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Originally published Monday, October 7, 2013 at 9:32 AM

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Ford board seen discussing CEO plans as Microsoft searches

Ford directors gathering this week in Dearborn, Mich., are likely to discuss future plans by Chief Executive Officer Alan Mulally, who is being considered for the top job at Microsoft, according to a person familiar with the board’s thinking.

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SOUTHFIELD, Mich. — Ford directors gathering this week in Dearborn, Mich.,are likely to discuss future plans by Chief Executive Officer Alan Mulally, who is being considered for the top job at Microsoft, according to a person familiar with the board’s thinking.

The matter will probably be covered informally over dinner Oct. 9 or before presentations begin on Oct. 10, said the person, who asked not to be identified because board gatherings are private.

Executive Chairman Bill Ford, Mulally and Chief Operating Officer Mark Fields — the heir apparent to the top Ford job — all have reiterated Ford’s plan for no change through 2014 at the top of the second-largest U.S. automaker. Getting clear direction from the CEO will be crucial to the board’s efforts to pull off a smooth switch to a post-Mulally era, whenever he leaves. Ford’s history of transitions is bumpy.

“This is not something that can be just left hanging,” said Maryann Keller, an auto-industry consultant who has served as director on six boards. “If there’s going to be a new leader for Ford, then that new leader has to be appointed and named quickly.”

Microsoft CEO Steve Ballmer announced in August that he was retiring within a year. Directors, led by Chairman Bill Gates, have discussed as CEO candidates Mulally, 68, former Nokia CEO Stephen Elop, Microsoft business development and evangelism chief Tony Bates, and former Microsoft No. 3 executive Paul Maritz, according to people with knowledge of the matter.

The search process is still in the early stages and the board isn’t close to making a decision, said the people, who asked not to be identified because the process is confidential.

“Nothing has changed from what we announced in November,” Jay Cooney, a Ford spokesman, said by telephone. “Alan is focused on continuing to execute the One Ford plan, and we don’t engage in speculation or publicly discuss board matters.”

For Ford, “it’s a highly distractive element that enters into the conversations that go on,” said Jon Luther, chairman of Roark Capital’s Arby’s Restaurant Group, who has managed CEO transitions both as a director and as a former CEO of Dunkin’ Donuts. “You have a very high-level, public board that has to address these issues, because so many constituents of the Ford business are affected by it.”

The stakes are high for Dearborn-based Ford, which has had just 10 leaders in its 110-year history, and some of the transitions resulted in tumult.

Founder Henry Ford overstayed through poor health and mounting losses in the 1940s. His oldest grandson, Henry Ford II, in the 1970s feuded with and pushed out Lee Iacocca, who became an icon at Chrysler.

Alex Trotman in the 1990s avoided preparing multiple successors. His heir, Jacques Nasser, attempted to remake Ford into a consumer-products company and failed, with his tenure ending after crises with sport-utility vehicle rollovers caused by Firestone tires.

This time will be different, Bill Ford, 56, said last week in an interview with Bloomberg Television. He called his company’s top management team the best in his 34-year career.

“Whoever the next CEO is, it will be seamless,” Bill Ford said. “They’ve loved working in this style with this vision since 2006,” when Mulally arrived from Boeing. “There is no appetite within the management team for deviating.”

The Ford board has sought to groom internal talent since Bill Ford went outside the company to recruit Mulally away from Boeing following a 37-year career at the aircraft manufacturer. Bill Ford yielded the CEO post he had held since replacing Nasser in late 2001.

“This is a board that has been dealing with succession issues for some years,” said Keller. “They know who the heirs-apparent are. They put in place a process a year ago that was meant to create a logical and orderly transition for Mulally’s replacement.”

Late last year, Ford elevated Fields to chief operating officer, positioning him as the top candidate to succeed Mulally. Fields, 52, told reporters last month that Ford’s business-plan review meetings, conducted every Thursday and initiated by Mulally, have been “core to changing the culture at Ford.”

