WHAT'S FORD DRIVING AT? - Tyre-burst headlines have cast a shadow over Ford lately, but the car-maker's boss Jacques Nasser will stay focused on a head-spinning strategy - pulling a pageant of illustrious acquisitions together and cutting a customer-pleas

WHAT'S FORD DRIVING AT? - Tyre-burst headlines have cast a shadow over Ford lately, but the car-maker's boss Jacques Nasser will stay focused on a head-spinning strategy - pulling a pageant of illustrious acquisitions together and cutting a customer-pleas

Last Updated: 31 Aug 2010

Can Ford manage it all? Over the past two years, America's second-biggest automotive company has bought two European manufacturers, Volvo Cars and Land Rover, adding to the two luxury car subsidiaries acquired a decade earlier, Jaguar and Aston Martin. All these companies, together with Lincoln in the US, have been put into the newly established Premier Automotive Group run from London by ex-BMW executive Wolfgang Reitzle.

In Asia, Ford has just pulled out of a dollars 7 billion bid for Daewoo which, if it had gone ahead, would have added a Korean arm to its long-standing alliance with Mazda of Japan.

Welding all these businesses into a coherent whole would tax the ingenuity of an Alfred Sloan, but there's more. Jacques Nasser, the 52-year-old Lebanese-Australian who took over as president and chief executive of Ford last year, has launched an ambitious drive to rebalance its business from capital-intensive manufacturing to consumer-related activities, with their higher potential for profits. The purchase of Kwik-Fit, which operates tyre, exhaust and brake fitting centres in Britain and continental Europe, was one move in this direction. Another strand has been a series of acquisitions and joint ventures in the internet sector - Nasser is determined to make Ford the leading carmaker in e-commerce.

But these grand global ambitions suffered a jolt recently with a crisis in Ford's own backyard. A scandal involving faulty tyres for the company's top-selling Explorer (sports utility vehicle) had an initially reluctant Nasser testifying before a US congressional sub-committee. Even though most of the blame has ended up with Firestone (the tyremaker), the incident has dented the company's image. When a business is growing internationally as fast as Ford is the risk of such unexpected calamity is high.

He conceded in an interview with MT that the new organisation looks complex, but seems undaunted by the task he is taking on. All the takeovers are strategically sound, he says, and the corporate cultures of the acquired companies are compatible with Ford's.

He points to the example of Cisco, which under John Chambers has made many more takeovers than Ford in the past decade - at one stage it ran at eight to 10 a year. The ability to handle acquisitions well, he argues, is one of the factors that will differentiate great companies from good ones over the next decade. To make the mergers work Nasser intends to enhance the individuality of the brands, at the same time 'securing global economies of scale, optimising our intellectual capital, leveraging our supply base, and spreading best practice throughout the company'.

This was the impulse behind the organisational changes he announced a year ago, modifying the global structure, known as Ford 2000, that his predecessor Alex Trotman had introduced in 1995. Trotman's idea was to break down an excess of regionalism - Ford of Europe, for example, operating almost independently of Ford in North America. There was too much overhead in the various regional groups and too many overlapping functions. 'What Alex did was right,' Nasser says. 'We may have overcompensated, going too far on the side of globalisation, but the change was needed to break the culture of regional dominance.'

Nasser has brought the pendulum back, rearranging the company into what he calls consumer business groups, all of which have a high degree of autonomy. Ford of Europe has become a fully fledged profit centre rather than a cost centre within a global organisation. The aim is 'to build on the strengths of Ford 2000 by adding a brand and regional influence that will allow us better to connect with customers'. The business groups, Nasser says, are 'almost self-contained for all the things that matter to consumers', while drawing on the resources and expertise of the support groups at corporate headquarters for product development, engineering, marketing and so on.

Were the acquisitions driven by opportunism, or was there a grand plan?

Nasser describes the purchases of Aston Martin and Jaguar at the end of the 1980s as 'independent opportunities'. But even at that time, he says, some people in Ford's top management were aware of the need to expand the company's 'brand width' and to allocate resources to segments of the market that had higher growth potential. These ideas crystallised in the 1990s as a 'consumer mindset' began to take over.

