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Q&A with Ford's Jacques Nasser
''There's clearly going to
be more consolidation in this business''
These are heady times for
Ford Motor Co.'s new CEO, Jacques A. Nasser. Since he took the wheel on Jan. 1, Ford has
acquired Volvo Cars for $6.5 billion, announced record operating earnings of $6.6 billion
for 1998, and hired away top talent from DaimlerChrysler. Business Week's Keith Naughton
caught up with Nasser as he headed for a Detroit luncheon in March, where he was named
Automotive Industries Man of the Year. In an interview with Business Week, as well as
during the luncheon, Nasser reflected on the good times at Ford and the road ahead for the
world's No. 2 auto maker.
Q: With all the success Ford is having, how do you keep your feet on the ground?
A: The reality check for all of us is that although we've had many things go well for
us, the majority of us have also been through times when it was tough. And we don't forget
very easy. And although many things are going well for us, there are some areas where
we're not doing that well.
Q: Such as?
A: You'd have to be disappointed with our performance in South America. [Ford lost
$226 million in South America in 1998, including a $151 million loss in the fourth quarter
of 1998. Nasser has said he does not expect to make money in South America in 1999.] Our
overall results there are not what we'd like them to be. But when you get a 40% to 50%
shift in currency values overnight, it's hard.
Brazil has been a bit of a shock. It is a lot worse than anybody imagined. As an industry,
we did it again. We all rushed into a growing market. And then we all complained about
overcapacity. There will be a shakeout there. It's inevitable.
Q: How about the difficulties you've had on the passenger-car side of the business?
A: We're not satisfied with our car performance. [Ford's car sales were down 6% in
February, while sales of its sport-utilities, minivans, and pickups rose 20%] In the truck
area, we have a connection with the customer that we've lost in the car business. We
really did miss a beat there [with cars].
On trucks there has been incredible product innovation that just hasn't been there in the
car business. Ideas like Chrysler's dual sliding doors on the minivan, four-doors on
pickup trucks, and crossover vehicles have all helped to fuel the truck business. I think
the truck people have connected with consumers far better than car people.
Q: It seems like you might get some help with your cars from hiring Chris Theodore from
DaimlerChrysler to become Ford's VP of large- and luxury-car development.
A: I think he'll just be magic in that area because he's so creative. Chris's talents
will fit very well with the rest of the team. He brings an enormous level of skill.
Q: Why are you bringing in outsiders into Ford, when the Detroit tradition was to
"grow your own?"
A: We're going through a period where the world is going through an incredible amount
of change. Globalization has affected almost everything we touch, from economies to
capital markets to communications to trade policies to environmental issues. All these
things are becoming much more global.
Also, there has been an incredible explosion of technology that has changed the way people
live their lives and do business. The Internet, wireless phones, pic-tels. You are able to
do things now that you weren't able to do before in business and in your personal life.
And what's becoming more and more important is the strength of brands and the relationship
to consumers over a longer period. We've got to stop thinking of ourselves as a
transaction-based business -- we sell a vehicle and then we wait until you want to buy
All of those changes, which have happened so quickly, give an opportunity to bring in
different skills and different perspectives. It's helpful to have these different
viewpoints and different cultures. That gives you diverse views to address the business.
[Nasser was born in Lebanon and raised in Australia.]
There were times when it was difficult to attract people to the automotive industry. Now,
we're seen as a very good place to be. Ford is a particularly good place. People really
want to be part of a winning team.
A: Because we are different. The brands that we have, the acquisitions that we've made
and the type of people that we are and the attitudes we have. And the influence of the
Ford family and Bill [Ford] as chairman.
Q: But you want Ford to try be even more different. What do you want Ford to become?
A: We want a company that centers its thinking around consumers and what they want,
and allow that to filter through into all our business decisions.
We've been a very nuts-and-bolts and transaction-oriented industry. We've viewed customers
as always telling us about our problems. We never thought about the customers' costs after
the sales -- insurance, resale value, recycling.
