Ford Faces Tire Problems and Changes in Management

Despite its product fumbles, Ford Motor Company seemed in great shape as the new century opened. Corporate profits hit a record $7.2 billion in 1999 as the stock market and new-vehicle demand stayed strong in an unprecedented boom economy.

Ford Division remained "USA-1," owning five of the country's top-10 sellers, including the big F-Series pickup and midsize Explorer SUV. Both were vital high-profit assets in a market gone mad for trucks, and Dearborn gave them yearly improvements to protect their class-leading sales status. The Explorer, for example, was redesigned for 1995 and given optional V-8 power the following year. Answering competitive SUV challenges, Ford soon fielded the F-150-based Expedition and, a bit later, the jumbo Excursion and compact Escape.

Dearborn was no less expansive in the luxury field, pouring major money into new products and plants for Jaguar and Aston Martin, acquired in the 1980s, then adding Land Rover, another British icon, and well-regarded Volvo of Sweden. In 1999 these four makes were combined with Lincoln and Mercury into a new division, Premier Automotive Group (PAG).

Nineteen ninety-nine also witnessed historic changes in top Ford management. Chairman Alex Trotman retired, handing the reins to 42-year-old William Clay Ford, Jr., great-grandson of the company founder and nephew of the late Henry Ford II. At the same time, hard-charging Jacques Nasser was elevated to president and chief executive officer after two years as head of North American operations.

But suddenly it all turned sour. First, the economy unraveled as overpriced "tech stocks" tanked, taking Wall Street and the economy down with them. Then, in 2000, the cash-cow Explorer and its original-equipment Firestone tires were implicated in rollover crashes linked to almost 300 deaths and scores of injuries. Nasser traded charges with Firestone officials in the media and before Congressional investigators, then ponied up $3.5 billion to replace some 6.5 million tires.

But months of damning publicity clobbered Dearborn's image -- and its stock price. So did a string of recalls and launch glitches involving the new Escape, 2001 Thunderbird, redesigned '02 Explorer, and the small Focus, Ford's latest attempt at a "world car." Other new models like the Lincoln LS and sister Jaguar S-Type didn't sell as expected. Longtime Japanese affiliate Mazda was also in trouble, a further drain on corporate coffers.

And there was worse. After burning through more than $15 billion in 1999-2000, Ford lost a staggering $5.45 billion in 2001 and almost a billion more in '02. Part of that came from having to match the costly zero-percent financing program instituted by GM to jump-start a stunned market after the September 11 terrorist attacks. Equally ominous, Ford's near-term domestic product pipeline looked dry, and Jaguar was gushing red ink.

Many things had obviously gone wrong. Most pundits blamed CEO Nasser. So did the Ford board, who sacked "Jac" in October 2001. A reluctant Bill Ford took command. Nasser had overreached.

Buying Volvo and Land Rover was costly enough, but Nasser also splurged on wispy e-commerce ventures, a chain of auto repair shops in Britain, Norwegian-built electric cars, even junkyards. "The plan, theoretically, had promise," said trade weekly Automotive News. "[But the] acerbic Nasser left out a couple of ingredients: building reliable vehicles, and keeping the troops happy."

Some wondered whether Bill Ford could turn the company around, but he silenced many skeptics by moving swiftly to put Ford's "Glass House" in order. From now on, he declared, Ford would build great cars and trucks, period. No more of Nasser's grand vision for a cradle-to-grave "transportation company."

After shuffling key executives and drawing up a new organizational chart, Ford announced a recovery plan that aimed to achieve $7 billion in pretax profit by 2006, mainly through "leaner" manufacturing, "smarter" engineering, plant closures, worker layoffs, and supplier concessions. New models were supposed to help, particularly new cars, which Ford heralded by proclaiming 2004 as "The Year of the Car." But recovery proved stubbornly elusive.

For more on the amazing Ford, old and new, see: