KEL663 ©2012 by the Kellogg School of Management at N.docx

KEL663
©2012 by the Kellogg School of Management at Northwestern
University. This case was prepared by Matt Bell under the
supervision
of Professor James B. Shein and was based on research done by
Scott Schuenke ’11, Erik Severinghaus ’12, Daniel G. Simmons
’11,
Jason Snider ’11, Lisa Taylor ’11, and Matt Taylor ’11. Cases
are developed solely as the basis for class discussion. Cases are
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intended to serve as endorsements, sources of primary data, or
illustrations of effective or ineffective management. To order
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the Kellogg School of Management.
JAMES B. SHEIN
At Ford, Turnaround Is Job One
When Alan Mulally became CEO of Ford Motor Company in
September 2006, the company

was bleeding red ink. All of its brands were losing money.
Ford’s U.S. market share had been in
freefall for more than ten years, dropping since 1995 from 25 to
16.8 percent and leaving the
company with its smallest market share since 1920. Total losses
for 2006 were estimated at $8
billion.
Ford was losing ground domestically and internationally.
General Motors’ (GM) Chevrolet
brand had overtaken Ford to become the number-one U.S.
brand. Toyota had surpassed Ford to
become the second-largest automaker in the world behind GM
(by early 2007, Toyota would
become number one, pushing Ford to third place).
As recently as fall 2000, Ford’s shares paid a quarterly dividend
of $0.50, but by the time
Mulally accepted the job, it had been reduced four times and
stood at $0.05. During the few
weeks before he actually started, the dividend was suspended.
In some ways, Mulally was a surprising choice. He was a thirty-
seven-year veteran of
Boeing, and there was no precedent for bringing an outsider into
the insular world of automaking.
Still, Mulally’s hiring was widely seen as a good decision.
Analysts pointed out numerous
similarities between Boeing and Ford. Both were subject to
global competition, complex
regulations, and fast-changing technologies. Both had a
unionized workforce. In both the auto and
aviation industries, designing and introducing new models took
years (in fact, nearly every new
vehicle Ford rolled out in the two years following Mulally’s
arrival was approved before he

began his Ford career).
Perhaps most importantly, as head of Boeing’s commercial
airplane division Mulally had led
a successful turnaround effort. The company had been losing
market share to archrival Airbus,
struggling with inefficiencies, and dealing with diminished
public perceptions about the
company. An airline industry downturn brought on by the 9/11
terrorist attacks had led to a
massive restructuring effort at Boeing in which Mulally cut the
workforce from 120,000 to
50,000, reduced the time it took to build an airliner by 50
percent, and introduced the fastest-
selling new airplane ever.1 When he left Boeing, the company
was an example of what could be
accomplished through good leadership and a sharpened focus on
product. With Ford in dire need
1 Monica Langley, “Inside CEO Mulally’s Radical Overhaul of
Ford,” Pittsburgh Post-Gazette, December 22, 2006,
http://www.postgazette.com/pg/06356/748288-185.stm.
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AT FORD, TURNAROUND IS JOB ONE KEL663
2 KELLOGG SCHOOL OF MANAGEMENT
of turning itself around, Mulally’s revitalization of Boeing was

especially appealing to Ford CEO
William Clay Ford Jr.
But there was also a healthy dose of skepticism as to whether
Mulally could keep Ford out of
bankruptcy. Some felt he was brought in too late.2
A Brief History of Ford
Henry Ford Sr. was born in 1863 in Detroit. He was an
engineer, first by hobby and then,
beginning in 1890, by profession. While working for the Detroit
Edison Company, he used his
free time to build experimental gasoline engines, eventually
building a gasoline-powered buggy.
By 1899 his superiors thought his hobby was becoming a
distraction and they forced him out.
Shortly thereafter, Ford founded the Detroit Automobile
Company, but left over disputes with
colleagues who did not share his vision for faster production of
lower-margin vehicles.
In June 1903 he founded Ford Motor Company to pursue his
vision. The company quickly
became famous for making cars for the masses.
Ford introduced the Model T in 1908 and over the course of
eighteen years went on to sell
nearly 15.5 million units with help from the moving automobile
assembly line he invented in
1913. An important key to the Model T’s success was Ford’s
commitment to manufacturing
simplicity, exemplified by his famous statement: “A customer
can have a car painted any color
that he wants, so long as it is black.”

The Model T ran into its first serious competition in 1926 when
GM introduced the more
powerful and stylish Chevrolet automobile. Ford discontinued
the Model T in May 1927.
Henry Ford Sr.’s son, Edsel, became company president in 1918
and led the business until his
death from cancer at age forty-nine in 1943. Ford Sr. then
resumed his leadership of the company
but quickly began grooming Edsel’s son, Henry II, to take over,
which he did in 1945.
Over time, Ford acquired partial or full ownership of numerous
other brands, including
Mazda, Aston Martin, Jaguar, Land Rover, and Volvo.
William Clay Ford Jr. took over as chairman and CEO at the
end of 2001. That year, the
company lost nearly $5 billion. The company was suffering
from poor employee morale, quality
issues, sluggish sales, and intense competition.3 It was also
reeling from tire problems with its
Explorer SUV, which caused numerous accidents and led the
company to take a $2.1 billion
charge to replace all Explorer tires.
In 2002 Bill Ford launched a major effort to revitalize the
company, divesting several
noncore companies, lowering costs, and launching “the biggest
wave of new products in our
2 David Kiley, “An Interview with Bill Ford and Alan Mulally,”
Bloomberg Businessweek, September 7, 2006,
http://www.businessweek.com/autos/content/sep2006/bw200609
07_376309.htm.

