Ford, the world's most famous car maker, has appointed an outsider as its boss for the first time. In so doing it has consigned to the back seat a member of the company's founding family - a self-avowedly nice guy, an honourable, even idealistic, man - and replaced him with a hard-headed, bean-counting cost-cutter. In general the markets are pleased.
Why? Because swapping Bill Ford for ex-Boeing executive Alan Mulally shows that the Dearborn colossus might at last have realised that what some analysts have been saying for a while - that it could face bankruptcy within five years - is true, and that its inward-looking culture has been largely to blame. As one analyst says: 'We don't know whether Mulally is the right choice, but his main advantage is that he is not from Detroit.'
Ford is not alone in facing problems. Its rival General Motors lost more money last year and is considered closer to bankruptcy. But Ford's response has been different - some would say slower and duller. As one analyst says: 'Ford is two years behind GM in what it needs to do to turn itself around.'
Many say there is a cultural problem at Ford, epitomised by the very presence of Bill at the top (he remains as executive chairman) that bespeaks an overly political leadership - Ford used family voting power to oust his predecessor Jac Nasser in October 2001 - and conservatism both in choice of leaders and in what those leaders are allowed to do. Nick Scheele came and went, as did countless others.
More generally, Ford has suffered from the Motown mindset. 'There is a Detroit-centred culture of incremental marginal decision-making, conservatism, lack of vision,' says the analyst. This has led to it neither producing what people want to buy nor taking steps to overhaul itself.
The headline numbers demonstrate the problems. In 2000, Ford sold 7.4m vehicles; in 2005 it was 6.8m. Income has bobbed up and down (a $5.3bn loss in 2001, and a $2bn profit in 2005). But the most striking feature is that car making has consistently lost money ($3.9bn in 2005), while the company has relied on financial services to bring in profits ($5.9bn in 2005).
The problem has been most acute in America. Ford has seen a fall from 4.9m sales to 3.7m between 2000 and 2005 in its own back yard. Until two years ago, it made money in America, and now it makes losses. And this scale of loss is not universal - GM and Chrysler combined made losses of only just over half of the Ford figure. To cap it all, in 2003, Toyota passed Ford in worldwide sales of cars and trucks - bad enough, but two years later it passed it in North America.
America has fallen out of love with Ford and, experts say, it must mend the relationship to survive. Jon Rogers, auto analyst at Citigroup, says: 'They have 18 per cent market share in North America and 26 per cent of capacity. They have to match capacity with demand.'
In January Ford announced a restructuring plan for North America called the Way Forward, involving $6bn of cuts by 2010, a capacity reduction of 1.2m vehicles and a loss of 25,000 to 30,000 jobs - out of a total of 300,000 - by 2010. One of Mulally's first tasks will be to approve an accelerated version of this and decide on plans drawn up by ex-Goldman Sachs banker Kenneth Leet, appointed to look at restructuring options to raise cash. 'Mulally has got to change the culture at Ford. He has got to agree the targets and then stick to them,' says one analyst.
Beyond the cost-cutting, Mulally will have to start producing cars Americans like. Ford would not have overcapacity if it made the right things, says Rebecca Lindland, analyst at Global Insight in New York. 'They are not building products that American consumers want to buy - or they have not in the past five years.' It is not that the company cannot do it, she adds. It launched the very successful updated Mustang 'muscle car', but this is a niche product.
Why has Ford missed out? Partly, says professor Garel Rhys of the Centre for Automotive Industry Research at Cardiff University, it is complacency. 'It is the failure of the management team to come up with products people want.
'In the Nineties Ford had a very good product line-up. It had the Explorer as its SUV, the Windstar people-carrier and the F-type pickup truck. A degree of complacency crept in and they were not trying to replace model lines.' So when, in the early 2000s, rising oil prices made Americans question ownership of large vehicles, Ford was left with showrooms empty of alternatives.
Meanwhile, says Rhys: 'They went on a buying spree.' Ford acquired luxury marques such as Jaguar, Land-Rover, Aston Martin and Volvo to take on the European Mercedes and BMW. Aside from investing in companies that were too specialised to be integrated effectively, it did not invest quickly enough in new products. Ford has now turned Aston to profitability and done the same at Land-Rover, but is breaking up the Premier Automotive Group that comprises these cash-consumptive marques.
Under Nasser, the company diversified into 'consumer services', splurging on car-rental group Hertz and repair chain Kwik-Fit, among others. The faults in this strategy did not appear while cash poured in from Explorer sales, but when they dried up, the businesses were sold.
Sadly both for the company and the family, which still controls some 40per cent of voting shares, Bill Ford did not have the answers to the challenges he faced. He unveiled a turnaround plan, involving cutting 20,000 jobs, in January 2002. Two years later came another package and this year the Way Forward. None did any good. Observers say he was not radical enough. Also there were no major model successes. And, says Lindland, there was a 'brain drain' - from senior figures such as ex-BMW executive Wolfgang Reitzle to key designers.
Bill Ford appeared to admit last week he now lacked credibility. Many feel he was hamstrung by his name and role as a company insider. Lindland says: 'There's a saying that you never operate on your own family, and I think that is true here.'
It will therefore be up to Mulally to wield the knife. He has proved able to do this at Boeing. He has also shown himself capable of generating products people want to buy - he championed the fuel-efficient long-range 787 Dreamliner that brought Boeing back from the dead in its competition with Airbus. But at Boeing he headed a company that launches one new product in a decade, has a small customer base and operates in a duopoly. Now he must launch a model a month, with competitors from around the world beating him on his home ground. Being an outsider will not be enough.
