Brainstorm Green: Ford’s Alan Mulally

April 17, 2012, 1:03 PM UTC

Below is an unedited transcript of his appearance:

ALAN MULALLY: So, how are you? (Audience response.)

Boy, it’s making my eyes water back there listening to that. I remember that $1.01. I think the intra-day low was even below that.

Well, I’m really glad to be here and I’m really excited to be here. When you get a chance to work on three of the biggest issues that we’re all thinking about worldwide when it comes to economic development and energy independence and security and environment sustainability, you know, clearly Boeing and Ford are right in the middle of solutions to those three big issues that we care about worldwide.

And when Fortune approached me, I asked them how they would like to do this meeting, and they said, well, it’s very interactive and would you mind doing a town hall kind of format, and leave most of the time for discussion. I said, absolutely because that would probably be the most exciting part.

So, I’d like to thank Fortune for arranging this again, because whatever we are going to do together on these three big issues we’re going to do it together with public-private partnership, with technology, with innovation, but also especially with working together on where we really want to take our world.

So, I’m really glad to be here, and what I thought I might do is just spend a couple of minutes and tell you, share with you Ford’s approach to all three of these issues and kind of our fundamental strategy.

So, here’s the plan. (Laughter.) It hasn’t changed since 2006. I had a great life at Boeing (BA). I’d been there for 37 years, and I had a chance to contribute to all the Boeing airplanes as a designer, and so the 707, the 727, the 37, the 47, the 57, the 67, the 777, as John mentioned, and the 787, and so just a life committed to the safe and efficient transportation, dealing with the same issues, economic development and energy independence and environmental sustainability.

Then I got a call from Bill Ford, and I said, Bill Ford of the Ford Motor Company (F), and yes. And so he explained the situation and he said they were having some trouble — (laughter) — and he even shared with me at that time I think that the forecast that they had for profits for 2006 was a $17 billion loss. That means $17 billion with brackets around it. And if you’re in business and you have brackets around your profits, it means you have no idea what you’re in business for.

MORE: JetBlue creator to Ford CEO: “We all thought you were insane”

And we were able to achieve that in 2006 — (laughter) — and we had become a — in the United States we had become a fabulous truck company, large SUV and Mustang company. With the agreements we had with our unions we were not able to make cars in the United States and make them profitability. We had great cars outside the United States, in Europe and Asia-Pacific.

And we had also become a house of brands. So, we had purchased Aston Martin and Jaguar and Land Rover and Volvo, we had a 33 percent equity position in Mazda, and we had Ford, Lincoln and Mercury, and we were trying to be world class in all these different brands. We had actually 97 different nameplates that we were working on to be world class. And we were losing money on all the brands and all the vehicles, and outside of that things were really going pretty well. (Laughter.)

And so it was a very serious situation, and so the most important thing that we needed to do as a company, of course, was that strategy clearly wasn’t going to move us forward as a company, so that’s where this plan — and I don’t know why I did this, but I brought it out to show John because he’s asking me what we were going to do to save this American icon, and you know my history of I care so deeply about manufacturing and the United States competitiveness, and so what we’re going to do. So, all the elements of the plan are on this card, and the reason I wanted to bring it back up is that we don’t have a different plan for sustainability or energy independence and security or environmental sustainability that’s not on this plan, because we just have one plan.

And you look up at the top and you see the circles and that’s the market around the world, because it will be about split between Asia-Pacific, Russia, and Europe and the Americas.

Then you look at the size of the vehicles, and this is a tremendous shift for all of us worldwide, nearly 60 percent of the vehicles worldwide or in the next few years are going to be B to C size like Fiestas and Focuses, about 25 percent will be CD size like a Fusion, and about 15 percent will be larger vehicles like a Taurus and, of course, the bigger trucks and SUVs.

Now, you can imagine the transformation at Ford to go from a U.S. company centric to a global company with that balance, but also to move from a truck and SUV company to a full family of vehicles, dominated by smaller and midsized vehicles.

