Mulally jumps to Ford; 2 Boeing veterans step up

Alan Mulally came in to lead Boeing Commercial Airplanes out of a production meltdown in September 1998, when mismanagement had shut down assembly lines in Renton and Everett for a month and the company lost money for the first time in 50 years.

After years of ever-darkening times — with more than 50,000 people laid off locally and the industry staggered by the Sept. 11, 2001, attacks with Boeing airplanes — he exits to become head of Ford Motor Co. with Boeing's commercial airplane unit once more on top of the aviation world.

His division made a profit throughout those torturous years, even as production was halved. The man who ruthlessly and successfully engineered the turnaround could have cruised to retirement in a few years, satisfied with achievements. He could have waited until the next-generation jet 787 flies next year.

Instead, he's going to try re-engineering a flagging car business.

He introduced the Toyota production system as the model for Boeing. Now he'll try revamping Ford.

Many thought Mulally's turnaround feat, along with the success of the current 787 program and his decades of loyal service, would have earned him the chief-executive spot at Boeing. But after Harry Stonecipher departed last year, the top post went instead to 3M Chief Executive James McNerney.

On a conference call Tuesday, McNerney said Ford had approached Mulally about a month ago and that he had had several conversations with him attempting to persuade Mulally to stay.

Alan R. Mulally


New title: President and CEO, Ford Motor Co.

Old title: President and CEO, Boeing Commercial Airplanes

Age: 61

Family: Wife, Jane "Nicki" Connell, and five children

Boeing career: Joined Boeing in 1969; worked on the 727, 737, 747, 757 and 767 airplanes; vice president of engineering, and vice president and general manager of the 777 program; senior vice president of Airplane Development, 1994; president of Information, Space & Defense Systems and senior vice president of Boeing, 1997.

Education: Bachelor's and master's degrees in aeronautical and astronautical engineering from the University of Kansas; master's degree in management from the Massachusetts Institute of Technology as a 1982 Alfred P. Sloan fellow.

"But it was very clear to me that there's an itch he had to scratch — the opportunity to run a big company," McNerney said.

Mulally made a final decision to leave Boeing on Friday, McNerney said.

"He wanted to lead a Fortune 100 company for a long time, and here's his chance," said Sam Maxwell, senior vice president of investments in Seattle for RBC Dain Rauscher. "He's a great leader, but it's going to be a challenge for him, because the car business is having a pretty tough time right now."

That is why Bill Ford — stepping aside as CEO of the company his great-grandfather founded but remaining its executive chairman — said he wanted Mulally.

At a news conference Tuesday in Dearborn, Mich., Ford said he pursued Mulally doggedly.

"One of the primary drivers of this decision was that the rest of the management team needed somebody who had been through this, had been through the wars, had battle scars and came through victorious, and that is Alan," Ford said.

Ford shareholders liked the news, which was announced after the close of regular trading. After climbing 12 cents during the regular sessions, shares shot up 41 cents to $8.80 in after-hours trading.

Mulally's legacy locally is many-sided. Even the launch of a new airplane, the successful 787, was achieved only after threatening to locate production outside Washington state.

At that time, Mulally was frank in his opinion of the state's competitiveness.

"We suck," he famously said in 2003. The words stung enough to prompt local politicians to come up with $3.2 billion in business tax breaks and training funds, an incentive package that kept 787 assembly in Washington.

"He has always played very straight and made it clear to the community and elected officials that they should not rely on tradition or loyalty to preserve the region's position in Boeing's calculations," local historian Walt Crowley said.

Former Gov. Gary Locke, who picked Mulally to co-chair his Washington Competitiveness Council, said he developed a strong personal relationship with the Boeing executive in the drive to keep the 787 here.

"He was so key to improving the entire business climate in Washington," Locke said. "He was willing to point out both the strengths and the weaknesses of the business climate, and he encouraged policymakers to continue putting emphasis on those strengths.

"He's got that great positive, can-do attitude that Ford Motor Company can use. He's certainly going to be missed in our state."

But Mulally had his detractors.

Industry analyst Scott Hamilton, on his Leeham.net Web site Tuesday, said that fixing the late-1990s production messes as Mulally's "crowning achievement." But, he wrote, "Mulally was never well-regarded as a salesman for his airplanes."

He recalled that Steve Udvar-Hazy, chairman of International Lease Finance Corp., Boeing's biggest customer, once complained publicly that in 18 months Mulally hadn't traveled to ILFC headquarters in Los Angeles to make sales calls on him, "in stark contrast to John Leahy, the super-salesman of Airbus, who made frequent trips to L.A." from France.

"Others in the industry also echoed Hazy's complaint, and insider scuttlebutt, whether true or not, was that this was one reason Mulally was passed over to succeed Stonecipher," Hamilton wrote.

Mark Blondin, president of Local 751 of the International Association of Machinists, blamed Mulally for offshoring and outsourcing work, decimating his membership ranks.

"Keeping that work in-house could have mitigated the damage of 9/11," said Blondin. He was also bitter that Mulally chose not to meet with him since a one-month strike last fall. "They just can't get over it," he said.

Perhaps because he was an engineer himself, Mulally managed to maintain better relations with Boeing's engineers union at a time of severe cutbacks.

Charles Bofferding, executive director of the white-collar union, the Society of Professional Engineering Employees in Aerospace (SPEEA), said Mulally "appreciated the technical community."

He doesn't even hold the massive layoffs against Mulally.

"Could the company have survived if all those people had still been employed? There certainly was an industry downturn not unique to the Boeing company. And there are financial realities," Bofferding said. "He certainly believed that one of the keys to survival is laying off people when you must. At that time, he felt he had to and so he did."

Henry Harteveldt, a travel-industry analyst for Cambridge, Mass.-based Forrester Research, said one of Mulally's primary contributions to Boeing was straightening out the production-room floor after he became president of the commercial airplanes unit in 1998.

The assembly lines had ground to a halt when needed parts didn't arrive on schedule. Mulally cut Boeing's number of suppliers in half and gradually introduced rolling assembly lines "almost like the auto industry, where every piece is ready as the plane comes down a rolling track," Harteveldt said.

In his 37 years at Boeing, Mulally's greatest legacy will be the fuel-efficient 787, Harteveldt predicted.

Mulally's contributions were particularly impressive considering the circumstances he faced, said Richard Aboulafia, an analyst with Teal Group.

"I think history is going to be very good to him," he said. "He managed to launch a potentially world-beating product in the middle of a revenue downturn while the company was trying to cut back on all expenses."

Mulally sold the concept of recruiting as many partners as possible to share the work of building the 787.

"In outsourcing work, he removed risk from the company's books and helped make it a no-brainer," Aboulafia said.

Compared to his predecessor, Ron Woodard — who was ousted for the production snarls in 1997-98 — Mulally was a data-driven engineering wonk, said Adam Pilarski, an analyst with Avitas.

Mulally's executives were required to present the state of their operations to him in a conference room near his office every Thursday morning.

"Woodard was a gut type of guy," he said. "Mulally was a 'show me the numbers' guy."

Aaron Gellman, professor of management and strategy at Northwestern University, has known Mulally for about 20 years and has consulted for his commercial airplanes division.

The 61-year-old Kansas native is "a strategic thinker," said Gellman. "But he also knows a hell of a lot about a hell of a lot."

Mulally said at the Dearborn news conference that he drives a Lexus but "can't wait to own a Ford car."

"I can't wait to be a car guy," he said.