00:06Let's give a GSB welcome to Ellen Melleli.
00:27I'll be outside after this to take your
car orders.
00:30[LAUGH] We've got some great vehicles for
you.
00:36First of all it's really neat to be back,
in the MBA program.
00:40And what I thought I'd do is, you're still
studying case studies, right?
00:45And they describe the situation, give you
lots and lots of data,
00:47then you're supposed to think or reflect
on what you would do.
00:50So I thought a way to introduce our
conversation
00:53today was, let's to a case study on Ford,
okay?
00:57And then you get to be me.
01:00Cuz I'm looking for a few more good ideas.
01:02And I'm gonna get it here today.
01:04Okay, so, it's, 2006.
01:09I'm, the, the chief executive officer at
Boeing, commercial airplanes.
01:15I'm looking forward to creating one more
Boeing airplane.
01:18To replace maybe the 737.
01:1980% of all the seats that are flying
worldwide are Boeing airplanes.
01:25Feeling really good about Boeing, feeling
really good about our contribution to
01:27safe and efficient transportation, and I
get a phone call from Bill Ford.
01:32I'm going, Bill Ford, of like the Ford
Motor Company?
01:35The great grandson of Henry Ford?
01:39And he said, we're in really tough shape,
and I would
01:43really like your help, and would you
consider coming to Ford.
01:48So, I started doing my due diligence, and
at the end of the day, I was being asked
01:53to serve a second American, and global
icon, and
01:56I just couldn't, I just couldn't turn that
opportunity down.
01:59So, I walk into the office in the world
headquarters of the Ford Motor
02:03Company, the 12th floor and I look out the
window, and here's the rogue plant.
02:08And here's where Henry Ford created the
assembly line, this
02:13is where Mister Toyo Da of Toyota came to
visit.
02:18To learn how to make cars and
02:20how they continuously improve their
quality and productivity.
02:23And here's the entire plan.
02:25At the time it was a 100% vertically
integrated.
02:28Most efficient operation in the world.
02:31And I'm, reviewing the situation.
02:34And here's the situation.
02:36I check with our finance people and they
give me the the
02:40great news that we are projected to lose
$17 billion in 2006.
02:44You could run out of money really fast.
02:49At $17 billion a year.
02:52I also review in the situation about what
Ford has become.
02:56And Ford has now become a house of brands.
02:59And remember, I left Boeing to come to
Ford.
03:02And Ford was Aston Martin, it was Jaguar,
it was Land Rover, it was Volvo.
03:06I was, had a, had a significant
relationship with Mazda.
03:12And so Ford was this house of brands.
03:14And it also happened to have Ford and,
Mercury and Lincoln brands also.
03:20Also, Henry Ford set up for it all around
03:23the world so that he can participate in
the economy.
03:26Not only provide great cars and trucks but
also be a part of economic
03:29fabric of all the countries at which
03:31Ford operated, but Ford had become very
regionalized.
03:34And none of the Fords talked to each other
around the world.
03:37There was no synergy.
03:38And we were competing with the best global
companies in the world and we
03:41had no scale, and no integration of
03:44all the intellectual capability around the
world.
03:47Also, in the United States, we had labor
agreements with the unions, and our cost
03:50structure, where we really couldn't make
cars
03:52in the United States and make them
profitably.
03:55So we stopped doing that.
03:56And ones that we did make were pretty
marginal.
03:58And we focused on bigger SUVs and trucks.
04:01So if you wanted to, if you wanted to, you
know,
04:03live on a 150 and put your house behind it
simultaneously, you
04:05needed to get the best truck in the world
from Ford but
04:08we didn't have a full family of vehicles,
in the United States.
04:12Also, we had never, we really hadn't made
a commitment to the investing class or the
04:16competition so we were kinda competitive
on quality
04:19and fuel efficiency and safety and really
smart design.
04:23But we weren't really best in class.
04:26In addition, we were unprofitable in every
one of
04:29those brands and in every model we were
losing money.
04:34Thinking back, I wonder why I did come.
04:39>> And we we're running out of cash really
fast.
04:45So, that's the situation.
04:48I've got a card and I have a pencil.
04:52So, please shout out what you would do.
04:55You thought this was gonna be a free
lunch.
04:59Now with that situation, this is
Standford.
05:03We've got engineers, we've got business,
we've got
05:06the smartest people in the world right
here.
05:09OKay, what would you do?
05:11Okay, just shout it out.
05:15Okay, now I'm going to take notes, because
I've got
05:17a feeling that this is going to work out
really well.
05:19[LAUGH]
Okay, fantastic, probably over capacity.
05:32>> Standardize vehicle platform.
05:36>> Standardize the platforms.
05:37>> Labor negotiations.
05:38>> What would you do about that?
05:41>> Try to reposition the probably long
term pensions
05:53>> Wow, what do you mean by that?
05:53>> Put a little more emphasis on the four
brand
05:58of cars, not all the inferior cars.
06:11>> [LAUGH]
>> Okay, what else?
06:17>> [INAUDIBLE]
>> [LAUGH]
06:23>> That was, not part of the plan.
06:25>> [LAUGH]
>> Although we.
06:28>> That's what happened.
06:29>> But that's what happened cuz we're a
real pain right now.
06:32>> [INAUDIBLE]
>> Wow, maybe all around the world.
06:43>> Figure out what customers want.
06:47>> [LAUGH]
>> [INAUDIBLE]
06:50>> Overhaul your design process.
06:55Maybe do it together.
06:58What do you think the customers really
want?
07:02[INAUDIBLE] Fuel economy.
07:05>> Focus on quality and safety?
07:13>> Seamlessly connected to the internet.
07:16Hands on the wheel, eyes on the road.
07:18Bluetooth activated.
07:25[SOUND] Oh man, I found the next
management team right here.
07:34>> [INAUDIBLE]
>> Really?
07:39>> You mean you can't compete on a global
scale by operating regionally?
07:57performance culture based on discipline.
07:59>> Lower your reliance on incentives.
08:00[LAUGH]
>> [INAUDIBLE] China.