So, our whole entire plan is to serve the customers with the vehicles they really do want, and the other thing is that the people want a full family of vehicles, so whether it’s small, medium and large, cars, utilities and trucks, around the world, but they also want best in class quality, best in class fuel efficiency, the lowest CO2, really safe vehicles, really smart design like Sync and MyFord and connectivity, and they also want the very best value.

And it’s very interesting over the last five years all four of those requirements have coalesced around the world. And when people make a decision on a vehicle size they’re making a lifestyle decision. Remember when especially in the United States smaller vehicles used to be cheap and cheerful? Not anymore. When people are making the decision on a vehicle they want absolutely the best in class on all four of those parameters.

MORE: Former FERC regulator: God gave us fracking

So, when you walk into the Ford showroom today, and most third party people will share this with you, that we probably have the finest lineup now, and especially based on the fuel efficiency and low CO2.

Now, if you look across, you see a plot, and PGA doesn’t stand for Professional Golf Association or Bubba, it stands for Profitable Growth for All. And the most important thing that we had to come together on is we were going to do whatever it took to put together a business that would turn the corner from going out of business to profitability growing, because that’s the only way to have a sustainable business.

And the only way you can do that in business, and you all know this, is you’ve got to make products that people really do want and they value them, and you need to do it more productively with less resources and less time than the competition, which brings us back to sustainability and green again, because everything about the Ford plan is making the finest vehicles starting with the quality and fuel efficiency and the safety, but also on the production side is using less resources and less time. And so everything about our plan is reduced: water usage, energy use, using everything to go to lean, to have fewer vehicles, more top hats per vehicle so we can get the quality per vehicle increasing, and also the productivity. So, everything about the Ford plan is based on what you might call sustainability or green.

So, where are we today? We borrowed that small home improvement loan of $23.5 billion approximately. We have now paid back nearly $21 billion of it. Our debt now is at about $13 billion, and our corporate structure is around 10. We have now been operating profitability, we’ve turned the corner for the last few years. We’re actually increasing market share based on the strength of these products. We’re growing in the United States and worldwide, and we reinstated a dividend, which is fantastic.

But coming back to the product line, we’re living to make the very best cars and trucks in the world, and to do it in numbers that will make them more affordably. And as we go through the discussion, I’d like to share with you where we’re going on petrols and diesels and hybrids and plug-in hybrids and all electric, and we have a number of the auto journalists here that are driving the Ford Focus Electric, all electric, 110 miles per gallon equivalent. They’ve been driving it all around. And I might have them kind of come up and give it a little bit of testimonial, maybe so guys can get ready, and they’re here with us also today.

So, with that kind of introduction about how we’re approaching the business at Ford, I’d be glad to open it up to questions and answers. I think they’re going to turn the lights up a little bit, and we have three people they said that would have mics. So, if you can just raise your hand and maybe introduce yourself so at least I can meet you.

There’s one over there. Yes?

QUESTION: Alan, electric cars, can you give us the story on range anxiety? They get maybe 100 miles or so on a charge, and that’s good for a local commute, but a lot of Americans want a lot more distance than that. And battery, the lithium ion battery technology is still very expensive. So, what’s the curve on that? When are we going to get a 200 or 300 mile range battery at an affordable price?

ALAN MULALLY: Well, I think you’ve framed it very well. You know, remember that in the early 1900s with Henry Ford the vehicle choice were all electric vehicles, and then the gasoline engine, the internal combustion engine made that obsolete because of the economics again.

So, we’ve all been looking for the next generation of batteries. We’ve made a lot of progress. The latest versions of the chemistry and especially on nickel-metal hydride batteries are now moving to lithium ion. We’ve got to be able to do lithium ion batteries in large scale, because right now we’re putting together a lot of cells. They’re very expensive, they weigh a lot.

