How Ford Engineered its Turn-Around

John Krautzel
Posted by in Management & Business


When the Great Recession hit in 2008, lots of automakers, including the Ford Motor Company, took big hits. Ford had been hurting for several years before the economy went sour, causing them to engineer a turnaround strategy that was almost derailed by the recession. Through a series of strategic moves, Ford managed to become profitable again while some competitors were still mired in bankruptcy proceedings.

CEO Alan Mulally came on board with Ford in mid-2006, when the company was losing billions of dollars. He and Mark Fields, who was already in charge of the company's North American operations, charted out a bold turnaround strategy that made the company profitable again by 2009. They stuck with the plan, even though the company suffered huge losses and plunging stocks that bottomed out at just over one dollar per share during the first two years of its enactment. Despite the heavy initial losses, the determination to forge ahead by changing corporate management culture and reducing production by more than a million cars has paid off.

Part of the turnaround strategy involved the use of data, with Mulally embracing his new mantra, "data will set you free." He always wants to know what the numbers are, even if the news is bad, as was the case when the resale value of used Fords took a dive in recent years, causing Ford Motor Credit to take a hit. Before the implementation of the turnaround strategy, management had been loath to give bad news to the CEO, which was part of the problem. Using negative data instead of ignoring it allowed Mulally and his managers to understand buyers and determine which cars and technologies they would want in the future so that they could avoid making cars that wouldn't sell.

Even with all these changes, the company would not have been able to get to the position it is in now if it hadn't been for Fields' work with Visteon. Like many of its competitors, Ford Motor Company had a parts and components unit that was having trouble long before the recession hit. Visteon had seventeen plants that Ford bought back from the company in order to stave off bankruptcy, only to have the buyback become a huge factor in its later financial crisis. Fields was the architect of the turnaround strategy to close or sell off the Visteon holdings, a painstaking process that is finally over with the recent sale of the last plant.

It was not an easy or quick path, but Ford did the seemingly impossible by making the company profitable again after the recession. While Chrysler and GM were trying to emerge from bankruptcy, Ford instead dug deep and used data, innovation, and a sound turnaround strategy to cut its losses. Even though there are still a few tweaks that need to be taken care of, Ford looks like it will remain profitable and serve as a strong indicator that the American manufacturing sector really is making a comeback.

 

(Photo courtesy of freedigitalphotos.net)

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