Daniel Howes

Daniel Automaker's 'way forward' isn't a clear path after all

Daniel Howes

DEARBORN -- The anxiety was supposed to end Monday.

Michigan and Ford Motor Co.'s employees expected to get all the answers, to know which plants would close and which would survive, which executives would get axed and which ones wouldn't, which communities would bear the brunt of yet another automotive retrenchment and yet another hit to their tax bases.

But questions about Ford's "way forward" restructuring are only beginning for an automaker whose grand vision of where it wants to be by the end of the decade begs two words in response -- "show us."

"I recognize," Mark Fields, Ford's president of the Americas, told me in an interview Monday evening, the open questions in the "way forward" plan "continue to add a level of stress to the organization" often referred to as an extended family. "What family also understands is if we attack the issue head on and we do it with tough love."

In theory, perhaps. But this is Ford's second major North American overhaul in four years amid strong economic times and confirmation of just how small it thinks it must get to prosper. Among the nagging questions still hanging out there:

The Wixom plant officially will close in the second quarter of next year, part of a plan to cut as many as 30,000 hourly jobs, but are other Michigan plants on Ford's "to-be-announced" hit list?

Ford intends to build a low-cost plant assembling small cars and crossover vehicles somewhere in North America. But where -- and does Michigan or the industrial heartland, instead of Canada or Mexico, have a prayer at getting it?

Chairman Bill Ford wants "innovation" to be a core principle of a leaner, risk-taking Ford, to define its cars and trucks, its environmental and technological pedigree and the way it does business. But it's less certain what "innovative" actually means, where we'll see it and how it will turn Ford's North American losses into profits.

Ford is thumbing its figurative nose at Wall Street by saying it will not give annual earnings guidance, a vintage Bill Ford move that says as much about his desire to be unencumbered by detailed recovery plans as his belief that Ford not pander to Wall Street. It doesn't need to -- not when the Ford family's Class B shares control the company.

Ford is committing to make its North American operations profitable no later than 2008, but we don't know what will happen -- and who will be held accountable at the top -- if they don't make it. If the past is prologue, the answer is "not much."

Most important of all, how do we know this six-year restructuring will succeed where Ford's other restructurings du jour didn't go far enough (Back to Basics and Back to Basics II) or failed (Ford 2000 and former CEO Jacques Nasser's dot.com spending binge)?

It's about starting over

"This was a clean-sheet approach," Bill Ford said Monday. "You've never seen this level of cuts. You've never seen this level of innovation taking place. It's worked in Ford of Europe. It's worked in Mazda. It's worked in South America. We're turning around our operations. A lot of the levers we've pulled before, and we know they work."

They have so far.

With the exception of Jaguar Cars Ltd., a voracious consumer of luxury car capital, Ford's automotive operations are profitable -- Europe, Asia-Pacific, South America, Mazda and three of the Premier Automotive Group's four brands.

But the challenge of turning around Ford's North American operations, beset with restrictive labor contracts in the United States and Canada, declining market share and lagging quality perceptions, will be more formidable than anything Ford has undertaken overseas.

High gas prices and SUV fatigue are cooling demand for Ford's big money-makers. Foreign rivals like Toyota and Honda have strong positions in small and midsize cars and the emerging hybrid vehicle market. Ford, Mercury and Lincoln-brand vehicles still have a reputation for dodgy quality and stodgy designs, though recent efforts like the Fusion, the all-new Explorer SUV and the coming Edge crossover augur improvement.

Ford's reputation on Wall Street is in tatters. Its bonds are rated "junk," even though the bulk of its debt isn't scheduled to mature for 20 years or more. With 1.2 million units of production now scheduled to disappear, its earnings power is considered to be smaller. And, Monday, some analysts sitting in the audience couldn't suppress smirks as Bill Ford and Mark Fields detailed the "way forward" plan.

Remaking culture is hurdle

And then there's the United Auto Workers, whose leaders lamented the "cloud hanging over the entire work force because of pending future announcements." As important as Ford's plant closings may be to its restructuring, the union's leadership isn't likely to chuck 70-plus years of precedent nor hasten its demise by prematurely embracing the plan just because it's good for Ford.

Ford's brass gets this. It also understands that by reserving the names of at least two assembly plants it aims to close, the location of its low-cost plant and the remaining facilities to be idled, the automaker is giving UAW President Ron Gettelfinger the room to maneuver. If possible, he could emerge from the plant closing mess with some victories to tout.

Which gets to the heart of Bill Ford's "way forward" plan, quarterbacked by the 44-year-old Fields.

To achieve what Bill Ford envisions -- more efficient plants, better quality, more innovative cars and trucks that deliver technological, environmental and safety firsts that rivals can't -- Ford's hidebound and patriarchal culture needs an extreme makeover.

For a 102-year-old industrial icon that came to define American industrial prowess, the Arsenal of Democracy and then industrial decline, that means fomenting a cultural revolution and restructuring a vast enterprise -- at the same time, using the same people in an institution undergoing wrenching change.

"Here is what we will not stand for," Bill Ford said. "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 consumer wants."

In theory, he's spot on.

But driving change in a culture as inbred as Ford's, even with carrots that promise financial rewards for innovation and risk taking, won't be easy. The notion that set Ford apart from its rivals, that it was an extended family, can be as much a liability as an asset.

"The hidden message," said Brian Johnson of Sanford C. Bernstein in New York, was "we're not going to be running this as a family charity anymore."

Daniel Howes' column typically runs Sundays, Wednesdays and Fridays. He can be reached at (313) 222-2106 or dchowes@detnews.com.