June 13, 2007
Bill Ford

Ipek Cem was recently in Detroit, where she interviewed Bill Ford, Chairman of the Ford Motor Company. Tune into 'Global Leaders' to find out Ford's vision on the state of the auto industry, their investments in Turkey, how to build a green car as well as his views on the competitiveness of the U.S. economy.

Ipek Cem: My guest today is Bill Ford who is the Executive Chairman of the Ford Motor Company. Welcome to Global Leaders.

 

Bill Ford: Thank you very much.

 

Ipek Cem: We are sitting here in Detroit at your world headquarters and the automotive industry is going through a a real rough time. What is your take on what is happening? Why did the U.S. lose so much ground?

 

Bill Ford: Well I think you have to look at it in two sequences. One is the U.S. and the other is the rest of the world. The rest of the world we are doing very well. In Europe, in South America, in Asia particularly China. So the rest of the world's doing very well. We do have a problem here in the U.S. And it's a problem really borne of a number of things. We have a health care issue here that's very big and a pension issue, which some of our competitors don't have. We have over capacity in this market, not just us but the entire industry. So we are working very hard to restructure ourself in the U.S. as we continue to grow ourselves outside of the U.S.

 

Ipek Cem: When a customer makes the decision to purchase a certain brand of car and you have many brands actually under the Ford Company. How loyal is that customer?

 

Bill Ford: Well less and less, and the reason for that is there is so many brands today.  There was a great prediction about 20 years ago that about today that we would be down to about 3 or 4 global brands. In fact, the opposite has happened. We've had Koreans come into the market, now Chinese are coming into the market and all the old brands stayed. So we have actually more brands today than we certainly had 15-20 years ago. All of that means, it is very competitive, there is over capacity in the global industry and each brand must really have a brand promise that resonates with the customer.

 

Ipek Cem: Does that mean for example as Ford since you are a compilation of many brands and you recently disposed of about 80% of Austin Martin, are you looking to consolidate and dispose of more brands?

 

Bill Ford: Well, we're really not going to announce anything. We are always looking at our portfolio of brands for a lot of reasons. One, can we make a unique story for each brand? Two, are there manufacturing synergies between the brands? And can we share product development across all the brands? That's something we're always reviewing. Because in some cases it's relatively easy in some cases it is difficult. For instance, we have a big truck here called the F Series truck. It's very popular, very profitable. But it is sold nowhere else in the world. So you can't have too many products like that around the world. You can have a few particularly if they are profitable. But more and more your going to see product sharing around the world and the question is how do all those brands fit in to all of that?

 

Ipek Cem: When you have the Ford name, it carries so much weight in the automotive industry. It's part of the fabric of U.S. history and the history of automobiles. When you have the family involved in the business, it has a much different approach than lest say Wall Street might have or analyst or a private equity fund might have. How are you balancing the demands of investors and and also your care for the company?

 

Bill Ford: Well it is always a delicate balancing act. I think Europeans are much more used to having family involved companies, particularly over generations than here is in America. We are kind of unique in that respect in the U.S. I think it gives Ford an identity and a humanity that other nameless faceless companies don't have. I think the American people know that there is a Ford family and the Ford family is involved and our research shows that people think that is a good thing. We're not just going to come here, take the money and run. We've been here for a 103 years and through very good times and some very difficult times. And so, this is part of us. I mean I feel that I'm part of the company and the company is part of me. I can't separate my workday from the rest of my life. Its always with me. 

 

Ipek Cem: We have been walking around Detroit and Dearborn, we asked a couple people about their opinions about Ford and the family and it seems like you are very well entrenched in the in the culture of this area. At the same time, when we read newspaper articles an about the Ford company, there seems to be this expectation as if the Ford family is about to walk out or is considering walking out. Do you find this exaggerated? 

 

Bill Ford: Totally exaggerated. In fact there was one article from one family meeting, which is interesting because we have been meeting as a family for  20 years and the press never know about it. Unfortunately, one of our meetings, which was just a routine meeting made it into the press about a month ago.

 

Ipek Cem: I read it, I read that article.

 

Bill Ford: That of course spawned all sorts of other articles. The short answer is, the family is totally committed to the company and that hasn't changed for 103 years. Of course the family asks questions. I mean it is our biggest shareholding and it's our identity. And as we are going through the restructuring in the U.S. there are lots of questions the family has,but that's normal and we've been doing for the past 20 years.

