Since arriving at Ford (F +0.00%) in 2006, CEO Alan Mulally has done a tremendous job of revitalizing the storied American automaker. Under his steady leadership, Ford has been completely transformed -- realizing its promise as a steadily profitable, blue-chip maker of high quality cars and trucks.
Shareholders who bought Ford during its darkest days have been generously rewarded by the efforts of Mulally and his team. The stock is up more than 400% from its 2009 lows, and it's even paying a dividend. And Ford has done a great job of pushing into new markets and capturing market share while rivals like General Motors (GM 0.96%) have struggled.
But there's one big shadow hanging over this story, one that may have contributed to the stock's roughly 10% decline over the last year: What happens when Mulally retires?
A question that has weighed on Ford's stock
Mulally has said over and over that he has no immediate plans to retire, and he's active and in apparent good health. But he's 67, and many analysts believe he will retire at the end of 2013. But the uncertainty surrounding his succession has concerned many investors.
In fact, one big-name analyst, Morgan Stanley's Adam Jonas, told Bloomberg this week that he thinks the uncertainty has been weighing on Ford's stock price. Ford stock is trading well below its historical price-to-earnings ratio, despite a string of solid profits driven by strong results in North America, Ford's most critical market.
Those concerns may be spurring action at Ford's highest levels. Bloomberg's Keith Naughton reported on Thursday that Ford's board has begun discussing a formal succession plan for Mulally. The first step, according to Naughton's report, will be the promotion of Ford's North and South America chief, Mark Fields, to the position of chief operating officer -- a step intended to make clear that Fields will eventually be Mulally's successor.
Wow. For investors who've bought into -- and who bought stock because of -- Mulally's vision, the idea of his departure is sobering to contemplate. What will that mean for Ford's future?
A capable successor for a well-regarded CEO
I spoke to Mulally not long ago, and one of the things he emphasized in that conversation was the steadiness and cohesion of his entire senior management team. Much of the group has been in place for several years now, and Ford's current direction under the vaunted "One Ford" plan is one that they conceived and managed -- as a group.
Mark Fields is a key member of that group. Fields, who joined Ford in 1989, has long been seen as a rising star, having run Japanese automaker Mazda (then controlled by Ford) and Ford's European division before taking on his current role in 2005. Once known as a brash infighter, Fields has softened his approach in recent years, taking cues from Mulally's inclusive, consensus-building example.
In fact, all signs are that Fields has bought fully into Mulally's approach and the One Ford plan, which bodes well for Ford's continuing success under his leadership. Even better from shareholders' perspective, he's said to hate complacency. I expect he'll continue Mulally's efforts to push Ford's business forward, toward better products, bigger margins, and an expanded presence in key markets.
The upshot: In all likelihood, a steady course for Ford
Here's the takeaway for investors: It appears that Ford's board is getting serious about implementing a visible succession plan for its rock-star CEO. It also appears that the likely candidate to succeed Mulally is a well-qualified, respected executive who is likely to continue and build on the course set by Mulally since 2006.
Long story even shorter: If Fields is the guy, and it's starting to look like he is, that's good news for Ford investors -- and it should be good news for the stock once it becomes official. Stay tuned.
