A difference in the automotive industry
Who is Mark Fields and how has he taken PAG from a $122 million loss in the first half of 2002 to a $166 million profit in the first half of this year?
Mark Fields has always had to battle the perception that he was too young to make a difference in the automotive industry. When he took over Ford Argentina at 36, people wondered what Ford was thinking. When Mazda handed him the reigns at 38, the automotive world was shocked. And now, at 41, he has been put in charge of Ford’s Premier Auto Group (PAG), which consists of four brands — Aston Martin, Jaguar, Land Rover, and Volvo – representing 300 years of combined history, with two very different cultures.
Fields joined Ford Motor Company in 1989, after a stint at IBM. A graduate of Rutgers University with an economics degree, He was brought in under the marketing leadership program at Ford. The program was set up to attract MBA talent to come to the automotive field. The highly talented group is kept interested by changing jobs every 12-18 months. This process also allows the higher-ups to see how quickly one catches on to the automotive market. Nasser and other higher-ups spotted Fields immediately. The big shocker came when Fields, at age 36, was picked to follow the charismatic Henry Wallace in the top spot for Mazda.
Fields have had little trouble winning the respect of the rank and file at PAG. They know he is there to turn a profit for the company. Fields predecessor, Wolfgang Reitzle, did a lot of things right, but he left PAG bleeding. Fields was in the same position at Mazda. In 1999 he was given the task of creating a profit. Phil Martens was head of engineering for Mazda at the time. According to Phil Martens, now Vice President, Product Creation, North America, Fields success was based on trust.
“Mark is a very durable person, very disciplined. He is able to focus on three to five items that are critical and make them happen. We agreed to trust each other.” Fields was the business brain and Martens the engineering brain. Together they were a formidable force, cutting the fat and creating new models for future growth. “Zoom-Zoom” was created under Field’s reign. By 2002, after Fields and Martens had left, Mazda was considered a remarkable comeback and had reported the largest turnaround in the company’s history to date.
Another person that helped turn Mazda around was Robert Shanks. Shanks is known for taking the numbers apart and finding the fat, a regular financial diet guru. Shanks did such a good job at Mazda that he was brought over to PAG on December 1st, 2001.
Said Mark Fields, “Bob’s rigorous and disciplined approach to the field of corporate planning and his strength as a business strategist will be a great asset to the PAG brands as we move forward.”
When asked, Fields insists that he didn’t come to PAG to preside over an auction. He shouldn’t have to – In 2002 premium vehicles accounted for 10 percent of total sales and that is what PAG sells. If PAG is to show a profit in 03 it will have to come from algorithms Fields already has knowledge of and knows how to implement. When Fields took over at Mazda he laid off 20% of its workforce. When he took over PAG he eliminated very few jobs. Instead, he moved management jobs to strengthen core brands. He closed expensive office space in London and moved the PAG team to the Ford Design building, Ingeni, in SOHO.
According to Fields himself, “I have deliberately taken time for due diligence. These brands represent 300 years of combined history, two very different national cultures, four distinct corporate cultures, and a total of 142 national markets around the world. Heritage is critically important. It is the key to an all-important competitive edge in today’s ultra-competitive era – that edge is distinctiveness.” Indeed, that is the thought of the Swedes and the English and the people that buy those cars. Each car is not just a car that is to be driven, but a story of its own time in history. Whether it is an old 242DL or an E-Type, people who drove those cars remember who they were in life when they owned that car.
The latest business decision Fields has made is that Halewood is going to house production of Freelander and X-Type. Jaguar and Land Rover now report to Joe Greenwell, while Aston Martin and Volvo report directly to Fields. Greenwell is a product guy with public relations experience. He is every bit as passionate about cars as Fields is about numbers. It is a marriage that is essential for PAG to survive a matter of opposites being able to live and communicate together. And to trust each other. Fields has to know that Greenwell knows his product well enough to know when he needs more money in order to generate more profit from more sales – sales incurred by creativity, process, and design.
Matthew Taylor, Managing Director of Land Rover, is pleased with the decision. “You have to think not only revenue but the quality of that revenue. Sustainability of growth is based on the invention of genuinely new creations. It is our job to know what needs to be done to create profit.”
Mike Wright, Managing Director of Jaguar, says this works for him as well. “I’m pleased with the clear strategy that Fields is bringing us. It’s about focus and implementation. It is possible to do this with the combined cooperation of all of us.”
According to Fields, “I am looking for the intelligent commonality both vertically and horizontally within brands and across brands as makes business sense. This should improve the relevance of products to brands. The aim is not to tame our brands, but to teach them to hunt together as a pack – a pack backed by the global might of Ford. We need to find the “fit” between different cultures. If you buy an Aston Martin, it won’t be instead of a Land Rover – in fact, you may well have both.”