08:00[LAUGH] [LAUGH] I personally have this
philosophy if I, if I think anybody's
08:12from China I give them a hug.
08:17[LAUGH] Look at we'll talk about this in a
little bit but the,
08:19the China market now as you know, is
bigger than the United States.
08:21It's just a fabulous opportunity and I
love the Ford brand.
08:30We're expanding as fast as we can.
08:32>> [LAUGH]
>> Now why would you do that?
08:32>> [INAUDIBLE] brand had to be Ford and
Lincoln.
08:36Is that a new business school expression?
08:41We'll talk about this some more.
08:43And again this allows you to ask some
questions that you want to
08:46ask to, because all of these are a clear
part of the plan.
08:48What would you do about financing?
08:51>> Leaves you in debt.
08:53>> You better not run out of money.
08:57So, when you do a transformation like this
the
08:58most important thing is when you have a
plan...
09:01But two, do you have the finances in
place?
09:02Cuz if you run out of money during
09:04the, during the transformation it doesn't
work out.
09:07So get a home improvement loan.
09:11>> [INAUDIBLE]
>> Cuz they're so
09:20But better have a cost structure here so
you can.
09:29I did that on the first day.
09:33[LAUGH] Back to [UNKNOWN] oh, you
[INAUDIBLE] okay.
09:42And this is what we did.
09:44And thanks for inviting me.
09:48And I would propose to you that everything
you said
09:51is about leaderships, cuz that's what your
class is about today.
09:55Everything you say is about leadership.
09:57Cuz every one of those is a courageous
decision.
10:00It's gonna come from having a, a point of
view about the future, and
10:04having your conviction that you're gonna
have
10:07a comprehensive plan to implement that
compelling vision.
10:10And just one last question.
10:11What would you use, what would you have
used for, your vision in this situation?
10:16Something, think of, of like what would
you have rallied everybody around?
10:20Because you clearly are where you are, but
you're
10:22going to different place, you just
described this different place.
10:26What would you, what would you do about
that compelling vision?
10:28How would you describe what your new Ford
is going to be like?
10:30What do you think that's important?
10:32>> [INAUDIBLE]
>> My god.
10:37>> [LAUGH]
>> Oh man.
10:40I don't know if I can wait until after
this to meet you.
10:47That's absolutely incredible.
10:54And that's exactly what we did.
10:57And when you walk into that same office
today, where
11:02I walked in four and a half year ago, the.
11:06The entire wall is filled up with Henry
Ford's vision for the Ford Motor Company
11:12that he laid out on January 24th of 1925
in the Saturday Evening Post.
11:18And you can Google it and find it, it's
like fantastic.
11:22And it says, opening up the highways to
all mankind.
11:27That's what Henry Ford was about.
11:28He wanted to make traveling on the
11:30highways affordable and available for all
of us.
11:35And at the time, the only people that had
a car were, were wealthy.
11:39He couldn't afford a car.
11:40So, he describes in this vision how it
would have to be big in scale.
11:47To get the economies of scale.
11:48They'd have to be a complete family
vehicle.
11:50They have to be best in class, in safety,
in efficiency.
11:53And have to contribute to making life more
pleasant, more useful.
11:58Everybody will have to participate.
12:01And at the time, January 24, 1925, he's at
the top of his game.
12:04He has 56% market share worldwide.
12:08Every country around the world wants Henry
to come set up his operation.
12:13He's wildly successful by any measure, and
at the end of this advertisement for
12:17his vision, it says that, it's not about
what Ford has done up through 1925.
12:23But this is all about the opportunity to
serve all the people around the world.
12:31So that's what we went back to.
12:32He didn't, he wasn't talking about Jaguar
and Aston Martin and Landrover.
12:35He's talking about Ford.
12:37So we went to work and we did all those
things that you just said.
12:40We focussed on the Ford brand.
12:42We decided to have a complete family of
vehicles, small, medium
12:45and large, cars, utility and trucks, in
every region around the world.
12:48We also decided that they'd be best in
class, in quality,
12:52in fuel efficiency, safety, really smart
design, like Sync and MyFord.
12:56And because of our scale, you know,
[INAUDIBLE] keep
12:59going on around the world, absolutely the
very best value.
13:02We also decide to match our production to
13:04the real demand, which is, what
[INAUDIBLE] pointed out;
13:06cuz we were, cuz we were facilities for a,
13:09you, market share is considerably higher
from years back.
13:12So we were profitable.
13:14We also invested in accelerated our
investment in
13:17all these new vehicles, during the worst
of times.
13:19So even though we're loses 17 billion
dollars.
13:21We actually invested more during the worst
of times so we'd
13:25be here to help everybody as part of the
accounting recovery.
13:29The financing, we took out a small
improvement loan.
13:32We took this, this plan to 500 banks.
13:35We presented to 'em.
13:36We raised 23 and a half billion dollars.
13:38Bankers don't want your assets.
13:41They want you to be successful.
13:42They actually would like you to pay the
money back.
13:44Not quite as fast as we're paying it back
now,
13:45cuz they like to get some interest, more
interest too.
13:48And then the last thing is we decided that
we're
13:52gonna work together as one team for around
the world.
13:55No matter where we operate, we're gonna
operate as one team.
13:57And use all that energy, and that's why
you
13:59see the new C one platform for the Focus.
14:01And so we're gonna have ten top hats off
that new, that new platform.
14:05And, we could be making 2 million of them,
14:07worldwide each year, in five different
locations, and 80% of
14:10the parts are exactly the same, all
customized to the
14:13unique taste of the, of the consumer's
around the world.
14:16You could imagine with that approach, what
we can do vis a vie the competition.
14:23That's my report to the committee.
14:26Okay, now, what are you thinking about and
maybe if you
14:29just, we've got some microphones, although
it's pretty good here, too.
14:32And maybe just introduce yourself, and
let's just move
14:36to a, there's so many things to talk
about...
14:38Especially with economic development and
energy
14:40independence and security and,
environmental sustainability.
14:46Okay, where's, this one in the middle.
