Letter to Shareholders and Consumers from Ford President, CEO
30 March 1999
Letter to Shareholders and Consumers from Ford President, CEO
Jacques Nasser Outlines Achievements of Past Few Years
and Consumer Vision for Next Century
DEARBORN, Mich., March 29 -- The following is the text of
Ford President and Chief Executive Officer Jacques Nasser's letter
to shareholders from the company's 1998 Annual Report. The report will be
mailed to shareholders of record on March 29. It can also be read on Ford's
worldwide website, http://www.ford.com.
Ford's annual meeting of shareholders will be held on May 13, 1999,
10 a.m., at the Detroit Opera House. Notice of the Annual Meeting, a Proxy
Statement and voting card will be mailed to shareholders in advance of the
meeting.
Ford is a team of diverse entrepreneurs, across 200 markets on six
continents. Ford people share the energy and excitement of feeling like
business people running their own small companies. They know the thrill of
success when consumers invest their own hard-earned cash into our products,
our services, our company. They are carrying forward the spirit and ingenuity
of our founder, acting nimbly, and leading with passion.
That's our vision. That's our "DNA". And that's where Ford is headed.
We're all energized by what the future holds, and ready to take decisive
action. We're passionate about our consumers -- and, of course, our
shareholders.
Let me start with a short story.
Five years ago, we began remaking Ford to really compete in a global,
diverse marketplace. One where economies around the world have become truly
interconnected. Where consumers get information instantly with ease through
use of the Internet. And where making consumers pay higher prices to recover
cost increases just "isn't on" anymore.
With Ford 2000, we formed one global enterprise. We reengineered our
processes to become more efficient and responsive -- stronger products, higher
quality, at lower cost.
Our aim was to be the world's leading automotive company -- no excuses.
And I think the results have been pretty impressive.
We've launched an incredible array of new vehicles, with several actually
creating or redefining market segments, like the Lincoln Navigator sport
utility vehicle. Our quality is best-ever. We've made tremendous gains in
productivity. In the past two years we reduced our total costs by more than
$5 billion, and became the world's most profitable automaker.
We've had 11 consecutive quarters of improved earnings. Since the end of
1993, our market capitalization has grown three and a half times, from $20
billion to $70 billion. And our total shareholder returns have outperformed
the market by a wide margin.
Personally, I'm proud of the Ford team for achieving these results.
But the story is far from over -- we knew we had to do more. Ford has a
rich history of innovation and entrepreneurial spirit. It's a great business.
We wanted all of our people to have this spirit, and a real passion for our
business and success. We wanted Ford enthusiasts!
So, we started a broad educational effort. We began teaching
entrepreneurial business principles to our people. We wanted them to feel and
behave more like owners, with a deep appreciation of what it means to be a
shareholder.
We became teachers. Business acumen was taught in intensive three-day
sessions to all salaried employees. We called it Business Leadership
Initiative, or BLI. Executives participated both as students and as teachers.
Believe me, you don't really know a subject until you get out and teach it!
BLI also featured team-oriented community service, and a 100-day project aimed
at improving top- or bottom-line growth. The results of these projects also
have been impressive, and are providing immediate benefit.
Our teaching and learning didn't stop there. In the age of the Internet,
information in any large corporation should flow without barriers of any kind.
Senior managers typically invest a lot of time informing investors and
consumers. We need to take as much time -- if not more -- informing our own
employees.
With that in mind, I began a weekly e-mail newsletter called "Let's Chat"
that goes out to 145,000 people in the company. We now have a running dialog
between the CEO and employees that is unfiltered. A sample is shown on page
29. This is just the beginning. We intend to have information move without
boundaries to allow our people to be more effective and responsive.
I'll tell you, this new teaching and learning process is working. We're
looking at our business in a fundamentally different way. As a business in
total, and as a portfolio of four main businesses -- Automotive, Ford Credit,
Visteon and Hertz.
We give each business its own profitability and growth targets. Then,
each one breaks down its business into meaningful pieces to grow and improve.
We're also pursuing synergies across the four businesses to accelerate growth,
sharpen our competitive advantage and improve asset efficiency. We're also
maintaining the flexibility to add to, or delete from, the portfolio over
time, with a focus on superior shareholder value.
The changes we've made have been nothing short of transformational,
producing record results and pushing our company to a position of financial
strength. But to continue to achieve superior shareholder returns, we know
that we must sharpen our consumer focus. That's why our vision now is to be
the world's leading consumer company that provides automotive products and
services -- not just the world's leading automotive company.
It might seem like a subtle change, but it's one that really describes
where we want to go. To further transform ourselves and profitably grow our
business, we are passionately pursuing what we call a "consumer headset."
That starts with understanding the rational requirements of consumers.
Package. Price. Quality. Safety. Value. Driving dynamics. The functional
and practical items necessary to satisfy consumers.
For example, we're now looking at costs from a consumer's perspective, not
just a manufacturer's view, through the entire ownership cycle. This point of
view gives us better insight into ways to bring greater value to consumers,
and it provides ideas on how to expand the breadth of our business and keep in
contact with people who buy our products.
Another example -- we've dedicated ourselves to finding even better ways
of delivering cleaner and safer vehicles to consumers at a faster pace. Our
rallying cry is "Cleaner, Safer, Sooner."
In the past year, we announced a series of environmental and safety
advances, including depowered front air bags, side air bags, and a computer-
based "smart" Advanced Restraint System. We also initiated low-emission
vehicle standards in all our 1999 model year sport utility vehicles.
