By Courtney Trenwith
Hal Feder, the man in charge of Ford Motor Company’s overseas growth, reveals the extraordinary turnaround in the car giant’s fortunes over the last five years, and why the Middle East could hold the key to its future
A short five years ago, Hal Feder was calculating how much it would cost to return his family from South Africa to the United States as the worldwide brand to which he had devoted his entire 30-year career teetered a mere $4bn away from liquidation.
As president and CEO of Ford in Southern Africa, the American had a bird’s eye view of the business’ global figures and the scene was not pretty.
“The cash got to about $14bn — the finance guys will tell you it takes about $10bn to run a company like Ford, so we were probably a quarter or two from the brink, and, at that point, the scary thing was we had already told the government we don’t need your money,” Feder tells Arabian Business.
“So it got pretty serious. I asked myself how much would it cost for a family of four to get back to the US because there was no guarantees [of survival].”
Ford’s miraculous revival, led by former Boeing CEO Alan Mullaly, has become a textbook example of how to bring back a company from near bankruptcy. It was even more amazing considering the fate of the two other auto firms in the US, General Motors and Chrysler, which despite accepting multi-billion-dollar government bailouts, are still far from crying: “we’re back”.
Now global director of export and growth, Feder says the days of excuses and cover-ups within Ford’s executive ranks have been bulldozed and a new culture of transparency and honesty cultivated.
Last year, the Detroit-based automaker made $5.7bn in net profit and ended the year with the highest pre-tax profit for a single quarter in nearly ten years, earning $1.7bn in the fourth quarter. Its share price also has rebounded, from as low as $1 in 2009 to more than $12.
That compares to losing $17bn a few years earlier.
“There’s clear evidence that the plan is working,” he says. “We’ve just completed our third year in excess of $8bn of pre-tax profit. [We’ve had] fourteen quarters now of profitability [and] $34bn in liquidity.
“Alan calls it the largest home improvement loan in history. We were in about $36bn worth of debt, [then] we went out and raised about $23bn ahead of the capital markets collapsing and actually — if you can believe it — put the Ford oval on the table at the banks and said ‘if this doesn’t work you own the oval’, so we hocked — mortgaged — our brand. We’ve paid off those loans now. So I think you’d have to look at the financial comeback of Ford and say that this plan is working.
“Now we’re in a position where we’ve got ourselves back on our feet financially and we’re in expansion or growth mode, as opposed to reinvention mode, and our challenge these days is much different, it’s really taking that ‘One Ford’ to the next level.”
The light at the end of the tunnel for Ford is not only visible but it is illuminating a new path to growth. And this time the Middle East will play a far more pivotal role in the future of the company.
“[Ford sells] about 1.5 million vehicles [in the Middle East] today but we see 2.5 million by 2022, so it will grow at substantially larger and faster rates than the global economy. We see the global car industry being about 100 million from 80 million,” Feder says. “The Middle East, the Far East, the emerging markets and Russia have got good growth rates, but the Middle East will be a key driver in the next ten years for economic growth and the automobile business.”
The Middle East represents nearly half of Ford’s business in its 84 export markets, which together are the company’s seventh-largest segment. Saudi Arabia is the largest of the 84 export markets and the UAE is third.
Sales in the Middle East broke the 75,000 unit barrier for the first time last year, representing ten percent year on year growth. Ford presently has about seven to eight percent market share across the region and Feder says the goal is to crack double digits by 2015-16. But he claims the focus is not on the number, but rather on what it’s going to take to get there.
“It’s getting the infrastructure in place on the growth side, [while] on the loyalty side, it’s taking care of people and ... starting to create a culture in our dealerships we call an engagement, where the employee is so engaged into the business they act like owners of the business,” he says.
“That’s a much different mindset than actually coming in to collect the pay cheque. The Al Tayer Group here in the UAE does this so the people in the business feel like they’re the owners of the business so that when the owners of the business are not there the business continues to prosper and people make decisions on the showroom and in the service lanes that are in the best interests of not only the customer but the business.
“Because if you think about customer satisfaction, how can you give something you don’t already have? So the employee has to be satisfied before you can provide the satisfaction to the customer.
“Growth and loyalty: those are the things that I think will underpin and drive whether we’re successful ultimately. The number will be the number, it’s not our focus, it’s doing those things that will put us in position to get that number.”
