If Microsoft Takes Mulally, Where Does That Leave Ford?

Ford (NYSE:F) maintains that CEO “Alan [Mulally] is focused on continuing to execute the One Ford plan,” company spokesman Jay Cooney told Bloomberg on Monday. “Nothing has changed from what we announced in November.”

Ford does not have a contract with Mulally; last November, when it was announced that the CEO planned to stay on through 2014, he said his contract was “a very firm handshake with the chairman.” As Ford Chairman Bill Ford specified last week in an interview with Bloomberg Television, Mulally will stay at Ford “as long as he and I would like it to happen.”

Through sources familiar with the matter, AllThingsD learned at the end of September that Microsoft is considering Mulally as the successor to the company’s current CEO, Steve Ballmer, when he retires sometime before August of next year.

Microsoft’s (NASDAQ:MSFT) reported interest has made the end date for the Mulally’s tenure at Ford of particular importance, so much so that it will be a topic of discussion when the company’s board of directors gathers this week in Dearborn, Michigan, a person familiar with the board’s plans told Bloomberg. The question of Mulally’s departure will be covered informally over dinner on Wednesday or before presentations begin Thursday, according to the news outlet.

Many experts in the automobile industry have focused on what Mulally’s expertise will mean for Microsoft. “Does the CEO have to actually know what the business does?” former Chrysler CEO Robert Nardelli was asked on Bloomberg Television’s Surveillance.

In response, Nardelli noted that Mulally’s “outside perspective” will be an advantage. “What we do as CEOs, about 70 percent of what we know is pretty portable, they are fundamentals of running a corporation,” he explained to Bloomberg Television, adding that Ford’s CEO is “an excellent candidate for the opportunity.” Of course, he will not “write code,” Nardelli said, which is not a problem.

He then comparing Microsoft’s current situation — being behind the technical curve — to the problems Chrysler faced during his tenure at the company. Noting that he had no previous experience in the automotive industry, Nardelli said he told his critics at the time that “car guys got you into this” position in the first place. According to him, what Mulally will bring to Microsoft is strategic vision, clear and crisp communication, and vigilance on the company’s day-to-day and week-to-week performance.

It is true that Mulally lacks experience in the computer industry, but he did push Ford to innovate — and that is what Microsoft needs. Under his leadership, the car company began to expand its use of fuel-saving technology, including hybrids and electric cars.

Even more importantly, Mulally implemented a culture of executive collaboration at the automaker, a talent that likely appeals to Microsoft, which has lost several potential internal successors. His One Ford strategy, which is echoed by Ballmer’s “One Microsoft” platform, was aimed at putting the company and its leadership on the same page regarding the company’s performance goals.

While Mulally’s presence may help Microsoft, his departure could shake up Ford. “This is not something that can be just left hanging,” Maryann Keller, an auto industry consultant who has served as director on six corporate boards, told Bloomberg. “If there’s going to be a new leader for Ford, then that new leader has to be appointed and named quickly.”

Jon Luther, chairman of Roark Capital’s Arby’s Restaurant Group, took the concern a step further. For Ford, “it’s a highly distractive element that enters into the conversations that go on,” he said to the publication. “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.”

Ford shareholders know how tumultuous previous transitions in leadership have been. In the company’s 110-year history, it has only been led by 10 different individuals, but many of the transitions have coincided with difficult times in the automaker’s history: Henry Ford stayed on through the 1940s despite his poor health, and losses mounted; Henry Ford II feuded with Lee Iacocca, who later went to Chrysler; and Jacques Nasser’s attempt to remake Ford into a consumer-products company in the 1990s failed miserably.

Bill Ford told Bloomberg Television last week that this transition will be different. “Whoever the next CEO is, it will be seamless,” he said. And according to Keller, “this is a board that has been dealing with succession issues for some years,” and “they know who the heirs-apparent are.” Ford’s board “put in place a process a year ago that was meant to create a logical and orderly transition for Mulally’s replacement,” she said in her interview with Bloomberg.

Still, Keller noted that the company culture will evolve under new leadership. “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.”

Microsoft’s CEO search process is still in the early stages, Bloomberg’s sources added. Nokia (NYSE:NOK) CEO Stephen Elop is still a top candidate. Microsoft’s acquisition of the Finnish company’s cellphone business locked Ballmer’s successor into manufacturing devices, which is likely why many industry experts are favoring the former company executive and current Nokia CEO as the next Microsoft chief executive.

Elop chose to form a partnership with Microsoft, which was looking for an ally for its new smartphone software. Nokia picked Microsoft’s Windows Phone mobile operating software over Google’s (NASDAQ:GOOG) Android, a deal that made both companies deeply dependent on each other for their mobile future.

Follow Meghan on Twitter @MFoley_WSCS

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