Jac Nasser was always riding for a fall, Angus MacKenzie writes. “We’re going to shake up this company,” the blunt-speaking, hard driving Lebanese-born Australian confided even before he was made CEO of the world’s second biggest carmaker. Nasser had a vision of a leaner, faster Ford Motor Company; one that would transcend the unfashionable “rustbelt” imagery of auto manufacturing and become hard-wired into the new internet economy as a provider of automotive products and services. But that vision last week crashed headlong into the fickle conservatism of Wall St and Detroit’s entrenched power elite.
Long regarded as one of Ford’s most able managers, Nasser was never entirely trusted with the company’s fortunes. While his predecessor and mentor, Sir Alex Trotman, was both chairman and CEO of Ford, Nasser was only made CEO. The chairman’s job was given to Bill Ford Jr, great grandson of the company’s founder, and a man whose family still controlled 40 percent of the company’s stock. At the time one senior Detroit-based analyst claimed publicly it was right and proper that a Ford was at the head of the company.
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Nevertheless, Nasser began to shake up Ford. He promoted talented insiders to key positions in Detroit, regardless of their nationality or status on the Ford payroll. And when he couldn’t find the talent he wanted inside, he went outside, ignoring long-serving Ford executives who had carefully worked their way up the corporate ladder. In appointing former Volkswagen group designer J Mays vice-president of design, for example, he bypassed a whole generation of Ford designers.
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| Jacques Nasser |
Anxious to expand Ford’s product portfolio into the higher profit, premium brand sector, Nasser first acquired Volvo and then Land Rover, and folded them in with Aston Martin, Jaguar and Lincoln to form the Premier Automotive Group (PAG). In a brilliant piece of opportunism he hired ousted BMW product development chief Wolfgang Reitzle to run PAG, which this year will produce about 900,000 premium branded vehicles, roughly equal to BMW’s volume, and three times as many as cross-town rival General Motors.
As part of his strategy to re-invent Ford, Nasser enthusiastically courted the internet, inviting computer industry entrepreneurs such as Michael Dell to speak at senior executive meetings, and offering all Ford employees computers and internet access.
There were two reasons for this. At a time when e-business was the darling of Wall St, aligning Ford with a new industrial paradigm seemed a smart way of keeping investors on-side. But Nasser also saw the internet as a means of creating new revenue streams. “We invest 70 percent of the cost of a car over its lifetime, but only get back 30 per cent of the income it generates,” he once grumbled.
Nasser believed the internet would enable Ford to be more directly linked with its customers – both internal and external – up and down
the automotive value chain.
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By GlobalDataAgainst this background Nasser’s tenure at the top was always only going to be as solid as Ford’s share price. Acutely aware of this, Nasser assiduously courted Wall St analysts and opinion leaders, using the company’s strong run of quarterly earnings growth as evidence his strategy was working. But the share price stubbornly refused to respond, as investors noted Ford’s fragility in Europe, and its overwhelming dependence on trucks in North America. And when Nasser’s decision to recall 13 million Firestone tyres last year, at a cost of about $US3 billion, combined with falling sales in a market spiralling into recession to produce Ford’s first two quarterly losses in a decade, his fate was sealed.
The Firestone debacle, prompted by lawsuits which implicated faulty tyres in fatal crashes involving Ford’s best selling Explorer sport utility model, was an event outside Nasser’s control, although as the man responsible for Ford’s US products prior to becoming CEO, he should have been aware of any shortcomings in the Explorer’s engineering. And few predicted just how rapidly the internet would become a discredited commodity on Wall St. But not all Nasser’s problems were beyond his control.
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| William Clay Ford Jr |
During his tenure as head of both Ford Australia, and then Ford of Europe, Nasser’s ability to ruthlessly cut costs and boost profitability earned him praise inside Ford’s World Headquarters, along with the sobriquet “Jac the Knife”. But once the short-term benefits had been realised, it became clear that Nasser had cut beyond the bone in places. Starved of investment, a number of key Ford product programs in Australia and Europe were either delayed or compromised.
Ford’s Australian market share has collapsed from 24.3 per cent in 1995 to just 13.9 per cent in the nine months to the end of September – once market leader, it now ranks behind GM and Toyota. In Europe, a lack of diesel engines, delays in bringing new Mondeo and Fiesta models to market – and to design a Focus – based rival for Renault’s Scenic – have also cost Ford valuable market share. Meanwhile, chronic overcapacity and an expensive plan to improve Ford’s image by moving the company’s European headquarters functions to Germany have further impacted on profitability. Ford of Britain, long the cash cow of the company’s European operations, last year posted a £636 million loss.
As CEO, Nasser may have surrounded himself with able, internationally experienced executives who shared his bold vision for Ford,
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but these were simply a veneer atop a middle management cadre whose outlook reflected Detroit’s insular mindset (when Alex Trotman decided to hold the Ford 2000 conference outside the US in the 1990s the local passport office was reportedly inundated by applications from Ford senior managers who had never travelled outside the country before). Nasser tried to force change by instituting a grading system that required 10 percent of senior managers to get C ratings (a C rating meant a loss of bonuses and pay rises; two C ratings meant you were fired) but this only created a deep well of resentment within the company.
Meanwhile, Nasser’s plan to buy up Ford dealerships met with fierce resistance from influential independent dealers angry at being forced out of their lucrative businesses. The dealers successfully lobbied the board, calling Nasser arrogant and forcing him to back down.
Even so, Nasser may have survived had the chairman not been a Ford. Rumours of growing friction between Bill Ford Jr and Nasser had been circulating within the company for months before the feud between the two exploded onto the pages of The New York Times last February.
Fundamentally, the issue was one of control; Bill Ford didn’t want to be a mere figurehead, left to comment only on touchy-feely issues such as the environment and corporate citizenship. He wanted to run the family business. And even though many Ford insiders privately questioned his ability – his lame performance during the Volvo acquisition press conference drew groans from employees watching the event live on the company’s in-house TV network – the sliding share price, quarterly losses, and growing dissatisfaction among middle management gave him the credibility he needed to call Nasser’s strategy into question.
Long time Detroit watchers won’t be surprised that Jac Nasser has gone, as the Ford family has a history of bitter clashes with ambitious senior executives. In some ways this latest episode is a re-run of Henry Ford II’s firing of Lee Iacocca in 1978. But while Henry II was a battle hardened executive – the man who had overseen Ford’s post-war revival – Bill Ford Jr’s sole credential for running the company appears to be his surname.
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