Ford Forging Ahead

Donald E. Petersen, chairman of The Ford Motor Company, must be sitting
on top of the world. His company is making General Motors eat humble pie, even
though GM is almost twice the size.

Ford is reporting more profits than its giant competitor in absolute
dollars as well as producing cars about $800 cheaper. Ford has $9.2 billion
in cash, twice the sum held by that legendary cash giant, GM.
Ford is ahead, by most observers, in quality control. Although GM was
ahead on air bag technology and placement in the mid-Seventies; today, Ford is
the only domestic auto company offering air bags (on its Tempo and Topaz models).
After years of obstinate opposition to this life-saving device, GM is now recog‑
nizing it must play catchup to its Dearborn neighbor.

So confident is Ford that its vice president, Helen Petrauskas, speaking
on July 29th to the Automotive News World Congress, devoted herself to debunking
the myth that “safety doesn’t sell.” She cited a recent survey by Ford in the
U.S. that found “a safe to drive car” second only to a “dependable, reliable car”
in the opinion of new car prospects.

Petrauskas also reviewed the road experience of 18,000 Ford cars with
driver side air bags. More than 900 were involved in crashes and 120 of them were
severe enough to deploy their air bags. With obvious pride, she concluded that
“not one air bag deployed when it shouldn’t have. And they all deployed when they
should.”

The September issue of Ford Times will highlight the survivors of serious
crashes in air bag equipped Ford cars with their first person accounts. This
company magazine will go to one million households. In contrast GM never wanted
survivors of its air bag equipped cars (which 10,000 were sold between 1973-1975)
to receive any publicity.

Now back to Donald Petersen. What do you do with $9.2 billion? Buy some
other companies outside of the auto industry in order to balance the ups and downs
of auto sales? Give a substantial portion in greater dividends to your shareholders
whose stock has already doubled in one year? Buy back your own shares with the
money? Restore some of the wage cuts Ford workers took a few years ago and add
some fringe benefits? Do all four?

Of course, when a company has vast pools of cash, but isn’t selling that
many more cars, one has to ask how Petersen and his predecessor accomplished this
turnaround in just five years. Remember, analysts were wondering aloud whether
Ford Motor Co. of 1980 and 1981 would even survive. It was done by cost-cutting -‑
starting at one billion dollars a year cut from the excessive layers of middle
management and bureaucracy. Ford also sent more of its production to cheaper
labor countries for importation and assembly in the U.S. And, for the first time
in years, Ford became the style-setter, leaving GM’s look-alike models behind.

This momentum is likely to carry forward for a while. If Petersen spends
the money along the lines of the afore-mentioned ways, future Ford vehicles will
not necessarily be improved — however more diversified the company and however
better off are the shareholders and workers.

With this in mind, I wrote Mr. Petersen recently and suggested that a tiny slice of
the cash hoard be used to advertise and promote air bags prior to offering them as
standard equipment for the whole front seat in more Ford Models. In addition, Ford
could establish safety research and development programs and raise the status of the
safety engineer so that more graduate student engineers desire to work on these
frontiers.

There are other fundamental initiatives that Ford, while riding high, can
undertake around the country to induce good works and good minds to find tolerant,
technological answers to some of society’s vexing problems. It often said that the test of leadership lies in confronting and overcoming adversities. Petersen’s leadership test is what to do when you have overcome, and have the resources with which to lead.