14:53Oh dear, let's just say row 18 wanted to
ask this question.
15:00Miko, nice to meet you thanks for coming.
15:02What do you think about the sustainability
of traffic going forward?
15:06And how, what is forward?
15:07So what is your vision to, to make traffic
more sustainable?
15:10>> Absolutely, this is a really important
question, and I'm really,
15:15I'm just so pleased that the position Ford
is taking going forward.
15:19We, part of our business is gonna be how
15:20to we have transportation solutions, and
as you know, we
15:23have so many cities now that are moving,
into
15:262, 3, 4, 10, 20 million people in, in
cities.
15:29And so we're gonna be part of
15:31that solution about using all modes of
transportation.
15:34But when you look at, the specifics of
your question, I think
15:37the technology roadmap we see going
forward, which is what we're investing in.
15:41Is there's a lot of room to improve
15:42the internal combustion engine both petrol
and diesel.
15:46And that's why you see things like turbo
15:47charging, direct fuel injection, light
weight materials, integrated electronics.
15:51Lots of opportunity to improve.
15:52The new Explorer, 30% improvement in fuel
mileage.
15:55>> You know, all the capability if you
need to carry seven passengers.
15:59Then I, I, we see more
16:00biofuels, ethanol, cellulosic, going
forward, alternative biofuels.
16:06I think we'll then see more
electrification, always
16:09be that component of natural gas,
especially for the
16:11bigger vehicles, and we have the
infrastructure for the
16:14natural gas, then you'll see more
electrification, more hybrids.
16:17There are some plug in hybrids, and the
there are some more all electric, but the
16:20real issue there is, the infrastructure,
and the
16:23cost of the batteries, because today, you
have
16:25an all electric vehicle, and the battery
alone
16:27costs $15,000 and they weigh 700 pounds,
so,
16:31it's nice that you and the battery can
16:33ride along in the car, but not anybody
else.
16:37>> but, we're working on that really hard,
and we're making a lot of progress on it.
16:41But it's that part on the technology but
also the infrastructure.
16:44>> But I think electrification will see
more and more.
16:47And then, we haven't, we're still very
very positive about hydrogen.
16:52But the issue there as you know is,
16:53that one, you have to have the
infrastructure again.
16:56So, it's a public-private partnership
between the governments, and
16:59business all around the world on how you
wanna proceed.
17:01But also, you need really efficient fuel
sales,
17:04that are cost effective, which we don't
have today.
17:05And you still need the very efficient
battery, cuz you're gonna
17:08take hydrogen next to a platinum, outcomes
a water up take pipe.
17:12And electricity goes over to the, the new,
new cap of battery.
17:15So, kind of the same enabling
technological
17:17box that we need to all of them.
17:18But it's kind of that progression that
we're seeing going forward.
17:20I think the biggest thing is that we.
17:23We, the citizens of the world, are gonna,
play a
17:26very important part, in making this
decision about where we go.
17:29What do we wanna do about energy
independence and security, right?
17:33What are we gonna do, what are we
17:34gonna do about, generating, our
electricity clean, cuz
17:37you can't just be working on using it
clean, but we need to generate it clean.
17:41And then where do we wanna go with energy
policy, by going forward.
17:44On the the sustainability [UNKNOWN] thing,
80% of
17:47all of the Ford vehicle components are
from recycle.
17:51So we have, very quietly moved to a place
where you really
17:54do wanna use the minimum amount of
resources, the minimum amount of time.
18:01Thank you so much for being here today.
18:03>> I'm actually a joint MBA and Masters in
public policy student.
18:07>> And I, I see Ford as, basically a great
example, almost symbolizing this country.
18:13Coming out of our, recession here, on the
one hand, a remarkable turn around story.
18:186.6 billion of profit last year.
18:22>> Keep, please keep going.
18:24>> The company's looking great for the
future.
18:26On the other hand, There's still very high
employment and employment for
18:31Ford has you know, had made some tough
decisions which were absolutely necessary.
18:35>> And the country in some ways has
18:37corporate profitability, it's highest
level ever last year but,
18:40other parts of the economy aren't doing as
18:42well and I'm wondering where we go from
here?
18:44Do we need to accept that
U.S.manufacturing is
18:46going to look different in the future and.
18:48And how do, the leading companies, how
should they
18:50think about operating in this com, in this
country and,.
18:52>> Also internationally?
18:55First of all thank you for your comments
as the dean pointed out is just,
19:02this is so important for manufacturing, is
so important for.
19:08The U.S. is so important for every country
in which we operate around the world.
19:12Because, we are, a key part of the
solution for economic growth, right?
19:17Also, energy independence and security.
19:19And, also environmental sustainability.
19:21I, I think I mentioned during our, our
conversation, with the
19:25Dean earlier that, when I first When I
first arrived at Ford
19:29and I started working on the
public-private partnerships and going back
19:33to Washington D.C. I felt like I was
running drugs or guns.
19:36You know, if you're from the auto
19:37industry, because, they stood so tall, for
trying
19:41to help people understand what the cost
19:42benefits were for both fuel efficiency
and, safety.
19:45Because we were taking a lot of costs and
materials and putting them out of.
19:49>> Reach for people to own them.
19:51And, I'm so pleased with your comment that
where you, how you started
19:54out because we are now, viewed as a, a
major, portion of the solution.
19:59Ford Dollars, big issues.
20:01And going back to the issues that you
raised,
20:03and we, and we have to talk about it.
20:05We have serious problems.
20:07Now you take our trade deficit, and you
take our, budget deficit.
20:11And this is not sustainable.
20:13I mean, we all, have been living way
beyond our means.
20:16For a lot of years, and we have
20:17structural problems that we absolutely
need to address.
20:20And [SOUND] it was mentioned, that I'm on
the President's
20:24Export Council and also we have a
manufacturing sub committee there.
20:30so, pleased that we have now moved the
discussion over to what are we
20:34really gonna do about the intersection
now,
20:36of economic development and, and, and
environmental sustainability.
