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FORD DECLARES RESURGENCE OF FORD MOTOR COMPANY

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FORD DECLARES RESURGENCE OF FORD MOTOR COMPANY

Following is the text of remarks by Bill Ford, Chairman and CEO, Ford Motor Company, at the Ford Motor Company Business Review on January 23, 2006.

Today, we declare the resurgence of the Ford Motor Company.

It doesn’t begin today; it's already begun. But today, you'll see and hear how serious we at Ford are about winning in the 21 st century – both in North America and around the world.

We call our North American plan, “The Way Forward.” It’s bold and sweeping and it builds on the innovation-driven vision we talked about last September. It's a strategy that calls for sacrifices at all levels of the Company. It puts the customer first. And it demands we look beyond short-term financial targets to create sustainable, profitable change in our North American business.

Much of what's written about today's discussion will focus on the cuts to plants and personnel, and that’s understandable. These cuts are a painful last resort and I'm deeply mindful of their impact. They're going to affect many lives, many families and communities – and we're going to do everything we reasonably can to ease the burdens.

The people in some of our plants aren't the only ones asked to sacrifice. As you know, we are reducing our salary-related costs by 10 percent. And we are reducing our officer ranks 12 percent by the end of the first quarter.

By taking the actions we are today, in the long run, we will create far more stable and secure jobs. We all have to change. And we all have to sacrifice. But I believe this is the path to winning.

The Way Forward contains some strong medicine for our North American business. But it also contains the vision and strategic focus to rebuild the business. With it, we will retake the American roadway.

Mark Fields will explain the details of the plan shortly. But the full story of what’s happening at Ford cannot be told by cuts – you can’t cut your way to success. The full story is about what Ford stands for – and what we will no longer stand for.

Ford Motor Company stands for a far-sighted commitment to growth. We stand for a renewed focus on the customer. We stand for boundless innovation in every aspect of our business – from design, to safety, to fuel-efficiency, to efficiency on the factory floor.

We stand for the distinctive look, feel, quality, toughness, boldness and fun of automobiles that are unmistakably Ford. And we stand for the hard-working men and women of Ford Motor Company and their families.

Business plans change as the world changes – but these principles will never change.

Here is what we will not stand for: incremental change, avoiding risk, thinking short-term, blocking innovation, tying our people's hands, defending procedures that don't make sense, and selling what we have instead of what the customer wants. In short, we will not stand for business as usual.

When I took over as CEO at the end of 2001, we were awash in red ink, losing more than $5 billion that year. In 2002, we launched a major effort to revitalize

our company.

We divested ourselves of several non-core businesses and created the biggest wave of new product launches in our history. Since 2003, we have made money each year. In fact, this morning we announced net income of $2 billion.

Outside of North America , we've made continuous progress. Our automotive operations in Europe , Asia , and South America were all profitable last year. Mazda is enjoying its best performance ever. Jaguar is bringing out fast, beautiful, groundbreaking cars. Aston Martin is expanding.

Land Rover's largest-ever introduction of new products is winning in the marketplace. And Volvo is entering its most aggressive product period ever, with five new models in eighteen months.

And in parts of the world where the car market is growing sharply, so are we. We're doing especially well in Russia , Turkey and Hungary . In India , we introduced our most important new product in years. And Ford sales in China – the fastest growing market in the world – were up 46 percent last year.

We’re proud of our success around the world. But here, on our home turf, we must do more.

The plans we announced in 2002 were not wrong. They took us as far as we could go without making dramatic changes – but that’s not nearly far enough, especially in light of how much the global marketplace has changed. Oil and steel prices are up, competition from abroad has intensified, and domestic demand for SUVs dropped sooner than anticipated.

We need to change the business model that's existed for many decades at Ford. How will we do this?

First, we are taking a more far-sighted approach.

Last year, we stopped publishing quarterly earnings guidance. This was a result of the tremendous volatility in the market as well as the spikes that we saw in steel, crude oil, and other commodities. Today, I am announcing that Ford Motor Company will no longer publish annual earnings guidance either.

This decision may be contrary to the advice from some of the respected people in this room. It is not that we do not value your opinion. We do. But we need to underscore an important point inside the company and out: we cannot succeed in the long run if we're focused only on the short term.

We must be guided by our long term goals of building brand, satisfying customers, developing strong products and accelerating innovation.

Over time, we believe this approach will lead to sustainable profitability. You'll be able to judge our results as we report our progress.

We do have extremely rigorous targets for costs, capacity utilization, and other traditional metrics. But we will also be managing to allow our employees more freedom, to take smart risks, and to demonstrate their creativity. Mark will elaborate on all this in a moment.

