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M
ulally also studied the competition. The chief executives of General Motors and Chrysler had both called to congratulate him shortly after his arrival in Dearborn, but he had yet to meet either one in person. Now, as he gazed out his window at the Renaissance Center—the futuristic cluster of cylindrical towers that dominated the Detroit skyline and served as GM’s headquarters
^*
—Mulally decided it was time to pay a visit to America’s largest automaker. On October 13, 2006, he arrived at the Renaissance Center for a meeting with GM CEO Rick Wagoner.

Wagoner, like so many other Detroit executives, had worked his way up through the ranks in the company’s finance department and now took obvious pleasure in his own authority. Tall and imposing, Wagoner had captained his high school basketball team in Richmond, Virginia, and went on to play at Duke University. After earning an MBA from Harvard Business School, he took a job at General Motors in 1977. In Detroit, Wagoner soon found himself
on the fast track. By 1992, he was already CFO. And he was only thirty-nine. By age forty-eight he was CEO. Wagoner was a good manager, but he also benefited from a strong economy and an insatiable hunger for GM’s
big sport utility vehicles. Some questioned whether GM really needed another insider at the top, given its inability to overcome its own historic weaknesses.

“
An outsider could never come in here and figure it all out,” Wagoner insisted.

That was in 2000. Over the next six years Wagoner made some impressive gains. He started globalizing product development while Bill Ford was still fighting to convince his own team to even consider such a move, and he led the company’s lending arm—the General Motors Acceptance Corporation, or GMAC—into the home mortgage business in time to cash in on America’s housing boom. Wagoner knew GM had problems, but the company was making money, and he was content to move slowly.

“[Wagoner’s] strategy, in effect, was a big bet on continued cheap oil,” wrote journalist Paul Ingrassia. “By coincidence, in June 2004,
National Geographic
magazine carried a cover story titled ‘The End of Cheap Oil.’ One GM executive showed the story to Wagoner and suggested GM might be relying too heavily on trucks and SUVs. Wagoner retorted that the same faulty thinking had made GM the last company in Detroit to cash in big on the truck boom, and he wasn’t about to repeat that mistake.”

Now GM too was paying for its overreliance on pickups and SUVs. But reality had done little to diminish Wagoner’s self-confidence. Though privately dismissive of Mulally, he received his guest graciously, welcoming him to Detroit and the automobile industry.

“We’re fierce competitors, but we have a lot of things in common,” Wagoner told Mulally, explaining how the two companies had historically collaborated on certain issues relating to government regulation of fuel economy, emissions, and safety. “I hope we can continue to work together in the future.”

Mulally assured Wagoner that nothing would please him more. After all, he still had so much to learn about the automobile industry. Wagoner smiled smugly. He would be happy to school the novice CEO. So Mulally began firing off a barrage of questions about everything from business cycles and product strategy to the upcoming negotiations with the United Auto Workers and the U.S. Environmental
Protection Agency’s efforts to raise corporate fuel-economy averages. He sounded like a man struggling to negotiate unfamiliar terrain. It was a calculated ploy worthy of Mata Hari, and Wagoner fell for it entirely. He was more than happy to play the wise master to Mulally’s naïf. He went out of his way to demonstrate his knowledge of these issues and others that Mulally had not dared ask about. It was a good thing Mulally was already becoming famous in Detroit for his grin, because as he listened to Wagoner talk, he could not help but smile.

These guys don’t have a clue, either
, he thought.
They’re in the same place we are. They have all the same problems that Ford does
.

As he was leaving, Mulally told Wagoner he would like to be able to call him in the future if he had more questions. He was just trying to be polite, but Wagoner took it as another sign of weakness. He would later claim publicly that Mulally had sought his help as he struggled to understand the industry in those early days. The truth was, Wagoner had been played so well he did not even notice.

Mulally did not need to study Ford’s archrival, Toyota. He had been a keen student of the Japanese automaker for years.

“
They make products that people want, and they do it with less resources and less time than anybody in the world. They’re a magical machine,” he said in an early interview. “This system of continually improving the quality, putting the variations into the product line that people want and doing it with minimum resources and minimum time is absolutely where we have to go. If you look at Ford, it’s the antithesis.”

A
t the same time, Mulally was discovering that at least a few things in Dearborn were worth keeping.

He had granted tacit approval to Fields’ Way Forward II plan shortly after accepting the job in Dearborn, assuming it would serve as a stopgap until a new and better plan could be developed. Now that Mulally had the opportunity to study it with a better understanding of the company and its problems, he realized that Fields’ new plan was fundamentally sound. If implemented correctly,
it would reduce Ford’s North American production capacity by 26 percent over the
next two years, reducing its installed maximum annual production capacity to 3.6 million units by the end of 2008. That was still more vehicles than Ford’s sales forecasters thought the company needed, but the gap was much narrower than it was now. Moreover, that figure assumed each factory would be running two shifts. If as many UAW members took buyouts as the company hoped, the actual capacity would be
closer to 3 million units—about equal to projected sales. The plant closures and job cuts were also expected to reduce Ford’s annual operating costs by $5 billion. At the same time, Fields’ plan promised to accelerate the introduction of new cars and crossovers.
Some 70 percent of Ford, Mercury, and Lincoln products by volume would be new or significantly upgraded by the end of 2008.

