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How a global IT revamp is fueling Fords turnaround

Stephanie Overby | Sept. 1, 2010
If financial results are any indication, the One Ford strategy is moving the company in the right direction.

IT has evolved from order taker to integrated business partner and innovator, says Smither. As Ford, perennially the number two U.S. automaker, attempts to move ahead of the competition and stay there, the tech team is critical. "Every vehicle manufacturer understands the importance of technology--not just for business operations but for its products, whether it's digital convergence, environmental sustainability, even how you communicate with customers," says Thilo Koslowski, Gartner vice president of automotive and vehicle information and communication technologies. "Ford is moving in that direction quicker than any other vehicle manufacturer."

Eliminating excess capacity and inefficiency within the IT organization and the company is supposed to enable Ford to return to--and sustain--profitable growth. Last year, even as American auto sales slumped to their lowest level in decades, Ford surprised the industry with a $2.6 billion profit and gained U.S. market share for the first time since 1995. General Motors and Chrysler, meanwhile, filed for bankruptcy and federal bailouts.

"It was a significant change-management challenge, but two things helped us," Smither says. "We were aligned to the One Ford plan, so as we were integrating IT operations, business operations were doing the exact same thing. And a year in, the economic meltdown hit, which became a motivator in enabling the change."

One Way Forward

"Ford has talked about this idea of One Ford for 30 years now," says David Cole, chairman of the nonprofit Center for Automotive Research (CAR) in Ann Arbor, Mich. "But there was never the discipline or the organizational structure to make it happen."

By the time the recession hit in December 2007, however, everyone from executives to assembly-line workers had a personal stake in restructuring. The U.S. auto industry was crashing; Ford alone would lose $30 billion and cut half its workforce between 2006 and 2008. Unemployment in Michigan rose to record levels and the Detroit area reported the highest home-foreclosure rate in the country. "It became very clear to everyone here that business as usual wasn't going to get us where we needed to go," says Smither.

But it was Ford's action before the financial crisis that enabled a sharp turn in the right direction. Call it prescience or desperation--no one can say for sure--but in 2006, before credit evaporated, the company had borrowed $23.6 billion in private loans. "Ford mortgaged the entire company--right down to the blue oval, they like to say--and it kept them out of bankruptcy," says Cole.

Mulally unveiled his unifying vision: The roles, processes and products at Ford should be more alike than different, and there needed to be fewer of each if the company was ever to be profitable again. "There was a high degree of duplication," says Smither. No common systems meant no common processes, insufficient collaboration, and little data sharing. The discord between regions was so bad, according to a 2006 Fortune magazine article, that the "joke around the company a few years ago had it that if the head of Ford Europe said it was snowing out, the head of North America would put on his bathing suit."

 

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