The Long Road Down – Part 3

Read The Long Road Down – Part 2 HERE

By Jerry Weber

08.24.2007

Part 3

In talking about Ford, the iconic creator of our modern auto industry, I will not rehash familiar ground. I am not going to restate the saga of how Henry Ford took his floundering enterprise to the big-time by introducing mass production of a car that worked well and was built strong. I think everyone that is a reader of this site is probably familiar with that story.

Less well known is how Henry could not delegate or take things to the next higher level as easily as he could create. Therefore the Model T stayed in production a very long time (1908 through 1927) and it took Ford a year of being closed down completely to bring out its successor, the Model A. If GM wasn’t already doing annual model changes with several brands, Ford might have gotten away with the long production hiatus. But they forever lost their lead to GM in units produced during this period.

Ford Motor Co. didn’t have an easy time being Number 2.

First, Chrysler was right on their tail, emulating many of the same things that GM did. Secondly, an increasingly eccentric and obstinate Henry was still at the controls, preventing things like hydraulic brakes from going on his cars until 1939 (years after the rest of the industry made them standard). It was said of Ford’s V8’s that they could go, but couldn’t stop. This was merely one example of Ford’s personal preferences overruling engineering logic and/or marketing strategy during the decades before the war.

Ford Motor Company’s biggest nightmare was ahead, as Henry Ford was pushing 80 years old, the Second World War was approaching, and Henry didn’t like Roosevelt, Jews, or the allies America was siding with. He wrote through his own newspaper about all of these issues and became a problem for the US Government, both in the run-up to American involvement in the war, and during the war itself. The problem was that Henry Ford’s opinions about the war were colliding with the country’s needs in the area of industry mobilization. Since Ford Motor Co. was the second largest vehicle producer in the US, the country needed their production for the war effort. Additionally, Henry Ford’s day-to-day management of Ford, with active assistance by Harry Bennett, by most accounts a coarse, uneducated, violent goon that the elderly Ford had somehow decided to cede a considerable amount of authority to in the Thirties and Forties, was erratic and unreliable. The situation deteriorated to the point that President Roosevelt thought of nationalizing Ford for the duration of the war.

However, through a complicated intervention of the Ford family, old Henry was “persuaded” into retirement and Edsel Ford (the son of Henry Ford and the father of Henry Ford II, and previously marginalized by his father and Bennett) effectively took control of the company. In events now resembling a Greek tragedy, Edsel Ford died in 1943 from stomach cancer (some say the stress of setting up the massive 3,500,000 sq. ft. B-24 Liberator production line killed him) and there was no one else in the family deemed competent to take charge, other than a very young Henry II, who happened to be in the Navy at the time. The U.S. government agreed to release Henry ll from naval service to run the company. It is from this period we go into the modern post war period of the “new” Ford Motor Company.

In addition to the trouble with the US government, which young Henry was only too eager to settle by increasing profitable wartime production, there were bigger problems. It seems that Henry l left behind an out-of-control company heading for bankruptcy, as his iron-willed methods drove managers and engineers out of Ford to places like GM and Chrysler. The company was also in bad shape financially and Henry ll alone could not repair it. Unlike his grandfather, the “Deuce”, as he was called, was only too happy to recruit brain power from outside Ford to turn the behemoth around. And after summarily firing Harry Bennett in 1945, that is what Henry Ford II did, and with dispatch.

This new team of WWll vets came to Ford in 1946 and featured a group among them called the “whiz kids”, all ten of whom had worked on a Army Air Forces statistical team during the war; and that group was headed by two men named Robert McNamara (the same who would later become Sect. of Defense during Vietnam) and Arjay Miller. It was this team and Henry ll’s willingness to accept change that brought Ford back from disaster and allowed them to finally pass Chrysler and take back second place in U.S. sales. A status, by the way, that they kept from after WWll until last year, when Toyota beat them out for the No. 2 spot. The new sick man among the Big Three in the post-war auto industry would be Chrysler, not Ford, and that was enough for Henry ll even if he wasn’t Number 1 in sales.

What did Ford do with the new blood? The team is probably best remembered as the design team for the low-slung 1949 Ford, which effectively matched the post-war GM offerings. The whiz kids took only nineteen months to develop and then produce the 1949 Ford, which, while still impressive today in terms of time to market, was absolutely breathtaking at the time. It is not an exaggeration to state that the 1949 Ford saved the company. Approximately 100,000 orders for the ‘49 Ford were taken the first day it was introduced. Their F-Series trucks also would see 50 years of success (trucks, in fact, lately have produced much of the profit for Ford).

