Bill Ford, Alan Mulally
Carlos Osorio  /  AP
"You often hear people at Ford say we can't manage prosperity. I think it's really quite different than that. It's that we stop changing," says Executive Chairman Bill Ford, right.
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updated 1/10/2011 4:37:04 PM ET 2011-01-10T21:37:04

In every boom cycle of its 107-year life, Ford Motor Co. became complacent, unprepared for the inevitable bust in the auto business.

From the 1920s, when Ford lost its dominant position in the U.S. because it was slow to update the Model T, to the 2000s, when it squandered billions in SUV profits and narrowly avoided bankruptcy, the company stuck with some strategies too long and didn't pay enough attention to others.

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"You often hear people at Ford say we can't manage prosperity. I think it's really quite different than that. It's that we stop changing," Executive Chairman Bill Ford told The Associated Press in a recent interview.

Now, coming off a great 2010, Executive Chairman Bill Ford and Alan Mulally, the man who replaced Ford as CEO four years ago, say they are ready to break that cycle. Mulally has transformed the company into a simpler, nimbler organization that's ready to react to change more quickly. Management experts aren't so sure.

Thanks to strong new products and stumbles at rivals like General Motors and Toyota, Ford saw the industry's biggest increases in market share. It had the best-selling vehicle — the F-Series pickup — and ended 2010 with its second straight annual profit. Ford's U.S. sales rose 20 percent, almost double the industrywide increase.

Mulally laid the groundwork. He cut brands and put in place a system that encourages managers to stay on top of market changes and other issues and communicate more openly with each other. It was a radical change at company known for vicious infighting, where managers who pointed out problems were demonized. The healthier communication in Ford's top ranks means it's much more likely the company will hire its next CEO from within the company instead of turning to another outsider like Mulally.

Mulally, 65, won't say when he plans to retire.

Management experts say it's easy to talk about a willingness to change and much harder to do it, especially after pulling off a remarkable comeback like Mulally did after coming to Ford from airplane maker Boeing Co.

"Act two is always very, very hard," said Joe Bower, a professor of business administration at Harvard Business School. "There are leaders who can do it, but it requires a tremendous willingness to imagine the need to rethink everything."

Consider Ford in 2000. Flush with profits from sport utility vehicles and pickup trucks, it earned $3.5 billion and bought the Land Rover luxury brand from BMW. Just one year later, hammered by the faltering economy and a slow reaction to a recall of Firestone tires use on its SUVs, Ford lost $5 billion, announced a plan to cut 35,000 jobs and fired its CEO. Bill Ford held the reins until he hired Mulally.

Even now, Ford is facing some demons, including the recent recall of 600,000 Windstar minivans whose axles can break and questions from Consumer Reports, which says its MyFordTouch dashboard touchscreen is too distracting. The company says it reacted quickly to the Windstar issue and will study Consumer Reports' findings but believes its system is safe.

Ford and Mulally say management can respond faster to such crises because of changes Mulally made. He instituted weekly meetings with the entire 18-member executive team, ensuring that all of Ford's leaders are constantly examining worldwide market conditions, future products and other issues. He also simplified the company's mission, getting rid of excess brands like Land Rover, Volvo and Mercury so Ford could concentrate on its core Ford and Lincoln brands. The company is now consolidating Lincoln dealerships and trying to take the brand even further upscale in order to revive its flagging sales.

"Everybody now knows why they're coming to Ford. They know why they're coming in in the morning. They know what success looks like," Mulally said.

Success, though, has a natural tendency to make a company smug. Experts say management teams continue to do what made them prosperous, believing that the formula will always work. Bill Ford, 53, the great-grandson of company founder Henry Ford, says he's seen it many times in his 31 years with the company.

"In the past, we would become static, and perhaps thought we had the secret formula and we were going to be slaves to it," he said.

James Schrager, a professor at the University of Chicago Graduate School of Business, said it's commendable Mulally and Ford recognize the company hasn't changed quickly in the past. Mulally's plan to save Ford was well done, but it hasn't been tested yet by an unforeseen event that throws off the strategy, such as a huge gas price uptick, Schrager said.

"There's a lot of things that happen outside of Ford's control that determine if they go from boom to bust," he said. "What I haven't seen yet is if they know how to deal with these large exogenous changes that will happen to them from time to time."

Story: Chrysler hopes to rev up comeback with 300

A few years ago, Ford said, the company would have based its product plans on fuel price predictions that could turn out to be wrong. Now it has a simpler vision: If you build high-quality, fuel-efficient cars and trucks in each segment, fuel prices don't matter anymore.

"We have the product lineup and the engine lineup and the transmission lineup to give the customer whatever they want regardless of whatever the external factors are. That's a freedom that's hugely off our backs," he said.

Ford and Mulally say simplifying production also will help them deal with external changes. For example, the new Focus sedan will eventually come in hybrid, plug-in hybrid, gas and electric versions, all built on the same Michigan assembly line. Ford will be able to switch quickly between them if it finds buyers prefer one technology over another.

Story: The 10 hardest-to-find cars in America

Ford is also saving hundreds of millions of dollars by building one car for all worldwide markets. Previously, Ford's global regions operated as independent companies, so cars developed in Europe would never make it to the U.S. or Asia. Now, Ford is basing 10 vehicles off the new, European-developed Focus, including a small minivan that will be introduced at the Detroit auto show this week. Eighty percent of the parts those vehicles share are the same.

Those savings have helped Ford make money even though U.S. and global auto sales are near historic lows, and industry analysts say big profits are possible when economies recover and sales return to more normal levels.

Will the turnaround stay on track if Mulally decides to retire?

Story: Big Three poised to dominate at auto show

Mulally and Ford think so. The weekly meetings are training the team in all aspects of the business, they say, and the sharp elbows that used to characterize Ford's executive ranks have given way to a spirit of collaboration. Ford won't say for sure whether the next CEO will come from within the company. But the chances are high.

"At the old Ford, you had heroes and villains," Ford said. "Now, it's, 'OK, where do we have issues and how do we solve them?'"

© 2013 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Photos: Production models

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  1. Volvo’s C30 electric crash test display is shown during the media preview of the 2011 North American International Auto Show at the Cobo Arena in Detroit. Volvo is hoping to burnish its reputation for car safety at the event, which features over 30 debuts of vehicles made by automakers from around the world. The show is open to the public from January 15 to 23. (Paul Sancya / AP) Back to slideshow navigation
  2. A model poses in front of an Audi A7 during the media previewfor the show. (Mark Blinch / Reuters) Back to slideshow navigation
  3. The 2011 Jeep Compass is unveiled. Chrysler Jeep is celebrating its 70th year in 2011. (Mark Blinch / Reuters) Back to slideshow navigation
  4. A Chevrolet Corvette, right, and a 2011 Corvette ZR1 sit on display. (Kamil Krzaczynski / EPA) Back to slideshow navigation
  5. The 2011 Ford Explorer, winner of the 2011 North American Truck of the Year award, on display at the 2011 North American International Auto Show. (Rebecca Cook / Reuters) Back to slideshow navigation
  6. Volvo’s Electric C30 car is powered by a lithium-ion battery and can be charged from a household power socket. (Stan Honda / AFP - Getty Images) Back to slideshow navigation
  7. Venturi’s high-voltage buggy concept includes a 300-horsepower engine. (Paul Sancya / AP) Back to slideshow navigation
  8. The new Dodge Ram 3500 truck is equipped with a powerful 350-horsepower engine. (Stan Honda / AFP - Getty Images) Back to slideshow navigation
  9. The 2011 Camaro RS convertible. (Rebecca Cook / Reuters) Back to slideshow navigation
  10. A model poses next to a Dodge Charger Hemi. (Tannen Maury / EPA) Back to slideshow navigation
  11. The 2011 Dodge Challenger SRT8 392. (Rebecca Cook / Reuters) Back to slideshow navigation
  12. The new Chevrolet Sonic small car will go into production later this year for the 2012 model year. (Stan Honda / AFP - Getty Images) Back to slideshow navigation
  13. Porsche returns to the 2011 North American International Auto Show with the Cayman R sports car. (Paul Sancya / AP) Back to slideshow navigation
  14. The new Bentley Continental GT will launch from standstill to 60mph in just 4.6 seconds and has a top speed of 197 mph. (Stan Honda / AFP - Getty Images) Back to slideshow navigation
  15. Toyota Executive Bob Carter introduces the Prius V midsize hybrid-electric vehicle, left, and the Prius C concept, right. (Paul Sancya / AP) Back to slideshow navigation
  16. Ford's Mark Fields introduces the Ford C-MAX electric vehicle. (Tannen Maury / EPA) Back to slideshow navigation
  17. Dr. Martin Winterkorn, Chairman of Volkswagen Management Group, introduces the new Volkswagen Passat. (Bill Pugliano / Getty Images) Back to slideshow navigation
  18. The Porsche 918 RSR sports car Has a V8 engine that delivers 563 horsepower and can jump to 767 horsepower with the push of a button. (Friso Gentsch / EPA) Back to slideshow navigation
  19. Audi introduces the new A6 Hybrid. (Scott Olson / Getty Images) Back to slideshow navigation
  20. A model poses next to the Ferrari 458 Italia. (Kamil Krzaczynski / EPA) Back to slideshow navigation
  21. The BMW 650i convertible is unveiled. (Mark Blinch / Reuters) Back to slideshow navigation
  22. The Mercedes Benz SLS AMG E-Cell has four electric motors (one for each wheel) and can accelerate to 60 mph in 4 seconds. (Paul Sancya / AP) Back to slideshow navigation
  23. Ford’s President and CEO Alan Mulally presents the Ford Focus ST. (Tannen Maury / EPA) Back to slideshow navigation
  24. Ford’s Executive Chairman Bill Ford introduces Ford’s electric lineup: (Left to right) the C-MAX electric car, the Transit Connect electric truck, the Focus electric car and the C-MAX hybrid. (Stan Honda / AFP - Getty Images) Back to slideshow navigation
  25. The interior of the Buick Verano, GM’s first upscale compact car for a luxury brand, is shown. The Verano is GM’s only new model to debut at the event. (Geoff Robins / AFP - Getty Images) Back to slideshow navigation
  26. The Chrysler 300, once a hot-selling sedan, is redesigned with a sleeker look. (Tony Ding / AP) Back to slideshow navigation
  27. Tom Stephens, vice chairman of General Motors, holds up the 2011 North American International Auto Show Car of the Year trophy, which this year was awarded to the Chevrolet Volt. (Paul Sancya / AP) Back to slideshow navigation
  28. Two of the new Mercedes Benz C Class vehicles are shown at a Mercedes Benz event the night before the official start of the media preview event. (Bill Pugliano / Getty Images) Back to slideshow navigation
  29. Michael Price cleans a Cadillac CTS-V coupe race car on the show floor. (Rebecca Cook / Reuters) Back to slideshow navigation
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    Above: Slideshow (29) On the catwalk in Detroit - Production models
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    Slideshow (12) On the catwalk in Detroit - Concept cars

