Hot seat has scorched many top Ford execs
Mark Fields is the latest Ford Motor Co. chief executive ousted from a company where big decisions still are very much influenced by its founding family.
Henry Ford II didn’t like Lee Iacocca, and said so publicly. Don Petersen ran afoul of Hank the Deuce and tried to sideline the next generation of the family. Jac Nasser angered dealers and employees, important constituencies to the family. And Fields, named to the top job less than three years ago, was judged to be the wrong guy at the wrong time, despite presiding over two years of record profits.
“We had a board meeting (last) Friday, and following that, Mark and I got together and we decided that it was the right time for him to resign,” Executive Chairman Bill Ford Jr. said when Fields’ departure — and the appointment of Jim Hackett as president and CEO — was announced May 22. “So really only at that point did we activate (Hackett) as the new CEO.”
The automaker is in a hurry. Amid plateauing vehicle sales and lagging quality, Ford is trying to cement its place in a rapidly changing industry with newcomers Tesla Inc., Waymo, Apple Inc. and others from Silicon Valley.
Hackett, a management veteran with a reputation for teamwork and attention-grabbing moves in his time as head of Steelcase Inc., follows Fields as a “change agent” who Bill Ford Jr. hopes will dismantle the management hierarchy and better deliver the message that the automaker is a future-looking company.
“With Mark, it was kind of a retrenchment to some of that Ford history,” said David Cole, chairman emeritus at the Center for Automotive Research. “That, plus the decline in the value, put a lot of pressure on all the shareholders, which included the Ford family… I think they perceived Mark Fields as business as usual. And that turned out to be the kiss of death.
“That would have scared the liver out of anybody.”
Ford CEOs have always had tough jobs for a multitude of reasons. Few could have filled Alan Mulally’s shoes, according to Cole.
“One of the toughest jobs in the world is to replace somebody who was viewed as an icon,” Cole said. “That was a horrifying job that Mark had.”
History of clashes
Since Henry Ford II fired automotive legend Lee Iacocca in 1978, Ford CEOs and presidents have stayed with the company for an average of four years — not including Bill Ford Jr.’s tenure in the 2000s. Fields was fired two years and 11 months after his appointment to succeed Mulally, whose tenure ran for nearly eight years.
The family with its name on the cars of the 114-year-old automaker remains a guiding and stabilizing force within the company. Bill Ford Jr. and his cousin Edsel Ford II sit on the 16-member board. As chairman since 1999, Bill Ford Jr. is the voice of the Ford family.
Record profits and sales under Fields were marred by an unclear vision for the future. His retirement came as the board grew less confident in Fields and more involved in pushing for a clear path forward for the company.
A board vote ousted Fields, not a shareholder vote. In recent months, Ford’s outside directors began to delve more deeply into Fields’ strategy for the future and grew increasingly troubled with the company’s direction and Fields’ ability to lead it, according to a source familiar with the situation.
The Ford family’s 70.9 million shares make up less than 2 percent of the company shares, yet the stake gives the family 40 percent of the voting power within the company, according to a February regulatory filing with the U.S. Securities and Exchange Commission. Under a structure established when the automaker went public in 1956, a single Class B share is equivalent to 16 common shares, and can be owned only by family members.
The weighted shares have been challenged by recurring proposals at annual meetings, but those challenges have been routinely voted down. Dissident shareholders like John Chevedden have called the super-votes unfair because they give the Ford family so much control.
“The super-voting shares effectively give them veto power over any decisions,” said Bryce Hoffman, author of “American Icon: Alan Mulally and the Fight to Save Ford Motor Company” and a former Detroit News auto writer. “But the company still has to satisfy the public markets. Nobody can force the family to do something they don’t want to do. That doesn’t make it immune to the market.”
Ford CEOs have historically clashed with the family even during periods of growth. But that doesn’t appear to be the case with the dismissal of Fields, as pressure came from outside directors.
Iacocca, whose eight-year run as Ford’s president began in 1970, infamously butted heads with then-Chairman and CEO Henry Ford II. Even bringing the wildly popular Ford Mustang to the market in 1964 and running the Blue Oval during Detroit’s Golden Age didn’t keep Iacocca in good standing with Hank the Deuce.
“It’s personal, and I can’t tell you any more. It’s just one of those things,” the grandson of the company’s founder told Iacocca when firing him, according to “Iacocca: An Autobiography.” When Iacocca pressed, Hank the Deuce replied: “Well, sometimes you just don’t like somebody.”
Phil Caldwell, a loyal lieutenant of Hank the Deuce, took over the presidency from Iacocca. In 1981, he became the first company CEO whose last name was not Ford. In the four years before his retirement, Caldwell led the company through some of its most difficult years, including competition from Japanese carmakers.