But Ford had only Mercury and Lincoln to go against Chevrolet, Pontiac, Olds, Buick, & Cadillac. This imbalance was meant to be addressed by a new product named after Henry ll’s late father, Edsel. In 1958 this new middle-class car was to be the missing link for Ford. Unfortunately for Ford, the derided styling was too different, and at the same time, 1958 was one of the recession years in the up and down cycles of the car business. All car companies’ fortunes went down but Ford lost hundreds of millions on the Edsel. By 1961 it was over and Ford was a lot poorer as a result of the experiment of launching a new division. Ford never tried it again.

But Ford was hardly clueless in the auto business. In 1961 Lincoln refreshed their perpetually money-losing line, making it totally different from Mercury, and finally, a worthy (and profitable!) competitor to Cadillac. They built the only post-war four-door convertible, the stunning Lincoln Continental. (President Kennedy was killed in one, not Lincoln’s fault; Kennedy ordered the bullet-proof dome removed for the parade in Dallas).

In 1964, a rising star named Lee Iacocca, who would become president of Ford (from my home town of Allentown, Pa), broke into the headlines with the new Mustang, a sports cars built off of the plebian Falcon platform. Ford invented the pony car segment which made millions, and built a sporty car out of an economy car chassis. It made GM and Chrysler hurry to catch up to Ford for once.

In 1965, the Ford LTD was a mid-priced luxury Ford that was advertised to “be as quiet as a Rolls on the road”. It looked good and sold well. The Thunderbird, which had been going against the Corvette since 1955, was enlarged in 1958 to become a four-place sporty coupe. While it couldn’t even come close to running with the Vettes from a performance standpoint, it sold far more units as a family-type upper-level sporty car. Even Ford’s Falcon of the 1960’s was the best-selling of all the contemporary economy cars. It wasn’t earth-shattering in engineering terms, but then Ralph Nader never wrote a book about it, either, which was a definite plus. It was not the Sixties that were unkind to Ford, it was the same 1970’s that began to derail GM that caught Ford unawares and unprepared as well.

The 1970’s saw Ford caught in the same gas crunch affecting GM and Chrysler with too many V8-powered gas-swilling cars and trucks. Here Ford also made a huge blunder. Almost as if to match GM’s reviled Vega in terms of lousiness, Ford builds an economy car called Pinto. This was a little two-door hatchback, which was a style becoming popular in the Seventies in the U.S. However, Ford Pintos had a much-publicized problem with their gas tanks exploding if rear-ended in a serious accident. Like the Corvair and the subsequent Vega from GM, Ford’s first trip down to sub-compact car land ended badly. Here the foreign competitors were at their best, and they handily beat Ford and GM. It is thought-provoking to note that after Honda brought out the CVCC engine, Lee Iacocca, then the president of Ford, was extremely interested in using the CVCC engine in the Pinto and/or the Fiesta. He also sent out feelers about selling the Honda Civic with the CVCC engine as a Ford-branded car in the States, to which Honda was apparently initially amenable, as well as the prospect of selling engines to Ford for use in the Pinto and/or Fiesta. There’s a big fat “what if” for you. But it was all academic as Henry Ford erupted in anger when he found out about Iacocca’s idea, and squashed it immediately, saying no Ford was going to have a Japanese engine in it.

As a sidebar to the Pinto debacle, Chrysler later had a little sub-compact in this period called the Omni/Horizon that actually worked fairly well and sold well. In 1979 Lee Iacocca was fired by Henry Ford from the presidency of Ford and bolted for the bankrupt Chrysler Corporation, where he had started production of the Omni/Horizon as quickly as possible.

Ford had competent managers in the 1980’s and they seemed to be staying with the concept that if you don’t make any spectacular blunders like the Edsel, you can survive and prosper. Lincoln was now legitimately challenging Cadillac, especially after the 1985 downsizing at GM. The Ford F-150 continued to out-sell Chevrolet trucks for some 25 years straight. The Mustang, after a bad period of being on the execrable Pinto chassis, was made more competitive on a Fox platform, which Ford used right up until the current model came out. And, of course, the car that made Ford in the Eighties and Nineties, the Ford Taurus, introduced in 1985 as a 1986 model. Again, like the 1949 Ford and the 1965 Mustang, it was a huge hit that turned the company’s fortunes around. For half what an Audi 5000 cost, Ford gave you a similar-sized and styled car. Taurus was the best selling car in the country until finally knocked out in the late 90’s by Toyota after a bad redesign in 1996. The futuristic Taurus of the late 90’s lost sales almost from the time the “oval” look debuted.

But the 1990’s saw Ford hit another big homerun. They brought out a very profitable car-sized SUV called the Explorer and caught the auto industry by surprise. Demand skyrocketed from the moment of introduction. The Explorer held its lead throughout the decade of the 90’s and into the 00’s. The Explorer stumbled when the Firestone tires that the factory installed failed and rollovers ensued. The allegation was that after the rollover, the roof crushed too easily on the Explorer. Firestone and Ford paid millions, and only now years later is the bitter taste gone from that nightmare. In 2000, Ford sold a peak of 445,000 Explorers, but by 2000, every foreign and domestic manufacturer had at least one SUV. Ford is currently on track to sell less than 150,000 Explorers this year. Because of the fierce competition, neither Ford nor anyone else will probably ever dominate the segment again. In fact, the current top-selling SUV in the U.S., the four-cylinder Honda CR-V, will probably sell about 200,000 units in 2007.

