Melanie Stern is section editor of Families in Business.
Boeing's Alan Mulally has accepted perhaps the most dangerous job in big business as CEO of Ford. Can he fix the besieged autos giant – or has he just been drafted in to take the heat off Bill and the family? Melanie Stern reports
So. Hell hath frozen over: Bill Ford has quit the chief executive role at Ford and brought in an outsider, Boeing vice-president Alan Mulally (pictured), to replace him. Bill has also dropped the chief operating officer role, and is now executive chairman. Mulally has been admitted to the executive board. He hasn't said too much about his new job yet except to tell reporters that he was "not afraid, but nervous", the kind of rather sweet comment that makes running Ford sound a bit like falling in love.
Alan's appointment is momentous is many ways. It covers most of the gristle family businesses have to deal with: succession, suitable family leadership, separation of ownership and management, separation of the chairman and CEO role, dealing expediently with the effects of globalisation, locating and keeping sweet outside executives. But most family businesses don't have to deal with it all at once.
Mulally may not be a 'car guy', but there are parallels between his industry and Ford's that make this move a sensible one. Airplane manufacturers have been squeezed to within an inch of their life since 9/11 and remain under pressure from the paralysis of the global commercial airline industry. Ford has been in a state of financial and operational seizure since then too, with the lowest productivity of all the major auto firms who increasingly steal their market share with sleeker, cooler new models, and is at the mercy of rising oil prices affecting consumer trends. Boeing is a company at the top of its game and a global business icon, so any ripples within the firm have serious consequences for the industry at large. Ford remains an icon, but its player status is fast eroding, and Bill Ford's endless lay-off tranches clearly make waves and affect US productivity, not just its own. But the differences are vast too. Firstly, of course, Ford, though publicly listed, is a family-controlled company. Boeing, and the aerospace industry, can always rely on the defense industry and NATO for order flow when commercial airlines can't afford new planes, whereas Ford's business is completely consumer-driven and has no sure bets to lean against in harder times – such as now.
The fact that Ford is now in the hands of a non-family CEO is real headline news. For the last few months family scion Bill, made chief executive in 2001 after the last non-family chief executive Jacques Nasser was bumped, has maintained the line that he was in the job for the long haul, saying that he was not looking for his replacement even a couple of weeks before Mulally's appointment was made public.
Mulally isn't just an outsider to Ford. He is an outsider to Detroit and to the automotive industry. It's not unusual to see executives being drafted across different industries, but at a time when confidence is in dire need at Ford, someone who knows – or can at least, learn – the intricacies of their turf and the problems they face is vital. Mulally can't and hasn't claimed to be anything other than a beginner in the market, and he'll need to be a gifted study to pick it up in the time he needs to take over from Bill Ford, born and raised on the industry. But a look at analyst opinion and what the auto industry blogs say shows mostly positive sentiment on his chances. Let's not forget, Bill took the job having never run a company before, let alone another world-class corporation. Mulally has the tools on paper. "I feel good that I could attract someone like Alan to the company," Bill said of the appointment and, indeed, even if he couldn't run the company, he has done well to bring someone with Alan's résumé on board. The Boeing lifer has rich experience steeling out crises and making the kind of tough, risky decisions that ultimately saved Boeing's bacon and – they both hope – will save Ford's. He is well-respected for having kept the wolves from the door at Boeing after the firm's order pipeline crashed post-9/11. He is credited with leading the development of Boeing's 777 airliner, and has said he did it by drawing lessons from the way Ford designed and launched its Taurus model, one of the firm's best performing having sold nearly 7 million in its 20 years of production.
Bill has been vociferous about his intention to remain a key architect of the new and improved Ford under Mulally, cementing his point with the rather choice war cry: "I was born with Ford Motor Company, I will die with Ford Motor Company, and frankly everything else is just detail". He is generally considered one of big business' good guys, so most find his pledges heart-warming; it feels a little evil to say anything bad about him. But there is a fair bit to say. Not so many have questioned Bill's habit of saying one thing and then doing another, dithering that has hurt his family business. His words have not always correlated with his actions. For example, in Newsweek's September 11 issue, Bill told reporters, "I'm not looking to replace myself". This was published days after his successor was made public. His pledge not to take a salary from Ford until it turned a profit was a good soundbyte; but he doesn't need the cash – he made a tidy $13.3 million from his stock ownership in the firm last year. Now, the latest reorganisation plan, released a week after Mulally's appointment, and the last fashioned under Bill's tenure as chief executive, has raised lay-offs of hourly workers in its North American business from the last target of 30,000 in January to around 75,000, though all are voluntary offers. Ford is aiming to return its North American business to profitability by 2008, and if this plan works, Mulally would then have a real shot at turning the company around. He shouldn't feel too uncomfortable about being the new face of the Ford juggernaut as it puts most of its loyal white-collar workers out of work, having done it all before at Boeing. But it is fortunate for Bill, and the Ford family, that they can take a back seat in the proceedings and that Bill will no longer be the person at the top of this plan; journalists will eventually refer more to Mulally than Mr Ford, and the family can retrench until sunnier times when they will no doubt emerge back into to the spotlight, in time to claim the glory as one of the world's most successful and resilient business clans. Perhaps by then, a generation will have come and gone, and Ford may have a new family member somewhere quietly preparing to retain power.
