When Ford Motor Co. announced late last month it would close seven major assembly plants and slash its workforce by 30,000 as part of a new restructuring plan, company officials hyped the plan as a big step toward making Ford more competitive with its foreign rivals.
But many Detroit watchers, including Wharton Associate Professor of Management John Paul MacDuffie, weren’t quite convinced.
MacDuffie, a longtime expert in the U.S. auto industry, says although Ford is hardly down for the count, the major details of its restructuring plan—most of which center on cost-cutting—won’t be enough to return the company to glory. More than just cutting costs, says MacDuffie Ford needs to find a way to be relevant again—and that means designing new products that create buzz and, of course, sell briskly.
“People worry about how much this plan is focused on cost-cutting,” says MacDuffie, who serves as co-director of Wharton’s Reginald H. Jones Center for Management Policy, Strategy, and Organization. “Cost-cutting alone is not going to put you back into financial health.”
The auto industry is unique, says MacDuffie, in that a company’s fortunes can swing wildly from one year to the next. And often, swings into profitability can be driven by the arrival of a new car or truck that sells unexpectedly well. So if Ford, which reported a loss in the U.S. of about $1.6 billion last year, can design and build just one or two new products that capture the public’s imagination, its misery may be more short-lived than some believe. The problem? Given the company’s struggles in recent years, it may no longer have the talent to pull it off.
Great design ideas come from great design minds, and keeping talent in-house has grown more difficult as the company’s performance has plummeted. Making things even worse, MacDuffie says, are recent efforts by Toyota and Hyundai to lure talent away from Dearborn-based Ford. “I think Ford has certainly had days when its financial status has looked worse,” MacDuffie says. “But the worry is that this is the second announced big turnaround plan for Ford, the one a couple of years ago didn’t work and the company has lost a ton of talent. Losing talent is worrisome, especially when it comes to creating exciting new products.”
There is hope, though. MacDuffie says the U.S. leadership team of Chief Operating Officer Anne Stevens and President Mark Fields might have enough savvy to pull off the turaround. “[Fields] seems to be a straight talker, not somebody who gives you a lot of rhetoric, and yet he’s not gloom and doom either,” MacDuffie says. “Ann Stevens is also a very impressive leader … and from my point of view those were the best two people they had. In that sense, I feel more optimistic for the company’s prospects.”
But MacDuffie was quick to add one caveat: “If you lose a lot of talent ... then all the best executive leadership in the world isn’t going to help you.”
Originally published on February 23, 2006