How Ford Finally Found the Road to Wellville : The Japanese Had America's Big Three Car Makers on the Ropes. But Each Came Back With Different Styles. Ford Decided All It Had to Do Was Make Better Cars. What a Concept!

Doron P. Levin is business and economics columnist for the Detroit Free Press and the author of "Behind the Wheel at Chrysler: The Iacocca Legacy" (Harcourt Brace & Co., 1995)

On the evening of January 29, 1985, the Ford Motor Company held a black-tie dinner gala on the "Gone With the Wind" sound stage at the MGM studios in Culver City to introduce its new mid-size car, the Taurus. New-car "presentations" often are nothing more than overblown press conferences. This time, however, Ford had hired Robert F. Jani, creator of the 1984 Olympics' opening ceremony and the Bicentennial fireworks display in New York harbor, to produce something special. With multiple movie screens resplendent with dazzling outer-space imagery and model satellites ascending and descending from an 89-foot-high ceiling, the coming-out party for Taurus was perhaps the most memorable introduction of a new car in American automotive history.

The executives at Ford spared no expense; they took no chances that the first public glimpse of Taurus might go unnoticed. The car hadn't been scheduled to be produced until later in 1986. For 11 months following the gala, the auto maker cranked out advertising, displayed prototypes at auto shows and relentlessly pitched Taurus stories to the media.

The aerodynamically styled sedan represented, in Ford's view, a gargantuan leap in design from the stodgy vehicles it had built in the 1970s that in the early 1980s had driven the nation's No. 2 auto maker perilously close to financial disaster. With Taurus, Ford was asking customers to give it another chance, to accept a vehicle that, in looks and performance, was different from anything it had built before. Taurus promised better performance with fewer glitches and manufacturing flaws.

Ford executives were nervous, though, because potential customers who had been asked to rate sketches and clay models hadn't been entirely enthusiastic. "Some of the early research was pretty scary," says Lou Ross, recently retired Ford vice chairman, who at the time was in charge of Taurus' product development.

Those attending Taurus coming-out parties saw many departures from standard automobile designs, notably the new car's lack of a grille. Only Ford's blue, oval-shaped insignia floated against the car's smoothly curved nose. Detroit had never tried to sell a conventional sedan without a grille, an item no longer needed to help cool the engine but still a decorative feature that customers expected to see on a car. None of the guests at the L.A. gala could have known that Ford engineers had designed a conventional grille, just in case, that could have been manufactured and substituted quickly if the Taurus had bombed.

After a shaky launch marked by slow sales and a few early quality problems, sales of Taurus--and its clone, the Mercury Sable--began to take off late in 1986. Marketing executives offered financial incentives to ensure that rental-car fleets bought Tauruses and Sables, thus providing the models with substantial visibility. Public taste for the unfamiliar exterior design seemed to be growing. Lee Iacocca, at the time Chrysler Corp. chairman, and other rival executives ridiculed Taurus's softly rounded shape as a "flying potato," a "jellybean" or worse, but none of it contained the car's burgeoning popularity.

Taurus's shape gave impetus to an automotive styling trend that would find virtually all car models becoming progressively rounder. More important, it became the emblem of a new Ford Motor Co., an auto maker to improve quality and pay closer attention to customer satisfaction.

The Taurus was only one of Ford's triumphs. Since the early 1980s, the company has staged a remarkable turnaround, lifting itself from a company on the verge of financial ruin to a business with with a strong balance sheet, impressive earning power and, most significantly, a vastly improved reputation among the auto-buying public.

In late January, Ford announced 1995 profits of $4.1 billion on total sales of $110.5 billion, its fourth-best year in history. The company's resurgence is perhaps the single strongest piece of evidence that the U.S. auto industry has returned from the brink. General Motors still has not gained back much of the market share it lost in its disastrous slide of the 1980s. And Chrysler's turnaround, while impressive, has been that of a smaller company without Ford's global reach--and with the aid of government-guaranteed loans in 1980.

If the name Ford was once mocked as an acronym for "fix or repair daily," today the blue Ford oval emblazons an array of highly regarded, highly rated cars, trucks, sport-utility vehicles and minivans. For the past several years, models built by Ford have been prominent on the top-10 list of automotive bestsellers. In 1992, the Taurus surpassed the Honda Accord to become the top selling car in the United States. In California, where more imports are sold than anywhere else in the country, Ford has been selling five of the 10 best-selling models: the F-Series pickup truck, the Explorer, the Taurus, the Escort and the Ranger truck--more than any other auto maker. And that trend will grow in the future, according to Alex Trotman, Ford's chairman since the fall of 1993, who anticipates no recession in the industry's immediate future.

