Alan Mulally: Driving Ford Through Crisis

Hey Podcast listeners! As you know, we’re setting aside a few episodes over the next few weeks to highlight some of the incredible speakers who will join us for Live2Lead 2020. Today, we’re excited to share a talk from Alan Mulally, former CEO of Boeing and the Ford Motor Company. Alan’s leadership helped Ford beat bankruptcy and become the only Big Three car company that didn’t take a federal bailout in the early 2000s.

We’ve pulled this talk from 2015 when Alan joined us for our event Exchange to share his journey with Ford and the leadership lessons he learned along the way. Be sure to get your ticket and hear Alan Mulally live on October 9th for Live2Lead 2020 at JohnMaxwell.com/Virtual.

Our BONUS resource for this episode is the Driving Ford Through Crisis Worksheet, which includes fill-in-the-blank notes from Alan’s talk. You can download the worksheet by clicking “Download the Bonus Resource” below.

READ THE TRANSCRIPT

Mark Cole:       Hey, welcome to the John Maxwell Leadership Podcast, Mark Cole here. And whether you are a tenured, in other words old, podcast listener, or whether you're brand new, we are starting a series that I promise you, you are going to love. We have an event on October the 9th called Live2Lead. It's October the 9th, 2020. And for the next few weeks on our podcast, we're going to introduce to you some of the speakers that are going to be speaking at this epic global event on October the 9th, 2020.

And so today I'm so excited because I'm going to bring to you one of the most respected corporate business leaders I have ever met. I've spent a good deal of time with him and today you're going to hear one of those times I got to spend with him. His name is Alan Mulally. Alan is the former CEO of Boeing and the Ford Motor Company. If his name sounds familiar, it should. He is the leader who helped Ford beat bankruptcy and become the only big three car company that did not take a federal bailout in the early 2000s.

Alan's a great friend of mine. He's a great friend of John's, but more importantly, he is an unbelievable, tremendous leader. As you listen to this 30-minute talk that he did at a recent Exchange event that we host around the world, you are going to be impacted by Alan and his philosophy of team leadership. Now this event took place a few years ago in San Francisco, and we thought it would be great to let you hear from Alan as we anticipate him speaking on October the 9th.

Now, if you would like more information about the October the 9th event, we want to invite you. It's a virtual event and you will get to hear from Alan, John Maxwell and several other speakers. In fact, if you want more information, you can go to johnmaxwell.com/virtual. Again, that's johnmaxwell.com/virtual. As always be sure to visit maxwellpodcast.com/live2lead, click the bonus resource button to download the note sheets for today's talk. You are going to love Alan. So let me get out of the way and let you engage with our friend, your friend, Alan Mulally. Here's Alan.

Alan Mulally:    Thank you. Thank you. Wow. I wish my mother could have heard that. Thank you, John for inviting me. Well, it's a real pleasure to be here and I got a chance to listen this morning and it was just absolutely fantastic. So I asked John, "What I could do to add value to your life?" And he said, "Would you just share your leadership journey yet at Boeing and at Ford?" So I'll be glad to do that. And I'll take any question you want, for example, if you want to know what it's like to testify on behalf of your bankrupt competitors, the most important thing is a fly there in your corporate jet. It gets the conversation with the Congress off to a really good start. So I'll be glad to share all of these insights with you. Okay. So my journey, so I had the honor to serve at Boeing for 37 years. And as aeronautical engineer, I was on the design team for every Boeing airplane.

So the 707, the 727, the 737, the 747, the 757, the 767. And I was a chief engineer and the program manager for the 777. And then as CEO of Boeing, I led the launch of the 787. And airplanes are really a big deal. There's about four million parts in the commercial airplane. You're creating something out of nothing. And so it's really important that everybody associated with a new airplane program knows what the vision is for the airplane. And also what the strategy is for achieving that vision, but that they also know what the status is against the plan, because you're making an airplane, it's a creation. Things are going well. Sometimes they're not, you're blowing up engines, you're breaking wings. And so it's just really important everybody knows the vision, the strategy and the plan. And every airplane has a vision, whether it's a short range, whether it's long range, was point to point nonstop, like the 777 today flies a daily flight nonstop on China Southern, from Guanzhou China to Las Vegas, back and forth every day.

