litigation, and several international matters, like an illegal
strike in Russia. But the global
hot spot that month seemed to
be Canada. A red slide highlighted a dispute with the Canada Revenue Agency.
Lawyers Lou GhiLardi
(Lef T) and pe Ter sherry,
Jr., work CLose Ly wi Th
The finanCe depar Tmen T.
It wasn’t the company’s biggest legal problem, but it
was one on which Leitch needed help. It was essentially
an argument between U.S. and Canadian tax authorities,
Leitch says, about transfer pricing—how much revenue
and profit each country should receive from Ford’s extensive cross-border transactions with its Canadian affiliate.
In this case, Ford had already paid the U.S. Internal Revenue Service according to its allocation of revenue and
profit. But Canada believed that it had not been allocated
enough revenue and profit by Ford. It reassessed Ford, and
required the company to pay 50 percent of the amount plus
interest while the dispute raged on.
A multidisciplinary team with representatives from
the finance and government affairs departments was
appointed to tackle the problem in the follow-up meetings. Ultimately, Leitch says, Ford and the two countries
agreed to what he calls an “appropriate” solution, and they
did so relatively quickly. Most important to a company
working furiously to improve its liquidity, Ford did not
have to make a second tax payment.
“It’s never an easy thing to take into the [executive]
group a very large issue that has a red status against it,”
Leitch acknowledges. “But it’s very important that every-
one knows the true status, so that we can work together
to resolve it.”
Lesson Two:
CommuniCa Te CandidLy up, down, and ou T
When MULALLy FIRSt BegAn hoLdIng hIS Meetings, he noticed something that bothered him. the executives were keeping their remarks short. they were presenting their coded slides. But all the slides were green.
Finally, the Ceo spoke up. “hey, we’ve lost billions
of dollars,” he told them. “there must be some red slides
out there.” A week or two later, Mark Fields, president of
Ford’s operations in the Americas, presented a slide about
an important product that had been scheduled to launch.
there were problems, and it had been delayed. It wasn’t
clear how or when the mess would be resolved. this was
the first red slide. When Fields finished, all eyes turned
to Mulally. Slowly the boss began to—applaud. At first,
Leitch remembers, no one was quite sure what to make of
this. Finally Mulally said, “this is exactly what we need!”