"I hope we're in a period of moderate, sustainable growth," Trotman says. The fundamentals are sound. Interest rates are low. We believe there will be continued job growth. Trucks should pick up a point or two of market share," which today represents about 150,000 vehicles annually.

For the past year or so, Ford has been subjected to withering criticism in the financial press for its lower profitability, daring styling changes and higher prices. Wall Street analysts, ever mindful of the profit imperative, sharply criticized Ford for allowing engineering and development costs to balloon to $6 billion for the worldwide program that included the Ford Contour/Mercury Mystique compact twins. The Contour, introduced in 1995, was introduced with a basic price tag of $13,805, as compared with $11,380 for the Tempo, the model it replaced. Ford counters such criticism by stating that the Contour is a far better automobile--the experts confirm that--and that it includes air bags and other equipment not available on the Tempo.

Ford's higher price tags have also affected the Taurus and Sable, but the company maintains that its aggressive pricing has been dictated in part by rising costs. The auto maker claims it is trying to shave costs with a worldwide efficiency campaign dubbed "Ford 2000."

In the short term, Ford's ability to overcome price resistance and to calm Wall Street's palpitations will probably depend on the strength of the economy and vehicle demand. But even critics consider current profitability and pricing woes as temporary and express astonishment at the rapid improvement of Ford's vehicles. How did this company, an automotive pioneer that literally invented mass-production of motor vehicles, lose its way with customers? And how did it manage its return to their good graces? The answer is that Ford, in the name of survival, decided it had to build better cars and trucks. Accomplishing that feat demanded thorough corporate self-examination. Like many tales of turnaround, this one began in crisis.

*

It was in 1979, Lou Ross recalled, that a worried Philip Caldwell, then Ford CEO, summoned him to his office amid plummeting sales following the Iranian oil crisis. Though the nation's attention was focused on Chrysler's highly publicized attempt to secure a government bailout, Ford's financial condition also was dire.

"We considered our natural share of the market about 25%," Ross says. In the worst 10-day reporting periods following the fuel crisis, our share dropped to 12%." At that time, a point of market share was worth about 100,000 vehicles per year. The auto maker was bleeding cash.

Caldwell, whom Henry Ford II had chosen as his successor after Lee Iacocca was fired in 1978, didn't mince words with Ross.

"Caldwell told me we had to do something or we'd go under," he recalls. An engineer and son of a Detroit policeman, Ross had returned from an assignment in Brazil in 1979 when Caldwell decided to appoint him to supervise a broad overhaul of the Ford's product line. "I really wasn't sure how we were going to get out of the fix we were in," Ross says.

The immediate cause for Ford's predicament was clear-cut. In response to the gasoline shortage of 1979, the second in six years, sales of fuel-efficient Japanese brands had mushroomed to a level no one in Detroit thought possible. As more American car buyers bought Toyotas and Hondas strictly for fuel efficiency, they discovered that Japanese models were sturdy, cleverly designed and equipped with thoughtful touches--remote gas-cap releases, cup-holders and the like. Japanese models, moreover, were moderately priced, due in part to the relative weakness of the yen to the dollar. Word spread quickly: Honda Civics, Toyota Corollas and Datsuns were smart buys.

Customers' tastes had shifted quickly. Ford, like GM and Chrysler, were building gas-guzzling rear-wheel-drive behemoths, and not very attractive or high-quality ones at that. "The most exciting car we had at the time was the Torino," Ross says of a mid-size, rear-wheel-drive sedan that was discontinued in 1977.

Detroit's hubris, swelled by decades of domination, had clouded its assessment of just how damaging the upstart Japanese competition could be. The Big Three tried to develop quick fixes to Japan's fuel-efficient models, but they fell flat. "We had brought out the Maverick and Pinto, which were not very good cars," Ross says. "We had no performance, no appearance."

To create vehicles that might draw customers back to showrooms, Ford designers, engineers, marketers and product planners first had to admit to themselves and to one another that they had lost touch with what car buyers wanted. "In those days we spent an awful lot of time figuring out what General Motors was doing and then based decisions on that," Ross says.