Keep in mind that cars and trucks touch people on an emotional level in
ways other products just don't. So having a consumer focus also means having
an intuitive -- really visceral -- feeling for the things that will surprise,
delight and excite. Products like our industry leading "Built Tough" Ford
trucks and the new Ford Thunderbird concept come to mind as great examples of
vehicles that make that emotional, human connection.
We have six great automotive brands -- Ford, Lincoln, Mercury, Mazda,
Jaguar, Aston Martin. And we are acquiring Volvo Cars, another great brand
with consistently unique appeal. Volvo also provides synergies, growth, and
the opportunity to reach new customers and further strengthen our position in
the premium vehicle market. It's a real "jewel" of a brand that we're proud
to bring into the Ford family!
Lincoln Mercury's move to California in 1998 was aimed at getting closer
to consumers in a leading-edge market. To think differently. To act
differently. To make the emotional connection. The 2000 Lincoln LS
exemplifies this new and exciting direction.
The 1999 North American International Auto Show in Detroit marked a
turning point for Ford. For the first time, we displayed all our brands
together under the Ford "Trustmark." We think a caring, dynamic company can
be an umbrella that strengthens all the brands under it.
Auto Collection, our new retail network, embodies this philosophy. In
Tulsa and San Diego, and more cities to come, all our brands are sold in a
more coordinated way. This enhances the brands -- individually and in total
-- and reduces distribution costs. It also enables us to get closer to
consumers and build and broaden a relationship that will last throughout the
ownership experience, and provide new growth opportunities.
We're also continuing our "reasoned approach" to growth around the world,
using local partners and targeted investments. This strategy is being used in
countries such as China, India and Thailand.
Consumer focus. Strong global brands. Leading quality and value. Nimble
leadership and teamwork. Corporate citizenship. And a passion for growth.
These are key elements of our vision of becoming the world's leading consumer
company that provides automotive products and services, and delivering
superior shareholder returns. And we are totally committed to succeeding.
But the team and I want results! So, along with a clear vision and a
strong consumer focus, we've established specific, measurable objectives.
These results-oriented targets tell us if we're headed in the right direction
short-term. Longer term, they will tell us -- and you -- if we've achieved
our vision.
To stretch the team to achieve tough objectives, in 1997 we began to
publicly state annual financial goals for our automotive business. In 1998,
we added goals for our automotive-related businesses. I think "going public"
really motivated us to succeed -- out of pride and the sense of challenge it
provided.
Well, in 1998, we met or exceeded six of our eight financial milestones.
For 1999, our automotive milestones will stretch us further: 5 percent or
more return on sales in North America, earnings growth in Europe, improved
operating results in South America, total costs down $1 billion from 1998 and
capital spending of $8.5 billion.
Automotive-related milestones are: earnings growth of 10 percent for Ford
Credit, record earnings for Hertz, earnings growth and $2 billion of new
business for Visteon.
These financial milestones really work -- by guiding our efforts and
marking our progress for all of our stakeholders. But our ultimate measure of
success is total shareholder return.
We measure how we're doing in shareholder return against the Standard &
Poor's 500 -- not just how we are doing compared with other automotive
companies. If we want to be a truly superior consumer company, we have to
measure ourselves against the best.
So, our goal is to be in the top 25 percent of S&P 500 companies for
shareholder returns, over time. It may not be realistic to expect to be in
the top quartile every year. But we must be there consistently to achieve our
vision.
The nearly 30 percent return we achieved over the past five years is good
-- but puts us in the second quartile. Our average annual return of 52
percent for the past three years is in the top quartile. And our 89 percent
return in 1998 is clearly in the top quartile. This kind of performance is
what we're about!
In the 20th century, the automotive business has been a mass production
industry. The global economy and advanced information age technology are
changing that very quickly. A fundamental change is shifting the focus from
mass production to individual consumers. At the same time, a fairly dramatic
consolidation within the industry is happening.
To be successful, companies will always need world-class manufacturing
efficiency and quality. But that's not enough -- they'll also need a new
level of understanding of the consumer. One that acknowledges and includes
the rational and the emotional. In short, a global strategy with a local
heart!
Over the next few years, we'll be remaking Ford into a very different
company. An even stronger company. A company with a future as strong as its
heritage. Above all, we'll be building a company that adapts and changes as
fast as the consumers it serves.
Ford is a global company rich in diversity, with a long heritage of
working among various cultures, languages, disciplines and orientations.
We've begun providing employees with opportunities to realize their potential
faster than they would elsewhere. We've launched initiatives for them to grow
through learning. We recognize the importance of growing and attracting
outstanding people who can make a real difference through their leadership in
the business. We must identify them, develop them and provide them genuine
opportunities to make an impact.
This journey is in its initial stages, but it is picking up momentum. We
intend to accelerate it, and build leadership at all levels. Leadership whose
attitudes and behaviors reflect the importance of consumer focus, growing
people and actively driving the transformation of Ford.
I'm extremely proud of our team's results to date, and we're absolutely
ready to take Ford to the next level!
In closing, on behalf of the entire Ford team, I would like to express our
sympathy and support for all the employees and families involved in the
tragedy at our Rouge complex. We all were deeply saddened. The safety and
well being of our Ford family has been and always will be of paramount
importance to us. We will move forward in honor of these family members.