How Bill Ford Jr. led Ford Motor Co. through the recession

Bill Ford Jr. never thought he’d see the day when Chrysler and General Motors would be forced into bankruptcy proceedings, when American automakers were in such peril that they had to look to the government for a bailout or when the entire auto industry was teetering on the brink of disaster.

Yet that’s exactly the depths to which the automotive industry sank over the past two years. As the worldwide economy slumped into a massive recession, the auto industry took one of the worst beatings of any area on the business landscape. Car sales slumped, auto component suppliers went bankrupt, Chrysler partnered with Fiat, and GM underwent a restructuring and downsizing that included the elimination of the Pontiac, Saturn and Hummer brands from its lineup.

As the executive chairman of Ford Motor Co., Ford — the great-grandson of company founder and American business icon Henry Ford — helps lead the one U.S. automaker that didn’t face bankruptcy proceedings or the humiliation of limping to Capitol Hill with its hands out. But that doesn’t mean Ford Motor Co. has emerged in 2011 unchanged or unchallenged by the events of the past two years.

In November, Ford gave a presentation at the Ernst & Young Strategic Growth Forum in Palm Desert, Calif., moderated by veteran journalist Charlie Rose. During the presentation, Ford talked about the recent past of the auto industry, where the industry is headed and what business leaders in other industries can learn from the lessons taught to automotive executives in the past couple of years.

“Every industry says they’re in a time of great change,” Ford says. “I suppose when you’re in it, you really feel like you are. But if you just look back a few years and look forward a few years, you’d be hard-pressed to find any era in any industry that will comprise more change.”

Do the right thing

When the other American automakers went to Washington seeking a federally funded lifeline, Ford figured his company would be at a disadvantage on the consumer sales front.

“We didn’t really know what a bankruptcy meant for us,” he says. “Would a customer buy a car or truck from a bankrupt company? What we didn’t realize at Ford was that it would resonate with the average person on the street that we didn’t take a bailout. We thought the average person would take the opposite stance, as in, ‘I have so much money wrapped up in this company, I’m going to buy their car or truck.’ We were worried that no one would buy from us, because they were now shareholders of sorts in GM and Chrysler.”

Instead, Ford received — and still receives — letters of support from small business owners and operators who admire Ford’s ability to get his company through the recession without the need for taxpayer dollars.

“The letters I got, and continue to get, are incredible,” Ford says. “Things like, ‘I’m a small business owner in Des Moines and no one would ever bail me out, and we’re really glad that you guys did it the right way.’ It really was heartwarming to see the response we got.”

But there was a cost for staying financially self-sufficient. Ford Motor Co. had to borrow against many of its assets to finance the research and development projects that allowed it to stay away from the jaws of bankruptcy and bailouts. The company amassed a large amount of debt, compared with GM and Chrysler, who emerged with clean balance sheets thanks to their sources of external funding.

But Ford believes a commitment to developing your business internally is one of the most reliable methods by which you can weather an economic storm. If you’re developing new products and services and finding other ways to enhance your business from within, you’ll become much more strategically diverse and self-sufficient as a company.

Ford’s emphasis on internal development is reflected in one of the first conversations he had with Alan Mulally, who succeeded Ford as the company’s president and CEO in 2006.

“One of the things I told Alan in our first meeting was, ‘There is no point in going through all of the pain we’re going to have to go through if we don’t keep investing in research and development and product development,’” Ford says. “He agreed completely. Now that we’re through and out the other side, most of our competitors, both domestic and foreign, slashed their spending during that period. Not only didn’t we do that, we actually accelerated some key areas. So when the clouds started to lift, we had the products, technology and features that made our vehicles very desirable.”

Ford and his leadership team set those wheels in motion even before Mulally came on board, working with bankers to get capital to pump back into the company’s development areas. From Mulally’s first day on the job, he began making the rounds to banks, trying to secure the loans necessary to make it all happen.

“It was a pretty dicey period,” Ford says. “You can imagine it was a pretty interesting conversation I had with the extended Ford family.”

To build the case to the other stakeholding members of his family, Ford needed to go back to the basics of good business communication from the executive level: Lay out your plan, be as forthcoming with information as possible, answer questions and seek feedback.

“I was very proud of the fact that, over the course of that discussion and over the next couple of years, when every day they’d pick up a paper that says, ‘Ford, GM and Chrysler aren’t going to make it,’ they all hung in there,” Ford says. “I had to continually sit down with them and say, ‘We do have a plan, you’re not seeing it yet, but it’s going to work.’ To their great credit, they all hung in there. And that really allowed the rest of the management team to not have to worry about the shareholders. They could focus on fixing the problem.”

The patience of the Ford family is being rewarded. Not only did the company emerge from the financial crisis without the need for federal money, but Ford says the company’s debt is being paid off much faster than either the company’s leaders or industry analysts anticipated.

“There was a disadvantage to doing it the way we did. But that disadvantage [of debt] is shrinking almost on a daily basis,” Ford says. “I wouldn’t trade places with anybody. I love where we are. I love our product, our direction and our freedom to operate without interference.”