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Mike Rutherford's column

The blue oval's new chief executive has his work cut out...

By Mike Rutherford

29th November 2006

If I was asked to nominate the most damning, scary and revealing motor industry article I've read all year, it would be the one my trembling hands tore from a leading American business magazine a little over a week ago. Among other things, the story said that Ford was in a mess. It's hurting like never before. Unless things change big time, it is going down the tubes. And there's more. Much more. At the wheel of the enterprise that has just lost .8billion (£3billion) in its last, dismal three-month accounting period, is Alan Mulally, whose corporation is forecast to burn another bn (£1.6bn) cash in the next quarter.
 
The only way is up for Ford – and this week it’s in a Bond movie, wins Car of the Year and is crowned world rally champion


He's called a "student driver", because he is, to say the least, new and unfamiliar with the motor industry, having spent a lifetime in the commercial airline business. And as the mild-mannered, newly appointed chief executive officer at the blue oval, he has revealed that his first big move is to - wait for it - stage a weekly business plan meeting! "We cannot keep going the way we're going. Continuing to do what we have been doing is not about to create a viable Ford," he says.

Mulally is so new to the car world that Brit Peter Horbury, Ford's North American design boss, claims the guy, understandably, simply isn't familiar with everyday motor-industry speak. Another long-time Ford insider, who prefers to stay anonymous, warns that Mulally is going to make some "howling mistakes", as he attempts to learn the complicated automotive business.

Meanwhile, he has fixed costs at Ford of bn (£30bn), and somehow has to find the cash to pay 300,000 employees every month. Another problem his human resources department is coming to terms with is the fact that there has recently been a monumental brain drain from the company, with seven executives at or above senior vice-president level having left.

The mess Mulally's firm is in is so dire that it doesn't expect to return to profitability before 2009. He may even have to start borrowing against Ford's factories and office buildings. As I said, I'm merely providing a summary of what the respected and influential global business magazine - Fortune - had to say about the blue oval, in an article published mid-November. The mag even asked if the maker will survive - but wasn't brave enough to answer the question itself. Leading analyst Shelly Lombard came close, summarising Ford's plight as follows: "This company is up the proverbial creek with a very small paddle."

Seems to me that when things get this bad, the only way is up. And Ford has illustrated within the past few days that it is, at least, moving in that direction. First, it managed to place its products - a new Aston Martin and Mondeo - in the latest James Bond film, which is proving to be one of the best movies of the year. Next it was a shock win for the Ford S-MAX in the European Car of the Year competition. And a few days later, the firm managed to seal its first World Rally Championship constructors' title for 27 years.

These three happy and extraordinary events in the space of a week will not, in isolation, do much to stem Ford's frightening and ongoing billion-dollar losses. But they are great morale-boosting victories over rival companies. Now, all it needs to do is sort out its finances and profit margins, personnel problems, falling sales and high retail prices. I just pray that new boy Mulally is a quick learner...

Mike Rutherford writes for the Times, Daily Telegraph and Independent, presents ITV's Pulling Power and is founder of the Motorists' Association

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