Ford is the only one of the Big Three U.S. automakers that hasn't taken government bailout money or declared bankruptcy. Ford is still losing $1 billion per month, but it has money in the bank and hopes to be making money by the year 2011.
CEO Alan Mulally sees signs of hope in increasing demand for Ford cars. The Focus, a compact car, is one of the most popular vehicles that drivers are buying under the Cash for Clunkers program.
Mulally says there is a fundamental shift in the kinds of cars Americans want to buy. He says, "As we've gone through the cycles with fuel prices, you can correlate very well the purchases of smaller, fuel-efficient vehicles with gas prices moving up."
The company believes that over time American consumers will be paying more for fuel. Mulally says Ford has adopted a philosophy of having a complete product line — small, medium and large cars, utilities and trucks. "Consumers value all three of those no matter what fuel prices are," Mulally adds. "Ford will make its plants flexible so it can move between vehicles as consumers' needs and wants change."
Steve Inskeep: If we spoke with one of your predecessors at Ford, they would also say that they put out a complete line of vehicles. What is different about what stands behind those words now?
Alan Mulally: Over the recent history, we have really focused on the larger SUVs and the trucks. We have fabulous smaller cars around the world. Nearly half of our operations are outside the United States. What we put in place three years ago is that we decided with everything we had done in our cost structure, with the agreement we made with the union, the UAW, we could actually make cars in the United States, and make them profitably. This is terrific news for manufacturing in the United States and all the wonderful jobs that this fabulous industry creates.
Have you fixed problems, such as union expenses, salaries, health benefits and other legacy costs, so that your cost per car is competitive with Toyota?
That was a very important part of our plan. We have reduced the total operating cost. We have dealt with the legacy cost on retiree health care; we have reduced the all up wage rate from nearly $75 an hour to around $50. So we are competitive in the United States — competing with the best companies in the world including the Japanese.
Meaning that the cost of a Ford Focus is about the same as the comparable Japanese car?
We will be absolutely competitive on every vehicle we make.
It takes a while to implement all the pieces of the plan. But over the next two or three years, we will be competing with the best in the world.
How much of Ford's recent turnaround do you think can be attributed to people who aren't going to buy from GM and Chrysler because of their recent bankruptcies?
About half of the market share that we are gaining is from GM and Chrysler and about half are from our Japanese competitors. We're all very sensitive when companies use taxpayer money. In Ford's case, consumers are not only very pleased with our cars and trucks, but they are very pleased that we did not take taxpayer money, that we are paying our loans back and we are right on our plan to move back to profitability in 2011.
You must have in mind how many months you've got before you run out of money?
Yes absolutely. I think this last quarter gave everybody a lot of confidence on the liquidity because we ended the quarter with $18 billion in cash and we reduced the cash-burn rate to $1 billion. So clearly that shows that we have sufficient liquidity now.
Does the gasoline-powered vehicle have an expiration date? Is it on its way out?
No, I don't think so. There a lot of improvement first of all on being able to improve the internal combustion engine. That's why in the Ford plan, you see us moving toward technologies like direct fuel injection and turbocharging, where we can improve the fuel efficiency for all of our vehicles no matter what size by over 20 percent.
Following that, I think we'll see more hybrids. The tough issue about that is that you are carrying around two power plants so it is very tough on the cost side, which we are continuing to make progress on.
But one of the real positive things to look forward to is that we move to full electrical vehicles. The key to that is the enabling technology on the batteries. The other part of it is the infrastructure. That's where we've got some great work going on with the electric companies around the United States and around the world, where you actually generate the electricity clean. You use batteries to store the electricity, and now the electricity is moving around where you need it and when you need it. And then, we will really have made progress to move all of us away from our dependence on fossil fuels.
But it sounds like you think that's a good ways away?
I think it's going to take time for it to happen because it is going to take the governments of the world to work together, the power companies to work together. But clearly right now most people believe that the movement toward electric vehicles and electric systems solutions looks very appealing.
Mr. Mulally, thanks very much.