And just to give you an idea, to your point, a battery for a hybrid vehicle is around a 2 kilowatt hour battery, weighs around 100 pounds, maybe around $2,000. And as you move to a plug-in hybrid size, say around 8 to 10 kilowatt hours, then that weight moves up to around 300 pounds and the cost is around $7,000 to $8,000. And then when you move into an all-electric vehicle the battery size moves up to around 23 kilowatt hours, it weighs around 600 to 700 pounds — some people actually are taking our seats to be able to carry the battery around, not us — and also they’re around $12,000 to $15,000. Now, this is $12,000 to $15,000 out of a $22,000 car. So, you can see why the economics are what they are.

So, you absolutely capture the essence: We need to keep making progress on the battery technology itself, they’ve got to be easily charged and quickly, you have to be able to operate in cold and hot temperatures. And we’re making progress on a lot of those but we’re right at the front end of making the productivity improvements that we really need to make.

Now, having said that, we believe so — if I might just mention our technology roadmap that gets at that, we really believe that we can improve the internal combustion engine in the near term very significantly. And that’s why you see — and we kind of — from a customer point of view we describe it as a “power of choice,” that whatever works for the customer you’ll be able to get that option from Ford.

So, internal combustion engine, petrol or diesel, because it all changes, the economics, as you know, around the world, then we move to alternative fuels, biomass, the ethanols, the natural gas, then when we move up I think the next thing we’re going to see is electrification of the vehicles, especially dominated by hybrids initially, and then plug-in hybrids and all electric, which are the toughest.

We’re still working, we’re very bullish on hydrogen, and there we’ve got to make the breakthrough on the battery technology also, but we also have to make a breakthrough on fuel cells. But the idea of having a hydrogen tank, mixing it in with platinum and water comes out the back, the electricity goes over to a high performance battery, and then we’re in a place where a lot of us would like to be. We have to have the infrastructure for that, of course, which is huge, and we have to make a breakthrough on the battery and the fuel cell.

Now, on the electric vehicles we’ve got some great options for you. We believe in it so much for the longer term that you have the choice now of a hybrid, a plug-in hybrid and all electric, and of course the economics that go with that, like we described, but you can drive on more and more, and depending on your lifestyle, if you’re in the city and you don’t need more than the 100 miles a day and you have access to electricity and charging, with a Ford solution you can charge it in the minimum amount of time and it’s a great vehicle, has all the features and the quality and the safety that you’ve come to expect.
And then also if you want to drive even more on electricity, then you can get a plug-in hybrid and kind of manage that, and we have some great work with Microsoft and others on being able to manage your life with electric vehicles, so being able to charge on the off peak hours, knowing what the status of your vehicles are, and the data maps are such that you can know where all the charging stations are and plan your life if you want to go that way. And, of course, the all-electric you want all those applications and more, because you really are limited by the 80 to 100 miles.

So, that’s our basic technology roadmap, and none of us know which one is going to end up being the solution depending on the technology development. So, in the meantime we’re going to pursue all of them and make that power of choice available to the consumer.

QUESTION: Hi, Alan. Truman Semans with GreenOrder.

ALAN MULALLY: Very good.

QUESTION: You referred to the infrastructure and the infrastructure challenges are present for electric vehicles and for other alternative fuel vehicles. How do you think that’s going to get solved? What part of it goes to the OEMs, what goes to the utilities when it comes to EVs and what really requires the government, federal or state and local, to make that happen?

ALAN MULALLY: Sure, I think it’s going to be, continue to be but we need to even accelerate the public-private partnership on where we’re really going, and it’s going to start with what we’re all thinking about right now is what is our energy policy, because right now all these different energy sources are in play, but I think it’s going to take public-private partnership.

When it comes to the infrastructure clearly everything is in place for gas and diesel. When it comes to — I mean, all of them have issues. The biofuels have a certain distribution channel sort of in the Midwest; there are a lot of issues with that. Most of that is subsidized today, which is another issue, how do we want to — what kind of world do we all want and how do we want to use our previous taxpayer money.

When it comes to electrification I think your point about the infrastructure is really important, because the grid needs to evolve. We need to make some big decisions on how we generate the electricity, right, because we don’t want to just be working on the use of it clean but also what are we going to really do to generate our energy clean.

