How do you turn an automotive company around when the U.S. auto industry has taken nosedive, followed by a hard-hitting global economic downturn? You focus your strategy on core competencies and change the corporate culture that prevailed during the industry tailspin.  At least that’s how Ford Motor Company President and CEO Alan Mulally explained his company’s turnaround over the past several years.

Mulally took questions from more than 200 Georgia Tech students and faculty in his hour-long town hall-style meeting on Oct. 1. As a Georgia Tech Manufacturing Institute Distinguished Lecture, Mulally explained how it took a culture change that embraced openness and accountability to move the company forward. This included getting the divisions to accurately report what was happening within the organization. When he first arrived, Mulally introduced a color-coded reporting system that highlighted areas that were performing well (in green), those that were off plan (in yellow) and those that needed attention (in red). Unfortunately, in the beginning, all reports showed green despite the company’s forecast for losses of $17 billion that year. Presenting a new kind of leadership, Mulally encouraged Ford’s leaders to acknowledge the current reality. After several weeks, one team changed its report to red while the rest remained green. Eventually, the rest of the units followed suit.

“We needed to create an environment where it was safe to be open and accountable if we were going to turn Ford around,” he explained. “When those reports started changing colors, it was a breakthrough moment.”

Mulally also explained that the company had to focus its strategy in order to survive. The company outlined four core competencies that today are carried throughout every aspect of the business. Those four competencies are best-in-class quality, fuel efficiency, safety and technology. So, how did Mulally and team determine these four competencies?

First, it went back to the basics and focused on what made the company a success in the first place with No. 1 selling products like the Fiesta and the Taurus. When Mulally arrived at Ford, the company had some 97 nameplates under its brand. Today, it has only 16. In fact, when one student asked Mulally which car he drives, Mulally replied that he drives every Ford vehicle and several from the competition to benchmark Ford’s designs.

The second way the company determined its core competencies was taking the “unique approach” of listening to its customers. He used the marketing of the Fiesta as an example. The head of marketing said that to market these cars, the company could not simply use talking heads, which had been the go-to marketing tactic in the past. The marketing director recommended giving away 100 Fiestas to customers, allowing them to drive them and blog about it. When some of the Ford team said, “We can’t do that. What if they don’t like it?” The marketing director simply replied, “Don’t we need to know that?”

A few students also raised questions about environmental concerns. The solution, in Mulally’s eyes, is twofold. Industry can continue to improve fuel efficiencies and look at alternative fuel sources as well as provide more electric options. But, there must also be a change in policy, especially in terms of dependency on imported oil in the United States. In China, he noted, the government is taking steps to cleaning up the environment when it comes to automobiles.

“China is very concerned about the environment,” Mulally explained. “Government is driving the change in automotive production in that country by setting quotas for hybrids, electric and hydrogen.”

Looking ahead, one student asked about the importance university research will play in Ford’s future. Mulally responded: “It will continue to increase because that public-private partnership is a win-win for everybody. That partnership is the foundation, and in the U.S., we are starting to get that back. The United States is now putting importance on manufacturing from a policy perspective.”