Instead of questioning customers and shoppers rigorously about likes and dislikes, Ford usually invited car buyers to view mock-ups of future models and tell interviewers which ones they liked. "Research was more of a beauty contest," he says.

Ford hired Marty Goldfarb, a bright Canadian marketing specialist with an academic background in anthropology and psychology, to instruct the company on how to use focus groups to gain a deeper understanding of buyer attitudes. Buyers of all ages were invited to tell Ford executives about their vehicles, discussing what annoyed them--from overblown advertising promises to rude service. Participants didn't necessarily know that Ford was sponsoring the focus group. Company executives sat through several meetings a day, watching videotapes, listening to the numerous reasons for the driving public's disappointment, frustration or just plain fury.

"People weren't just mad, they felt as though there had been a breach of faith. They talked about parts that rusted, cars that wouldn't start, dealers who wouldn't fix problems," says Kinder Essington, who was creative director on the Ford account at the J. Walter Thompson advertising agency in the early 1980s. "I remember that a guy at one focus group got up, fired his chair against the wall and stalked out when he was told that Ford was the sponsor of the focus group."

Goldfarb was less interested in finding out whether people loved or hated Fords than in finding out why. Americans, more than any other culture, he believed, harbor deep emotional responses to automobiles, because cars have represented mobility and freedom for the individual. Thus, when a car failed to start in the morning, it posed more than an inconvenience: Owners felt as though they'd been personally betrayed.

Poor morale among customers also was an issue for Ford's 400,000 employees, particularly technical and design specialists who understood that Ford vehicles hadn't simply fallen out of fashion--they were being thoroughly outclassed by the competition. Many employees were dedicated professionals who sincerely strived to produce better vehicles but felt handcuffed in a corporate system that didn't elicit their best efforts.

Don Petersen, a lifelong Ford employee whom Caldwell appointed president and chief operating officer in 1980, believed that much of the company's organizational structure was counterproductive. Petersen had felt that way since joining the company as a junior engineer. Discouraged by the corrosive politics of climbing the corporate ladder, Petersen had considered quitting several times. Ford's steep dive in sales--and a net loss of $1.5 billion in 1980--provided him the rationale for attempting to reshape corporate culture as a way to encourage better performance.

Shortly after taking office, Petersen toured Ford's studios to review the sketches and designs of all future models. "Frankly, I was disappointed in what I saw," he wrote in his 1991 book, "A Better Idea." Petersen was convinced that rigid command hierarchies within Ford had discouraged people in every area of the company from showing initiative, from sharing information with one another and from finding creative, cooperative solutions to problems.

Workers, quite simply, were afraid of offending their bosses. A manager's status was measured according to the number of people under his or her supervision. Managers competed fiercely among themselves for promotions; their subordinates were expected to display loyalty to the chief. To outdo their peers, managers withheld information from rivals and prohibited subordinates from cooperating with members of competitive departments, a practice that inevitably led to design errors, delays and cost overruns.

The blue-collar work force mirrored the office staff. Factory workers had little incentive to offer ideas to improve quality and efficiency. Since the 1930s, the United Auto Workers union and Ford's management had maintained a tense truce, interrupted by occasional strikes. However, the union was reluctant to promote closer relations between its members and supervisors, and plant supervisors were disdainful of advice from hourly workers, who often knew simple fixes to complex problems.

Petersen held monthly meetings with W. Edwards Deming, the renowned quality guru who had helped Toyota and other Japanese corporations, and with numerous experts in the field of organizational psychology. Under Petersen's imprimatur, Ford employees at all levels were encouraged to contribute ideas and make suggestions. Training and exercises designed to break down bureaucratic barriers became the order of the day. Old-line bosses who ruled departments in an authoritarian fashion increasingly felt pressure to listen to subordinates, to include them in decisions--or to retire. Ford executives persuaded union leaders that without cooperation, the company and all its union jobs were doomed.

Ford's actions were consistent with an industry-wide trend that reduced employment in assembly plants up to 50%. The trend also swept through the white-collar ranks, displacing layers of middle managers. In 1978, Ford employed 506,000 workers worldwide; by 1981, with the closing of several plants, Ford's global employment figure had dropped to 404,000.