3 Funding Universe, “Ford Motor Company: Company History,”
http://www.fundinguniverse.com/company-histories/Ford-
Motor-
Company-Company-History.html.
KEL663 AT FORD, TURNAROUND IS JOB ONE
KELLOGG SCHOOL OF MANAGEMENT 3
history.”4 He noted the challenges of full-scale global
competition and acknowledged that the
days of unlimited, inexpensive gasoline were gone forever.
In January 2006, when the company was still losing market
share, it launched a new
turnaround effort dubbed “The Way Forward,” which was the
first fundamental restructuring of
the company. But before this effort was even a year old, he
realized new leadership was needed
and he persuaded Mulally to take the job.
The Decline of a Once-Great Brand
Despite its long-used motto, “Quality Is Job One,” by the time
Mulally came on board, Ford
had dug itself into a rut of churning out poor-quality,
uninteresting vehicles. One such example
was the Ford Focus, a subcompact introduced in 2000 as a car
for the thirty-five-and-under set

and heavily promoted for its driving pleasure. It was recalled no
less than nine times to fix a host
of safety and quality issues.5 Ford’s attempt at succeeding in
the minivan market failed miserably
with its Windstar and Freestar, which suffered from self-
inflicted wounds of poor quality and low
safety ratings.
In terms of design aesthetics, for a painfully honest critique one
had to look no further than
Ford’s own Mark Fields, head of the North America division. In
2006 he told one interviewer that
some of the company’s products had been so bland that “the
only way you’d recognize them is if
they ran over you.”6
Despite its founding on the principles of simplicity, Ford had
become extremely complex,
with numerous vehicle platforms and countless vehicle
configurations; each region, division, and
brand running independently; and a corporate culture in which
people hesitated to deliver bad
news. That last shortcoming went a long way toward explaining
why overly aggressive sales
forecasts had become the norm, which resulted in consistent
excess capacity at Ford’s
manufacturing plants through the 2000s.
Ford’s market share continued to erode under intense
competition, especially from Toyota
and Honda. Its financials also deteriorated through 2006. (See
Exhibit 1 through Exhibit 3.)
Ford, like its domestic competitors, had become heavily
dependent on sales of its high-
margin trucks and SUVs. Such vehicles had been generating

$6,000 to $10,000 of profit per unit,
while passenger car sales had been a mostly break-even
proposition, and small cars were sold at a
loss.7
That dependence on high-margin, big vehicles left each of
Detroit’s automakers woefully
unprepared for rising fuel prices, which hit $4 per gallon in
2008, and the resulting change in
consumer preferences toward smaller, more fuel-efficient
vehicles.
4 Ford 2005 Annual Report, p. 2.
5 SafetyForum, “Ford Focus,”
http://www.safetyforum.com/fordfocus.
6 Maria Godoy, “Q&A: Ford’s ‘Way Forward,’” National Public
Radio, January 23, 2006, http://www.npr.org/templates/story/
story.php?storyId=5168799&ps=rs.
7 Jon Gertner, “From 0 to 60 to World Domination,” New York
Times Magazine, February 18, 2007.
That same year also marked the start of a multiyear recession.
With tighter credit, consumers
had a harder time financing new car purchases. A rising level of

unemployment along with
feelings of insecurity among those who had jobs brought a wave
of frugality to the country, with
people hanging onto their cars longer. A 2009 survey by
Consumer Reports found that half of
respondents had delayed the purchase of a new vehicle, with 30
percent citing concerns about the
weak economy.8 (See Exhibit 4.)
Previous Turnaround Attempts
When Mulally took over, Bill Ford was in the midst of his
second turnaround effort. His 2002
restructuring included a major downsizing, with 20,000 job cuts
and numerous plant closings.
Asked why another, much larger restructuring effort was needed
just four years later, Ford
president and chief operating officer Jim Padilla said the
mistake with the 2002 restructuring was
that Ford thought it was in the midst of a normal cycle of
industry ups and downs, when what was
really happening was a fundamental shift in the very nature of
the market.9 The company needed
to figure out how to profitably manufacture and sell smaller
vehicles. There was no attempt to
change strategy before downsizing.
Ford’s 2006 restructuring, “The Way Forward,” included cutting
another 30,000 jobs and
idling fourteen plants worldwide by 2012.10 Analysts felt that
Ford was beginning to recognize
the need to change every aspect of the company. But before
long Bill Ford realized that its
corporate culture was blocking changes throughout the
company, and therefore new leadership
was required.

Even before the 2002 restructuring, Ford had tried to make
sweeping operational changes,
such as cutting vehicle development costs, by engineering a car
once to serve multiple markets
worldwide and trying to operate as one company rather than as a
collection of regional
companies. But these prior efforts failed, in large part because
the company’s executives and
managers resisted the pressure to give up their turf.
The Turnaround Tripod
Strategy
Shortly after becoming CEO, Mulally reengineered the
turnaround effort he inherited and
rebranded it as “One Ford.” That stood for One Team, One Plan,
One Goal. The new plan was
built on the themes of focus and simplification.
Before slashing costs, Mulally considered what Ford’s strategy
should be. He put a laser
focus on the Ford and Lincoln brands, divested its other brands,
and launched a full family of
8 “Average Age of Cars Is Increasing,” Consumer Reports Car
Blog, March 5, 2009,
http://blogs.consumerreports.org/cars/2009/03/
average-car-age-increasing-older-cars-on-the-road.html.
9 Godoy, “Q&A: Ford’s ‘Way Forward.’”
10 “Ford Overhauls Way Forward Plan,” AutoWeek, September
15, 2006.