And, of course, the infrastructure for electricity is going to be a very big issue across the United States, and also kind of the capability, how fast are you going to be able to charge and where the corridor is going to be and what happens when we travel off the corridors that have the infrastructure initially.

So, again that’s why we really tailored the Ford offerings to be able to handle all those different situations, and depending on where you live and what your lifestyle is and the access to the infrastructure you have a solution that’s moving us towards a green world with Ford.

The hydrogen is even tougher, because now we really don’t have a hydrogen infrastructure in any significant way in the United States. But again I think that’s going to be a little further out, and I think it’s going to be a marriage of the invention, the further invention on the fuel cells and the batteries coming along with the infrastructure for hydrogen, but clearly that’s a very, very compelling vision for not only generating electricity clean but using it.

Yes? I hate to be the one who has to select. Will you still love me and come to the store tomorrow? (Laughter.)

QUESTION: Amy Christensen. I’m with the United Nations on Sustainable Energy for All, but my question is, given this increasing urbanization and the challenges of moving more and more people and goods in tight spaces, are you all looking at all to other types of transit solutions or staying focused? I know that earlier you all had looked at multimodal hub and spoke networks and what you could do with megacities. Are you still looking at that or just really refocusing on the vehicles?

ALAN MULALLY: No, we really are. The neatest thing about what we’ve been through the last five years is the first thing we had to do is just really focus on Ford. So, we divested all those other brands, and the best thing we can do from a lean point of view or a sustainability point of view was to get all that attention, all those resources focused on a complete family of best in class Ford vehicles.

So, just a couple comments about that, we have gone from those 97 different nameplates to less than 20, and we’re servicing all the markets, small, medium and large, cars, utilities and trucks, around the world with that same thing. And you can imagine what that means to sustainability and using less resources and less time, and the consistency of purpose. But it’s also allowed us to think about the system solution.

A lot of our operations are in some of those big cities, like we operate very extensively in China, and have big operations in Chongqing, for example, and just another small city of 35 million people in China, and so this is a very — and the Chinese are taking this very, very seriously, what do they do as they grow these cities and the migrations start to come in so that they have transportation systems that allow people to move on different ways of having their personal mobility but not necessarily doing it with just cars.

So, we’re involved with many of those projects around the world, because we don’t want to miss an opportunity for us to be part of a transportation solution, because there are always going to be cars but I think that the emphasis on how do you use all the other modes of transportation, how do you get it connected, how do you know you can get there, how do you charge for it, how can you make it easy.

So, we’re very interested in that, and we’re trying to participate in most of the different models that people are suggesting. But clearly in these big cities it’s going to be a different solution. And then we’ll evolve the business accordingly.


QUESTION: Hi. It’s Daniel Kim at Lit Motors Corporation.

ALAN MULALLY: Very good.

QUESTION: So, to follow up on her question actually, there’s a lot of waste if you look at the infrastructure of where cars — the spatial capacity that they take up on the highways. And if you also look at another example, 80 percent of most people drive alone, especially in California. Does Ford — there’s a lot of efficiencies that could be maximized. How does Ford maybe take a stance on that for R&D or for the next 20 years?

ALAN MULALLY: Well, the business that we’re in primarily is making cars and trucks, and make them affordably in large numbers as the customers want them. We try to involve ourselves with every government around the world, because we operate everywhere around the world, and that’s why I always mention the economic development as well as the energy independence and the environmental sustainability, because all around the world everybody is looking for solutions for all three.

In Ford we took a position that the best thing we can do is always be thinking about all three. So, we involve ourselves, we’re there, we’re on the requirements side, we’re on the planning of the future side, but clearly the way you describe it is true, but we are doing everything we can to be part of the solution and work with the people that actually have the responsibility for doing that.

But it’s interesting, because a lot of the emerging countries and their economies have a little bit more room to kind of plan that out ahead of time. So, we’re getting a lot of good ideas, especially in India and in China.

QUESTION: So, just to follow up, do you feel like that is the wave of the future is smaller vehicles will have to be something we do have to address, that there will be a market possibly, maybe not in Ford’s business plan for the next 20 years but there will be a space for that?