So you can just imagine what that means as far as the level of safety and also the efficiency of the airplane. So everybody needs to know what that vision is. Also, they need to know what the strategy is for achieving it, whether it's the technology strategy, the product strategy, the family of airplanes strategy, everybody needs to know that, and everybody needs to know what the status is. And that's where the business plan review that everybody writes about came from because every Thursday at six o'clock in the morning, we'd have everybody associated with the program, all networked around the world. We'd have all the skill teams, engineering, manufacturing, procurement across the world, all the businesses around the world, Asia Pacific and in Europe, North and South America.

And in two and a half hours, about 320 charts, we would go through everything about the program and we'd have the plan and then we'd have the status against the plan. And then we'd actually even color code it if it was going well, it would be green, if the area that you were working on had a problem, and you knew what the solution was. It would be yellow. And if yo didn't know yet what the solution was and you had a problem, it would be a red. And so the idea is that very quickly in two and a half hours, everybody would know everything and everybody could work together to turn the reds, to yellows, to greens.

And the other thing that was just really, really important is the team itself and starting with the leadership team. It has to be a very cohesive, it has to know how to work together. It has to know how to trust each other. We make commitments to each other as a team. And also it's all focused on results. Everything that we're doing is to create this fantastic new airplane on schedule that meets all the performance requirements so that the expected behaviors are really, really important. You have to seek to understand before you seek to understand, you have to facilitate the dialogues that you need to have and work your way through it. Be committed to the answers that you come up with. And then you're all collectively accountable for the results. This goes on and on and on for five years, when you do a new airplane program.

So was then I asked after we bought... After the end of the cold war Boeing bought McDonnell Douglas and Rockwell. And as we rationalized that aerospace assets in the United States, so they asked me this commercial airplane person to integrate these defense companies, which was a real highlight film for two years, to integrate all of these fantastic assets. And we use exactly the same working together approach, came together around the vision, comprehensive strategy for achieving it, and then this relentless implementation process. So things are going well. I had one more airplane that I wanted to help with. That was a replacement for the 737, which is the most popular airplane in the world. And then I got this call from Bill Ford and I'm thinking, this is a great grandson of Henry Ford and he's calling me. And so Bill, shared the situation and it was pretty grim.

He described how Ford had become a house of brands. We had purchased Aston Martin, Jaguar, Land Rover, Volvo, Mazda, in addition the wonderful Ford and Lincoln brands. He also described how we'd become very regionalized, which was a real asset when Henry Ford set up Ford. Because he was absolutely a visionary. He wanted to not only make the best cars and trucks in the world, but he also wanted to operate in all the countries around the world. So he could be part of the fabric of the economy, contribute to economic development, energy independence, and security and environmental sustainability, but Ford had become very regionalized and there was no synergy across Ford and we're competing with the best companies, global companies in the world. Also, people were making a lifestyle decision with their cars and when they purchased a smaller car, they wanted it to be, have all the same characteristics and quality and fuel efficiency and safety as the larger vehicles had.

So we didn't have that complete family of vehicles at Ford. Also, the world was starting to slow down and also the fuel prices started to move up. Also, we were size for around 26% market share in the United States. And we were passing through 9%. And these three companies, these three American companies, GM and Chrysler, and Ford had been going out of business for 80 some years and they didn't take the competition seriously and didn't make the best cars and trucks in the world. So we were going through 9% market share. So we had 300%. You can imagine overcapacity in all of our assets in the company. So generally it was going pretty well. You're probably wondering why I would leave Boeing and go to Ford. And of course the real clincher was that we were losing money on every brand and every car. And as Colin pointed out, the first forecast I saw for profits, this is in September for the entire year was a projection of a $17 billion loss. And four months later we achieved it.

