Bill Ford Jr. has a lot to be happy about these days. Iconic Ford Motor (NYSE:
F ), founded by the current Ford chairmans great-grandfather Henry, has driven
back from the economic precipice with new products, a laser-focused business
plan and a strengthening balance sheet that let Ford reinstate a dividend after
a five-year lapse. Even the Ford family's Detroit Lions which hasn't had a
winning season in the National Football League since Ford bought Land Rover from
BMW could make the playoffs after a 12-year drought. Chairman Ford can thank
Ford President and CEO Alan Mulally for just about all that, except the Lions'
resurgence. And as rumors that Ford was seeking Mulallys successor rocketed
through the sector at Internet speed last week, investors understandably
wondered whether Ford's good times could keep rolling without Mulally at the
wheel. Mulally unquestionably has delivered a slew of improvements. When he
walked through the door in September 2006, Mulally realized at once that many of
Ford's models were off target and its plethora of brands including Mercury,
Land Rover, Jaguar and Aston Martin were distracting at best. Fixing challenges
that deep would take patience and extraordinary will. It would also take time a
commodity Mulally knew he didnt have in abundance. Recognizing that the economy
was heading into a storm, Mulally incurred nearly universal wrath for putting
all of Fords assets in hock to build up a $23.6 billion "rainy day" fund.
But when the Great Recession hit with a fury, Ford was ready and didn't have
to hit the federal government for bailout money like archrivals General Motors
(NYSE: GM ) and Chrysler. In just five years, the 37-year Boeing (NYSE: BA )
veteran and former president and CEO of the aircraft manufacturer's commercial
airplanes unit, has taken a sluggish, unwieldy carmaker that lost $12.7 billion
in 2006 and has turned it into a leaner, meaner competitor that earned $6.6
billion last year. In the first nine months of 2011, Ford has matched its income
for the full fiscal 2010. It also has a new four-year deal with the United Auto
Workers union that raises costs by only 1%. That's not a bad second act for
the aerospace engineer who took the revolutionary Boeing 777 program from rough
sketch to reality. It was no simple task. The secret to Mulally's success:
focus. Not just the car of that name although the 2012 Focus Electric had star
power when Mulally drove the prototype around the David Letterman set back in
August. Mulally's focus on Ford has been key to the automaker's turnaround.
In a speech earlier this year at the Stanford School of Business, Mulally
illustrated why Job One was reestablishing the Ford brand. He discovered the
root of Ford's problems on his first day working at Dearborn, Mich.,
headquarters. "I drive in, and there is not one Ford vehicle in the garage,"
he told the audience. There are all these Aston Martins and Jaguars. I remember
thinking to myself, 'I wonder what all the people in this building are working
on. I dont think its Ford'. And Ford was 85% of the business. That's when
Mulally determined to shift gears. He sold off Jaguar, Aston Martin and Land
Rover and folded the Mercury brand, getting the company's focus back on Ford.
Indeed, the automaker's revival is closely tied to Mulally's "One Ford"
focus a cultural and strategic shift executed under the theme: "One Team. One
Plan. One Goal." "One Ford" is the rallying cry for the company's
development of a global car platform that would streamline the manufacturing and
launch of new models in different markets by using common design elements and
parts. The first fruit of the automaker's so-called C-segment common platform
is the 2012 Ford Focus. That's not to say Ford is flying high with no fear. It
still must find ways to boost global sales particularly in Asia, where its
market share reportedly is less than 2%. And the recent reversals of fortune at
Toyota (NYSE: TM ) and Honda (NYSE: HMC ) wont last forever. While Ford has made
great strides in beefing up its balance sheet, it still has a way to go before
its corporate debt reclaims investment-grade status. And it just might be time
to pull the plug on Lincoln, the laggard luxury brand. Another challenge:
Winning over investors who have remained cool, pushing the stock some 36% lower
so far this year. Its now trading at around $10.75, up somewhat from the early
October low of $9.37. Despite media speculation over his possible exit, the
66-year-old Mulally is going as strong as ever and has no apparent reason to
leave Ford anytime soon. But good companies make solid succession plans to
ensure smooth leadership changes. Companies whose market value is closely tied
to a leader can take a hit if they don't have a solid plan in place. Recall
investors initial dismay when Steve Jobs announced he was stepping down as Apple
s (NASDAQ: AAPL) CEO earlier this year. So it's likely that Ford will appoint
a chief operating officer in the near future whom Mulally can mentor for a
couple of years. Once Fords credit rating returns to investment grade which
could happen by next year Mulally likely will announce his planned retirement
date shortly thereafter, says Automotive News . Who might be in line to succeed
Mulally when he eventually steps down? Here are the three hot prospects: Mark
Fields . Now president of Ford's Americas division, Fields is the odds-on
favorite. He's been Mulally's right-hand man in the turnaround and is a true
believer that Ford is on the right road. It doesn't hurt that he has a close
relationship with Bill Ford. Joe Hinrichs. Promoting Hinrichs to head Ford's
Asia/Pacific and Africa operations in 2009 and giving him the coveted title of
chairman and CEO of Ford Motor China suggests Chairman Ford is hedging his
bets. If Hinrichs can dazzle in the world's largest auto market, he might be
able to steal some of Fields's thunder. John Krafcik. The outsider on the
short list, former Ford exec Krafcik is the CEO of Hyundai Motor America , who
has boosted the South Korean company's competitive position and reputation.
Krafcik is the ultimate "car guy": When he was a Ford engineer in the 1990s,
he once street-raced Bob Lutz (who'd later become vice-chairman at GM) down an
expressway in a Taurus. Lessons learned. He's innovative, passionate and he
hates to be passed. In the meatime, Mulally is firmly in Fords drivers seat with
eyes focused sharply on the rough road still ahead. As of this writing, Susan J.
Aluise did not hold a position in any of the stocks named here.
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