Ford: Just Fix the Car

By Daren Fonda

Read the stories about Ford Motor Co., and you may think things are pretty bleak in Dearborn, Mich. A new CEO, Alan Mulally, is parachuting in from Boeing, supposedly armed with turnaround tools that will put Ford in the black. One part of the company's luxury division, Aston Martin, is on the auction block, and Jaguar and Land Rover may soon follow. Wall Street has lost confidence: Ford's stock, which closed at $8.77 a share last week after a recent run-up, is still valued at less than the company's cash on hand. This week Ford is expected to unveil a revision of its Way Forward plan, which will add further cuts and closures to the 30,000 jobs and 14 factories already being eliminated.

And have you driven a Ford lately? I rented a Focus in Oregon this summer and can't say I fell in love. The car lacked basics like an armrest and a driver-side trunk release--forget cruise control--and emitted a high-pitched whine at 60 m.p.h. O.K., it was a stripped-down, beat-up rental. But people, please, can't you do better?

It doesn't take a leap of faith to imagine a healthy Ford Motor. Chrysler bounced back under Dieter Zetsche, who emphasized distinctive design and management discipline. Now he's a TV star. And Nissan was nearly bankrupt when Renault's Carlos Ghosn flew in and orchestrated a stunning turnaround (he declined overtures from outgoing CEO Bill Ford to try the same trick in Dearborn). Central to both revivals, however, is something Ford has too often forgotten: it's all about the car, stupid. "No automotive turnaround has been successful without a steady flow of strong products," notes General Motors chief Rick Wagoner, who is also attempting a product revival, with mixed results.

It's not that Ford suffers from a lack of talented employees. Scores of ace designers and engineers toil in the ranks, and you can see their work in a handful of recently launched models, like the Mustang, the Mercury Milan and the Ford Fusion, all critical and commercial hits. Ford also became the first American automaker to sell a hybrid SUV, with the Escape model in 2004.

But Ford Motor needs the kind of head-knocking leadership that, undermined by endless management shuffles and power struggles, Bill Ford didn't provide. Ford's product-development staff has been reorganized half a dozen times since the early '90s. John Mendel, a former sales executive, recalls a management meeting in the late '90s at which an analyst warned that Ford needed to invest in next-generation car designs and engineering. "The overwhelming response was that Ford is making more money than ever," he recalls, "and 'How could we be in trouble?'"

Sadly, while Ford hit the jackpot in the '90s, earning $40 billion, the windfall wasn't always managed well or spent wisely. Ford elected to keep plowing money into pickup trucks and SUV lines, surrendering the heart of the car market to the Japanese and the Koreans. Today the company that invented the Model T relies on platforms developed by Mazda and Volvo, in-house foreign brands, for its new cars. In an interview with TIME, Mulally said that before he joined Ford, his perception of the company "was one of innovation." But Ford's innovative years seem as faded as a rusty T-Bird.

You can't blame all of Ford's woes on mishaps in Dearborn. Soaring gas prices are killing two of Ford's strongest segments: pickup trucks and SUVs. And like GM, Ford pays crippling "legacy" costs for retiree benefits. David Cole, head of the Center for Automotive Research, estimates that Ford's disadvantage against foreign automakers amounts to an average of $2,500 a vehicle--money that could otherwise go into features like armrests in base models, keeping Ford competitive. "When you're constrained by that level of difference," he says, "it compromises your ability to do things."

So what's the game plan? Basically, make Ford look more like industry leader Toyota. Ford has steadily made progress in that regard: standardizing vehicle architectures across global brands; increasing the number of body styles built on the same platforms; cutting product-development times; and opening factories with flexible assembly lines. Mulally, who has studied Toyota's vaunted production system, says it's too soon to discuss changes: "The key will be being able to see that we're making progress and moving forward." It sounds mushy. But if Mulally can attach wings to Ford and get the company to soar, he too will be a Motown star.

With reporting by Joseph R. Szczesny/Detroit