Ford Motor Company Comeback: Crisis of 2006 Essay

Introduction

Since its establishment in 1903, the Ford Motor Company is one of the leading automakers globally. After founding the automobile manufacturing company, Henry Ford headquartered the corporation at Dearborn, Michigan (Cronin, 2014). The company offers its products under the Ford and Lincoln brand names for commercial and luxury vehicles respectively. In over a century of operations, the American automaker embraces innovation as a key strategy that seeks to fulfill the changing needs of customers internationally. Over the last decade, the profound leadership of the organization has been integral in overcoming challenges that were undermining the success of the Ford Motor Company.

In 2006, Ford was about to make a loss of $12.7 billion before the leadership of its new CEO, Alan Mulally, rescued the American automaker. Earlier, the company experienced poor leadership, owing to the family approach to running the multinational company. The leadership of the new CEO accounted for the revitalization of the company since it edged its competition with Toyota. Interestingly, the company realized profits exceeding $6 billion in 2010 amid the global financial crisis that affected economies between 2007 and 2008 (Hanawalt & Rouse, 2010). Further, the need to create enthusiasm among employee teams also consisted of one of the key strategies necessary for Ford to execute in its quest for global success in the automobiles sector. In this respect, this paper discusses the comeback of the Ford Motor Company in the crisis of 2006, including the 2008-2010 global recession.

Ford’s Vision and Mission Statements

Ford Motor Company’s vision and mission statements influence the management to put in place measures that foster their realization. Ford’s vision statement reads, “People working together as a lean, global enterprise to make their (people) lives better through automotive and mobility leadership” (Cronin, 2014, p. 12). The vision statement denotes the company’s emphasis on global leadership, stakeholders’ consideration, and a lean approach to business. The global perspective of the vision statement indicates that Ford works towards claiming the top slot in the global automotive sector. Currently, the multinational automobiles company has secured the second-largest domestic automobiles player after General Motors (GM) besides claiming the fifth spot globally. Ford regards its stakeholders as significant by improving its HR policies while at the same time reinforcing its corporate social responsibility mechanisms for its customers, investors, and employees. The assembly line approaches embraced by Ford facilitate the efficiency of its lean business operations (Hesselbein, 2011). The need to bolster the growth of the company’s sales is crucial for realizing the global leadership aspect of the company’s vision.

Ford’s former CEO, Alan Mulally, facilitated the establishment of the company’s mission that states, “One Team. One Plan. One Goal.” The “One Team” aspect infers to the lean working strategy adopted by the global automotive enterprise. Further, the “One Plan” component of the mission statement indicates the aggressiveness employed by Ford to maximize profits through the development of new and products that have value to customers who work together as a single team. Moreover, the “One Goal” element aims at promoting desirable growth among stakeholders (Cronin, 2014). The mission and vision statements at the company require the leadership team to unceasingly ensure that employees work towards the realization of shared targets. The code of ethics upheld by Fiord plays a central role in ensuring that employees conduct themselves in a way that is in line with the organizational culture, as well as the mission and vision of the automobile player.

Ford’s Code of Ethics

Ford maintains a profound code of ethics that influences the company to observe responsibility in its operations. The American automobile company underlines that it carries out its business processes in a fair and honest manner. Further, Ford expects all its stakeholders to perform its tasks ethically as a way of bolstering the company’s commitment to integrity. As such, the company’s employees, as one of the key stakeholders, have the responsibility of reporting parties that violate the company’s rules or ethical policies. Moreover, Ford’s Code of Conduct Handbook integrates the aspects of financial interests, equal employment opportunities, and rewards for employees (Hesselbein, 2011).

The Globalization Crisis Challenging the Ford Motor Company

The Ford Motor Company has faced an array of challenges over the years that have tested its sustainability in the highly competitive automobile sector. In 2006, management inefficiencies and a weak lineup of vehicles saw the company on the verge of collapse denoted by an impending loss of $12.7 billion (Cronin, 2014). The poor financial trend caused by poor management threatened the company’s ability to safeguard its second spot as an automotive business with the highest sales in the United States.

Further, a few years before 2006, Ford adopted an unhealthy culture characterized by conflicts between executives. The executives engaged in turf wars while in meetings, thereby failing to reach decisions concerning key issues that affect the performance of the company (Hanawalt & Rouse, 2010). The executives disregarded the essence of realizing decisions in meetings, thus undermining the spirit of teamwork in the management of the company. Therefore, the decision-making crisis contributed to Ford’s poor financial performance in 2006.