Ford vehicles aimed at moving the company away from its
dependence on trucks and SUVs. His
goal was to make each model the best in its class in terms of
quality, fuel efficiency, safety, smart
design, and value.
The company’s focus on fuel efficiency led it to develop the
EcoBoost engine that generated
up to 20 percent better fuel efficiency. The company also began
producing hybrid vehicles and
made plans to introduce electric vehicles in the near future.
To help make money from smaller vehicles, Ford created
packages of high-margin, must-
have options, such as high-tech “infotainment” features. Its
Sync infotainment suite, which
enabled drivers to control stereos, smart phones, seat controls,
and more with a voice command–
operated system,11 added $400 to a vehicle’s sticker price
while costing the company less than
$30.12 Not only did Sync help grow Ford’s margins, but it
helped enhance the company’s image
as well. In a 2010 survey, 80 percent of potential customers said
Sync improved their overall
image of Ford and 70 percent said it made them more likely to
buy a Ford.

Operations
An important aspect of Mulally’s turnaround plan was improved
manufacturing productivity,
which brought manufacturing capacity in line with consumer
demand. That required paring its
workforce from 122,400 in 2006 to 72,600 at the end of 2009
and closing twelve North American
manufacturing plants. The company planned to close four more
plants by 2011.
Another key aspect of manufacturing productivity was a greatly
simplified product lineup.
Under Mulally’s leadership, Ford reduced the number of
platforms (chassis) it used to build
vehicles from twenty to eight, and the number of vehicle models
it produced from ninety-seven in
2006 to forty-five in 2010. The company’s intention was to
eventually offer as few as twenty to
twenty-five vehicle models. Mulally had done something similar
at Boeing, where he reduced the
number of aircraft models from fourteen to four.13
The number of configurations available for each model was
reduced as well. When Ford
introduced its newest Explorer in July 2010, it was offered in
1,500 different configurations—
down from a whopping 76,000 configurations just two years
earlier.
Ford’s simplified product line-up resulted in far greater “parts
commonality,” meaning that
the same or similar vehicles built in different countries used the
same parts. In late 2010, for
example, Mulally said 80 percent of the 2011 Ford Focus’s parts

would be the same no matter
where it was built.14 Greater parts commonality also enabled
the company to reduce its global
suppliers from 3,300 in 2004 to 1,600 at the end of 2009.
Ultimately, the company had a goal of
reducing that number to 750.15
11 John Rosevear, “Ford Just Keeps Rolling,” The Motley Fool,
July 23, 2010,
http://www.fool.com/investing/general/2010/07/23
/ford-just-keeps-rolling.aspx.
12 Ed Oswald, “Microsoft’s Sync Parts Cost Ford About $30,”
Betanews, February 22, 2008, http://www.betanews.com/
article/Microsofts-Sync-parts-cost-Ford-about-30/1203717682.
13 Langley, “Inside CEO Mulally’s Radical Overhaul of Ford.”
14 Ibid.
15 Ford Motor Company, “Working With Suppliers:
Sustainability Report 2009/10,”
http://corporate.ford.com/microsites/
sustainability-report-2009-10/economy-recovery-restructuring-
suppliers.
Financials

Within ninety days of becoming Ford’s CEO, Mulally appeared
before a room full of bankers
and raised $23.6 billion—enough money to stave off
bankruptcy, fund the company’s turnaround,
and protect against an economic downturn that he sensed was
looming. He mortgaged all of the
company’s assets to raise the money, including the company’s
iconic brand logo.16
Still, two years later, in November 2008, Mulally joined his
Detroit counterparts in
Washington, D.C., to lobby the federal government for a
bailout. They were rebuffed—even
scolded—for showing up in private jets. A month later the three
leaders returned, each driving a
fuel-efficient company car, and this time the reception was
warmer.
GM and Chrysler were in danger of going out of business by the
end of the year. Ford’s
position was much stronger thanks to the private funding raised
by Mulally, and he said he never
intended to use government money. He appeared before
Congress, he explained, mostly to
support the other automakers but also to appeal to government
leaders just in case the economy
worsened and Ford needed the money in the future. A week
after that meeting he declared that
Ford would forgo government funds.17
Both GM and Chrysler ended up receiving billions in
government loans. Ford’s ability to
survive without the government’s assistance helped Ford
distinguish itself from its cross-town
rivals, improving its reputation and increasing its brand equity.

Ford’s turnaround also required concessions from the UAW,
which it won, including a
reduction in salaried benefits.18 Concessions from the UAW in
2007 and 2009 were estimated to
save the company $500 million per year.
Ford’s revitalized cost structure helped it hold down incentives,
which raised its profit
margins. (See Exhibit 5.)
The Leadership Factor
Ford’s success was about more than a revitalized product line,
better manufacturing
efficiency, and fundraising. There was a distinct leadership
difference, starting at the board level.
The company’s board deserved credit for bringing in fresh
leadership. While GM’s board
stuck with Rick Wagoner, Ford recognized the need for a new
perspective and brought in
Mulally. Even Bill Ford admitted that the company’s leaders,
himself included, had become
cautious. He had confidence that Mulally would put a business
framework in place that would
liberate people to pull off bolder designs.19
16 Kimberly S. Johnson and Tom Krisher, “Ford Bailout Money
Unecessary, Company Says,” Huffington Post, December 10,
2008,
http://www.huffingtonpost.com/2008/12/10/ford-bailout-money-
unnece_n_149824.html.
17 Johnson and Krisher, “Ford Bailout Money Unecessary,
Company Says.”
18 Fred Meier, “Ford Turnaround Plan Turns Around $2.08

