Case Study of Ford's Turn Around

Case of Ford’s turnaround

Yunru Hong

Elevator Pitch: In the early twentieth century, Ford Motor Company was the symbol of manufacturing, it stands for efficiency, simplification and innovation. In the early twenty first century, however, Ford became one of the automaker companies that have been struggling with rapid change of technologies, complex regulations and fierce worldwide competitions. The case demonstrates that a turnaround can only happen when the company acknowledges its weakness and is willing to change, and it is especially difficult for a former industrial giant. The reasons that Ford kept losing its market share and its profit margin are not only because of the rising of its competitors (e.g. GM and Toyota), but also due to its declining products quality, overly complex platforms and excess capacity for aggressive sales forecasts. Moreover, it was worsened during global economic recession. After several unsuccessful turnaround attempts, Ford brought in Mulally, who had led Boeing a successful turnaround effort, to revitalize its strategy and culture. He started with simplifying the product line and reducing configurations, which aims to improve product quality and manufacturing productivity. He recognizes that vehicles are being replaced at a lower rate due to vehicles’ longer life span and consumers’ tightened financing. He realizes that adding more value into one vehicle can enhance company’s competence. Therefore Ford introduced high-margin and must-have option package to help small car profit as well as focused on developing fuel efficiency engine to meet consumers’ demand. Another very important aspect of the turnaround relies on Mulally’s financial movement. His raised $23.6 billion eventually helped Ford stand strong during a massive federal government bailout during the economic crisis in 2008 and subsequently enhance the company’s reputation. Most importantly, the difficulty of turning around a bad situation for the company like Ford is not only about strategies, it sometimes is about bringing back the pride and the spirit that was missing when the giant had been losing his ground. Mulally created a culture of being honest on the company’s reality, being critical on product design, and being Ford once again. Last but not the least, the turnaround did take two years to happen under Mulally’s leadership, which says that success is coming only if you found the right direction and keep moving.

Discussion questions:

1. In what ways was Mulally a surprising choice to be Ford's next CEO?

Most importantly, Mulally is an outsider of automobile industry and there was no such precedence of doing so, therefore it remains uncertainty for skeptics. Also, before Mulally accepted the CEO of Ford, it was undergoing its restructuring under Bill Ford, and it was a little bit surprising for others to see that Ford is willing to acknowledge that fresh leadership was truly needed by that time.

1. What were some of the main problems in Ford's previous turnaround efforts?

First of all, the previous turnaround efforts were not recognizing the fundamental shift in automobile industry so that strategy like downsizing could not really solve the problems. Secondly, internal resistance of changing mainly causes ineffective execution even good strategies were suggested. Last but not the least, some traditionally bad culture in Ford, such as inflated expected sales forecasts cannot be changed unless fresh leadership is brought in.