Ford's fight for survival
Layoffs and plant closings won't save the No. 2 automaker. Here's what analysts are looking for.
By Alex Taylor III, FORTUNE senior editor

NEW YORK (FORTUNE) - When Ford Motor announces its North American restructuring plan on Monday, the headlines will be about the number of plants closed -- as many as ten -- and the number of people who will lose their jobs -- up to 30,000 over the next five years -- if published reports are correct.

But the layoffs and the plant closings are just the beginning of a needed overhaul at Ford.

Ford Chairman and CEO Bill Ford.
Ford Chairman and CEO Bill Ford.

To begin with, those cuts are merely a reflection of a reality that already exists. Ford needed to get smaller yesterday. It has been losing market share for ten years, and sales of some of its most popular vehicles from the past like Taurus and Explorer have slumped so alarmingly they will probably never recover.

Analysts and others will try to peek below the surface to see what else the automaker is doing to stem the need for more downsizing in the future. Here's one effort already underway that has gone unnoticed: Ford is making significant changes in its global organization and product engineering that should make new model development far more efficient and economical.

What's happened is that Ford has almost completely reversed the shifts made in the radical reorganization a decade ago called "Ford 2000." The brainchild of former chairman and CEO Alex Trotman, Ford 2000 attempted to adjust to the increasing globalization of the auto business by eliminating regional organizations in Europe, Asia and South America and replacing them with five vehicle centers. Each of the five centers would be charged with developing a single class of vehicles -- large rear-drive sedans, small front-drive econoboxes -- and marketing them around the world.

Ford 2000 looked good on paper but really messed things up. A lot of local market knowledge disappeared with the elimination of the regional organizations, and lots of experienced managers went out the door too. Then, under Trotman's successor, Jac Nasser, the vehicle centers stopped sharing common components like air conditioners and shock absorbers and began developing their own, causing an explosion in costs.

Now Ford has recentralized product development and engineering to enforce an economical sharing of platforms and components across product lines. So engineering for a new small car platform known as C1 will serve as the underpinnings for cars marketed by Ford, Volvo and Mazda.

Observers will also be watching for signs of increasing responsibility being handed to 44-year-old Mark Fields. Fields, whose French-cuff shirts and doo-wop haircut set him apart from the company's other executives, was given the keys to North America just four months ago after stints in Europe and Japan.

Yet Chairman and CEO Bill Ford has left him virtual carte blanche to devise the North American turnaround plan despite his lack of experience. Jim Padilla, Ford's ostensible number two executive and the man to whom Fields reports, has stayed out of the way, too.

Whatever else he is good at, Fields has proved himself a gifted phrase maker. His turnaround plan has been dubbed the "Way Forward," and Fields describes the company's new car philosophy as "red, white and bold."

"Bold" certainly couldn't be said about Ford's vehicles in the past. Despite internal complaints that its new models were boring and looked too much like their predecessors, everything coming out of Dearborn looked like it had been warmed over, not redesigned. The 2005 Ford Five Hundred was so nondescript that it almost vanished from sight, while the 2006 Ford Explorer looks almost identical to the older model it replaces.

Finally, observers will be looking hardest for some sense of plan, direction and persistence from Chairman and CEO Bill Ford. The company has seemed almost rudderless over the past five years with numerous management changes -- Field's job seems to turn over on an annual basis -- and a sense that even lumbering old General Motors was moving more smartly and aggressively in the marketplace.

Earlier in January, Bill Ford declared that it was time for Ford to stabilize its market share after its long decline. Monday will be the first chance for him to demonstrate that he actually means it. Top of page

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