In 2008, the emergence of the global recession affected various industries negatively, including the automobile industry in the US. As such, the period between 2008 and 2010 saw various players in the industry, including the “Big Three” automakers, namely, Ford, GM, and Chrysler, undergo financial difficulties. The financial crisis strained the financial reserves of the automobile players to the extent of making them unable to cater for their operational costs. Consequently, in 2008, Ford recorded an all-time high annual loss of $14.6 billion (Hanawalt & Rouse, 2010). Further, its share value went down to $1.01 per share in 2008, denoting the adversities of the global financial meltdown.

The period between 2006 and 2010 almost saw Ford go bankrupt (Cronin, 2014). However, through crucial interventions, especially at the leadership level, the company engineered a turnaround that accounted for its current position in the sector. Importantly, the 2006 management crisis required sound leadership to streamline the decision-making processes that would foster the efficiency of Ford’s short and long-term strategies. Additionally, the 2008-2009 recession prompted Ford to make important financial moves that would rescue it from bankruptcy (Hanawalt & Rouse, 2010). Therefore, focusing on how Ford addresses the challenges is relevant.

Ford’s Leadership Response to the Challenges

The need to engage in a new approach to Ford’s challenges brought about by internal and global crises proved crucial for the success of the company’s leadership. The necessity for intervention also held an influence on fostering the sustainability of the company amid the harsh economic times experienced globally (Hanawalt & Rouse, 2010). The leadership led by the company’s administrative wing and CEO proves strategic in tackling the issues by making important management decisions.

In 2006, the Executive Chairman of the Board at Ford, Bill Ford, facilitated the recruitment of Alan Mulally to act as the company’s new CEO who initiated the change of leadership strategies to overcome the challenges experienced. Mulally brought new changes to Ford by focusing on the “best-self” approach to leadership (Cronin, 2014). The leadership approach concentrated on inspiring and motivating team members to show commitment to the shared course. The move by Bill Ford to recruit Mulally made the company’s vision clear to all people. The vision consisted of a comprehensive plan coupled with a relentless implementation strategy for Ford’s major projects. Furthermore, Mulally’s leadership underscored the essence of working together as a unit.

Further, Mulally introduced the “One-Team” approach that was based on the need to get rid of the turf wars and silos that created disunity in Ford. The strategy sought to establish a simplified leadership arrangement that influenced employees to work as “One Ford,” thus creating a mantra that drove their commitment. Further, the new CEO introduced compulsory weekly meetings for all the senior managers at Ford where the “One Ford” mantra characterized the conversations. Notably, Mulally and Bill preferred holding informal meetings to discuss issues of different levels of importance to the success of the company (Hesselbein, 2011). Moreover, the respondent sought to establish the best teams that revived the devotion of members to the vision and purpose of the organization.

Further, in 2006, Ford’s management team led by Mulally sealed an important deal with a credit institution that secured $23.6 billion before the closure of institutions that offered credit facilities (Cronin, 2014). Further, the company opted to mortgage its assets as a way of bolstering its financial health ahead of the looming global economic crisis. The move ensured that Ford avoided a federal bailout that could have led the company to bankruptcy. Its rivals, GM and Chrysler, underwent the federal bailout, unlike Ford’s case. The intervention also protected Ford’s shareholding companies from dilution since the federal bailout would scrap off their birthrights. The financial boost provided resources for the leadership to use in its strategic endeavors that sought to realize Ford’s comeback.

Further, between 2008 and 2010, the leadership at Ford identified the reduction of its workforce population as a key move towards cutting the costs incurred by the company (Salleh & Grunewald, 2013). In the process, the company cut its links with at least 40,000 employees to reduce its expenses on the workforce. The wider picture embraced by Ford’s management was to cut the operational costs by a considerable $4 billion in 2010 (Hesselbein, 2011).

Moreover, Mulally’s leadership initiated the manufacture of smaller cars with efficient fuel consumption rates. The redesigned Taurus sedan is one of several changes in the models of the Ford fleet of cars (Hesselbein, 2011). The new models introduced by 2010 facilitated the improvement of Ford’s brand image. Consequently, they facilitated the company’s comeback in competitive markets. The move also sought to meet the changing demand patterns in the automobile markets.

