Just back from China, where he presided over ceremonies celebrating a major new plant expansion in Chongqing, he is optimistic about the market there, but he is reluctant to take a stab at what will happen next year in the U.S. “I do expect things to stabilize next year,” is as far as he will go.
Suffering from a nasty cold, he is not in an overly chatty mood during a recent interview with Ward's editors. Not all that surprising, considering the gravity of the task before him.
As the outlook in Detroit becomes gloomier by the day,employees are holding their breath as Padilla and the company's leadership team hammer out a plan to reverse the auto maker's sliding fortunes in North America.
Dubbed the Way Forward, the plan was announced in October by CEO Billafter vehicle sales tanked and the auto maker suffered a $284 million loss for the third quarter, a huge drop from year-ago when it earned $266 million. Excluding special items, the loss totaled $191 million, compared with year-ago earnings of $515 million. An announcement on restructuring is expected in January.
The auto maker's sales statistics also are scary. While Ford's January-October sales were down only 3.7% overall vs. last year, sales of its big, high-profit Expedition and Lincoln Navigator SUVs slid 27% and 25%, respectively, through October. Sales of the new Explorer, Ford's high-volume moneymaker, fell 28% vs. last year. And, even though its F-150 fullsize pickup broke monthly sales records in the summer, by October, it was is trailing prior year by 3.6%, according to Ward's data.
Ford's U.S. light-vehicle share through October, including its import brands, was only 18.5%, down a full percentage point from like 2004 and more than five percentage points from five years ago.
That is expected to be just the beginning of the cutbacks to be detailed early next year.
Ford's Way Forward includes plans for several assembly plants to be idled in addition to numerous other sweeping cost cuts, but Padilla and others have said every aspect of the company's business is undergoing scrutiny as it struggles to revitalize itself.
“Way Forward will focus on clarifying the auto maker's brands, strengthening the vehicle lineup and improving quality, costs, growth and profitability,” says Ford President of the Americas Mark Fields in a recent memo to employees.
“I think we've made it pretty clear that nothing is off the table,” Padilla tells Ward's. “This business depends on two things: cost and revenue,” underscoring he is not focused on just making cuts.
On the revenue side, Padilla points to Ford's new midsize cars just hitting the market.
“We have a lot of new products coming,” he says. “We're expecting the Fusion, the Milan and the Zephyr to lift off the latter part of this year. Which I think is the right timing, because the marketplace is hungry for a fuel-efficient, midsize, stylish car like the Fusion. I think we're going to hit it right with that one.”
“We've got other products out there,” he adds. “Our small SUVs are moving. Our Freestyle crossover is doing well. Small SUVs and crossovers this year are up 40%, and we've got more coming next year. The revenue side is a key part of this as we move forward.”
More cross/utility vehicles and a stronger lineup of cars vs. trucks definitely is the direction Ford's product strategy is headed, but Padilla stops short of saying the auto maker is going to orchestrate a major shift away from trucks or body-on-frame SUVs.
“I do anticipate there will be a move away from large SUVs,” Padilla says. “That's why we put our small Escape on the market. That's why we put out the Freestyle crossover, and that's why we have more crossovers coming. We anticipated this type of change, if you will, in the marketplace. We didn't expect it to be this rapid, and we do have to wait and see how it settles out. Nobody predicted $3 a gallon (fuel prices).”
While not agreeing with criticisms that some of Ford's most recent offerings in the U.S. and abroad have boring styling, Padilla is quick to name several of the industry's most highly regarded designers who recently joined Ford: Martin Smith, the former Opel design boss who defected to Ford of Europe in 2004 to become its executive director-design; and Freeman Thomas, who Ford poached fromGroup's advanced design studios earlier this year and now is director-strategic design in North America.
Thomas penned the Audi TT and is credited with helping create's audacious new styling direction. He also developed the original New Beetle design concept with Ford Design Chief J Mays. In addition, Ford named Peter Horbury, the man responsible for Volvo Car's design renaissance, as North American executive director-design.
“We ask our people to step forward and do what they do best, and that's be creative, be innovative,” Padilla says, pointing to Volvo.
Ford, like GM and Chrysler, is struggling with health-care and legacy costs and wants help from the United Auto Workers union in reducing those costs, but Padilla will not say a word about what kind of concessions the auto maker is trying to negotiate. Is it looking for the same deal as GM?
“Frankly, we prefer to keep our discussions with the UAW behind closed doors, so that we can work things out,” he says.
So far, that strategy seems to be working. Ford – unlike supplierCorp. – has managed to maintain very cordial relations with the UAW.
UAW President Ron Gettelfinger has praised Ford for the proactive role it played in helping restructureCorp., its largest supplier, while simultaneously slamming Visteon's management for, he says, intentionally allowing some of the supplier's troubled operations to further deteriorate.
“The UAW leadership has shown, in my view, a realization of where the business is at and where the industry is at, and has shown great courage in taking necessary steps,” Padilla says. “I think this has been to the benefit of members and the benefit of companies.” Padilla says.
“One good sign is that the work we did onwas approved at multiple local union levels, with a 90% approval rating. So I would expect that we would reach some reasonable agreements on other issues and topics going forward. And when we are ready to tell you about it, we will,” he says, growing a bit testy.
Ford also is working hard to spruce up its green image, which has been hammered by environmentalists since market realities forced Ford to pull back some promises it made several years ago regarding fuel economy.
Now the hybrid-electric vehicle front-runner in Detroit with the Escape Hybrid and Mercury Mariner hybrid, Ford is promising to have the capacity to build 250,000 HEVs annually by 2010. But it already is bumping heads with industry leaderMotor Corp., which is showing a reluctance to share its limited supplier base as demand for components far outpaces supply.
Is Ford planning on creating its own HEV supplier base?
“We'll do what is necessary to build up what we think is an important phase in gas-electric hybrid production,” he answers, adding that creating such a new supply chain should not be that difficult.
Building a supplier base for HEVs is no different than for other components, he says. “In the early stages you work with known suppliers; you work with alternative suppliers, and in some cases you do a technology run-off and pick your spots and collectively go forward.”
Padilla adds joint development efforts with other auto makers are not out of the question.
“There should be ample opportunity for joint efforts in this area, particularly in areas that are transparent to the customer,” he says. “We just put in the production an all new 6-speed transmission that was jointly developed by GM and Ford. The partnership is strong, and it benefits both companies and our customers.”
It appears Ford is creating a good road map for its future, one that will be revealed soon. At least then the auto maker's employees, suppliers, dealers and everyone else will be able to stop holding their breath. Unfortunately, they probably still won't be able to breathe easy.
– with Steve Miller