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How Alan Mulally set Ford on a stronger course

By Neal E. Boudette

Alan Mulally arrived at Ford Motor Co. in 2006 with no experience in the auto industry. After eight years at the helm, the 68 year old Kansan is preparing to retire with a reputation as one of the best chief executives the industry has seen in a generation.

Ford is making more money than ever in its history–$42 billion in the past five years. Its market value is more than $63 billion, an increase of $48 billion since he arrived. The company’s cars and trucks sell well around the world and Mr. Mulally’s management style is widely studied and copied.

It wasn’t immediately clear where Mr. Mulally might land next, but recently he has been looking West–away from gears and metal and toward the technology industry.

He was a candidate to become the next CEO of Microsoft Corp., people familiar with the matter said.

And as long ago as late 2012, he told an acquaintance that Microsoft and Google Inc. were the only companies he would be interested in leading after eventually retiring from Ford, a person familiar with the matter said.

Mr. Mulally will likely retire before the end of the year and be replaced by Chief Operating Officer Mark Fields, said another person familiar with the matter.

Ford declined to comment. Asked over the weekend, during a trip to Beijing, about succession planning, Mr. Mulally said the company hadn’t set a date.

When he arrived at Ford after 37 years at Boeing Co., Mr. Mulally broke down regional rivalries that had divided the company for decades, quietly demanding and rewarding accountability from his lieutenants. Most famously, he pulled Ford back from the brink of collapse in 2008 and steered the company clear of the government-funded bankruptcy restructurings that were needed to turn around crosstown rivals General Motors Co. and Chrysler Group LLC, now part of Fiat Chrysler Automobiles NV.

“The American auto industry should pass the hat and build a statue to Alan,” said Michael J. Jackson, chief executive of AutoNation Inc., a large dealership chain that operates 40 Ford franchises.

Few would have expected that result. Although he had run Boeing’s aircraft division, Mr. Mulally had failed to impress the company’s board enough to give him the CEO job in 2005, when directors instead went with an outsider, Jim McNerney.

A year later, Ford CEO William C. Ford Jr., a great-grandson of Henry Ford, concluded it would be best if his company, too, handed the reins to an outsider.

The auto maker was losing billions of dollars at the time and burning through cash. It was burdened by huge costs, a bloated bureaucracy and a collection of poorly performing brands, such as Jaguar, Mercury and Land Rover.

The company’s regional arms were so out of sync that Ford made one Focus compact car in Europe, while the North American unit made its own small car with the same name out of a different set of parts.

During Mr. Mulally’s first month on the job, Ford dramatically mortgaged most of its assets, including its blue oval logo, to borrow $23.5 billion. That cash helped keep the company afloat during the financial crisis.

Mr. Mulally also changed the way Ford’s management team operated. He instituted a weekly meeting where each manager presenting a report on his areas, coded in green, yellow or red, to show whether business was on target.

After a few months, Mark Fields–now Mr. Mulally’s designated successor–confessed that a vehicle program for a new sport-utility vehicle was “red.” Mr. Mulally clapped in response, setting an atmosphere where Ford executives felt encouraged to air bad news, rather than let problems fester.

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