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Ford had to make a clean break. It had to banish “Big Three” from the American lexicon. It had to prove to Congress and the American people that it was different. And the best way to do that was to stop asking for their money.

We have a choice
, Mulally thought as his plane circled Detroit International.
GM and Chrysler don’t, but we do
.

Breaking with Detroit

T
he next morning—Thursday, November 20, 2008—found Alan Mulally back at the head of the round table in the Thunderbird Room, watching the weekly slide show and wondering if Ford Motor Company could make it through the worst financial crisis since the Great Depression on its own. The numbers were still horrible. Overall industry sales were down sharply in North America and Europe. But something was happening. Ford’s sales in both regions did not appear to be down quite as much as its competitors’. It had started in October. Ford’s sales analysts cautioned it could be a fluke. Now, three weeks into November, it was beginning to look like a trend.

In the United States, the new version of the Ford F-150 pickup had finally arrived in dealer showrooms, and demand was surprisingly strong. The economy was still in a nosedive, but if there was one thing Ford knew, it was truck customers. The latest model proved that. It offered a host of new features that spoke directly to their needs and wants, including things like a retractable side step for easy bed access, a high-tech system that kept trailers from swaying, and even an optional dashboard office—complete with keyboard, printer, and a special mobile version of Microsoft Windows for folks who worked out of their trucks. The new F-150 also boasted better gas mileage than the previous model. It was an eye-pleaser as well. And the decision to delay its launch had only made customers want it more.

In Europe, Ford’s new Fiesta subcompact was also off to a strong start. It was peppy and fun to drive and got 40 miles to the gallon. It was also more stylish and much better built than most of its
competitors. Ford was actually selling more of the sexy new models in some markets than it did of the previous version a year earlier, when the European economy was still strong.

Neither the F-150 nor the Fiesta was going to save the company by itself. Overall sales were still down sharply. But the early success of these products did suggest that Mulally’s strategy was fundamentally sound. By continuing to invest in new cars and trucks while other automakers cut back to control costs, Ford was leaping ahead of the competition. If it kept it up, it just might emerge from this recession faster and stronger than its rivals. Ford’s chief economist, Ellen Hughes-Cromwick, told the team that she believed the economy would bottom out within the next three to six months in the United States. She predicted that car and truck sales would rebound in the second half of 2009. People could only put off buying a new vehicle for so long, she said.

Even Chief Financial Officer Lewis Booth had a little bit of good news. Ford’s cash burn rate was beginning to slow. All of the cost cutting was starting to make a difference. The philodendrons had not died in vain.

Our plan is working
, Mulally thought.
We just have to make it through this trough
.

After the slides were finished and the executives had refilled their coffee cups, Mulally reassembled his team for the special attention review session. The agenda was full, but it could wait. There was a more pressing question that Mulally wanted answered first. As he looked around the table at his team, he could not help glancing over at the wall of old photographs of the company’s founder and his early automobiles. A giant blowup of Mulally’s pocket card had been added to the wall, right next to a picture of Henry Ford and his hero, Thomas Edison. There was the Dearborn plowboy who had put the world on wheels through sheer force of will and strength of vision. If there was an archetype for the self-made man, he was it. And Mulally did not want to let him down.

“Can we make it without the government’s money?” Mulally asked his team. “Can we get through this without their help?”

There was silence as the other executives weighed the risks and
potential rewards of going it alone. If Washington was writing checks, Ford would be foolish not to take one. But if it could somehow make it through this crisis on its own, it would make up for a lot of years of bad products and broken promises. Jim Farley could see the marketing potential immediately.

“This can be a moment that really separates Ford,” he said. “It can be a moment that really differentiates us.”

General Motors and Chrysler had already made it clear they would have no choice but to file for bankruptcy without a bailout.

“We’re not there yet,” Booth said. “We still have options.”

“Let’s look at them,” Mulally said.