As for the Taurus, again, the competition is so fierce in the full-sized FWD market (as Toyota, Honda and now Hyundai continue to enlarge their cars with each model change), that Ford will probably never again have the dominance they had in the 90’s with Taurus (and its mechanical twin, the Mercury Sable).

What happened to Ford in the 90’s was a new leader, Jacques Nasser. Nasser took the billions of cash Ford made with trucks, SUVs, and cars and bought some other brands. He bought: Aston Martin, Volvo, Jaguar, Rover, and a host of other things; repair garages in England, auto internet sites, and auto-related software providers. In retrospect, this was money Ford needed to put into the rejuvination of their aging car models and developing a couple of new small cars as a viable Plan B in case gasoline became expensive. Worse, no money was made from these acquisitions; just losses of many millions, and if anything, Ford’s talent pool of executives was also stretched too thin.

Like all executives who make blunders, Nasser was soon gone and Ford enters into the new century with little cash and aging cars. This, just when the foreign competitors were ramping up to full speed with their new American plants and newly styled models.

Ford has always been a paternalistic company; much more so than the other two domestic competitors. For forty years Henry l stamped his conservative ideals on the company. Then for another forty years Henry ll played a game of not having any great exposure to losses for the Ford family and not having outsiders make the final decisions. Ford thus had become a company of the occasional “out of the park home run” followed by years of mediocre performance. It never seemed as balanced as GM. Now that the last Ford (William) has relinquished control, we start a new era for Ford. The new CEO, Alan Mulally, certainly has been given carte blanche to reinvent Ford.

Can Ford turn the corner from here? There seems to be a new look to Ford since Mulally came from Boeing last year. As CEO he has shaken up many old conventions and probably will sell the rest of Nasser’s foreign acquisitions (Jaguar, Rover and perhaps Volvo). But Ford, like GM, has lost precious time and the competitors, like water coming in from a leaking dam, are everywhere at once. My guess is that Ford can stay alive, but it won’t be anywhere near the size it once was. And it may not have all the divisions it has now, either. Ford has a new pickup truck due next year, and if fuel stays under $3.00 a gallon, the company may gain some lost momentum here. The new Mustang sells well, as do some crossovers at Ford, but the new bread-and-butter sedans have not all hit their mark. Lincoln has a raft of new products, but the Town Car is obsolete and still out there selling poorly every year with $6000 rebates.

It is hard for me to believe that the company that put us “on wheels” in America is in the straits that they are. What it teaches us is that nothing in this world is forever. Especially in business, and especially if the business is poorly managed.

Lastly, as part of the effort of trying to turn the company around, Ford has borrowed billions that will one day have to be repaid along with the interest of tens of millions they are repaying currently. This colossal debt is merely another facet of current situation of the Big 3 that also works against their survival.

Next will be the saga of Walter Chrysler and Chrysler Corporation, the last of the “Big Three”.

COPYRIGHT Autosavant.net – All Rights Reserved

Author: Brendan Moore

Brendan Moore is a Principal Consultant with Cedar Point Consulting , a management consulting practice based in the Washington, DC area. He also manages Autosavant Consulting, a separate practice within Cedar Point Consulting. where he advises businesses connected to the auto industry. Cedar Point Consulting can be found at http://www.cedarpointconsulting.com.

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6 Comments

  1. Very good post! Great article that helps me in terms of getting some background on the current Ford. I’m going to read Part 2. And Part 1.

  2. I agree, good article. I come from a “Ford family” even though I don’t drive a Ford now, although I kept it as close as I could with a Mazda6. I’d buy a Ford next if I could be assured of it’s quality and longevity.

  3. I got burned on a Ford EXP and a Ford Tempo and then went to Toyota and have never looked back. I don’t care if Ford makes cars that fly and run on pickle juice, I am never buying a Ford again.

  4. Just adding a little detail, Jaguar was buyed by Ford in 1989-1990, Nasser wasn’t CEO yet. It was during the reign of Donald Petersen and Harold Arthur Poling

    I hope Mullaly successor will follow Mullaly’s ideas and policies.

  5. This is like an all-Ford blog this month! I like it!!!!!

  6. “But it was all academic as Henry Ford erupted in anger when he found out about Iacocca’s idea, and squashed it immediately, saying no Ford was going to have a Japanese engine in it.”

    — Did Henry Ford II not realize he was currently selling the Mazda B-series pickup as a Ford Courier?

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