Second, we’re going to sharpen our focus on those who count the most – our customers. They are changing and we're going to change with them.

True customer-focus means that our business decisions originate from our knowledge of what the customer wants, both today and tomorrow. “If you build it, they will buy it” – that’s business as usual, and that's wrong. “If they will buy it, we will build it” is right – and we’re going back to it.

Our over-reliance on SUVs was business as usual. We were obviously pleased with their profitability and hoped that demand would continue to rise, even though we knew that day would come when customers would begin to embrace other segments, like cars and the fast-growing crossover market.

Our product plans for too long have been defined by our capacity. We developed vehicles to fill plants, sometimes at the expense of creativity. That's why we must reduce capacity in North America .

From now on, our products will be designed and built to satisfy the customer – not just to fill a factory.

We're going to go way beyond what we’ve ever done before at Ford to find out what’s on the customer’s mind. But we’re determined to do even more than that.

My great-grandfather once said of the first car he ever built: “If I’d asked my customers what they wanted, they’d have said a faster horse.”

At Ford, we’re going to figure out what people want before they even know it – and then we’re going to give it to them. It's where we began and it's where we must go.

This is going to require change number three: we must unleash our spirit of American innovation. To me, innovation is seeing what others can’t see, and using that vision to build what others have never built.

It's the only way to make a car that’s smaller, yet roomier; lighter, yet safer; faster, but more fuel-efficient. Innovation resolves contradictions. It flattens old barriers, and it’s the heart of all progress.

It has a very specific purpose here at Ford. It will drive the bold American designs of our cars and trucks – giving them the uniquely American look and feel that reflect our country’s spirit, ingenuity and sense of adventure.

Innovation will drive our new advances in safety. Ford and Volvo engineers are exemplifying that by working together on safety innovations like a new collision-avoidance system, night-enhanced vision and the next generation air bag. Finally, American innovation will drive our new advances in fuel-efficiency – to offset high gas prices, the environmental impact and dependence on foreign oil.

By 2010, more than half our Ford, Lincoln and Mercury products will have hybrid capability. We’ll have the capacity to produce up to a quarter of a million hybrids a year, and scale up as the market demands. Right now, we are also offering four new flex fuel vehicles for 2006 that run on a mixture of gasoline and ethanol. These new advances in fuel-efficiency – as well as bold American design – all spring from innovation.

There’s a lesson for us in the launch of the Ford Escape Hybrid. The Escape was the first hybrid ever designed, engineered, and built by an American automaker – and the first hybrid SUV launched by anyone.

As we tried to design it, test it, and launch it on time, we found that the old systems and methods were getting in the way. So we put scientists and product engineers on the same design team and offered them the flexibility to get the job done.

They delivered the product on time – generating more than a hundred patents, and developing new design techniques that we are using now to develop other products.

Getting scientists and engineers together doesn’t sound so complicated. Getting management off their backs doesn’t sound so revolutionary. Why didn’t we do this before? Because we didn’t have to. The system in place was good enough for getting other products out at that time.

Now the question is: what other bureaucratic walls have we built that are holding us back?

The Rouge is another example of innovation. Despite cynicism and institutional barriers, we built the most progressive assembly plant in the world. The Rouge marries lean, flexible, and environmentally friendly manufacturing with America 's best-selling vehicle, the F-Series truck.

Over time, the Rouge will save us many millions of dollars not just because of its green roof, but in energy costs like heating, cooling and lighting.

Projects like these need to be the rule, and not the exception.

I like to tell school kids about a time a hundred years ago when my great-grandfather Henry Ford built his first car in a shed behind his house.

At the end, after he was finished, he realized there was one thing he hadn't anticipated. The car was too big to go out the door. He actually had to knock down a wall to drive it out.

We intend to remind people every day that if you want to build something that’s never been built before, you may have to knock down a wall or two.

Today, we are moving from a culture that discourages innovation back to a company that celebrates it.

In this effort, we recently sent out a mailing to 120,000 US dealers, employees and retirees asking for ideas. Going forward, our employee evaluations will include a section on innovation. We’re also going to design compensation plans that reward new thinking. And we’re going to create a way for employees to appeal a decision, even if they have an idea and the boss says no.

We also launched an innovation website in November to solicit ideas from employees. In our first month, we received more than a 1,000 ideas, and we’re following up on some very promising ones.

This company was founded by an inventor; we want to make sure that today the company is overflowing with innovators. We’re going to find them, encourage them, and then we're going to reward them.