'Consumers (in the US) saw us as a very strong light-truck company, and probably the leading sports utility company,' says Nasser. 'We had a first-class global rental company in Hertz, a world-class financial services business in Ford Credit. We had some extremely strong models - Mustang, Thunderbird, Transit. But we needed to develop a more evenly robust business model, and this led us to target luxury vehicles as an area of growth.'

Lincoln - Ford's rival to Cadillac - was 'reasonably good in the US but not overly strong'. Jaguar was improving, but volumes were small. 'We started to ask: what else is out there?' The attraction of Volvo Cars was that it provided volume, it had a strong but complementary brand, and, unlike Jaguar in 1989, it was not a sick company. 'It was not for sale,' says Nasser. Yet, 'together with Volvo, we created that opportunity'.

With the more recent addition of Land Rover and Range Rover, Nasser is looking for annual sales of 1.2 million to 1.5 million luxury vehicles within a few years.

Part of the increase will come from Jaguar. The company was making fewer than 30,000 when Ford bought it, but with the recent launch of the S-type, to be followed in 2001 by the X400 (the 'baby Jag'), built at Halewood, Jaguar will be heading for sales of 200,000 cars a year. Buying Jaguar for dollars 2.5 billion was widely criticised at the time, but the turnround has been impressive and the benefits have not been all in one direction.

'People say Ford saved Jaguar, and that is partly true,' Nasser says.

'We helped them on quality; we instilled sound business principles. But we also learned a great deal ... about how you connect emotionally with the marketplace, how you get a team spirit with every person in the company feeling a passion about the brand.'

Will the preoccupation with luxury cars lead to a neglect of the Ford brand? This seems in urgent need of rejuvenation in Europe, if not in the US - over the past five years, the 'blue oval' has lost a quarter of its market share in Europe, falling from nearly 12% to less than 9%.

Ford was the first of the major car companies to treat Western Europe as a single market. The creation of Ford of Europe in 1967 was designed to eliminate duplication between the British and German subsidiaries and to organise product development, manufacturing and marketing on a Europe-wide basis. Despite growing labour relations and productivity problems in the two British factories, Dagenham and Halewood, the integration process went well.

The German plants performed consistently, as did the enlarged assembly plant at Genk in Belgium. A new front was opened up in Spain, and Valencia is now Ford of Europe's second-largest plant. For much of the 1980s the European operation was a jewel in Ford's crown.

The 1990s have been less happy. As well as a slipping market share, financial performance has been poor and overcapacity has been allowed to persist.

Some critics blame a lack of stability in top management - senior executives were parachuted in from the US and stayed for too short a time to make an impact.

Correcting these weaknesses is the responsibility of Nick Scheele, a 56-year-old Briton, who was appointed chairman of Ford of Europe last year after seven years with Jaguar, and David Thursfield, his chief executive.

Scheele's priority was to deal with the overcapacity. In 1999, Ford of Europe had the facilities to build 2.2 million vehicles, against sales of 1.65 million. At least one assembly plant had to go and Scheele concluded that it had to be Dagenham, but he offset that politically explosive decision with a big expansion of engine production. When this and other measures have taken effect (Ford has also sold its Azambuja plant in Portugal and closed its plant in Poland), capacity and sales should be roughly in balance.

His next task is to rebuild market share. Ford appears to have a brand-perception problem in Europe, especially in Germany, where it has just over 8% of the market (behind Volkswagen, Opel and DaimlerChrysler; Ford's share in Britain, its largest European market, is about 17%). Part of the problem is that Ford is not seen as German enough. Opel traces its history back to the end of the 19th century, when the Opel family diversified from sewing machines and bicycles into cars. Although the family sold out to General Motors in 1929, the American connection is played down. With Ford, by contrast, there is a sense that key decisions are taken in the US and that the needs of the German customer are not paramount.

To generate the product-led renaissance that Ford of Europe needs, Scheele is expecting great things from his two engineering centres, one based at Dunton, Essex, the other at Merkenich, near Cologne. With Dunton, Ford can tap into the flow of technicians coming out of British universities - 'many of our best engineers are British' - and it avoids homogeneity in design thinking.