Could the Intervention Be Done More Effectively?

The interventions influenced by the able leadership of Alan Mulally depicted effectiveness that accounted for the comeback of the automaker in the early 2010s. The financial decisions established by Mulally realized desirable efficiency. Thus, they accounted for the profitability of the company after making record-breaking losses in 2008 (Hesselbein, 2011). Nonetheless, the management still needed to implement measures that could facilitate the realization of the global leadership aspect of Ford’s vision.

Ford required a comprehensive improvement of its vehicles to meet the production capabilities of its rivals, including Toyota, General Motors, and Volkswagen (Hanawalt & Rouse, 2010). Therefore, the need to improve the sales of the company to reach the levels of its rivals was not considerably included in the decisions made by the leadership team at the Ford Company. For this reason, Ford is only the fifth-largest automaker internationally.

Further, the management needs to consider improving the image of the American automaker in comparison with its Japanese and European rivals (Cronin, 2014). For instance, the Lincoln luxury brand performed miserably compared to other classy cars in the market. In this respect, the need to meet the market standards would have attracted consideration from the team managers to make positive deliberations. Thus, the management needs to act more strategically towards the fulfillment of the company’s objectives and goals.

Recommendations for Future Leaders in Their Strategic Plans

The essence of leadership is geared towards the creation of a positive influence on the entire management team as well as juniors towards meeting shared goals and objectives. Therefore, the need to realize the shared vision should always inspire the strategic plans developed by leaders. In this case, the following strategies would be of use to leaders in combating challenges that affect the company’s performance negatively.

Leaders need to embrace ambassadorship and liaison by focusing on the big-picture, approaching issues procedurally, and acting as a role model. Liaison and ambassadorship foster global leadership through connectivity and networking (Hesselbein, 2011). Focusing on the big picture fosters the commitment of the teams working together to meet the ends of the company.

Leadership in a transition management environment needs to facilitate the smooth running of such processes. The leadership provided by Bill Ford ensured that the former Boeing CEO, Mulally, ensured that the latter (Mulally) gelled with the rest of the management team effortlessly. Thus, accommodating new executives in their new positions is also a key factor in leadership.

The creation of a culture where the top management team members oppose the senior leaders without fear is also an approach that leaders can consider in their strategic efforts. The need to manage conflicts in an organization through reasonable arguments proved strategic for Mulally’s tenure at Ford. Before Mulally’s leadership, turf battles undermined the efficiency of decision-making processes (Hesselbein, 2011). Thus, leaders could also employ the strategy to combat key challenges in their organizations.

Suggestions for Combatting the Challenge

The challenge influencing Ford’s comeback would be a critical one for any given leader. I would suggest the importance of working as a team when experiencing internal conflicts. Internal conflicts undermine the effectiveness of decision-making processes, thus leading to poor performance (Hesselbein, 2011). Sound financial management is important in bolstering the sustainability of an organization. Making strategic financial decisions safeguards the financial future of the organization by creating key foundations (Hanawalt & Rouse, 2010). Cost-cutting approaches to operations also streamline cash flows within an organization.

Moreover, an improvement of the services and products offered by a company is also one of the key factors for consideration when a challenge arises (Hanawalt & Rouse, 2010). The reputation of the brand triggers financial benefits that are necessary for leveling the prevailing hurdles. Thus, the competitiveness of a company is usually the factor that determines its sustainability in difficult times.

Conclusion

Alan Mulally’s leadership between 2006 and 2014 at the Ford Motor Company proved integral for its comeback in the automobile industry. The strategic leadership approaches improved the company’s management approach, thus resulting in profitability after making significant losses in 2008. Leaders facing similar challenges may apply the strategies implemented by the former Ford CEO to steer their companies towards success.

References

Cronin, M. J. (2014). Ford finds its connection. New York, NY: Springer International Publishing.

Hanawalt, E. S., & Rouse, W. B. (2010). Car wars: Factors underlying the success or failure of new car programs. Systems Engineering, 13(4), 389-404.

Hesselbein, F. (2011). Leadership by example. Leader to Leader, 2(59), 4-7.

Salleh, M., & Grunewald, D. (2013). Organizational leadership: The strategic role of the chief executive. Journal of Leadership, Accountability and Ethics, 10(5), 9-20.