Image: Ford Motor Co. Chief Executive Officer Alan Mulally
John Makely  /  msnbc.com
Alan Mulally is being lauded for revamping Ford’s U.S. and global manufacturing operation to be cheaper, more efficient and more flexible, and for creating higher-quality vehicles that customers want.
Alison
By Allison Linn Senior writer
msnbc.com
updated 10/26/2010 8:44:01 AM ET 2010-10-26T12:44:01

When Bill Ford first approached Alan Mulally about taking the top job at the struggling vehicle maker that bears his family name, Mulally remembers that he responded with a laundry list of criticisms.

Among them:

Why wasn’t Ford making more small vehicles in the United States?

Why didn’t it have a cohesive family of vehicles?

Why weren’t the company’s worldwide operations working better together?

And why was it taking so long to get badly needed new products to market?

Most people would probably have balked at taking on such a tangle of problems, especially at a point in life when people typically look toward retiring.

But Mulally — who was 61 at the time and had spent the past eight years engineering a major turnaround in Boeing’s commercial airplane production and then cutting tens of thousands of jobs after the Sept. 11 terrorist attacks decimated the airplane industry — found himself drawn to it.

“After that conversation, I knew that I was going to come to Ford,” he said in a recent interview with msnbc.com.

Four years later, that risky decision to tackle Ford’s problems is paying off. Mulally is being lauded for revamping Ford’s U.S. and global manufacturing operation to be cheaper, more efficient and more flexible, and for creating higher-quality vehicles that customers want.

Those moves are paying off: Ford sold 1.44 million vehicles in the first nine months of this year, up 21 percent from a year earlier, and the company says it is on track to gain market share for the second year in a row. In 2009, the company reported its first full year of profitability since 2005, and it has remained in the black since.

On Tuesday, Ford posted third-quarter earnings of $1.7 billion, a 68 percent increase and its sixth straight quarterly profit, handily beating Wall Street estimates.

Story: Ford posts 68% rise in third-quarter earnings

That's despite a deep recession that hit the already ailing auto industry like a sucker punch.

For many customers, however, what stands out most is that Ford is the only one of the Big Three automakers to neither accept government bailout money nor take a trip to bankruptcy court. That’s thanks in part to Mulally’s decision in 2006 to take on billions in debt to fund its own turnaround plan.

“The response that we received because we did not ask for the precious taxpayer’s money has been tremendous,” Mulally said.

Still, the turnaround plan hasn’t been without consequences, especially in the United States.

In the past five years, Ford has cut its North American work force by nearly half and closed or made plans to close more than a dozen U.S. manufacturing facilities. Ford currently employs about 72,000 workers in North America and 178,000 worldwide.

In addition, the unionized workers who have remained at Ford and the other U.S. carmakers have had to accept concessions to their once extremely generous labor contracts to keep their jobs.

Ford also has sold off brands including Volvo and eliminated nameplates such as Mercury. Hundreds of dealerships have been shuttered.

The new Ford is a much trimmer operation than when Mulally took the helm in 2006. He said he thinks the company is now at the right size to meet current demand but also to accommodate growth as the economy improves.

“We really feel like we are in a really good place,” Mulally said.

Despite the lost jobs and other economic fallout, analysts say Detroit is celebrating what is looking more and more like a success story.

“Pretty much universally, Ford is being held up as heroes because they didn’t accept government money,” said Aaron Bragman, senior analyst with IHS Automotive in Northville, Mich.

Bragman said Detroit has been more willing to accept the sacrifices it took to get to this point because Ford is far from the only automaker that had to cut their company to the core in the past few years.

“It’s not been just Ford slashing and cutting personnel,” Bragman said. “And the benefit of Ford doing it is that they’re growing. … Nobody likes you better than when you bring in a winner.”

Perhaps the most tangible embodiment of Ford’s transformation is the Michigan Assembly Plant in Wayne, Mich., not far from the company's Dearborn headquarters. The plant, which once churned out Ford’s behemoth and highly profitable trucks and SUVs, is now gearing up to produce a new version of the small Ford Focus.

The transformation is thanks to a $550 million remodel, a more efficient production system and an effort to lower labor costs, all of which make producing the cheaper small cars more profitable. It’s also part of Ford’s goal to offer customers more fuel-efficient options and move the company beyond the F-series trucks and other big vehicles that it has traditionally been best known for.

Video: Made in America: Ford F-150 (on this page)

The new Focus, which was developed in Europe, is also one of a number of vehicle models that will be built worldwide on the same so-called “C car” platform, allowing the company to be more nimble as customer preferences and demand changes.

Image: Ford Focus- MADE IN AMERICA
John Makely  /  msnbc.com
Friday, October 8, 2010, in Wayne, MI The Michigan Assembly Plant in Wayne, Michigan gets ready for the production of the new Ford Focus after a $550 million conversion of the plant. (John Makely/ msnbc.com)

The company’s worldwide operations have, in fact, become so coordinated that some question whether Ford could easily move production to other countries if labor disputes or other problems arise. Mulally says the company plans to keep making vehicles in the United States as well as in other countries where it has customers.

“It starts with our basic assumption that we want to make them here — we want to make them in the United States, as well as we want to make the same vehicle in Europe or Asia Pacific,” Mulally said.

On Monday, the company announced an additional $850 million investment in its Michigan-based engineering and manufacturing operations, which the company said will create up to 1,200 new jobs by 2013.

Mulally says he's pleased that the changes in labor agreements and manufacturing efficiencies have allowed the company to become more competitive with its U.S. operations.

“We have earned the right now to make a complete family of best-in-class vehicles right here in the United States, with U.S. workers and competing with the very best in the world,” he said. “That’s not only good for Ford and our customers and our stakeholders but that’s good for the United States of America.”

United Auto Workers President Bob King said the relationship between the automakers and the union is dramatically different than in the past, and both sides are united in the common goal of making quality vehicles efficiently.

Still, Ford is now doing so well that union officials already have indicated they will be less willing to make more sacrifices going forward. Ford’s unionized workers were also the only ones who did not give up the right to strike as they made concessions.

“We’ve got to make sure, as the company is doing much better, that there’s a fair share of that upside that goes to the membership, and that’ll be a major focus of what we’re doing in 2011,” King told msnbc.com.

King said it helps that there seems to be a real sense that the company is interested in working with employees.

Paula Stubbe, a group leader at Michigan Assembly Plant, said she feels like management has in recent years done a better job of listening to workers and taking their input about how to make a better product.

Image: Paula Stubbe
John Makely  /  msnbc.com
Ford employee Paula Stubbe on the production line at the renovated Michigan Assembly Plant in Wayne, Michigan, where they are gearing up to start producing the new Ford Focus. (John Makely/ msnbc.com)

“They probably realize that we know the vehicle more than they do,” Stubbe said. “They’re not just assuming. They are asking us and we are trying to work together to make sure we get the quality vehicle.”

Mulally says he's confident that employees both in the offices and on the factory floor have come to appreciate the importance of staying competitive, and that partly means keeping costs low.

“Everybody understands that for us to grow the business every year, year after year, we need to continuously improve our quality and our productivity, so I think that’s going to be the center of the discussion,” he said.

Msnbc.com multimedia producer John Makely contributed to this report.

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Video: Made in America: Ford F-150

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