ALAN MULALLY: Oh, sure. Well, I think like all of us I would love to be able to move around in a city conveniently — or around anywhere, right, and I’d love to see connected integrated transportation systems where I didn’t always have to drive a car; it would be fantastic.

And so, I think, again, the reason that we’re having this conference is that we’re the ones that are going to have decide this, because it’s going to be a combination of public and private partnership, and technology and innovation, and doing it together, because no one of us ‑‑ we can say what we think as a company or a person, but I really think there’s a lot of opportunity to create integrate transportation systems for the good of all of us, and work all three issues, because we want to continue the economic growth, and we want to keep moving towards energy independence and security, and we want to contribute to a better world, and business sustainability. So, that’s why we always lump them together. We don’t have a separate plan for one. And try to involve everybody we possibly can.

You’re welcome.


QUESTION: Hi. Tim Millan from AMD, Advanced Micro Devices.

We heard before that the CEO of Zip Car is moving heavily into Ford vehicles, which sounded wonderful.

ALAN MULALLY: We love him. Scott is a great leader


QUESTION: As the car sharing business takes off, and you were talking about these mega-cities around the world, maybe you can talk a little bit about Ford’s strategy seeing transportation as more of a service than a commodity?

ALAN MULALLY: Thanks for not using that commodity word, because we really do think we add a lot of value with the vehicles. I think, going back to Scott’s case, that’s one of the reasons that we’re involved with Scott and Zip Car, because I think there’s going to be not only Scott’s model, which is pretty appealing, but also there are going to be a lot of different models going back to the question about what do integrated transportation systems look like.

A couple of interesting ones are Hong Kong today, and the way that you can move around through Hong Kong with one credit card, and access a lot of different transportation systems. So, I think the best thing that we can do is to stay involved, and be involved even with investments, so that we are helping figure out which one of those models we’re going to evolve to. And then we’ll evolve the Ford product line accordingly.

But right now, the most important thing we do is make the most efficient, and the most affordable vehicles.

QUESTION: He said one Zip Car displaces about 15 cars off the road. So, does that help or hurt business?

ALAN MULALLY: Well, this world is growing, and the automobile business is a huge part of the world economic development. And in the United States alone it’s nearly 13 to 15 percent of the U.S. GDP. And this desire for freedom and move around, we’re seeing it everywhere around the world. Now, do we need to develop integrated solutions for that? Absolutely. Do we want to be a part of that? Absolutely. And I could see our business model continue to evolve as we do that.

QUESTION: My name is Craig Higgins and I’m the CEO of BM Motors, and I’m the proud owner of a new Ford F-150 that I’ve been driving for a couple of years. A great vehicle.

ALAN MULALLY: Can you go on a little bit more?


QUESTION: I’ve actually been driving Ford F-150s for about 30 years. So, I could keep going.

ALAN MULALLY: You know the F-150 is just an amazing thing. Remember, we’re committed to all of them, but 35 years the number one vehicle.

QUESTION: That’s to my point. The Ford F-150 has been the number one best-selling car in America for many years. Number two, right behind it is the Chevrolet Silverado. And the question is, the fact that those are the vehicles that really power America, it’s what you can put an eight-by-four sheet of plywood in, it’s the thing that small businesses are using. However, it seems that they’re the slowest and the latest to adopt the new technologies.

So, I guess the question is, since they consume about 70 percent in America, trucks, vans and SUVs consume about 70 percent of the 61 percent of transportation fuel in America, do you have plans at Ford to address that with your class 2 trucks, 3 trucks, 4 trucks, vans and SUVs going forward, as far as electrification.

ALAN MULALLY: Right. Now, a lot of the statistics had the bigger vehicles in it. And we have as a strategy; our biggest vehicles now are the F-150 and the Super Duty. So, all the other ones that are bigger, we’re completely out of that business. With respect to larger vehicles, what year is yours?

QUESTION: Mine is a 2011.


QUESTION: My brother has the ’12 ‑‑ no, the ’11 with the 6-cylinder in it.

