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Friday
Dec092011

Ford’s Succession Race: Handicapping the Field

By Christopher A. Sawyer

Alan Mulally's (left) eventual departure leaves Bill Ford, Jr. with a major problem to solve.A recent article in the Wall Street Journal (subscription required) set off speculation about who will succeed Alan Mulally as Ford’s CEO. Though the former Boeing executive is now 66, few in the company are willing to see him depart. Despite the fact that many of the plans he championed were in process or on the table at the time of his arrival in September 2006, it took the soft-spoken but driven Mulally to cut through Ford’s legendary bureaucracy, create consensus, assemble a team to make it work, and never — ever — hide bad news or information from management. (Mulally has been called “intense” and is said to possess “a volcanic temper.”) Unlike most executives placed in this position, Mulally didn’t look outside of Ford for talent. He kept onboard many who, insiders and outsiders alike, believed would be the first to be asked to leave, cleared away the disarray, and made them work together as a team. And for anyone who has worked in, with or around Ford, it was the first time that this word didn’t include a capital “I”.

Then

Before Mulally’s arrival, Ford was on the precipice. The company seemed to be out of money and ideas, and executives carried more knives in their backs than are sold on late night television. Everyone wanted to be in charge, but no one wanted to take charge if it meant diminishing their role. And the person who should have been in charge, William Clay Ford, Jr., didn’t want the job.

Billy, as he is known, is just the latest Ford family member to run the company. But having your last name match the one on the building doesn’t mean you are the best candidate for the job. Seen as a stabilizing influence after the disastrous reign of Jac Nasser, Billy couldn’t fix what ailed Ford. Feeling that he didn’t have the skills necessary to pull it together and save the family business, he began to look outside of Ford’s executive ranks for answers.

Insiders say his interest in putting Ford under the control of Nissan-Renault CEO Carlos Ghosn was very real. Nissan was riding high at the time, and Ghosn had made a play in the press for GM to join his conglomerate. A favorite of the business and automotive press, Ghosn was a rock star who had turned a moribund ward of the state (Renault) and a dying also-ran (Nissan) into strong performers with a seemingly bright outlook. Further, he and Billy are both ardent environmentalists and believers that the automobile is a major factor in climate change (a.k.a. “global warming”). Placing Ford in the Nissan-Renault fold would, Ford, Jr. believed, put his company on a stronger footing, massively cut global vehicle duplication, and create an entity with unparalleled purchasing power.

The pairing never took place. More than one source suggests it is because the Bush administration refused to turn over such a large portion of U.S. manufacturing capacity to a foreign government (the French government owns 15% of Renault). These sources say the U.S. government provided Ford with a list of possible executives willing and able to take the top slot at Ford, and that Alan Mulally was among the top five. Mulally championed former Boeing CEO Phil Condit’s “Working Together” philosophy, but despite a long run of success, including as CEO of Boeing Commercial Airplanes, Mulally was twice passed over for the chairmanship of Boeing. Mulally’s career there was over. He could continue as BCA’s CEO, but advancement was not a possibility.

It is just as plausible that the Ford family refused to turn over effective control of “their” company to a foreign concern. (Reportedly, Dieter Zetsche also was approached by Billy.) Casting about for a replacement for Billy, the all-American, Kansas-raised Mulally fit the bill of the person who could lead Ford into the future. With his engineering background and experience working with Toyota on problem solving techniques used for the Boeing 777 project, Mulally would bring the discipline and knowledge necessary to unravel the mess. Whichever of these two scenarios is the case, the decision was quickly made to go with the boy from Boeing.

Now

The WSJ article says Ford’s transition program may include creation of a Chief Operating Officer position for Mulally’s successor. This would allow the next CEO to work alongside the current one and absorb as much of his leadership style and vision as possible, while allaying the fears of employees and investors. Turning the keys over to a new CEO, especially a Ford insider, could spook both, and set off a wave of recrimination in the automotive and financial press. This, in turn, would have repercussions for Ford’s vehicle sales and stock price.

Conducting a COO search also lets Ford spokespeople and executives plausibly deny that the company is engaged in a high-level search for a new CEO. And it sets in place an organization that allows the board to change direction should the COO choice prove not to be a proper fit. Mulally could then stay on as CEO while a new candidate was chosen.

Internal Candidates

A number of internal candidates have been floated, including Mark Fields, the 50- year-old executive vice president and president of The Americas; group vice president, Global Product Development Derrick Kuzak; Chief Financial Office Lewis Booth; group vice president Global Sales and Marketing Jim Farley; and group vice president and president Asia Pacific and Africa, Joe Hinrichs who also is chairman and CEO of Ford China.

Mark Fields has the lead for now, but will it hold?

