Was Bailing out GM Really Necessary?
Americans were told bailing out the auto industry, well at least parts of it, was the only way to save the collapse of the industry. This would also prevent the continuing slide of our economy, eventually ending up in a total meltdown – a depression.
The problem I have always had with any comment that implies the option taken was the only or the best, is that the deliverer of said statement is not qualified to know with certainty that the option(s) not taken would produce worse, same or better results.
Of course all of us, have, are or will be faced with making choices/decision making – I get that. So, as I look back at what some of our national leaders told us in the race to make the decision to bail out GM and others, I think it would be interesting to see how Ford Motor Corporation avoided bankruptcy, further loss of market share, and performed a resurrection from the ashes of corporate cremation, all without being bailed out, without your approval, by the U.S. taxpayers.
As you might recall, this was about saving the country, not just an industry, union, much less a particular manufacturer, or two. The following will not come as a surprise to any open minded person with the personal “hands on” experience of running a household budget, much less a small, mid-size or large business. It will likely still baffle policy makers that have never had the “responsibility” for consistently endorsing the front of payroll checks. From 1906-2006, a Ford was either the CEO, President or both of the Ford Motor Company (FMC.) Breaking that down, a member of the “family” was running FMC for over 90% of the time the company has been in existence. In September of 2006, William Clay Ford Jr. was pretty much fired, and with good reason. As a CEO Bill was much like my Minnesota Vikings, awful! He was/is probably a heck of nice guy, very capable at many things, but as the CEO of a major United States based automobile manufacturing company he sucked.
He is a folk guitar player, vegetarian, Black Belt in Tae Kwon Do, very philanthropic, knows trucks and drives a Hybrid. Good guy in many ways. When the great grandson of founder Henry stepped down, some say he had little choice; FMC had just experienced a $12.6 billion loss. This happens when you have years of bad management, terrible strategies, invest in very questionable ideas and pretty much just stink at running your company. To make matters worse, your company was competing against the very companies that stole your industry away from you in the first place! That would be Honda, Toyota, Nissan, just to name a few.
In steps Alan Mulally, a former Boeing CEO. Yes, a non-car person is selected to run FMC. In short, this is what he did:
1) Got the Volvos and Land Rovers off the Ford Motor Company parking lot. Sold off – Volvo, Land Rover, Austin Martin and Jaguar (Ford F series truck - second most popular selling vehicle of all time and number one last few years).
2) With private banking industry, restructured debt. Reduced number of available chassis from 20 to 8 – this would be a manageable number
3) Reduced brands from over 90 to under 25 – this would make it possible to make good products, ones consumers would actually buy. This is called focus!
4) Had a new message: “One Ford” — meaning “One Team, One Plan, One Goal”
5) Held weekly strategy meetings with key personnel to assess, monitor, adjust and implement
6) Communicated this mantra and became evangelical in its delivery
This strategy worked. It could have failed but it worked and the proof is in the numbers. In 2010, FMC posted a $6.6 billion profit – a $19+ billion turnaround. Mulally and his team did what families everywhere do every day. Mulally did what small, mid-size and large companies do every day…assessed where his company was, how it got there, took responsibility, cleared the financial house of ridiculous and unnecessary expenses, met with the folks who held debt and worked out a plan, probably prayed, and then put the plan in place as everyone made sacrifices.
So the question is… Which plan really worked based on sound decision making?