Faced with the worst crisis in his company’s 103-year history, William Clay Ford Jr. on Tuesday made a stunning acknowledgement: It would take a plane guy–not a car guy–to turn around Ford Motor Co.
Caught in a whirlpool of heavy losses and eroding market share, the Ford scion gave up the chief executive’s job at his family’s car company and handed the position to Alan Mulally, the longtime head of Boeing Co.’s commercial airplane group.
Ford, 49, said he will remain a day-to-day presence at the company as “executive chairman.” But he is counting on Mulally, who engineered an impressive turnaround at Chicago-based Boeing, to pull Ford back from the edge.
“Our management team really needed someone who had been through the wars, had the battle scars and came out victorious,” Ford said at a news conference after the announcement.
The move comes as Ford Motor weathers one of the worst years in its history. The nation’s No. 2 car company has lost $1.4 billion so far amid a 10 percent slide in sales. Rival General Motors Corp., meanwhile, has been enjoying a mini-revival, earning $1.2 billion in the second quarter on an operating basis.
Since he took the job in 2001, Bill Ford had been widely criticized for failing to provide the firm leadership needed to shake up his company’s sclerotic corporate culture. Tuesday’s move confirms he was uncomfortable, too.
“I went to the board earlier this summer and said, `I’ve got too much to do,'” he said.
Analysts were quick to say that Ford was ill-suited for the job.
“Because he was a Ford, people were afraid to tell him the truth,” said Rebecca Lindland, a senior analyst with Global Insight. “There was a level of coddling that has no place in a CEO’s office.”
There are precedents in many industries for bringing in complete outsiders as chief executive. But that hasn’t always worked out in the auto business. Former Bausch & Lomb executive Ron Zarella’s tenure in the 1990s as head of GM’s North American operations was considered a failure.
“We shouldn’t take for granted that heading a plane company [means] that you can be a great CEO of a car manufacturer,” said Boris Groysberg, an organizational behavior expert at Harvard Business School. “But … it might take an outsider to transform Ford.”
Mulally, 61, certainly knows a little about a corporate icon in crisis. In his eight years as head of Boeing’s commercial airplane group, the aeronautical engineer saw archrival Airbus SAS swoop past Boeing as the world’s largest planemaker by stealing away more than 20 percent of Boeing’s market share.
The problems at Boeing were very similar to those at Ford. Costs were out of control, Boeing had too many outdated products, its foreign competitor was the more efficient manufacturer and an inbred corporate culture prevented management from doing anything about it.
Mulally, a 37-year Boeing veteran, was appointed head of a highly troubled commercial unit in 1998. When the Sept. 11 terrorist attacks decimated the airline industry, he slashed billions in costs, shaved Boeing’s product line down to four key models and drastically shortened the amount of time it took to build an airplane.
Throughout it all, Mulally, who former Boeing Chairman Harry Stonecipher once likened to “a high-school cheerleader,” gets credit from former colleagues for being a strong team builder among both union and salaried employees.
His eternally optimistic style can sometimes grate, associates say. But part of his success is that he never backed down from Airbus.
In the midst of the market share slide, Mulally committed the company to the most ambitious new-product program in its history–a radical new plane called the 787 Dreamliner. Because it was built out of strips of carbon-fiber composite instead of aluminum it would be significantly lighter and more fuel-efficient than anything Airbus had to offer. But it would also require the company to shed its tired old skin and adopt a completely new business model and manufacturing process.
The gamble has so far paid off. Over the last two years, the 787 has allowed Boeing to adroitly outmaneuver Airbus to win key orders. Mulally predicted that based on the order book, Boeing should have its lead back by next year.
“Some people think America can’t compete in the design and manufacture of sophisticated products,” Mulally said Tuesday in the conference call. “I believe we absolutely can if we pull together. We’ve shown we can do that in commercial airplanes and we’ll show we can do it in automobiles.”
That kind of thinking was what attracted Bill Ford–especially given the company’s struggle to design and produce more cars that Americans respond to. Ford said he first started thinking about asking for help in May and June but didn’t formally tell the board he wanted to search for someone until July.
During his search process he didn’t focus solely on the auto industry as would have been the norm. Instead, he looked for the best executive who had led a turnaround and Mulally’s name “kept popping to the top consistently.”
What’s clear, however, is that even with all his turnaround experience, Mulally faces the challenge of his career.
In January, Bill Ford made a first stab at a restructuring when he anointed former Mazda executive Mark Fields to head the company’s struggling North American division and announced a broad rescue plan called “Way Forward.”
The original plan called for eliminating 30,000 union jobs, 4,000 salaried positions and 14 North American plants by 2008. But analysts now expect more and Ford recently warned that “everything is on the table.”
More Top Picks Best Classroom Storage Cubbies
On Tuesday, neither Mulally or Ford shed any light on what might really happen. But Mulally said he had studied the Way Forward plan and thought the company was on the right track.
While Bill Ford said he had no concerns that Mulally’s lack of auto experience would get in the way, building cars for consumers is different than building planes for airlines. Global Insight’s Lindland said what Ford still needs is a product czar like GM vice chairman Bob Lutz.
But David Cole, chairman of the Center for Automotive Research in Ann Arbor, Mich., said the most important thing is that Ford needs new leadership–fast.
“The move amplifies the urgency for Way Forward to move more quickly,” Cole said. “It also highlights that Ford needs help from the outside to do it.”
– – –
Ford’s new CEO
Alan Mulally will replace Bill Ford, who has seen the company’s stock price slide since taking control in 2001.
ALAN MULALLY
Born: Aug. 4, 1945
Education: Bachelor’s and master’s of science degrees in aeronautical and astronautical engineering from the University of Kansas; master’s degree in management from MIT
Experience: Joined Boeing in 1969 and advanced through several engineering positions to become president of the commercial airplane unit in 1998 and later, executive vice president of the company.
FORD STOCK PRICE
Weekly closes
2001 through 2006
Tuesday’s close: $8.39
Jan. 5, 2001: $26.25
Sources: Bloomberg, Boeing
baiduhai
– See microfilm for complete graphic.