On October 30, 2001, Ford Motor Company’s board of directors ousted CEO Jacques Nasser, replacing him with William Clay Ford, Jr.—who was already Ford Motor Company’s chairman of the board. The company’s 10/31/01 press release, about this matter, stated that “Bill Ford will set the company’s objectives and focus on corporate, financial and strategic issues, the overall direction for the future of the company and strengthening relationships…” All of this made for good press. Yet, Jacques Nasser was a scapegoat, as Ford Motor Company’s strategic direction had already been set by Bill Ford, not Jacques Nasser. Within a year of Mr. Nasser’s firing, Bill Ford had set a goal for Ford Motor Company to turn a pre-tax profit of $7 billion by 2005—which was later pushed back to 2006. Not surprisingly, on April 8, 2005, Ford Motor Company officially scrapped this $7 billion earnings goal—many reasons were cited except one: Bill Ford is no more fit to run this company than is Ralph Nader. Let me explain.

William Clay Ford, Jr. is a green socialist born with a silver spoon in his mouth. He is in a quandary as he loves his wealth and power, but hates the very products that made the Ford family so wealthy. Indeed, Bill Ford believes his company’s cars and trucks emit a substantial portion of the carbon dioxide that he passionately feels is responsible for the global warming that is baking our planet to death (i.e. Mr. Ford has completely bought into the green socialist nonsense about global warming). Therefore, it is Bill Ford’s vision to make Ford Motor Company a model practitioner of “sustainable capitalism.” In other words, Bill Ford wants to blend green socialism and capitalism in order to form a more perfect corporation.

Consequently, Mr. Ford has looked to what is tantamount to a political solution to resolve his own cognitive dissonance (i.e. the love-hate quandary mentioned above). As many political leaders believe socialism and capitalism can be blended to form a more perfect nation, Bill Ford feels that having Ford Motor Company adopt green socialist ideals will somehow transform Ford Motor into a company “with the best set of social values.” Hence, Mr. Ford believes this appearance of “social responsibility” will somehow help Ford Motor sell more vehicles. Indeed, this company has become nothing more than a third-way corporate experiment to satisfy Bill Ford’s conscience.

My assertion that Bill Ford is a green socialist is supportable. First of all, please be aware that he served as the chairman of Ford Motor Company’s Environmental and Public Policy Committee from 1997 until 1999—he became chairman of the board of directors, of Ford Motor Company, in 1999. Upon becoming chairman of the board, Mr. Ford launched his “green revolution” under the nebulous guise of “corporate citizenship.” Under Bill Ford’s direction, Ford Motor undertook the following initiatives:

1. Environmental Management, which includes the following:
     * Climate change/global warming initiatives
     * Protecting and renewing ecosystems infringed upon by Ford Motor’s office buildings and manufacturing plants.
     * Developing uses for recycled materials in Ford’s vehicles
     * Cutting water use in manufacturing
     * Reducing the use of “chemicals of concern”

2. Protecting human rights

3. Increasing diversity within Ford Motor Company

4. Contributing to a safer and healthier world 

All of the above-mentioned information can be found in Ford Motor’s 2000 Corporate Citizenship Report. Clearly, Ford Motor’s leftist initiatives reflect William Clay Ford’s “greenness.” However, the following quote from Mr. Ford should remove all doubt:

I believe there is now more than enough evidence of climate change to warrant an immediate and comprehensive — but considered — response. Governments will have a role to play in the change process. I’m not dismissing global treaties and their potential to generate action, but I believe there’s a better way. Transparency, stakeholder engagement, and accountability with real performance measures and standards will be the real regulatory tools of the 21st century, and consumers will be the real regulators.

Evidently, Mr. Ford feels that his green version of social responsibility is going to attract customers to his company’s products. Perhaps the fact that the aforementioned statement was delivered at the October 5, 2000 Greenpeace Business Conference, in London, will make Ford’s products all the more attractive to consumers?

Ford Motor Company’s shareholders and creditors should be especially alarmed by Bill Ford’s green socialism as he is making Ford Motor politically and economically accountable to political/environmental groups that are only accountable to plants, animals, inanimate objects, and thus to Mother Earth herself. Members of such environmental groups are self-appointed, as I haven’t yet heard of any environmentalists being appointed by redwood trees or spotted owls. By politically engaging with environmental groups such as Greenpeace, Mr. Ford has decided to allow Ford Motor Company to be held accountable for global warming itself (among other fashionable leftist causes). Make no mistake here, holding Ford Motor self-accountable for its alleged contribution to global warming—for which there is no scientific evidence—does not come without real monetary costs.

Before delving into these costs, let’s look at how Mr. Ford is melding capitalism with self-imposed accountability to the “green” movement. The following quote, from the 2000 Corporate Citizenship Report, was penned by Mr. Ford himself and reflects his faith in his own third-way philosophy of corporate governance:

Discussions about business tend to fall into two categories. Most rely on the obvious financial indicators, gauging success in ways that have been in use for most of the last century. Nearly all of these standard indices look backward at what has been achieved.