Of these, Mark Fields is the front runner. He has operational experience, and has worked closely with Mulally. His time as president of The Americas has been fruitful, though it coincided with Mulally’s revamp of Ford’s global structure and the subsequent profitability it created. Though Fields told the Wall Street Journal that fears Ford would return to its old ways once Mulally was gone are unfounded, many within the company are uncertain that Fields — a convert to Mulally’s management style — has the backbone and depth to carry it forward. Traditionally, success has been the Ford Motor Company’s greatest adversary, causing management to become complacent while egos flourished. It will take a strong hand to keep this tendency in check, and Fields has not yet proven that he has the strength.

Is Derrick Kuzak too valuable in his present position?

As the head of Global Product Development Derrick Kuzak has overseen the creation of the vehicles that have brought Ford its recent success. Long a proponent of uniting Ford’s global products and processes, Kuzak is a soft-spoken (think Seinfeld’s “low talker”) engineer who understands that it takes more than value for the money to make a vehicle successful. However, Kuzak may be too important to Ford’s continued success in his present job, and has shown no signs of wanting to take over the reins once Mulally leaves.

Lewis Booth loves performance, but may be too old to succeed Mulally.

Lewis Booth, on the other hand, has done nothing to suggest he would not want the top job. Currently CFO, Booth has plenty of operational experience within Ford.  He was president of Asia Pacific and Africa Operations, president of Mazda where he oversaw implementation of the company’s Millennium Plan and the launch of the RX-8, chairman of Ford of Europe and Volvo, as well as head of Ford Export Operations and Global Growth Initiatives. Apparently Booth is a performance freak; he is also reputed not to lack for backbone. On the minus side, Booth is close to Mulally’s age, has more experience within the company than the man he would replace, and probably believes he has no need of Mulally’s mentoring.

Like Kuzak, Farley may be too valuable, plus his recent anti-GM outburst could hurt him.

Jim Farley came to Ford from Toyota where he was group vice president and general manager of Lexus. However, Farley is better known as the corporate manager during the launch of Toyota’s Scion brand. He oversaw product development, sales planning, customer services, logistics and distribution, and moved from there to vice president of Scion. His background is primarily sales and marketing, and Ford needs a strong and steady hand in this position in the coming years. Look for Farley to take on more responsibility in the coming years, but not to stray too far from this part of the business. Also, many in the company see him as a bit of a loose cannon, e.g., “Fuck GM

Youth may work against Hinrichs this time around.One major hurdle standing between Joe Hinrichs and the COO slot is his age. Only 44, Hinrichs began his career at Ford 11 years ago as manager of the Van Dyke Transmission Plant in Sterling Heights, Michigan. Within two years he was executive director of Ford’s Material Planning and Logistics organization before being named director of manufacturing, Vehicle Operations. Next he was named president and CEO of Ford Motor Company of Canada, Limited, and then moved on to become vice president North American Manufacturing. A number of similar assignments followed until Hinrichs was named group vice president and president, Asia Pacific and Africa and assumed the responsibilities as chairman and CEO of Ford China. These are impressive credentials, but given his strong manufacturing background and Ford’s current quality problems in China, Hinrichs is of more value to Ford in the world’s fastest growing auto market.

External Candidates

WSJ mentioned just two, each with experience at Ford: Phil Martens and John Krafcik. I have had the opportunity to interview both, and there could be no greater difference between two people if you tried.

Phil Martens' return might set off wave of departures from Ford.

Though Martens has an impressive resume, his reign would be the most disruptive to Ford. Many Ford engineers, current and past, have said that his ascension would be disastrous for the company and cause many people there during his previous stint to leave the company. Multiple sources recount his return from Mazda in 2002, and the effect it had on planning for the 2005 Mustang. Martens, these sources claim, was the reason the Mustang launched without an independent rear suspension. Add to this the in-fighting that many insiders claim effectively destroyed SVT, the myriad screen grabs of Prince Charming from Shrek II (this was Martens’ nickname inside Ford) found on cubicle walls during his tenure, and you have some of the reasons many within Ford would greet his return with fear.

My exposure to Martens took the form of an interview in his office while I was executive editor at Automotive Design & Production magazine. The editor-in-chief and I met Martens in his office, and I began the session with a question I often ask: “In five minutes or less, give me a synopsis of your career, pulling out the highest and lowest points.” It’s an easy way to get the subject focused on his contributions, as well as a barometer of how he views his successes and failures. (You can read the full text of the article here.) Fifty-five minutes later, Martens was done. This left little time to get to the meat of the proposed article, what Martens saw as future for Ford, the auto industry and himself. So angry I couldn’t see straight, I submitted the article in resume form, but cooler heads prevailed. The editor-in-chief agreed to write the main body of the article, leaving the company and product-specific items to me. It was a memorable interview, but for all of the wrong reasons. Currently, Martens is CEO of Novelis, Inc., an aluminum products company.

