Alan Mulally is early for his interview. The CEO of Ford Motor (F) has come down to the company cafeteria for an impromptu chat, and it doesn’t take long for him to start pitching Ford’s revival. “This is the most fantastic turnaround in human history,” he says, as we head to his office, a large suite with model cars on shelves and views of Henry Ford’s original Rouge factory in the distance.
Mulally, 65, can act and sound like, well, an overly exuberant car dealer. But analysts say he’s revived the automaker, turning a firm potentially destined for the junkyard into a profitable company with a rising market share and some hot-selling models. The big question now: whether he can keep the momentum going if the economy hits another rocky road.
Ford has certainly zoomed ahead since 2006, when Mulally, who up to that point had spent his entire 37-year career at Boeing, took the wheel. That year Ford posted a $12.6 billion loss and had no clear route to profitability, analysts say. Mulally’s turnaround plan involved cutting labor costs, taking out loans—more than $23 billion worth—and selling noncore brands, such as Land Rover and Volvo. Taking on the debt was just as controversial as selling brands and laying people off, analysts say, but the money allowed Ford to invest in more fuel-efficient engines and innovative vehicle models. It also let Ford avoid the fate that befell both General Motors and Chrysler: Chapter 11 bankruptcy protection and a government bailout.
Today, Ford has about 120,000 fewer workers than it did in 2006, and it intends to eliminate the Mercury brand. But the company is also making money. Sales are up 24 percent this year. The company has been in the black for five consecutive quarters, earning $8.9 billion over that time. “He’s been spectacular, and I don’t think that’s overstating it,” says analyst Steven Dyer, of investment firm Craig-Hallum Capital. Ford’s stock has soared nearly 1,000 percent from its 2008 lows. For his efforts, Ford paid Mulally nearly $18 million last year.
Yet even those who praise Mulally say Ford’s future isn’t filled with green lights. Some analysts say U.S. auto sales could weaken because the American economy has shown signs of slowing down again. At the same time, GM is back from the brink, having emerged from bankruptcy protection with a lower cost structure and some hot new models. Ford’s product mix is also shifting to more small and midsize cars, which aren’t as profitable as large vehicles, notes Deutsche Bank analyst Rod Lache. That shift alone could shave $650 million off pretax profits, he estimates.
SmartMoney caught up with Mulally in Dearborn, Mich., to hear his thoughts on the car business, Ford’s future and his favorite set of wheels.
Is America’s love affair with the automobile ending?
Absolutely not. The biggest change we see today is demand for all sizes of vehicles. Consumers want the very best quality, features and mileage, starting with the small cars.
The economy is slowing, and it’s a tough environment for car sales. How do you keep the momentum going?
We’re picking up market share, and we’ll be solidly profitable for 2010 and 2011, even though we’re experiencing a slower recovery from this recession than any we’ve had. The most important thing is to lead with the finest cars and trucks.
What areas of the business need improving?
We still have a few too many dealers for our size. It needs to consolidate. We’re working with suppliers to align them more with us too.
Corporate turnarounds often fizzle. How do you keep Ford from getting complacent?
We’ll have the freshest showroom of any manufacturer in a few years, and we’re bringing products to market the fastest we’ve ever done it. There’s no time to get complacent.
Is it a challenge to convince Americans to buy a small car?
Not at all. We didn’t make small cars for a while in the U.S. because we couldn’t make them profitably. We’re making them now because we can do it profitably.
What’s Ford’s answer to GM’s electric Chevy Volt?
The Volt is a unique design. They’ve said they won’t make many of them. We’re making hybrids available for everyone, and they’re affordable.
How can Ford be a green company when it sells gas guzzlers like the Expedition SUV and Mustang?
We’re a consumer company, and we’re market-driven. We’re making the vehicles people want and value.
Did borrowing $23 billion put Ford at a disadvantage now that GM and Chrysler have shed lots of their debt?
Borrowing the money gave Ford the biggest advantage ever. It enabled us to get back to profitability during this recession and accelerate the development of new products. The plan was always to pay the money back. We paid back $4 billion in the second quarter.
You had never engineered or designed a car before coming to Ford. Are you weighing in more now?
I always have. I’m a designer, whether it’s a commercial airplane or a car. The principles of designing a vehicle are exactly the same.
Are you thinking of retiring?
I love what I’m doing. We’re accelerating Henry Ford’s vision, and that’s pretty exciting. I don’t want to retire.
What’s your favorite vehicle besides a Ford or Lincoln?
A Boeing 777.
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