 

Ipek Cem: Going back to what you mentioned about competitiveness and the legacy cost, pension cost, health care cost. Can you explain to our audience a little bit how it's different in in the U.S. and in your sector?

 

Bill Ford: In most of the world uh the pension and health care obligations are are largely if not completely picked up by the government. In this country, particularly following World War II, we did something quite different. The companies particularly the major manufacturing companies, took on the obligation on health care, not just for their current workers but for the retirees as well. And they also took on pensions. Well what has happened is the cost of health care just sky-rocketed in the United States. And we are stuck with a huge health care bill not only for our workers but for all the retirees we have as well. It's very different here than it is in the rest of the world. So we have a very different cost structure in the U.S. than we do in the rest of the world.

 

Ipek Cem: Yes I was reading that this cost is anywhere between 1,200 to 1,600 dollars per car.

 

Bill Ford: Actually we spend more on health care per car than we do on steel. It's kind of an amazing fact.

 

Ipek Cem: This is not just an automotive sector issue but it's a U.S. competitiveness issue. I know that your government and the automotive sector is talking and this is an ongoing discussion. Do you see any breakthroughs or any steps to be taken in a direction to remedy this?

 

Bill Ford: Well we have a major negotiation with our union here this summer. And obviously this will be one of the topics of consideration. But I would say this, if we don't fix this as a country, the U.S. won't have any manufacturing base left. Because manufacturers will simply pack up and move everything off shore and that's not the national best interest. I do believe we'll find some resolution but the question is who pays because at the end of the day somebody has to pay for it. But nobody is raising their hands and saying I'll pay for it. So, it's going to be a protracted negotiation, not only with our union, but obviously the government's going to be involved. But I think really nothing less than the future of U.S. manufacturing capabilities is at stake.

 

Ipek Cem: In fact I was finding out that the population of Detroit itself is shrinking due to what the auto sector is going though.

 

Bill Ford: Well actually that is only partly true. Detroit has actually been shrinking for quite a while. What's happened is that the area is growing. The metro area is growing. The city centre has been losing population but that's been actually the case for some time.

 

Ipek Cem: OK. Now the world's eyes were on the Daimler disposal of Chrysler. This is major news. One of the Big 3 is now run by a private equity group. Even though we know that in that private equity group, there are former auto executives and people that are very close to the industry. How does this change the outlook for the industry?

 

Bill Ford: Well I'm really not sure if it changes it fundamentally. Because I think a lot of what Cerberus, which is the private equity group (owning Chrysler) will do, is probably what most people would do in terms of what they're going to have to do: continue to restructure the North American operations, continue to work on their dealer issues, continue to turn out great products, at a quicker pace. So there is nothing really revolutionary in that. And in fact you know it's interesting, people are you know lots of articles are being written about what will Cerberus do?  Ultimately if you just look at the pattern of equity, they typically will take a distressed company, fix it up the best they can and then they'll either sell it back to the public or to another buyer. In some cases, they can hang on to it for a long time. So it is unclear what the end game is for Cerberus, but it's pretty clear to me what the medium to short term game is, which is the same as frankly what we're doing.

 

Ipek Cem: There's always the stereotyping of financiers coming in breaking up companies selling them off as opposed to management trying to build a future for a company. Do you have a concern like that?

 

Bill Ford: For Chrysler? I really don't because I don't know the management group there. I certainly know some of the executives that they've hired. They came from our industry and they have good people. I just don't know what their game plan is and I'll probably be the last to know given that I'm a competitor of theirs. So it is very hard to see for me to comment on where they are headed.

 

Ipek Cem: We've been talking a lot about the U.S. and like you mentioned, demand in other parts of the world it is growing and the manufacturing opportunities globally are growing. What are some of your winning manufacturing centres globally?

 

Bill Ford: Well we can start with Turkey.

 

Ipek Cem: Yes, we can start with that.

 

Bill Ford: Turkey has been fantastic for us. The Kocaeli plant is one of our best in the world. We have a terrific workforce there. We've invested I think since '98 over 1.6 billion U.S. dollars. We had a major expansion there that we announced in 2006. It's great for us. As you know Turkey is very well located for export. The domestic Turkish market has been very strong.