Bill Ford Jr. and his cousin Edsel Ford II worked their ways into the company’s highest ranks in the late ’80s and early ’90s. Donald Petersen, Ford’s CEO from 1985-89, was known to quote Edsel Ford in saying there were no crown princes at the Blue Oval.
“I’m not a caretaker for anybody,” Petersen told Fortune magazine in 1989. “I admire the fact that (Edsel and Bill) are trying very hard to go as far as they can. But being a Ford does not give them a leg up. The principle we must operate on is that selection to top management is based solely on merit.”
Amid disagreements with the board and the Ford family, Petersen was forced out.
Then as now, the company’s leadership cannot be separated from the family. Bill Ford Jr. told The New York Times in 1993, “When people joined this company, they knew we held this unique position. So if it makes other people uncomfortable, I guess I’m sorry. But it’s a fact of life they’re going to have to live with.”
Harold “Red” Poling, who followed Petersen as CEO from 1990 to 1992, appeared to have few disputes with the family and retired from the company at age 68. But when Bill Ford Jr. became chairman in 1998 — a position that was held by then-CEO and President Alex Trotman — Trotman spat, “So now you have your monarchy back, Prince William,” Fortune reported in 2000.
The family oversight has often proved beneficial, according to Hoffman. He said they were instrumental in pushing out CEO Jac Nasser in 2001 after less than two years on the job amid conflicts with dealers and employees – and the Firestone rollover crisis. That crisis linked faulty tires used on the Ford Explorer and other vehicles to 200 deaths and 800 injuries, leading to a recall and replacement of 20 million tires.
Bill Ford Jr. replaced Nasser as CEO, the first Ford family member in more than two decades to run the company. He recruited Alan Mulally from Boeing Co. in 2006 to lead a sweeping industrial restructuring as the automaker slipped into crisis and then the Great Recession, which pushed two Detroit rivals into bankruptcy.
Mulally was credited with changing the culture at Ford by fostering teamwork under his “One Ford” mantra. During his tenure, Mulally cut six of Ford’s eight brands and mortgaged the company’s assets — including the Blue Ovals on the sides of World Headquarters — to carry it through the Great Recession. Mulally was well-regarded within the company.
In 2014, Mulally left the company on his own terms. And with board approval, he backed Fields to succeed him.
Feeling the pressure
Shares fell 40 percent under Fields, vehicle quality slipped and strategic decisions were delayed or slow to come to market. The company was void of short-term achievements despite long-term aspirations, analysts say, and Fields engaged in rhetorical battles with President Donald Trump. This pressured the board and frustrated shareholders, despite record sales and profits.
Fields’ pay packages, determined solely by a compensation committee of outside directors, signaled more dissatisfaction with his leadership. Last year, Ford’s top five executives missed out on hundreds of thousands in bonus pay because the company failed to meet quality standards.
While Fields still made a $2.7 million incentive bonus for meeting company goals last year, he missed out on additional bonuses as CEO that were awarded to other executives to “recognize and reward exceptional performance.” During his time as CEO he was never awarded one of those incremental bonuses, according to Ford proxy statements.
“We’re as frustrated as you are by the stock price,” Bill Ford Jr. said during the company’s annual shareholders meeting May 11. “Most of (the Ford family’s) net worth is tied up in the company, and stock price matters a lot to us.”
Cole said the lagging stock price amplified other troubling factors under Fields.
“They want (their shares) to be profitable,” he said. “Unless the world thinks Ford is a good investment, it’s not good for the family. In (Fields’) case, both the family and the external shareholders (were asking) what’s wrong with this picture.”
The re-emerging “Old Ford” culture of hierarchy – and a lack of clarity about where the company was going – caused concern in the company, according to comments Bill Ford Jr. made after Fields’ departure. The board feared the company would fail to compete in an industry headed toward automation and areas like ride-sharing.
“There was a lot of talk from Mark and not a lot of action,” said Hoffman. He said Fields failed to follow “this amazing management system” Mulally left, which is part of the reason he didn’t last.
Bill Ford Jr. said as much in an interview with The Detroit News last week: “I didn’t feel the ‘Old Ford’ so much as I felt the stress. When Alan was here, he engendered such a sense of can-do and optimism. And maybe we lost a little of that.”
The key for Hackett will be delivering quick results, according to Hoffman and Cole.
“Hackett got on the radar screen (and) obviously, Bill was very enamored with his performance,” said Cole, adding that the 62-year-old CEO will have to implement a culture of change in a short amount of time. The company, he said, “can’t go back.”