20:40Because we have to do this in a
public-private partnership,
20:42and we're the ones who are gonna have to
vote.
20:43We can't del, you can't delegate this to
somebody else.
20:46>> These are issues that we need to decide
where we wanna take the.
20:49The U.S., and where do we want to take our
countries, all
20:52around the world, and how do we do that
working, working together.
20:55So do we have a long way to go?
20:58Is now the time to, to really, move those
up on the agenda?
21:03I think there's no reason, why back to
your question about the United States, why
21:07we can't compete with the best in
21:09the world just like we're doing, with
manufacturing.
21:11And I think it's true for every country
around the world.
21:13As all the countries move up Maslow's
hierarchy
21:16and create these great jobs and, great
industries.
21:21It's gonna be so globalized that, that
operating everywhere helps everybody, and
21:26it's not like a have or have not or zero,
sum game.
21:29We have to move the economic development
up for everybody, right?
21:31So I, I, I think that the most important
thing is, you got,
21:34we just got to be competitive and the data
sets you free, right?
21:37You, you all business people and the data
sets you absolutely free.
21:40What does profitable growth look like?
21:41There's only two things you have to do,
right?
21:44Create products that people really do want
and value, and will
21:46actually pay for, and do it more
productively than your competition.
21:50That means use less resources and less
time.
21:54>> It's taken you two years to get this
degree.
21:56I think I've contributed to helping you
get through this.
22:01>> Always go, go back to that.
22:04What do we stand for?
22:05And, do we have a profitable growth plan
cuz
22:07if you're not profitably growing, what are
you doing?
22:14You're going out of business.
22:16>> I've never had a question asker so
close.
22:21>> I, I'm feeling fine, how are you?
22:24So, I wanna know what you think about the,
the Google car, and is it real?
22:28And what's the impact of that?
22:30>> Do you know about the Google Car?
22:32It's one of the dreams of the founders,
that have a, a autonomous car.
22:35I really like driving.
22:41>> now, I say this with, with all
22:44due respect; because as an airplane person
too.
22:47You know, we've gotten to the place now
22:49where, most of our airplanes they can take
off
22:52by themselves they can land by themselves,
but we
22:54always have pilots there, and as an
engineer [COUGH].
23:00>> You just can't anticipate everything
there's not another.
23:04There's no, nothing like the human being,
for being able to
23:06handle, multiple things, and analyze
things, and then deal with it.
23:11And, with all engineering skills, you just
can't anticipate
23:14every situation, that sophisticated
vehicles can get themselves into.
23:18And so, I think that, that, you can write
23:22these specific uses of it, but it be very
controlled.
23:25And there's no reason technically, you
can't do it.
23:28but, you can imagine all the different
23:30issues that go along with a systems
solution.
23:34So from Ford we could always have you, in
charge.
23:38And you're gonna be the driver and you're
gonna
23:40be a better driver because a sink in my
Ford.
23:41Because you're gonna be able to use,
access all your, your information.
23:45Your navigation, your guidance control,
your hands are gonna be, be on the wheel,
23:48you're gonna use a five position consumer
23:50electronics controller, and you're gonna
be voice activated.
23:53So you can hear everything with your
voice, so you can keep
23:56your eyes on, and you're gonna
23:57be seamlessly connected to, our Digital
World.
24:03Yes sir, oh, oh I'm sorry [INAUDIBLE].
24:11I'm, I'm Clay Calhoun.
24:12And I'm a, a second year student here
>> Very good.
24:14>> First, I wanted to say I love my Ford
Edge.
24:16It's the best car I've ever owned.
24:20I, and second I, I worked a, a little with
GM during their restructuring.
24:24And even more than kinda their balance
sheet, what
24:27I though was the main problem, was the
institutional culture.
24:31At the company, which was, you know,
24:33management versus, labor instead of
working together.
24:37You kind of, see sense of entitlement from
everyone there.
24:41And from what I understand, when you
24:42got to, Ford, things weren't all that
different.
24:45Can you, talk about, maybe tell, some
stories as to what culture's.
24:49>> Like then, and what you did to, change
the culture.
24:53and, you know, kind of how you initiate
cultural change from the top down.
25:02I was thinking that, one of the things
Bill Ford,
25:06that bill ford was asked one time about
the culture.
25:08And, I think he used the Kremlin comes to
mind.
25:12>> From a, you know, past history.
25:16And, and you imagine what it was like at
Ford, when everybody was regionalized.
25:21There were no skill teams like engineer
manufacturer, that went
25:23across the company so there was no way to,
work together.
25:27And, and everybody was scared.
25:31It's not going very well, we're losing
money.
25:34There's not that compelling vision where
we're going,
25:37There's not actions in place for this,
there.
25:39So, and, and, And problems with the
vehicles.
25:42And, so, it was pretty.
25:44It was a pretty tough environment,
Although, I'd say that, Ford has always
25:49attracted, the best and the brightest,
over the years, from around the world.
25:53I mean, none of the Wizkid stories and.
25:55It's just, it's just this fabulous company
with
25:57107 year history of, of innovation
throughout the years.
26:01And so talented people, motivated people.
26:05But, we didn't have a plan, we didn't have
a vision,
26:06we didn't have a comprehensive strategy
and, we weren't implementing it.
26:10So it was pretty, scary.
26:11And everybody's kind of looking out for
themselves
26:13and a lot of people were leaving and.
26:18the only thing that I, I know to do is,
just like my days at Bollingworth.
26:23We got to pull everybody together.
26:25We need a compelling vision, about where
we're going, so we
26:27all understand where we're going, so then
all the actions are explainable.
26:31Everybody has to be on the team.
26:33So I, I every skill team I invited.
26:36So engineering, manufacturing, legal,
communications, every skill team, was now
26:40on the team, on the leadership team, all
reporting to me.
26:44And and all the business leaders from
around the world,
26:48Asia Pacific, Americas, all there, and
then we started, what
26:52we do, what I've always done with big
airplane program,
26:55is that I have a weekly meeting, where we
review.
26:57Everything associated with the plan,
everything.
