Alan Mulally of Ford: Leaders Must Serve, with Courage
0:00[MUSIC]
0:06Let's give a GSB welcome to Ellen Melleli.
0:09[SOUND].
0:16Thank you.
0:19Thanks.
0:21Thank you.
0:23Thank you.
0:25So, how are you?
0:26Good?
0:27I'll be outside after this to take your car orders.
0:30[LAUGH] We've got some great vehicles for you.
0:36First of all it's really neat to be back, in the MBA program.
0:40And what I thought I'd do is, you're still studying case studies, right?
0:44Do a lot of that?
0:45And they describe the situation, give you lots and lots of data,
0:47then you're supposed to think or reflect on what you would do.
0:50So I thought a way to introduce our conversation
0:53today was, let's to a case study on Ford, okay?
0:57And then you get to be me.
0:59Okay?
1:00Cuz I'm looking for a few more good ideas.
1:02And I'm gonna get it here today.
1:04Okay, so, it's, 2006.
1:06It's, September.
1:09I'm, the, the chief executive officer at Boeing, commercial airplanes.
1:15I'm looking forward to creating one more Boeing airplane.
1:18To replace maybe the 737.
1:1980% of all the seats that are flying worldwide are Boeing airplanes.
1:25Feeling really good about Boeing, feeling really good about our contribution to
1:27safe and efficient transportation, and I get a phone call from Bill Ford.
1:32I'm going, Bill Ford, of like the Ford Motor Company?
1:35The great grandson of Henry Ford?
1:38That's the one.
1:39And he said, we're in really tough shape, and I would
1:43really like your help, and would you consider coming to Ford.
1:48So, I started doing my due diligence, and at the end of the day, I was being asked
1:53to serve a second American, and global icon, and
1:56I just couldn't, I just couldn't turn that opportunity down.
1:59So, I walk into the office in the world headquarters of the Ford Motor
2:03Company, the 12th floor and I look out the window, and here's the rogue plant.
2:08And here's where Henry Ford created the assembly line, this
2:13is where Mister Toyo Da of Toyota came to visit.
2:18To learn how to make cars and
2:20how they continuously improve their quality and productivity.
2:23And here's the entire plan.
2:25At the time it was a 100% vertically integrated.
2:28Most efficient operation in the world.
2:31And I'm, reviewing the situation.
2:34And here's the situation.
2:36I check with our finance people and they give me the the
2:40great news that we are projected to lose $17 billion in 2006.
2:44You could run out of money really fast.
2:49At $17 billion a year.
2:52I also review in the situation about what Ford has become.
2:56And Ford has now become a house of brands.
2:59And remember, I left Boeing to come to Ford.
3:02And Ford was Aston Martin, it was Jaguar, it was Land Rover, it was Volvo.
3:06I was, had a, had a significant relationship with Mazda.
3:12And so Ford was this house of brands.
3:14And it also happened to have Ford and, Mercury and Lincoln brands also.
3:20Also, Henry Ford set up for it all around
3:23the world so that he can participate in the economy.
3:26Not only provide great cars and trucks but also be a part of economic
3:29fabric of all the countries at which
3:31Ford operated, but Ford had become very regionalized.
3:34And none of the Fords talked to each other around the world.
3:37There was no synergy.
3:38And we were competing with the best global companies in the world and we
3:41had no scale, and no integration of
3:44all the intellectual capability around the world.
3:47Also, in the United States, we had labor agreements with the unions, and our cost
3:50structure, where we really couldn't make cars
3:52in the United States and make them profitably.
3:55So we stopped doing that.
3:56And ones that we did make were pretty marginal.
3:58And we focused on bigger SUVs and trucks.
4:01So if you wanted to, if you wanted to, you know,
4:03live on a 150 and put your house behind it simultaneously, you
4:05needed to get the best truck in the world from Ford but
4:08we didn't have a full family of vehicles, in the United States.
4:12Also, we had never, we really hadn't made a commitment to the investing class or the
4:16competition so we were kinda competitive on quality
4:19and fuel efficiency and safety and really smart design.
4:23And.
4:23But we weren't really best in class.
4:26In addition, we were unprofitable in every one of
4:29those brands and in every model we were losing money.
4:34Thinking back, I wonder why I did come.
4:36>> [LAUGH]
4:39>> And we we're running out of cash really fast.
4:45So, that's the situation.
4:48[SOUND].
4:48I've got a card and I have a pencil.
4:52So, please shout out what you would do.
4:55You thought this was gonna be a free lunch.
4:58[LAUGHING] Okay.
4:59Now with that situation, this is Standford.
5:02The MBA program.
5:03We've got engineers, we've got business, we've got
5:06the smartest people in the world right here.
5:08Right?
5:09OKay, what would you do?
5:11Okay, just shout it out.
5:15Okay, now I'm going to take notes, because I've got
5:17a feeling that this is going to work out really well.
5:19[LAUGH] Okay, fantastic, probably over capacity.
5:30Good.
5:30>> Invest in R&D.
5:32>> Good.
5:32>> Standardize vehicle platform.
5:36>> Standardize the platforms.