 

Ipek Cem: The relationship between Vehbi Koc and Ford was started in 1928, I believe he got the dealership and was representing Ford Ankara. Then the relationship strengthened over the years and now there's manufacturing as well. Do you foresee even more of a strengthening of your investments in Turkey?

 

Bill Ford: Well I do because the history is so great, in two respects. One is the business history, which you just outlined, the other is the personal history with the Koc family. The Koc family and our family go back to '28. And there is a new generation of Koc's coming though the company. Mustafa is just a few years younger than I am, and Ali's a few years younger than that. So I consider them both friends as well as work colleagues. It's a very strong relationship. We couldn't have a better partner than the Koc family and obviously Rahmi Koc has been just fabulous for Ford Motor Company ever since he has been involved. So really of you look at it from both circumstances, the business case is very strong and the personal relationship is very strong.

 

Ipek Cem: What are some of the other manufacturing venues that you feel are very competitive and hold promise?

 

Bill Ford: Well, in fact you know it's interesting... as I said at the outset, we are doing great every place but the U.S. South America has been a terrific turn around story for us. We've been gaining share and making a lot of money down there in recent years. We have a terrific manufacturing facility in northern Brazil which we think is one of the best in the world. China, we're the fastest growing car company in China and have been for the past 2 years. So things are going very well there. India, we are growing very fast. And in western Europe, our operations there are probably going better today than in any time in the last 15 years. So really the only area of concern we have, and its a big one, is the U.S. market.

 

Ipek Cem: So you have a restructuring plan in place right now, its not new and with that, will you be closing more plants in the U.S.?

 

Bill Ford: We have announced that we are closing more plants and yes we will, I'm not announcing any new plant closures, but we have yet to close some of the ones we announced. And that will go on and it's very painful but it's necessary. Part of the reason its necessary is what we call flexible manufacturing. It used to be in the old days, if you wanted to build one car or one truck you had to have one plant and that's what you did. And today you can send 3,4, or 5 different models through the same plant. So you don't need as many plants. And I mean it's that way around the world. The reason we feel the pain more here is that we had a hundred years of building these plants and so, whereas in China we started with flexible manufacturing. So it's a very different kind of equation, part of what we have run into here is a hundred year history that we have to try to modernize very very quickly. It's painful.

 

Ipek Cem: When you look the world today one of the issues is global warming I know you have the reputation as to be an incurable environmentalist and that this is an issue dear to your heart.

 

Bill Ford: I am glad you didn't say that my hot air contributed to global warming.

 

Ipek Cem: Well that was going to be my next sentence because we know car emissions, its about 12% of the greenhouse gases its a its a higher percentage in the U.S. What are some of the new technologies that you feel could be winning technologies?

 

Bill Ford: I think this is a great time to be in our business because there is so much interesting technology that's coming. Many really smart people coming up with terrific ideas and if you think of it, our industry really didn't change much over 100 years. The internal combustion engine it evolved, but there were really no major revolutions, but we are I think right at the doorstep of some really significant breakthroughs. Now question is, 'which ones.' Well you go all the way starting from the most complex which would be a hydrogen fuel cell. The good thing about that is the only thing that comes out  of the tail pipe is, water vapour which is about as clean as you can get. Now the issue is where do you get the hydrogen? And so today most hydrogen is petro chemically derived. So that but in time that will become certainly one of the technologies.

Today we have what we call bio fuels, could be anything from bio diesel to ethanol to butanol and a lot of these can be plant based fuels. So in theory they should be almost inexhaustible in their supply. That's pretty exciting. They don't burn 100% clean, but they are a lot cleaner than today's gasoline. Clean Diesel has come a long long way and of course in Europe, that's been very important part of the strategy, less so here the U.S. But you know then you have, we have just announced in Orlando Florida we launched buses to run on hydrogen. Today's internal combustion engine, but on hydrogen. I guess what I'm saying is there are a huge number of technologies that are emerging. Don't really know yet which one will emerge. We have hybrid vehicles on the road today, electric vehicles are still very promising. So what we're trying to do is to play in every one of these technologies until we can figure out which ones to really place our bets on. Because there is no one silver bullet as we sit here today, but but there is so much momentum behind these technologies now. I think it is exciting. I think we're going to see something very different in the next 10 years than we've ever seen before.

 

Ipek Cem: Are pretty much all car manufacturers working on these technologies? Can you patent them? How does it work will it be shared?

