Tuesday, July 24, 2007

More Blind CEO Devotion: An Interview with Ford's Mulally

Yesterday's Wall Street Journal carried an interview with Ford's new(ish) CEO, Alan Mulally.

I cannot help but feel that this is one of those "happy talk" sessions, where the interviewer fawns over the CEO, tossing softballs and avoiding embarrassing questions.

The Journal interviewer largely focused on the process by which Mulally became acquainted with Ford, upon his arrival, and how he had managed since then. Scrupulously avoided were realities such as: Ford's dismal recent and forecasted profit performance; Ford's insufficient size to compete with giant Toyota in the years ahead; the reality that realizing Ford has the wrong mix of cars during a time of high gasoline prices has nothing to do with quickly creating the right mix.

Mulally seems like a sincere, hard-working, dedicated guy who may have jumped into a lethal fire. Despite his apparent success in rescuing Boeing a few years ago, he didn't get the top job. That being the case, he jumped at Bill Ford's offer of the Ford CEO position.

No matter how well Mullaly builds his executive team, or learns about auto production and marketing, he is still CEO of an ailing, smallish producer of largely commodity products. His five "tips" for "taking on a new company in an unfamiliar industry" read, in part, as follows:

1. Deal with reality, and restructure accordingly.
2. Talk to everybody.....
3. Fine-tune the business plan every week- not once a year.
4. Get all the players at the table.
5. Encourage subordinates to disclose problems.

Honestly, I don't think we need Mulally to know these things. But, what's missing is number 0:

"Admit when you simply do not have a winning hand, and need to seek a merger, or dissolution, rather than simply exhaust assets in a futile attempt to survive."

I don't think Mulally is being totally candid- with Ford, or the Journal. He said he spoke to dealers at length, asking them what they thought. Trouble is, for every major auto maker, but especially ailing titans GM and Ford, the dealership network is killing them. Consolidation is required, but not really an option, due to existing laws in most states.

Further, Mulally is silent on just how much time investors will give a company which plans to lose money for the next two years, has racked up large losses recently, and faces further uncertainties and difficulties in its competitive, regulatory and customer arenas.

As I have written previously, Ford, partly due to its family's concern with the company that bears its name, has roused itself several times before to affect a self-rescue. This time, however, I believe it has waited too long, become too small, and run the odds of success to a new, potentially fatal low point.

Maybe Mulally can dress Ford up for a merger or sale to another auto maker. I seriously doubt, given his glib responses in the Journal interview, and his focus on process, rather than results, that Ford will ever, independently, earn consistently superior total returns for shareholders over several years.

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