ALAN MULALLY: Did you get the 6-cylinder, and turbo charged, the direct fuel injection.

QUESTION: It’s great. Absolutely. You can pay me after.

ALAN MULALLY: No, no. But, this is a very important answer to the question, because when we were first putting together our sustainability and our growth roadmap and this technology roadmap, there were some people that thought maybe the truck owners, like to your point, it’s part of the fabric of business in the United States, and the economy, as well as lifestyle. We’re probably not going to sell a lot of F-150s in downtown Paris, but I mean, it’s part of the United States.

It’s part of the fabric of our lives. And there was a kind of a thought; well maybe the truck owners wouldn’t be as interested in fuel economy. Maybe our quality, fuel efficiency, safety, smart design wouldn’t be the same. We fell behind the competition by one mile per gallon and I’ve never seen so many comments from our truck owners, because just like we were talking about, whether it’s a Fiesta, or whether it’s an F-150, they want absolutely the best fuel economy and the lowest CO2.

So, what you just got is a tremendous breakthrough in fuel economy, as you know, because internal combustion engine, whether it’s petrol or diesel, we have both of those on the F-150s, and when we went to direct fuel injection and turbo-charging and because of our scale, almost a 30 percent improvement in fuel economy and 15 percent reduction in CO2. And now you’re seeing all the lightweight materials come in, all the different steel alloys, aluminum alloys.

We just made an announcement that I think Andrew is going to be here from Alcoa, more composites, and every time you take weight out of a vehicle, one and one really equals three, because then you downsize the engines, and the fuel economy goes up, and that’s exactly why I think we’re over 50 percent now. Who would have thought 50 percent of the engines selected by the customers now are not V8s, but they’re V6s that are the most fuel efficient vehicles in the world and Ford, again, is leading in fuel efficiency.

Same thing on the Explorer, the new Explorer, we sold seven million Explorers over the years. And the latest new Explorer now has moved from a truck platform over to a car platform, direct fuel injection, turbo charging, lightweight materials, 30 percent improvement in fuel economy. It’s a fantastic vehicle on a car platform now. We’re making it in Chicago, and with our new agreements with the UAW, we are competitive in the United States, and compete with best in the world. We’re going to be exporting that new Explorer to 93 countries around the world. So, this is about a United States and competitiveness, but all based on quality and fuel efficiency, and safety and really smart design. So, we’re going to keep doing that across the entire vehicle, whether it’s a Fiesta or it’s an F-150.

How are you? This is the creator of Jet Blue.


QUESTION: I’m not there now, so don’t blame me for what’s going on there.

ALAN MULALLY: How are you?

QUESTION: I’m in Brazil. How are you, Alan?


QUESTION: When you took the job, we all thought you were insane. We thought you were going through a midlife crisis in the aviation business. But now you make more money than the whole aviation business combined. So, congratulations.

ALAN MULALLY: Thank you.

QUESTION: You were the only auto manufacturer that didn’t take government money, and didn’t file for bankruptcy, and I worry about your competitiveness going forward. Are you competitive cost-wise? Were you able to get the UAW to give you the same kind of concessions on healthcare, retirement healthcare, and all that kind of stuff as your competitors? Can you be sustainable?

ALAN MULALLY: Absolutely. First of all, good to see you.

QUESTION: Come to Brazil and visit us. I have an airline down in Brazil now.

ALAN MULALLY: I know. And we’re there a lot. We have a huge operation in Brazil.

QUESTION: I have a Fusion that I drive around, an armored car Fusion in Brazil. So, I’m in a Ford every week. (Laughter.)

ALAN MULALLY: And you’re running it on sugar cane?

QUESTION: No. It’s one made in Mexico, so it has just gasoline.

ALAN MULALLY: We can help you with that, too.

