It must feel pretty good to be Alan Mulally these days. Passed over for the top job at Boeing BA -2.18% a decade ago, Mulally found career redemption at Ford Motor F -0.41%, where he is widely admired for turning the carmaker around without a government bailout. Now, at age 68, there’s flattering talk of a possible Third Act for Mulally: running Microsoft MSFT +0.23%.
Many in the investment community and the media have already anointed Mulally the frontrunner to succeed Steve Ballmer as Microsoft chief executive, even though the board is said to still be weighing a short list of candidates.
Where does that leave Ford? In an unwelcome state of limbo. The carmaker has had a transition plan in place since last fall, when Mark Fields was promoted to president and chief operating officer, making him the clear successor to Mulally, who Ford said would remain as CEO at least through 2014. The two-year transition would give Fields time to settle in to his much larger responsibilities while allowing Mulally an elegant departure worthy of his folk hero status.
Instead, the incessant Microsoft buzz has left Ford in an awkward position. The perception that Mulally is about to jump ship creates uncertainty for employees and investors. The company insists “nothing has changed” about Mulally’s plan to stay through 2014, and Mulally himself says he’s still “excited” to lead Ford. But the rampant speculation can’t be good. Still, no one — including Executive Chairman Bill Ford, who hired Mulally as his own replacement — wants to be seen as urging him to go.
Mulally certainly deserves a victory lap at Ford. The company is in infinitely better shape today than when he arrived in 2006. Back then, Ford was in crisis, on its way to recording $30 billion in losses by the end of 2008. By the time the Great Recession hit, Ford was burning through cash at a rate of almost $2 billion a month. Mulally slashed jobs, closed factories and restructured labor agreements, while selling non-core luxury brands and eliminating unprofitable dealerships. A risky, but well-timed loan in 2006 proved to be the key to Ford’s survival, providing urgent cash while General Motors GM -0.21% and Chrysler plunged into bankruptcy.
Fast forward to today: Ford has been profitable for five years, racking up $35 billion in net income through 2012, plus another $7 billion estimated net this year. By designing vehicles that share underpinnings around the world, Ford has reaped massive savings from its global scale. Its margins in North America are among the best in the industry, its European unit is on the road to recovery and it is rolling out an aggressive growth plan in China, the world’s largest market. With a bevy of new fuel-efficient powertrains and advanced infotainment systems, Ford models like the Fusion sedan, Escape crossover and Explorer SUV are proving to be just what customers want. Most important, Ford’s culture has changed. Mulally managed to knock down historical fiefdoms and got everyone in the company working together toward a common goal: “One Ford.”
Some challenges remain, of course. Ford is still wrestling with how to rebuild its Lincoln luxury brand, for example, and it must find a formula for growth in notoriously unstable South America. It must also continue paying down its $19 billion unfunded pension liability. But these are long-term challenges that won’t be resolved on Mulally’s watch anyway, or they depend on economic conditions that are beyond anyone’s control.
In other words, there’s not much left for Mulally to do at Ford.
In fact, the longer he sticks around, the more he becomes a distraction, especially if Microsoft’s CEO search drags on. And he risks overplaying his hand; if he waits too long to leave, something could go wrong that will tarnish his golden reputation. Plus, a long goodbye increases the risk that Fields will grow restless and become vulnerable to poaching by another company.
Mulally deserves every bit of credit he has received for positioning Ford for success; now it is time to graciously hand the reins to Fields, who has earned the confidence of Ford’s board of directors, employees and investors.
For the sake of Ford, Mulally ought to say his goodbyes and move on.
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