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August 21, 2012

News & Features

Ford CEO succession in the planning stages

Detroit Free Press

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Ford CEO Alan Mulally is not expected to retire until at least 2014. (Ford)

Ford CEO Alan Mulally, who orchestrated a financial, cultural and product-led turnaround at Ford, turned 67 this month. Mulally — the former CEO of Boeing Commercial Airplanes — is not expected to retire for at least 18 months, and Executive Chairman Bill Ford jokes that the architect of Ford's turnaround can continue to work as long as he likes.

When Mulally steps down, the board is expected to replace him with a carefully groomed successor from within as part of succession planning by Ford and its board of directors.

Unlike 2006, when Ford faced a gathering economic storm and then-Chairman and CEO Bill Ford decided to seek an outsider to take the CEO title, Ford today is on a path of sustainable global profitability. Rather than parachute another outsider into the Glass House, insiders and corporate governance experts say, promoting from within is much more likely.

Speculation about Mulally's replacement started bubbling when the CEO turned 65. It gathered steam this spring when Ford restored its investment-grade credit score, reclaiming assets pledged as collateral when it took out what Mulally called a $23.5 billion "home-improvement loan."

"The successor should come from within, because Ford has made such radical change in its culture and needs someone who has been there before, during and after the turnaround," says analyst Rebecca Lindland of IHS Automotive.

The contenders

The most frequently mentioned contenders are the regional chiefs: Mark Fields in North and South America, Stephen Odell in Europe and Joe Hinrichs in Asia Pacific.

"Mulally has done a good job. You can't ignore that," says Bob Schulz, managing director at Standard & Poor's Ratings Services. "Under his tenure, there is a track record of where Ford wants to go. That provides a base for succession."

Under Mulally, Ford has become a process-driven company with "personnel development committees" to groom multiple candidates for openings.

Mulally casts a big shadow, but he also created a culture that has drummed his "One Ford" mantra into the subconscious of potential CEOs.

The odds-on favorite appears to be Fields, 51, who oversaw the turnaround in North America to have it become the most profitable region. He is the most recognizable face after Mulally.

Odell, 57, is tackling overcapacity and losses in Europe.

Hinrichs, 45, is leading an aggressive growth plan in Asia Pacific, and China specifically, where Ford is hustling to catch up in the world's largest auto market.

"It makes sense to reward someone who has turned around a region," says Lindland.
There are strong reasons to replace Mulally internally.

"We do see benefits to developing internal candidates, because you can see them, develop them, have control over their development," says Felicia Fields, group vice president in charge of human resources and corporate services. "We tend to prefer internal candidates," she says, but they will always be gauged against outside talent.

Sometimes new blood is essential to a turnaround. That was the case six years ago, when Bill Ford wanted to step down as CEO and needed an outside replacement fast. The housing bubble grew fragile and Ford was caught with a product lineup that was overly dependent on pickup trucks and large SUVs.

More troubling, there was a reluctance throughout the company to communicate bad news up the organizational chart.

Mulally's strengths

Mulally shook up a culture often plagued by infighting, and rewarded those who spoke up when problems arose.

The outsider from Boeing started as a one-man band as he implemented his ideas and processes. Although journalists grew weary of the "One Ford" liturgy and his disciplined adherence to talking points, Mulally today is a hard act to follow.

The board, with counsel from Bill Ford and Mulally, will choose the successor with little help from outside consultants.

For now, Mulally is having fun staying where he is.

"He's not ready to move on," Lindland says. "He doesn't do it for the money. He's not a turnaround specialist or job jumper. After getting through the hard time, why not stay around and enjoy some of it?"

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