A small but growing approach to assessing business focuses on corporate responsibility, or citizenship, gauging whether or not a company is meeting new, broader definitions of its roles and responsibilities. This view relies heavily on openness, transparency, and engagement with outside stakeholders to determine whether or not a company is meeting these new expectations. It can identify emerging marketplace issues because it involves dialogue about expectations and potential along a wide range of issues. It looks forward at what needs to be done.

The differences of these approaches are apparent in many ways. For example, financial markets have difficulty measuring the economic value of citizenship efforts. The absence of effective measurement tools can lead them to discount these issues. And, while activists are beginning to see that a company’s financial performance is critical to citizenship efforts, there is a tendency to say that a focus on shareholder value means the company is pursuing profits over principles.

Our corporate citizenship report is an attempt to address these evolving standards of conduct. It adds measurement mechanisms for corporate citizenship to the more established measurements of corporate finance. The next step is to merge these two methods of examination because, from my perspective, there is danger in separation and opportunity in connection. (emphasis added)

If this isn’t third-way thinking, at the corporate level, then nothing is. Of course, when such muddleheaded thinking is spawned by a company’s chairman and CEO, the company’s long-term prospects aren’t very bright.

To me, it is mind-boggling that Ford Motor Company’s board of directors has allowed Bill Ford to take Ford Motor Company down this bizarre “green” path. Perhaps he has the board of directors buffaloed into believing that eventually Ford Motor Company will be richly rewarded for being on the leading edge of “sustainable capitalism” (a term you will find on page 11 of Ford’s 2000 Corporate Citizenship Report). I will go on record right now stating that Bill Ford’s third-way management philosophy is not only unsustainable, it is incompetent and will lead to Ford Motor’s financial ruin.

As mentioned earlier, Bill Ford’s third-way initiatives do not come without real costs. Here is a concrete example. In an October 4, 2001 msnbc.com article, Ford Motor Company admitted that its production costs per vehicle had “…ballooned an average of more than $1,000 a vehicle over the past five years, while product quality has plunged far below that of rivals.” An uncompetitive cost structure and poor product quality can put a company at a competitive disadvantage. Not surprisingly, during each of the three fiscal years (2002, 2003, and 2004) Mr. Ford has been CEO, Ford has lost money in its automotive operations.

Ford’s high cost structure is particularly alarming considering its fragile financial condition—as reflected in its December 31, 2004 fiscal year-end financial statement. The following points illuminate several disturbing financial weaknesses:

• On an “as-given” basis, Ford Motor’s automotive operations had a deficit working capital position of $10.3 billion.

• Ford had 35 cents of cash and marketable securities for every dollar of current liabilities.

• Ford’s total liabilities amounted to a staggering $175.8 billion.

• With a tangible equity position of about $8.8 billion, Ford Motor Company’s total liabilities to equity ratio stood at 20 to 1—keep in mind that 3 to 1 is considered risky.

It is interesting to note that Bill Ford spent 1995 to 1997 as the chairman of Ford Motor Company’s Finance Committee. It is also curious that Ford Motor’s own admission, that its cost structure had become less competitive during the second half of the 1990s, closely correlates with Bill Ford’s ascendancy through Ford’s management ranks (i.e. 1995 — chairman of the Finance Committee; 1997 —chairman of the Environmental and Public Policy Committee; 1999 —chairman of the Board of Directors of Ford Motor Company). There is no doubt that Mr. Ford has played a major role in “leading” this company into such a financially fragile position. To be sure, such financial fragility makes this automaker’s future questionable in light of rising interest rates and skyrocketing oil prices.

By now, it should be obvious that Ford Motor Company is a lemon of a company. Perhaps it is more appropriate to describe Ford Motor as a watermelon of a company, just like the green socialist at its helm. In other words, Ford has become “green” on the outside yet is now “red” on the inside. Perhaps all of Ford Motor’s cars should have this color scheme as a tribute to Bill Ford’s third-way business experiment; that is, turning green money at the top-line into red ink at the bottom-line of its automotive operations. For the three-year period Mr. Ford has been CEO, Ford Motor has lost over $3.1 billion in automobile manufacturing.

Unless Ford Motor can eventually access the U.S. Government’s printing press, through a third-way bail out, Bill Ford will likely preside over one of the world’s most spectacular bankruptcies. At this point, the heat Mr. Ford will be feeling will not come from that environmental bogeyman called global warming, it will come from shareholders and creditors. Of course, Ralph Nader will throw a party upon Ford Motor’s demise. The guest of honor will be William Clay Ford, Jr.—hero of the green movement.

© 2005 Eric Englund
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Eric Englund has an MBA from Boise State University and lives in the state of Oregon. He is the publisher of The Hyperinflation Survival Guide by Dr. Gerald Swanson. You are invited to visit his website.

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