July 18, 2007 at 1:00 am

Daniel Howes

For Mulally, simplicity is Job 1

CEO peddling foreign luxury lines to intensify focus on Ford's core

In his first town hall meeting as Ford Motor Co. CEO last September, Alan Mulally essentially dismissed a question about a corporate strategy team, saying those who run the company will chart its course -- and that's exactly what's happening in Dearborn.

Every week, it becomes clearer that the Mulally era at Ford is all about simplifying the business to save it. The architect is a 37-year veteran of Boeing Co. unencumbered by the pride, nostalgia, imperial delusions and parochialism that have stoked denial in Detroit and hobbled decision-making at Ford and its cross-town rivals.

Good thing, too, because Mulally's honeymoon is over. Sell Aston Martin, the bespoke British sports car icon, for $848 million? Certainly, and easily, in a market awash in private capital. Peddle chronic money pit Jaguar and the recently profitable Land Rover, a brand whose value may have peaked in these greener, anti-gas guzzler times? In a heartbeat, if it intensifies the focus on the core Blue Oval.

Entertain offers for Sweden's Volvo Cars, even if it contributes millions to Ford's bottom line and is renowned for safety? Absolutely, says a ranking Ford executive familiar with the situation, because the distraction of running Volvo, investing more there and integrating it into Ford's operations may outweigh its longer-term benefit.

And all of it simplifies the business and raises cash to plow into Ford's debt-financed restructuring, whether to speed product development or finance a union-managed fund to cover hourly retiree health care costs and remove the liability from Ford's strained balance sheet.

"The union leadership has been asking for years to clean up this portfolio -- for years," the Ford executive tells me, meaning the moves on Jaguar, Land Rover and probably Volvo are likely to help, not hurt, tough talks with the union beginning Monday.

A radical culture changer

For Mulally, probably Executive Chairman Bill Ford Jr.'s canniest personnel play since becoming chairman in 1999, none of his moves -- save his intense focus on the Ford brand worldwide -- is about tradition, or Ford's deep ties to the Brits, or the legacies of those who went before him, or Volvo's stellar quality reputation or whether Bill Ford Sr. is an avowed Jaguar man.

"Any good company is always reviewing their portfolio," Mulally told me. The goal is to deliver an "integrated, viable, leveraged Ford around the world -- no matter what."

He could have added: And it doesn't matter who looks bad in the process. Of course Volvo is for sale -- for the right price -- which is why Wall Street generally is greeting signals that Volvo is in play, too, with a calm satisfaction that says, "It should be."

The heart of Ford, from Dearborn and the capitals of Europe to China, Russia, India and South America, is the Blue Oval, not ancillary brands acquired in the go-go late '90s.

Back then, everyone from Ford's Jacques Nasser and VW's Ferdinand Pich to Renault's Louis Schweitzer, GM's Rick Wagoner and Daimler's Jrgen Schrempp thought they could buy their way into every segment of the market. Only Schweitzer, the bookish French bureaucrat, appears to have succeeded.

Mulally's dismantling of the imperial Ford is not so much about returning the company to its roots, a twisted web of competing fiefdoms, regional rivalries and petty corporate politics that historically resisted change.

It's about radically changing Ford and its culture by paring the company to expose its automotive strengths and emulating Toyota Motor Corp., the automaker whose globally integrated operations Mulally studied closely during his Boeing days. And, second, showing that Bill Ford's No. 1 draft pick can live up to his billing -- and very soon.

Expectations and pressure are rising for Mulally to deliver some bold moves of his own to justify his mondo pay package and outsized reputation as the man who led Boeing's commercial aviation unit through its darkest days after the Sept. 11 attacks.

'Stuff' has to happen

"People want to see real significant change going forward," says an individual familiar with the thinking at Ford. "There's no honeymoon period left. Stuff has to start happening."

Yes, it does. And as much as the wags seem to think the solution to most of Ford's problems would be the summary firings of its top 50 executives, the fact that Mulally hasn't really done any such thing is as much a commentary on Ford's executive bench strength as an important reason behind his push to off-load luxury brands.

Better to focus the talent and cash he has on the core business of Ford worldwide, Lincoln and Mercury in the United States and Mazda, than disparate and nationally sensitive marques like Jaguar, Land Rover and Volvo.

In the fat days of '99 and 2000, Ford conned itself into believing it could afford such luxuries, could slow-walk the car market in favor of trucks and could ignore the more fundamental problems in its core Blue Oval business. Now, it's painfully obvious that it can do none of that.

If the Blue Oval emerges from this painful retrenchment smaller but stronger and more focused, a single name brand equipped to challenge Toyota's Toyota and Honda's Honda, it will be worth the turmoil. Because without a strong Blue Oval, there can be no Ford.

Daniel Howes' column runs Mondays, Wednesdays and Fridays. You can reach him at (313) 222-2106, dchowes@detnews.com">dchowes@detnews.com or http://info.detnews.com/danielhowesblog.

Mulally: "Any good company is always reviewing their portfolio."
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