Billion Profit,” USAToday, April 27, 2010,
http://content.usatoday.com/
communities/driveon/post/2010/04/ford-turnaround-plan-turns-
around-208-billion-profit/1.
19 Kiley, “An Interview with Bill Ford and Alan Mulally.”
Mulally’s teambuilding and communication skills went a long
way toward reconnecting
employees with the pride of the once-great company, which
resulted in a much-needed boost in
morale.
Recognizing that it takes time to bring about sweeping changes
in the auto industry, one of
Mulally’s first moves was to line up enough financing to bring
his vision to fruition. The New
York Times declared, “Ford’s decision to borrow billions in
2006 when the capital markets were
thriving will go down as one of the most significant moves in
the company’s 105-year history.”20
In 2007 he sold Jaguar, Land Rover, Volvo, and Aston Martin,
and reduced the company’s
stake in Mazda.

One of his other top priorities was to stop inflated sales
forecasts. In an early interview, he
said, “Turnarounds of this magnitude succeed when capacity
and costs are aligned with a realistic
expectation of demand.”21
But he recognized that the company’s survival depended on
much more than the cost
structure. Ford needed to revitalize its product offerings and
public perceptions.
Mulally fostered a culture of transparency, demanding that the
company deal with the reality
of the situation. For instance, every Thursday at 7:00 a.m. (a
tradition he had started at Boeing),
Mulally conducted a two-and-a-half-hour business plan review
(BPR) with his eighteen direct
reports. Everyone gave a status update on his or her function’s
contribution to the turnaround and
its performance against corporate profit targets. Some three
hundred PowerPoint slides containing
key performance metrics were reviewed. The purpose was not to
highlight successes but to
provide accurate reports. There had been a strong history of
resistance against bad news.22
At these meetings, participants were required to pay attention—
no cell phones, Blackberrys,
or side conversations. Candor was expected as data and then
more data were reviewed. No one
was punished for bringing bad news to the table.23 In fact,
when one manager detailed the poor
performance of his unit, some Ford executives were stunned by
Mulally’s applause and his
encouragement, telling the bearer of bad news, “Great
visibility.”24

The fact that Mulally was not a “car guy” allowed him to ask
innocent questions. In one early
meeting in his office, he laid out twelve different metal rods
that Ford used to hold up a vehicle’s
hood. He wanted to demonstrate to managers that this kind of
variation was costly and did not
matter to consumers.
In order to familiarize himself with the Ford product, Mulally
began driving a different Ford
vehicle to and from work each day. In the predawn darkness one
morning, he got into a Mercury
Milan and reached for the light switch, but it was not where he
expected it to be. He had to get
out of the car and turn on the lights in his garage to find it.
Another time, in a Ford Escape, he hit
20 Bill Vlasic, “Choosing Its Own Path, Ford Stayed
Independent,” New York Times, April 8, 2009,
http://www.nytimes.com/
2009/04/09/business/09ford.html?_r=1&scp=5&sq=vlasic%20m
ullally%20debt%20ford&st=cse.
21 Business Management, “Management Issues: Is This The
Toughest Job in America?”
http://www.busmanagement.com/article/Is-
this-the-toughest-job-in-America/.
22 Stephanie Overby, “How a Global IT Revamp Is Fueling
Ford’s Turnaround,” CIO, August 30, 2010,
http://www.cio.com/article/
607564/How_a_Global_IT_Revamp_Is_Fueling_Ford_x2019_s_
Turnaround.
23 Langley, “Inside CEO Mulally’s Radical Overhaul of Ford.”
24 Ibid.

what he had learned to be the light switch, but the windshield
wipers came on. He found that the
wipers and lights were in still different positions in a Mustang.
After complaining to Americas product head Derrick Kuzak,
Mulally learned that Ford had a
longstanding practice of each product line operating
independently, which resulted in
differentiation in a bid to produce a “unique car.” Mulally’s
response: “World-class companies do
not operate this way.”
Kuzak soon began creating a “Ford feel” for all its vehicles.
“When you get into a Ford
vehicle blindfolded, you should know immediately it’s a Ford
by the feel,” Kuzak said.25
Leadership at the Competition
G M
While Ford recognized the need for new leadership, it took the
U.S. government to help GM
see the need for a new CEO, pushing out Rick Wagoner in early
2009. Steven Rattner, who led

the government’s efforts to restructure GM and Chrysler,
branded Wagoner as “aloof and in
denial” and “living in a fantasy that [GM] was still the greatest
carmaker on earth.”26
Wagoner was replaced by fellow GM insider Fritz Henderson,
who lasted only until the end
of 2009, when former AT&T CEO Ed Whitacre replaced him.
Named to lead the company after it
emerged from bankruptcy, Whitacre was seen as a good choice,
having taken regional phone
company Southwestern Bell through more than a dozen mergers
and acquisitions and turning it
into the AT&T of today. But Whitacre made it clear he was
taking the GM position only until the
company was on the road to profitability.
In August 2010, with GM poised for an initial public offering
designed to help pay back the
billions borrowed from the government, Whitacre declared his
mission complete and stepped
down. Dan Akerson, a managing director at buyout shop Carlyle
Group and a GM board member
since 2009, replaced him.
It is difficult to compare Mulally’s leadership style with that of
GM’s leader, because GM
had four CEOs in a span of just eighteen months. But it is safe
to say that GM was slower to
respond to changing market conditions than Ford. While Ford
became focused on the Ford brand,
GM steadfastly held onto its eight brands and its various
corporate fiefdoms. It took the
company’s bankruptcy filing to motivate it to shed Saturn,
Hummer, Pontiac, and Saab.

