'Your World': Ford's CEO on Company's Progress

This is a rush transcript from "Your World With Neil Cavuto," July 26, 2010. This copy may not be in its final form and may be updated.

NEIL CAVUTO, ANCHOR: Well, Ford taking the wraps off its next-generation Explorer. It is environmentally friendly and gas friendly to boot. How about up to 26 miles per gallon friendly?

To an always friendly Ford Motor Company CEO Alan Mulally on a gentler, kinder SUV monster, because these guys used to all be called monsters. I guess less so, right?

ALAN MULALLY, CEO, FORD MOTOR COMPANY: Well, this is a new one, and it really is an exciting development because we were just talking that we have sold over 6 million Explorers over the years; 4 million are still on the road. And every year 140,000 of those owners are trading their vehicles in, and this is the vehicle they wanted. All the latest technology, the quality, the fuel efficiency, the safety, the smart features like MyFord and Sync.

So now they have the new SUV they have always wanted.

CAVUTO: Showing my car ignorance, the four-cylinder version that’s out, which gets all this power, is more expensive than the six-cylinder version. Why?

MULALLY: Exactly, because of the fuel efficiency that it brings to the consumer. With the V6, we have two options, a V6 or you can do an I4, which is an EcoBoost engine that has turbo charging and direct fuel injection.

CAVUTO: And why would I want the six?

MULALLY: Well, depends if you want to have some extra towing capability, because you can pull about 5,000 pounds with that, about 2,000 pounds with the I4. But most people, they have one need or the other. So the neat thing about the I4 is you get this tremendous improvement in fuel efficiency, 30 percent over the existing Explorer.

CAVUTO: So you’re not worried about cannibalizing a hot product here?

MULALLY: No, not at all, because the Explorer is a very important market on that medium-size SUV. It has been for a long time, it continues to be.

Remember, the Ford offering was that we would have a vehicle in every market size, small, medium and large, cars, utilities and trucks, and the promise that every vehicle that you get from Ford is going to be best in class on quality, fuel efficiency and safety.

CAVUTO: While I have you here, I was reminded when you came that Harry Reid says I guess you owe the auto industry rescue your success. Specifically, this is what the Senate majority leader had to say. Listen to this:


SEN. HARRY REID, D-NEV., MAJORITY LEADER: My friend says that we bailed out the auto industry. Well, isn’t that a good thing we did? Isn’t it a good thing today in America we have an automobile manufacturing sector? If it had been up to them, General Motors would be gone. If it were up to them, Ford Motor Company would probably be gone.


CAVUTO: You didn’t take any bailout money.

MULALLY: Not at all. And I think maybe what he was referring to or trying to frame was the fact that clearly when GM and Chrysler were running out of money and they told all of us that they were bankrupt, we made a very big decision to decide to go back to Washington, D.C., and actually testify on their behalf that they get temporary help.

CAVUTO: Why did you do that?

MULALLY: Well, clearly, in the automobile business in the United States, 70 percent of all the parts come from our suppliers and they support all the automobile companies.

CAVUTO: So they would have gone down your suppliers...


MULALLY: ...if Chrysler and GM would have gone into freefall, then the suppliers would have gone in...

CAVUTO: But you wouldn’t have gone out of business.

MULALLY: Well, most people think it could have taken the U.S. from a recession into a depression, which would have put pressure on all of us.

But clearly in Ford’s case, we had a plan, we had already borrowed the money to transform Ford, to accelerate the development of the new cars and trucks, but it was a surreal experience to go back and testify. But I think in hindsight — we never would have known — but I think in hindsight we did the right thing.

CAVUTO: Yes, but to say that — not pushing on this penny, but to say you’d have been gone had it not been for rescuing GM and Chrysler seems to me a bit of a leap.

MULALLY: Well, we clearly had a plan at Ford. And of the neat things that came out of that was that everybody realized that Ford was not only making great products, but they were also creating a strong business.

So I think we did the right thing for the industry, and the right thing to the U.S. economy.

CAVUTO: But do you ever, Alan, feel at a competitive disadvantage? I mean, if you were to ask anyone in the White House or the congressional leaders who they’re rooting for — they love Ford and the president speaks very admirably about you — but I think if they had to put their dollar on the car maker they want to see make it, it’s the ones they rescued, right, not you?

MULALLY: Well, I don’t think we really are disadvantaged, because people ask us about the debt. Because clearly when GM and Chrysler went through bankruptcy, that they shed a lot of their debt. Well, we took on the loans to transform Ford, and now, as we’re profitable and generating free cash flow, we’re actually paying back the loans, which is fantastic. And the good will for us not taking precious taxpayer money and actually running a healthy business and creating products that people want, I wouldn’t trade our position...


CAVUTO: Yes, but what do you make then when GM buys essentially a sub-prime lender?

MULALLY: Well, the neat thing about Ford, again, is that we have our own finance company. We’ve had it for many years.

