Reversal of Misfortune

Some people believe football is a matter of life and death. I'm very disappointed with that attitude. I can assure you it is much, much more important than that.”
— Former Liverpool football manager Bill Shankly

Desperate words from a fiercely competitive man, they would seem to have resonance for Nick Scheele.

A keen soccer fan and zealous supporter of the English Premier League's Arsenal Football Club, Scheele is no less competitive. But the president and chief operating officer of beleaguered Ford Motor Co. feels no such desperation as the auto maker changes its game plan.

“We face a serious situation, no question about that,” he tells Ward's in an exclusive interview. “But this is a great company. This is a company that's weathered, probably, more storms than anybody else.”

Storms? Jackbooted soccer hooligans cause less havoc than the tumult that rained misery on Dearborn during the last 24 months.

Since the Firestone debacle befell Explorer, Ford has gone from the world's No. 2 auto maker to the No. 1 target of talk show comedians. And along the way, it lost more than $5 billion — largely because of warranty claims.

Its quality and productivity once were the envy of cross-town rival General Motors Corp. According to J.D. Power & Associates and the Harbour Report, Ford now trails GM in both categories.

Meanwhile, the auto maker's market share — 21.5% through May, down 1.5% from like-2001 — continues to lag. And its mid-June stock price levels, though nearly $3 higher than February's 52-week low of $13.90, were more than $10 less than the 52-week high of $26.15.

But business, like a soccer match, ebbs and flows. Momentum shifts suddenly — the consequence of a lucky bounce, or carefully conceived maneuver.

Ford isn't counting on providence to reverse its fortunes. Instead, the auto maker is executing a Scheele-inspired plan of attack.

Where the company's focus was once on the nebulous worlds of e-business and consumer services, the goal is simpler now: Keep all eyes on the ball. As a result, a cultural transformation — Scheele says restoration — is under way within the celebrated confines of the Glass House.

Most observers point to Oct. 15, 1999, as the day Ford's troubles began. Jac Nasser, then-president and CEO, unveiled a vision to make Ford “the world's leading consumer company for automotive products and services.”

Revisited today, his words have an ominous ring.

“The transformation won't be easy,” Nasser said. “We'll be involved in businesses that are new to us. New stresses will be placed on our technology, our manufacturing efficiencies, our creativity and our much-prized nimbleness.

“It will change how we do everything, from design, to engineering, to manufacturing, to sales and distribution.… Over the next few years, we will be remaking Ford into a different company, a stronger company, and a company with a future just as strong as the heritage it has left to us all.”

No specific mention of product direction or quality enhancement. The following year, Ford vehicles were cited in 60 recall campaigns — more than any other auto maker.

And despite generating record revenue totals that same year, history has, to date, judged Nasser harshly. Two sentences in Ford's 2001 annual report take dead aim at his services-oriented philosophy: “We pursued strategies that were either poorly conceived or poorly timed,” says Bill Ford Jr., chairman and CEO. “The real cause of our poor performance, however, was that we lost track of the things that made us great.”

The energetic Nasser had pushed his vision hard. Predictably, converts were made and Ford was awash in joint ventures that offered services from insurance coverage to collision repair.

“I would say many of those, not quite all, but many of those will have been divested by the end of this year,” says Kathleen Ligocki, vice president-marketing and operations.

And what will such moves mean to Ford's bottom line?

“From a cash generation standpoint,” she says, “we're on track to divest a billion dollars. Easily on track.”

Ligocki, whose responsibilities include joint venture management, does not elaborate. But among the entities known to have price tags are:

Hertz Equipment Rental Corp. — a wholly owned subsidiary of Ford's Hertz Corp., it rents construction and industrial equipment. (Merrill Lynch suggests the entire Hertz operation could also be sold.)

Collision Team of America — a chain of 32 collision shops in four states, conducting business under various brand names.

Kwik-Fit — Europe's biggest auto repair chain, specializing in exhaust repairs, with 2,400 outlets and 11,500 employees.

Greenleaf LLC — a network of 31 recycling centers in the U.S. and Canada.