T O Y O T A
While Ford, GM, and Chrysler were all losing sales even before
the recession took hold in
2008, Toyota’s sales were rising. A relentless focus on quality
led to rapid growth, but before
long Toyota put sales growth ahead of quality. Senior
management became intent on becoming
the global sales leader.27
25 Ibid.
26 Micheline Maynard, “Bailing Out the Big Guys, Posthaste,”
New York Times, September 19, 2010,
http://www.nytimes.com/
2010/09/20/books/20book.html?ref=chrysler_llc.
27 Steven Spear, “Learning from Toyota's Stumble,” Harvard
Business Review, January 28, 2010,
http://blogs.hbr.org/cs/2010/01/
learning_from_toyotas_stumble.html.
The company’s rapid growth “sparked tremendous internal
concerns about quality-control
problems,”28 and in late 2009 those fears were realized. Just
after Toyota surpassed GM to

become the world’s largest automaker, its hard-earned
reputation for quality crumbled when
previously denied problems with sticking gas pedals emerged,
leading to numerous recalls. In late
January 2010, the company suspended sales of eight recalled
vehicles to address the accelerator
pedal problem. By the end of 2010, the company had recalled
8.5 million cars and trucks for a
host of safety, quality, and reliability problems, including a
brake malfunction in its much-
heralded Prius hybrid.
In the wake of its problems, the company lengthened product
development lead times by
several months to allow more time for testing and reduced the
number of engine and key feature
variations to simplify engineering.
While Toyota ended 2010 with a global sales increase of 8
percent, it was the only automaker
to report lower sales in the United States, Toyota’s largest
market. The company’s share of the
U.S. market fell to 15.2 percent from 17 percent in 2009.29
Toyota’s U.S. deliveries slipped 0.4
percent compared with overall industry growth of 11.1
percent.30
Toyota’s problems could not have come at a better time for
Ford.
C H R Y S L E R
Chrysler had a revolving door not only to its CEO’s office, but
to its owner’s office as well.
German-based Daimler-Benz purchased the company in 1998,

creating the combined entity
DaimlerChrysler AG. But in 2007 DaimlerChrysler sold
Chrysler to the U.S. private equity firm
Cerberus Capital Management. In that same year, as part of
Chrysler’s bankruptcy process, Fiat
acquired a stake in the company.
Former Home Depot CEO Robert Nardelli was brought in to run
Chrysler in 2007, the same
person who did so much damage to Home Depot and got more
than $100 million in severence.
Then came Robert Kidder, who was hired to take the reins after
the company came out of
bankruptcy. He was succeeded by Fiat’s CEO, the Italian
lawyer-accountant Sergio Marchionne.
The newly configured company planned to sell Fiats through
Chrysler’s dealer network,
while using its fuel-efficient engine technology to help Chrysler
gain market share.
S U P P L I E R S
Mulally realized that many of the industry’s suppliers were
struggling to stay in business; a
number of them were approaching bankruptcy. Without parts,
Ford was out of business as well.
Under the direction of Tony Brown, Ford vice president of
global purchasing, cross-
functional teams were set up to monitor parts manufacturers.
Human relations could assign Ford
operating employees to suppliers, Ford treasury could help with
loans, and the legal department

28 Gertner, “From 0 to 60 to World Domination.”
29 Yoshio Takahashi, “Toyota Global Sales Up 8%,” Wall
Street Journal, January 25, 2011, http://online.wsj.com/article/
SB10001424052748703398504576101190281234486.html.
30 John Crawley and David Lawder, “Factbox: Throttle Finding
Latest Ttwist in Toyota Saga,” Reuters, February 9, 2011,
http://www.reuters.com/article/2011/02/09/us-toyota-usa-fb-
idUSTRE7180BK20110209.
could help with contract issues.31 Much of the work had to be
secret, especially if a supplier was
to be abandoned after a model run ended. That supplier had to
survive until Ford no longer
needed parts from it.
Some Steps Backward and Then Some Bold Steps Forward
Between 2006 and 2008 Ford lost more than $30 billion, just as
the skeptics had argued when
Mulally was hired. It took a while for an automaker’s changes,
such as the design and launch of
new models, to impact the company’s performance.
The light at the end of the tunnel started to appear in June 2007
when Ford made its way into

the top ten of J. D. Power & Associates’ annual Initial Quality
Study, a measure of customer
complaints in the first ninety days of vehicle ownership. In
summer 2009 Ford earned its highest
quality rankings ever, beating Toyota and Honda for the first
time.32 And in June 2010 Ford broke
into the top five.
Meanwhile, Toyota fell all the way to twenty-first place in
2010, its lowest ranking since the
survey was launched in 1987; its rapid fall resulted from its
numerous safety-related recalls.
Ford also won Motor Trend magazine’s 2010 Car of the Year
and Truck of the Year awards
for its Fusion Hybrid and Transit Connect, respectively. Ford’s
quality, style, and fuel-economy
improvements caught the eye of more than just industry
watchers. They translated into strong
sales, with Ford’s market share gaining 1.9 percentage points
from the end of 2008 to summer
2010, climbing to a respectable 17.3 percent.
Automobile Magazine named Mulally its 2010 Man of the Year,
describing him as “living
proof that a single, extraordinary leader with vision and
determination really can make all the
difference in an organization.”33
31 Bryce G. Hoffman, “Inside Ford’s Fight to Avoid Disaster,”
Wall Street Journal, March 9, 2012.
32 David Kiley, “Ford Tops Quality Survey,” Bloomberg
Businessweek, July 21, 2009,
http://www.businessweek.com/autos/autobeat/
archives/2009/07/ford_tops_quali_2.html.