It was during one of the earliest of these meetings in 2006 that Fields, the head of Ford’s Americas operations, strayed from the company’s internal track record of hiding problems. In sharing that a balky tailgate was interrupting production of the Edge utility vehicle, he won Mulally’s early praise.

Mulally and other executives within Ford have shared this anecdote countless times as a watershed moment that marked a turning point in Ford’s culture. The company culture is bound to evolve with a new leader at the helm, Keller said.

“You always think how much of this is one person and one personality, who is somewhat unique in his ability to get people to cooperate to each other, and do you get back to the old fist-fighting days?” she said. “One hopes that Ford doesn’t go back to the food-fights of the late-90s and early-2000s, when it ran more like Congress than a functioning business.”

Mulally was present for last week’s business-plan review meeting, Joe Hinrichs, Ford’s president of the Americas, told Bloomberg Television today in an interview.

“The business is going on as usual,” he said. Asked whether Microsoft was discussed, Hinrichs said “nothing came up” and added that Mulally is “dedicated to Ford.”

Publicity around the process has been unfortunate for Microsoft and for Mulally, whose recruitment by Ford in 2006 had been entirely private until it was announced, said Richard McCallister, a managing director for Boyden Global Executive Search in Chicago.

“This is a little bit unfair to Alan because it’s not often discussed in such a public manner,” said McCallister, who has served on the boards of three public companies. “He’s going to be put on the spot with Microsoft and he’s going through a lot right now for no good reason.”

Mulally’s relentlessly upbeat approach and his success at instilling a culture of executive collaboration at Ford may be attractive to Microsoft, which has seen potential internal successors leave.

“Every corporation in the world should want Alan,” Bill Ford said in the Bloomberg Television interview.

While Mulally lacks experience in the computer industry, he has pushed Ford to expand its use of fuel-saving technology, including hybrids and electric cars, as well as infotainment that runs on a Microsoft operating system. The automaker last month bought a software startup called Livio to help it devise systems that better link car passengers’ mobile phones to their vehicles.

Mulally has delivered multiple keynote speeches at the annual Consumer Electronics Show in Las Vegas. In September, when Mulally reiterated the plan to continue as Ford CEO through 2014, he was in Berlin at the IFA technology show.

“Anywhere he wants to be in charge in the CEO job, he will make the company perform better,” said Aaron Gellman, a professor of management and strategy at Northwestern University’s Kellogg School of Management.

Ford doesn’t have a contract with Mulally. When the company announced in November its plan for Mulally to stay through 2014, the CEO said his contract was “a very firm handshake with the chairman.”

“He’s here as long as he and I would like it to happen,” Bill Ford said last week.

Mulally made almost $21 million in 2012, according to data compiled by Bloomberg.

Whether Mulally leaves Ford before or after the end of 2014, it’s unlikely he would just retire, said Gellman, who has known Mulally for decades. He said he was unaware of his friend’s plans.

“It would be hard to keep him on the bench for very long,” Gellman said by telephone.

Admiration of Mulally extends beyond his friends. His efforts to bridge divides within the company and the $23.4 billion that Ford borrowed within his first few months on the job helped Ford avoid bankruptcy in 2009, when General Motors and Chrysler Group’s predecessors took U.S. bailouts.

Ford earned $35.2 billion from 2009 through 2012 after losing $30.1 billion in the previous three years.

“There’s a love fest that’s gone on around this company for many years now, and deservedly,” Keller said. “They brought in a guy who actually healed the company, managed to quell some of the fighting factions and actually got everybody on the same page. He was able to pull off something that others couldn’t.”

For the next transition to be smooth, Ford’s executive chairman will have to manage the process, said Luther, the Arby’s chairman who is also a director at Chili’s restaurant owner Brinker International and amusement-park operator Six Flags Entertainment.

“Bill Ford has got to step up and take control of the communications,” Luther said. “He and Mulally have to agree on what kind of communications. They have to make a call here at some point.”

Information from Bloomberg reporters Matthew Miller and Alyssa Zahler in New York and Dina Bass in Seattle is included in this report.

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