In the cross hairs for Ford’s rapidly declining fortunes, Nasser could use one of those bulletproof vests himself. Sources close to Ford’s board tell NEWSWEEK that Nasser has until the end of the year to present the board with a convincing turnaround plan. Speculation about Nasser’s tenure has reached such a level that last week chairman William Clay Ford Jr. found it necessary to issue a companywide memo supporting his embattled CEO. “Jacques has provided strong leadership and continues to meet the challenges head on,’’ Ford wrote. That hasn’t been easy since the wheels are falling off at Ford, which just two years ago was revered as America’s best automaker. Back then Nasser had his eye on becoming the next Jack Welch and transforming Ford from an Old Economy relic into a 21st-century powerhouse that not only built cars, but sold, repaired, rented and even recycled them. Wall Street was dazzled and predicted Ford would overtake General Motors as the world’s largest auto-maker. Now Ford is in free fall and its reputation is sullied by Firestone’s accusations that the Explorer is unsafe.
But there is much more than just Firestone’s fallout hitting Ford. In three years Ford has dropped from the best to the worst in car quality among Detroit auto-makers, according to consumer researcher J.D. Power and Associates. On new-model launches, Ford has suffered a series of recalls, including five on its popular small SUV, the Escape. Last month Ford had to shut down the factory making its highly anticipated new Thunderbird to fix the car’s overheating engine. Ford sales have plunged 11 percent this year, more than twice the decline of the overall U.S. auto market. And Ford’s profits, once the highest in the industry, are expected to fall 80 percent this year; and its stock is trading at a four-year low. Now analysts warn that Ford could run out of cash by the end of the year, forcing it to slash its dividend, close plants and lay off thousands. In two years Ford burned through nearly $15 billion in cash–much of it on diversification schemes, like car junkyards and e-commerce ventures, which didn’t pay off. “We are facing the perfect storm,” says a high-level Ford executive.
To weather it, Nasser has promised a broad overhaul at Ford. He began last month by cutting 5,000 jobs, or 10 percent of Ford’s white-collar workers, and eliminated bonuses for top executives (including his own, which was $7.7 million last year). Last week Ford’s board approved a plan to merge the company’s car- and truck-engineering operations, which is expected to save money and eliminate additional jobs. Nasser, who declined an interview request from NEWSWEEK, has said nothing is off-limits in his cost-cutting crusade. But he warns that Ford will face strong head winds since he doesn’t expect the economy to turn around for 12 to 18 months. Farther down the road, Nasser is betting more than $1 billion on a radical new model named the X-Trainer (read: Cross Trainer), which combines the attributes of an SUV, a minivan and a station wagon. But that model, produced by an elite team of Ford’s top engineers and designers, won’t hit the streets until early 2004.
By then, Nasser will either be a survivor or on the streets himself. But he has faced adversity before. Born in a remote mountain village in Lebanon, Nasser, 53, was raised in Australia, where he took a trainee job in Ford’s finance department 33 years ago. Nasser rose through the ranks with a reputation as a car lover and an ace cost cutter, which earned him the nickname “Jac the Knife.” But by the time he took the wheel in January 1999, Nasser had tired of that label. He drafted a lofty new mission statement that promised to transform Ford into “a leading consumer company for automotive products and services.” To realize his sweeping ambitions, Nasser spent an estimated $5 billion to diversify Ford into new businesses, like British auto-repair shops and e-commerce start-ups. He also recruited bright young M.B.A.s from outside the auto industry and placed them in top jobs. He even started palling around with New Economy stars like Michael Dell, Jerry Yang and Bill Gates. But insiders say that when Firestone hit and the economy soured, Nasser may have been too distracted implementing his cultural revolution to take care of business. New-model launches were suddenly subject to recalls at an automaker that once boasted “Quality Is Job One.” And insiders accuse Nasser of weeding out too many of Ford’s old guard, who were experts at the nuts and bolts of the business. “In an attempt to change the corporate culture, Jac got rid of lots of talent,” says veteran auto analyst Maryann Keller. A spokesman for Nasser acknowledges the CEO was distracted by Firestone, but disputes that a talent drain led to problems with new-model launches.
But Nasser’s biggest mistake might have been not paying enough attention to whose name is on the building. Chairman William Clay Ford Jr., 44, great-grandson of Henry Ford, rose to power with Nasser and the two initially shared an easy give and take. But when Nasser became consumed by Firestone last year, he began leaving Ford out of the loop. The chairman, whose office is next to Nasser’s, would have difficulty getting Nasser’s subordinates on the phone, say sources close to Ford. Overlooking the Ford family, which still controls 40 percent of the company’s stock, has never been a good career move. Just as his uncle Henry Ford II once did with Lee Iacocca, Bill Ford this summer created an “Office of the Chairman and CEO” to more closely monitor the actions of his chief executive. Nasser is now required to give his chairman formal progress reports on all operations of the company. Ford also installed a trusted lieutenant, former Jaguar chief Nick Scheele, as Nasser’s new No. 2 executive in North America. Scheele wasted little time giving employees a sobering assessment of the company. “Our quality is not where we want it to be, our… costs are high and our sales volume and market share have fallen,” he wrote in an Aug. 13 internal memo obtained by NEWSWEEK. “We must step up and address these issues quickly and decisively, or we risk losing our position as one of the best and most respected automotive companies.”
Hot new models are always the best cure for an ailing auto-maker. That’s why Scheele got the T-bird factory running again late last month by pressing a supplier to come and fix the cars’ engine problems as they came off the assembly line. That nostalgic $35,000 two-seater will not rack up big sales, but celebrity owners like Katie Couric will help burnish Ford’s battered image. The big sales are expected to come from the $26,000 X-Trainer, which company executives hope will become the must-have vehicle of this decade that the Explorer was in the ’90s. To avoid association with the dowdy old Country Squire station wagon, Ford will call the X-Trainer a “sport wagon,” give it rugged SUV styling and equip it with three rows of seats, say company insiders. But with money tight, Ford is postponing other new models to conserve cash. A redesign of the F-150 pickup, Ford’s top seller, has been pushed back one year, to 2004. And a much-needed restyling of the Lincoln Navigator won’t come until next spring, although it was originally due this fall. “If you’re struggling and now you’re delaying product, how are you ever going to get better?” frets auto consultant Wes Brown.
Car buyers like Judy Mercer are not going to wait around for Ford to fix its problems. After faithfully driving Ford Explorers for a decade, Mercer just bought a $33,000 Toyota Highlander SUV. She switched because she saw the Firestone controversy drag down the resale value of her 1997 Explorer. “I was running away from the bad publicity on the Explorer,” says the Memphis computer programmer. “I felt like I was driving around a lemon.” It will take more than a quick tune-up for Ford to fix that kind of damage.