33 Joe DeMatio, “2010 Man of the Year: Alan Mulally, CEO
Ford Motor Company,” Automobile Magazine, November 2009.
Exhibit 1: Total Ford Financial Statements ($ in millions)
2010 2009 2008 2007 2006 2005
INCOME STATEMENT
Sales 128,954 118,308 145,114 170,572 160,065 176,835
Cost of sales 104,451 100,016 127,102 142,587 148,866
144,920
Selling, administration, and other expenses 14,562 14,288
23,304 21,837 19,389 25,071
Operating income 9,941 4,004 -5,292 6,148 -8,190 6,844
Goodwill impairment 0 0 0 2,400 0 0
Non-operating income -11 5,840 423 3,030 1,478 2,342

Interest expense 6,152 6,828 9,805 11,038 8,783 8,417
Minority interests 538 10 176 403 421 285
Pretax income 4,316 3,026 -14,498 -3,857 -15,074 1,054
Corporate income -4 240 205 271 194 469
Taxes (corporate level) 592 69 63 -1,333 -2,655 -855
Net income 3,728 2,717 -14,766 -2,795 -12,613 1,440
Depreciation 5,900 8,018 12,826 13,052
EBITDA 15,841 12,022 7,534 19,200
BALANCE SHEET
Cash and marketable securities 35,771 43,474 39,952 50,798
55,624 0
Auto receivables 3,992 3,708 3,065 4,530 3,163 0
Finance receivables 73,265 80,885 96,101 112,733 110,767 0
Inventories 5,917 5,450 6,988 10,121 10,017 0
Other current assets 5,924 5,924 5,787 6,555 9,185 0
Net investment in operating leases 10,393 15,062 23,120
30,309 26,606 0
Property, plant, and equipment 23,027 24,596 23,930 35,979

35,786 0
Goodwill 102 209 246 2,069 3,611 0
Deferred income taxes 2,468 5,663 7,204 9,268 14,85 0
Other assets 5,585 12,919 16,554 23,365 21,248 0
Total assets 166,444 197,890 222,947 285,727 290,858 0
Payables 16,362 14,594 13,145 20,832 21,214 0
Other current liabilities 17,457 21,584 32,374 30,343 30,139
0
Current maturities of debt 2,049 2,095 1,191 920 1,924 0
Long-term debt 102,140 130,992 151,878 167,610 170,548 0
Other liabilities 27,286 35,140 38,886 60,394 70,498 0
Total liabilities 165,294 204,405 237,474 280,099 294,323 0
Shareholders equity -642 -6,515 -14,527 5,628 -3,465 0
Total liabilities and shareholders equity 164,652 197,890
222,947 285,727 290,858 0

Exhibit 2: Automotive Financial Statements ($ in millions)
2010 2009 2008 2007 2006 2005
INCOME STATEMENT
Sales 119,280 105,893 129,165 154,379 143,249 153,413
Cost of sales 104,451 100,016 127,102 142,587 148,866
144,920
11,356 13,660 12,327 12,704
Operating income 2,920 -2,706 -9,293 -1,868 -17,944 -4,211
Goodwill impairment 0 0 0 2,400 0 0
Non-operating income -326 5,288 -726 1,161 1,478 1,247
Interest expense 1,807 1,515 2,061 2,363 995 1,220
Minority interests 526 145 163 389 421 285
Pretax income 1,313 1,212 -11,917 -5,081 -17,040 -3,899
Corporate income 0 0 0 0 0 0
Taxes (corporate level) 0 0 0 0 0 0
Net income 1,313 1,212 -11,917 -5,081 -17,040 -3,899

Depreciation 3,876 4,094 5,803 6,763
EBITDA 6,796 1,388 -3,490 4,895
BALANCE SHEET
32,588
Auto receivables 3,992 3,708 3,065 4,530 3,163
Finance receivables 0 0 0 0 0
Inventories 5,917 5,450 6,988 10,121 10,017
Other current assets 5,924 5,924 5,787 6,555 9,185
Net investment in operating leases 0 0 0 0 0
Property, plant, and equipment 23,027 24,596 23,930 35,979
35,786
Goodwill 102 200 237 2,051 3,594
Deferred income taxes 2,468 5,663 7,204 9,268 14,851
Other assets 4,460 10,983 10,931 16,948 13,450
Total assets 66,398 82,002 73,815 118,489 122,634
Payables 15,010 13,358 11,175 18,955 19,627
Other current liabilities 17,457 21,584 32,374 30,343 30,139
Current maturities of debt 2,049 2,095 1,191 920 1,924

Long-term debt 17,028 32,321 23,036 25,777 28,512
Other liabilities 23,360 29,177 29,867 47,540 55,213
Total liabilities 74,904 98,535 97,643 123,535 135,415
Shareholders equity -8,506 -16,533 -23,828 -5,046 -12,781
Total liabilities and shareholders equity 66,398 82,002 73,815
118,489 122,634
Exhibit 3: Financial Services Financial Statements ($ in
millions)
2010 2009 2008 2007 2006 2005
INCOME STATEMENT
Sales 9,674 12,415 15,949 16,193 16,816 23,422
Cost of sales 0 0 0 0 0 0
11,948 8,177 7,062 12,367

