Mulally overcame skepticism that a plane guy could revive Ford

When Alan Mulally, left, was tapped as Ford CEO in 2006, "there were lots of raised eyebrows" inside the company, said Bill Ford, right.

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DETROIT -- When Alan Mulally was named Ford CEO in 2006 after 37 years at Boeing Co., plenty of industry veterans had the same question: What does a plane guy know about the car business?

Eight years later, as Mulally prepares to hand the reins to Mark Fields, no one is asking that question anymore.

Mulally, 68, is widely credited with saving the 111-year- old automaker from the bankruptcies that staggered its rivals, General Motors and Chrysler Group.

He got Ford Motor Co.’s warring fiefdoms to work together, sped up the time it takes to get a vehicle from drawing board to showroom and overhauled the lineup with stylish, fuel-efficient models that have won over a new generation of drivers with not just trucks and SUVs but sedans. Since Mulally started on Sept. 6, 2006, Ford shares have surged 87 percent and the company has made money 21 quarters out of 29, including the last 19.

“Ford was in a pretty precarious position,” said David Cole, chairman emeritus of the Center for Automotive Research in Ann Arbor, Mich. “Had Alan come from real estate or something, it probably wouldn’t have worked, but aerospace is a complex business. And he understood that the most important thing is you need a coach leader. He is a team guy and manufacturing is a team sport.”

Mulally will step down before the end of the year and be succeeded by Fields, 53, now COO, according to people familiar with the matter. The company may announce the moves as soon as May 1, said the people, who asked not to be identified revealing internal plans.

Moribund culture

In 2006, Bill Ford, great-grandson of founder Henry Ford, decided it was time to step aside as CEO after spending five years trying to turn around the No. 2 U.S. automaker. Ford was unprofitable and mired in its third restructuring in less than five years. To shake up a moribund corporate culture, Ford, who remains chairman, decided to look outside the industry, and Mulally’s name kept coming up as a turnaround specialist.

Passed over for the CEO job at Boeing, Mulally had recently revived Boeing’s commercial plane business. After the 9/11 attacks prompted airlines to cancel jet orders, he trimmed more than 30,000 jobs to boost profit.

When Mulally was tapped as Ford CEO in 2006, “there were lots of raised eyebrows” inside the company, Bill Ford later told Businessweek.

One of Mulally’s first acts was borrowing $23 billion to shore up Ford’s finances and buy time to turn around the company.

Intact legacy

“In hindsight he did a great job of keeping them out of bankruptcy,” said Michael Levine, a New York-based fund manager at Oppenheimer Funds Inc., who helps manage about $237 billion, including Ford shares. “His legacy is intact; he worked through one of the most difficult periods in U.S. auto history.”

With the One Ford plan, Mulally pushed the automaker to develop cars that could be sold worldwide, instead of making products for individual markets. During his tenure, Ford also pushed the boundaries of technology, including using lightweight aluminum to help reduce fuel consumption.

He encouraged subordinates to share not just good news but bad as well, highlighted by his Thursday business plan reviews, where his direct reports post more than 300 charts coded red, yellow or green to indicate problems, caution or progress. Fields was the first to highlight a problem, earning him Mulally’s praise.

“He didn’t terrify people,” said Jeffrey Sonnenfeld, associate dean of the Yale University School of Management. “Most turnaround leaders come in with the spirit of fear and threat. He didn’t frighten people about how bad it could be. He felt that case was already made. Instead, he helped people see how they could work toward a vision of who we must be.”

Lincoln still lags

Besides rejuvenating the Ford brand and its models, he cut costs, closed factories and sold Ford’s luxury division, which included Jaguar, Land Rover and Aston Martin. He also killed the Mercury brand to focus on the Ford and Lincoln lines.

Mulally has been unable to breathe life back into Lincoln, Ford’s remaining luxury brand. Lincoln reached its sales zenith in 1990, when 231,660 were sold. Last year, it sold 81,694 vehicles, 456 fewer than the year before.

The Taurus may be one of Mulally’s rare missteps. The large sedan had been America’s best-selling car, with annual sales peaking at 409,751 units in 1992. Ford killed the name in 2006, before Mulally revived it as a 2008 model. He ordered a redesigned model for 2010, though sales have never topped 80,000.

Microsoft candidate

Late last year, Mulally was among the candidates to be the new CEO of Microsoft Corp., people familiar with the matter said at the time. He ended the speculation in January after his candidacy faded over concerns about his age and lack of technology experience, people with knowledge of the matter said. Microsoft named Satya Nadella, its cloud computing chief, CEO in February.

Mulally is lining up a post-Ford position that will keep him involved in corporate governance or business policy, according to people familiar with his plans.

At Ford, Mulally “brought the company together in a way I can’t imagine anyone else would have done,” Cole said. “He’s defined a new culture and I don’t think that’s going to go away.”

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