This is what it is going to be like at Ford: Far-sighted, customer-focused, and innovative.

At the same time, we must make some dramatic improvements in our cost structure. Mark will talk shortly about our plants and our employees. Our capacity must be tailored to customer needs – to a level that will boost profit margins and stabilize market share.

We also have to reduce the gap between Ford and our competitors in material costs. Doing so will not only improve our cost structure through economies of scale, but it will allow us to foster greater innovation through stronger, smarter partnerships with our key suppliers.

As you know, our health care and legacy costs are enormous.

We've been working in partnership with the UAW to address the ever-escalating costs of our health care benefits, including a recently approved agreement to reduce costs in a reasonable way. Still, more progress is needed.

But we can't solve this problem alone, not when health care costs nationally are rising eight percent a year and the system is full of disincentives to control costs. This problem will only be solved with business and government working closely together. For US-based companies to remain competitive worldwide, we must find new solutions to this problem.

Just as important as setting a strategy for the company is finding the right people to lead it.

Mark Fields was our choice to turn around North America . He is a great motivator and a great leader. He has the kind of courage, candor, and communication skills it takes, and that we need, to turn tradition on its head. And he’ll do it.

Our plan in North America reflects lessons from our successes around the world – including Mazda, where Mark led the turnaround by telling his team: “Change or die.” They changed. Under Mark, North America will change, too.

Anne Stevens is working with Mark as chief operating officer of the Americas and the first female executive vice president in Ford's history. She's a no-nonsense, straight-talker who takes on the tough challenges and doesn't back down. Before taking on the Americas , Anne was responsible for the dramatic turnaround in our South American business.

That team is further bolstered by Bob Shanks, the CFO of the Americas , and the financial brains behind Mazda's and Land Rover's successful turnarounds. Bob has brought a comprehensive financial perspective to the team and a deeper sense that cutting alone is not enough. We must invest in our future if we’re going to have one.

In closing, I want to emphasize something I said at the start. We are making important announcements today about The Way Forward – but this change has already begun. The proof is in our products.

For the third year in a row, the Ford F-Series was named the “Truck of Texas,” and it was best-selling pickup in North America for the twenty-ninth year. The Ford Five Hundred and Mercury Montego were the only sedans to earn the Insurance Institute's gold rating for frontal, side, and rear crash test performance.

The 2006 models of the Ford Five Hundred, Ford Focus and Mustang Convertible have all been rated among the top two in their class by Consumer Reports. And the Ford Fusion, Mercury Milan and Lincoln Zephyr are all off to a very good start.

These products will help us stabilize our market share and move toward long-term sustainable profits. But that's only the beginning.

Let’s imagine for a moment that we didn’t have a 100-year old history, a well-loved brand, economies of scale, loyal customers, great suppliers and committed dealers.

Imagine, instead, that we were a start-up company without all those advantages, and we had to compete against the best companies in the world. What would we do?

The only way to compete would be to become far-sighted, customer-focused, and innovative – exactly what we were a hundred years ago, and exactly what we need to become today to win again in America and around the world.

For too long, we’ve used the advantages of size to avoid change. Now, we’re going to use the advantage of our size to accelerate change. We’re going to be a big company that thinks like a small company. If we can do that, Ford will win – and win big.

I appreciate the fact that winning will require sacrifices by the people of Ford, and there will be fewer of us here in the future than there are today.

We take these difficult steps with a sense of compassion and gratitude for those who have served us with all their hearts. But we must press ahead for the good of all.

I know that if we come together behind these shared goals we can seize our heritage of innovation and emerge stronger than we've ever been.

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These cuts are a painful last resort and I'm deeply mindful of their impact.

that phrase "last resort" is a term rarely seen in the public speechs... so i know there is two ways to take the phrase.

one would be, that FoMoCo is trying to soften up everyone because they have bad news...

but again there is the perception that things are a lot worse then everything is made to appear... and that if this "last resort" doesnt help the company to become profitable, what will happen next?

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Other than the Mustang...when you drive by a Ford dealership, it just is so dull....nothing pulls you in. And this Mercury thing...just such blatant badge-on-a-Ford look...they have to do better than that.

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Other than the Mustang...when you drive by a Ford dealership, it just is so dull....nothing pulls you in.  And this Mercury thing...just such blatant badge-on-a-Ford look...they have to do better than that.

on that aspect i think GM has a lot brighter future... although GM lost a lot of money... they have more appealing products coming... and already on the lots...

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I think Ford is going to have very troubled times ahead. Way too reliant on trucks in the past. And the cars that are coming on stream are too safe, too plain.