Explainer: The best cars of the decade

  • Image: Ford Focus
    Ford Motor Company  /  Ford Motor Company
    When the European-developed Focus replaced the long-overdue-for-retirement Escort (which itself debuted at a world car when it replaced the Pinto) in 2000 critics cheered its superior combination of small car practicality, handling and efficiency in a crisply styled package.

    Every year, the North American International Auto Show (better known as the Detroit auto show) kicks off with the announcement of the North American Car of the Year.

    The award is based on factors such as innovation, design, safety, handling, driver satisfaction and value, and it’s determined by a group of about 50 (currently there are 49 jurors) U.S. and Canadian journalists representing newspapers, magazines, and websites across the continent. (Full disclosure: this includes msnbc.com in the form of this humble contributor.)

    The jury whittled down a list of all the all-new and mostly-new cars this year to three finalists: The Chevrolet Volt, Nissan’s Leaf and the Hyundai Sonata.

    The Volt, the centerpiece of GM’s comeback, was named winner for 2011. A list of past winners shows the only predictable pattern is that excellent cars usually win the competition.

    Here’s a look back at the winners over the past decade.

  • 2011 Winner: Chevrolet Volt

    Bill Pugliano  /  Getty Images

    Jurors appreciated the Volt’s ability to drive long distances as needed using gasoline power, making its 40-mile all-electric range practical in a car that can serve as the driver’s sole source of transportation. General Motors’ Voltec electric drive system will proliferate to variety of models and body styles, making the Volt a significant milestone. GM has been on a roll in recent years, winning North American Car of the Year in 2008 with the Chevrolet Malibu and in 2007 with the Saturn Aura.

    Story: GM’s Chevy Volt named 2011 Car of the Year

  • 2010 winner: Ford Fusion Hybrid

    Ford  /  Wieck

    The 2010 Fusion Hybrid was judged to be the best hybrid yet, with a winning combination of spaciousness, price and overall normality in a thoroughly efficient family sedan. Buick’s superb LaCrosse sedan and Volkswagen’s always-fun Golf were runners-up.

  • 2009 winner: Hyundai Genesis

    embedded
    Paul Sancya  /  AP

    Hyundai heralded its advancing engineering and design prowess with the launch of the aptly-named Genesis premium sedan, a feat which earned the company a North American Car of the Year victory. The car was praised for its comfort and build quality, which were unprecedented for the Korean company. Runners-up were the label-defying family box Ford Flex and the surprisingly zoomy Volkswagen Jetta TDI.

