Automotive History: Ford’s Déjà Vu Moment – How Donald Petersen Saved Ford In The Eighties


(originally posted 12/29/11)    Oil prices have just hit record highs, and the nastiest recession since WWII has the country in its grip. Ford’s line-up of bloated, heavy vehicles is piling up like cord-wood on the dealer’s lots. The only car selling is its “Americanized” global compact. Ford stock is priced in cents, and bankruptcy rumors are swirling. The top exec hired a year earlier is intelligent, unassuming and straight-talking. He commits Ford to building “higher quality products with stronger customer appeal…emphasizing smaller, more efficient cars”. Ford in 2008? No, it’s 1981.

Like Alan Mulally today, Donald E. Petersen was an atypical choice when he was promoted to the Presidency by the Ford family in 1980. An engineer, development executive, and genuine piston-head, Petersen was also the antithesis of Lee Iacocca, whom he replaced. Never in modern history has an automotive CEO been so devoid of spin and hyperbole. No wonder Ford of the eighties looked to Japan for inspiration.

Petersen learned of Toyota’s use of quality guru Edwards Deming’s techniques, and uses Deming and corporate guru Peter Drucker in the first coherent US automaker assault on “total quality”. As measured by owners, vehicle quality improves 60% from 1980 to 1987.

1983 Ford Thunderbird

The aerodynamic 1983 T-Bird launches a dynamic wave of efficient, exciting and successful passenger cars. The Turbo-Coupe has the world’s first fully computer controlled (EECV-IV) integrated turbocharged fuel injected engine.

The Ranger successfully takes on the long-established Japanese compact pickups, becoming the category best seller for many years.

The Fox-body Mustang reinvents and dominates the pony-car class with its balance of light weight and V8 power at an affordable price.


In the biggest single auto product gamble in modern times, the 1986 Taurus is launched. It leapfrogs the competition, and sets the packaging and dynamic standards for the modern US-market sedan.  Taurus soon sells 400k units per year, taking away the best-seller crown from Accord by 1992.

Petersen employs Japanese “just in time” production methods at Ford, and the Atlanta Taurus factory becomes the most efficient auto factory in the US (including Japanese transplants).

Petersen’s honest, cooperative, non-political management style motivated the management ranks as never before, and his deep experience in car development as a car enthusiast assured that Ford’s products were consistently more dynamic than the competition.

In trend-setting, car-conscious California, Ford becomes the number one selling brand, selling passenger cars successfully while GM and Chrysler have already become terminally irrelevant there except for trucks (and Corvettes).

Profits explode, and Ford becomes the most profitable car company in the world in 1986-1987.  “F” becomes a Wall Street darling as its stock goes from 68 cents in 1981 to over $10 in 1987, resulting in an 1342% gain.

But what really separates Petersen from the rest of his ilk is that he totally keeps his perspective, candor, and most of all modesty, to the end of his term at Ford, despite the phenomenal success that was fully his doing. In stark contrast to Iacocca, who had to be dragged out of Chrysler kicking and screaming well past his usefulness, and then tried to weasel his way back several more times, Petersen consciously and quietly retired two years early in 1990 at the age of sixty-three. He wanted a new management team to have a running start in dealing with the clouds he clearly saw gathering in Ford’s horizon.

In an exceedingly frank and prescient farewell discussion with thirteen journalists the day before he retired in 1990, Petersen expresses grave concerns about the future of the US auto industry. According to one reporter: “…his terse answers were sobering. The word survival came up a lot because it’s no joke to ask how much of a home-grown auto industry will exist a generation from now.”

“Because of the deep partnerships of the Japanese companies with their suppliers, changes can be implemented predictably and rapidly.  The steady loss of state-of-the-art manufacturing technology in the US manifests itself in the longer product cycles and lower real or perceived quality of the domestic automakers”.

Petersen goes on to say: “there’s this nibbling away, this gradual erosion that’s occurring that nobody sees very well, I don’t think. It bothers me a lot.”

He ends with: “the manufacturing sector in the US is going through the same process now as the agricultural sector went through in prior generations…we have to accept that it (manufacturing) will generate a far smaller percentage of the employment of the people of the United States than it does now or did 10 years ago. There will be far fewer jobs.”

Those words spoken twenty years ago seem remarkably prophetic, especially in light of the future bankruptcy of GM and Chrysler, and Ford’s narrow escape itself. Alan Mulally has charted a similar course for Ford’s salvation, emphasizing efficient European cars and quality.

Ford’s stock between 2008 and 2010 took a similarly strong ride up, although the gain from the lowest point to the highest was a mere 689% this time. Has Ford learned its lesson, and will it avoid the mistakes that came along after Petersen?

Update 10/9/2020: Here’s a chart of Ford’s stock price since that last peak in 2010.