By the end of 1995, the company's work force numbered about 320,000 in its worldwide automotive operations and another 25,000 in financial and diversified operations. Remarkably, Ford today is building more cars and trucks--6.6 million in 1995--than it did in 1978, with about 40% fewer workers.

Near the beginning of Petersen's tenure as president, he asked design chief Jack Telnack and his staff whether they admired the cars and trucks they had planned for the mid-1980s. "After some hemming and hawing, they said that they didn't," Petersen wrote, "and we talked about why. That's when I asked them if they would design a 1983 Thunderbird that they would be proud to drive and to park in their driveway."

Like most American cars of the late 1970s and early 1980s, Ford models were boxy and, in the view of their designers, formal and stodgy, with nameplates such as Fairmont, Granada and LTD. They were laden with chrome and doodads such as hood ornaments.

To Ford designers, nothing was more ridiculous or aesthetically offensive than the vinyl roofs that had become popular among marketing executives who counted on them to denote luxury-- and to coax a few extra dollars from customers. Compared to the research and techniques more sophisticated marketers used to reach customers, Ford and other U.S. auto makers operated on a primitive level.

"We thought we'd capture buyers in California by taking one of our cars, painting a pinstripe on it and calling it the 'California Dreaming' model," said Bob Rewey, group vice president of marketing and sales. Buyers in California bought a higher proportion of imported vehicles than anywhere in the nation because they were the least satisfied with the design and functionality of Detroit's vehicles.

Designers in Ford's European subsidiary--in part because of their distance from the company's Dearborn, Mich., headquarters--felt free during the late 1970s to pursue a new initiative, exemplified by the clean, rounded, aerodynamic look of the Ford Sierra. Telnack, who had worked for Ford of Europe, proposed a radical new 1983 Thunderbird.

"There was some discomfort with the design, but we had to do it," Telnack says. "We felt it doesn't do any good to just follow. We had been successful when we went our own way. As design leaders we could help legitimize a purchase decision."

The 1983 Thunderbird debuted at a fortuitous moment, since the U.S. economy was emerging from recession and automotive purchasing was on the upswing. The Thunderbird sold strongly, and it also won plaudits from reviewers for its beauty. Thunderbird, however, was a two-door specialty model not targeted to a mass market. But the T-bird's popularity gave Ford designers the courage to try an even more radically aerodynamic design for a new family sedan--code-named Taurus--that had to sell in large numbers if the company was to restore its shaky financial base.

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Ford had begun working on Taurus in 1980, the year of the auto maker's massive financial loss. The $3 billion required to design the car, and to retool the assembly plants in Atlanta and Chicago where it would be built, represented an amount almost equal to the company's net worth at that time. Philip Caldwell and Don Petersen agreed that the car had to be something special, something different. But debates raged among managers how "expressive"--the auto industry's euphemism for extreme--it should look.

Until the 1980s, Ford executives tended to shy away from avant-garde exterior designs. Although a small number of research subjects reported that they liked expressive mock-ups, many more rejected them. Ford, therefore, stuck with designs that offended the fewest people, particularly those features that resembled what GM already proved it could sell. The pattern might have continued if customers hadn't begun deserting Ford and GM in droves.

Petersen, Ross, Jack Telnack and others began to question whether Ford's research-and-development methods ensured that its models were No. 2 or No. 3 instead of first on shopping lists. Mightn't a new model have a better chance to succeed as the enthusiastic first choice of a smaller number of shoppers--even at the risk of some consumers hating it?

A successful innovative design, even if a bit strange at first, offered another advantage: It had the potential of remaining "fresh" for a long time, especially if competitors copied it. Fins struck many as strange-looking when they were introduced; by the time the trend died, almost every auto designer had tried them. As Taurus's shape evolved, it was clear that the car looked like nothing ever created by an American car maker.

"Executives had always told us to reach for a design, and then they'd chicken out," Telnack says. "Mr. Caldwell was a very conservative businessman, and the company was losing a lot of money. He had the guts to push us. He told us he wanted something different. This time, he really wanted to make a Ford statement."

Taurus's aerodynamic design distinguished it visually from other cars on the road. Moreover, the manner in which Taurus was conceived, researched, built and marketed--unlike any vehicle Ford had ever produced--created a new paradigm for cooperation within the company. Normally, senior executives would have appointed a Taurus program manager, who drew engineers and specialists as needed from various departments--constantly provoking squabbling and turf battles. During the three or four years of development, a new manager might be appointed two or three times.