26:59So we meet at seven o'clock in the
morning, because we're trying
27:01to honor, time changes in Shanghai, and,
and the Australia and everything else.
27:05So we've got the clocks all up on the
wall.
27:07We're all interneted, connected on the
internet.
27:10We have screens that were on the round
table, we are
27:13seeing all the leaders where ever they are
around the world.
27:16[SOUND] One set of charts.
27:20All of the plan, whether it's income
statement, balance
27:22sheet, launches of new vehicles, it's all,
blue bars.
27:25There's a forecast, a red diamond, which
is,
27:27that, that leaves assessment for how it's
going.
27:29Then that, there's a, they risk and
opportunities, all
27:32the risk have been identified, the
opportunities have been monetized.
27:36And so, we're looking also five years out,
so when we complete the
27:39performance like the 6.6, or you could
also say an operating profit, 8.3.
27:42I just might toss that in.
27:46>> that, everybody knows what the plan is,
everybody knows what the status
27:49of the plan is, and everybody knows the
areas that need special attention.
27:51When you do it together, the mean goes
from seven to.
27:54About 7 to 9.30, and then, we have guests
there, from around the world, from the
28:02engineering, manufacturing, all, all
watching, and we meet
28:05them, and we get their feedback at the
end.
28:07So you can imagine how, hoe transparent
and, and close you get.
28:11Now when we first started this.
28:13Remember I told you that, that within a
couple of
28:15days the forecast was that we were gonna
lose $17 billion.
28:18So I started the business plan review, the
charts are flowing,
28:21320 charts, we even have them color coded,
red, yellow, green.
28:26Any change in the chart is in blue, so
there's lots
28:29that doesn't change, all you're looking
for is what has changed.
28:31You don't want to hear a long explanation
about what, what's going on.
28:34But what you want is that, everybody knows
28:36the plan, everybody knows the areas of
special attention.
28:38So the color you got, you got the charts
going,
28:41and I, there's about three or four weeks
of data flowing.
28:44And all the charts are green, and I, I
stopped the meeting and I said guys.
28:52We're gonna be $17 billion, is there
anything that's not going well?
29:00>> Eye contact, goes to the floor.
29:03Nobody says anything.
29:04Now remember that closure yes about, it
wasn't okay,
29:08to bring things up, I mean there's command
and control,.
29:11You know, people disappeared.
29:13>> So, I think that, and then a week went
by and they're green.
29:19And, and of course they got me.
29:21They got this new leader.
29:23What, what's this leader gonna do?
29:24And, so the next two weeks later Mark
Fields.
29:31He was a, leader of all the Americas
business, Canada, the United States and
29:36South America had an edge avant, in
29:38Oakville, Canada and then actuator issue,
on
29:40the, tailgate, so he stopped production
because
29:43we're gonna be best in class, we're
29:45not gonna deliver one vehicle, unless it's
done and is the best in quality.
29:50So he had 2 or 3,000 edges.
29:52You know, sitting out on the tundra, think
I was cold, so it went sinking in.
29:55Cuz when you stop production.
29:57I mean, it's a big deal.
30:00And so up comes his chart.
30:03For the launch of this new edge.
30:04And it's bright red.
30:08And I mean, you, it got so quiet.
30:10I, I, you know what they're all thinking,
it's over, Mark's gone,
30:14[NOISE] he's out of here, and what's this
new guy gonna do?
30:17So, I started to clap now they knew that
was a sign the
30:21door was gonna open someone was gonna come
in Mark's out of here.
30:26So I could just, I could just feel it I
mean, it just and
30:30I said Mark is there anything that we can
do to help you with that?
30:37And before Mark could say one word, Benny
30:41Fowler who is the head of quality now
world
30:44wide, said Mark, I think I've seen that
issue
30:46on a launch that we did six months ago.
30:49Because you know in the car business you
have
30:51so much product coming out and that's
what's so exciting.
30:55And then Joe Hendricks, at the time, he's
a leader of [UNKNOWN] now.
30:57Was the header of a manufacturer, and he
said you
31:00gonna need some manufacturer engineers,
cuz as soon as you
31:02find the problem and fix it, you're gonna
have to
31:04change all these vehicles and get the
production going again.
31:06I'll have those, I'll have our dynamite
talent up in Canada immediately.
31:12And then Derek Cusack who leads product
development worldwide,
31:18says Mark I've seen that technical issue
on
31:20such and such five years ago or something.
31:22I'll get right on that.
31:24That exchange took 12 seconds.
31:30We're on to the next chart.
31:32Course it was green.
31:34[LAUGH] On the next shot, it's green.
31:37The next week I think it was still red.
31:41Everything else is green.
31:43Next week I think he changed it to yellow
31:46because they found a solution and now
they're implementing it.
31:50I think the next week, it turned to green
and boom, all of
31:55the vehicles started going and then,
probably, one of the most exciting
32:00days of my life both from an oh, shit, I
mean this is a terrible situation.
32:05[LAUGH] Sorry, so sorry.
32:10>> To my gosh, we're gonna make it.
32:13Was the following week, guess what the
charts looked like:?
32:18They looked like a rainbow.
32:19>> [LAUGH]
>> Like a rainbow.
32:22And I'm, I'm going, oh, my goodness.
32:27I'm now the data says.
32:29Right here, why we're losing 17 billion
dollars.
32:33Cuz the data sets you free, right?
32:35Data tells you everything.
32:38But, also now, it was safe enough that you
could share how it was.
32:43You weren't red, the issue you're working
on is red.
32:45And, matter of fact, the expectation is
that
32:49everybody really does know what the
situation is.
32:52Cuz you can't manage a secret.
32:53People can't help if they don't know what
the real situation is.
32:56And it's safe and you're not gonna get a
[UNKNOWN].
32:58Now you can imagine the accountability
around the table.
33:01Are you gonna be read on a item and then
you're gonna go through the
33:04week and come back and say to all your
colleagues I was really busy last week.
33:08I didn't have a chance to work on that.
33:11And the pressure in a positive way is like
fantastic.