Currently, John Krafcik is the president and CEO of Hyundai Motor America and, to hear him tell it, he’s quite happy working for the South Korean automaker. He has a BS in Mechanical Engineering from Stanford University, earned a MS in Management from MIT’s Sloan School of Management, worked on the seminal auto industry book The Machine That Changed the World, began his auto industry career working at the GM/Toyota joint venture NUMMI plant, and spent 14 years at Ford where he was an up-and-coming product planner and executive. His path often crossed with that of Phil Martens who, some close to the situation say, had a hand in Krafcik’s departure for Hyundai in 2004 where he became vice president of Product Development and Strategic Planning.

Despite Krafcik's talent, as his predecessors discovered, being the center of attention isn't always a good thing.

One thing Krafcik learned before ascending to his current post as president and CEO, was not to use the word “I” when working at a Asian company. His predecessors, who used the noun liberally and did not meet their Asian masters’ strict sales and market share projections, often were summarily replaced. Thus, Krafcik’s move to the top slot came both quickly and as somewhat of a surprise to industry observers.

Banishing the ninth letter of the alphabet from his vocabulary, and helping to pull Hyundai toward the production of fuel-efficient and stylish vehicles, Krafcik and his management team have increased Hyundai’s U.S. market share by 50% since 2008. It should be noted that Krafcik isn’t the Second Coming when it comes to Hyundai’s resurgence. That’s because Finbarr O’Neill was in charge at Hyundai Motor America when it launched its 10 year/100,000 mile warranty program. O’Neill saw it as a way to use marketing and advertising to make up for the quality shortcomings of the actual cars, and as a portent of things to come when the cars improved. Meanwhile, Hyundai’s home office was in the midst of a major quality offensive, having learned its lesson regarding shoddy quality and its effect on customer loyalty. In short, these initiative didn’t start with Krafcik, but continued and were promoted under him.

Now no one remembers Hyundai’s dreadful early cars, its less-than-stellar recent offerings or its time as the top new car choice for used car buyers. They are more likely to think of the company’s stylish cars and trucks, those vehicles’ long list of standard equipment, and programs like Hyundai Assurance.

People who have worked for Krafcik, some of whom nevertheless followed him to Hyundai, say he has a substantial ego and often unnecessarily acerbic wit. However, they also are quick to point out his insistence on a Mulally-like sense of teamwork and discipline. And though he declined feelers to run GM post-bankruptcy stating the job was beyond his capabilities, Krafcik knows the pitfalls of the Ford system, and has a background similar to Mulally’s.

The biggest roadblock to him becoming Ford’s COO may be his family. Uprooting his son and daughter when they were eight and six, respectively, and asking his wife to leave her medical practice in Michigan was easier than it would be now. Also, according to more than one Hyundai-Kia insider, Krafcik has a burning desire to prove to the domestic automakers that he is smarter and more capable than they believed when they shunned him in 2004. Nevertheless, the opportunity to do to Ford what still needs to be done (which is a lot) while moving it forward in the industry and with consumers, may be too much for Krafcik to resist.

If, as many industry observers believe, Krafcik’s move to the front office was a ploy where failure would have given the South Koreans the ammunition they needed to put one of their own in charge, not only did their plan fail, it failed spectacularly. However, if this scenario is right, the Wall Street Journal’s article will have them questioning Krafcik’s loyalty and long-term devotion to Hyundai. If it is not, it may create doubts where none existed.

The bottom line is that Ford is looking for a future CEO to replace Alan Mulally, but couching it as a COO search. To not look for a replacement would be the height of irresponsibility. Of the candidates mentioned thus far, Mark Fields and John Krafcik are the leaders. However, as in all horse races, the betting isn’t settled until the horses cross the finish line.

Reader Comments (4)

Your analysis seems spot on. Fields and Krafchic make sense as the prime candidates For my money Krafchic has more substance but Fields has the insider advantage. If you listen closely you can hear employees at the Glass House shouting "Anyone but Martens!" at the top of their lungs.

December 12, 2011 | Unregistered CommenterNoah Brannigan

Noah:

Thanks for the comment. As for the "Anyone but Martens" shouting, you are spot-on. The rank-and-file engineers would bolt if they could should he be elevated. My only guess is that he is on the list because Bill Jr. reportedly liked him.

December 12, 2011 | Registered CommenterChris Sawyer

Although there is a change in Ford's ownership, the operation still continues. I just hope that the quality of their product will not change.

February 12, 2012 | Unregistered Commenterused cars

It will change, probably for the better. The problems with the MyFord/MyLincoln Touch systems was a wake-up call that showed chasing technology without proper quality protocols and ease-of-use planning is as bad, if not worse, than having leading edge technology. You can be pretty certain that won't happen again.

February 13, 2012 | Registered CommenterChris Sawyer

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