For Taurus, Ford appointed a team comprised of key engineers and managers and led by veteran engineer Lew Veraldi. Veraldi and the team were responsible for the car from go-ahead to "job one"--factory slang denoting the first car to roll off the assembly line. Veraldi and his team took special pains to poll co-workers about what features they wanted Taurus to offer. Engineers disassembled scores of models made by rival auto makers to discover "best in class" technology for every conceivable function, from window-lift mechanisms to the turn signals.

Many clever, customer-pleasing innovations and creature comforts were included in the car: cargo netting in the trunk, a slide-out tray for coins within reach of the driver, a picnic tray in the station wagon, oil dipsticks painted yellow so they could be seen easily, attached fuel-tank lids to prevent loss. More important, though, thanks to Team Taurus, the auto maker had been indoctrinated to a vital new cultural value: the necessity to concentrate harder than ever on pleasing customers.

"Taurus was a very holistic piece of design," Telnack says. "It delivered on the promise."

*

Notwithstanding Taurus' popularity with buyers of mid-size sedans, Ford was floundering in a number of market segments: compact cars, compact pickups, minivans and luxury sedans. Nowhere was the overall slide more evident than in California, where Japanese models proved more popular than in any other U.S. market. By thoroughly studying consumers in California, Ford was able to learn about fashion and lifestyle changes that eventually would affect consumers across the nation. Ford redoubled its initiative to hold focus groups and interviews, especially in venues such as Marin County and San Jose, where consumer behavior was significantly ahead of the rest of the nation and likely to be predictive of how car buyers elsewhere might react.

"We had to learn to listen. There's a difference between getting a sense of what you're being told and really understanding what consumers mean," Bob Rewey says.

Ford's consumer research evolved at a rapid pace through the 1980s. Even models that missed being full-fledged home runs won a following. The Aerostar minivan--with an exterior design inspired by the space shuttle that, unfortunately, more resembled a turtle--is a case in point. Unlike Chrysler's Plymouth Voyager and Dodge Caravan minivans, the smash hit successor to the family station wagon, Aerostar was a rear-wheel-drive, shrunken version of a full-size van, albeit with some technical gadgetry to reduce its truck-like feel. Chrysler minivans, equipped with front-wheel drive and derived from a modified car body, had the advantage of a car-like feel, especially for women, who became its primary drivers.

Ford subsequently came to understand what Chrysler had already discovered about its minivans: Some women--particularly those who favored skirts and dresses--disliked the step-up height of pickups and minivans such as the Aerostar and GM's Astro and Safari. The front-wheel-drive layout of Chrysler's minivans permitted a lower step-up height.

Throughout the 1980s, Lee Iacocca loved to bait former colleagues by saying of the Aerostar and other competitive vehicles: "We showed them how to do it, but they still don't get it." Ford planners, to their credit, made sure Aerostars dimensions allowed it to fit in a standard suburban garage, something the previous generation of larger vans couldn't do. Aerostar advertising stressed its advantage over Chrysler's minivan, a greater towing capacity and a heavier payload. Aerostar, despite its liabilities, came equipped with features and options that had never been offered in truck models: a separate high-capacity air-conditioner for the rear of the vehicle, electronic instruments, a trip computer, cruise control, a sophisticated stereo system, even headphone jacks for rear-seat passengers.

Ford finally grasped what minivan customers wanted and undertook a strategy to catch up. Harold A. "Red" Poling, who served as president under Don Petersen and took over as Ford's chairman and chief executive in 1990, gave the go-ahead to a joint venture with Nissan to produce a "true" minivan.

Using a front-wheel-drive design penned at Nissan's American studio in La Jolla, Calif., the two auto makers agreed to cooperate on design and engineering and build the vehicle at a Ford assembly plant near Cleveland. The nearly identical minivan models were named the Mercury Villager and the Nissan Quest. When Ford introduced the Villager in September 1992, the vehicle as was praised for having the driving feel of a car while offering the utility of a van.

Ford's Windstar, introduced in 1994 and built on a modified Taurus chassis, refined the minivan still further. Windstar finally gave Ford dealers the type of family vehicle that could compete formidably with Chrysler. Late in 1995, Chrysler raised the ante with a newly designed minivan featuring a left-side rear-passenger door.

