In 2006 Ford (F) was hemorrhaging money and desperate to save itself. The 103-year-old company embarked on a turnaround plan that affected every division of the Michigan-based automaker. Ford sold off its luxury European brands, cut its workforce by a third and put up its cherished assets as collateral for billions of dollars in loans. Wall Street investors and industry insiders hailed the aggressive steps needed to change the company — measures that were largely spearheaded by CEO Alan Mulally. In an interview at Ford headquarters in Dearborn, MI, Mulally says the tough restructuring plan he and other Ford executives supported was a difficult, but crucial, operation and the right one for moving the company forward.
"What we went through was so sobering for all the stakeholders associated with Ford," he concedes. "Because what everyone realized is the only way for all of us to benefit is if we are profitably growing. The only way we can profitably grow is if we're competitive. Everybody knows that to survive as a company you can't back off on the investment in the new products. I have never seen such cooperation as we have then as we have now that every quarter, every year we continue to work on the quality and productivity of this operation."
Ford's highly publicized recovery has become a model for other companies experiencing rough patches. The automaker, which at one point was losing more than $12 billion, has posted profits for 11 consecutive quarters and has plans to hire thousands of workers in the U.S. and increase global auto production. Robust sales in North America have buoyed Ford for the past year but the company's profits are likely to take a hit in the near term because of continued weakness in Europe. Ford Chief Financial Officer Robert Shanks told The New York Times last week that the automaker's international losses would triple in the second quarter primarily because of tough economic conditions in Europe. Disappointing sales in Europe led to a $149 million loss for Ford in the first quarter.
At Ford's Flat Rock, MI manufacturing plant, 1,700 workers assemble the 2013 Mustang sports car, producing about 500 a week. Additional shifts at its U.S.-based assembly plants are coming because of Ford's strong position in North America. At the end of the year the Flat Rock employees will begin building the new Ford Fusion, one of Ford's best-selling models. One employee interviewed at the Mustang plant says the concessions he and others made in 2006 and 2007 were "needed" to rescue the company from the brink of bankruptcy.
"We were working 7 days a week, production 6 days a week, then it went down to hardly anything," he says. "Change is coming back. Ford is out of debt now. They're putting us to work. It's a good thing. We take a lot pride in what we do."
Ford wasn't the sole U.S. automaker to slash pay and benefits from United Auto Workers Union members. General Motors (GM) and Chrysler made significant changes to retiree pensions, benefits and salaries too as part of the terms of its taxpayer-supported bailout. Ford's competitors like Toyota (TM) and Honda (HMC) assemble vehicles in the U.S. with non-union employees, a longstanding sticking point with the UAW. Mulally says the company has closed the pay discrepancy with its competitors and employee "wages and benefits are comparable to the best in the world that are competing in the U.S." Ford boasts that it now earns a profit on every car produced in the U.S. — a major feat for the automaker.
"We have wages and benefits that competitive with the best companies in the world and the U.S. so we have earned our right to operate in the U.S.," Mulally says.
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