San Francisco 

QUESTION: In a recent Harvard Business Review interview, you said at one point that you thought if Ford didn't make the changes it is attempting to make it wouldn't be around as we know it in five years. Was that a bit of rhetorical flourish, or can you point to specific changes in the market place that pose that sort of immediate threat to you? The marketplace as opposed to the capital markets, I mean.

ANSWER: Well, I think there is a little bit of exaggeration to make the point, because I think Ford is a very strong company and will continue to be strong. But that's not the way we look at it. We don't view it as 'can we survive?'. We're really looking at how can we make this company a lot stronger. How do we become [a] leader in all of the important elements of the business, and I think today, saying this immodestly, at least, we are amongst the leaders in many categories of the business around the world.

I think for anyone to maintain any sustained advantage long-term you have to have the mindset of just continuing to improve and transform. And if you get to a position where you think this is it, I've made it, this is the end of the journey, there are too many other strong competitors. And, by the way, I think that is the case in almost every industry now.

And that wasn't the case some years back. But whether you are talking the airlines business, or the telecommunications business, or the national telephone business, or the financial services business, or the banking business, the globalisation of the world's economy and technology have just changed the rules completely. And I think they've changed them in favor of the consumer and they've changed them to the advantage of those enterprises that are nimble and flexible, and who can really use technology and use the economies of scale that the globalisation of the markets has allowed to happen.


QUESTION: So you are saying the changes at the supply level have been driven by technology over the last few years, that now there's a power shift and it's the consumer end that's really driving the transformation of corporation?

ANSWER: Yeah, I really think if you stand back from it, what's happened over the last several years is a very gradual but very determined change in the world's economy and really in the political systems around the world. You can look at it and characterise it as the European Union, and you can take specific dots, like a common currency, or you can go to South America and look at the opening up of markets, such as Argentina and Chile, or you can look at actions that have been pushed by the WTO to reduce tariffs, eliminate quotas. All of these are globally driven events that have liberalised trade and allowed capital markets to be much more transparent around the world.

And I can give you a couple of other things that have happened. As an example, harmonisation of regulations around the globe. The fact that when you look at trade now, you certainly can look at the tradable goods sector, but you've also got to look at what's going on in the capital markets, and stock exchanges all over the world and the fact that it's now almost boundary-less.

Markets that were very, very national at one point, telephone systems as an example, are now global enterprises. And you see that with what's going on with the consolidation in telecommunications. And the same thing is happening in almost every industry.

At the same time that's happening, you're getting more liberal trade, and you're getting reductions in tariffs and elimination of quotas, and more common currencies and more clarity in terms of financial and fiscal policies around the world. At the same time that was happening, technology was changing. Technology that allowed instant communication around the world. Technology that allowed instant transactions to be happening around the world. Technology that got consumers better educated. Technology that got companies better informed.

I'm specifically talking about e-commerce type of technology, but it goes beyond that as well. Just looking at CNN, Sky, CNBC. Instant information, whether it's on the financial markets, or political events or catastrophic events. A lot of data, a lot of information. All of this making our decision-making better and faster. At the very least, better informed.

So all of this was going on, and I think it's had a dramatic effect on industry, on government, on societies and the majority of the end results I think have been very good.

If you wanted to take a 50,000 foot view of one thing that's happened. Environmental concerns and issues. They were largely very localised concerns. It wasn't so long ago that people were wondering, what is this meeting in Rio, and why are they meeting in Buenos Aires?

Then all of a sudden it became, wouldn't say acceptable, that's probably not the right word, but it became logical that if you were to start to be planning about a sustainable economic development, you needed to take a global view about the environment. You couldn't have one set of environmental standards in one country and then across the border have another set of standards. It became patently illogical and irrational to do that.

So with all of this going on, there are tremendous opportunities in almost every business. And in our business of course, economies of scale and the very heavy load of technology and the asset intensity that we have is a crucial factor. Particularly technology as it relates to safety and technology as it relates to the environment. And the small players are going to find it very difficult to stay really competitive.

QUESTION: You seem to be saying in some of your reported statements that the first step for Ford to be able to adapt itself into that fast decision-making environment is for people inside the company to see the company in its entirety rather than as functional units. But there are so many businesses under the Ford brand, everything from financial services and you are adding them still, e.g. yesterday's announcement about the recycling division. How would you describe the company? What is it that Ford now is, and what business would it have said it was in five years ago? How has that changed?