Their Way Foward plan seems penned by spin doctors. Just not feelin' it.

Edited by HarleyEarl

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I guess I don't see the troubled times in terms of new product. The Fusion, Milan, and Zephyr have been extremely successful so far, selling at a better clip than when the Five Hundred was first released, and the Five Hundred has pretty much met sales expectations. The Edge and MKX should do well too. And if Ford executes this plan of a new reusable, recyclable car that is affordable, it could very well be the start of a new era for Ford Motor Company. The Duratec 35 is on its way, 250,000 hybrid cars by 2010, AWD in the Fusion and other models...I'm seeing quite a bit a progress myself. The SUVs are really the only thorn in the side right now...but car sales have been doing very well lately.

Actually, I'm starting to see Fusions show up around campus...maybe the Ford marketing campaign is actually working to attract younger buyers to it. People complain about Mercury rebadging, but honestly, the brand is doing pretty decently. It doesnt carry any baggage from the past and is connecting with a younger audience.

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I guess I don't see the troubled times in terms of new product.  The Fusion, Milan, and Zephyr have been extremely successful so far, selling at a better clip than when the Five Hundred was first released, and the Five Hundred has pretty much met sales expectations.  The Edge and MKX should do well too.  And if Ford executes this plan of a new reusable, recyclable car that is affordable, it could very well be the start of a new era for Ford Motor Company.  The Duratec 35 is on its way, 250,000 hybrid cars by 2010, AWD in the Fusion and other models...I'm seeing quite a bit a progress myself.  The SUVs are really the only thorn in the side right now...but car sales have been doing very well lately.

Actually, I'm starting to see Fusions show up around campus...maybe the Ford marketing campaign is actually working to attract younger buyers to it.  People complain about Mercury rebadging, but honestly, the brand is doing pretty decently.  It doesnt carry any baggage from the past and is connecting with a younger audience.

I haven't seen any Fusions, Milans, or Zephyrs on the road yet...I don't know how they are selling here yet...(it's very much an Honda/Toyota/Nissan market here except for SUVs and trucks) but from what I've read about them, they definitely seem like solid midsizers..definitely more than competitive with the Asian makes as far as the hardware goes...

Edited by moltar

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I think that the anouncements today are just a step up on what Ford has been dong. When Bill Ford took over the CEO position FMC was bleeding money, today the anounced that 2005 was their 3rd consecutive profitable year. North America is still a big mess and I have no doubt that they will be smiling at the end of this young year.

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"Last year, we stopped publishing quarterly earnings guidance. This was a result of the tremendous volatility in the market as well as the spikes that we saw in steel, crude oil, and other commodities. Today, I am announcing that Ford Motor Company will no longer publish annual earnings guidance either.

This decision may be contrary to the advice from some of the respected people in this room. It is not that we do not value your opinion. We do. But we need to underscore an important point inside the company and out: we cannot succeed in the long run if we're focused only on the short term."

interesting...i suppose the wall street boys will get all whiny about this and punish Ford accordingly.

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Okay. This is going to sound strange. I grew up in a GM household...my Dad was a Chevy man until the day he died...my relatives have worked in GM stores for years..and I work in a GM store...

But I really want Ford to turn things around.

Sounds nuts, right? Here's why I say that. There would be nothing better for the economy, the buying public, and future product than to have it back to the way it was - GM vs. Ford. Two companies pulling their collective asses out of the fire and slugging it out in the marketplace.

Some might say, "Well, what about Toyota?" Before you get all misty eyed and damp in places thinking about all the things Toyota has done for the automobile industry, think about the things they haven't done. Like bring passion to performance and styling - actual emotion to a vehicle - not just a number calculated out to the nth degree.

Can you imagine two companies able to bring their engineers out from under the staid policies of the past...and making actual cars that people want to look at - on the transports...in the dealerships...in their neighbors' driveways and getting so caught up in the excitement of buying a new American car and not thinking they just settled? GM fans vs. Ford fans! How many people can say, "Yeah, my Grampa was a Subaru man..."

The GM turnaround will be tough, and so will Ford's. But I truly hope it works for both of them...and for us.

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They reason they are doing well in europe is that they sell better cars there. If they bring some of there cars in europe stateside that woud help a lot.

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Okay. This is going to sound strange. I grew up in a GM household...my Dad was a Chevy man until the day he died...my relatives have worked in GM stores for years..and I work in a GM store...

But I really want Ford to turn things around.

Sounds nuts, right? Here's why I say that. There would be nothing better for the economy, the buying public, and future product than to have it back to the way it was - GM vs. Ford. Two companies pulling their collective asses out of the fire and slugging it out in the marketplace.