The success of minivans proved to be just one sign that vehicle buyers were migrating from cars to trucks. Sales of minivans, sport utility vehicles and pickup trucks throughout the 1980s grew at a pace that caught the entire industry flat-footed. Stricter federal corporate average fuel economy (CAFE) standards forced a reduction in the size and utility of conventional passenger cars, so buyers increasingly were willing to consider truck-like vehicles--so long as they weren't forced to compromise comfort or prestige. That minivans, sport utility vehicles and pickups were heavier and, therefore, less fuel-efficient than cars didn't hurt their popularity, since gasoline remained readily available and its price stayed flat instead of soaring to the $2.50 a gallon level once predicted by energy forecasters.

To capitalize on the growing popularity of truck-like vehicles, Ford developed the Bronco II compact sport utility, a smaller version of the full-sized Bronco. Like Ford's Ranger compact pickup, from which it was derived by enclosing the pickup bed, the Bronco II was designed as a "lifestyle" vehicle, aimed at young singles, couples and families with enough disposable income to ski, camp, windsurf and scuba-dive. Four-wheel-drive versions permitted drivers to steer the Bronco II off-road into reasonably rugged terrain. But Ford's research showed, surprisingly, that fewer than 10% of sport utility owners drove on unpaved surfaces. They liked the image of owning a rugged vehicle but didn't make use of its technical capabilities.

Controversy has engulfed the Bronco II because of its involvement in an unusually high number of rollover accidents. Critics say the Bronco II's high center of gravity made it dangerous, but Ford maintains that it is safe when driven responsibly, and a federal safety investigation in October 1990 found no safety defects. In March 1995, a federal judge threw out a proposed settlement of a class-action suit brought against Ford by Bronco II owners. The plaintiffs had argued that the rollover controversy lowered the resale value of their vehicles.

The Bronco II, like the S-10 Chevy Blazer and several other Japanese sport utilities, did suffer from a major design drawback: It had only two doors. Families with children, looking for an alternative to a car, were unlikely to consider the Bronco II, even if it fulfilled many of their needs. They liked its size and utility but didn't want to forego ease of entry, quiet, climate control and a smooth ride. Jeep's Cherokee and Grand Wagoneer and the Chevy Suburban dominated the market for four-door sport utilities. None of the competition offered, in Ford's view, an ideal package for consumers.

GM planners also concluded that the S-10 should offer two additional doors and the creature comforts families expected from a well-appointed car. But GM engineers chose a low-budget approach: grafting an additional two doors onto the S-10's frame without substantially changing its size. Ford had a more ambitious vision: The chassis used for the Bronco II was lengthened 18 inches and the body was widened by two inches.

Ford was especially clever about the name of the new sport "ute:" Explorer. Instead of sticking with the macho Bronco II persona, Ford marketers chose a gender-neutral identity that denoted boldness without being blatantly male. The Explorer, which debuted in 1990, was a vehicle aimed as much at women as at men, and intended to be as appropriate for a trip to the symphony as a trip to the supermarket. Indeed, Ford planners strived to make the top-of-the-line Eddie Bauer Explorer model as commodious as a luxury sedan, with leather upholstery, electric locks, carpeted floor mats, premium stereo, speed control, sun roof and an extended comprehensive warranty.

At a time when vehicle sales were weak following the Persian Gulf War, Explorer became Ford's financial life vest, generating, according to the estimate of financial analysts, several thousand dollars of gross profit per vehicle. The healthy profit reflected the fact that Explorers were flying out of showrooms without rebates and at very close to full retail price. Indeed, during the past six years, Ford has never had to offer a rebate or incentive of any kind to stimulate sales of the Explorer, a statement that can be made about very few vehicles.

Another telling proof of Ford's commitment to listen to customers, dealers and employees revealed itself in 1989 with the introduction of the front-wheel-drive Probe, a sporty coupe built in Flat Rock, Mich., by Ford's affiliate, Mazda Motor Corp. of Japan. Ford considered halting production of the rear-wheel-drive Mustang and giving the Mustang name to the new sporty model. Mustang enthusiasts, inside and outside the company, howled with protest. Ford executives realized how much equity had been accrued by the Mustang brand, revisited the research and satisfied themselves that a strong Mustang market, different from that of Probe, existed.

