STEVE INSKEEP, host:

When the CEO of Ford Motor Company looks out his window, he takes in quite a view.

Mr. ALAN MULALLY (CEO, Ford Motor Company): Oh, its phenomenal. Out one window Im looking at the Rouge Plant where Henry Ford created the moving assembly line, and I go a little bit to the left and I see General Motors, and I go nine degrees and I see Chrysler.

INSKEEP: Alan Mulally keeps an eye on the competition from his office in Dearborn, Michigan. Unlike the competition, Mulallys company has not had to take government money and has not been through bankruptcy. Ford is still losing a billion dollars per month, but it has money in the bank and hopes to be making money again by the year 2011.

Alan Mulally sees signs of hope in an increasing demand for Ford cars. The Ford Focus, a compact car, is one of the most popular vehicles that drivers are buying under the Cash for Clunkers program. Now, when we reached the CEO, we asked if this just reflects car buyers grabbing subsidies or if it reflects a fundamental shift in the kinds of cars that Americans want to buy?

Mr. MULALLY: Well, I sure think its the latter, Steve, because weve been, you know, as weve gone through the cycles with the fuel prices, you can correlate very well the purchases of smaller, fuel-efficient vehicles with gas prices moving up. And, of course, nobody knows where thatll end up but overall our point of view is that over time we will be paying more for fuel.

And so, in Fords case, we have adopted a philosophy of having a complete product line - small, medium and large cars, utilities and trucks - because we believe that the consumers value - all three of those, no matter what the fuel prices are, and we also are making our plans flexible so we can move between the vehicles as the consumers needs and wants change.

INSKEEP: So, youre betting on high gas prices and small cars but not entirely?

Mr. MULALLY: Well, we have a point of view that over time fuel prices will gradually go up. But, like I said, the customers, whether you buy an F150 pickup truck - you know, been the number one vehicle in the United States for 34 years - those customers care about fuel efficiency just like consumers who buy a new Escape or a new Focus or a new Fusion that gets 41 miles to the gallon. So, thats our fundamental plan.

INSKEEP: I think, Mr. Mulally, and Im sure youd agree if you went back and researched, if we spoke with one of your predecessors at Ford, they would also say they put out a complete line of cars from large to small and that theyre prepared to serve all different kinds of markets. But what substantively is different? What is different about what stands behind those words now?

Mr. MULALLY: Well, Steve, it really has not been the case. We, over the recent history, have really focused on the larger SUVs and the trucks. And we have fabulous cars, smaller cars, around the world. Cause nearly half of our operations are outside the United States, and we serve all of the countries around the world.

What was new, what we put in place three years ago, is that weve decided that with everything that weve done with our cost structure, with the new transformational agreement we made with the union, the UAW, that 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.

INSKEEP: I want to make sure I understand something you said when you said you can make cars profitably now in the uns.

Mr. MULALLY: Yes.

INSKEEP: People who follow at any level the auto industry have heard about the greater expenses in the U.S. - union expenses, salaries, health benefits, legacy costs, as theyre called. Have you now in your opinion fixed those problems at Ford so that your cost per car is competitive with, say, Toyota.

Mr. MULALLY: Exactly Steve. That was a very, very important part of our plan. And, you know, with all

INSKEEP: And its dollar-for-dollar now or are you

Mr. MULALLY: Oh yes, exactly.

INSKEEP: a little behind?

Mr. MULALLY: All the constituents we work with on every element of our competitiveness, we have reduced the total operating cost. One piece of that are the labor costs. We have dealt with the legacy costs on retiree health care; weve got the entry-level wages appropriate. And now we have reduced that 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.

INSKEEP: Meaning that the cost for a Ford Focus is about the same for the comparable Japanese car?

Mr. MULALLY: We will be absolutely competitive on every vehicle we make.

INSKEEP: Will be.

Mr. MULALLY: Well, this 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.

INSKEEP: How much do you think of Fords recent turnaround can be attributed to people that just arent going to buy from GM and Chrysler because of their recent bankruptcies?

Mr. MULALLY: Well, its an important part. About half of that market share that were gaining is from GM and Chrysler, and about half are from our Japanese competitors. You know, the consumers of the United States, you know, were all very sensitive when companies use taxpayer money.

In Fords case, they 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 ourselves and were right on our plan to move back to profitability in 2011.

INSKEEP: But just to be clear, I mean, economic uncertainty being what it is, I suppose if youre losing money by a month-by-month basis, which you are now, you must have in mind a burn rate and how many months youve got before you run out of money.

Mr. MULALLY: Yes, absolutely. And I think this last quarter gave everybody a lot of confidence on the liquidity, because, you know, 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.

INSKEEP: General Motors has made headlines in recent days by claiming that their Chevy Volt, which primarily has an electric motor, although theres gasoline backup, can get 230 miles to the gallon, they say. I know youve also got electric cars that

Mr. MULALLY: You bet.

INSKEEP: that are on the way. Is the gasoline-powered vehicle got an expiration date at this point? Is it one its way out?

Mr. MULALLY: No, I dont think so. Theres a lot of improvement, first of all, on being able to improve the internal combustion engine. And thats why in the Ford plan you see us moving towards technologies like direct fuel injection and turbo charging where we can improve the fuel efficiency for all of our vehicles, no matter what size, by over 20 percent.

Following that, I think well see more hybrids. The tough issue about that is, is youre carrying around two power plants. And so its very tough on the cost side, which we continue to make progress on. But one of the real positive things we look forward to is that we move to full electric vehicles.

Now, the key to that, of course, is the enabling technology on the batteries. The other part of it is, is the infrastructure, and thats where we have 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, when you need it.

And then we will really have made a progress to moving all of us away from our dependence on fossil fuels.

INSKEEP: But it sounds like you think thats a good ways away.

Mr. MULALLY: Well, I think its going to take time for it to happen, because its 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 towards electric vehicles and an electric system solution looks very, very appealing.

INSKEEP: Mr. Mulally, thanks very much.

Mr. MULALLY: Youre welcome.

(Soundbite of music)

INSKEEP: Alan Mulally is CEO of Ford Motor Company. He spoke with us from the companys headquarters in Dearborn, Michigan.

(Soundbite of music)

INSKEEP: Its MORNING EDITION from NPR News.

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