Boeing Exec to Take Over as Ford CEO
Less than five years after taking the helm of the company founded by his great-grandfather, William Clay Ford Jr. said Monday that he was handing the keys to Ford Motor Co. to an executive with no experience selling cars.
Alan Mulally, who is credited with turning around Boeing Co.’s struggling commercial airliner business, will take over as chief executive of Ford, effective immediately.
Bill Ford, who will remain executive chairman, is relinquishing day-to-day control at a time when the Dearborn, Mich., automaker is under assault from Asian competitors and is faced with daunting healthcare and pension costs tied to an aging workforce. Ford lost $1.3 billion in the first half of the year and said last month that it would accelerate its plan to cut costs by shuttering plants and shedding workers.
Replacing Ford with Mulally “is another admission that the challenges the company faces are much tougher than initially envisioned,” said B. Craig Hutson, automotive analyst with Gimme Credit, in a research note.
Although Mulally has spent his entire career at Boeing, the 61-year-old Kansas native and licensed pilot said Tuesday that “the fundamentals of these two industries are exactly the same.”
“I absolutely think that we’ve shown that we can [compete] in commercial airplanes and I think we’re absolutely going to show people that we can do it in automobiles,” he said.
Analysts who followed Mulally’s career at Boeing said Ford was getting an affable executive who seeks consensus rather than confrontation but still can make the hard decisions that the automaker will need to turn around its business.
Some of those decisions will be on Mulally’s plate as early as next week, when he attends his first meeting as a Ford director to discuss his predecessor’s restructuring plan, dubbed the Way Forward.
The plan, announced in January, initially called for closing 14 North American plants and eliminating 30,000 jobs. With market share continuing to slide and sales of lucrative pickup trucks and SUVs plummeting, Ford will announce deeper cuts this month.
Mulally, who will take over daily operations full time Oct. 1 after moving to Michigan from Seattle, said he had reviewed the restructuring plan and “it looks like they’re going absolutely in the right direction.”
As head of Boeing’s commercial aircraft business, Mulally presided over the company’s largest layoffs, including slashing 35,000 jobs shortly after the Sept. 11 terrorist attacks, which grounded air travel.
Mulally’s departure from Boeing was “not unexpected,” because he had been passed over for the top job at the Chicago-based company twice in as many years, said Scott Hamilton, an aviation consultant with Leeham Co. Mulally was considered a top contender before Phil Condit resigned in a Pentagon ethics scandal and again when Harry Stonecipher resigned after acknowledging an extramarital affair with a Boeing employee.
When Boeing’s board last year brought in James McNerney, who was three years Mulally’s junior, to run the company, it was only a matter of time before Mulally left, Hamilton said.
“I obviously pointed out that in my opinion he should stay,” McNerney said Tuesday, “but it was very clear to me that there was an itch he had to scratch.”
Scott Carson, Boeing’s head of sales, was named to replace Mulally.
Ford often has had a family member in the chairman’s office since Henry Ford founded the company in the early 20th century. But “there’s a long history of outsiders coming in” and taking the day-to-day reins as CEO, noted Jeremy Anwyl, president of online auto site Edmunds.
Those include Robert McNamara -- later secretary of Defense under presidents Kennedy and Johnson -- and Jacques Nasser. Bill Ford, who took over as chairman in January 1999, replaced Nasser as CEO in October 2001.
Bill Ford said he told the board of directors in May or June that he was wearing “too many hats” as chairman, CEO and president and raised the possibility of finding a new CEO.
The job cuts Mulally made at Boeing were necessary for the company’s survival, analysts said. They credit him with helping the plane maker recover from two of the worst crises in its history amid increasing competition from Europe’s Airbus.
Mulally took the helm of Boeing’s commercial aircraft business in 1998 just as it posted a $1.6-billion loss because of production problems. At one point, a parts shortage forced the company to temporarily halt production. Mulally cut jobs, outsourced work and streamlined operations by introducing lean manufacturing, a concept taken from Japanese automakers. By the end of 1999, Boeing was back on its feet.
Two years later, the terrorist attacks pummeled the commercial aircraft business and Mulally again cut the workforce as he continued to restructure operations. Boeing slashed its supplier base by half. It also changed its assembly process so that planes move along a production line similar to that of an auto factory rather than all the components moving to stationary assembly points.
In an interview last December, Mulally said the changes made aircraft assembly easier, faster and cheaper and gave the sales team more flexibility to negotiate deals.
“He made Boeing much more efficient and cost effective,” consultant Hamilton said.
Mulally’s experience in turning around a troubled corporate giant was a key factor in his being wooed by Ford.
“Our turnaround effort required the additional skills of an executive who has led a major manufacturing enterprise through such challenges before,” Bill Ford wrote in an e-mail to employees.
After losing its title as the world’s largest commercial aircraft maker to Airbus in 2003, Boeing is expected to regain it next year with record sales.
“Boeing is back in the commercial aircraft business in a big way,” aviation analyst Wolfgang Demisch said. “I think that’s a pretty impressive record, and I can see why he would be attractive to the Ford guys.”
Mulally also is coming from a company that routinely deals with the federal government, a background that could come in handy for an industry wrestling with the government over issues such as fuel economy and pollution standards. The White House said Tuesday that President Bush would meet with U.S. automakers after the November election to discuss fuel-saving technology and other issues -- a meeting that has been postponed twice.
But Demisch cautioned that Mulally had a lot to learn, particularly in marketing and distribution, which are quite different in the aerospace business. Instead of making multimillion-dollar airplanes for a few customers, Mulally will be making millions of cars for millions of customers.
“There is a tremendous learning curve to go through, but it sounds like the Ford board decided that the problems were such that they needed to go outside the box to get them addressed,” Demisch said.
Bill Ford said he first approached his company’s board about hiring a new CEO in late spring and first talked to Mulally about the job by telephone in July. Mulally said he resisted at first but eventually agreed to the move.
One immediate issue Mulally faces is what to do with Ford’s Irvine-based Premier Automotive Group, which comprises the Aston Martin, Jaguar, Volvo and Land Rover brands. The unit lost $162 million in the second quarter, and Ford said last week that it planned to unload Aston Martin.
Ford’s stock price, which has fallen more than 70% since Bill Ford took over as chairman, rose almost 5% in after-hours trading after closing up 12 cents at $8.39 in the regular session.
Ford said it would disclose its new CEO’s compensation package in a future regulatory filing. Bill Ford wasn’t paid a salary or bonus last year. Boeing paid Mulally almost $1.6 million in salary and bonus last year.
Ford, 49, said he would be “extremely active” as executive chairman but sought to deflect speculation that he would be reluctant to cede power to Mulally.
“The CEO is the CEO and that doesn’t change,” Ford said. “All ‘executive chairman’ connotes is that I’m going to be here every day. As CEO, he has the responsibility and the freedom to do his job.”
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peter.pae@latimes.com
