Ford announced two milestones this week. The first is a new CEO coming from outside the company, in this case Boeing. The second is a restructuring plan that everybody knew was coming. We just didn't know how deep, or how far they would cut. This company is very quickly becoming a case study at Business School for how NOT to run a company.
The company has a management team that has been asleep at the switch for at least 25 years. You would think they woke up this morning for the first time, and said we have to cut everywhere.
Let's start with what's missing from the plan, the MASTER plan that Ford is now proposing. I have reviewed all publicly disseminated documents and this is what I conclude. I don't see a word anywhere talking about "LET'S MAKE CARS OF HIGH QUALITY THAT PEOPLE WANT TO BUY."
The only thing these guys talk about is financial engineering. They've blown it, they've blown it so bad, that the question is, are they so far down in the hole that they can't dig themselves out. They may be at that point. Let's deal with reality. America is NOW a high cost producer of just about anything that involves manufacturing. In 1900, half our population was involved in agriculture. Think, half of us were farmers, or farming related.
With the continued industrialization of this country, we moved from the farm to machines, to manufacturing. America was a manufacturing powerhouse for decades. The latest census shows that we are a 75% service society, and about 4% agriculture. The rest is manufacturing, and that sector will continue to decline.
Automobile manufacturing is the tip of the problem. We will come to a point perhaps, where there will be little to no car manufacturing in this country. It's sad, but it is what it is. We have to deal with it. Ford has not wanted to deal with it for decades. They wait till now to say, we have a problem, "Hello, anybody home, are you listening."
I was talking to an individual recently who has sold Lincoln cars (owned by Ford) for 25 years. He told me about a woman that bought a Ford Navigator, and drove immediately from the dealership on a trip to Florida. The horror show began in New Jersey. Windows started to open and close on their own. Internal lights went on and off. By the time she made it to Maryland, she had to leave the car at a Ford dealership.
Two weeks later, the company decided to give her a new car. Apparently while building the car, a worker put some kind of sharp tool through the wiring harness in the engine compartment. The shorts were everywhere, and affecting every major electronic component of the vehicle. This is not an isolated incident. Ford use to advertise, "Where quality is number 1." Had they put quality in their cars through the years, they wouldn't have a problem today.
What do the people who run Ford drink at night? What do they smoke? Do they think everyone else outside their company is functioning in the same manner that they are. The Japanese continue to set a high standard. The standard may be so high that we Americans may not be able to reach it anymore. Is that a reason for Ford not to try?
Ford has 75,000 hourly workers in the United States. The company has offered to buy out all of them. If you have a FULL year on the job, you get a $100,000 buyout, and healthcare benefits for 6 months. If you have either 30 years on the job, or you are age 55 with 15 years or more on the job, you get $140,000 to leave immediately. You also get to keep your pension, but you give up retirement health care coverage.
Workers are also being offered college benefits with 8 other options. These are people who in a good year are use to making a $100,000 with overtime. Where do we stand now? You have a 100% UNHAPPY workforce. You know how a car spins its wheels in the snow. You are going to have every worker at Ford spinning his wheels, do I take the deal, do I not take the deal. They will be flipping coins trying to figure it out. Meanwhile the executive ranks are going to be saying to themselves, "What am I doing here."
The whole game plan is about as disruptive to a corporation as disruptive can be. How is anything going to get done including manufacturing well designed cars that people are comfortable buying?
Wait, there's more?
This whole deal has been announced before the new CEO, Alan Mulally of Boeing takes over in the next couple of weeks. Is their any reason why this announcement couldn't wait two weeks for the new man to come in? Ford made a CONSCIENCE decision to announce immediately. They didn't want their new CEO to take the pubic hit for adverse public reactions that are going to come from the latest restructuring plan.
Can Ford come back?
It's really a good question. The answer is that it's going to be tough under all scenarios. The best bet they have going for them is bringing in an OUTSIDER. Einstein once said, "The significant problems we have cannot be solved at the same level of thinking with which we created them." I believe this is a cardinal rule of management as well. The problems of a company cannot be solved by the same executives who were there when the problems were created.
The executives now in charge at Ford are part of the problem. They in fact are the problem. They have too much invested in an old way of thinking, an old management style that is no longer appropriate for the 21st century. In fact, it hasn't been appropriate for 25 years, which is why the Japanese are eating Ford for lunch. It may still be too little, too late, and what about QUALITY and DESIGN, still not a word from Ford.
Goodbye and good luck
Richard Stoyeck's background includes being a limited partner at Bear Stearns, Senior VP at Lehman Brothers, Kuhn Loeb, Arthur Andersen, and KPMG. Educated at Pace University, NYU, and Harvard University, today he runs Rockefeller Capital Partners and StocksAtB
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