Last month, Ford pulled the plug on Wingcast LLC, its joint venture with Qualcomm Inc. The would-be provider of telematics services was meant to compete with OnStar, the General Motors Corp. system.

Based on cell phone technology, Ford had hoped to offer Wingcast service on some '03 models. Instead, a spokesman says there are efforts to develop a system using Bluetooth — short-range, wireless technology that enables the integration of vehicle and handheld communication devices.

Despite the time and investment Ford devoted to “non-core” enterprises under Nasser's tenure, Scheele and company say there is little internal backlash as the pendulum swings back to the industry's fundamentals.

“It has had bumps,” Scheele says. “I mean, there's no question about it. Because it was a fairly abrupt stop-turn. But we were reverting to something which is really what most people joined the company for.

“I mean, most people joined the company to be part of designing, building, wholesaling, marketing and financing cars and trucks. And I think there was a lot of confusion raised by saying, ‘Well, what you should be doing is doing something terribly different.’ Being an entrepreneur and doing things that people really didn't join the company to do. And so I think that there was a sense of relief that, ‘OK. This is what we wanted to do all along. And we're back to it.’”

By all appearances, Ford's leadership is onside. In a separate interview, Ligocki's take is eerily similar.

“I think there's some feeling again of, ‘This is who we are,’” she tells Ward's. “This resonates with a lot of people.… It's kind of like, ‘I really just have to do this every single day.’

“So it may not be as glamorous as the world of the past couple of years — the e-business world — but I'll tell you, you really mainline the passion in this business when you've got a great car or truck out there.… Going through the difficulties of last year, kind of recognizing that we needed to regroup, now (we're) hitting stride.”

This is not to say Ford is ignoring the needs of people who buy their products, Ligocki says.

“I still believe that a series of core services around great products is critical. And I always think that Ford Credit exemplifies the best example. That's not going to go away.”

Ligocki, who has held three portfolios in less than a year, says her current responsibilities include managing joint ventures — for which Consumer Connect, Ford's business development arm, serves as an “incubator.”

Once ventures such as e-tailing or customer relations centers are deemed to have value, they are aligned with the appropriate internal structure — a process Ligocki is overseeing presently. “Covisint clearly belongs with purchasing. Percepta, which is call centers, has gotten on its feet and there's a fair amount of internal clientele now. That will move to purchasing, actually, because it will have a normal supplier-customer relationship with the client.” FordDirect will be maintained within Consumer Connect, she adds, referring to the Internet sales lead tool that is generating 60,000 inquiries every month. And of those leads that result in showroom visits, the deal closure rate is more than 15%.

Says Scheele: “A lot of people, they thought (back to basics) meant we're going back to the great days of the '70s. Now, I don't remember the '70s as too great a period, frankly. And they thought it meant changing a lot of other things.”

Such as the Premier Automotive Group (PAG).

“It is odd,” he adds, addressing Wolfgang Reitzle's decision to leave his post as PAG chief. “People think that since Wolfgang's left, that must mean that you've got nobody left who understands the luxury business. I thought, ‘I don't know what I spent seven years at Jaguar doing.’”

Scheele is credited with fixing Jaguar in the U.K. During his tenure, the flagging brand recaptured its flair and was restored to profitability as Scheele shepherded the introduction of models such as the XK8.

In addition, Scheele has been hailed for piloting Ford of Europe's turnaround — a feat he helped accomplish by implementing a restructuring plan that reduced the auto maker's costs by $1 billion. His plan — which involved capacity rationalization — contributed to a break-even year in 2001. This contrasts with the company's $1.13 billion loss the year before.

Bill Ford has said Ford of Europe's about-face is a template for the North American plan.

Apart from PAG's critical role in Ford's revitalization plan — most significantly, the expectation that it will generate one-third of the company's profits by mid-decade — there is a market that cannot be ignored, Scheele says.

“Everything is moving upscale, and we need to be part of that. I bet you, in your closet, most of your ties are silk today. Thirty years ago they would have probably been polyester. And the same is true of cars. It's not a car issue, it's a societal issue.”

Notably, PAG was part of Nasser's game. Yet it remains an integral part of the Ford lineup, going forward.