CAVUTO: I know you do.


CAVUTO: I know Mr. Whitacre’s explanation for why, because you have that and it puts them at a competitive disadvantage.

But, ironically, the one thing the government argued for rescuing them, that they got a little too heady and deep in, they’re doing again with buying a sub-prime lender.

MULALLY: Well, you know, clearly it goes back to the fact that not — the previous president and also President Obama, they made — they both made a decision that it could have taken the U.S. from a recession into depression, so they did what they thought was right at the time. We supported that. And I’m...

CAVUTO: Because there was a school of hard knocks on that, too, you didn’t really have to do that.

MULALLY: I’m confident that they want to get out of that business as quickly as possible, but they did what they thought they needed to do at the right time. In hindsight, we agreed with that and that’s why we testified on their behalf. But I’m sure glad that we had a plan where we didn’t have to do it, and now we’re — we’re here for the customers. We’re the best product line of any automobile manufacturer.

CAVUTO: Well, you are on fire, and truth be told, you are getting a lot of kudos, both from the financial types and the car types, so my hat’s off on that regard.

But there is a feeling among some of your CEO brethren that we’re heading in for something bad, that it’s either double dip or a pronounced slowdown again and it’s going to get bad. And that’s why they’re piling up cash, $2 trillion worth.

MULALLY: Well, it’s a very important concern because this clearly is the slowest recovery that we have ever had following a recession.

Now, in the industry case, we’re, I think, probably equal to everybody else. We think about maybe an expansion of GDP, about 3 percent to 3.5 percent for this year.

CAVUTO: So you’re not in the double-dip crowd?

MULALLY: We’re not into, but we’ve had recessions in the past that once it starts to recover it will slow down a little bit and then get going again, as you know.

The thing that’s a concern when you’re at this lower level is that any kind of a slowdown, you know, is a concern. But everything we see with the consumers and their purse decision, we see a steady recovery here.

CAVUTO: Now, your counterpart at H. J. Heinz was telling me on Fox Business — which, Alan, if you do not get, you really should demand — but he was saying, "You know, Neil, I see very little out there to make me think we got out of the first dip; that we’re — we’re still in a bad way."

MULALLY: Well, you know, at the worst when we were going through that thing, the industry level got down to about 10. 6 million vehicles. And we have never seen that kind of level. And right now, with the first-half performance that we’ve had, we see about 11.5 to 12 million for the year, and then that growing, you know, steadily next year.

So everything we see right now, it’s slower-than-normal recovery, but it’s steady.

CAVUTO: When Toyota was staggering after the whole brake and steering wheel issue, did you ever kick its tires and say, "Hey, it may be worth buying?”

MULALLY: Well, in Toyota’s case, you know, we tried to learn everything we could. And as you know, one of the things I did my due diligence on when I left Boeing to come to Ford was I wanted to make sure that we had a culture, that the most important thing is we wanted to know any problem we had, whether it was us or a competitor, did we know about it and did we make sure we didn’t have the problem. And if we could learn from it, do we include it in the design.

And in that case itself when we were going through that, we checked all of our operations worldwide and we actually found a similar design that looked similar in one of our joint ventures in China. So we checked it out. They had changed suppliers like Toyota had.

CAVUTO: But never in that process did you want to buy...

MULALLY: Never, never. And we stopped the production and then we found out, and then we turned production back on. Because the most important thing that we deliver is safe and efficient transportation.

CAVUTO: The environment now with higher taxes coming in January, you’ve heard there’s a little bit of a mutiny within the Democratic Party as to whether those tax cuts for the wealthy should be allowed to expire. Any thoughts on that?

MULALLY: I just — I just know that the most important thing, like we’ve been talking about, is to keep this economic recovery going. And so...

CAVUTO: Well, some of them argue and tell their leadership raising taxes on anybody in this environment isn’t a way to keep this recovery going.

MULALLY: So my expectation is that we need the all-time working together amongst all the parties to ensure that whatever we do on fiscal and monetary policy and what we do about the deficits and the trade deficits — everything that we are talking about — ought to be looked at the lens right now is are we further enhancing the environment we can economic grow the economy of this country.

CAVUTO: Well, many of your CEO counterparts say, no, that’s not the case. And they say that there is a view in Washington they don’t like CEOs. They don’t like business titans. They don’t like business guys period.

MULALLY: Well, in Ford’s case, that’s what I can really speak from, Neil, and I have been so gratified to be included in the 2007 Energy Independence and Security Act on the one standard for fuel mileage and CO2 coming together.

CAVUTO: Would you leave any of this to join the administration — Commerce secretary, Treasury secretary?

MULALLY: I really like serving Ford, Neil.

CAVUTO: So if he asked you, you’d say no?

MULALLY: I think it’s really important that I continue...



CAVUTO: You judiciously handle it all.

Alan Mulally, very good seeing you.

MULALLY: Continued success. Thank you very much.

CAVUTO: Thank you very much.

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