Wednesday, May 24, 2017

1780 The Auto Crat

Four wheels and a 20 HP engine.  Get out and get under.

It takes a lot of nerve to tell a guy named Ford how to run a car company, but here goes.

Let’s get all the bad stuff out of the way first.  Henry Ford was an industrial and financial titan but had a dark side.

Union buster. Anti-semitic. Autocrat. Fifty percent of a mutual admiration society with Hitler. (The other half was Adolf.)

Okay, enough bad stuff for our purpose here. Now some interesting stuff for history buffs and finance geeks:

Ford is credited with one innovation he didn’t innovate and not credited with one he did.

The one he didn’t: Mass production.  It was in the pipeline when he started pumping cars out of the River Rouge complex in Michigan, still one of the wonders of the industrial world.

Ford made everything that went into its cars except the tires.  Those came from Firestone.  They made steel on site and then turned it into millions of cars and trucks.

But mass production and interchangeable parts would have happened around the time it DID happen. And while Ford did it well, they didn’t do it first.

Ford’s one-true-innovation was financial, not industrial.  He made his independently owned dealers buy their inventory.  Better than bank loans. A whole lot cheaper.   Back in the Model T days, no one had done that on a large scale.

Also in finance:  Ford is a public company (NYSE:F.) But the superstock still is family owned.  So when you buy shares, you’re buying aftermarket products. The real power is in what’s called the “B” stock, the kind only the Fords have.

Heading in the right direction: in the dark days of auto production in the early 2000s, Bill Ford hired Alan Mulally, an engineer and high ranking guy at Boeing and made him chief executive.

Jaw dropping. An outsider.  An airplane guy.  At the time, we wrote that it was a brilliant choice even if the new guy had never set foot in a car factory.

Mulally had the right credentials. He made huge transportation machines and other stuff that’s far too heavy to lift.  He ran a profitable company with a labor situation so complex it was a wonder they produced as well as they did.

Perfect credentials.

And they made it through the recession without federal help.  Amazing. No other US based carmaker managed that one.

But in auto years -- which are like dog years only shorter -- that was ancient history.  And recently Ford has been faltering in areas that it considers crucial to its future.

Things like self-driving cars are simmering on medium heat when they should be on the high powered burner.
They’re behind in electric car development.  They’re doing okay in sales.  But doing okay is not okay.

Lurking in the background was something Bill said not long ago: his company was in the “mobility business,” not “just” a car maker.

That’s reminiscent of Jack Welch telling General Electric shareholders “we’re not an industrial conglomerate, we’re a communications company.”

That quote also was little noticed.  And it’s hard to tell where it came from when GE’s big profits were in medical equipment, plastics, jet engines, washing machines, stoves and lightbulbs.

“We’re a transportation company?” No. You make F-150s and Mustangs and other large and small machinery.  Sometimes you do it well, sometimes not (If you want a Lincoln, buy one. But the reviews will suggest otherwise.) When you lose sight of your real purpose, you are heading for the undercard instead of the main event.

Toyota and Honda don’t stay awake nights worrying about an identity crisis.  They’re pretty sharp operators and have eaten Detroit’s lunch for years. It’s a lesson Ford has to learn.

I’m Wes Richards. My opinions are my own but you’re welcome to them. ®
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© WJR 2017, former Taurus owner but once was more than enough. 

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