Ford's strength has been in reliable, conservatively engineered cars with a more utilitarian image than, say, Volkswagen, which has built up a strong reputation for technical innovation. But the Ford Focus, launched in 1998 as a replacement for the Escort in the lower-medium category, was more adventurous. Its styling was acclaimed and it won the European Car of the Year award. Much now depends on the new Mondeo, to be unveiled at the Paris Motor Show this month, and the new Fiesta, out next year.

If Ford is to broaden its product range in Europe, it will presumably do so in co-operation with the companies that now constitute the Premier Automotive Group. This will call for delicate co-ordination between Scheele and Thursfield at Ford of Europe, Wolfgang Reitzle at Premier, and Richard Parry-Jones, the British engineer who heads product development at the centre. Ford of Europe and Premier are already working together in areas where immediate savings can be made - buying advertising time on television, for example - but there is also scope for sharing components and even platforms.

Nasser accepts the need to tackle Ford's weakness in Europe with 'tremendous new products', of which the Focus is an example. But different tactics are required. Noting that the luxury specialists like Mercedes have edged into Ford/Volkswagen territory, Nasser intends to fight back on two fronts: with an improved range of Ford cars and a big expansion from the Premier group.

Nasser believes the diversity of brands will give Ford a competitive advantage, especially when linked to the other changes he has set in train to make the organisation more responsive to the consumer's needs.

'Under the traditional business model that we grew up with, we started with a vision of a wonderful product, designed and developed it, manufactured it efficiently and defect-free, shipped it to the dealer and hoped we would not hear from the customer for three years. That's the transaction-based model, and it's flawed. Now we are evolving to a consumer-relationship model. First-class design and engineering skills are still mandatory, but we have to add new consumer skills. Ignoring the customer after he has bought the car makes no sense.'

Engineering and manufacturing, the part of the value chain that has dominated Ford's thinking in the past and absorbed most of its investment, is 'very asset-intensive, very high-risk, very low-margin'. Nasser seeks more of the consumer relationship part of the chain - 'it's less cyclical, less asset-intensive and the margins are better'. This does not imply withdrawal from manufacturing, but rather a change in the balance of the business.

On one side Nasser puts the decision to hive off Ford's large components business, Visteon, as a separately quoted company. (General Motors has done the same with its Delphi subsidiary.) It no longer made sense to devote resources to a business that did not give Ford a distinctive advantage.

'Consumers are indifferent as to whether the steering gear on a Ford car is made by a Ford subsidiary or an independent company,' he explains.

On the other side are the downstream investments, including a car recycling business in Florida, the first in what is intended to be a global network of state-of-the-art specialist companies, and Kwik-Fit in Britain. Kwik-Fit is not typical of what Nasser has in mind. 'It's a great company and we have learned a lot from it, but we are not about to buy lots of spare parts and services businesses.' Nor will Ford be buying up dealerships.

In 1998, it formed a partnership with Jardine Motors in Britain, known as Polar Motors, in which Ford holds 49%. This venture, now encompassing 40 dealerships, serves as a retail laboratory, aimed at developing 'a new customer experience' and spreading best practice.

But more fundamental for Nasser is the internet. 'Eighty per cent of the consumer strategy is in e-commerce. It gives us unfiltered communication with customers, the ability to move quickly, to have a relationship with the customer and the customer's family, on everything from a Ford Fiesta to an Aston Martin.'

One recent move is a joint venture with Microsoft in CarPoint, which the partners hope will lead to the first online build-to-order system that allows customers to order any car model to their exact specifications, delivered when they want it. Another is a partnership with TeleTech, an e-commerce specialist, to consolidate all Ford's customer contact services throughout the world. This will enable customers to contact Ford around the clock, by telephone, e-mail or other internet routes. Ford has also, with Qualcomm, set up a 'telematics' company known as Wingcast that will bring wireless internet access and other information services into cars and trucks.

