The Road Ahead
Nonetheless, despite a 2009 that proved better than even its biggest boosters could have hoped for, Ford's bond rating remains in junk territory and "their debt burden is a reality that can't be dismissed," says Rebecca Lindland, an analyst with HIS Global Insight. While she has a favorable view of Ford's prospects overall, one near-term problem, she says, is that "the car market is still not out of intensive care." Her firm estimates that American car buyers will purchase 11.5 million vehicles in 2010, a 10% rise from 2009, but still vastly short of the 15.5 million to 16 million units she says would normally sell, based on historic demand, demographics, and other factors.
Another lingering problem for Ford is its agreement with the United Auto Workers, which has used the company's recent success against it, rejecting contract changes that would allow Ford to reduce job classifications, freeze the pay of new hires, and be relieved of the threat of a strike over the next six years. The Ford vehicles that have advanced furthest in quality scores, meanwhile, are built by nonunion workers in Ford's Hermosillo, Mexico, plant, a fact that suggests no easy resolution to the labor problem.
And, as noted earlier, Ford has launched ambitious corporate makeovers before — to no avail. As we noted in 1995, under the Ford 2000 plan, 1999 model year vehicles would herald an era in which "all regional boundaries are supposed to vanish, along with superfluous rungs of corporate hierarchy and $2 billion to $3 billion of overhead." A decade later, the company is still promising the imminent appearance of a global platform.
Booth acknowledges that while Ford ended 2009 on several high notes, it is only in the middle of what will be a long and complicated transformation. Success, he says, will hinge on a "religious adherence" to the processes that Ford now has in place. "Let's not kid ourselves," he says. "Our previous processes weren't getting the results we needed, and we knew we had to change. We do want to be different."
It's curious, perhaps, that a veteran of 30-plus years is playing such a key role in reinvigorating the company. But if the One Ford vision that Mulally champions is to take hold, then the automaker will have to adopt at Dearborn many of the practices that its often more nimble overseas operations have practiced for years. Booth was directly involved in much of that overseas success.
And, while one gets the distinct impression that his heart remains very much in operations, as he says, "When the boss asks you [to take the CFO post] and things are tough, you say OK. I love the job I'm doing now. To not have been in Detroit over the last 12 months would have been to miss the most extraordinary times that I've ever seen in the motor industry."
The next 12 months may be more extraordinary still, as Ford prepares to reap the rewards of what it has sown during the past two years. No one will be watching the results more closely than Booth. "Cars are in my blood, for better and worse," he says.
Who knows? If things go well, the guys in product development may even let him design a headlight cowl.
Scott Leibs is editor-in-chief of CFO.
Road Kill
No doubt about it, 2009 was a monumental clunker for auto sales. Analysts expect a postrecession rebound, but it won't happen overnight. That gives rise to the question: Which carmaker will be best-prepared to capitalize when it does?
14.8 million — Average number of cars sold annually in U.S., 1980–2008
10.4 million — Number sold in 2009
30% — Decline in sales, 2009 versus 1980–2008 average
40% — Decline in sales from best year (2000)
13% — Anticipated rise in sales, 2009–2010
42% — Anticipated rise in sales, 2009–2012
56% — Anticipated rise in sales, 2009–2014
2012 — Year in which car sales match recent average
Source: CMS Worldwide
A World of Difference
While working at one of America's largest companies certainly has its advantages — Lewis Booth has held posts on four different continents and been responsible for operations in a fifth, for example — there are some lessons that may be hard to learn. One of them, as Booth notes, "is straight from Business 101, but easy to lose sight of," and that is the importance of cash.
Fortunately, Booth got a crash course during one of his overseas postings. In 1997 he became group managing director of the South Africa Motor Corp. (Samcor) in Pretoria, a joint venture that was enduring some tough times. "The industry was down and we were losing money and we had borrowing limits," Booth says. "We had to watch very closely to make sure we could pay the wages every month." Booth admits that "up until then, cash wasn't a rationed resource at the bigger units of Ford where I had worked." But in having to sweat the bills each month, he says he developed "sort of a visceral feeling about cash that's much harder to get in a big company."
That experience served him well when he was tapped to become CFO at Ford, where, as vice president and treasurer Neil Schloss notes, "he keeps us all focused on cash and cash flow, even as he brings finance and operations together in a common mission." — S.L.
Reader Comments» Post a comment