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Ford’s Mulally Builds Dreamliners That Take Off: David Pauly

Alan Mulally’s hall-of-fame performance as chief executive officer of Ford Motor Co. no doubt gets as much notice at Boeing Co.’s headquarters in Chicago as it does at Ford’s Dearborn, Michigan, home.

Ford hired Mulally in 2006, a year after he was passed over for the top job at Boeing. Instead, the aircraft and defense company hired James McNerney, then CEO at 3M Co.

Today, Mulally’s Ford is screeching ahead without resorting to government bailouts and bankruptcy proceedings as did rivals General Motors Co. and Chrylser Group LLC. Ford this week reported record third-quarter profit of $1.7 billion -- the old high was in 1997 -- and its share of the U.S. light vehicle market was 15.1 percent, up from 13 percent two years before.

Boeing meantime is best known for its inability to get its 787 Dreamliner off the ground. Boeing last year wrote off $3.5 billion in costs related to the 787 and to the also-late 747-8 jumbo jet. McNerney says the 787 will be delivered in the first quarter of 2011, almost three years past due.

Soon after taking charge at Ford, Mulally mortgaged the company to borrow $23 billion. That proved to be a stroke of luck when later, the credit markets seized up leaving GM and Chrysler desperate for cash and in need of handouts.

Hot Stuff

Under Mulally, 65, Ford earnings have been boosted by new models such as the Fiesta subcompact and the hybrid Fusion. The CEO has cut costs by jettisoning brands like Volvo and will stop making Mercury models at year-end.

Mulally has paid off $10.8 billion of Ford’s debt this year, including $3.6 billion to a union health-care trust due today. The company will still have an automotive debt of about $22.8 billion. This puts Ford at a disadvantage to GM and Chrysler, whose debts were pared by bankruptcies.

GM is now 61 percent owned by the U.S. government and Chrysler is controlled by Italian automaker Fiat SpA. Both plan selling shares to the public.

Ford has earned $6.4 billion so far this year, compared with a $2.7 billion profit for all of 2009. The company is still in the red for Mulally’s tenure, having lost $30.1 billion in the three years ended in 2008.

Boeing’s troubles are common among aircraft makers: New airplanes require years of development. The 787 has been an extreme example, however, perhaps because the plane is made with innovative plastic composites for greater fuel efficiency. The 747-8 is the company’s biggest jet yet.

In the Black

Even so, Boeing remains profitable. It earned $837 million, or $1.12 a share, in the third quarter and said profit for 2010 would be as much as $4 a share, more than double last year’s number.

McNerney, 61, had to sympathize with Mulally back in 2005. McNerney had headed General Electric Co.’s jet engine business but in 2001 lost out to Jeffrey Immelt in the race to succeed Jack Welch to run GE.

For all its delivery problems, Boeing is still a stronger company than Ford. Its bonds are rated investment grade; Ford’s are still junk. Boeing’s shares are up about 31 percent so far this year while Ford’s have gained about 41 percent.

Neither Mulally or McNerney has an easy road ahead. And no one knows whether Mulally would have done better than McNerney as Boeing CEO. But it’s great fun to speculate.

(David Pauly is a columnist for Bloomberg News. Opinions expressed are his.)

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