This is a really important question, and I mentioned this at the start. What Ford and the UAW have done is phenomenal for the United States, because I mentioned we were moving all the vehicles out of the United States because we couldn’t make them here with the wages, and benefits, and the work rules especially. And in a working together way, the same reason we’re all here, do we want to have a manufacturing base in the United States? And remember, with the free trade agreements we’re all signing, we were literally giving away manufacturing outside of the United States. And I don’t know of a country that’s ever been sustainable if it didn’t have a strong manufacturing base, and especially you know that 70 percent of all the research and development in the United States right now is associated with manufacturing, manufacturing with a big M.

So, we approached the UAW, we talked about if we were effective, and we were competitive, then we could make vehicles in the United States. And we make that commitment. And they said, let’s try. And we did it. We went from defined benefits and defined contribution, we took all the retiree healthcare and put it in a separate VBA (ph) completely funded it with Ford stock, which has done very well for them. We changed all the work rules. Job banks are gone, all the limitations on the classifications. We went to entry-level wages that are competitive. And we went from all up $78 an hour to around $52. And we are competing with the best companies in the world right here in the United States.

I think maybe the most important thing, David, maybe even more than that is the fact that we did it, and we now are profitably growing, which means that we are now hiring nearly 12,000 new employees for great jobs and great careers. And everybody knows now that only if you’re competitive do you get a chance to grow the business, or somebody else should do it right. So, I think we absolutely are competitive. And I see also a different attitude going forward that says, the best thing we can do for the industry and for great jobs and great careers in the United States is to keep improving our competitiveness every year forever, which is what we’ve done for the last five years.

QUESTION: Does UAW take a long-term view on that?

ALAN MULALLY: Absolutely.

QUESTION: Are they saying now they’re going to come and take all the money, like they do in the airline business when that happens?

ALAN MULALLY: Well, we’ve been there. And I think there’s something ‑‑

QUESTION: Like they do at Boeing, so you have to move factories to South Carolina, and all that kind of stuff?

ALAN MULALLY: I think that with what we’ve been through, how positive people are knowing what it’s like when you are competitive, and being able to grow. And if you’re not, then you should be doing something else. Remember, in Ford’s case, we were moving the operations out of the United States because we couldn’t compete. So, they made a commitment, and we both made a commitment to competitiveness and improving that every year forever. So, I think it’s very much different than it was before.

QUESTION: Congratulations.

ALAN MULALLY: Thank you.

Yes, go ahead.

QUESTION: Hi. My name is Theo Spencer; I’m with the Natural Resources Defense Council.

And I was wondering, there’s been a fair amount of talk about regulation throughout the day, and I was wondering if you could talk a little bit about the agreements that reached the auto manufacturers and the government, sort of an unusual bright spot from our point of view, on fuel economy standards going forward on to 54 miles per gallon. And there is an earlier stage in that, too. And how that came about, and what might be some positive lessons to learn from that and for other sectors?

ALAN MULALLY: Well, you’re absolutely right. It is really a significant development, and the reason it happened is that the White House, I’ll give a lot of credit to, pulled all the constituents together, including California. It was unbelievable what everybody did by doing this together. And the reason I think they were able to do it was, back to where we started on the importance of fuel efficiency and CO2 reduction to the consumer, because it’s a reason to buy. Remember those four reasons, it’s a reason to buy. It’s a number one reason why people come in, what is the fuel economy on this vehicle no matter what. So, we have taken a position in Ford that we are going to pay more for energy. It’s more expensive to find it. It’s more expensive to bring it to market. The mixture of the energy is going to change. But we assumed that we’re going to pay more for it. So, from a customer point of view, that means that it’s going to be valued by them if we can increase the fuel efficiency every year forever.

And it’s quite remarkable, since 1975, I’m sure you know this, we’ve increased the fuel efficiency of cars by over 100 percent, and trucks by over 70 percent. And so, it can be done in the technologies we just talked about, we’re going to continue to do that every year. But what brought everybody together was that everybody came to this consensus that fuel efficiency and CO2 reduction were good economics, good business, so let’s pull together and do the standards together. And we went after one national standards.

Remember all the different states that were working it differently? And so, not only one national standard on miles per gallon, but we also harmonized CO2 reduction with miles per gallon. So, it’s a tremendous achievement by everybody. Now we have certainty, everybody has certainty. Now we can use enabling technology and the innovation to march right up that miles per gallon. And it’s the right thing to do. It’s good business, because people value it.

