DETROIT — This is not how Jim Farley expected to spend his first few months as COO of Ford Motor Co.
The 57-year-old, who became Ford’s second-in-command and heir apparent to CEO Jim Hackett on March 1, has spent the better part of six weeks holed up in his downtown Detroit apartment on endless conference calls and video meetings. Instead of overseeing key product introductions, Farley has been managing the coronavirus-induced crisis that has halted most global production, killed multiple employees and further sunk Ford’s already-struggling stock price.
Among Ford’s senior leadership team, though, Farley may be uniquely positioned to handle the crisis.
The situation Ford is in now mirrors when Farley joined the company in late 2007, just ahead of the Great Recession. As one of the only remaining top Ford executives from the financial meltdown more than a decade ago, Farley is applying a number of lessons to weather and recover from the current downturn.
“It’s like deja vu,” Farley told Automotive News. “There’s a lot that feels similar. You could use a lot of the experiences to your advantage.”
One of the biggest lessons he learned? Cash is key.
Liquidity, Farley said, “advantaged the company tremendously” during the Great Recession.
In 2006, under new CEO Alan Mulally, Ford mortgaged most of its assets, including the Blue Oval logo, in exchange for a nearly $24 billion loan that allowed the automaker to avoid filing for bankruptcy. Mulally also cut Ford’s dividend that year to conserve cash.
The same moves are playing out today.
Ford suspended its quarterly payments to shareholders last month, the same day it announced it would draw down $15.4 billion from two lines of credit. Separately, Executive Chairman Bill Ford said he would defer his full salary, while other top executives are deferring half of their compensation until the loans are repaid.
Farley said Ford’s purchasing team in particular is under a lot of pressure to creatively rein in expenses.
“We’re looking at every dollar that leaves the company right now,” he said.
Ford had $30 billion in cash on April 9, an amount it said would be enough to get through the third quarter without producing any vehicles.
The moves to shore up Ford’s finances — both then and now — would not have been possible without another recession-era lesson Farley has leaned on in recent weeks: quick decision-making.
Mulally’s actions ahead of the recession are credited with saving Ford and helping the automaker forge a different path from General Motors and Chrysler, which underwent government-backed bankruptcies.
Today, Farley said, Hackett and the leadership team have been ahead of the curve on a number of issues, including suspending the dividend, deferring executive compensation and agreeing with the UAW on the need to shutter U.S. assembly plants.
“Some of it is actively helping be part of the solution, making ventilators and masks, but there’s just as much going on inside the company on cash management, taking care of our employees, doing the right thing and turning off the system as quickly as we could,” Farley said. “Everyone’s scrambling, and we’re really good at it. Decisions get made at the right level, and all the bureaucracy gets kind of washed away.”
That fast decision-making is driven by strong relationships and near-constant communication.
Farley said he spoke daily with Rhett Ricart, a Ford dealer and 2020 chairman of the National Automobile Dealers Association, as Congress hashed out the $2 trillion economic stimulus package about what could best help Ford’s retail network. Ricart, in turn, asked Farley to lobby governors to let dealers at least keep service departments open under shelter-in-place orders, which has largely happened.
Hackett, Farley and other executives also have held regular town hall video conferences with tens of thousands of Ford employees to keep them informed.
“It’s just important we stay really close,” Farley said. “It comes natural to us as a family company.”
Another lesson learned: Protect workers through furloughs when possible, as opposed to permanent layoffs.
Hackett has vowed to avoid eliminating jobs as a result of the pandemic and has floated the idea of rotating furloughs for salaried employees if the crisis lingers.
“If we furlough someone, we’re going to protect their medical insurance,” Farley said. “We don’t want to lay off people. We’ll do everything we can to protect that because we feel like demand will come back. And frankly, laying them off in this environment is really challenging for people.”
Farley said Ford’s leadership team is working through how to restart U.S. plants in a safe manner. In the meantime, he said, he’s been inspired by workers who have volunteered for jobs making masks, gowns, face shields, respirators and ventilators for health care workers and those afflicted by COVID-19.
“That is consistent with what I saw in the past,” Farley said. “The commitment to do the right thing.”