Global Insight Perspective | |
Significance | One of the areas in which Bill Ford said that changes would be made was in leadership, and that no position was safe including his own. One day later, a new CEO is announced, proving that sweeping changes are under way at the automaker. |
Implications | A newcomer to the auto industry, Mulally will face significant challenges as Ford attempts to continue its "Way Forward" restructuring. His background in manufacturing and engineering, as well as success in leading troubled companies through difficult times, is expected to help Ford turn around its fortunes in the marketplace. |
Outlook | While Mulally is an experienced production and manufacturing executive, his lack of auto knowledge may be the bigger challenge, as many of Ford's woes can be traced to troubled product development. The dearth of timely and relevant products will need to be addressed quickly. |
In a late press conference on Tuesday evening (5 September), Bill Ford Jr. officially stepped down as CEO of Ford. His successor is the executive vice-president of Boeing and president and CEO of Boeing Commercial Airplanes, Alan Mulally. Ford will remain as chairman of the troubled automaker.
Ford officially announced the replacement in an e-mail to employees, in which the former CEO talks about his decision and the reasons for bringing in an executive who was not part of the auto industry:
"As I wrote in my employee letter last week, one of the three strategic priorities that I've been focusing on this year is Company leadership. While I knew that we were fortunate to have outstanding leaders driving our operations around the world, I also determined that our turnaround effort requires the additional skills of an executive who has led a major manufacturing enterprise through such challenges before.
That's why I'm very pleased to tell you that Alan Mulally, who as CEO led a successful turnaround at the Commercial Airplane division at the Boeing Company, will become our president and CEO, effective immediately. Alan has deep experience in customer satisfaction, manufacturing, supplier relations and labor relations, all of which have applications to the challenges of Ford. He also has the personality and team-building skills that will help guide our company in the right direction."
The move to find an external executive to lead the company has not been a secret, as Bill Ford Jr. announced in an article published in Newsweek earlier this week that he is actively seeking top leadership from anywhere it presents itself. He stated in that article that all positions were being looked at, even his own. With previously rumoured attempts at luring Renault-Nissan's Carlos Ghosn evidently unsuccessful, Mulally will now take over at the struggling automaker and face a situation that is not entirely new to him.
Been Here Before
Alan Mulally has spent 37 years at Boeing, and was named president of Boeing Commercial Airplanes in 1998. Mulally was also the director of the revolutionary 777 airliner programme, where he credits much of the development and production methods used in the creation of the Ford Taurus sedan in his plan. More recently, he is credited as having dramatically increased orders for the new 787 Dreamliner, Boeing's new state-of-the-art commercial passenger jet scheduled for production later this decade. Mulally was named as one of BusinessWeek magazine's "Best Leaders of 2005" for his sweeping changes in production, workforce, and development of the Commercial Airplanes division.
Certainly he has had experience running troubled companies in troubled times. Mulally was president of the Commercial Airplanes division during the 11 September 2001 terrorist attacks on the United States, and presided over the division as industry orders for new airplanes dried up nearly overnight in the wake of greatly reduced air travel. Bankruptcies by airlines led to the need for aeroplane manufacturers to completely overhaul their business model, which is what Mulally did, to great success. It is hoped that his experience as an executive in aeroplane manufacturing, and presiding over a troubled manufacturer in a difficult economic situation will translate well into the automotive industry, given the current financial picture at Ford.
Outlook and Implications
Bringing in an outsider to run Ford during the "Way Forward" restructuring plan could have a number of effects. Bill Ford Jr. is very popular with employees, and has helped to assure Ford employees that "he is not going anywhere" by choosing to remain as chairman of the company. The arrival of fresh blood will hopefully stem the exodus of top and middle-level managers who are trying to leave the company, many for non-automotive positions. In order for Ford to pull itself out of its current slump, that executive talent must be retained.
What Mulally gives Ford is an opportunity not unlike the situation when Carlos Ghosn went to Nissan. Like Ghosn, it will be easier for an outsider like Mulally (albeit coming from a non-automotive background) to make sweeping changes in a number of areas, as he is beholden to no-one and has not formed the kind of internal connections that can lead to cronyism or favouritism. However, he is not a "car guy", and that could hurt as much as help the company. His familiarity with a difficult engineering product, manufacturing for a cyclical industry, and wild fluctuations in fuel prices' impact on that product's sales may seem to make him ideal for the position, but one could argue that what Ford needs is not more businessmen, but product people.
Ford's failures have been largely product and market related, not production related. The Five Hundred sedan came to market blandly styled and underpowered compared to the Chrysler 300, the once-popular Focus compact has fallen behind its competition in terms of refinement and features, and the compact Ranger pick-up has been all but abandoned in terms of development. With the market for full-size pick-up and sports-utility vehicles (SUVs) shrinking due to volatile fuel prices, Ford's only true bright spots are the Fusion mid-size sedan and the retro-styled Mustang. For the second-largest automaker in the United States, two bright spots are not enough to maintain market share and profitability. Mulally will have to address these product shortcomings as well as any manufacturing improvements during his tenure.