  • 2008 winner: Chevrolet Malibu

    GM  /  Wieck

    General Motors won for the second year in a row with almost the same car. The Malibu is built on a lengthened version of the same platform as 2007 winner Saturn Aura. The Chevy offers more space at a family-friendly price. The sporty Cadillac CTS and Honda’s ever-popular Accord family sedan were the other finalists.

  • 2007 winner: Saturn Aura

    WIECK/GM  /  AP

    General Motors showed that it was serious about the U.S. car market with the lavishly appointed Saturn Aura. Although the brand didn’t survive GM’s subsequent bankruptcy, the Aura signaled that GM had the ability to produce superior cars, and not just trucks and SUVs. The 2007 runners-up were the Honda’s return to the subcompact segment with the Fit and Toyota’s top-selling Camry family sedan.

  • 2006 winner: Honda Civic

    Honda

    Although the new Honda Civic debuting at this year’s Detroit auto show promises to be more exciting, the outgoing model had the poise, performance and efficiency to win 2006 North American Car of the Year. The Civic features a broad model lineup, including coupe and sedan body styles and hybrid, gasoline and natural gas powertrains. Runners-up that year were the not-quite-great ’06 Ford Fusion (the improved ’10 model won the award in hybrid form) and the Pontiac Solstice sports car.

  • 2005 winner: Chrysler 300

    Chrysler  /  Chrysler

    Muscular, almost menacing styling, Hemi V8-powered vroom and Mercedes-Benz-based underpinnings made the Chrysler 300 popular with celebrities, consumers and with North American Car of the Year jurors. They chose the 300 over the Chevrolet Corvette and Ford Mustang, making 2005 a celebration of American muscle.

  • 2004 winner: Toyota Prius

    Justin Sullivan  /  Getty Images

    The second-generation Prius marked the car’s growth from tinny plaything for greenies to a real car with broad appeal to a cross-section of consumers, thanks to its increased power, space, and efficiency. Hatchback lovers were also glad to see the practical body style appear in an appealing vehicle. The Prius won over a couple motor-journalist favorites that consumers snapped up by the hundreds, the Cadillac XLR and Mazda RX-8 sports cars.

  • 2003 winner: Mini Cooper

    AP

    If you packed fun in a box and bolted wheels on the bottom, you’d have the Mini Cooper. North American Car of the Year jurors and consumers both found the Mini irresistible thanks to its responsive handling, fuel efficiency and ease of parking in crowded urban streets. It prevailed over essentially two versions of the same car, the four-seat Infiniti G35 Coupe and the two-seat Nissan 350Z.

  • 2002 winner: Nissan Altima

    Mike Ditz  /  Nissan

    Nissan shrugged off its also-ran status in 2002, introducing a new, larger and more competitive Altima family sedan to challenge to reigning duopoly of Honda Accord and Toyota Camry. Altima’s success showed consumers were still willing to shop at other dealers, presaging the later success of mainstream sedans by Chevrolet, Ford and Hyundai. Runners-up in 2002 were the Cadillac CTS, which showed GM’s earliest efforts at regaining relevance and the short-lived Ford Thunderbird, which signaled the beginning of the end of the retro fad.

  • 2001 winner: Chrysler PT Cruiser

    David Zalubowski  /  AP file

    The PT Cruiser marked the apogee of the retro “heritage” car trend, and it did so for the right reasons. The car was memorably styled, immensely practical, fun, efficient and — this is unusual for such a popular car — affordable. The PT Cruiser was an unqualified home run for Chrysler, but subsequent retro models would never quite capture the zeitgeist the way the PT Cruiser did. Even during the SUV boom, the green movement was laying the groundwork for a return, and the first hybrids sold in the U.S., the Honda Insight and Toyota Prius were the other 2001 finalists.

  • 2000 winner: Ford Focus

    Ford Motor Company  /  Ford Motor Company

    Ford’s current One Ford strategy is only the latest incarnation of the company’s repeated attempts to develop models it can sell all over the world. When the European-developed Focus replaced the long-overdue-for-retirement Escort (which itself debuted at a world car when it replaced the Pinto) in 2000 critics cheered its superior combination of small car practicality, handling and efficiency in a crisply styled package. Speaking of styling, few had ever seen the likes of the audacious Audi TT, which was a finalist, along with Ford’s Lincoln LS, which borrowed hardware from global subsidiary Jaguar.

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