Reference no: EM132171954
In September 2006, William Clay Ford, Jr., the Board Chairman of Ford Motor Company and great- grandson of Henry Ford, the company’s founder, hired Alan Mulally away from the Boeing Company to be Ford’s President and CEO and to oversee the restructuring of the company. In his first few months as President and CEO, Mulally’s efforts were “focused on getting Ford leaner. He sold its Aston Martin division and announced a series of plant closures and layoffs that he says [would] return the company, which lost a staggering $12.7 billion in 2006, to profitability.”
Shortly after taking over as Ford’s President and CEO, Mulally delivered “a Vince Lombardi ‘What are we made of?’ speech [to his top management team]. It wasn’t good enough just to say we’re going to cut costs and speed up product development; we also have to say we cannot keep going the way we’re going. Continuing to do what we’ve been doing is not going to create a viable Ford.” In late 2006, Robert Barry, an analyst with Goldman Sachs, argued that Ford’s restructuring would be a mammoth, multiyear effort; and he expressed doubt that Ford could be successful given relentless competition; a depleted pool of managerial talent; large cash-burn rates; and severe pressures on product mix, product prices, and sales volume.
However, writing in Bloomberg BusinessWeek in June 2007, David Kiley observed, “[j]ust eight months into the job, Mulally is working hard to change institutional work habits that took years to develop. He wants managers to think more about customers than their own careers. He has made it a top priority to encourage his team to admit mistakes, to share more information, and to cooperate across divisions. He’s holding everybody’s feet to the fire with tough operational oversight and harsh warnings about Ford’s predicament.”
In commenting on plans for Ford’s future in a June 2007 interview with a reporter from Institutional Investor magazine, Mulally said: “We want to aggressively restructure the entire business to be profitable in the face of lower demand and a changing model mix. That means accelerating the development of products and services that customers really want especially smaller and more fuel- efficient vehicles. We’ve secured financing that will help us achieve those goals, and we are further developing relationships with our dealer and supplier network. The whole value chain needs to be restructured in the same way and be prepared for the new products and services.”
In the summer of 2010, James Tetreault, Vice President of Ford’s North American manufacturing, spoke about the restructuring of the company under Mulally’s One Ford plan. Tetreault “noted that the company previously lacked commitment to a strategy, illustrated by the fact that ‘One Ford’, the automaker’s plan to transform its business to deliver profitable growth, ‘is the first three-and-a-half year plan I’ve been on.’ That’s because in the past there had always been another plan rapidly coming down the line.” Tetreault also said that a key to the success of the One Ford plan was to overcome the hyper- competitive atmosphere at the corporate level people had to change and figure out how to work together; they had to become more collaborative to be successful.
The One Ford plan also addressed a significant structural problem associated with the production of cars for the U.S. and European markets. “[U]ntil very recently Ford cars produced for Europe were entirely different than U.S. cars different platform, different suppliers, ‘different everything,’ and [it was] expensive to maintain these separate product and supply chains.” Under the One Ford plan the company is now working toward building a high level of flexibility into its assembly operations. This flexibility will be driven by global car platforms and “an emphasis on transforming plants to quickly switch model mixes to better react to customer preferences.” This reflects the key One Ford planning premise of: “People working together as a lean, global enterprise for automotive leadership, as measured by: customer, employee, dealer, investor, supplier, union/council, and community satisfaction.”
In less than four years as President and CEO, Mulally steered Ford away from the brink of disaster, rallying the company around a four-point mantra printed on a card that Ford employees can carry in their wallets, cutting labor costs by 22 percent, and slashing the number of vehicle models Ford produced from 97 to 20. “The moves paid off. In 2009, Ford made a $2.7 billion profit; by early 2010, the company had earned ‘car of the year’ and ‘truck of the year’ awards from the auto press and its stock price rose 700% from its 52-week low.”
Would a network (or lattice) organization be a viable structural alternative for Ford Motor Company? Explain your answer.