33:15Cuz everybody there is trying to figure
out how to help go forward.
33:18So in that one day it was probably, I was
at, it was probably like, oh my gosh.
33:23This is really in bad shape.
33:26But we all knew that.
33:27On the other hand, I knew at that moment
that
33:29we were going to be able to turn Ford
around.
33:32So that's my, can I, can I tell you one
more?
33:38okay, so here's another one.
33:39In this thing about vision and, and
everybody understanding.
33:42So I wanna tell you about the first time I
drove
33:44in the garage of the World Headquarters of
the Ford Motor Company.
33:48How we doing on time?
33:49[INAUDIBLE] 15 minutes, okay.
33:53So I left Boeing and I'm coming to Ford.
33:58I drive into the garage of the world
headquarters of the Ford Motor Company.
34:04And I drive in, there's not one Ford
vehicle in the garage.
34:10I know, I know, and I just left Boeing to
come to Ford and there
34:15all these Ashton Martens and Jaguars and,
and I, I remember thinking to myself I
34:20wonder what all the people in this
building are working on I don't think it's
34:24Ford and it was Ford was 85% of the
business but Ford was kind of.
34:31And, then I remember walking up and then
walking in that office like I shared
34:34with you and I knew, I knew it right away,
what we had to do.
34:38And you can imagine when the culture
change.
34:41Can you imagine being with all those
different brands, we had
34:4497 different models, that we were trying
to be world class at.
34:48So, let's go work on the new Jaguar from
8:00 to 8:10, then we'll work on
34:52the new Edge from 8:10 to 8:20, can
34:55you imagine doing that for 97 different
things.
34:58Business, the days when people would pay
you to manage a conglomerate, are over.
35:04Information is ubiquitous, people wanna
know exactly what that brand stands for.
35:09And what to expect when they walk in that
Ford's door, right?
35:15Small, medium and large.
35:16Cars, utilities, trucks.
35:17Best in class, in quality, filters and
safety.
35:19And you've gotta have a laser focus on
that branch.
35:22All the suppliers know what the plan is.
35:24All of your [UNKNOWN] customers know what
the plan is.
35:30What that did to, almost unleash all the
talent inside for
35:33it because now, everybody knew what we
were coming to work for.
35:36They knew what we were going to do, and
35:38that just created this, add that to the
business
35:40plan review process and the creating value
road map
35:43where you actually have to create value
every year.
35:45Because this is, it's a discounted cash
flow right?
35:48It's a wonderful think a discounted cash
flow right?
35:50All you gotta do is fill the arrows in.
35:52The arrow's up and the arrow's down.
35:53And if you're in business, good businesses
grow at discounted cash
35:56flow whether it's cash or profits by 15% a
year, right?
35:59And most good companies grow the top line
by
36:017% a year, by making price [INAUDIBLE]
along value.
36:04And then they also improve their
productivity by 7%.
36:08And what's 1.07 times 1.07?
36:13That's how you grow 15% a year.
36:14That's what good companies do.
36:16So it's just absolutely unleashed all the
talent around the world.
36:20By, by focusing the vision, what we are,
and the
36:22comprehensive strategy and then that
36:24relentless implementation part by working
together.
36:41[LAUGH] What's the biggest mistake you've
made since joining Ford?
36:47What have you learned from it?
36:49What would done differently?
36:56Is there another question?
37:02>> [LAUGH]
>> I don't, I
37:08don't know about the mistake word, I
thought.
37:16You're reflecting about this all the time.
37:18What, work you've done.
37:19Or, actions you have taken.
37:21And, it was, And, there's not anything
that I would not
37:26do, I think, part of the reason is, we're
in crisis, right?
37:30And so, you have to.
37:30You have to pull together.
37:31You have to decide what you're going to
do.
37:33Together and then you've gotta move
decisively and,
37:37I don't know how we could've moved any
faster.
37:40I'm so pleased about how we pulled
together.
37:42I'll tell you, another thing, I wondered,
really wondered whether I was doing
37:44the right thing by going back and
testifying on behalf of GM and Chrysler.
37:50I mean, I'm a market person.
37:52I really believe that market should
allocate precious resources.
37:55Not governments, the market.
37:57We should do it with our purchase
decision, right?
37:59We're the ones that decide the products
are,
38:01are successful or what companies will be
successful.
38:04And so to go back and testify on behalf of
my
38:09bankrupt competitors, I mean, it's a, it's
a serious question, right?
38:14They were, they were gone they should have
38:16been gone the market should have let it
go.
38:18But I also at the same time believed like
two administrations and all their
38:22economic advisors that if we would have
taken 12 to 15% of the US
38:25GDP in the bankruptcy in the United States
we would have taken the United
38:29States from a recession into a depression
so that's why I decided to do it.
38:34And if you like to know how to go to a
38:36hearing, most important thing is to fly on
your corporate jet.
38:38[LAUGH]
Works really well.
38:44I kept reminding them I was not there to
ask for the precious taxpayer
38:50money, I was there supporting my, my
competitor for the good of, of the world.
38:55And the other thing is, is to have
38:57very thoughtful answers to their questions
is another thing.
39:00Do you remember when, when we were, we
were
39:03all sitting there and they were going down
asking,
39:05Chrysler, would you, the leader, would you
work for
39:08$1 a year, if we give you our money.
39:10Yes, please, thank you.
39:12Would you work for $1 a year.
39:20And then he turned around to me and said
39:23well Mr. [UNKNOWN] would you work for $1
per year?
39:27I, I just couldn't think of what to say.
39:29So I kind of rubbed my chin thoughtfully
and
39:30I said, no I think I'm okay where I am.
39:32Just got killed for that.
39:35>> When I reminded them that I wasn't
there to ask them
39:39for them for the money, but they kind of
forgot about that.
39:45>> The other thing is, is they you know,
you're sitting there and they give
39:49you little bottles of water and the most
important thing is just to sip it.
39:52Cos you can't get up and leave.
39:53[LAUGH]
And we're there sometimes like 12 hours.