ANSWER: I don't think the business scope has changed. We're in the personal mobility business. I think what's changed is that the opportunities under that umbrella have changed. If you want to think of personal mobility as the Ford Motor Company is business, underneath the Ford Motor Company, you have a group of brands, a group of enterprises: Lincoln, Mercury, Aston Martin, Jaguar, Volvo, Ford, Mazda, Ford Credit, Hertz, Auto Collection, I could keep going on. All of these are enterprises that support the vision of providing personal mobility. And the definition of personal mobility really has been expanded.

It's no longer 'sell a car or sell a truck'. It's also wanting to make sure that we have a longer term relationship with the customer and be able to provide services and support for the customer and the family of the customer over a long term period. Not only a transaction of selling a vehicle. And the advantage of this of course is that you have a more stable, more robust business equation. Loyalty should increase. You add value to products and services beyond the initial point of sale, and that's good business. And I think just as importantly you are more connected to what consumers really want and you are better able to anticipate and create future products and services for them.


QUESTION: Are you at odds with what seems to have been happening in other parts of the corporate world? You seem to be trying to create this broad company philosophy, this change in DNA, to break down these functional units. But there's also been a trend to disaggregation in other parts of the economy. People breaking those functional units out of the company completely. You look at computer manufacturers, for example. Are you swimming against the tide of corporate evolution here?

ANSWER: No. If you look at where we were organisationally, we were essentially very functionally driven on a global basis. And I believe in functional excellence and the development of technology and best practices all happens in the functions. And that's where you get your economies of scale as well. But at some point you have to make a connection with the consumer. And that's where our brands come into play.

So, if anything, I would say, and I'm pretty familiar with what's happening in the computer world, particularly Microsoft and IBM, I'd say we're all heading in the same direction, and that is to better align the business enterprises with the consumer and the marketplace.

Now that doesn't mean getting rid of the functions. The functions are very important for us. There's so much synergy and integration and economies of scale that run across the functions that they will always be a mainstay of our organisation.

It's the interface with the brands and the strategic direction of the brands and the interface with the customers that we've really changed over the last couple of years.


QUESTION: Let me take that point then. You have so many brands in the US market particularly. How do you stop those brands from just becoming a blancmange? A single set of Ford values at the same time as you are trying to create an overarching set of Ford values? How do you not lose the particular values in single brands?

ANSWER: I think it depends how you approach the brands. We quickly decided that the four luxury brands needed to be strategically together, and that's why we formed the Premier Automotive Group. By grouping them together that actually almost ensures that we strategically separate them as far as image is concerned. And I think they are very well differentiated.

From Aston Martin being the most exclusive, to Lincoln, which is clearly an American luxury division. So I think there's very little overlap in those four brands that we've got in the Premier Group. The interesting thing about it is the when we started to talk about the brands that we had, Wolfgang Reitzle (head of Ford's Premier Automotive Group) said when he looked at if from the outside, particularly after the Volvo acquisition, he looked at Ford as being in the strongest position in terms of brand differentiation, because our brands were so different and covered such a broad range of demographic and geography across the world.

Ford in the US is clearly a very strong brand. Well known, respected. And particularly in the truck and sports utility segments. And Mazda of course is a very different brand than Ford. It's a very different brand in Japan or Europe or the US. It's a Japanese brand that stands for the sportier side of car and truck development.

So I don't think we've got a lot of overlap. Some of our competitors may have that. I don't think we've got a lot of overlap with our brands at all.

Our brands are really there to facilitate growth for us. And it's growth in all the segments that we can future at the moment.


QUESTION: As you integrate the product design and engineering parts of Ford around the globe to take advantage of the technologies that you now have at your finger tips, is there a danger that you start to get more sameness in the products themselves, that the brands are eroded from that perspective?

ANSWER: I don't think so. I think it's exactly the opposite because what will happen is that we will be able to concentrate on those technologies that really drive what consumers want. And drive those technologies in the most efficient way possible, and then differentiate them for the different brands.

I'll just give you an example. The Lincoln LS and the Jaguar S Type. The basic development of those products, the pieces that are very asset intensive and required heavy engineering, they were the components and systems that were essentially developed in a common fashion.

But there was a separate team working on the Lincoln and a separate team working on the Jaguar, as far as the fit and finish, the craftsmanship, vehicle dynamics.

There was a separate team working on the interior designs and the exterior designs. Not even in the same country. So those areas that are crucial for brand essence differentiation and that are crucial to the personality of the vehicle and are apparent to consumers, in visual, or sound or touch, or feel or smell, those areas are made different.

The interesting thing is, in general, those particular areas that are high leverage differentiators are not the heavy technology and heavy investment areas. So, you get the best of all worlds. You get the best technology, you get the most efficient use of asset and engineering resource allocation. And guess what, you take some of that money and you put it into areas that customers really care about.

