Scott Cauvel, vice-president of sales for Ford Motor Co. of Canada Ltd., travelled out West to speak at the UBC Sauder School of Business November 17. The topic: how Ford weathered the 2008 recession and the business lessons that can be learned from its experience. Business in Vancouver caught up with him after the talk.
I look at it from an even more encompassing time frame than just 2008 – maybe 2007, going back even to 2006 for us, because obviously, the storm was pretty long in nature by most business accounts, but for us in particular it really started along with the transformation of the company.
That restructuring that we did, beginning in late 2006, is to us really what separates us today in the marketplace and put us on this trajectory that we’re on now as a company globally, that we took actions early on, really before the worst of the storm maybe came together, and I think it’s very indicative of how the company has operated for the past three or four years in particular.
Yeah, like I said, in 2006 we knew that there was something – I don’t think anyone in their worst imagination could have envisioned the economic crisis that was about to come. We knew there was a challenge on the horizon; there was a storm out there, and the company had to get at it sooner. That’s when we took on a lot of outside support. We went out and leveraged ourselves and brought in about $23 billion or $24 billion of capital to get ready for it, as well as to position our business over the next several years.
I don’t know that anyone would say we saw exactly what was about to come, but thankfully for Ford, we did see something out there on the horizon that we knew we had to respond to and get ready for. It was that 18-month window of time where we were quicker to react that I think has positioned ourselves in the marketplace today.
One of the biggest changes I think we’re seeing is this push toward the truck end of the marketplace. We’ve seen a very substantial shift in the business between cars and trucks in Canada. That’s a key difference because this country in particular has been 50%-plus of the business being cars – historically 52% to 55% cars, 45% or so trucks – and it’s reversed itself really throughout this entire year. It’s been more of the 48 or 42, 45-55 car-truck split. That’s a very key difference in Canada.
This market versus the U.S. has always historically been more car, more small car, more small people mover and minivan-type vehicle sales than what we see in the U.S.
We’ve seen a pretty substantial shift toward the truck end of the business, and that’s indicative of the economy coming back.
It’s [because of] markets in B.C. and a lot of Western Canada … as that economy starts to come back we’re seeing people move more toward pickup trucks – because that’s a tool for people to do their job. That, to me, is the biggest thing that we’ve seen.
That’s a really big question. I don’t know in our last two- or three-year history of operations if there was a more critical decision that our company ever made.
We felt that we had the strength and the brand to do it on our own, and we had already taken actions to shore up our finances and to bring capital into the company – $23 billion, $24 billion worth of capital to be ready.
That capital helped put together a product cycle plan. It helped that whole daisy chain of events that was about to happen, and we’re very proud of the fact that everybody had to do their own thing, but we know that we made a very good decision, to find our way through this on our own.
Depending on what business you’re looking at, there’s probably varying degrees of an answer there, but I don’t know if – as an auto industry – if we had seen anything like that for probably 50 years maybe. You probably have to go back to the Second World War era to find that type of downturn we saw.
We saw an industry that, in this country, went from 1.7, 1.8 million units a year, down to 1.4 million units a year. The U.S. went from 17 million units a year down to 9.5 or 10 million units in the worst of that downturn.
It was an absolute seismic shift in our business, and everyone was impacted, but I would tell you, as has probably been documented, the auto industry was probably as much, if not more impacted by the downturn.
It’s easier said than done, but you have to have your house in order. You have to be right-sized at any given point in time for the most challenging of situations that you can find.
For us, we’ve now reconstructed our business to weather the worst of the storms we just saw. We’ve positioned ourselves in the marketplace now.
We could build a business around 1.7 or 1.8 million units a year in Canada, but that would not position you as well as you need to be for a 1.4 or 1.5 million-unit industry.