Ford History III: Edsel & Bill Redux

Ford Centennial Coverage by TCC Team (6/3/2003)

Ford: A Century of History, Part I by Mike Davis (6/2/2003)
In the early years Ford begat Cadillac, then his own car company.

Ford Timeline: 1863-1943 by Mike Davis (6/2/2003)

Ford History II: Young Henry by Mike Davis (6/2/2003)
Ford loses two generations and ends up reinventing itself.

Ford Timeline 1943-1982 by Mike Davis (6/2/2003)

Ford History III: Edsel & Bill Redux by Mike Davis (6/9/2003)
Today's Ford bears almost no -- and quite a lot of -- resemblance to its past.

Ford Timeline: 1974-2003 by Mike Davis (6/13/2003)

The fourth generation of the Ford family to enter the business was potentially quite numerous: three children of Henry II, two of Benson, four of Josephine (Mrs. Walter Ford) and four of William Clay Ford.

Out of these, only two have counted: Edsel Ford II, Young Henry’s only son, born 1948, who became a company employee in 1974 after graduating from Babson College; and William Clay Ford Jr., born in 1957, who joined in 1979 upon graduation from Princeton. Both young Fords went through a series of management development positions of increasing responsibilities — and gave a good account of themselves among other Ford employees not so well anointed.

Meanwhile, Henry Ford II was winding down his active management of Ford Motor Company and, with the young family members way too inexperienced to take the reins of a now-public company, supported company veterans Phil Caldwell, Don Petersen, and Red Poling to run things.

These professional managers took the company through the industry sales-and-profit-crisis that followed the gasoline-availability panic of 1979. The company booked a series of annual losses — $1.5 billion in 1980, $1 billion in 1981 and $658 million in 1982 — which it had not experienced since the dark days before financial controls were installed right after World War II.

But Ford persevered to invest in a plethora of new products in the Eighties. They included: Ford’s first domestic front-wheel-drive cars; the downsized Ranger pickup and its SUV spin-off Bronco II, and a series of highly differentiated cars derived from the rear-wheel-drive Fox family first introduced in 1977. Moreover, Ford held steadfast to the body-on-frame, rear-wheel-drive Panther family of large cars while archrival General Motors was abandoning rear-wheel-drive. Ford also wrested truck sales leadership away from GM in this decade. The tour de force, though, was Ford’s successful design leadership with its “jellybean” cars, notably the Taurus and Sable.

Fords in the mix

The Ford family’s younger generation, however, had relatively little to do with these developments, although Edsel was an influential marketing manager at Ford Division for the Taurus launch. They handled assignments in product planning, finance, marketing, sales and manufacturing, including overseas posts — for example, Edsel in Australia and Billy (as he was known then) in Switzerland. The “boys” also attended advanced management programs at Harvard (Edsel) and MIT (Billy).

It has to be recognized that these were young men who did NOT have to work, who did not have to make the daily tough decisions required of managers and endure the endless meetings for which Ford (called “the Ford meeting company” by insiders) is famous. Instead, they could well have afforded playboy lifestyles, cavorting endlessly on the world’s beaches, bistros, and slopes. Such has been the fate of numerous family-controlled “brand-name” companies, which end up being business-school case histories.

But not the Fords. For them, the company was not a source of dividends or capital gains — Ford was their life, their fate. And, unlike their parents, grandparents and great-grandparents, they shied from the limelight and kept their family lives very private.

Within months after Henry Ford II’s death, both of the younger Fords were elected to the company’s board of directors early in 1988, a year in which Ford’s worldwide vehicle sales came to 6.5 million units and profits to $5.3 billion. In 1989, Ford “won” a bidding war with General Motors to acquire prestigious Jaguar Motors of Britain for $2.5 billion.

Storm clouds gather

Storm clouds, however, then gathered rapidly. Sales and profits began to slide, culminating in a whopping $7.4 billion loss for 1992, despite the introduction of the Explorer. Don Petersen, at 63 relatively young, retired as chairman in 1990 following a rumored dispute with family members over use of company aircraft for personal travel. It was said, “He forgot whose name was on the building.” Whether true or not, the rumor was widely believed and certainly would have followed in a Ford company tradition of the “cult of the personality.”

In 1991, Edsel Ford II was named president and chief operating officer of Ford Motor Credit Company, an important and challenging position in the corporate structure, while his nine-year-younger cousin Bill was “merely” head of business strategy for the Ford Automotive Group.

