How Ford Survived the Great Financial Crisis

On December 2, 2008, Alan Mulally was behind the wheel of a kiwi-green Ford Escape. That morning, Ford announced it was selling its entire fleet of corporate jets. Now, the CEO was driving the 500-plus miles from Dearborn, Michigan, to Washington, DC. Accompanied by his press aide, two executives, and a security team, Mulally’s caravan sped across the industrial ruins of the American Rust Belt. The inconspicuous travelers stopped only for bathroom breaks, devouring the turkey salad sandwiches, potato chips, and soda, packed by Mulally’s secretary, as they went. Within 10 hours, the group arrived at Ford’s Washington headquarters. 

The nation’s capital was becoming an all-too-familiar place for Alan Mulally. Just weeks before, he flew in on Ford’s corporate jet for a round of public hearings, testifying before the Senate Banking Committee on November 18 and the House Financial Services Committee on November 19. Live on national television, Mulally had stood in solidarity with General Motors CEO Rick Wagoner and Chrysler CEO Robert Nardelli, asking Congress for a $25 billion “bridge loan” to save the American auto industry. 

They received unbridled scorn from taxpaying citizens, media, and politicians alike. Months before, in the very first meeting, New York Representative Gary Ackerman remarked: “There’s a delicious irony in seeing private luxury jets flying into Washington, D.C., and people coming off of them with tin cups in their hands.” (This was why Mulally had taken pains to travel by car, the second time round). Congress had spent that autumn bailing out Wall Street to the tune of $700 billion. They were in no mood to provide more. Officials were hearing it from irate constituents, who bemoaned “corporate welfare,” while they were increasingly being forced to pinch pennies. Now, the country’s leaders were out for blood. 

Illinois Representative Peter Roskam wondered aloud if the “Detroit Three” CEOs were willing to work for $1 a year. Mulally responded: “I understand your point about the symbol and clearly the intent of what you’re asking, but we’re trying to field a skilled and motivated team also. And it’s just so important that, as we do this plan, we have the team that we need.” Roskam pushed back: “Okay. Just so I’m clear, I’m not asking about the team; I’m just asking about you,” to which Mulally replied, “I understand.” Unsatisfied, the first-term Republican continued: “And the answer is no?” “Uh, I think I’m okay where I am,” said Mulally, drawing a cringe from Ford’s Vice President of Government and Community Relations, Ziad Ojakli, who was seated nearby. Massachusetts Democrat Michael Capuano piled on: “We’re not sure we trust you! My fear is, you’re going to take this money and continue the same stupid decisions you’ve made for twenty-five years!” 

Mulally was bearing the cross for the sins of an industry he was still trying to figure out. Unbeknownst to his interrogators and the masses watching on TV, Ford Motor Company had seen signs of impending economic doom and, unlike its competitors, was relatively well-positioned to weather the storm. Returning to Capitol Hill that early December day, Mulally carried a restructuring plan he and his team drafted over a frantic Thanksgiving holiday, along with a speech he dictated, eloquently laying out his company’s merits. Mulally wanted to prove that Ford was different. The “Blue Oval,” an American icon, could stand on its own. 

A Company Betting on Itself 

Alan Mulally unofficially became Ford Motor Company’s CEO on September, 5 2006. That day, as he entered the executive parking garage at world headquarters in Dearborn, Mulally was struck by how few Fords he saw. The company’s top brass evidently preferred Jaguars and Land Rovers to vehicles bearing the Ford name. Bill Ford was there waiting. The outgoing CEO, now chairman of the board, and the great-grandson of Henry Ford, Bill Ford was struck by Mulally’s casual attire: “a blue blazer, olive slacks, a blue button-down shirt, and a yellow tie.” This wasn’t a Silicon Valley tech startup. It was an automotive institution in Michigan. Here, executives wore suits. But, as he would soon prove, Mulally was ready to shake up the status quo. 

An aerospace engineer who ran Boeing’s Commercial Airplanes Group from 2001 to 2006, Mulally was naturally drawn to Ford Motor Company’s mythos. Ford had delivered the automobile to the masses, revolutionized manufacturing, raised factory workers’ living standards to unprecedented levels, and served as the “workhorse” for blue-collar businesses from California to New York. To Mulally, the kid who grew up on the Kansas prairie idolizing John F. Kennedy and dreaming about space travel, Ford was as American as baseball and apple pie. 

However, by 2006, Ford Motor Company was in crisis. Despite record profits, the late 1990s had set the stage for volatility. Leadership spent frivolously, leaned too hard into luxury, alienated dealers, and even altered the hue of its famed logo. “Ford began to lose sight of the fundamentals. Quality began to suffer. Corners were cut. Launch dates were missed. Vehicle designs began to slip,” writes automobile industry journalist and author Bryce G. Hoffman, in his 2012 book American Icon. 

In 2000, Ford was at the centre of a federal investigation into fatal rollovers of its Explorer SUV. The scandal cost the company $2.1 billion in recalls, hundreds of millions more in litigation, and dealt a severe blow to the brand. By the end of the year, earnings had declined by over 50%. In 2001, Ford reported a loss of $5.45 billion. By 2005, its North American factories were operating at just 79% capacity. Ford was losing $590 on every car it produced in the region. Meanwhile, Honda and Toyota were making over $1,200. In May 2005, Standard & Poor’s lowered the company’s credit rating into junk-bond status. 

Oil prices rose. Consumers’ habits were changing. Gas guzzling trucks and SUVs, which had been Ford’s bread and butter, were out. Fuel efficiency was in. Bill Ford, then Ford Motor Company’s CEO, looked to Mark Fields, then head of Ford’s European division, for help. Fields hatched a plan he called “The Way Forward,” which, as Hoffman writes, was “a bold plan to cut the business back to profitability by shuttering factories and slashing jobs.” The company promised a quick turnaround, but continued losing money and market sha ...

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