So this was not a forecast accuracy issue. This is like we needed a different vision and strategy and plan. So you wonder why I would go. And in the end, what I really care about my real passion is engineering and manufacturing. And 70% of all of the research and development in the United States and in the world today is associated with manufacturing with a big M, and no country has ever prospered or survived. If it didn't have a really strong manufacturing base, because all that creativity and innovation, that's where it comes from that actually makes people's lives better and more worthwhile. And so at the end of the day, I felt like I knew the United States was not stressing manufacturing like they have in the past. So I felt like I was being asked to serve a second American and global icon. So I arrive in Detroit, and the world headquarters of Ford is in Dearborn, where Henry Ford was born and they meet me at the plane and they picked me up in a Land Rover.

Now I had left Boeing, this wonderful clear brand to go at Ford, that beautiful blue oval. And they picked me up in a Land Rover and I'm going note to self, I wonder what they're working on here. And then we drive to the world headquarters and the world headquarters in Dearborn is a 12 story building and has garage underneath where all the executives park. So we drive in the Land Rover into the garage where all the executives park, and there's not one Ford vehicle, not one. Note to self. I wonder what everybody in this 12 story building is working on. It wasn't Ford. And it was 85% of the business. So we have a press conference on the first day and I was a first leader that was outside the automobile industry anywhere in the world to join the automobile industry.

And you'll see why by the story I'm going to tell you. And so Bill Ford we walk out on the stage and about 400 journalists there in the auditorium at Ford. And there are about 1400 journalists that are online worldwide because the automobile industry in the technology is around 20% of the GDP worldwide. And so everybody wanted to know who this new person was and what the plan was. And did I know how serious it was and what we're going to do to save Ford? So we start the press conference, they're all asking questions and I just got there. And finally, when the journalist said, Mr. Mulally, with all due respect, the automobile business is very, very, very complicated starting with the products themselves. And I'm a customer in person. So do you have a question?

And the journalist said, yes, since you don't know anything about the business or the vehicles, what does that mean to us that we're in trouble and we have you here? So I rubbed my chin very thoughtfully and I said, well, I really do agree with you that the automobile industry is very sophisticated starting with the products. Matter of fact, an average car or truck has around 10,000 parts. And you think about the engineering and the manufacturing and the aerodynamics and the system integration, very, very sophisticated products. I might point out that the 777 airplane has four million parts and it stays in the air. And the next day in the Detroit news, three inch headlines, I think we got the right guy.

And so the point of the story is you can see how insular they were. And also I could see that we had a long way to go here, but... Okay. So we do the very same working together principles that we've done over the years. Everybody wasn't on the team, very few people are on the team, very little sharing of information. Everybody's scared to death to share information, and you can never... It was at a time which wasn't very dissimilar to a lot of companies where you never brought an issue up to your leader or your boss, unless you had a solution. So now you're managing a secret. You have no idea what's going on. And so they had no idea, no idea what the real situation was. So we got everybody on the team, skilled teams across the world, engineering, manufacturing, procurement, functional mother and father for all of the skills and the employees worldwide.

And then also just join the matrix and the business Asia Pacific, Europe and the Americas and Ford Credit. And so we got together and next step was, we agreed on a compelling vision, took us a little bit. And we found it in Henry Ford's original vision. Henry, took out an ad in January 24th in 1925, in the Saturday Evening Post, if you Google it, it's the most phenomenal ad I've ever seen. And he talks about opening the highways to all mankind. And then he describes what the strategy is for doing that. It had to be large in scale, manage all the factors of production, continuous improvement. This is January 24th, 1925. And then he had like more worthwhile and easier. And then he ends with saying, and he had... I think he had 50% market share worldwide at the time. That he views the situation forward, not with a sense of great accomplishment, which they were, but with a feeling of wonderful service going forward to all mankind worldwide.

So we adopted that vision that was very compelling to all of us, a reason to dedicate our lives to that purpose. And then we'd agreed on the strategy. And that meant dealing with that reality that I shared with you, which they hadn't been dealing with. And a lot of them, they didn't what the real situation was. So we decided we're going to focus on the Ford brand and then Lincoln. So we divested all the other brands. And then we decided that we're going to serve all the markets around the world. And we also decided that we're going to have a complete family of vehicles, small and medium and large and cars utilities, and trucks. And we also agreed that we are going to use technology and the talents around the world that every new vehicle that we produce will not be just a fast follower, kind of competitive, but it'd be best in class.

