Lewis Booth FCMA executive vice-president and CFO, Ford Motor company worldwide.
| Position | Interview - Company overview |
Ford was the only large US car manufacturer to avoid bankruptcy proceedings in 2009. What did you get right that your main competitors--Chrysler and General Motors--didn't?
Back in 2006 we recognised that there was likely to be economic turbulence ahead. In September and October of that year we raised $23.5bn worth of financing capacity to give us enough liquidity to implement our business plan even if the economic climate became difficult, which of course it did. This kept us going through the downturn. We learned that, when times get hard and you need liquidity, that's just when it's impossible to obtain it. So you really have to manage your liquidity in advance.
We also had in place a well-developed plan to focus and integrate the business. If we'd had liquidity and no plan, we could still have got ourselves into a real mess. If we'd had a great plan and no liquidity we also would have run into problems. Fortunately, we had both.
What are the most valuable lessons that you have learned from getting Ford through the global downturn?
I have learned three extremely important lessons. The first is that liquidity really is king during difficult times. A lack of it inhibits whatever you are trying to do.
Second, at Ford we've collectively learned to put a much greater emphasis on cash management. In the past we'd tended to focus on the P&L, with people assuming that cash would follow along in a similar fashion. We've now dispelled that belief and got people to focus on all the things they can do to improve the cash position, even when profits are deteriorating. We have reduced our working capital requirements substantially over this tough period.
My third lesson has been to recognise the value of getting the whole organisation to understand the balance sheet, which was viewed historically as the preserve of the CFO and the CEO. As the company built up lots of debt to give it liquidity, we went out and met all the operational divisions to explain the balance sheet. We told them that the business had a finite capacity to manage a large debt and that it had to start generating a positive operating cash flow to pay this back. This "socialisation" of the balance sheet helped us to get them to agree to higher profit targets etc. People realised that improving the balance sheet wasn't just another task for the finance team; it was a business imperative.
Growth in the automotive industry is likely to be driven by the Bric economies. How is Ford making...
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