39:57And so that's another important thing is
going really easy on the water.
40:03Cuz the whole worlds watching you.
40:04[LAUGH]
Now on a, on a really serious note.
40:14And I think about this all the time.
40:17A lot of people ask me, cuz this is,
40:19you know, it's democracy and it's the way
it works.
40:22And weren't you offended at the way you,
you were treated?
40:25and, and cuz, you know, they were pretty
aggressive questions.
40:30It was a serious situation.
40:31The United States was slowing down
economically.
40:35Here you had a significant portion of the
GDP was at risk.
40:39And it's going to get worse.
40:41And Hank Paulson, who is secretary of the
treasury was sitting in the same chair
40:45that I was sitting in the day before
40:47trying to explain where the $700 billion
went.
40:49And everybody was scared...
40:52And, they're anxious.
40:53And, they're asking questions that need to
be asked.
40:56And, so I never took it, I never took it
personally.
40:59And, I also believe, the only way to, to
deal with
41:02the, with things like this, is you gotta
do it together.
41:04You gotta make it okay.
41:04Just like we were talking about, to have a
conversation.
41:07So, I never, I don't have any remorse for
that.
41:08And, I, I wouldn't have done that
differently.
41:10I think, everything on the product was
good.
41:14So I don't think of it so much the
41:15mistakes as that, I think that just
pulling together around
41:20this compelling plan we decisively, that
we, that we did
41:23it at the right time and, and doing it
fast.
41:25And it doesn't get any better.
41:26You know, most people tell you that, they
41:28wish they would've done something sooner,
not waited.
41:30I think maybe because we were in such a
terrible crisis, we had to move.
41:35And I'm in awe that, that we moved so fast
and we're now
41:40making the best cars and trucks in the
world that people really do want.
41:45>> My name's Marcus and thank you for your
time today.
41:48My questions about vision.
41:50So you talked a little bit about Ford's
globalization.
41:53>> And a lot of your competitors have
41:54opened up plants in the United States
so...
41:57My question is, what does it mean to be an
American car manufacturer?
42:02It kind of goes back to the question
earlier.
42:07And I only can kind of speak from a, a
42:12multinational, large corporation operates
around the
42:14world with Boeing and with Ford.
42:17And it really, is about being a global
company.
42:20And, you can have your headquarters
somewhere.
42:23You know the taxes and the way
42:24you repatriate money, exchange rates and
everything.
42:28But I really believe that the companies
that
42:30are gonna serve and provide what people
really do
42:32want, and do it most effectively are gonna
42:35be one that lav, leverage their assets
world wide.
42:38And you know, some brands are.
42:41There's always that conversation about is,
is Amer, is the fact
42:44that it's an American brand, does that
help you or not?
42:47The neat thing about Ford, again, is that
when Henry set it
42:51up everybody around the world thinks about
their Ford operation as Ford.
42:54You know, Ford is number one, number two.
42:56All the markets in Europe and it, and Ford
of Britain
42:58concerned to be a British company and so
we're very fortunate.
43:03And that's very different and like you
said the company's that, that
43:06have, the say Asian companies have said
come to the United States.
43:10Cuz one of the reasons they did that was
they were taking all the
43:13wealth back home, so there's a lot
43:15of encouragement for them to operate here
too.
43:17But I love that Ford is in this place.
43:20I think that what we've really done is
accelerated Henry's
43:23original vision, actually accelerated by
operating everywhere around the world.
43:27It's so neat to be part of the fabric,
plus
43:29you know all the customers, you know
everything that's going on.
43:31And you're, you're not only providing
great cars
43:33and trucks but also great jobs and
careers.
43:36So, I, I think the big companies that,
that have the
43:40scale, and that's part of competing, are
gonna operate like global companies.
43:47>> Guy with the mic.
43:49>> My name is Guy with the mic [SOUND.]
43:52I'm Chen, first year, Alan great to have
you here.
43:54My question is about, I'm Chinese too so
you owe me a hug.
43:59My question is actually about jobs.
44:03So things I wanted to point out, you
caught 40% of the, the workforce at Ford.
44:08And, and you know, I think it's an
44:09understatement, given the overcapacity and
other industry in general.
44:14But you know, I think so much about the
debate about economic
44:16growth right now is about bringing jobs
back, are those jobs coming back?
44:20And do you see the auto industry grow as
bringing the jobs back?
44:22>> Absolutely and we just announced, well
can I come back up just a
44:26little bit to your, to your start of your
question, because it's really important?
44:30This is about business and, this is about
profitability growing.
44:34And you've got to do whatever it takes,
because if, just like the situation we
44:38described, you couldn't go very many years
44:40losing $17 billion, and then you're gone,
right?
44:43So you have to size yourself to the real
demand no matter what.
44:47Remember in the automobile industry,
because all their costs
44:49they thought were fixed, then they'd keep
their production up...
44:52Over deliver all these vehicles, just to
get the last incremental dollar,
44:55cuz if, couldn't, didn't think they could
do anything about their cost.
44:58So what we did is we went to the to the
unions
45:00and we talked about a future where we
could actually make cars in
45:04the United States, but we had to have our
cost structure right and
45:07we had to size ourselves in the near term,
to the lower demand.
45:11Well, we agreed, because you, we came
together around this vision
45:14of profit growing and actually hiring,
hiring and providing great jobs.
45:18But you gotta take the tough action to get
yourself
45:20started so you can keep investing during
the toughest of times.
45:24I mean it's, you don't, you don't any way
want to go through that.
45:27That's why, this economic development
worldwide is so important.
45:30Now having said that we sized ourself to
the real demand.
45:34We took out all the extra production both,
45:36as somebody mentioned earlier also with
our distribution channel.
45:39And with Ford and with our suppliers.
45:41And so now we're operating profitably at
the lower demand.
45:44And, and we invest it for these new
products.
45:46So now, we just announced over the next
45:48two years, we're gonna hire 7,000, new
employees.
45:51And just give you one example, we're
making the new Explorer in Chicago.
45:55That's the one that's 30% more efficient
than our last one.
