enormous.
How will the product development cycle time change?
By the end of the decade, a program that took us 48 months to execute will take 24 months. We may not choose to execute the program in 24 months, but we’d like to be able to push a button and have a major program on the street in 24 months. We’re in an industry where tastes change, all sorts of variables impact what the customer wants-so if you’re four years away from bringing something to the marketplace, there’s a greater risk of missing the market than if you’re two years away.
What benchmarks did you use as you developed Ford 2000?
We looked at a number of successes in major organizational change, as well as at some shipwrecks. Among the successes we looked at were Motorola, Eastman Kodak, and McDonald’s. One conclusion we reached is that the top-down approach doesn’t work if you want to make a major change: Three or four people meeting in secret, devising a process change, then throwing it over the wall to a large number of employees in a complex organization doesn’t work. That was a common feature of the shipwrecks: The buy-in wasn’t achieved before the company set sail on the change.
So how did you get the buy-in?
We couldn’t get total buy-in with 350,000 employees. But about 100 senior people from all over the world formatted the process change. What we did wasn’t perfect, and we knew it wouldn’t be. But it was hammered out day and night by lots of people and then cascaded as those 100 people went back to their operations or divisions and interacted with the people there. The challenge is to make it everyone’s crusade. And those who can’t join the crusade have to find some other way to occupy their days.
Fully 40 percent of your sales are from non-U.S. markets. Which markets hold the most potential?
Growth in the auto industry in the next century will come from the Asia-Pacific region, and we have to increase our presence there dramatically. We’ve committed major investments in
How will Ford 2000 allow you to tap 40 into those markets more quickly and smoothly?
Ford 2000 helps in getting product focus on, for example,
How does a car get “Indianized”?
Suspension, brakes-various component changes that have to be made due to poor roads and driver behavior. The old format made it impossible to get the focus needed to make those changes.
What is your strategy for
We were disappointed when the
Is the reality of doing business in
what you thought it would be? China
The business we’re doing now in
But this is all part of our long-term strategy. Our bread and butter comes from
At one time you had 30 percent market share in the
We might. Our focus now is balance.
Your suppliers are on the periphery of Ford 2000. Since they must integrate their processes with yours, are they to become satellites of Ford?
No. We have interdependence, and that’s healthy. I don’t see Ford ever becoming dependent on a single supplier, nor do I see a supplier depending totally on Ford. While we’re working with fewer suppliers, we still have to maintain a competitive stance and strategic dependence for the future.
Some have noted that perhaps the big automakers might become systems integrators, much like Boeing hiving off subassemblies. Is that likely?
Not for Ford. Many things are core to us: engines, transmissions, painting, some of the assembly.
How would you characterize your relationship with the Ford family?
Very good, in my opinion. I don’t find it onerous to have the people whose name is on the building in close proximity. The Ford persona is helpful, in that our company is still thought of by many as a family company, one with people in it, as opposed to a big corporation.
How does it feel to have five Fords in the top 10 best-selling vehicles in the
We aren’t driving to have five of the top 10 just for the fun of it, although it is fun. Rather, we are spending a lot of time on the bottom-line quality of our market share. We are trying to strike the right balance between share and profitability. It’s not leadership at any price.
What would you like to have accomplished when you step down?
It’s very simple: Higher levels of customer satisfaction. Shareholder satisfaction with their total returns. Employee commitment and satisfaction. Measured by numbers that are better than when I started.
How would you rate yourself at midcourse?
In employee commitment, north of when I started. In shareholder value, on the line. But the middle point isn’t that important. It is what the track looks like after I finish my tenure.