It looked like young Edsel, by now a maturing 42, was to be the heir apparent. The leap-frogging continued as Bill became general manager of Climate Control Division in 1992 and Edsel was elected a vice president of the company in 1993. In 1994 Bill became a vice president as head of the Commercial Truck Vehicle Center.

Then a new development in family and company relationships made it seem the crown was Edsel’s to claim. Bill’s father William Clay Ford had owned the Detroit Lions professional football team for some 30 years. At age 70 in 1995, the burden of managing this sports business seemed more than he could handle alone. So Young Bill stepped aside from active management in Ford Motor Company, claiming membership only on key board committees, in order to help run his branch of the family’s “other business.”

In the meantime, the top executive of Ford Motor Company in 1993 had become the fourth non-family member and first non-American, Scottish-born Alex Trotman. As a young engineer, he had transferred from Ford of Britain, risen through Ford’s North American product planning ranks, and subsequently racked up a credible record as head of Ford of Europe.

Trotman inherited a strong product line and restored profits, which soared to $22 billion in 1998 with the $16 billion spinoff of a financial company not related to the auto business. But, in the “new broom sweeps clean” fashion often practiced by executives desiring to put their own stamp on a place, he reorganized the company along global lines in a program called “Ford 2000.” He disbanded his own Ford product-planning group — one of the company’s longtime advantages — and, in the almost universal opinion of Ford insiders, threw the whole organization into chaos.

Trotman also began shedding vehicle lines that had a long history with the company and volumes that most auto companies would willingly accept. Restyled Taurus/Sable, Continental and Town Car models marketed during his tenure fared poorly and introduction of the European Mondeo-based Contour/Mystique also flopped. A strategy to abandon market share and force traditional Ford buyers into non-traditional, European-like price ranges ultimately hasn’t worked.

Lincoln-Mercury headquarters was expensively uprooted from Michigan to be plunked down in Southern California on the theory it would provide insight to the yuppie marketplace.

Family foresight

It is unclear whether the Ford family recognized things were going haywire. The family’s members on the company’s board of directors consisted of William Clay Ford, Edsel II, and Bill Jr., but even family board members may fall into the trap — demonstrated in other companies — of simply rubber-stamping proposals which management brings before them. And, after all, profits seemed to be rolling in from Ford’s heavy emphasis on trucks, including the newly fashionable SUVs, where the company held a commanding presence.

In any event, the family — which, it must be noted, controls the company through a special class of stock — reportedly decided about this time that Bill Jr. rather than Edsel II was to become head of the company. In 1998, Edsel resigned from the presidency of Ford Credit to assume a consulting role with the company, principally in dealer and community relations, where he shines.

In 1999 Bill Jr. became chairman of the board of directors of Ford Motor Company while Jacques Nasser, a native of Lebanon raised and educated in Australia, whose Ford career had mainly been overseas, became president and CEO. In the meantime, Ford had acquired Volvo Cars of Sweden for $6.45 billion and invested in a small Norwegian company that had a workable golf-cart-sized electric car that might help the company meet some environmental requirements in key states.

Operating profits for 1999 reached a record $7.2 billion, encouraging Nasser to splurge on acquisition of a series of automotive-service related companies. At the same time, he instituted a program of hiring and promoting from outside company ranks while forcing long-term loyal staff employees to retire. The effect on morale was disastrous. Quality plunged. Concurrently, relations with dealers — who are an auto company’s direct customers — also collapsed.

An expensive and inefficient management group was set up in London, England, to manage mainly North American operations of Ford’s luxury brands, which now included Land Rover, acquired from BMW.

Profits for 2000 were half those of 1999, an ominous trend. It started in the summer of 2000, when Ford was virtually brought to its knees from an onslaught by legislators, litigators, and media attacking the safety of Ford’s crown jewel Explorer. The fault apparently lay with a mysterious manufacturing defect in tires produced at one Firestone tire plant over a limited period of time, but both companies were accused of negligence for tire failures that allegedly contributed to hundreds of deaths and injuries over several years.

Clearly, neither Trotman nor Nasser nor Bill Ford bore any responsibility for these tragedies. Nevertheless, when a second Firestone tire type on Ford vehicles seemed to be developing problems, in 2001 Nasser moved quickly — perhaps too quickly and without participation by Firestone — to replace them all at a cost to Ford of several billion dollars.

Between these problems, overseas industry shortcomings and a highly competitive North American market, Ford Motor Company posted losses of $5.45 billion in 2001 and nearly a billion dollars for 2002. In the process, Nasser resigned late in 2001 after less than three years on the job, and Bill Ford Jr. became CEO as well as chairman.

A Ford was thus back in the driver’s seat of the company for the first time in 20 years.