Ford opened a $53m parts distribution centre in Dubai’s Jebel Ali Free Zone in November 2011 as part of its commitment to the region, while Feder says it plans to open a new headquarters in Riyadh by the end of the year to service significant growth in Saudi Arabia, where Ford sold 60,000 vehicles in 2012.
It also has expanded into Lebanon with Folic Automotive signing on as a new dealer.
“I think you’re seeing a whole lot of growth in the dealer side of the business. We’ve probably spent about $100m or so in terms of new facilities, in terms of quick lanes, [which] is our quick service retail outlet, and you’ll see more of that,” Feder says.
“We’re working very hard with our dealers to make sure we’ve got enough service capacity to take care of our customers because one of the things is... when you sell as fast as we’ve been selling, you run out of capacity, you run out service stalls, so you have to put the stalls in.
“[You also need to] hire the technicians, so there’ll be a lot of job creation as a result of this expansion and you have to train the technicians because they don’t come ready to fix these complicated, highly technical cars. So stalls, people, and training, we’re working very hard on that.”
Ford also is using the Middle East as a testing ground for new vehicle features for the first time in the company’s history. Cooling systems, fuel efficient tanks, performance in extreme conditions and some off-road features are aspects being tested in the region.
“We’ve got specific engineering researchers that are part of our plan here. We will leverage the Middle East with respect to testing some of these features going forward; we already do that,” Feder says.
“You’ve got a fairly extreme climate in the summer here so we will use that and the terrain to make sure our products are not only right here but right for the world.
“So the volume, the investment that we’ve got going into the region, coupled with the growth rates really demands a lot of attention from us. It’s also a very interesting market in terms of the geo-political climate and the investment that’s going on by government and business working together.”
Feder says the region’s young and growing population as well as increasing wealth will facilitate the above-average growth. There is still a high proportion of the population who do not own a car.
“There’s wealth [and] the governments are very motivated economically to support business,” he says. “We find that the investment will flow to where business and government are working together.
“There are some concerns with respect to the Arab Spring and some of the geo-political challenges [and] the Syria situation is a concern, but by-and-large it’s a good place to do business now and a great place to do business in the future.”
The region’s increasing role ties in with Ford’s new global focus, which has been the trunk of its recovery. Several manufacturing and distribution plants in Europe and the Middle East have been shut down or are in the processing of closing as the company consolidates its worldwide facilities.
“I’ve been with Ford now 30 years in June. One of the things that we’ve not done that whole 30 years is we’ve not operated as a global entity, a One Ford entity,” Feder says.
“We’ve operated regionally, or multi-nationally, where you’ve got one region over here doing their Ford thing and another region over here doing their Ford thing. We called the products the same but there was very little commonality between the regions, so now we have a global cycle.
“We have nine platforms that are carrying the breadth of product across the whole range; five global platforms and then there’s four regional platforms like Mustang and F-series. It gives us scale [and] it gives us product development efficiency, so one dollar in product investment ends up going further.
“I think we had some crazy number like 90 steering wheels in the Ford system. I mean, a steering wheel is a steering wheel; you’ve got a base one, a luxury one, there’s some wood, there’s some leather. You could probably get by with about three or four [but] we had about 90.
“Instead of buying 200,000 here and 200,000 here and 200,000 here, we’re [now] buying millions of components, which drives our costs down and our quality up. So you get scale and you get efficiency and you’re able to essentially cover the market, small, medium or large cars, or trucks and utilities. That’s been the key in the last five years. When you think about how Ford has come through this crisis, where others haven’t come out so well or had to go to the government for money, we’ve kind of reinvented ourselves and gone back to what was [Ford founder] Henry’s original vision.”
But, he says, there is one difference.
“Nowadays, the real difference is there’s this competitive hunger in the company that probably wasn’t there [during previous periods] when prosperity came back,” he says. “If you look at our history, we’ve kind of had a series of ups and downs. We’ve relaxed when things got a little less dire or less intense.
“When our backs are to the wall we tend to be at our best and now there’s this urgency within the company as a result of some of this, not just the strategy, but our cultural change with this strategy that really gets us going in the morning.
“One of the things that I think that Alan and the leadership team installed as we were going through this crisis is a different way of managing the business. It’s going to sound very fundamental to you but in the old days we did a business plan [that was] very well thought out, in the nice three ring binder with charts and then we put it away and then updated it the next year and then put it away and then updated it the next year. Now we have a business plan that’s very much a living document.
“We were spending the last five years saving the company and now we’re really trying to set up a platform for future growth.”For all the latest transport news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.