 

Bill Ford: Well it's very hard to have any kind of sustainable advantage in this industry. And the reason is we all share similar suppliers, but you can certainly get a jump on your competitors. And you asked if they are all working on the same technologies. Not exactly, I'd say most of the manufacturers are working in some of these technologies. A few like ourselves and a couple others are trying to work on all of them. So you know it's interesting because you could point to a technology and then you could say who is the leader in that and it might be Ford and you say who is the leader in that and it might be Toyota, the next one might be General Motors, it might be VW, and it all changes of course too. And there is collaboration going on between our companies in some respects, but there is still a lot of proprietary work being done as well.

 

Ipek Cem: We talked earlier about demand and this is an issue that's perceived differently in parts of the world. It may be now more of a concern in the developed world and in the developing world may be a secondary concern of course generalizations. When you look at the regions of the world. What kind of demand is there for this kind of fuel efficient or cleaner cars?

 

Bill Ford: I think there is great demand. The question is can we make it convenient for the customer. And the second is, do we have the fuel infrastructure to make it work? Let's say we wanted to go to all ethanol in the next 5 years. We could do that, but it is very difficult to get ethanol to every gas station on every corner in this country, much less the world. It makes it even much more difficult when you start talking about hydrogen because hydrogen needs to be stored differently than gasoline. So now you're talking about tearing up every gas station in the world. Can it be done 'Yes', but when you do it you better make sure that that's a bet that's going to win  because your not going to be tearing up the infrastructure every 5 years. So I mean there are those issues that are very real issues that a lot of people don't think about. They think ‘well just want the technology'. It's fine we can give you the technology, but if you can't fuel your vehicle, it doesn't make a lot of sense. Same thing with electric, you know in theory you could just plug it into your house. The problem is that the draw on the electricity is such we would have to build more power plants and if those power plants are coal fired plants they add to global warming as well. So you sort of have to look at this holistically and say 'for society's sake what is the game plan'. We are a piece of it absolutely, but we are not the only piece.

 

Ipek Cem: Is government regulation effecting the industry in this sense, I mean, do you foresee a future where there will be more and more incentive to build cleaner cars?

 

Bill Ford: I do. I think there will be more and more incentive for frankly all power sources. Not just cars, but for our plants, the utilities, for the customers themselves and how they use. I think so and I think what is interesting is, you know the alternatives like wind power and and hydro obviously is not a new one, but there are new hydro plants going in. Solar is become much more effective. So I think we are finding new creative solutions  and I think government will continue to provide incentives not just in the U.S. but around the world to have that happen. Look at China, I mean China is starting to use a tremendous amount of power and they really need a way to do it in a clean fashion.

I think the global warming debate it's interesting in this country, because it tends to get very politicised very quickly. But in my mind whether it's global warming or it's energy independence. It pretty much takes you down the same road. So it almost doesn't really matter if you believe all the projections on global warming or if you believe the amount of fuel supply left in the  world because either one path you go down requires us to have a very different approach as we go forward to technology. And I think it's really exciting. It's interesting I think European has been talking about  this issue longer and perhaps in a more cohesive fashion than we have done in the U.S. It has become very hot very recently in the U.S. and there is a lot of talk now. But really Europe it has been much driven I'd say principally by countries like Germany, the Scandinavian countries early on and then of course the U.K. and other countries really have have raised the debate a lot in recent years as well.

 

Ipek Cem: And the hike in oil prices has reduced the demand in the U.S. for larger vehicles. Is this a trend?

 

Bill Ford: Well if fuel prices remain high it probably is a trend. You know it's interesting it hasn't really changed demand in terms of the types of vehicles as you would think it would. It has changed it somewhat, but it's run up very quickly and we had thought we would see a more severe shift. It is shifting and I think in the future, it will continue to shift but in our country, particularly for, like work trucks, people need a big truck. But you know I do think the trend in this country is going to be towards, has to be towards more fuel efficiency.  Whether it's legislated or whether it's customer demand, the pull is going to be there.

 

Ipek Cem: When I was talking with some of the Ford managers yesterday, they mentioned about hiring from a fleet of cars, a more flexible way of perhaps one weekend using a family car, and during the week using a smaller car. Is this a model that is being applied in other parts of the world?

