High-flyer to rescue of crisis-hit Ford

Alan Mulally, the man Ford has tapped to revive its stalled turnaround, helped revolutionise product development at Boeing in part by taking inspiration from the broad, team-based approach Ford used to create the hit Taurus in the 1980s.

Ironically, those ideas failed to catch on at the carmaker, some industry observers say.

Mulally's role in the 1990s managing the development of Boeing's enormously successful 777, a project to which he applied the Taurus model, may not be the most significant of the credentials that led to his appointment as Ford's new chief executive. But the story illustrates how his experience in the aviation industry could transfer well to the auto world.

As head of Boeing Commercial Airplanes, Mulally, 61, successfully guided a major manufacturer through a crisis - cutting costs and improving efficiency. Executive Chairman Bill Ford, who relinquished the CEO post to Mulally, expressed confidence that Mulally would do the same at Ford.

The day after his appointment was announced, Ford shares rose US16c (25c) to close at US$8.55 on the New York Stock Exchange.

After the September 11 terror attacks devastated Boeing's airline customers in 2001, Mulally streamlined its commercial jet-making business operation and managed to keep it in the black.

He trimmed the workforce by more than half to 50,000 employees, revised assembly-line operations to make production quicker and introduced the popular 787 jet, which has snagged record orders well before its first flight.

Dearborn-based Ford, meanwhile, has been battered by rising health care and material costs, tough competition from Asia and, perhaps most ominously, the rapid decline of the market for 4WDs and sport utility vehicles - the high-margin products that for years have sustained United States carmakers' bottom lines.

The company, which lost US$1.4 billion in the first half of 2006, said in July it was caught off-guard by the speed of this shift, which it attributes to high gas prices.

Mulally's Boeing experience should transfer well to Ford, said James P. Lewis, a project management consultant and author of Working Together, a book that chronicles the development of the 777 and for which Mulally wrote a foreword. "Ford's in crisis right now. What better kind of person to take over than someone who's been through it and survived it?" Lewis said.

Lewis' book describes how the 777 project, unlike previous product programmes at Boeing, involved not just engineers, but all stakeholders manufacturing people, pilots, machinists from the early stages, making it possible to eliminate flaws early.

In one example, baggage handlers were brought in to look at a mock-up of the cargo bay door. They told them the door's handle was poorly designed and would be impossible for a gloved hand to open, Lewis said. The team redesigned it.

According to Lewis, the concept originated with the Taurus. Boeing officials were introduced to it by Don Petersen, then president of Ford and a member of Boeing's board of directors, who put them in touch with Lew Veraldi, the engineer leading the Taurus project.

Like the 777, the Taurus, introduced in 1985, was a home run. It was the top-selling car in the US from 1992 to 1996.

David Cole, president of the Center for Automotive Research, said the team approach used on the Taurus never spread through the company because health problems sidelined Veraldi soon after the Taurus came out. He died in 1990.

In recent years, the aging Taurus has been more a symbol of the carmaker's product woes and itsshortage of fresh sedan models than the innovation it once stood for. Production is scheduled to stop later this year.

Today, product development is key to Ford's long-term recovery, but Mulally's recent cost-cutting experience will come in handy in the near term.

"You cannot product yourself out of this issue," Cole said.

In January, Ford announced a plan to cut up to 30,000 jobs and close 14 facilities by 2012. But in July, the company acknowledged that the turnaround was taking too long and pledged to speed it up. Detail of that acceleration is expected later this month.

Aviation consultant Scott Hamilton, of Leeham Co, said Mulally would benefit from many parallels between Boeing and Ford, including their ages. Boeing is 90 years old; Ford is 103. That means both have faced the healthcare and pension problems brought by aging work forces. Both have long been unionised.

"The bottom line is that making cars is not that different from making planes. It's a complex manufacturing process," said Charles W.L. Hill, a management professor at the University of Washington Business School.

However, he said Boeing's situation had in some ways been easier, since it had only one competitor.

Wall St analysts were cautiously optimistic about Mulally's appointment, but wondered how quickly a Lexus-driving aeroplane guy could become a Detroit car guy. Mulally spent 37 years at Boeing and often scribbled a smiley-faced aeroplane next to his signature.

"The Detroit auto industry is known for being insular and difficult to change," Morgan Stanley analyst Jonathan Steinmetz said.

"Mulally is the ultimate outsider."