With the seven brands that we've got … and you can look at them in all different ways. You can look at them in terms of the cultural view. Swedish brands, British brands, American brands, Japanese brands. Each one of them brings a very different personality and core strength.

One example for you, I would say we'll develop, and we have developed, areas of excellence, and clearly Volvo, with their new safety centre, is the world's leader in terms of safety engineering and development and technology. And a lot of the advanced research and technology development for safety for the Ford Motor Company will be generated and invented in Sweden. There's no point in doing it seven times.


QUESTION: Let me ask you about the exportability of business models generally, and taking the example of the changes in the dealership and distribution end.

My understanding is that this pilot project that is underway in the USA and that you are looking to take global, one of the elements of that is no haggle prices, which I believe is something of appeal to US consumers who, I'm told, don't like to haggle over price.

They feel they're being dudded if there's not a fixed price on the windshield. But I would have thought that, certainly from my experience in Australia, Australian car buyers expect to be able to haggle, and in some parts of the world, Asia and the Middle East, it's almost a national sport, you haggle over the price of a sock.

How do you adapt to accommodate those sorts of issues?

ANSWER: Well, I'm not sure that your premise is that bargaining on price isn't a beloved sport in the US either. I think like any purchase, you will find some people who will like a straight price and that's it, and you'll get other consumers who really do want total transparency of what the price is and how that compares to alternatives. And I think that's pretty common around the world. I don't think there are many locations in the automotive business where a no haggle policy would be universal. There's a place for it, just like there's a place for it in the US. But it will be a relatively small mix of the total volume even here in the US.


QUESTION: So am I wrong about that being a part of the dealership amalgamation program?

ANSWER: In some of the dealers it will be attempted. But I think in the end it really is going to depend, it will be the dealers that can offer a range of different services. As an example, if you are buying a vehicle on the internet, that's no haggle. That's it. The price is there.

No haggle doesn't mean it isn't a good price. And some people actually prefer that. They say, okay, there's a single price, I'll buy it or I won't buy it. I think that will work for e-commerce type of buyers.

For another, probably small percentage of buyers, that's what they also prefer at a dealership. But I'd say at most of the dealerships, people will want to discuss the price.


QUESTION: You've also spoken about the need for an intuitive knowledge of customers. You use the example of the grills on one of the trucks where a focus group was pulled together to choose this grill, and guess what, it choose the one that already existed. Let me relate that to Australia and the Falcon, that has had a pretty rocky start. What happened there? How did that disconnection with market expectations occur, and secondly, there are all sorts of stories in Australia that you personally intervened in the design process, some of which say you improved the design from the consumer point of view and some say you made it worse?

ANSWER: (Laughs) I think with any design, particularly if you are making a major change to a product, you've got to take some risks. And I think with any product that you're trying to make a breakthrough, you've got to take some calculated risk. Some work, some don't. And that's what intrinsic feel and a visceral feel for the consumer's all about.

In the case of the Falcon, I think it was pretty clear what we were trying to do is to get a product that really was more on the side of revolutionary rather than evolutionary. And the market's very conservative in Australia, always has been. The Commodore was out before the Falcon. It kind of established a conservative design for that segment, and it's difficult to shift.


QUESTION: So did you over-reach? What do you do from here?

ANSWER: Oh, I don't think so. You've got to over reach on design. I think any design that basically looks backward is bound to fail in the long term.


QUESTION: I guess my question is what do you do now? Do you try to educate the market? Do you try to move back a little bit closer to where the market is?

ANSWER: No. The product's out there. Now it's a job of marketing the product.


QUESTION: And did you intervene? Were you involved with it?

ANSWER: David, I'm involved in every design.


QUESTION: Which way were you pushing? More revolutionary or less?

ANSWER: I don't look at it that way. I don't look at it as 'let's make it more revolutionary, less revolutionary'. You try and get a value of where the product is and where you want to go with the brand. In some brands revolutionary and evolutionary, they're not even in the equation.


QUESTION: What do you see as the biggest short term threats to you realising this business model? What are the areas of change that you think are most unpredictable?

ANSWER: I think most of the areas of change are reasonably predictable. I'm excluding acts of war and catastrophe. Probably when you look at the Ford Motor Company today, our biggest risk on the horizon is that we need to get the best out of the assets around the world. We're very strong in some markets, and we're weaker in other markets, and we don't particularly like that. We're very growth-oriented and we see opportunities in almost all segments in all markets. Probably the biggest risk is making sure we've got the priorities right and executing appropriately.


QUESTION: What about your personal workload? What sorts of hours are you working and how much travelling? How much time are you spending on planes, how long are you in the office on any given day?

ANSWER: Well, there's no such thing as a typical day because they're all so different. But I probably spent 50 percent of my time travelling.