 

Bill Ford: Well you know it's interesting, there are companies all around the world now where you basically have a car sharing. I mean there is a couple in this country, where is, you want a vehicle, you subscribe to this, pay for service on a monthly basis, and it gives you access to a vehicle any time you want it. You then pick your vehicle up; drive it for as long as you want. Your are charged by the hour. You turn it back in and that's it. So, you don't own the vehicle, but you have access to it whenever you want to have it. I think those kind of creative schemes will continue to grow around the world, particularly as congestion in big cities becomes evermore an issue.

 

Ipek Cem: Right now Ford Motor Company has a new CEO who is termed 'a turnaround expert' and he was previously with Boeing and he is going to be very active in a possible turnaround. How do you feel he has contributed so far to the Ford Motor Company?

 

Bill Ford: Well I think he's been great. I went out and identified the person who had been through what I felt we had ahead of us. Because as I looked around in our company, we   didn't have any managers that had been though a major turnaround and when I found Allen Mulally that's exactly what he had done at Boeing. Particularly after 9-11 when airplane sales just dried up, he had to take Boeing though a major restructuring and he did it very successfully. Eearly days he's doing very well here. It's amazing how similar the airline business, the aircraft business I should say, and cars are. I mean other than the end product, the way you manufacture it, you deal with the supply base, you have to engineer it with great precision. All these things are very very similar. Obviously the end product is different, but the way you make it, it is quite similar.

 

Ipek Cem: When you look at your vision for the next couple of years. When we speak of a turnaround it needs some time. What kind of time horizon do you have in terms of a turnaround? And what exactly does a turnaround mean?

 

Bill Ford: Well a turnaround means ultimately being profitable again and so you know I think what we're looking at is, in terms of a turnaround, is to implement all the things we said we were going to do. The plant closures and selling off of our component plants. Get that behind us. It also means stopping our share loss in the U.S. and stabilizing our share. And finally it does mean retuning to profitability. So I guess you know what Allan has declared is we will be profitable in '09 in the U.S. in the automotive group and know we want to see progress all along the way towards that.

 

Ipek Cem: You have been, since 1979, you have been with the Ford Motor Company you have had many positions and you have been chairman for 8 years. And you held the CEO role as well. When you look into the future, I mean this is an important seat to sit in. Do you foresee yourself being with Ford all your life?

 

Bill Ford: Yes, it's hard for me to ever imagine not being. It's part of me I was born into the company in some respects and so for me the line has always been blurred between the company and my family. And one of the things I've always said is I feel like the employees of Ford Motor Company are like extended members of my family and I just grew up believing that.  So you know I can't imagine life without Ford Motor Company. I've never contemplated that for one minute. Because to me, this is what I love. I love this company,  you know I wish we were doing better in the US but I love the challenge that we've got ahead of us and I think it is a thrilling time with all this new technology coming on stream to really transform our industry into something quite different. And I think to me I can't imagine anything I'd rather be doing.

 

Ipek Cem: What is feeling in the next generation of Fords? Are they as involved?

 

Bill Ford: Well you know it's interesting, some of them are and some aren't. Kind of like our generation. There were 13 in my generation and really my cousin Edsel and I were the only two that really made a career here. In the next generation, I'm not sure how many there, are but, some of them are working at the company and are planning long careers here, but many of them don't live here and sort of have interests elsewhere. I think that is totally normal in a family and in a family business. You know some will get involved and and some won't.

 

Ipek Cem: Most people will wonder what what kind of car are you driving or cars, I should say?

 

Bill Ford: I drive something different almost every day.

 

Ipek Cem: So what's your favourite?

 

Bill Ford: Well my favourite has always been the Mustang. Mustang convertible. It's just a great sports car and with the top down on a nice day like today it's fantastic. But I am also intrigued by, you know I have serial number 1 of the hybrid because to me that was a very important vehicle for Ford. It's a new technology, it's something I think heralds the future where this company is headed. So for me, you know, those are the two vehicles that I probably have closest to my heart. The hybrid because I had a lot to do with that vehicle being launched. And the Mustang because as far back as I can remember, I thought that Mustangs were pretty cool.

 

Ipek Cem: On that note, I want to thank you very much for your time.

 

Bill Ford: Thank you so much. It was great meeting you.

 

This transcript was typed from a transcription unit recording and not copied from an original script. Because of the possibility of mis-hearing and the difficulty, in some cases, of identifying individual speakers, NTV networks and Ipek Cem cannot vouch for its accuracy.