Great morning for a run here in Northeast Ohio. Mild, clear and low humidity. And for some reason while I was running I was thinking of John Nevin. Nevin, who died recently, was the former CEO of Firestone. He was a manufacturing guy. And he argued more than 20 years ago that America was not going to maintain its economic prosperity by becoming a nation of burger flippers. We may be on the verge of seeing if he was correct.
Why? Well one reason is that it looks like Ford is about to join GM as a whale on the beach. That’s both sad and a crisis. And full disclosure here not that it matters to anyone. I bought Ford common stock two years ago because I believed the company could reinvent (great business cliche) itself. Not so sure now — with gasoline at $4 a gallon and buyers racing to mini-cars and scooters.
And my confidence in Ford even went up a bit when Alan R. Mulally joined the company from Boeing as CEO about two years ago. He’s done an OK job so far cutting staff, closing plants, etc. Unfortunately this is about the only strategy available these days to Ford, GM and a host of other large manufacturing companies that John Nevin used to believe was the foundation of our economy. Here’s from an article by Bill Vlasic in The New York Times yesterday:
DEARBORN, Mich. — In recent months, as Ford Motor Company executives watched $4 a gallon gas and a softening economy take a growing toll on sales and market share, the chief executive, Alan R. Mulally, prodded his management team for answers.
“Everybody says cut and cut some more, but how are we going to sustain this company?” Mr. Mulally said in one meeting in his office on the 12th floor of Ford headquarters, according to people in attendance. “What does a sustainable Ford look like, gentlemen?”
In less than two years since he arrived as an outsider from Boeing to run Ford, Mr. Mulally had already mortgaged the company to raise cash, sold off three brands and cut truck production in the face of rising gas prices.
I don’t have any problem with any of that as long as Mulally knows what he is doing. Sort of like the old mission and vision statements. You know. You’ve all read at least one and chuckled. I digress. Here’s the key point — for me at least — in the article:
“Why are we in business?” he repeatedly asked the group. “We are in business to create value. And we can’t create value if we go out of business.”
OMG. Mulally thinks Ford is in business to create value. (Another great business cliche.) Almost everyone else things Ford is in business to build and sell cars and trucks.
And by the way, John Nevin did create value for Firestone shareholders. He sold the company at a premium to Bridgestone.