Some might say, "Well, what about Toyota?" Before you get all misty eyed and damp in places thinking about all the things Toyota has done for the automobile industry, think about the things they haven't done. Like bring passion to performance and styling - actual emotion to a vehicle - not just a number calculated out to the nth degree.

Can you imagine two companies able to bring their engineers out from under the staid policies of the past...and making actual cars that people want to look at - on the transports...in the dealerships...in their neighbors' driveways and getting so caught up in the excitement of buying a new American car and not thinking they just settled? GM fans vs. Ford fans! How many people can say, "Yeah, my Grampa was a Subaru man..."

The GM turnaround will be tough, and so will Ford's. But I truly hope it works for both of them...and for us.

Same here! I grew up in a GM family, and will buy GM until the day I die, but I want Ford to pull through! I love the classic Ford Vs. GM arguments.........and I think they will someday return. Also, (I am ready for the stone throwing), why hasn't anybody thought of the merger of Gm & Ford. Then it would be The Americans Vs. The Japanese & Germans! That would be a legendary company rivalry. I think Toyota and even Nissan and Honda are getting so big, that this could be a possibility.

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They reason they are doing well in europe is that they sell better cars there. If they bring some of there cars in europe stateside that woud help a lot.

People wouldn't be willing to pay that kind of money.

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  People wouldn't be willing to pay that kind of money

That's what Ford believes, and GM, too (the Epsilon-based Caddy won't be sold here). I say that's a thoroughly untested assumption, especially in a world of increasing fuel costs. The notion of an American-made premium small car is something I'd jump at.

If I were the boys in Atlanta (home of one of the most efficient auto plants in the nation, not that it got them anywhere yesterday), I'd offer Ford the incentives it needs to bring and build the EuroFocus here.

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Same here! I grew up in a GM family, and will buy GM until the day I die, but I want Ford to pull through! I love the classic Ford Vs. GM arguments.........and I think they will someday return. Also, (I am ready for the stone throwing), why hasn't anybody thought of the merger of Gm & Ford. Then it would be The Americans Vs. The Japanese & Germans! That would be a legendary company rivalry. I think Toyota and even Nissan and Honda are getting so big, that this could be a possibility.

I don't know if I'd want an all-out merger, but I defintitely think the two should share more resources, especially concerning new technologies. They may be competitors, but they need to work together to fight off Toyota and other up-and-coming carmakers like Hyundai.

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...thoroughly untested assumption (re: premium small car)

Nice, succinct way of putting it.

Tho stuff is surfacing that hints there might be more than the A3 (disappointing) & C30 (unsure) soon.

"Well-placed sources said it is likely that Ford will soon introduce the

European version of its Focus subcompact to its American lineup as part of

the effort to launch high-value small cars that command more of a premium

than traditional U.S. econoboxes."

TCC: Ford Charts The Way Forward

and

TCC: More To Come From Ford

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"Well-placed sources said it is likely that Ford will soon introduce the

European version of its Focus subcompact to its American lineup as part of

the effort to launch high-value small cars that command more of a premium

than traditional U.S. econoboxes."

Something that should have been done by now.

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I don't know if I'd want an all-out merger, but I defintitely think the two should share more resources, especially concerning new technologies.  They may be competitors, but they need to work together to fight off Toyota and other up-and-coming carmakers like Hyundai.

They should work together on expensive new technologies since it would help them both survive.I also started to quietly cheer for Ford about 5 years ago when I realized it was no longer GM vs Ford but us vs them. These companies got themselves into this mess and if you look at the blunders they made it looks unthinkable. They let the Taurus die a slow death, a sad excuse for a minivan and too much focus on SUV's and were they trying to break GM's record with the Cavalier for the longest time on the market without a redesign with the Ranger? I hope Bill can pull a rabbit out of his hat cause I admire the history the Ford motor company has with America. Edited by I hope GMRULES again

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Something that should have been done by now.

Why? It might cost more than a base Fusion!

If they could sell it for $13,950 like the new Caliber maybe it would make sense but from what I hear it would be $16K or more. Believe it or not that's a big difference.

They have to make a move with the small car market but I don't know if the Euro focus will help here if the pricing isn't right. Otherwise every foreign journo I talk to says its great. Maybe they'll just take the hit or devalue the content a bit and offer it for an attractive price.

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...Maybe they'll just take the hit or devalue the content a bit and offer it for an attractive price.

OR (thought for the day)

maybe they're going to keep selling a refreshed (old)Focus while they intro all-new not-quite-a replacements?

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