And we chose a point of view that best in class from a consumer point of view, meant, the finest quality, the most fuel efficient, the lowest emissions, the most safe vehicles, and also the most smart vehicles that connect the car, especially. And then we also agreed that we are going to work together as one team using all of our resources around the world, which hadn't been done. We also agreed that we are going to have to restructure Ford really quickly because we were bleeding cash. We're going to be out of business in a few months. We also agreed that we need to accelerate the development of all these new vehicles. So even during the worst of times, as Colin said, we actually invested in all these new vehicles that you see today. And we also agreed that we needed to borrow a small home improvement loan.

As you know, if you're involved in a transformation or you're creating a profit of your growing company, the most important thing is you don't run out of money. So we decided, we need to borrow some money. And I asked them, the team they didn't know me. I didn't know them. I said, how much do you think we can raise? They said, Oh, maybe $8 billion. And I said, well, what if we pledged all the assets, including the blue oval? Which you can imagine me having the conversation with the Ford family at that time, they thought maybe they'd have to go to the bank. If we didn't pay back the money. I said, no, no, but the name will be gone. And they said, well, I might be able to get up to $12 billion.

I said, well, I think we ought to get as much money as we can, so we can invest in new products, restructure, and also have a cushion for this slowing global economy. And so we had 500 bankers lined up at the Waldorf Astoria in New York city. And the finance people were all ready to go. And we laid out this plan that I shared with you, same plans as we did at Boeing. And I wished them luck. And I said, please give me a call right away. And it just got quiet. Now, I started looking at the floor and I said, what's wrong? They said, well, we can't go ask for this loan. I said, why not? They said, because we've asked for this before. And if we go and ask, they won't loan us $1. I said, Oh, so what do you think we should do?

And then they introduced their car term to me. They say, well, you're the only new model we have. So you need to go give the presentation. I said, okay. So we got on the corporate jet, flew to New York and presented for three days to 500 bankers. And eight days later, we raised 23 and a half billion dollars based on the strength of the plan. And so that plus what we did with it is a reason that we did not go into bankruptcy and didn't ask for any precious taxpayer money. So we got a plan now, we got the money, we're working together. We've delineated the expected behaviors, how we're going to act, how we're going to treat each other. We set up our meeting schedule. We're going to have the business plan review every week, six o'clock in the morning to 8:30 to nine, we had 320 charts.

Every member of the team is going to present. The business is going to present first and the skill teams they all have five or six or seven charts covering every aspect of the business. And then I introduced them to color coding. And that was hard concept. They said, because they knew in the past that because we're so separate all around the world, that if you actually brought up an issue and said you were red, or your issue was red, it's was you were red, then you'd meet the interesting people and you disappear. And so the idea of color coding issue, that was a hard concept, but we're going to start. So we got the 320 charts identified and the first business plan review took three days. Because Ford attracts the best and brightest people.

The whiz kids McNamara, and they just want to talk about it, just talk about it instead of just here's the plan, here's the status. And then we can move on and then we all can help work the issues. And the other thing, it was kind of terrifying was that all 320 charts were green and they know, and I know we're going to lose $17 billion and all the charts are green. So I stopped the meeting after a few weeks and I said, we're going to lose $17 billion. You didn't know that before, but you know it now. And is there anything just one or two little things are not going well, just a couple of things? And of course they don't know me again. So they look at the floor and don't say anything. And so I go on to the next screen chart, the next screen chart, and next week they're all green.

And then I didn't know this until I read the American Icon book that they purchased for you. And so it was Wednesday and Mark Fields, who ended up succeeding me as a CEO of Ford, was having his business plan review, getting ready for Thursday. And so they had just shut down the production in Oakville, Canada, of the New Edge, because they ran into an actuator issue on the tailgate. And we said, we're only going to deliver the finest quality. So he shut down production. That's a big deal in production, as you know, and he had 10,000 Edges sitting down on the frozen tarmac, frozen tundra. That's an airplane talk. And so they shut down production. And up comes this launch chart at any one time around the world, we're launching 40 new vehicles. And for every new vehicle, it has three columns on the chart, has one for technical readiness, one for schedule readiness and a column for financial impact.