First, there was the revolver. Ford still had not tapped its $11 billion credit line. The actual amount available was closer to $10 billion now because Lehman had been underwriting a tenth of it, but it was still there. No one wanted to touch it—partly because it would raise Ford’s interest expenses, but mostly because Wall Street would view it as a last, desperate act before bankruptcy. The fact that Ford had not significantly scaled back its investment in new vehicles also gave the company a cushion that GM and Chrysler did not have. Treasurer Neil Schloss and his team were exploring the possibility of a debt-for-equity swap to reduce the amount of interest Ford was already paying. Then there was Volvo. Selling the Swedish brand had always been part of Mulally’s plan, but he had decided to wait until it was making money again. It was still not there yet, and the global economic crisis made it unlikely that Ford could get anything near what it had hoped to for the brand, but it could get something. Finally, there was the United Auto Workers. President Ron Gettelfinger was hinting that the union might be willing to renegotiate the terms of the VEBA to allow Ford and the other Detroit automakers to cover a greater portion of their upcoming obligations to the health care trust fund with stock instead of cash. The UAW was even willing to let them borrow back some of the money they had already set aside for those trust funds.
^*

By the time the team had finished going over all of these options, Mulally was beaming.

“We’re going to figure out how to do this on our own,” he said. “I believe in you, and I believe in the plan. And I believe it’s the right thing to do.”

T
hat night, some of Ford’s executives lay awake wondering if it really was. They were not convinced the company could survive the recession, even with government aid. Most were worried Ford was about to close a door that would never open again. The automakers were already trying Washington’s patience, and Congress had made it quite clear during the first two hearings that the last thing it wanted to see was any of the companies coming back in six months or a year asking for help again. If they wanted money from Uncle Sam, the time to ask for it was now.

Even if it looked like Ford could make it on its own today, there was no guarantee that it could tomorrow—particularly with the fate of the other two domestic automakers still undecided. It was still far from certain that any of the automakers would get a penny from Washington, and if General Motors or Chrysler collapsed, all of Ford’s assumptions would have to be reevaluated. With the capital markets frozen, there was nowhere else the company could turn.

When the team reconvened the following day, Mulally could read the fear on many of the faces. Ford’s blunt Australian controller Peter Daniel got right to the point.

“What if GM were to go down or Chrysler were to go down?” he asked.

There was awkward silence. He broke it with a have-your-cake-and-eat-it-too solution. What if Ford asked for a $9 billion line of credit but promised that it would only use it as a last resort? If it did,
the company would submit to whatever terms the government had already imposed on GM and Chrysler. Otherwise it would continue to follow its own turnaround plan. Ziad Ojakli said it would be a tough sell, particularly in the middle of a transfer of power when politicians were looking for simple solutions, but he agreed to see what he could do.

B
ill Ford was thrilled when Mulally told him he thought the company could make it on its own without a bailout. It was what he wanted. It was what the family wanted. It was what his great-grandfather would have insisted on, regardless of the risk. He also was worried that Washington would insist on the family ceding its control of the company to the regular shareholders as a condition of direct financial aid.

The board of directors was a little more concerned about the plan. It wanted to know what Ford was giving up and whether it could return to Washington later if the situation got worse. The outside directors were reluctant to exclude any option—including bankruptcy. As Ford’s cash reserves dwindled, they were once again worrying about their fiduciary responsibility to Ford’s investors. A Chapter 11 filing would wipe out all of the stockholders, but the secured bondholders might walk out of federal court with at least a portion of their investment. Normally directors are not legally required to worry much about bondholders, but that changes when a company is on the verge of insolvency. Corporate counsel David Leitch assured the board that the threshold had not yet been reached, but the directors were still nervous. A couple of them had already resigned.

Sir John Bond and Jorma Ollila both left the board in October, saying they needed to focus on their own companies. With the global economy imploding, that was understandable. Bond was the chairman of Vodafone Group, and Ollila was the chairman of both Nokia and Royal Dutch Shell. The crisis at Ford was requiring frequent trips across the Atlantic at a time when their own corporations also were contending with the global economic catastrophe. But bankruptcy also carried a much bigger stigma in Europe. If Ford failed,
their careers might be in jeopardy. Senior director Irv Hockaday tried to talk them out of resigning. He knew it would not look good to Wall Street. But Bond and Ollila could not be swayed.