US Outlook: It’s a hard act to follow but Ford’s ‘chosen one’ inherits a job where dressing-room dissent has been vanquished
Friday 25 April 2014
Don’t mention the names Ferguson or Moyes to Mark Fields, the chosen one who is set to succeed Ford Motor Company’s chief executive, Alan Mulally.
How do you follow one of the biggest turnaround acts in American corporate history? Mr Mulally was named recently by Fortune magazine as the world’s third-greatest leader, behind Pope Francis and the German Chancellor, Angela Merkel.
To be fair, Mr Fields has a better chance at Ford than David Moyes ever did at Old Trafford succeeding Sir Alex Ferguson as manager of Manchester United football club. That’s because Mr Fields, 58, is an insider at Ford of a quarter of a century’s standing and he has been groomed for the chief executive’s role over several years. He knows the Ford business inside out – for good and for bad. He has already run big chunks of the car giant. Still, though, his task is daunting.
Mr Mulally is a towering figure on the American corporate scene. He was brought in from Boeing in late 2006 when Ford was heading fast towards its darkest hour, trying to avoid the bankruptcy that befell its competitors General Motors and Chrysler. Barely through the door, Mr Mulally quickly agreed to mortgage some of Ford’s most important assets and signed off on a $23.5bn (£14bn) loan with the company’s banks just before the financial world started to collapse – a loan that meant Ford did not have to ask the taxpayer to bail it out.
He slashed his workforce almost in half, and then dismantled and sold off much of Ford’s so-called “premier automotive group”, which included Jaguar, Volvo, Land Rover and Aston Martin. The company was now able to focus on its own branded cars.
These are the quick, ruthless, decisive and smart decisions that investors expect from a chief executive. Many, however, believe that Mr Mulally’s biggest achievement at Ford was to change its very culture.
He tore down the competing silos within the company, laid siege to the internal fiefdoms that fought against each other and introduced – and enforced – the New Age-sounding mantra of “One Ford”. This was more than a slogan; it became the belief system that turned the company around.
The results over most of Mr Mulally’s tenure have been astounding. After losing about $30bn between 2006 and 2008, Ford earned roughly $42bn over the next five years. Its share price, which fell as low as $1.43 in 2008, traded this week at around $16.
Even in its figures issued last night - which showed quarterly profits falling due to the tough US market - he was able to talk of it being a “solid quarter” ahead of “the most aggressive product launch schedule in its history”. The company is launching a record 23 new vehicles globally in 2014. Overall revenue for the first quarter rose slightly to $35.9bn, and it sold 1.6m vehicles - a rise of 6%.
What next for Mr Mulally? It is highly unlikely that, as a youthful 68, he will click his heels three times and return to his native Kansas. He was a contender for the chief executive’s job at Microsoft, apparently to the chagrin of the Ford board members. He will be in big demand. There is speculation that he could end up in a senior role at Google, elsewhere in Silicon Valley, or in an even bigger job in corporate America.
For his part, Mr Fields will have to make sure that the reforms of his predecessor stay in place and that Ford does not return to its old ways of division and backbiting. He does not hide from problems. When Mr Mulally instituted weekly meetings at Ford, he was one of the few senior managers brave enough to raise his hand when he had problems to address. For Mr Mulally, it marked him out from the rest.
Mr Fields will have to address problems with some of Ford’s in-car electronics and see through Mr Mulally’s bold move to make the new version of the F-150 pickup truck, the bestselling light vehicle in America, mostly from aluminium.
For the Ford family, a smooth transition is paramount. The company’s executive chairman, Bill Ford, great-grandson of the founder, Henry Ford, said last week: “One of the things that Alan and I have talked about, really since he hired in, is how important it is for a great CEO to also have a great transition.
He continued: “A lot of great CEOs leave and then there’s chaos behind them … and Alan and I have talked about that – the importance of the final act of a great CEO is having a great transition.”
Those words are ringing true right now at Old Trafford.
Hubris and nemesis for the emperors of Silicon Valley
Wall Street’s most reckless bankers were rightly vilified for their greed, delusion and downright hubris following the financial crisis in 2008. Now it is the turn of Silicon Valley’s leading figures to have their morals and business practices exposed with the disinfectant of daylight. It is not a pretty sight.
There are at least two serious areas of concern with some of them. The first is their alleged collusion to stop their employees moving to rival companies for better money and opportunities. The second is their poor corporate governance, which shows a smug disregard for shareholders and makes some of them look like Roman emperors.
Consider first the size of the egos that it takes to make sure the chosen ones themselves are free to move around the boardrooms of technology’s top companies and make countless millions of dollars – while at the same time allegedly preventing talented employees from exercising their basic human right to jump ship.
The reported $324m payment by Apple, Google, Intel and Adobe Systems to settle a lawsuit that alleged they conspired not to poach staff from each other, and to suppress pay levels for thousands of tech workers, should cause deep concern in a country that claims to be a meritocracy where the talented and the hardworking can achieve anything. In Silicon Valley, apparently, only the chosen ones and the chieftains are truly free.
Then consider the dual classes of shares at some of Silicon Valley’s most storied companies – ones that give founders much greater voting rights than other shareholders. The company founders claim that these voting rights help to thwart the opportunistic and short-term demands of activist shareholders. There may be some truth in that, but these dual share classes also entrench further the positions of the Valley’s already haughty elite.
This club likes to take its companies “public” by selling some shares to get the public’s money – but then it likes, in effect, to keep the companies privately run. And regulators let them get away with it. Silicon Valley enjoys playing by its own set of rules. It might just be a matter of time, however, before public shareholders revolt against the overlords.
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