And they're all green and he had shut down production. And so he said, this looks like one of those red things Alan's talking about and somebody in the room says, so what's your point? They said, well, I think what he's saying is that if we get the issues identified, then we all work them together. We can turn the reds to yellows to greens. And someone else points that we don't have a solution for the red mark. He said, I think that's his point. We got to share it. And so finally somebody said, so what do you want us to do? He said, let's color all three of them red. And then somebody else in the room says, it was nice to know you Mark. Good luck. So the next morning, all the team comes together worldwide.

We're in a round table and inside the table, we have flat panel displays, that you can see every Ford location around the world from Sydney to Shanghai, to Beijing, to Cologne, to Sao Paulo. And so everybody is all there we've got one screen, same screen they're looking at, we're going to look at the 320 charts up the ultimate in clarity and status. And so we go along in green, green, green, and Mark puts up this red chart. And I mean, he said, I think he said, we have an actuator issue. We don't know where it is. We stopped production we're working on it. And with that, I started to clap and everybody in that place, I could see it in their eyes. There's a sign. The two large doors behind are going to open up two large people are going to come in and rip Mark out of [inaudible 00:23:33]. And Mark would be gone. Because that's what happened at Ford.

So Mark, was still there the doors didn't open, Mark still there. And so I said, is there anything we can do right away to help you out Mark? And before Mark could say anything, Derrick Kuzak who was running engineering worldwide said, I think I've seen that issue on such and such. I'll get you that data right away. Bennie Fowler, who was running quality worldwide had a similar comment. One of the neatest one was Joe Hendricks, who ends up running all the Americas now, who was leading manufacturing worldwide said, we're going to figure this out. We're going to need some manufacturing engineers. I'll get them identified right away and I'll get them up to Canada and we'll be ready to switch out these parts and get that production going again.

And that exchange took eight or nine seconds. And then we went on to the next screen chart, the next screen chart. In the next week, there's only one chart. That's Mark again, but Mark still here, but it's the only red chart, but Mark's here. And in the next week, maybe it was yellow. They identified the issue. They had a solution and Mark still here. And then the next week it's green and all the vehicles start flowing around the world. And Mark still here. And so guess what the 320 charts look like the following week? No, not all red.

That could have put me over the top too, but it looked like a rainbow. Now the really neat thing about that. Well, a bunch of neat things about that is that one, it wasn't that I knew it, what the status was, but now everybody in the entire company, 300,000 employees worldwide, plus all the suppliers, plus all the store owners, everybody knew now, because everybody's represented on the team. Everybody knew why we're losing $17 billion. And maybe even more importantly, that we had broken through the culture of Ford where not only was it expected that everybody share what the situation is, really what it is, but also that it was safe and you weren't the problem. You're going to be part of the answer.

And so from then on, we all knew. And I knew that no matter what happened to us, whether it was a financial crisis, whether GM and Chrysler going into bankruptcy, was a tsunami in Asia, no matter what came at us, that we're going to be able to deal with that reality at the same time with an eye on creating an exciting profitably growing company for the good of all of us.

Okay. So how did it turn out? It's unbelievable how it turned out. I'm in awe. So going down through all of the stakeholders because its profitable growth for everybody. So looking at the consumers, Ford is now the number one brand in the United States. It's the number one or number two in all 22 of the European countries. It's the fastest growing in Russia. It's the fastest growing in Asia Pacific. We have the number one, number three and number six vehicles in the world. And our market share went down a little bit further. And now we're back up to 16% and where we were a discounted brand in the marketplace. Now we command a premium versus Toyota. And so the product line itself, the Ford store owners that are here will tell you, but all the third party people will share that they consider the Ford product line, small, medium, and large and cars utilities, and truck to be the finest product line of any automobile manufacturer worldwide.