Do you see a microphone close to you?

QUESTION: (Off mike.)

ALAN MULALLY: Poppy, how are you?

QUESTION: (Off mike) ‑‑ how do you know it’s going to stick this time? How do you know that when the money is not flowing again, people aren’t doing very, very well again, and the economy turns completely they are not going to want bigger, they’re not going to want more, they’re not going to want showier? What tells you that this switch is for real this time?

ALAN MULALLY: Well, you know, Poppy, I think it kind of goes back to where we were talking about the enduring things that customers want and the fact that they’ve coalesced around the world. If you’re in China, or India, Russia, Europe, South America, United States, those four regions are the ‑‑ and this just happened in the last five or six years. Remember how we used to argue the requirements were different in Europe, and what the European customers wanted versus the United States in a vehicle. And they’ve all come together and that quality, fuel efficiency, and safety and smart design, of course, in our case, the very best value, because we can bring that with scale.

And as long as the macroeconomics go the way we’re talking about, I think that we’re going to see that gradual shift to 60 percent or smaller, 25 percent and 15 percent distributed around the world. And we feel so strongly about it, that’s why we’ve moved to these global platforms, as you well know and you have covered. But, remember those 97 different nameplates for all those vehicles. Well, now we have on the B1 platform, which is like a Fiesta size, a C1, which is like the Focus, and the CD4 platform, which is the Fusion, you take that, plus a small pickup, the Ranger, that’s going to be nearly 80 percent of the volume of Ford worldwide off of three platforms on every one of those platforms we can have 10 to 12 to 15 different top halves. So, if you want a 5-door, a 4-door, you want a wagon, a small SUV, you can get that and you can get it from Ford most affordably.

So, I don’t see anything changing about the full family needs worldwide. I don’t see anything changing about our desire for quality and fuel efficiency and safety and smart design, no matter what the vehicle size. And in Ford’s case, we can make such a difference, because we’re such a volume player that when you take the technology, the volume, and the affordability, and bring that together, then we can make the biggest difference of anybody to fuel efficiency and CO2 reduction.

One last thing about this importance about affordability, the Ford Focus ‑‑ I’m supposed to check the time. They said a hook comes out. Okay. Sorry, I’m kind of joining the conversation here on the table, number one. So, when you look at this Ford Focus electric, a lot of people make separate factories, separate vehicle, and that’s why we electrified the entire platform. So, petrol, diesel, hybrid, plug-in hybrid and all electric, not only are they on the same family, but they’re on the same production line. So, no matter what vehicle you want that works for you, and we can’t guess what the demand is going to be, but it’s on the same line, 70 to 80 percent of the parts are the same, you can imagine the efficiencies and sustainability of that. And then we’ll make it in the quantities that they want and then we’ll just move the production up on each different vehicle.

So, when you come to the Ford store you’re going to be able to get the solution that works for you most affordably, as David was alluding to. It’s all about competitiveness. Are you making the products that people really do want and value and are you making it more efficiently and using less resources and less time than the competition. And the people that do that, in our case, full family, best in class, most affordable, I think are the ones that are going to be serving their customers.

Okay. It says you are over time. Oh gosh. I’m so sorry. Okay. It was nice talking to you. I have to go. Maybe one last burning question.

QUESTION: (Off mike.)

ALAN MULALLY: How about a couple of shout-outs about what you guys thought of the new Focus electric. Well, it’s easy for you to ask the question. Can’t you say something now? Did you like it? And very fuel efficient, thank you.

Okay. I think I’d better stop now. I’d just like to say one more time about Fortune and this conference; it’s such an important thing for us to be together. We’re only going to do this if we pull together around the technology, about the innovation, about the public-private partnership, and we do it together, right. And this is too important to delegate to somebody else. So, I’m really glad to be here with you. I think the discussion is going to be great. And I’ll be available outside to take care of all your automobile needs.

Thank you.