This is a good foundation
, Mulally thought.

But he was wary. Fields and his team had let the market get away from them once. Mulally wanted to make sure they did not let that happen again. He directed the North American team to flyspeck their progress on cutting costs, boosting factory utilization, and stabilizing market share. Mulally was sure the Thursday meetings would keep them honest—and keep him up to date.

“Deliver the plan,” he told Fields.

Mulally was also impressed by a new approach to design and engineering that the company had started rolling out a year earlier. Ford was still developing different vehicles for different regions, but at least it had begun using a common system in each part of the world—one that promised to save both time and money. It was based on the system used by the company’s Japanese subsidiary, Mazda, but also incorporated best practices from Volvo and Ford’s North American and European divisions.

Mazda’s system was
similar to the one used by Toyota, which was widely recognized as the best in the world. At American automobile companies, design was art and engineering was science. Designers wore black shirts, Italian shoes, and sported enormous wristwatches that cost more than some of the cars they had created. Engineers favored khakis and plaid shirts with pocket protectors and wore their cellphones on their belts. The two usually met at arm’s length, if they met at all. Mazda’s system forced them to work together, often side by
side in the same studio. It also gave other functions such as manufacturing, purchasing, and even sales a seat at the drafting table. The point was to prevent costly and time-consuming revisions of the initial design. When these groups worked independently, mistakes occurred. A designer who knew nothing about thermodynamics might create a great-looking grille only to discover that it did not allow enough air to flow into the engine compartment. An engineer with no knowledge of ergonomics might develop an exhaust system that worked perfectly but was impossible to install. By including people from each of these disciplines in the design process, Mazda had been able to dramatically reduce such missteps.

The system was remarkably similar to the approach employed by Ford’s own Team Taurus, which had so impressed Mulally in the 1980s. He could not help but wonder why Ford’s product team had to relearn all this from the Japanese, but he was glad they were. The new system they had come up with also incorporated Volvo’s virtual design system, Ford of Europe’s superior industrial processes, and the more advanced computer-aided design and engineering systems used by the company in North America. The resulting amalgam allowed Ford to simulate every aspect of a new vehicle—from its ride and handling to the manufacturing steps required to build it—before work on the first prototype even started. The result was dubbed the Global Product Development System, or GPDS, and it promised to dramatically reduce both engineering costs and development times. It was already helping Ford bring new cars to market faster and for less money.

GPDS was just being rolled out when Fields took over Ford’s Americas group in the fall of 2005. It was first used to make last-minute changes he ordered to the new Ford Fusion sedan. The first vehicle to be entirely developed using it was the Ford Flex crossover.
^*
It was still a work in progress when Mulally arrived in September 2006, but the benefits of the new system were clear. It had already reduced the number of engineering changes required for each new part by 50 percent.
^†
These were precisely the sort of efficiencies Mulally was looking for, and the system’s team-oriented approach matched his own management philosophy perfectly. Moreover, it used many of the same digital design tools as Boeing, which had adopted a similar system during the development of Mulally’s 777.

Mulally was just as excited to learn about a still-secret collaboration between Ford and Microsoft Corporation that promised to make the automaker a technology leader once again. It would allow motorists to talk to their cars, and Mulally thought that was just the sort of thing that could convince consumers to take a second look at the Blue Oval.

As Mulally studied all of these efforts, he was reminded of the old Buddhist maxim: “The teacher will appear when the student is ready.” Such efforts spoke to the untapped talent still latent in the struggling automaker. By themselves, these measures would never have been enough to save a company so fragmented by internal strife and paralyzed by its own poisoned culture. But they were all things Mulally could build on as he constructed his own plan.

M
ulally also looked to Ford’s past for inspiration. As he learned more about the automaker’s illustrious history, he became convinced that the key to Ford’s future was a return to the principles that had made it so successful in the early days, when Henry Ford was still sitting in the chair he now occupied. The company that Ford founded had changed the world and created hitherto unimagined prosperity for generations. That was the result of not one man, one idea, or one vehicle, but the work of many men and women inspired by many great ideas who had together created many great cars and trucks. Over the subsequent decades, the company had lost its way, but Mulally was convinced he could help Ford find it again.

In between meetings, he dug through its corporate archives like a miner convinced that gold was close at hand. Mulally hit pay dirt when he came across an old advertisement Henry Ford had taken out in the
Saturday Evening Post
on January 24, 1925. In a style reminiscent of Norman Rockwell and Maxfield Parrish, it depicted a young,
windblown couple standing atop a grassy hill, their trusty Model T visible in the background. Their children play at their feet as the man and woman gaze optimistically across rolling farmland bisected by a road filled with automobiles, to a hazy horizon over which looms the smoky outlines of Ford’s new River Rouge factory. The caption read, “Opening the highways to all mankind.” Beneath it, Henry Ford outlined his vision for the company’s future.