We've been too engineering- and manufacturing-focused. We've only recently begun to look
at distribution. That's the next generation of transformation for the industry.
Q: You are known as Jac the Knife for you ability to cut costs [Ford has cut $5.2
billion in costs in the last two years, and has set a goal of cutting another $1 billion
in costs in 1999]. Can you just keep cutting costs forever?
A: We've been very successful in reducing our costs. But we've only been concerned
with the costs within our walls -- manufacturing, engineering and so forth. We need to
take the consumer's view of costs. If we start looking at cost the way consumers do, we
can come up with different strategies. And that isn't meant to be a call to arms to run
out and buy anything that says consumer.com. It's a change in the mindset of the company.
Q: You've had flat to negative revenue growth. How do you grow earnings and increase
shareholder return in a flat revenue world?
A: One of the biggest challenges we've got is to grow the business with top-line
growth. We've managed to improve our shareholder values over recent years primarily
through earnings, and partly through some better positioning of the company.
For the future, we need to continue to improve the earnings potential of the company while
at the same time growing. That is going to result from doing better with the businesses we
have -- organic growth, geographic growth, acquisitions. We will be active in all of those
Q: With the $6.5 billion acquisition of Volvo done, Ford still has $17.4 billion left
in its cash stash. Who will Ford acquire next?
A: [Laughs]. There's clearly going to be more consolidation in this business. Whether
you believe in the theory of five auto makers remaining, or five plus two, it's
inevitable. I think that's good for the consumer. You are seeing acquisitions because of
the continuing drive toward brand and improving the value for consumers. Those factors
will only intensify.
Q: When will Ford overtake GM?
A: [Laughs]. Let me see. Tuesday.
Q: Are you interested in acquisitions outside the auto industry?
A: We've tried that in the past and it didn't work out very well. At Ford, we're just
going to stick to our knitting. We're not going to run off and spend our money on business
where we really don't have much talent. This business is tough enough, we don't need go
out and tackle new ones.
Q: You had 1998 revenue of $144.4 billion and that will grow to $157.4 billion with
Volvo. When you're that big, how can you make big percentage gains in revenues?
A: We had Michael Dell in to speak to us. I like his comment, "How do they expect
us to grow at 50% forever. We're starting to become a big company." [Laughs] You can
relate to that. You do get to a point a where you have to reinvent the whole business.
Q: How important is acquisition to Ford's growth plan?
A: Acquisitions are always difficult to predict. I would say it's a minor part of our
plan. You can't predict them and you shouldn't really depend on them.
I think there's still a lot of growth in the automotive-related businesses, including what
has been the traditional business for us. It's not going to be in any one particular spot.
Some of it will come from the newly developed markets growing and coming back from
extremely poor levels. Some of it will come from our presence in these markets, where we
haven't been. Some of it will come from the very strong position we have in the
sport-utility segment and in the light- and medium-truck segments [pickups and minivans].
Some of it will come from what I think is an extremely focused premium-vehicle brand
leverage. [Ford has Lincoln, Jaguar, Aston-Martin and Volvo.] Some will come from
acquisition, and many of the acquisitions will give us opportunities to grow. For example,
Jaguar was an acquisition. The revenue growth from the acquisition wasn't that great. But
we've now got a brand and basis of building growth. [Because of new Jaguar models Ford has
developed, Jaguar car sales are expected to grow to 200,000 units within three years, from
around 20,000 when Ford acquired it.]
The same will apply to Volvo. It will give us the potential to grow beyond the level of
the acquisition and beyond the level that we would have been able to grow with our of
present brands. Volvo can go from 370,000 [unit sales] to something bigger than that.
[Ford is expected to develop a Volvo sport-utility vehicle and minivan.]
Q: What kind of acquisitions are you interested in?
A: Something that would help our basic business and nurture our basic business. Not
something that would require us to take our eye off the ball.
Q: Is Mazda [in which Ford holds a controlling 33.3% stake] enough of a growth vehicle
to give you the presence you want in Asia?
A: We think the combination of Ford and Mazda is powerful.
