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Mulally isn't retiring just yet, but Ford is planning for next CEO

Published: Friday, July 20, 2012

Updated: Friday, July 20, 2012 09:07


 

DETROIT - Ford CEO Alan Mulally, who orchestrated a financial, cultural and product-led turnaround at Ford, turns 67 next month.

Mulally 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 told the Detroit Free Press, 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," said analyst Rebecca Lindland of IHS Automotive.

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," said 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."

Ford has developed multiple candidates for about 100 top positions, including CEO, said Felicia Fields, group vice president in charge of human resources and corporate services, in a rare interview (she is not related to Mark Fields).

"It's not something we do sporadically and not something we do just at the top of the house," Felicia Fields said. "It's an ingrained process. We do succession planning in all levels of management," including vice presidents, directors and senior managers worldwide.

Ford's board of directors has several former CEOs, including lead director Irvine Hockaday, a succession expert and driving force in recruiting Mulally. Bill Ford has his own views, and he gets input from other members of the Ford family.

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

Two key positions were recently filled: Bob Shanks, 59, took over as chief financial officer April 1 from the retiring Lewis Booth. And Raj Nair, 47, replaced Derrick Kuzak, who retired, as head of product development.

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 Mark 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," said 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," Felicia Fields said. "We tend to prefer internal candidates," she said, but they will always be gauged against outside talent.

Recruiting from the outside is more expensive and risky.

"Research shows quite clearly it is more dangerous to parachute someone in from outside," said David Jackson, founder of Jackson Leadership Systems, leadership consultants in Indianapolis and Toronto.

Outside hires can hurt morale. A higher percentage of newcomers leave within a year.

A Korn Ferry study shows it costs about $500,000 to find and hire someone from outside the company, Jackson said.

But 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.

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