Too bad, says analyst Maryann Keller. If the auto maker really wanted to revolutionize its culture, it would dismantle PAG and allow the brands to make their own way.

“If you were just to take Volvo all by itself, and say, ‘Volvo, go and do what you want to do and be where you want to be and let your product evolve or lead the market,’ you know what? You'd probably, at some point, get something that looks like a Land Rover,” Keller says.

“But it won't happen in PAG … instead of allowing these products to naturally evolve with their customer, and go wherever the competition leads the customer, they're going to have to be making decisions about who gets what engine, who gets what transmission, who gets what feature. And that's the kind of problem that GM ran into for a long, long, long time.”

Keller agrees that Ford created its own crisis, but blames Alex Trotman, Nasser's predecessor.

“He began this process of ensuring that Ford had no bench,” she says, claiming Ford 2000 — Trotman's global restructuring plan — “eviscerated” the auto maker's executive ranks.

“Why did they have to go to Allan Gilmour?” Keller says, referring to the executive's return to Ford as vice chairman and chief financial officer after eight years in retirement. “Apart from the fact that he's certainly a brilliant choice, they had nobody inside. The same thing was true with GM. Why did they go to John Devine? … Why did they go to Bob Lutz?”

While Ford's boardroom is peopled with different (albeit familiar) faces, Scheele says its culture has also undergone significant change. “I think if you talk to anybody in the leadership group they know they are the people who are going to lead this revitalization of Ford Motor Co. It is not going to be done by Bill or by me or by Allan or anybody else. It's going to be done by the leadership team.

“I rarely say what I think in a meeting before everybody has spoken. Because I think, to do so, tends to shut off conversation. And my experience says that the collective airing of opinion tends to give you a better result than if there's just one.”

The fact remains, however, the two most important voices in the room belong to Scheele and Bill Ford Jr. Says Keller:

“I think that they, together, are a good team. But in auto companies, it never ought to be about two people. It ought to be about the total leadership. And as good as both of them might be … it's really going to be the question of, do they have the people to execute them. It's a talent thing.”

If so, Scheele's a good judge. His Arsenal footballers just completed a rare double-championship season, winning the league title and the coveted FA Cup.

By contrast, Bill Ford Jr. is a fan of another football culture. But his favorite team — the Detroit Lions — hasn't won a championship since 1957, the year he was born.

Gilmour Credited with Jaguar XK8

By Eric Mayne

Ford Motor Co.'s pool of car guys gets deeper with the addition of Allan Gilmour.

So says Nick Scheele, president and chief operating officer.

Asked about Gilmour's reputed product prowess, Scheele divulges that the Jaguar XK8 owes a debt to the auto maker's new vice chairman and chief financial officer.

“I've not told anybody else that story,” Scheele tells Ward's.

“I worked for Allan for a number of years. When I was at Jaguar and when I was in Mexico. He was a delightful boss. Knowledgeable about the business, but a tremendous product guy as well.”

In 1993, they happened to meet at Laguna-Seca where Scheele and Gilmour were racing historic cars.

“We'd done some quick market research on a different direction,” Scheele says. “I'd flown in from the U.K. the previous day with some new data and said, ‘Hey, we should go this way.’ … Allan immediately said, and this was just looking at sketches, ‘By God! Absolutely right. Let's go.’ So we ceased work on two other designs we were pursuing.”

The first XK8 bowed as a '97.

Scheele, who became a grandfather for the second time in March, is comfortable living in North America, having spent the 1980s here. For part of that stint, he was president of Ford of Mexico.

A long-time car aficionado, he keeps a Jaguar SS100 in the U.K., where his daughter lives.

Does he still get on the track?

“Not enough. I do like going on the track, but it's too rare. It was a bloody sight easier when I was not in this job.”

If Scheele's too busy to drive, what about Bill Ford Jr.?

“He does have a pretty hectic schedule, but I would have to say, he and I park next to each other and the cars I've seen him driving in recent days include a Mustang Mach I, an Aston Martin Vanquish, a Thunderbird, a Harley and an Aviator. So he's doing pretty well.”

Oh, don't get the idea that Bill Ford isn't well-rounded, Scheele says. He also drives competitors' products.