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Boeing Exec to Take Over as Ford CEO

Bill Ford relinquishes day-to-day control of the automaker to Alan Mulally, who is credited with a turnaround at the plane manufacturer.

September 06, 2006|Martin Zimmerman and Peter Pae | Times Staff Writers

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.

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