IMI Magazine

The outsiders

Auto experts raised a sceptical eyebrow when Alan Mulally was parachuted in from Boeing to head Ford. It broke all the rules, they said. Mulally was ‘an aircraft guy, not a car guy'. The auto industry is so complex, so specialised, they argued, that it can only be understood and run by insiders.

That was more than three years ago and, so far, the experts have been wrong. Only Ford has emerged with any credit from the chaos of 2008-09, shouldering its way through the market collapse and banking crisis with no need for Federal handouts.
Now Ford's sales are picking up, boosted by buyers who are happy to give the company credit for having remained independent, free of loans and guarantees from taxpayers. The Blue Oval also seems to be reaping efficiency benefits from closer co-ordination of its global assets. In the US, sales rose by more than 30% in the year to December, and shares have shown a ninefold increase since 1995.

'Left field' move
Meanwhile, attention has switched to a similar ‘left field' move, with 67-year-old Texan Edward E. Whitacre Jr (pictured) recruited by the Barak Obama administration to put General Motors back on course. Whitacre told reporters on his nomination as GM chairman: "I don't know anything about cars." Obama's press secretary explained: "What was required was somebody with savvy; big-business experience that could take a company, change its management culture and make some of those tough decisions to put it on the path towards viability."

Whitacre spent 43 years at telecoms company AT&T, a once-great institution that he was credited with reviving. After GM's release from bankruptcy, he lost little time in showing his steel as chairman, summarily ‘retiring' company veteran Fritz Henderson from his role of CEO after less than nine months in the job. It was probably Henderson's misfortune to have been the right-hand man of the previous chief executive, Rick Wagoner, and therefore part of the ‘old guard'.

Whitacre is now looking for a replacement. Will that person also come from outside the auto sector? Or is the search just window dressing, with ‘Big Ed' destined to become CEO as well as chairman?

Whatever the outcome, there must be those who have slogged their way up the management ladder and looking to exploit any weakness in their new boss. For precedents, they can point to Arno Bohn, recruited from computer company Nixdorf to run Porsche. He ran it all right - straight into the ground. Porsche then turned to a little-known company insider to take his place, a fellow named Wendelin Wiedeking.

Then there was Robert Louis ‘Bob' Nardelli, who capped a turbulent career at General Electric and Home Depot with a stint as chairman and CEO of Chrysler. Nardelli's portfolio of business school tricks had no impact on the problems being experienced by Chrysler, which slid into bankruptcy two years later.

While it's still early days for Whitacre at the GM helm, it's useful to look at Mulally's credentials for running Ford.

On the ball
First, it helps to be smart. Mulally has bachelor's and master's degrees in aeronautical and astronautical engineering, which even at the University of Kansas are not given away in breakfast-food boxes. Anyone who can manage the creation of a jetliner like Boeing's 777 has a lot on the ball. "I know what intensity means," said Mulally of this experience. "You cannot afford to let a day slide by." And he expects the same of his people.

As well as intelligence, it's essential for the outsider to have a grasp of manufacturing processes. This was stressed to me by Wendelin Wiedeking, who transformed a company on the brink of collapse to the world's most profitable car producer in percentage terms. "I don't stay on the level of the acrylic paint," he told me. "I get right down into the oil pan. It's important to understand the processes in your company, to know a car as more than a balance sheet and a marketing strategy."

Process knowledge is a key strength of Mulally, through his sourcing of the many components needed to build airliners. Ford's suppliers credit Mulally with transforming their relationship with the Blue Oval, a relationship that the former Boeing man found in tatters when he arrived.

Further, a CEO has to demand action, not lip service. At Ford, said a participant in Mulally's weekly Thursday-morning meeting, "the expectation, outside the meeting, is that you will work on corrective measures to get back on plan". Those measures are expected to show an impact next week, not next year.

Finally, Mulally encourages openness.
A car company is so complex that it's a cinch to sweep problems under the rug where senior management can't see them. Mulally has transformed the formerly political Ford culture to encourage his people to feel free to report problem areas without fear of reprisals.

Whether Whitacre will instil similar dynamism at GM remains to be seen. But a comment from a former colleague sounds encouraging: "He won't sit still. He doesn't like long meetings. He'll be fresh air." MIM

Leif disposal

You will search long and hard to find other car chiefs who have not spent most of their careers in the industry. Carlos Ghosn was a relative latecomer, joining Renault in 1996, but before that he was with Michelin.

Leif Johansson spent over a decade with Electrolux before taking over as head of Volvo, where one of his first moves was the disposal of the company's car business to Ford. The Blue Oval recruited ‘outsider' Fredrick Arp from rubber and plastics group Trelleborg to run their new addition, but Arp quit after only three years. The current boss of Volvo Cars, London-born Stephen Odell, has a more familiar CV, beginning his career as a Ford graduate trainee.

Ford's Alan Mulally may like to reflect on the fate of Christian Streiff. He, too, was involved with aviation, as head of Airbus, before joining Peugeot Citroen. But two days after Rick Wagoner was ousted as GM chief, Streiff was shown the exit door after his failure to stem the French group's losses. However, PSA is again relying on someone from outside the industry to take over the helm - Philippe Varin, formerly boss of steel group Corus.

Arguably, the outsider who has made the biggest impact on the auto scene is Sergio Marchionne. A former tax specialist, he headed a series of companies, ranging from pharmaceuticals to equipment testing, before taking over as CEO of Fiat. It's taken less than six years for Marchionne to transform the group into a credible carmaking power, with its purchase of Chrysler and joint ventures with India's Tata Motors and China's Chery Motors.

KARL LUDVIGSEN