Although the company and the media report that Bill was gracious enough to step down, a couple of facts from the recent past suggest he might have been sacked by his board, or at least jumped before he was pushed. Back in May at Ford's annual shareholder meeting, Bill was stunned by an attack from several parties in attendance who accused him of failing them and of putting shareholders, and the company, "at bankruptcy's door". One added that he had lost almost $1 million having invested most of his retirement fund in Ford (though surely his financial advisor should be on the receiving end of a stern talking to for such risky investing). That said, not many used their voting power to force change, with an 80% majority at the meeting voting against a motion to separate the chairman and CEO roles. That meeting, though, signalled a change in feeling about Bill's performance and about the corporate governance issues hanging over his holding both roles. A month later, Bill told his board he thought he was overloaded and had too many roles to do an effective job. He later said he started looking for a new chief that month. Rumour has it that Carlos Ghosn turned him down. But Bill says he wasn't necessarily looking for a market insider anyway. "I looked inside and outside the autos industry, and that's something we'll continue to do as we continue to build the team," Bill told BusinessWeek in a joint interview with Mulally. "There's a series of tradeoffs. He won't have the 'car guy' mentality. But he will offer us experience from another industry and a whole other way of doing things, many of which can be applied to us." Mulally will also be mentor and cheerleader of Ford's younger rising stars, something Bill champions.
What of Bill Ford Jr's legacy as chief executive and fourth generation successor? Unveiling rescue plan after rescue plan, each one with more severe lay-offs than before, compounds the evidence that this was a CEO at a loss. Bill looks to have been one of the nicest, but possibly most confused, of leaders – and that's just not good business. Mulally, meanwhile, despite having been twice passed over for the CEO job at Boeing, is here as a crisis manager and corporate saviour, so he'll need to show big ideas and results within his first 100 days. Politics-wise, Mulally handled political relationships for Boeing and should make more headway for his new employer in that regard. He'll be able to smooth relations with the Bush administration as the defense industry has a much closer alliance via defense with federal and Big Oil types than the car business. The company's relationship with their union, the International Union, United Automobile, Aerospace and Agricultural Implement Workers of America (UAW), won't be hurt by Mulally's experience with Boeing's largest and most powerful union group, International Association of Machinists and Aerospace Workers (IAMAW); in 2001 he led lay-offs totalling around 30,000 workers, about 30% of its global production workforce, something he said at the time was "absolutely gut-wrenching – but we need to deal with reality". Ford is almost a friend of the union, but Mulally is no soft touch and has drawn criticism from IAMAW's chief Mark Blondin, who said his unwillingness to strike up fair contracts with unionised workers, and his decision to keep outsourcing production abroad, caused strikes at Boeing in 2001. Mulally will have drawn lessons from that episode under the toughest of conditions, and his hard bargaining attitude – crossed with Bill's relationship with UAW head Ron Gettelfinger (who applauded the decision to hire Mulally) – is perhaps precisely what Ford needs to survive.
That said, the last non-family chief wasn't exactly a pushover, but he still felt the axe in the end. It is hard to tell at this stage how the Ford-Mulally power sharing plan will work, and to know whether Mulally will simply execute a plan fashioned by Bill, his board and the adviser he hired mid-summer to pick out parts of the business that could be sold off - or whether he'll be an equal partner in the plans as well as out there making it happen. "Alan will be informed of the decisions being made," Bill told BusinessWeek the day after the announcement was made. Bill had such a set-up with Jacques Nasser initially (at the time Bill was deemed too young to lead alone) and then was pretty loud about promising the company would 'get a grip' when he booted Nasser, a Ford veteran, out of the job in 2001 and took the corner office for himself.
Even if Mulally manages to do the impossible, one would hope he has looked at the history of other non-family leaders at Ford before he signed up. Nasser had a turnaround moment himself in his time at Ford, cutting $3.4 billion in costs from the firm in one year during the 1990s slump and earning himself the nickname 'Jac the Knife' – yet still ended up persona non grata. It seemed he was one of those fabled family company stewards: an able, seasoned executive tempted to the family fold with tales of working for an icon, a company with heart, and a big fat compensation package. But, no matter how well they do, they should never expect to break through the glass ceiling of family owner-management.
They're there to solve the problems and then quietly step away so the family can always seem in control; they should never hope to really be part of the gang. However quiet Bill seems to be in his new reduced role, one can bet with confidence that he and the family will remain just as powerful as they have ever been in decision making, since they live from the dividends from their 40% holding in the company. And as for non-family executives being considered part of the family: the 'decision' of Americas chief operating officer Anne Stevens to 'retire' shortly after Mulally's appointment might be an indicator that no matter how close you are, how long you work, and how well you do for a large family concern with this much riding on its survival, the only people who are family are those with the surname over the door.