What Ford can learn from Fiat

2006-10-26T19:00:00.000-07:00

Today in Wall Street Journal there is an article about how Sergio Marchionne is turning Fiat around. Before Mr. Marchionne was brought in, back in June 2004, the company acknowledged it was just months away from running out of cash. It has lost about $2.4 billion the year before. A four-year-old alliance with General Motors Corp. was on the rocks.

Today, Fiat is a very different company. Sales were up 19% in the first three quarters of this year. The business is profitable and its stock has doubled from last year.

Mr. Marchionne has been in the corner office for just about two years and we can see the outcomes. The question is: how come Ford hasn’t been able to accomplish the same results? Off course, there may be a lot of reasons but I think Ford and William Clay Ford can learn a lot from Fiat’s example.

Some of the main lessons are these: let me quote from “The Wall Street Journal”

Talking about Fiat’s CEO the author wrote: “The new comer mocked the auto-industry dogma that factory closings were the answer to the industry’s problem. Instead, he took a knife to the bureaucracy.”

“He boasted that Fiat at first would be selling fewer cars, not more, as he stamped out steep discount. They are a common practice in the industry, particularly in the North America where G.M. and Ford Motor Co. have often pushed cheap financing to keep sales up. Mr. Marchionne figured that though such promotions buoyed Fiat's market share, they widened its losses and cheapened the brand.”

“He also insisted that designer and engineers radically speed the process of bringing out a new model, skipping the step of building a working prototype. The result was to shave six months off the standard design-to-market time of 24 months or more.

Finally, instead of seeking a rescue through alliance-as Renault SA and Nissan Motors Co. have, and as GM considered doing-Fiat has pursued smaller, targeted joint ventures."

I intentionally high light the beginning of this quote because I think that we are all familiar with Ford’s problem solution. I pick on Ford because it is a company in the same industry; however, there are many companies that have the same dogma. They want to make us believe that the button-line-worker salaries are the reason of their bad performance. I agree that the button line has to be evaluated; however, how come nobody checks more carefully into a company’s bureaucracy. Is it because it is easier to blame somebody else? I am sure there are a lot of “reasons” (excuses) for not taking such approach. But, aren’t they, the ones in the corner office, the leaders that everybody should look up to? I guess we are short on true leaders who have the courage, boldness, and dignity to make such tough decisions.

Yesterday, I had the opportunity to talk to a former Ford high-level employee and he agreed that bureaucracy is one of the main problems at Ford. Actually from his presentation I can state that bureaucracy is the main problem at Ford.

Corporate turnarounds

What Ford can learn from Fiat