Nasser dismisses as irrelevant any distinction between companies as old or new economy. 'There's an economy out there and there's a new technology, the internet. Some companies get it; some don't.' The power of the internet is that it can transform the business. 'We have all transformed our business many times over. What the internet can do, because of its integration capability, is to take the separate functions - marketing, sales, logistics, production - and integrate them into one business process. In the past we could automate processes within a functional silo - say, production - but we could not integrate it with logistics. Now we can bring these functions together.'

Could all this make Ford the undisputed number one in the world motor industry, a status it last enjoyed in the early 1920s? Henry Ford invented mass production before the first world war, and Fordism, with its stress on standardisation and direct control of the workforce, was admired and imitated throughout the world. Then came the multi-divisional, multi-product model developed by Alfred Sloan at GM - and Ford slipped back. After 1945, led by Henry Ford II, the company was drastically remodelled on the GM system, yet the gap remained.

The next great advance, in the 1970s and '80s, was Toyotaism, or lean production, a way of designing and building cars that combined speed, flexibility and consistent quality. Japanese competition sent all the American companies reeling, none more so than Ford, which went through a profound crisis in the early 1980s. Out of that experience emerged a very different company, less Fordist in its approach to product development, manufacturing and relations with labour. Ford learned from Mazda, in which it had held a 25% stake since 1979 (increased to 33.4% in 1996).

'Mazda has been a very important ingredient in Ford's success,' Nasser says, 'much more important than a look at the financial figures alone would suggest. We learned from them about investment efficiency, about nimbleness, particularly in product development and engineering'.

Although GM had a joint venture with Toyota - to make small cars at Fremont in Calfornia - this was separate from the rest of the organisation and the lessons from it were slow to diffuse. By contrast, the Ford-Mazda factory at Flat Rock, Michigan, was more integrally linked with other Ford operations. It is only in the past few years, under Jack Smith and now Richard Wagoner, that GM has regained its equilibrium.

Could Ford be making the same mistake as GM did in the 1980s - taking on too much? In fairness to Ford, its acquisitions and joint ventures are more clearly targeted on making better cars and delivering a better service to the customer. And the organisational changes that Nasser has instituted are more evolutionary and less disruptive that the great reshuffle that took place under Roger Smith in 1984 - which had to be unscrambled by his successors.

In addition, Ford has an immensely successful and profitable business in its US heartland, which was not true of GM in the 1980s. Nevertheless, Nasser faces formidable challenges: to create a new kind of consumer-focused company while solving familiar old-economy problems: making the most of acquisitions, getting the global/local balance right and strengthening the Ford brand.

Nasser thinks he has the people to do it. 'We have the most diverse, most global leadership group of any major automotive company.' Another distinctive characteristic to which he attaches great importance is the family tradition - the Ford family controls 40% of the voting stock and William Clay Ford Jr, great-grandson of the founder, is chairman. What exactly does the family element provide? 'You can't touch it, but you can smell it, feel it. It's a different spirit, a sense of belonging, of continuity. We're one team.'


In the 1990s a number of Ford executives, including Jacques Nasser, said that the productivity gap between Dagenham and Cologne was closing. After negotiating a new trade union agreement in April 1999, Ford said it planned to raise Dagenham's capacity from 272,000 to 450,000 vehicles a year, including 150,000 of a model code-named B257. Why, then, did it decide to end car assembly at Dagenham? The answer, it seems, has a lot to do with the configuration of the plant and its suitability as a site for new investment compared with Ford's other European plants. When Nick Scheele took over as Ford Europe chairman last year, he saw that action was necessary not only to reduce capacity but also to ensure that the plants still in operation were flexible enough to handle more than one model. Of five main plants, Valencia in Spain, Saarlouis in Germany and Genk in Belgium either had this capability or could acquire it with relatively small investment.

Cologne, too, had been a two-assembly-line plant when it made Fiestas and Scorpios. Dagenham produced only Fiestas and it made no sense to upgrade, since that would perpetuate excess capacity.

