Nov. 9 (Bloomberg) -- Alan Mulally, Ford Motor Co.'s new chief executive officer, seems to have put his finger on the root cause of the No. 2 U.S. automaker's abysmal performance: disorganization.
A newcomer to the U.S. auto industry at age 61, the former Boeing Co. executive told analysts at a lunch on Oct. 24 that Ford has ``endless opportunity'' to reduce complexity and costs, according to a report by Peter Nesvold, automotive analyst of Bear Stearns Cos.
Paraphrasing Mulally's remarks, Chris Ceraso of Credit Suisse said the automaker has ``too many models, too many platforms, too many different components, too many plants.'' Ford shares closed 5 percent higher the day of the lunch.
Most telling, Mulally, who joined Ford in early September, revealed in an interview with Fortune magazine that the automaker, upon his arrival in early September, lacked a business plan or strategy. Various Ford business units were pursuing their own agenda, with little regard for a central purpose.
These assessments from the new CEO are blunt and rather breathtaking given that Ford posted more than $177 billion in worldwide sales in 2005 and has a century of experience in its industry. Yet Ford also has lost $7.2 billion so far this year and looks less capable than ever of competing against rising international brands like Toyota and Honda.
So far, Mulally hasn't said which Ford brands are drags on the company, though he may do so soon. Only one niche brand for the ultra-wealthy, Aston Martin, is for sale. The rest, said a spokesman, remain under review.
Confused Buyers
With about 18 percent of the U.S. market (heading for 15 percent to 16 percent after production cuts), Ford sells vehicles under the Ford, Lincoln, Mercury, Jaguar, Land Rover, Volvo and Aston Martin nameplates.
Toyota, with 15 percent of the U.S. market, sells most of its vehicles under only two brands, Toyota and Lexus. Scion, a small but growing Toyota marque, accounts for 7.2 percent of Toyota's U.S. sales.
The welter of different Ford names and models has confused buyers and overwhelmed management. In the midst of this proliferation, Ford has inexplicably allowed Lincoln to wither as a luxury symbol while letting Mercury degenerate into a brand with little meaning or definition.
Mercury sells fewer vehicles than Subaru or Acura and should be a leading candidate for closure if Mulally decides to reduce Ford's offerings. Such a move would be difficult, since most Mercury dealers also sell Lincoln.
Confronting Chaos
The chaos Mulally must address isn't confined just to the U.S. automotive market. He is telling subordinates and outsiders that Ford is ``a lot of Fords.'' To align conflicting efforts among divisions and departments he conducts an all-day review of operating and financial results starting 8 a.m. every Thursday, with mandatory participation by top executives.
``You just can't hide,'' he said of the new ritual to Fortune on Nov. 2.
``We all look at one screen,'' he said. ``If you're on a different planet, everybody's going to know.''
Don't be surprised if Mulally starts replacing executives who don't fit into his campaign to simplify operations and promote cooperation. The Detroit News last week, without attribution, reported that Jerry L. Calhoun, a Boeing human resources and labor relations executive and former Mulally lieutenant, was in town for discussions with his old boss.
Boeing, in a statement, said Calhoun, a 36-year veteran of the aircraft maker, has been planning his retirement. ``We're very close to naming his successor,'' Boeing spokesman Christopher Villiers said.
Time Is Short
Calhoun, if he joins Ford, could prove instrumental in recruiting new personnel as well as shaping the next labor contract between the United Auto Workers union and the company. The contract expires in September.
Without a doubt Mulally realizes that Ford and the UAW lack a coherent strategy to make their plants and work force competitive with new Toyota, Honda and Nissan factories popping up across the U.S.
Mulally is predicting that the restructuring of Ford might take three to four years, with no profits until 2009. The fact that Ford is considering how to mortgage its plants, tools and other assets to raise cash suggests time is running short and he might not have that long to set things in order.
