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“That is the plan,” Mulally reminded everyone who questioned his strategy. “Long-term profitable growth.”

Accelerating Kuzak’s product time line would require a heroic effort on the part of Ford’s designers and engineers. It would also require other departments to cut deeper. It was a testament to how much Mulally had changed the culture inside the Glass House that they were willing to do so. Fields expressed this new spirit in a speech to his troops that summer.

“I know this is really a kick in the teeth, but this is not Ford Motor
Company not delivering—this is the external environment. This is an egalitarian knock to the industry, and what’s going to separate the winners from the losers is how those companies approach this setback,” he said. “It’s easy to be a victim. It’s harder to say we’re going to take this and we’re going to make lemonade out of lemons.”

The Sum of All Fears

J
ust when it seemed as though Ford Motor Company had figured out a way to stay on course and ride out the downturn, the economic crisis in the United States turned into a global financial meltdown.

On September 15, 2008, Lehman Brothers—America’s fourth-largest investment bank—filed for Chapter 11 protection. It was the
biggest bankruptcy in U.S. history, and it pushed the world’s economy over the edge. Already-tight credit markets froze, making it nearly impossible for customers to get car loans. Not that many were interested in making big purchases with unemployment skyrocketing and no sign of relief in sight. In May, Ford had worried that demand for cars and trucks in the United States would fall from the 16.1 million units sold in 2007 to less than 15 million in 2008. A week after Lehman collapsed, Jim Farley warned that number could fall to 13 million—a level not seen since 1992.
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After returning to Alan Mulally’s regular weekly meeting cadence that summer, Ford was now back in crisis mode. The entire leadership team convened at least once a day, either in Mulally’s office or in the Thunderbird Room. Much of the attention was focused on sales, which continued to plummet. Fewer than 1 million cars and trucks were sold in the United States in September. That had not happened
since 1993. Ford’s own sales plunged by more than a third, falling nearly 35 percent from a year before. By October, even the daily meetings were not enough. Mulally’s team began huddling several times a day. They worked through lunch, taking quick bites of Caesar salad as they struggled to find a way through the worst financial crisis since the Great Depression.

Ford was running out of money, and it was consuming cash at alarming rate—$7.7 billion in the third quarter alone. That translated into more than $83 million a day. At that rate, Ford would be broke in a year.
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But unless something changed soon, it would not even survive that long. Ford needed between $8 billion and $10 billion just to keep the lights on and the factories humming.
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At its current burn rate, the automaker would fall below that critical level before summer. And sales were still declining—not just in the United States, but now in Europe and Asia as well.

Chief Financial Officer Don Leclair began planning for bankruptcy, despite the Ford family’s adamant insistence that it would never allow that to happen. But Ford’s board of directors insisted on preparing for the worst. Mulally’s turnaround plan seemed to be working, but several of the directors now feared that the gains he had made would be unsustainable in the face of the global financial cataclysm.

“Alan may have gotten here too late,” one director whispered during a break in the October meeting. The others said nothing, but they were all thinking the same thing.

With the credit markets now frozen shut, Ford’s treasury staff struggled to keep Ford Credit funded. When Mulally took over, the automaker’s lending arm was in surprisingly good shape—especially considering the state the rest of the company was in. Ford Credit had a good balance of secured and unsecured funding from both public and private sources. And because Ford’s sales were in a perpetual nosedive, its loan and lease portfolios were shrinking, meaning it needed less cash to keep up with demand. But it still needed some.
By early 2008, borrowing had become prohibitively expensive. Now it was becoming impossible. Getting rid of Aston Martin, Jaguar, and Land Rover reduced Ford Credit’s capital needs, but by October the situation was becoming critical.

For years, Ford Credit had pursued an aggressive expansion policy, aiming to build a brick-and-mortar presence in every market where Ford’s cars and trucks were sold worldwide. As cash became tight, those expansion plans were reevaluated and, in many cases, abandoned. Leclair wanted to preserve that money for the parent company.

Initially, Ford Credit CEO Mike Bannister agreed. He shuttered Ford Credit’s offices in Chile, closed up shop in Venezuela, and transferred the retail lending business in Brazil to Banco Bradesco. He unwound the Ford Credit’s Mexican operations, too. Bannister focused his support on critical products and critical areas like Ford’s home market in the United States. The second priority was Europe, but Bannister and his team decided that they would fall back to the five most important markets there if necessary—France, Germany, Spain, Italy, and Great Britain. The third priority was protecting Ford’s growing business in China. It was still small, but it was vital to the company’s future. Ford had been late to the game in Asia and could not afford to pull back now.

“That’s not enough,” Leclair told him. “We have to cut more.”

Bannister shook his head. Additional cuts would cost Ford sales it could not afford to lose. Soon it might have no choice. Until then, he wanted to keep moving as much metal as possible. But Leclair kept pushing. He wanted to get rid of more international operations and even cut back on domestic lending. Bannister warned they were already in danger of losing critical scale.

