Mulally jumps to Ford; leaves with company flying high

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.

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

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 precisely why Bill Ford, who is stepping aside as CEO of the company his great-grandfather founded but will remain 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 here 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, in 2003, 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 a $3.2 billion 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 did not convince everyone, especially among the ranks of Boeing machinists who were decimated under his leadership.

Mark Blondin, president of local 751 of the International Association of Machinists, blamed Mulally for offshoring and outsourcing work.

"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."

"Alan was very popular with the engineering community," he said. "He'd come to our council meetings ... at least once a year."

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.

Mulally cut Boeing's number of suppliers in half and instituted 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, he predicted.

Mulally's contributions were particularly impressive considering the circumstances he faced.

"I think history is going to be very good to him," said Richard Aboulafia, an analyst with Teal Group. "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. He described Mulally as "tireless and charismatic and yet keeping close to his engineering roots."

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 "balanced market-share concerns and profit concerns and did as much as anybody for any legacy industrial corporation," said Aboulafia. "A lot of these objectives in theory could be migrated over to Ford."

"He has taken the helm back from Airbus," Harteveldt said. "If Mr. Mulally can do for Ford what he did for Boeing, hopefully we'll see some really cool-designed cars coming out of the Ford plant."

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.