As for productivity, it takes 24 man-hours to produce a Fiesta at Dagenham, compared with 22 at Cologne - a difference that was not critical in the closure decision. With regard to the strength of the pound against the euro, Scheele is adamant that this was not a factor. Sterling is causing Ford a good deal of pain, but decisions of this kind are taken on a long view and Ford is assuming that Britain will join the single currency within five or six years.

Is Britain a good place to invest in and export from? 'It's hard to answer that,' says Nasser. 'It has been tremendous for Jaguar, and for engines, both at Dagenham and Bridgend. We've brought Transit engineering back to the UK; the Dunton technical centre is the largest in Europe; and we're opening a design studio in London. There are many things Britain can do well. Other things, perhaps because of history, it does less well.'

The implication is that high-volume car assembly is not something Britain is good at, at least in comparison with Germany. But it is wrong to think Ford is retreating from Britain. With the purchase of Kwik-Fit and Land Rover, it now employs about 50,000 people here, rather more than in Germany.

Peak employment in the UK, in the '70s, was around 70,000, but, as Nasser points out, there is more added value in Ford's current operations than there was then. The UK is no longer the centre of Ford's European empire, but it remains an important constituent.

1903: Henry Ford and 11 associates, with dollars 28,000 in cash, launch the Ford Motor Company on 17 June in a converted wagon shop.

1904: In first 15 months, 1,700 Model A cars are produced. First foreign plant opens in Canada. Henry Ford, later company president, believes future lies in the mass production of affordable cars.

1908: Launch of the famous Model T.

1910: Ford number 40,000 rolls off production line.

1913: Half the cars in the US are made by Ford. Exports to Europe, Asia and South America.

1914: Company introduces dollars 5-a-day minimum wage to retain workers.

1922: Ford acquires luxury Lincoln Motor Company.

1924: Buys Dagenham factory site in north-east London.

1925: Model T number 10,000,000 rolls off assembly line. Ford builds Tri-Motor aircraft used by first US commercial airlines.

1929: Construction begins at Dagenham. Car plant opens in 1931.

1932: First mass-produced single-block V-8 engine.

1938: Launch of Mercury line, Ford's entry to medium-priced market.

1942: Manufacture of civilian cars halted to concentrate on war effort.

1945: Henry Ford II becomes president as company faces millions in losses; hires cost-cutters, including J Edward Lundy, Arjay Miller and Robert McNamara, who becomes Ford President in 1960.

1954: Launch of the sporty Thunderbird.

1956: Ford goes public in largest-ever IPO.

1959: Fifty-millionth vehicle produced.

1964: Launch of the Mustang.

1965: Starts production of mid-engine GT40 race car in Slough.

1967: Establishes Ford Europe division.

1968: Begins production of Ford Escort.

1969: UK launch of the Ford Capri.

1974: Halewood plant opens in Merseyside.

1980: Henry Ford II steps down as chairman, replaced by Philip Caldwell.

1982: Launch of the Ford Sierra.

1985: Donald Petersen becomes chairman.

1986: Acquires equity in Kia Motors of Korea.

1986: End of the Capri.

1987: Acquires 75% of Aston Martin.

1988: Produces first global car, sold as Mondeo in Europe, Taiwan and Middle East. Modified in North America as Ford Contour and Mercury Mystique.

1990: Acquires Jaguar under new chairman Harold 'Red' Poling.

1991: Joins with Volkswagen in AutoEuropa venture to produce multi-purpose vehicle in 200,000sq m plant at Setubal, Portugal. Factory opens four years later.

1993: Alex Trotman becomes chairman and chief executive officer.

1994: Completes takeover of Aston Martin.

1995: Trotman launches 'Ford 2000' initiative, consolidating North American and European operations and planning single worldwide group by millennium.

1999: William Clay Ford Jr, great-grandson of Henry, elected chairman. Jacques Nasser elected president and chief executive officer. Ford buys Kwik-Fit for pounds 1bn (dollars 1.6bn). Acquires Volvo for dollars 6.45bn.

2000: Buys Land Rover for pounds 1.8bn. Dagenham plant halts car production. Aborts Daewoo bid. Last Ford Escort made after 32 years and 46 million British sales. Halewood Escort plant to switch to Jaguars.

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