How Gephardt Brokered Ford Management Change

In mid-July, Boeing executive Alan Mulally received an unexpected phone call from someone who had recently become a trusted adviser: former House Democratic leader Dick Gephardt. The career pol asked the career Boeing man: would you be interested in running Ford Motor Co.? Mulally was shocked and more than slightly skeptical. He is, after all, no car guy. Mulally spent 37 years at Boeing, rising to the top of its commercial airline division. Besides, Bill Ford Jr., great-grandson of Henry, already held the CEO job at the automaker, which was still firmly controlled by its founding family. But Gephardt—who'd also recently become a confidant of Bill Ford—insisted. "This is not just about you or Ford, it's about the country" Gephardt told Mulally. "It won't hurt you to go talk to them."

So began a whirlwind courtship that culminated Sept. 5 with Mulally and Bill Ford walking onto a stage in Dearborn, Mich., to announce that the fly guy was to become Ford's new driver. That dramatic handover never would have happened if Gephardt hadn't played matchmaker, a role he described publicly for the first time in an interview with NEWSWEEK. It is the story of how a labor-friendly politician grew close enough to two of America's top manufacturing executives to convince them of just how much they needed each other. "Having worked so much with Alan, I felt confident he was the kind of person Ford needed," says Gephardt. "I described in detail to Bill Ford what Alan did at Boeing."

What Mulally did was pull Boeing out of a nosedive after the September 11 attacks decimated its airplane business. He streamlined operations—cutting 70,000 jobs—accelerated the time it took to develop new jets and engineered exciting, fuel-efficient new airliners like the crucially important 787 Dreamliner jumbo jet. The result: orders tripled last year at the unit Mulally runs.

To Bill Ford, overwhelmed by the task of turning around America's No. 2 automaker, this sounded like the blueprint for overhauling his company, which lost $1.4 billion in the first half of this year as rising gas prices drove sales of its SUVs and pickups into the ditch. Mulally moved directly to the top of the list of execs Ford thought could replace him as CEO. (Bill Ford remains the automaker's executive chairman). And Gephardt became the logical choice to make the first approach to Mulally.

Gephardt never would have become that go-between if he hadn't worked with both companies on thorny labor issues. Shortly after leaving Congress in January 2005 after 28 years representing Missouri, Gephardt helped a group of investors buying a Boeing plant in St. Louis work out a labor deal with the machinists' union at the factory. Impressed by Gephardt's mediating skills, Mulally hired him last year to consult on Boeing's difficult labor negotiations with the machinists. Eventually, the talks hit turbulence and the union struck Boeing for a month last summer. But Gephardt helped Mulally navigate that storm and got both sides to compromise. "When it comes to turning around a troubled manufacturing company, Alan has the capacity to understand the issues," says Gephardt. "He respects the view of workers and the situation they find themselves in. He wants them to feel they are part owners of the company."

Around that time, Gephardt was approached by an old Democratic ally: Bob Rubin, President Clinton's former Treasury secretary. At the time, Rubin was on Ford's board of directors and a key adviser to Bill Ford. "Ford has a lot of problems," Gephardt says Rubin told him. "They need to work on their relations with the United Auto Workers. You should think about helping them with that." (Rubin last month resigned from Ford's board, citing a potential conflict of interest because Goldman Sachs, the investment bank he chairs, is seeking business from the automaker as it sells off assets. Bill Ford, though, says he still seeks Rubin's counsel).

Then in the spring, Ford reached out to Gephardt to ask for his help in preparing for difficult contract negotiations coming up next year with the UAW. Just as Gephardt was getting to know Bill Ford, the 49-year-old scion was growing weary of working three jobs atop Ford—chairman, CEO and chief operating officer. By midsummer, Ford told his board of directors he wanted to find someone to take on two of his titles and that he would remain chairman. It was around that time that Gephardt went from advising on union issues to consulting on succession. And he had a unique view into the jobs of both Mulally and Ford. Says Gephardt: "Alan has done a lot of the same things that Ford needs to do."

Convinced that Mulally was his man, Ford asked board member John Thornton to seek Gephardt's help in sounding him out. Thornton, another former Goldman banker with Democratic ties, gave Gephardt the task in mid-July. The assignment wasn't easy. After receiving Gephardt's first phone call, Mulally said he needed a couple days to discuss it with his family. When he called Gephardt back, he was ready to move forward, but cautiously. At age 61, Mulally was riding high at Boeing. "He could have easily taken three or four years of victory laps," says Gephardt. "Not everybody would take this risk at this point in their career."

But Mulally had been passed over for CEO at Boeing, which went outside last year to hire 3M chief Jim McNerney. Though by all accounts Mulally got along well with his new Boeing boss, Ford's offer gave him a second chance at the corner office. On July 29, he met with Bill Ford at his Ann Arbor, Mich., home and the two got on well, enthusiastically exchanging ideas for fixing Ford. Still, he remained reluctant and by the end of August appeared ready to reject the job. "Toward the end, Alan was leaning toward not doing this," says Gephardt. "He's worked 37 years at Boeing, it's the only job he's ever had. He's been in the trenches with his people. And now he was about to pull himself out to go to a new company with a product he's never worked on. It's a big risk."

Ultimately, though, Gephardt's patriotic pitch about saving another important American institution resonated with Mulally. "This is a United States icon," Mulally said on stage beside Bill Ford at Ford's headquarters last Tuesday. "Some people think the United States can't compete in the design and production of sophisticated products. I personally think we can."

Gephardt learned of Mulally's decision the day before the announcement-on Labor Day. Mulally called himself to deliver the news. "This is a tough job and it might not be possible," says Gephardt. "But Alan gets it. He understands that you don't build cars without the people who build them." And some times, you don't fill a CEO job without a good match maker.