45:58And we'll be exporting that vehicle to 94
countries around the world.
46:03And in that plant alone we'll be adding
1,200 jobs and
46:06then another 600 jobs with 100 suppliers
throughout the United States.
46:11And all of our suppliers now are all
global.
46:14Cuz, which, when you operate this way you
use your scale globally but
46:18then you operate locally so then you get
the best of both both worlds.
46:22So, and our plan is to fundamentally now,
to grow the business
46:26year after year forever cuz that's, that's
the purpose of a business.
46:30So, we're really excited about how
everybody
46:33pulled together to get to this place.
46:35And now it's really exciting now to grow
and provide all these great opportunities.
46:38In Asia Pacific, we're grow, we're one
46:40of the fastest growing companies in Asia
Pacific.
46:42Find tremendous opportunities.
46:44Great market in Europe, a little bit
slower growth, a little bit more mature.
46:47Fabulous growth in Brazil, Russia.
46:49And especially in India and China.
46:54Okay, maybe one last question because I
hear that
46:57when it gets close, you get up and leave.
47:02>> My name is Pragosh, I was at the
consumer electronic show at Las Vegas.
47:08And, I got to check out your, your Ford
Sync.
47:11>> What'd you think?
47:12>> And, I love the voice activated
experience, but I
47:14was wondering, are you guys thinking about
a app store?
47:17Much like how Apple came out with theirs,
for their hardware.
47:20>> Are you coming out with an app store
for your hardware?
47:23>> We're, we're not, right now, but you
saw the apps that we were managing now.
47:29And, we also have all the app producers
that
47:31are working on what's makes sense for a
car.
47:33The real thing we decided was, was to not
get in that as a business
47:37like Apple did but, but to focus
47:39on the automobile and the safe driving
experience.
47:41So we're not making any money on all those
apps ourselves.
47:44We could have taken a, a piece of each
47:46of those like other business models that
you know of.
47:48Because what we, what we want to do is a
ha,
47:50was to make sure that everybody when they
bought a Ford.
47:53That they could seamlessly operate and
yet, be connected to a digital world.
47:58So we're managing that interface that you
saw with
48:00sync and My Ford and that's been our, our
focus.
48:03Now a lot of people have wanted this, you
know
48:05when Pandora comes in or any, you know,
other applications.
48:08They would like, a lot would like us to do
48:10a business with them but right now we're
focused on providing
48:13a better driving experience and a safer
experience than having
48:16all of us have access to the internet for
right now.
48:22>> Thanks again for joining us and I
48:23appreciate getting to ask the last [COUGH]
question.
48:27My name is Caroline Mellon, I'm a first
year here and I had the honor
48:31while I was at Deutsche Bank, before
48:33Stanford of working with the Ford Credit
team.
48:37I wanted to know what you thought their
role was in the
48:43turnaround of Ford in 2009 and their
active, kind of intensive balance
48:47sheet management, and then what your
48:49objectives are for balance sheet
management
48:51as your positioning for growth, but also
preparing for another potential crisis.
48:57It sounded like you had a great experience
at the bank, too.
49:01>> They're, they're, they're one of our
main bankers, too.
49:05And they're fantastic.
49:06What what she is referring to is what we
call Ford Motor Credit Corporation.
49:12And it's a Captive Finance Company that we
have.
49:14Meaning that we own it.
49:17And it's cost the Capital goes with the
parent with Ford.
49:20As opposed to, you know, independent bank.
49:22This has been really important for Ford,
because as you go through these
49:26cycles, let's see, your banker friends
kind of come and go a little bit.
49:33and, I mean, cuz they're managing their
life too.
49:36And, but, but the reason we have a, a Ford
credit
49:39corporation is that during the worst of
times, the best of times,
49:42then we can continue to help with the
financing for all of
49:45our Ford store owners with all their,
their inventory, all their vehicles.
49:48We also have one-stop shopping.
49:50So when you walk into a Ford store, you
can
49:52get your financing for the vehicle, in
addition to the vehicle.
49:55And remember when when we went through
this crisis GM, and they're trying to work
50:01their cash so carefully they actually sold
GMAC,
50:04which they, which was their captive
finance company.
50:07So we really believe we've, we've done the
right thing.
50:08It really helped us get through this.
50:11Right now we have scaled back Ford Credit
50:14with the divestor of all these other
brands.
50:16But now they're really right sized and
they're just
50:19an absolute key part of our business going
forward.
50:22And I'm just so pleased that we keep that
50:24as a priority to keep that captive finance
company.
50:27And now on our balance sheet, now it just
gets better and better.
50:31That, you know, when you borrow $23.5
million, you need to pay it back, and
50:37it's a wonderful thing to be paying back
our banks, and our goal of
50:44course is to move back to investment grade
because our cost of capital goes down.
50:49That makes that allows us to invest more
in the products but also
50:53allows for credit to be even more
competitive on helping you with loans.
50:57So last year we paid $14.5 billion back on
our loans, which is fantastic and,
51:04we'll probably, keep some debt cuz, you
know, it's good to leverage, a little bit.
51:08But we're clearly moving back to
investment
51:09rate, a lot faster than what everybody
thought.
51:12And most important thing is you're growing
51:14the business profitably, generating free
cash flow.
51:17And it gives you great options not only on
51:18improving the balance sheet, but also on
the products.
51:22I know you're gonna get up and leave.
51:24And, and I would take it personally if I
wasn't done, so I'm gonna be done.
51:28I, was honored, to get a request to come
here.
51:31I, I grew up in Kansas, I grew up in
Seattle, Lebowing.
51:35We've had tremendous programs with
Stanford over the years.
51:39It's a fabulous school, as you know.
51:40You're getting, one of the finest
educations, and
51:43you're also getting one of the best global
educations.
51:45And it's so important, for where the
world's going and
51:48so, thank you for the invitation and,
congratulations, to you.
51:53I look forward to working with you.
51:54I would love you to consider maybe Ford,
as you're considering going forward.
52:04maybe you should drive a Ford, and feel
the difference.
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