“You’ve got to deal with the fundamental issues that are causing the automotive company not to be profitable,” he told Leclair.

Leclair also wanted to sell the company’s controlling stake in Mazda, despite the fact that Ford was still working closely with the Japanese carmaker on several key projects—including the new compact car platform that would provide the underlying architecture for the global version of the Ford Focus and other key products. Now it was Derrick Kuzak’s turn to push back.

“We can’t do that,” he told Leclair. “We still need Mazda.”

“There’s no other way!” the CFO insisted.

As that crisis deepened, Leclair even began calling for cuts to the product plan that Mulally had insisted on protecting. Given the dramatic drop in demand for pickups, Leclair argued that Ford should curtail future investment in its F-Series trucks. GM had announced that it was halting work on its next-generation pickups and Chrysler was cutting back on all product spending, so Ford had little to lose by doing the same. Leclair also wanted to scrap Mulally’s costly retooling plan. The small cars and crossovers he wanted to bring over from Europe might be far superior to the vehicles Ford was currently peddling in North America, but with few buyers for cars of any kind, Leclair argued that that no longer mattered. These European models were far more fuel-efficient than the ones currently in Ford’s U.S. showrooms, but as economies around the world ground to a halt, demand for oil was falling. So were prices at the pump. In the past Americans had always demonstrated an almost insane eagerness to jump back into big cars and trucks as soon as gasoline prices retreated to a level they could tolerate. Why should this time be any different? But Mulally would not pull back on his product plan.

“No way,” he said firmly. “That’s our future—building vehicles that people want and value.”

Leclair had never been particularly interested in anyone else’s opinion; now he steadfastly refused to discuss other options. He had always been pessimistic, but now he was talking openly about bankruptcy and demanding deeper cuts that he insisted were the only way to avoid it. One by one, the other top executives decided that they had had enough.

Ford Americas president Mark Fields had never gotten along with Leclair, so Mulally was not surprised when he showed up at his office door with an ultimatum.

“I can’t productively work in this environment anymore,” Fields said. “It’s either him or me.”

Mulally was surprised when Bannister told him the same thing. The Ford Credit chief had known Leclair since 1988, and they had been friends. They lived two blocks from each other and would often
race to work in their Mustang GTs. Their kids went to school together. But now Leclair was second-guessing Bannister’s plan to downsize Ford Credit, and Bannister was convinced he was going too far. He reminded Mulally of their conversation two years earlier, when the new CEO had asked him to reconsider his retirement plans. Bannister had only agreed to stay because he was convinced Mulally wanted to save Ford. However, if Mulally was going to let Leclair eviscerate what was left of it, Bannister would just as soon not stick around for the last rites.

Mulally knew most of the other senior executives felt the same way as Fields and Bannister. And unbeknownst to anyone besides Bill Ford and the other members of Ford’s board of directors, Mulally had identified a replacement for Leclair more than a year earlier—Lewis Booth, the head of Ford’s European group. Mulally thought Booth would be the perfect CFO. He had a huge amount of operational experience and was known throughout the industry as a real car guy, but he also had a financial background. Most important, he was a team player who was both liked and respected by the other Ford executives. The board agreed. But Booth was also the man in charge of selling Ford’s European brands. When Mulally asked him to consider the CFO job back in 2007, Booth had asked to stay in Europe until the Jaguar–Land Rover deal was completed. Once it was, Booth had promptly turned his attention to readying Ford’s Swedish brand, Volvo, for sale. Mulally knew that, given the state of the world’s economy, that was unlikely to happen anytime soon.

The situation came to a head just before the October board meeting.

Don Leclair was right about one thing—Ford was in an existential crisis, and the board was looking for a clear plan to address it. But as the team worked around the clock to hammer out a strategy to keep Ford solvent, Leclair dug in his heels and refused to cooperate with the other executives. The night before the board meeting, they had still not reached an agreement. Leclair walked into the boardroom on the twelfth floor clutching his financial projections and glowering at the other executives. Fields and Bannister scowled right back. Mulally tried to remain positive, but he was embarrassed: His team
had failed to deliver. When the board found out, the directors were dismayed. Where was the action plan they had asked for? The executives traded recriminations before being sent out of the room. When the doors closed behind them, the directors told Mulally they were disappointed. This sort of infighting smacked of the old Ford. The board told Mulally to get his team in line before the next meeting.

After the board recessed, Alan Mulally and Bill Ford walked down the hall to Ford’s office and closed the door. They knew what had to be done, but it was a difficult decision for both men. Mulally still got along well with Leclair and continued to admire his financial acumen and grasp of the business. He was reluctant to lose such a valuable intellectual asset. But he was far more concerned about the disruption Leclair was causing at the top of the Glass House. Bill Ford knew that, if it were not for Don Leclair, the automaker never would have secured the financing that was now the only thing standing between his family’s company and bankruptcy. Leclair had devoted his life to Ford and worked as hard or harder than anyone else in the building to save it. But he was dividing the company at a time when it needed to be united like never before. He had to go, and go now.