5:37Wow, good.
5:37>> Labor negotiations.
5:38>> What would you do about that?
5:41>> Try to reposition the probably long term pensions
5:50to be less.
5:50>> Very good.
5:51[LAUGH].
5:51>> Okay, what else?
5:52>> [INAUDIBLE].
5:53>> Wow, what do you mean by that?
5:53>> Put a little more emphasis on the four brand
5:58of cars, not all the inferior cars.
6:04>> Fantastic.
6:09Fantastic.
6:11>> [LAUGH] >> Okay, what else?
6:17>> [INAUDIBLE] >> [LAUGH]
6:23>> That was, not part of the plan.
6:25>> [LAUGH] >> Although we.
6:28>> That's what happened.
6:29>> But that's what happened cuz we're a real pain right now.
6:32>> [INAUDIBLE] >> Wow, maybe all around the world.
6:43>> Figure out what customers want.
6:47>> Really?
6:47>> [LAUGH] >> [INAUDIBLE]
6:50>> Overhaul your design process.
6:52Absolutely.
6:53End of production.
6:55Maybe do it together.
6:56[LAUGH]
6:58What do you think the customers really want?
7:01>> Safety.
7:02[INAUDIBLE] Fuel economy.
7:05>> Focus on quality and safety?
7:12Entertainment.
7:13>> Seamlessly connected to the internet.
7:16Hands on the wheel, eyes on the road.
7:18Bluetooth activated.
7:20Sync my
7:23Ford.
7:25[SOUND] Oh man, I found the next management team right here.
7:31>> [LAUGH].
7:33>> What else?
7:34>> [INAUDIBLE] >> Really?
7:37>> [INAUDIBLE]
7:39>> You mean you can't compete on a global scale by operating regionally?
7:43That's really
7:50something.
7:55>> We have a
7:57performance culture based on discipline.
7:59>> Whoa.
7:59>> Lower your reliance on incentives.
8:00>> Whoa.
8:00[LAUGH] >> [INAUDIBLE] China.
8:00[LAUGH] [LAUGH] I personally have this philosophy if I, if I think anybody's
8:12from China I give them a hug.
8:17[LAUGH] Look at we'll talk about this in a little bit but the,
8:19the China market now as you know, is bigger than the United States.
8:21It's just a fabulous opportunity and I love the Ford brand.
8:30We're expanding as fast as we can.
8:32>> [LAUGH] >> Now why would you do that?
8:32>> [INAUDIBLE] brand had to be Ford and Lincoln.
8:35>> Oh a tweeners?
8:36Is that a new business school expression?
8:38>> [LAUGH].
8:40It was a good...
8:41We'll talk about this some more.
8:43And again this allows you to ask some questions that you want to
8:46ask to, because all of these are a clear part of the plan.
8:48What would you do about financing?
8:51>> Leaves you in debt.
8:53>> You better not run out of money.
8:56Right?
8:57So, when you do a transformation like this the
8:58most important thing is when you have a plan...
9:01But two, do you have the finances in place?
9:02Cuz if you run out of money during
9:04the, during the transformation it doesn't work out.
9:07So get a home improvement loan.
9:09Got it?
9:09Okay, what else?
9:11>> [INAUDIBLE] >> Cuz they're so
9:18cool.
9:19Yeah.
9:20But better have a cost structure here so you can.
9:29Make them here too.
9:29I did that on the first day.
9:33[LAUGH] Back to [UNKNOWN] oh, you [INAUDIBLE] okay.
9:37This
9:40is fantastic.
9:42And this is what we did.
9:44And thanks for inviting me.
9:45[LAUGH]
9:48And I would propose to you that everything you said
9:51is about leaderships, cuz that's what your class is about today.
9:55Everything you say is about leadership.
9:57Cuz every one of those is a courageous decision.
10:00It's gonna come from having a, a point of view about the future, and
10:04having your conviction that you're gonna have
10:07a comprehensive plan to implement that compelling vision.
10:10And just one last question.
10:11What would you use, what would you have used for, your vision in this situation?
10:16Something, think of, of like what would you have rallied everybody around?
10:20Because you clearly are where you are, but you're
10:22going to different place, you just described this different place.
10:26What would you, what would you do about that compelling vision?
10:28How would you describe what your new Ford is going to be like?
10:30What do you think that's important?
10:32>> [INAUDIBLE] >> My god.
10:37>> [LAUGH] >> Oh man.
10:40I don't know if I can wait until after this to meet you.
10:43>> [LAUGH].
10:44[LAUGH] Okay.
10:47That's absolutely incredible.
10:54And that's exactly what we did.
10:57And when you walk into that same office today, where
11:02I walked in four and a half year ago, the.
11:06The entire wall is filled up with Henry Ford's vision for the Ford Motor Company
11:12that he laid out on January 24th of 1925 in the Saturday Evening Post.
11:18And you can Google it and find it, it's like fantastic.
11:22And it says, opening up the highways to all mankind.
11:27That's what Henry Ford was about.
11:28He wanted to make traveling on the
11:30highways affordable and available for all of us.
11:35And at the time, the only people th