Alan Mulally's Challenges at Ford Motor Company
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Case Code: BSTR263 Case Length: 16 Pages Period: 2006 - 2007 Pub Date: 2007 Teaching Note: Not Available |
Price: Rs.300 Organization: Ford Motor Company Industry: Automobile Countries: USA, World Themes: Turnaround |
Abstract Case Intro 1 Case Intro 2 Excerpts
"The bureaucracy at Ford grew, and managers took refuge in the structure when things got tough rather than innovate or try new ideas that seemed risky."
- Allan Gilmour, former chief financial officer at Ford Motor Company, in 2007.
"He's (Alan R. Mulally) got turnaround experience and has a reputation as a very good manager. I think anyone who takes the job at Ford has a lot of wood to chop but he seems like he has a decent track record and organization skills."
- Jon Rogers, a senior auto analyst at Citigroup, in 2006.
"I have never seen a company with the lack of consistency of purpose as Ford."
- Alan R. Mulally, president and CEO, Ford Motor Company, in 2007.
An Icon in Distress
In June 2007, Ford Motor Company (Ford Motors), the world's third largest automotive manufacturer, announced that it was working with Goldman Sachs, Morgan Stanley, and HSBC to decide on the future of its upscale brands Jaguar and Land Rover. Though Ford Motors did not confirm the news that it would sell these brands, it did not rule out the possibility either. Tom Hoyt, a company spokesperson, said, "As we've consistently been saying since last year, Ford Motor Company has been assessing a number of strategic options for all of our operations, as any responsible company would do. Ford is actively investigating its options in terms of other possible actions, and we're not ruling anything in or out."
Earlier, in March 2007, the company had sold its luxury brand Aston Martin to a UK-based business group. When Ford Motors sold Aston Martin, many analysts anticipated that it would also sell Jaguar and Land Rover as these luxury brands contributed to a considerable chunk of the company's losses. After failing to re-brand and integrate these luxury brands with its product portfolio, Ford Motors felt that acquisition was not the right way of penetrating into the upscale segment. The decision to sell these luxury brands was part of the restructuring exercise called the 'Way Forward' plan initiated at Ford Motors in January 2006 (Refer to Exhibit I for a note on Ford Motors' 'Way Forward' restructuring plan).
To ensure that this restructuring exercise was aggressively implemented, William Clay Ford Jr. (Bill Ford) had roped in Alan R. Mulally (Mulally) in September 2006. Mulally was to succeed Bill Ford as the president and CEO of the company. Mulally had been the executive vice-president at the Boeing Company (Boeing), a major aerospace and defense corporation, and head of its commercial airplanes division before joining Ford Motors. He was well known for his role in turning around Boeing's airplanes division especially during the slump the airplanes industry experienced after the September 11, 2001 terrorist attacks in the US.
Mulally was expected to effect a similar turnaround at Ford Motors. However, there were apprehensions about his selection for the top job at Ford Motors as he was a complete outsider to the auto industry, which analysts said, differed from the airplane industry in many ways. Analysts felt that Mulally would have to face a string of challenges at Ford Motors as a part of his turnaround efforts there. Ford Motors was known for its complex hierarchy and bureaucracy, which had created a lethargic environment within the company. The company was not able to integrate the brands it had acquired over a period of time and evolve a comprehensive winning strategy. This had led to a state of crisis at Ford Motors. Some analysts even predicted that the company would go bankrupt in a few years. It had lost US$ 12.7 billion for the year ended December 2006, one of the worst losses in the company's history. In the face of these challenges, Mulally had a huge responsibility on his hands. He had to take some drastic steps to save the company and bring it back to profits and gain the confidence of customers and investors...
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