Operating income 7,021 6,710 4,001 8,016 9,754 11,055
Goodwill impairment 0 0 0 0 0 0
Non-operating income 315 552 1,149 1,869 0 1,095
Interest expense 4,345 5,313 7,744 8,675 7,788 7,197
Minority interests 12 -135 13 14 0 0
Pretax income 3,003 1,814 -2,581 1,224 1,966 4,953
Corporate Income 0 0 0 0 0 0
Taxes (corporate level) 0 0 0 0 0 0
Net income 3,003 1,814 -2,581 1,224 1,966 4,953
Depreciation 2,024 3,924 7,023 6,289
EBITDA 9,045 10,634 11,024 14,305
BALANCE SHEET
23,036
Auto receivables 0 0 0 0 0
Finance receivables 73,265 80,885 96,101 112,733 110,767
Inventories 0 0 0 0 0

Other current assets 0 0 0 0 0
Net investment in operating leases 10,393 15,062 23,120
30,309 26,606
Property, plant, and equipment 0 0 0 0 0
Goodwill 0 9 9 18 17
Deferred income taxes 0 0 0 0 0
Other assets 4,349 5,160 8,158 8,440 9,265
Total assets 103,270 119,112 151,667 169,261 169,691
Payables 1,352 1,236 1,970 1,877 1,587
Other current liabilities 0 0 0 0 0
Current maturities of debt 0 0 0 0 0
Long-term debt 85,112 98,671 128,842 141,833 142,036
Other liabilities 7,150 9,187 11,554 13,456 15,593
Total liabilities 93,614 109,094 142,366 157,166 159,216
Shareholders equity 9,656 10,018 9,301 12,095 10,475
Total liabilities and shareholders equity 103,270 119,112
151,667 169,261 169,691

Exhibit 4: Average Age of Passenger Cars and Light Trucks
Year Passenger Cars Light Trucks
Total Light
Vehicles
1995 8.4 8.3 8.4
1996 8.5 8.3 8.5
1997 8.7 8.5 8.6
1998 8.9 8.5 8.8
1999 9.1 8.5 8.8
2000 9.1 8.4 8.9
2001 9.3 8.4 8.9
2002 9.4 8.4 9.0
2003 9.6 8.5 9.1
2004 9.8 8.6 9.4
2005 10.1 8.7 9.5

2006 10.3 8.9 9.7
2007 10.4 9.0 9.8
2008 10.6 9.3 10.0
2009 10.8 9.8 10.3
2010 11.0 10.1 10.6
2011 11.1 10.4 10.8
Exhibit 5: Operating Cash Flows (in millions)
2010 2009 2008 2007 2006 2005
Net income/(loss) attributable to Ford 6,561 2,717 (14,766)
(2,795) (12,613) 1,440
(Income)/loss of discontinued operations NA (5) (9) (41) (2)
(47)
Cumulative effects of changes in
accounting principles

NA NA NA NA – 251
Depreciation and special tools
amortization
5,900 7,667 12,536 13,052 16,453 14,011
Other amortization (316) (1,087) (369) 795 66 55
Goodwill impairment NA NA NA 2,400 NA NA
Impairment charges (depreciation and
amortization)
NA 311 7,404 NA NA NA
Held-for-sale impairment NA 650 421 NA NA NA
U.S. consol dealerships goodwill impair NA NA 88 NA NA
NA
Provision for credit and insurance losses (216) 1,030 1,874
668 241 483
Net (gain)/loss on extinguishment of debt 983 (4,737) (170)
512 NA NA
Net (gain)/loss on investment securities (83) (410) 1,376 20
NA NA
Net (gain)/loss on pension & OPEB
curtail
(29) (4) (2,714) (1,164) NA NA
Net (gain)/loss on settlement of U.S.

hourly
Retiree health care obligation NA 248 NA NA NA NA
Net losses/(earnings) from eq
investments
In excess of dividends received (198) (45) 38 (175) (253)
(135)
Foreign currency adjustments (348) 92 (503) 219 112 36
Net (gain)/loss on sale of businesses 18 33 522 (179) (33)
(1,099)
Stock option expense 34 29 35 75 77 116
Cash changes in operating assets and liab
were as follows:
Provision for deferred income taxes 34 (746) 1,880 (5,477)
(2,500) 704
Decrease/(increase) in accounts rec and
other assets
765 2,612 973 45 2,221 (2,813)
Decrease/(increase) in inventory (903) 2,201 (137) 371 (695)
(94)
Increase/(decrease) in accounts payable
and accrued and other liabilities

(704) (2,832) (12,299) 1,348 6,553 (66)
Net sales/(purchases) of trading
securities
NA NA NA 4,539 (6,771) (629)
Other (1,337) 881 542 914 275 132
Net cash (used in)/provided by operating
activities
10,161 8,679 (3,417) 15,127 3,131 12,345
1st Assignment
Read a selection of your colleague’s posts.
Respond to two or more colleagues in one or more of the
following ways:
· Provide an analysis, based on your understanding of both this
week’s readings and your experience and observations, of the
challenges of integrating the skills of management and
leadership.
· Ask a probing question about how one can learn to integrate
these skills effectively, substantiated with additional
background information, experiences, observations, evidence, or