Q: Do you grow fast in Asia with an acquisition, or do you take a slow and steady climb
up the hill?
A: We're always open, but for us at this time, we like the measured, reasoned, steady
Q: There are some real bargains in Asia, right?
A: Oh, really? [Laughs.] You know better than that.
Q: But you bid for Kia, which had plenty of debt of its own.
A: Kia was very different. We had been dealing with Kia for 12 years, so we knew them.
We had a very good relationship. We knew their capabilities. We knew their products. Also,
Kia is a large company, but it's not [as large as Nissan].
And the Koreans were prepared at least to look at debt restructuring. So far, the Japanese
have not been. There were three bids for Kia. We showed a lot of discipline. We went in
with the bid and we did not change it. We felt that we would be good for Kia and Kia would
fit with us. But it had to pass the business equation test.
Q: Do you worry about the stress acquisitions can put on a company?
A: Yeah. And look at our history: We took our first equity position in Mazda in '79.
We purchase Jaguar and Aston-Martin in '88-'89. And Volvo is 1999. So it's been every 10
years. We're very careful about the digestive process. We're acutely aware of it.
NEWS: ANALYSIS & COMMENTARY
Ford Be Nimble
He will give the company's
brand and regional units more autonomy
By the time Jacques Nasser
celebrates his first anniversary as CEO of Ford Motor Co. in January, there will be little
doubt that a new regime is firmly entrenched in Dearborn. BUSINESS WEEK has learned that
Nasser plans to announce in November a realignment of the sprawling $143 billion auto
maker that, while not actually repudiating Ford 2000, the strategic vision of predecessor
Alex Trotman, will put the company on a different path. Ford 2000 centralized worldwide
responsibility for functions such as product development, purchasing, design, and
manufacturing--and shifted other decision-making power to the home office.
Nasser wants to keep the efficiencies generated from central thinking about design and
production. But he wants to reintroduce the market focus in regions across the globe that
will give Ford (F) stronger brands and more appealing products. ''Ford 2000 was a good
idea carried too far,'' says a source familiar with the new plan. And no, Nasser is not
doing a reorganization. ''General Motors (GM) has given reorganizations a bad name,'' sniffs one Ford exec.
Nasser is ''trying to create the Ford 2000 that should have been created in the first
place,'' as one exec put it. That translates into a new organizational chart that formally
recognizes Nasser's heightened emphasis on the company's brands and gives the various
regional and brand units more autonomy. The reason: Nasser wants his top managers to be
more entrepreneurial, more accountable for the profits and losses they generate. He also
wants each brand to crystallize its own identity with customers. The plan, which still
could change, will be unveiled in November and implemented beginning next year.
In one respect, Nasser's move reflects the demands of a global auto business.
DaimlerChrysler (DCX) Chairman Jurgen Schrempp acknowledges that he, too, is streamlining
One of the clearest examples of Nasser's new vision is the plan to split up its North
American auto brands, with sales totaling $87 billion, into ''strategic business units,''
including Ford Car, Ford Truck, and Mercury, say sources close to the company. ''If it's
different in the mind of the customer, it will have its own [brand] group,'' explains
AILING DIVISION. Nasser's goal is to make Ford more nimble and more closely attuned
to customers. ''You've got to break down the business into the smallest possible units to
give the employees in them authority and accountability,'' says one source knowledgeable
about the plan. That applies to Ford of Europe and the company's ailing South American
unit, which lost $226 million last year. Nasser aims to restore to regional Ford managers
such as Ford of Europe President Nick Scheele the power that was stripped away by Ford
2000. It's not major surgery, stresses Robert L. Rewey, Ford's group vice-president for
sales, service, and marketing. ''We're evolving, we're not reorganizing.''
Since late 1996, when he took over Ford's global auto group, Nasser has been quietly
asserting the new vision and replacing key executive positions eliminated in Trotman's
overhaul. He has also been showing the door to underperformers and recruiting all-star
managers from outside--most notably former BMW exec Wolfgang Reitzle, who oversees all
Ford luxury brands: Lincoln, Jaguar, Aston Martin, and Volvo. This Premier Auto Group
''was the first step'' in Nasser's plan, says one insider. Even earlier, Lincoln-Mercury's
relocation to Southern California was a signal of Nasser's intentions. The division's
marketers, designers, and engineers have been relocated to the West Coast, far from
Detroit's stodgy mind-set.
