Alan Mulally at Ford

Alan MulallyFord has emerged as one of the strongest carmakers in the world and the hero in the Ford story is Alan Mulally. He is recognized as the person to bring about 
one of the biggest turnarounds in automotive history having joined Ford in 2006 after 37 years with Boeing.

Ford was tracking so poorly in 2007 that in Mulally’s first year the company posted a record $17 billion loss. His first major task was to sell off any tangible assets and the other poorly performing vehicle brands that Ford owned.

Jaguar LogoLand RoverThe disposal included Jaguar and Land Rover to Tata Motors, an Indian car and truck manufacturer. Mulally said he had no regrets over the sale, preferring to concentrate on the Ford brand.

The CEO at Ford prior to Mulally was Jacques Nasser who was criticized in 2001 for paying too much attention to new overseas acquisitions while letting the main Ford operations in the US decline.

Ford received US$2.3 billion for the sale, considerably below what they paid for it, however, analysts said that Ford would have received much less or may not have found a buyer at all if they had tried to sell later in 2008. Jaguar and Land Rover sales subsequently plummeted due to high oil prices in the summer of 2008, causing Tata to request a bailout from the British government.

Aston MartinMulally sold Aston Martin and Volvo, and reduced Ford's stake in Mazda. He then went to the business banks and Volvo Badgemortgaged Ford, including the blue oval, to the hilt.

In total he borrowed $23 billion and began a complete transformation of the company just before the GFC (Global Financial Crisis) bit hard.

For his achievements at Ford, he was included in the 2009 Time 100 list with the comment that, “Mulally understands the fundamentals of business success as well as any business leader”. He was named, Person of the Year, by The Financial Times and was also named the CEO of the Year by Chief Executive Magazine, both published in 2011.

However it’s the timely refinance deal in 2008 that helped Ford keep its foot on the accelerator and develop new models at a time when other carmakers were forced to stop development and slash costs. Ford's rivals General Motors and Chrysler were in bankruptcy and had to be bailed out by the Obama Government.
Ford has since paid back its original $23 billion loan from the commercial banks, its global sales have increased and the company has been profitable under Mulally's leadership. He also says he will continue to lead Ford through to the end of 2014.

Australian Made LogoTalking recently about Ford’s manufacturing future in Australia, Mulally has warned that the Australian economy will suffer in the long run with the loss of its auto-manufacturing sector. With Ford and Holden announcing manufacturing shutdowns in 2016 and 2017, and with Toyota likely to follow in 2018, Australia's entire automotive manufacturing base, which employs up to 50,000 workers, is destined to collapse, with little hope of a revival.
Commenting on the role of Government assistance in manufacturing, Mulally mentioned that no country is ever successful in the long term without a really strong and vibrant manufacturing base; it's the foundation of all economic development. He also believes that you have to actually make things to create value and that's why every country around the world is collaborating with the private sector to figure out how to create an environment where manufacturing is viable. Nineteen of the G20 nations have vehicle manufacturing industries, but that figure will fall to 18 once the car industry shuts its doors in Australia.
The auto industry estimates that at least $10 billion in economic activity would be wiped from Australia each year once car-manufacturing stops. Early in Holden's campaign for an increase in government assistance in 2013, Holden’s CEO Mike Devereux said that Australia needed to decide if it was content to simply end up as a nation of farmers, hoteliers and miners, leaving agriculture, tourism and mining as the big three once manufacturing leaves Australia.
Farming in Australia Tourism in Australia Mining in Australia

Asked if Australia was doomed, Mulally said he doesn’t know about doomed, but clearly Australia is going where it's going with its low import tariffs and reducing support for the vehicle industry. He wouldn't comment further on what the loss of the manufacturing industry would mean to the Australian economy, but he repeated the message that Ford will continue to sell cars once the Broadmeadows car assembly line closes. Ford is going to serve Australia with more vehicles but just not made in Australia.
The former boss of Volvo and now with General Motors, Stefan Jacoby, is also on record saying regardless of what the government is saying it was impossible to make cars in Australia. Since the market is so open, with a lot of Free Trade Agreements coming up, it is fundamentally impossible. Even if the Federal Government were to raise import tariffs it still doesn’t make sense to build cars in Australia. Car making is driven by scale of economics, of productivity, of an efficient supplier industry with optimised logistics and Australia is just too small in these scales according to Jacoby.
Holden's decision to end manufacturing in 2017 will put even more pressure on Toyota and makes it more difficult for Toyota to be the sole manufacturer in Australia. Toyota is now studying all relevant business impacts and a decision will be made on future investments sometime in 2014. Toyota Australia's Executive Director of Sales and Marketing Tony Cramb has admitted the situation is dire but insisted the writing is not yet on the wall, whatever that means.

February 2014


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