Ford CEO Mulally Faces New Challenges

The Associated Press
Wednesday, August 22, 2007; 10:05 PM

DETROIT -- He persuaded Wall Street to loan him billions of critically needed cash just before the credit crunch began and he shepherded cost cuts that led Ford Motor Co. to its first profitable quarter in two years, but the honeymoon may be over for Chief Executive Alan Mulally.

As he approaches his one-year anniversary running the No. 2 U.S. automaker after General Motors Corp., Mulally generally gets high marks for starting to right a troubled company. But questions remain about whether the former Boeing Co. executive has the product know-how to lead Ford out of its tailspin and the spine to get enough concessions from the United Auto Workers to make the company competitive again.

"I think he's done some good things and I think he has missed the ball a few times," said James E. Schrager, clinical professor of entrepreneurship and strategy at the University of Chicago Graduate School of Business. "Overall, I'd give him pretty good marks."

Mulally, hired by then-chairman and CEO Bill Ford on Sept. 5, was brought in to turn around a company that was unprepared when rising gasoline prices pushed people away from its trucks and sport utility vehicles.

Just two weeks after he started, the company unveiled another restructuring plan with more plant closures and early retirement or buyout offers to all 75,000 hourly workers. Ford at the time said it would take three years for the company to return to sustained profitability after billions of dollars in losses and said its share of the U.S. auto market would shrink to around 14 or 15 percent. It was 26 percent in the early 1990s.

Mulally began holding weekly meetings of top managers to keep the restructuring and new vehicle rollouts on track, offering help if needed and calming frayed nerves.

"The disruption and the uncertainty and the feelings of anxiety seemed to have disappeared," said Gerald Meyers, a former chairman of American Motors Corp. who now teaches leadership at the University of Michigan.

Mulally's best move, according to Schrager, came three months into his tenure when he lined up the $23.4 billion line of credit by mortgaging Ford's factories and even its blue oval logo. Knowing the time was right because of free-flowing credit, Mulally put other business on the back burner to focus on the financing, Schrager said.

"That was beautiful execution on his part," said Schrager, who has studied the auto industry for 35 years.

But after Mulally's first quarter, Ford posted the worst annual loss in its history for 2006, $12.6 billion.

Since Mulally's arrival, the company has rolled out several new products such as the Edge crossover vehicle, and Mulally ordered the return of the once popular Taurus by renaming the slow-selling Five Hundred sedan and Freestyle crossover vehicle.

Still, Ford's U.S. market share has dropped from 16.5 percent the month Mulally arrived to 13.7 percent last month as it has tried to wean itself from low-profit sales to rental car companies.

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