Now, sources say, Nasser is even considering putting Ford's North American mass-market
brand units Ford Car, Ford Truck, and Mercury under a single North American boss. One name
being bandied about is James C. Schroer, Ford's global marketing vice-president.
Nasser's charge-ahead style may allow him to redraw Ford quickly, but it also may be
upsetting the United Auto Workers, as the two sides negotiate a new national contract.
Nasser's plan to slim down Ford by spinning off $18 billion Visteon Automotive Systems has
rubbed workers at that parts unit the wrong way. Nasser and Ronald Gettelfinger, the
buttoned-down UAW vice-president who heads the union's Ford team, are both newcomers to
this pressure-cooker environment. This could complicate negotiations over Visteon.
Overseas, Nasser has already installed regional leaders for Europe, South America, and
Asia Pacific. His new plan simply gives them a greater say in running their operations,
and more responsibility if their efforts fail. Scheele says Nasser is giving him a free
hand in Europe. He's cutting capacity by 25% and sharing back-office costs with Volvo and
Jaguar. Nasser has also told him that the Ford brand must stand on its own in Europe.
Scheele wants to burnish the brand by reminding consumers it is German-made, since most
Fords are made near Cologne. To reinforce that prestige, Scheele has relocated
headquarters and R&D there, as well.
Wherever Ford operates, the central idea is to create bite-size, highly accountable
regional brand units that can get close to their target customers' tastes and needs. The
goal, especially for Ford's money-losing passenger-car brands, is to bring out cars with
brand personalities tailored to suit the younger, hipper buyers who have flocked to
European and Japanese cars. Says one source knowledgeable about the plan: ''It's going to
help them get the brand differentiation they want.''
Creating such virtual corporations inside Ford also provides another benefit: training
grounds for future leaders. Nasser himself cut his teeth on a series of jobs running
regional operations in Argentina, Brazil, Australia, and Europe. ''Ford 2000 eliminated
the training ground for all of Ford Motor,'' laments one former Ford exec. Nasser's new
''strategic business units'' would give a new generation of Ford managers the chance to
test their leadership skills with hands-on operating experience.
Striking the right balance between global integration and regional influence is extremely
difficult, management gurus say. And auto analysts and industry watchers mostly applaud
Nasser's willingness to adapt Ford's game plan on the fly. ''He seems to have a reasonably
agile philosophy, not getting locked into one strategy forever,'' says David E. Cole,
director of the University of Michigan's Office for the Study of Automotive
Transportation. Ford is likely to remain ''a company that's continuously restructuring, so
that tear-ups don't have to be traumatic,'' adds Merrill Lynch & Co. analyst John
Such continuing change seems likely as Nasser puts his stamp on Ford. So count on more
shakeups and new business plans from the nimble Jac.
By Kathleen Kerwin in Detroit, with Jack Ewing in Frankfurt
NEWS: ANALYSIS & COMMENTARY
Road to Beyond Year 2000
Alex Trotman becomes chairman and CEO
Trotman announces his ''Ford 2000'' plan for integrated global operations that are divided
along functional lines and not regional or brand lines
Trotman brings Jacques Nasser, then head of Ford Europe, back to Dearborn headquarters to
run the new global product-development group
The U.S. versions of Ford's so-called world car, the Mondeo, are introduced
Regional operating units in Latin America and Europe cease to exist as Ford 2000 begins to
Nasser dispatches James Padilla to Brazil to take charge of Ford's ailing South American
Nasser names James Donaldson to run Ford Europe
William Ford is named chairman and Nasser succeeds Trotman as CEO. Nasser begins brand
Nasser is expected to realign Ford organization to strengthen brand and regional emphasis,
reflecting his strategic initiatives