Alan Mulally: The Outsider at Ford

The changes at Ford initiated by CEO Mulally, a former aerospace guy, have meant the difference between death for the automaker and merely being sick

By David Kiley

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Almost 30 months after Alan R. Mulally left Boeing (BA) to become chief executive of Ford Motor (F), it's still easy to peg him as an industry outsider. Talking to Wall Street analysts in November, Mulally described the debut of the tiny, fuel-sipping Ford Ka at the "Paris Air Show" when he meant the "Paris Motor Show." Earlier this year, Mulally showed how he'd tried to stop appending an airplane doodle to his signature, but struggled to ink a car instead. "Rats. I still haven't got the car down," he said, in the "aw shucks" Kansas delivery that has become as familiar in Detroit as his off-the-rack blazers and shirts.

Outsider CEOs have a decidedly varied track record. Some bring in their own people and impose a jarring management philosophy on a corporate culture, as Robert Nardelli did at Home Depot with such mixed results that the board pushed him out. Some are unsuited to running an unfamiliar business. Former S.C. Johnson CEO William Perez's 13-month stint at Nike (NKE) comes to mind. Others tread more softly and succeed, like Eric Schmidt, the former Novell (NOVL) guy who runs Google (GOOG). Mulally arguably falls into the latter category. Since arriving he has left most of the team he inherited in place and quieted talk that an aerospace guy couldn't run an automaker.

Of course, Ford remains a very sick company. It lost $14.8 billion in 2008, the most in its 105-year history, and burned through $21.2 billion, or 61%, of its cash hoard. Tanking car sales have made scrap metal of Mulally's 2006 vow to make money this year, and he acknowledges that the best he can hope for is to break even in 2011.

But the man who chose Mulally, Chairman William Clay Ford Jr., says his CEO's progress in shaking up a calcified culture has thus far kept Ford independent and away from the U.S. Treasury's loan window. Under Mulally, decision-making is more transparent, once-fractious divisions are working together, and cars of better quality are moving faster from design studio to showroom. John Casesa, whose Casesa Shapiro consulting firm advises the industry, is impressed, too. "The speed with which Mulally has transformed Ford into a more nimble and healthy operation has been one of the more impressive jobs I've seen," he says. "It probably would have been game over for Ford already but for the changes he has brought."

That Mulally, 63, is the only Big Three CEO who hasn't begged Washington for money is evidence that Ford is better positioned than General Motors (GM) and Chrysler to survive and even prosper. So is the fact that Consumer Reports this month recommended 70% of Ford's vehicles, vs. 19% of GM's and none of Chrysler's. The danger is that forces beyond Mulally's control will wash away the progress he has made so far. Mulally, whose optimism can verge on corny, won't countenance negativity. "It's the toughest environment I've ever seen," he says. "But we will make it through if we stick to the plan."

A HISTORY OF "ORGAN REJECTION"

When Mulally was tapped as Ford CEO in the spring of 2006, reaction inside the company ranged from suspicion to outrage. What did an airplane guy know about the car business? "There were lots of raised eyebrows," recalls Bill Ford. The management team was particularly rattled, especially those who were hoping to fill the job themselves. One by one they stopped by Ford's office to ask him what the heck he was doing. Ford told them the company needed fresh perspective.

No one understood the travails of running the automaker better than Henry Ford's great-grandson.