A headline on the July 20 combined Detroit News/Free Press jumped out at me: "At Ford: Cut costs or else." The story, written by Jamie Butters of the Free Press, was based on an interview that he'd conducted with Allan Gilmour, vice chairman and chief financial officer of Ford. Earlier that week Ford had announced its second quarter earnings, a profit of $570-million. When announcing those results, Gilmour stated, "We continue to expect a modest profit for the full year, but those results are still unacceptable. We are continually monitoring our progress on the Revitalization Plan and are intensifying our efforts to reduce costs and improve efficiency to ensure that we stay on track."
And during the same announcement, Nick Scheele, Ford president and chief operating officer, said, "We made progress against several of our Revitalization Plan milestones, including a significant improvement in the J.D. Power quality study, but we are not satisfied with our results. Quality is our top priority and we expect further improvements going forward."
Speaking of the Revitalization Plan, Bill Ford, chairman and CEO of the company, stated in July, "If you look at our 100-year history, it is clear that our success always has been driven by our products and our people. Our revitalization plan is centered on products. Great products made us what we are, and they will take us where we're going in the future."
But there is something that troubles me about all this—and it undoubtedly troubles those who work for Ford far more. In the Butters story, it states, "As part of a wide-ranging plan to go from losing $5.5 billion last year to earning $7 billion before taxes in 2005, Ford is committed to saving $1.5 billion in annual overhead costs—the expenditures not directly linked to making cars and trucks." Part of that overhead consists of salaries for white-collar positions. And part of the means by which Ford will try to make its nut is by eliminating tens of thousands of blue-collar jobs.
And I think of the "or else" part of the headline.
Let's see. Gilmour says, "reduce costs and improve efficiency." That's certainly good. Scheele says, "Quality is our top priority." Given that the company has gone from Quality being Job One to recalls being far too numerous, this refocus on quality is not only laudable, but essential.
Bill Ford talks about the importance of products. And here I take exception. Sure, it is in the business of producing vehicles for sale. But products don't make that or any other company. People do. In the case of Ford, there are the men and women who have—and who continue to—toil in the factories and offices, in the labs and on the test tracks, creating those products.
Some people who are no longer with Ford made some bad decisions. Those decisions continue to reverberate and have already resulted in the loss of many jobs. And, yes, there is global overcapacity: too many cars chasing too few consumers. But for some companies, their market share is going north thanks to the efforts of some outstanding but unsung men and women who are getting it done—without an axe hanging over their heads.
People aren't "assets." They are what makes or breaks a company. And to treat them as expendable in order to make traders on Wall Street happy, while thinking that "great products" are what really matter, is nothing more than a recipe for failure. Or else.