research.
1st Person to respond to: (Respond with 1 Paragraph) No Report
Format Needed
As I reflect on the leaders at my job, there are several different
styles. A few years ago, I had a Dean who was a good leader but
is lacking effective managing skills. As a leader, she was
encouraging, and vision minded person. Nayar (2013) states,
“Leadership refers to an individual’s ability to influence,
motivate, and enable others to contribute toward organizational
success. Influence and inspiration separate leaders from
managers, not power and control” (para.7). She does an
excellent job of leading us as a department, but the daily
management of the staff is what was missing. As a department,
we achieve every goal and expectation, but individually, some
day-to-day management was needed. As a leader, she created
great goals and projects, but the management of the projects
lacked. Her management skills of planning, organize, and
coordinate these events were awful. She would forget to sign
invoices or answer emails from the staff as well as vendors.
There was a time when she had the vision of our team attending
a national recruiting event in Washington, DC. She gave us the
idea and delegated task for everyone in our department to
complete. The responsible daily needs to manage the project
and signed approvals needed were late or missing. There was a
massive lack of communication where she wouldn’t answer
calls, emails, nor text, and when she does, it was always after
the due date. Two weeks before the trip, she disappeared
without communication, which caused a panic amongst the
team. The lack of management affected our trip; it was stressful
because rooms were canceled due to confirmation email not
sent. We were supposed to have promotional items that didn’t
arrive at the office until after we left. Once they arrived, it
couldn’t be shipped to the venue because she wasn’t there to
approve the order.
There was so much chaos surrounding this trip and her ability to
manage the details and the department it taught everyone in our

department a few good lessons. The two leadership and
management skills I learned to use in future position
opportunities would be communication and commitment. This
experience helped me to see the importance of effective
communication as a leader and manager. Being able to manage
people requires you to be able to communicate what you need to
who needs to do it. Also, being able to follow up with people to
ensure the message is clear. Commitment is vital as a leader to
exhibit to your followers. A leader cannot expect to lead others
if you aren’t committed to the vision, project, or team.
References
Bridges, J. (2018, October 8). Leadership vs. Management,
What's the Difference? Retrieved from
https://www.projectmanager.com/training/leadership-vs-
management
Nayar, V. (2013, August 2). Three Differences Between
Managers and Leaders. Retrieved from
https://hbr.org/2013/08/tests-of-a-leadership-transiti
2nd Person to Respond to: (Respond with 1 Paragraph) No
Report Format Needed
Within the organization I am currently working with, the leader
within the department has several strengths and weaknesses. As
a manager, the greatest strengths are her exceptional abilities in
time management and problem solving. Her weakness is her
lack of support and her passive aggressiveness towards
employees. According to Hopkins (2014), A leader innovates
and a manager administrates on the innovation. A leader focuses
on individuals and inspires them, a manager focuses on systems
and structure. This statement is so powerful. As a leader, the
supervisor in my department strength is her innovative abilities.
Her weakness is her inability to focus on her followers and
inspire them. She is a great manager in my opinion. She is all
about the bottom line. She is an excellent problem solver and

time manager. Nevertheless, she is not an effective leader. She
has no interest in anyone or anything other than her bottom line.
She is unwavering in her focus on policy and procedure but due
to her leadership style of coercion and pacesetting, she
unintentionally cause division and frustration within the
department. This in my opinion makes an ineffective leader.
She also never praises her employees publically and is a passive
aggressive micromanager. I love the drive to get things done but
I completely despise the method. Due to the leadership and
management styles, the work environment is toxic and creates
unproductive frustrated employees. The effect she has had on
the department has been destructive. Retention is a very serious
goal for leadership but due to the supervisor’s leadership style
many new employees stay for only 30 days or less. This is
terrible for the department and the company as a whole.
This experience has taught me so much about how to balance
leadership and management skills. These include but are not
limited to actually caring for those that follow me. Showing
genuine care and concern for your team goes so far. It is not
just about the bottom line, it's about the people and who they
are as individuals. The other lesson is to focus on the people
and inspire them to become more. I strongly believe that if you
are able to share and transfer your vision into the hearts of your
followers you will not only help them to evolve but also blow
your bottom line out of the water. In the future, when I step up
as a leader and manager, I will never forget to focus on the
people over the bottom line. To also inspire them while also not
forgetting to manage the company system and structure.
Leadership and management go hand in hand. You must be a
great listener, never hold back praise, and also believe in those
that follow.
References:
Michael Ray Hopskins 2014. Lead on Purpose: Promoting
Leadership Principles in Product

Management. https://leadonpurposeblog.com/2014/06/21/the-
importance-of-leadership-in-effective-management/
Goleman, D. (2000). Leadership that gets results. Harvard
Business Review; 78(2), 78– 90.
2Nd Assignment (The Case Study is attached)
For the Week 8 Discussion, read the case study At Ford,
Turnaround is Job One (Shein, 2012), which examines how Alan
Mulally led the turnaround at Ford Motor Company as president
and chief executive officer. Following this, read the other
resources that discuss Mulally’s leadership and management
skills (Carey & Keller, 2012; Kaipa & Kriger, 2010). Finally,
review the executive summary that you created last week for
your BPPG, as well as the articles and resources you have
studied in the course until now.
Then, to prepare your post for the Week 8 Discussion, consider
what Alan Mulally accomplished as a leader at Ford Motor
Company. Ask yourself why his leadership was effective, and
determine the lessons that can be learned from this example of
leadership and management as they relate to the ideas, theories,
and topics discussed throughout this course.
With these thoughts in mind:
Post your response to the following: (2 paragraphs or more) No
Report Format Needed
Using the leadership theories and practice perspectives that you
have reviewed throughout the course, explain whether you think
Alan Mulally was an effective and ethical leader of Ford Motor

Company. Provide a rationale to justify your response. (Hint:
The answer should not be “because he’s done well.” Your
analysis should link leadership and management skills you have
examined throughout the course to specific examples of
Mulally’s successes or challenges while he was the leader at
Ford.)
What lessons can you learn from this case? Explain the
implications such lessons can have on your career as a leader
and as a manager.
What lessons can be learned from this case? What are the
implications such lessons can have for your current organization
or one that you care to be a part of?

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