What Ford's new 5-cent dividend means for Mulally

It makes sense for Ford CEO Alan Mulally, with Chairman Bill Ford at the company's annual meeting in May, to exit while on top and be a hero to Ford employees, retirees, investors and family members.

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Ford Motor Co. has reinstated a cash dividend of 5 cents a share.

So here's my 5 cents on what it means.

My bet is famed CEO Alan Mulally, 66, will retire possibly as early as the end of next year and definitely within two years.

Obviously, the dividend is a signal of Ford's confidence that its recovery is solid. Ford suspended its dividend in September 2006 to preserve cash.

Wall Street -- looking at Ford's profits of $6.6 billion so far this year and the ongoing recovery in U.S. light-vehicle sales -- already is predicting an increase in the company's dividend by the end of 2012.

The dividend wouldn't be possible without the turnaround plan executed by Mulally, who has just endeared himself again to thousands of Ford employees and retirees who have hung on to Ford shares.

The restoration of the dividend also will be an immediate bonanza for Ford senior management, and Ford family members who control shares representing 40 percent of the voting power at the automaker.

Those family members -- Bill Ford Jr., Edsel Ford and others – control millions of Ford shares that haven't generated a single dividend payout since 2006.

The next step in Mulally's turnaround plan will be retiring more debt and returning Ford to an investment-grade credit rating. S&P and Moody's dropped Ford's credit rating to noninvestment grade in 2005.

Ford said it would not resume dividend payouts until its credit rating was raised to investment grade. That position changed in October.

The agencies -- citing improved financial results and the automaker's new labor contract with the UAW -- recently raised the automaker's credit rating to one notch below investment grade.

Meanwhile, a report this week in The Wall Street Journal said Ford is conducting a wide search for Mulally's replacement. He's expected to retire in the next two years, the paper said.

The Journal, citing sources familiar with the automaker's deliberations, said Ford may appoint a chief operating officer to work alongside Mulally and eventually succeed him as CEO.

Ford called the story false and said it's not searching for an external successor.

Search or no search at this moment, I believe Ford eventually will appoint someone to the role of COO for Mulally to mentor. Once Ford's credit rating is returned to investment grade, which could happen next year, Mulally likely will announce his planned retirement date shortly thereafter.

Mulally's retirement will fall within a two-year window, or sooner.

It makes sense for Mulally to want to exit while on top and a hero in the eyes of Ford employees, retirees, investors and family members.

And if my guesswork is wrong, I'll wipe the egg from my face.

You can reach Jamie LaReau at jlareau@crain.com. -- Follow Jamie on Twitter

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