“One key mission is a search for the right balance between scale and focus. From a scale standpoint, we aim to fully leverage our combined might, in areas such as purchasing, logistics, and human resources. From a focus standpoint, we have to maintain and cultivate the aspects of each brand that must remain unique. For example, we selected a single transmission solution for use across several brands. By combining purchasing, we have shifted from individual volumes as small as 40,000 units to a joint volume of over 300,000. Joint buying power has enabled each brand to source a premium component, which is better than our brands could have afforded individually. What’s more, it was calibrated to each model, which meant we aligned with the DNA of each product.”
“In practice, this means – where appropriate – we work in concert to boost efficiency, eradicate waste and duplication, and to share know-how or best practices. At the same time, we must ensure the competitive strength of each brand as it continues to grow and evolve in its own right.”
Thanks to Reitzle PAG has some of the best products it has had in generations. But they still have problems and those product problems are being addressed. Under Reitzle, Lincoln was removed from the PAG mix and returned to Ford of North America to let them decide if it is a viable entity. Fields will be able to concentrate on having a greater business influence and let the engineers and designers design cars. Fields understand that whether you are selling widgets or cars, you have to have product knowledge and business acumen. Reitzle understood the product and was instrumental in the design, so much so that he worked with the designers on some products. Reitzle believed that growth was not an accounting practice, but creativity that generated a profit. Fields is not an engineer or designer. He is smart enough to hire the best designers he can get and do the work he was hired to do, as in the case of Mazda.
Fields have been hard at work strengthening the way the brands work together and the way Ford Motor Company works with PAG. When people talk about the different cultures inside PAG they mean English and Swedish. But there are also the corporate and brand cultures to consider. Fields biggest job will be working with Bill Ford, CEO, and Nick Scheele, President, and COO. According to Fields, he is the lens between PAG and Ford. “I help one side see the other. PAG understands the expectation of the Parent company and the Parent company understands the unique nature of these luxury brands.”
Nick Scheele agrees. “Mark is adept at bringing people together and helping them reach consensus. He is also respectful of different cultures. We saw it in Argentina and Japan and we are seeing it in Europe. He is a great visionary and a strong leader.”
Fields goes on to say, “Let’s be clear, though. This is not some exercise in nostalgia. Ford Motor Company did not buy these four separate companies for their sentimental value. Despite intense and growing competition, we intend to make significant money at this business – and we know we can do it.”
What are some of the moves Fields could still make?
- One way would be to build cars in North America. The Euro is strengthening, which cuts profit’s from sales in dollars. Fields said PAG has no plans to build any cars in North America, though he concedes that he can’t rule out anything, particularly in an area of increasing volatility. The move to North America has been staved off for the time being. Ford has just announced that the Freelander will transfer production to the Jaguar plant at Halewood when the replacement model is started in 2005. Jaguar has been struggling to meet their full potential and to fill all production capabilities. Land Rover has had quality and reliability issues.PAG is taking its act on the road to their dealerships.
- By having two or three brands in one dealership a customer has an array of choices from coupes to station wagons to SUVs. According to Taylor, “This is extremely important to our brands. People will say, why don’t you build a 2WD Land Rover? What would be next, a sedan? Combining the brands in the real world allows the customer to see options neatly laid out for them. If you’re at a Jaguar store and decide you need an SUV, hop over to Volvo or Land Rover. Also, the car dealers get it. They know our strategy and they know our intent.”
- The X-Type is already being reworked to look and feel less like a Ford and more like a Jag. The XK series has to look at a soft-top automatic retractable tonneau for it’s convertible. But they are small potatoes compared to the big money PAG will need to meet Bill Ford’s expectations. PAG is expected to contribute 33% of Ford’s profits by mid-decade with less than 10% of Ford’s global sales. These numbers were set when Lincoln was part of PAG and will have to be reworked by Fields between PAG and Ford of North America. Bill Ford promised Ford that they will have $5-$6 billion in profits by 2006. This means that PAG will have to go from losing money in 2002, to generating $1.25 billion a year in just a couple of years. Fields understands people and he understands global sales. He will need to strengthen sales in already productive regions and open up sales in new countries.
- PAG is already starting to platform share within its organization, now it needs to look at becoming a vendor for other Manufacturers. Porsche outsourced its Cayenne to Volkswagen. PAG will have to look for such partnerships. The fixed costs of four plants to produce 400,000 vehicles are staggering. If PAG can produce more vehicles they won’t lose another plant. Automotive News of Europe reported that mounting losses at Ford of Europe stunned Ford Corporation.
- The loss for the second quarter of 2002 was $18 million, but this year the figure for the second quarter has risen to $525 million. It is important to distinguish between Ford of Europe and PAG. Those numbers are the difference. Taking PAG from a $122 million loss in the first half of 2002 to a $166 million profit in the first half of this year was a great end to a first-year honeymoon. While Ford of Europe wishes they were in PAGs shoes, Fields knows he’s still got a long road ahead of him. Just like the people who built the cars of yesteryear have left their legacy, Fields will leave his indelible print on these news cars. At the end of the day, it is about the marriage of two – creativity and profit.