Color coding reports:

Mulally instituted a traffic light system at his weekly management meetings, held
Thursday mornings at 7 AM. At these meeting sessions direct reports would indicate their
progress on key initiatives. A green light meant all was well, a yellow light that some
attention was needed, and a red light that a situation was critical. At his very first weekly
session, Mulallys direct reports showed green lights with just a few yellow lights sprinkled
"You guys, you know we lost a few billion dollars last year," he told the group. "Is there
anything that's not going well?" After that the process loosened up. Americas boss Mark
Fields went first. He admitted that the Ford Edge, due to arrive at dealers, had some
technical problems with the rear lift gate and wasn't ready for the start of productionHe
urged them to roll up their sleeves and ask new questions, putting away their boxing
gloves. Lots of red lights showed up at the next Thursday morning meeting. By personally
modelling candor and a willingness to openly speak about complex, taboo subjects, Mulally
built a safe operating environment for his direct reports.
Evaluate Mulallys change methods. Are these effective?
When Allan Mulally took over at Ford in 2006, the company was losing billions of dollars and
the company was basically a dysfunctional organization, no collaboration and inefficiency.
But soon after taking over, Alan started implementing some changes and was able to turn
the venerable automaker around, revamp the company culture and restoring the business
to profitability. So what are the changes that he made? His changes were all laid out in a
plan he called One Ford, which can be reduced to four simple, easy-to-understand points:
Mulally kept hammering home these four points in every meeting, every town hall session,
every analyst meeting and press conference
1/ Aggressively restructure to operate profitably at the current demand and changing
model mix: he restructured the organization to make the organization leaner
- When Mulally took over as CEO in 2006, Ford was in tough shape. It had lost a
whopping 25% of its market share since 1990. The company held a huge portfolio of
poorly performing brands including Jaguar, Land Rover, Aston Martin, and Volvo. But
none of these brands was faring well, and each required major capital infusions to
compete. He belived that these cars were a dangerous distractions from Fords core
business so persuaded Bill Ford to sell off Jaguar, Land Rover, Aston Martin and focus
its resources on on the core brand only.

There was not just one Ford, but many. In addition to just plain Ford, there was Ford of Europe,
Ford of Asia and a host of other divisions and subsidiaries, each one manufacturing different cars.
They used to operate regionally And there was little coordination, or even cooperation between its
many parts. Now we are leveraging our global assets, innovation, technology, and scale to deliver
world class products for every market.

Moreover, changes also included massive cost-cutting initiatives that included

suspension of dividends to shareholders, closure of 17 plants and downsizing 54,500
jobs that accounted for 43 per cent of total workforce at the time by 2009

It used to be that we had too many suppliers and dealers. Now were putting in place the right
structure to maximize the efficiency and the profitability for all of our partners.

When he took over at Ford, the labor costs as high as $76/hour within Fords unionized workforce,
making the companys operating margins uncompetitive at home and overseas. However, he was able to
negotiatioate with the UAW to reduce labor costs,

2/Accelerate development of new products our customers want and value:

approach to our customers was: If you build it, they will come. We produced more vehicles than our
customers wanted and then slashed prices, hurting the residual values of those vehicles and hurting our
customers. Now we are aggressively matching production to meet the true customer demand. After
jettisoning the array of weak auto brands noted earlier, Ford went from selling 97 different automotive
products to just 20. This simpler, leaner product line enabled Mulally to drill down on manufacturing
excellence, product development excellence, and customer service excellence.
It used to be that we focused heavily on trucks and SUVs. Now we are shifting to a balanced product
portfolio, with even more focus on small cars and the advanced technologies that will drive higher fuel
economy in all of our vehicles
Mulally newly envisioned Ford not simply as a car company, but as a mobility company.
He brought innovative technology to Fords products that transformed the driver
experience, realigning its product portfolio for the 21st century.
3/ Work together effectively as one team
And at the heart of the One Ford plan is the phrase One Team. People are first. The main
thing about (implementing) a compelling vision is to include everybody -- pull everybody
together around the plan to implement a compelling vision."
the senior level management and heads of regional and other divisions were hesitant in
delivering bad news during meetings because it was not a part of their corporate culture at
that time
This made it impossible to have an honest discussion about the companys many
challenges, because any time an executive admitted they had a problem, their rivals would
pounce.
But Mulally had zero tolerance for that sort of nonsense.. Every week we have a Business
Plan Review meeting, or BPR. Our entire global leadership team, every business leader,
every functional leader, attends either remotely or in person. We talk about the worldwide
business environment at that moment Mulally made his weekly executive meetings a safe
environment where data could be shared without blame. It provides a fantastic window on
the worldthe whole team knows everything that is going on.
In his weekly meetings, he urged Fords senior leaders to offer each other help.
Mulally transformed this short-sighted, cutthroat, careerist culture into a model of
collaboration and efficiency
The entire Ford team from employees to shareholders, suppliers to dealers is absolutely
committed to implementing our new business model and becoming a lean, profitable
company that builds the best cars and trucks on the road for our customers.
Mulallys Working Together philosophy did not stop at the office door; it extended to all of
Fords stakeholders. He applied this same principle to the companys dealings with its
suppliers,
dealers and even the United Auto Workers. His message to each group was simple: We are
in
this together, and if you help us succeed we will make sure you share in our success.

