Abstract
The Global Financial Crisis that began in 2008 is considered to have been one the worst financial crises since the Great Depression of the 1930s. The 2008 crisis led to the failure of many large financial institutions, the rescue of numerous banks by national governments, and significant downturns in stock markets around the world. In many countries, the housing market suffered foreclosures which led to prolonged unemployment. This crisis played a significant role in the failure of key businesses, including banks, insurance companies, real estate lending and construction and the automobile industry, as well as declines in consumer wealth estimated in trillions of US dollars. This crisis led also led to a global recession and contributed to the European sovereign-debt crisis. The initial phase of the crisis can be dated to August 2007, when BNP Paribas prevented withdrawals from three hedge funds citing a lack of liquidity. This event was preceded by the collapse of the American housing bubble, causing the values of housing prices and securities tied to US real estate to decline dramatically and thereby damage financial institutions globally (Bailey and Elliot, 2009).
2The financial crisis was instigated by a complex interplay of government policies that encouraged excessive home ownership by providing easy access to mortgage loans for unqualified borrowers, overvaluation of mortgage backed securities based on the theory that housing prices would continue to escalate, questionable practices by both buyers and sellers, as well as compensation structures that prioritized short-term deal flow over long-term value creation, and a lack of adequate capitalization in banks and insurance companies to survive a decline in assets values. Questions regarding bank solvency, declines in credit availability and reduced investor confidence had a large impact on global stock markets, where securities suffered significant losses during 2008 and early 2009. Economies worldwide slowed during this period, as credit tightened and international trade declined. Governments and central banks responded with an unprecedented fiscal stimulus, monetary policy expansion and institutional bailouts (Bailey and Elliot, 2009).
3In addition to mortgage lending, one of the most severely damaged sectors of the American economy was the automobile industry. The US automobile industry was weakened by an increase in the price of gasoline during the period 2003-2005 which discouraged purchases of sport utility vehicles (SUVs) and pickup trucks. The high profit margins of these vehicles had encouraged the American “Big Three” automakers, General Motors, Ford, and Chrysler to make SUVs their primary focus in the early 2000s period. However, with fewer fuel-efficient models to offer to consumers, sales began to decline in the mid-2000s. By 2006, consumer demand also decreased due to a reduction in credit availability. When the financial crisis emerged with full force, in 2008, General Motors was forced into bankruptcy and was taken over by the US government. Chrysler was acquired by Fiat of Italy, with Ford the only remaining American automobile company to maintain its independence. Many observers attribute the ability of Ford to survive the international financial crisis to the organizational changes implemented by CEO Alan Mulally (Vlasic and Bunkley, 2008).
4The organizational changes introduced by Mullaly at Ford had a pervasive impact on how the company was structured, how collaboration was fostered, and how innovation came to flourish under his guidance. Briefly, Mulally’s solution to the problems faced by Ford during the financial crisis was laid out in a plan he called ‘One Ford.’ This type of organizational change required a mixture of various aspects of traditional Change Management and Change Leadership as well as elements of Organizational Development and perhaps even the Socio-Economic Approach to Management. In a combined way these change strategies bring about cultural changes which may lead to visionary thinking and new products, as well as to engage an entire enterprise to respond effectively to a crisis situation. Mulally’s One Ford organizational change model involved four aspects: 1) bring all Ford employees together as a global team; 2) leverage Ford’s unique automotive knowledge and assets; 3) build cars and trucks that people wanted and valued; and 4) arrange the significant financing necessary to pay for it all. A later section of this paper will discuss the One Ford strategy in more detail, but first a summary of some of the ways that organizational change has been approached in the prior literature will be discussed.