Alex Trotman, then a fast-rising, British-born executive in charge of North American operations, championed a major Mustang redesign. A group of eight managers lobbied him for permission to create a $1 billion remake of the rear-wheel-drive pony car. Trotman replied: "The first estimates don't provide the return we need." If the group agreed to spend no more than $700 million and finish the car in 36 months, rather than the customary 48 months, he would support it.

Operating from a vacant Montgomery Ward warehouse near Dearborn to keep the project as quiet as possible, a team of 250 managers, designers and engineers racked their brains for ways of capturing the romance of the original 1964 Mustang--on a low budget. To save money, the team decided to use the same chassis as the then-current Mustang. During tests of the convertible, the team was stymied by vibrations. The solution was found in a new Mercedes convertible that the team tore apart: a small metal device, nicknamed "the salami," that dampened vibrations.

Warm reviews and brisk sales greeted the 1994 Mustang, a model that might never have existed had not the eight managers felt comfortable enough to challenge senior management, an unthinkable act in bygone years.

*

In 1986, two best-selling books, "Iacocca: An Autobiography" and "The Reckoning," by David Halberstam, portrayed Ford as a bloated industrial giant on a downward spiral.

Against the backdrop of Chrysler's own brush with bankruptcy and resurrection, Iacocca vilified Henry Ford II and derided Ford's inability to capitalize on obvious consumer trends such as America's love affair with minivans.

Halberstam, a Pulitzer prize-winning reporter and best-selling author, spent five years rigorously studying the rise of Japan's Nissan Motor Co., contrasting it to a Ford company beset by confusion and squabbling. "The Reckoning" detailed Ford management's tendency to assign higher priority to efficiency and costs than to the quality and appeal of its vehicles. Halberstam criticized Caldwell, Ford's chairman at the time, for excessive caution. To Halberstam, Ford represented the perfect metaphor for the Big Three's post-World War II arrogance and torpor.

Halberstam's instincts were correct, but his timing was unfortunate. A book, like a car, may take years to develop. Many is the car model that appears fresh on the drawing board, but is out of date when it appears four years hence.

By the time the book appeared, in Taurus' first full year of production, Ford was on the brink of a highly successful run that continues to present day. By contrast, Nissan was soon to fall into doldrums caused by the strengthening of the yen in relation to the dollar, the resultant run-up in Japanese vehicle prices and the bursting of the bubble of that country's economy.

It would be reassuring to conclude that the outpouring of popular Ford vehicles from the early 1980s to the present day unassailably positions the auto maker for long-term prosperity. But learning to listen to customers and developing astute vehicles aren't the only tactics necessary for survival. Another is efficiency, which Ford is addressing with Ford 2000, the campaign to drive down cost by building "world cars"--with major body, engine and transmissions in common but accessories reflecting local tastes.

The automobile business is cyclical. Even a mediocre auto maker should make money--money it needs to develop new models--when the economy is expanding. The trick is not to pile up losses when the market for vehicles turns flat or weak in a economic recession, as it did in the early 1980s and early 1990s, and as it inevitably will again. If Ford's impressive array of vehicles can earn a solid profit during the next recession, the cars surely will make as big a hit with shareholders as they have with drivers.

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Driving Through the Years

1946: All the new postwar cars, merely warmed-over prewar models, were gobbled up instantly.

1946: The rakish postwar convertable was more at home in a color ad than rolling at highway speeds.

1954: T-birds looked sportier than they drove, but the ragtop, and removable hardtop, sold well.

1965: The Mustang was a big hit in 1965--and it still is 30 years later. Its fans made their objections known when Ford considered giving the rear-wheel drive Mustang's name to what became the Mazda-built front-wheel-drive Probe. Ford conceded, and the Mustang is now in its fourth reincarnation.

1967: The wooden-sided beach wagon or station wagon--the ultimate family vehicle of the '40s--turned into an ironclad before evolving into the popular minivans.

1971: Ford's first shot at building a compact resulted in the sluggish, cramped Pinto. Despite its many shortcomings, the Pinto sold well before the invasion of the imports.

1978: A sport-utility vehicle is designed for deserts, mountains and streams, but many are bought by drivers with no intention of roughing it. The Bronco evolved into the Explorer.

1987: In the years before 1920, no one could have predicted that the mundane pickup truck would be challenging the family sedan in terms of sales. Even the poor gas mileage that resulted from its relatively heavy weight has failed to deter buyers, since fuel has remained plentiful and its price remained flat.

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