In 2007, Mulally held a secret meeting with UAW President Ron Gettelfinger in which
outlined
his turnaround plan for Ford. He told the union boss that he would bring production back to
the United States if Gettelfinger would agree to major concessions that would allow Ford to
build vehicles profitably in this country. The result was a watershed contract that
fundamentally
changed the rules of the game the UAW had been playing with Ford for decades and went a
long way toward closing the companys labor cost gap with foreign automakers.
The union agreed to this because it could see that this would bring back jobs. During the
financial
meltdown of 2008 and 2009, Mulally also won important concessions from bondholders by
convincing them that taking a haircut on their notes was far better than seeing them turned
into
worthless paper. In the end, most of them made more money off those bonds than they
ever
expected. At the same time, Mulally approved a plan to dramatically reduce the number of
suppliers
Ford did business with, but negotiated deeper, more lucrative contracts with those that
made
the cut. As a result, Ford went from having the lowest supplier satisfaction rating in the
industry
to the best. And he worked similar magic with Fords dealers, convincing weaker franchise
owners
to sell their stores to stronger ones that could afford to invest in the customer experience.
In each of these cases, he got key constituents to make important changes for the benefit
of
Ford by showing them how those changes would benefit their own organizations. Think of
all the different players you rely on and show them how they can become more successful
by
contributing the success of your enterprise.

Mr. Chairman, Senator Shelby, and members of the Committee. Since the last hearing, I have thought a
great deal about the concerns you expressed. I want you to know I heard your message loud and clear.
On Tuesday, you received Fords detailed and comprehensive business plan, and I appreciate the
opportunity to return here today to share Fords vision and progress in becoming a profitable, growing
company.
You were clear that our business model needs to change. I agree. And thats exactly why I came to Ford
two years ago to join Bill Ford in implementing his vision to transform our company and build a greener
future using advanced technology. Let me share with you what we have done to change from how we
used to do business to how we do business now.
It used to be that we had too many brands. Now we have a laser focus on our most important brand: the
Ford blue oval. In the last two years, we sold Aston Martin, Jaguar and Land Rover and reduced our
investment in Mazda. And this week, we announced we are considering a sale of Volvo.
It used to be that our approach to our customers was: If you build it, they will come. We produced more
vehicles than our customers wanted and then slashed prices, hurting the residual values of those vehicles

and hurting our customers. Now we are aggressively matching production to meet the true customer
demand.
It used to be that we focused heavily on trucks and SUVs. Now we are shifting to a balanced product
portfolio, with even more focus on small cars and the advanced technologies that will drive higher fuel
economy in all of our vehicles.
It used to be that our labor costs made us uncompetitive. Now we have a ground-breaking agreement with
the UAW to reduce labor costs, and we appreciate the UAWs continued willingness to help close the
competitive gap.
It used to be that we had too many suppliers and dealers. Now were putting in place the right structure to
maximize the efficiency and the profitability for all of our partners.
It used to be that we operated regionally European cars for Europe. Asian cars for Asia. American cars
for the U.S. market. Now we are leveraging our global assets, innovation, technology, and scale to deliver
world class products for every market.
It used to be that our goal was simply to compete. Now we are absolutely committed to exceeding our
customers expectations for quality, fuel-efficiency, safety and affordability.
This is the Ford story. We are more balanced. We are more efficient. We are more global. And we are
focused. In short, we are on the right path to becoming a profitable, growing company.
We have moved our business model in a completely new direction, in line with the most successful
companies and competitors around the world. And as a result of our progress, we made a profit in the
first quarter of this year. Unfortunately, we all are facing a severe economic downturn that has slowed our
momentum.
Despite this downturn, Ford does not anticipate a near-term liquidity crisis. In fact, we expect our
automobile business to be profitable in 2011. But we do support a government bridge loan because it is
critically important to the U.S. auto industry.
Specifically, Ford requests access to $9 billion in bridge financing something we hope we will not need
to use. Instead, as we continue to drive change in our company, this line of credit will serve as a critical
safeguard, if events require it. And if we did need to access this loan, we would use the money to continue
our aggressive transformation and restructuring.
Ford is an American company and an American icon. We are woven into the fabric of every community
that relies on our cars and trucks and the jobs our company supports. The entire Ford team from
employees to shareholders, suppliers to dealers is absolutely committed to implementing our new
business model and becoming a lean, profitable company that builds the best cars and trucks on the road
for our customers. There is a lot more work to do, but we are passionate about the future of Ford.

In fact, we invite you to visit us in Dearborn to kick the tires, look under the hood and talk to our
employees. We hope you will join us and see for yourself the progress we are making to develop the
vehicles of the future.