2 Key Ford leaders to retire, Mulally to stay on
Friday, February 10, 2012
DETROIT (AP) — Two of the architects behind Ford’s remarkable turnaround are retiring, and their departures have intensified the guessing game over who will become the next CEO.
For now, Chief Executive Alan Mulally isn’t going anywhere. The energetic, 66-year-old Kansan is considered a hero for bringing the company back from financial disaster. He insisted on Thursday that he’ll continue to lead Ford.
But the retirements of two top lieutenants — CFO Lewis Booth and Product Development Chief Derrick Kuzak — on April 1 remove two of the five inside contenders for the CEO job. Their departures have renewed water cooler talk about who takes over for superstar Mulally.
Both men helped turn the company around after it borrowed billions in 2006 to stay in business. Kuzak, 60, got Ford to shift from being primarily a truck company to making more cars. Booth, 63, led the company’s financial operations through the banking crisis.
On Thursday, Mulally named their replacements and promised that Ford’s success will continue as it follows the plan that led it to prosperity.
“Nothing’s changing about the way we operate,” said Mulally, whose company last month reported its third-straight annual profit.
Company insiders say the leading candidates to succeed Mulally are now Americas President Mark Fields, Asia Pacific and Africa President Joe Hinrichs and Ford of Europe CEO Stephen Odell. There’s a slim chance Ford would look outside, but Executive Chairman Bill Ford Jr., whose family controls the company, has repeatedly pointed to a strong bench.
President and Controller Bob Shanks, 59, will become CFO. Vice President of Engineering and Product Development Raj Nair, 47, will replace Kuzak. Mulally said the promotions were part of the company’s succession plan for every top management position, including his own.
At least one of the appointments seemed to point to Fields as the next CEO.
Shanks is a close ally of Fields. He has worked with him since the early 2000s at Mazda, which Ford once ran, and at Ford’s European division. When Fields became president of the Americas in 2005, Shanks became the region’s controller. He also worked on the restructuring plans that eventually saved the company.
Investors shouldn’t be concerned about the retirements or the fact that Mulally hasn’t announced when he’ll leave, said James Schrager, a professor at the University of Chicago Graduate School of Business.
Mullally would risk being a lame duck if he announced a date. “He’s got to maintain very firm control of the business,” Schrager said.
He could stay for four or more years, as long as the company continues to perform well, he said. “I think that investors today understand that it’s about performance,” Schrager said.
Most analysts say Ford’s renaissance should continue despite the retirements of Booth and Kuzak. Mulally is still in charge and is following his “One Ford” plan that turned the company around.
“We don’t think that these changes in any way alter the financial or operational strategy that’s been in place,” said Bruce Clark, senior vice president of Moody’s Investors Service.
Under the “One Ford” plan, the automaker rolled out new products, matched production to demand, paid down debt and cut engineering and design costs.
Thursday’s news had little impact on Ford’s stock price, which closed down 1 percent at $12.69. The broader market rose just 0.5 percent.
But the strong corporate strategy might not be able to overcome all the executive changes.
Gerald Meyers, a University of Michigan business professor and former chairman and CEO of American Motors Corp., said it will be hard to replace Kuzak, the architect of Ford’s highly successful car and truck lineup.
Kuzak only recently changed Ford’s dysfunctional product development culture, and there’s a risk of it returning to old ways, Meyers said. He shifted Ford from being primarily a truck company to making fuel-efficient cars when gas prices were rising. He also saved the company billions by developing cars that are sold across the globe.
The key to Ford’s rebirth, Meyers said, is that the company has been able to fetch high prices for its smaller vehicles, making up for profits lost when truck and SUV sales fell. But Mulally may have to adjust if fuel prices stay relatively low or younger people stop buying expensive options that drive up small-car prices, Meyers said.
“That’s where the treachery is,” he said.
Meyers and others say the results at Ford have been dramatic since Bill Ford fired himself as CEO and hired Mulally in 2006, a year in which Ford lost a staggering $12.6 billion. Ford restructured, using a $23.5 billion loan from mortgaging its factories and other assets to close plants, shed brands and cut its global work force by more than a third.
Ford has now reported billions in profits for three straight years. It will resume paying a dividend next month for the first time since September 2006.
Still, Kuzak and Booth, leave some unfinished business.
Kuzak’s revamp of the flagging Lincoln luxury brand has just begun, and Booth is leaving before the ratings agencies return the company to investment-grade status. Ford was downgraded to junk status in 2005.
Booth led Ford Motor Co.’s financial operations through the banking crisis in 2008. As the company returned to profitability, he pushed to repay the money it borrowed to survive. At the end of last year, Ford had cut its debt to $13.1 billion.
Shanks, Booth’s replacement, began his career with Ford in 1977, serving in finance and strategy positions across the world.
Nair, who will replace Kuzak, joined Ford as an engineer in 1987 and has held leadership posts in the U.S., Europe, and Asia. He currently heads Ford’s global engineering operations.
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