What Went Wrong at Ford

What happened? "Ford allowed costs to balloon out of control," says Wall Street auto-industry analyst David Bradley of J.P. Morgan Securities. "It spent too much time and money becoming enamored with the Internet instead of making good cars and trucks. It wanted to own the entire customer experience via online Web sites, but customers simply weren't ready, and Ford took its eye off the ball." Adds analyst Joseph Phillippi, president of AutoTrends, a New Jersey-based auto industry research firm: "Vehicle prices were way out of line with what the marketplace was willing to pay. They cost too much to build, and when the economy nosedived, fewer people were willing to pay premium prices."

According to the latest Harbour Report, an often-quoted measure of North American automotive manufacturing productivity, Ford's legacy production systems and high marketing and incentive costs contributed to low profits-per-car across the Big Three. Even with manufacturing improvements, GM posted only a modest pre-tax profit of $337 per vehicle in 2002, while Ford lost $1,913 per vehicle.

Information is, once again, central to Ford's strategy. But this time, says CIO Marv Adams, who was recruited away from Bank One Corp. two years ago by Ford to "rationalize" IT, there's a new discipline now about what is hot and what's not. There is no way to solve the auto industry's "very complex problems," Adams says, referring to Nasser's grand plan, "by devising some Internet veneer that you can throw in front of it all."

To truly get Ford back on track now, Adams says, the automaker needs to "focus on using the great capabilities of the Internet and other technologies" that are far less flashy and obvious. "All IT work now is targeted toward improving quality and reducing the resources required to deliver new products" by up to $700 per vehicle, says Nick Smither, director of global IT business operations.

"Someone on my staff recently asked me what the headlines about Ford would be in The Wall Street Journal five years from now," Adams says, "and I said the headlines would be all about how Ford has transformed itself." The story, Adams hastens to add, would say nothing about IT, "yet every single area that would make Ford competitive again, from marketing to manufacturing," would be IT-driven. Or so Adams hopes.