Tuesday, September 05, 2006

Ford Names Top Exec From Defense Contractor Boeing; Why This is a Bad Day for the Blue Oval

Bill Ford is turning over the reigns of the car company bearing his family name to a senior executive from one of the nation's biggest defense contractors, Boeing. Allan Mulally replaces Ford as CEO after serving 37 years at Boeing, most recently as President and CEO of the company's commercial division and executive vice president of the corporate parent.

Ford's decision is certainly raising eyebrows and generating headlines but the obvious question for analysts and automotive critics is whether such a move what Ford Motor Co. needs? Frankly, it doesn't make much sense to this observer.

Here's why. Ford is one of the world's largest mass-market companies and it's in deep trouble because of its recent inability to sustain sufficient mass sales to maintain profitability. Ford has an aging loyal customer base and is failing to secure new buyers among younger demongraphics that feed long-term auto industry success.

So the solution is to hire a guy from a company that admittedly is nearly as storied as Ford (just mention the B-17, B-29 and B-52 and you get the idea), but which is virtually the opposite of a mass-market firm?

Boeing has two customer bases - the Pentagon and the world's commerical airlines. Neither of these markets bear even the remotest resemblance to the extraordinarily competitive world automotive market with its millions of individual consumers.

Unless Mulally has virtues that only Bill Ford knows about, this move looks very much like the long-shot Hail Mary of a desperate guy who's failed at saving a car company that could become a has-been much sooner than anyone previously thought possible.

Ford survived the tenure of a defense industry star once before - Robert McNamara in the 1950s and early 1960s with the Edsel debacle and the Falcon - but the company simply isn't as strong today as it was back then, if only because then Ford had three competitors, all in Detroit. Today there are legions of competitors from around the world and their ranks are growing.

This is a very bad day for the blue oval.

There is a case to be made for Mulally, but it's thin, as noted by Robert Farago at The Truth About Cars:

"There's also no question about Mulally's leadership abilities. His 'team-building skills' within and without Boeing are legendary. In a March '06 article for Design News, Boeing's Chief Engineer of the 777's interior design sang Mulally's praises.

"'Alan exhibits every quality that you would want to see in a good leader -vision, trust, integrity, and, above all, an overwhelming enthusiasm.' George Brody also said, 'He's just dynamic when it comes to getting people to pull together.' Of course, a big part of Mulally's confidence comes from his technical know-how. One wonders how long it will take Ford's new CEO to get up to speed on the intricacies of car building.

"Or if Mulally can readjust his internal clock to the car industry's three year product cycles. For 37 years, the Boeing man was attuned to a two decade gap between a new product's conception and customer deliveries. (You can count the number of planes he's worked on with one hand.)

"And that's on top of strategic thinking that extends out 40 years or more (a modern aircraft can stay in service 60 years). Ford has eight brands and dozens of models, each of which require some form of design, engineering and marketing right now - in addition to the models on the drawing boards or in development."

Go here for Farago's complete post.