So the Fiesta, the Focus, the Fusion, the Tourist, the Mustang, the Escape, the Edge, the Fleck, the Explore, the Expedition, the Ranger, the F series, which you can live in them and pull your house behind simultaneously. And the Transit and the Cargo that lineup now is the most complete best in class family of any manufacturer. And now that Ford store owners are the most profitable that they've ever been in their entire life. And they're investing in the products and they're investing in the consumer experience. On the supplier side, because 70% of the dollar value of an airplane as well as a car with all of our supply base. So having a collaborative environment with them where you're all aligned and you have absolute clarity on what you're trying to get done and what the status is. They had us... I think GM was a worst manufacturer work with in their opinion.

And I think we were next. When we started now, we're number two behind Toyota, of the manufacturers that they want to share their technology with and work with. When you look at the investors our intraday low on stock was a dollar one. And since then it's appreciated approximately 1837%. So, so many investors did very well by investing in Ford. Maybe the most exciting piece of data to me though about this is how the employees feel. And I've always believed in talented people working together. And so employee surveys are really important. You don't want to ask people what they think, unless you're going to do something about it. Because I guess we're really irritating, but the employees will tell you everything. Especially if you put a line on there that in numerical score. And just say, I'd like to say, they'll tell you who's hot. Who's not.

What this culture is, who should be gone, who should be kept. So it's a great source of data and you really do want to know how they feel. And we used The Mayflower Group at Boeing and we used The Mayflower Group at Ford. And I think the average percent positive about how people feel about the company and their role in it is less than 50%, which means that over 50% of the employees of these corporations, it's just a job, but they're not building a cathedral. And so we've always worked really hard on it. I think I got it up to 65, 68% at Boeing, which that was a highest. I thought that was all great. You know what it is at Ford? 89%. 89% positive, meaning that they believe, they know where the company's going. The confusion's gone. They believe in the leadership.

They know where they fit in. They feel like they're appreciated and they're getting great satisfaction for contributing to creating a viable company. We got up to our debt with a 23 and a half million dollars. Our debt got up to $39 billion. I [inaudible 00:30:10] my competitors, call me up and say, you're not going to be able to pay the loan payments on that, let alone pay it back. And we now have repaid all 23 and a half billion dollars. Our capital structure is about $10 billion. So we're right there now. We turned to investment grade. We've increased the dividend five times. The investors are getting a 4% return on their dividend in today's market. That's unbelievable. So we're in great shape financially. We have all of our investments in the vehicles, with our dealers and our suppliers all laid out for the next five years. And so Ford is in really, really good shape. And we had an orderly succession plan at Ford, which very few corporations have. So I'm very pleased for Ford about that. So that's my report to the committee.

Mark Cole:       Wasn't that a great message. I'm so glad you joined us for this week's episode. And I hope you've decided to join us for the Live2Lead virtual event this year. We have an incredible program lined up featuring John Maxwell, Alan Mulally, Kat Cole, Craig Groeschel, and the incredible Steve Harvey. It's an event unlike any other, and we're glad to be making it available to you, our podcast community. To secure your virtual pass, visit johnmaxwell.com/virtual and click on the register now button. You'll find all the details about the event as well as some special bonuses and other content you will have access to. As always thank you for listening to the John Maxwell Leadership Podcast. If you haven't already make sure you become a subscriber, we want you each and every week. Now, as I've mentioned at the beginning, you're going to get to hear more from our Live2Lead speakers over the next couple of weeks. We'll be back next week. I hope you'll join us, but until then let's listen. Let's learn and let's lead.

3 thoughts on “Alan Mulally: Driving Ford Through Crisis”

  1. I like the way Alan described the whole process of Ford success: Vision, Strategy and plan.
    He always uses the “we” instead of the “I” showing that it was a team work that brought Ford to such a success even though he was the one leading.

    Looking forward to the October 9th LiveLead2Lead.

  2. This podcast was tremendous! Wow – Ethan will change the world too! I am very much looking forward to Live2Lead. I am signed up and ready!! You are correct — It is up US to change the world!

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