Out of the frying pan … once a rising star at GM, Mark Hogan bolted to vie for a CEO's job at a smaller company

Chief Executive, The, May, 2005 by Dale Buss

On the first Monday in April, Mark Hogan's beloved Fighting Illini finished second in the national men's college-basketball tournament after spending nearly the entire season as America's No. 1-ranked team. The same thing may have happened to Hogan that day because two executives, Don Walker and Siegfried Wolf, moved in over Hogan to become co-CEOs of Canadian auto supplier Magna International, where Hogan is president.

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As the aspiring successor to Magna's founder and chairman Frank Stronach, does this mean that the former top General Motors executive and loyal University of Illinois alum is lagging in the succession race? It could be that Stronach, 72, is just putting more brainpower at the top, leaving several strong personalities to duke it out for the CEO chair. In a management culture as quirky and freewheeling as that of Magna, the fact that Hogan, who's turning 54, isn't one of the two new co-CEOs could soon make clear that the GM executive made a mistake in leaving. (Walker is six years younger than he is.) Or, Hogan could still maneuver his way through the new alignment toward ascension.

Regardless of how it plays out, Hogan's is a cautionary tale of how rising stars at major companies leap into tricky territory when they go for the CEO's job at a smaller company. "What it means for sure is that he's still got a chance to become chief executive officer of Magna," says a CEO in the supplier community who is close to Hogan. "But he didn't have a chance to become CEO of General Motors."

Hogan shook up GM with his decision to leave last fall for two reasons: Stronach, who was serving as interim CEO, offered him an opportunity to become global auto guru and president; and it had become clear that Hogan likely wasn't going to ascend to CEO of GM, where Rick Wagoner, 52, his former Harvard Business School classmate is embroiled in bringing the company back from the brink (see News Analysis, page 43). "Magna is in a strong and unique position for these times," Hogan now says. "If I was going to leave for anywhere, it was going to be here."

Throughout his 31-year career at GM, Chicago native Hogan has taken assignments that marked him as an executive headed for the top. He was the first of GM's general managers of New United Motor Manufacturing Inc., the company's joint-venture assembly plant in California, where he became a ready student of the vaunted Toyota production system and its chief missionary throughout GM. Then, Hogan spent six years helping overhaul GM's Brazilian operations. He became president of GM's new e-commerce unit in the late 1990s and then restructured himself out of that job after the Internet bubble burst.

As a GM "high-potential," Hogan also did stints in the treasurer's office in New York City, in public relations and even with GM's locomotive-building operation.

For the last few years, as group vice president of advanced vehicle development, Hogan flew under the wing of Bob Lutz, the GM vice chairman who had taken over the company's debilitated product-development apparatus.

In jumping to Magna, it's possible that Hogan only leapt from the frying pan into the fire. Magna is one of a handful of the largest Tier One automotive suppliers that are bearing the brunt of cost pressures from GM and Ford, which have both been slashing production schedules. Analysts recently trimmed profit expectations for Magna for this year and next year, simply because of the company's vast exposure--90 percent of its North America business--to contracts with the traditional Big Three. "The challenges that Magna faces are those that the industry faces: relentless price-cutting pressures from the OEMs and therefore the challenge to keep costs under control and maintain margins," says Kenton Freitag, director of corporate credit rating for Standard & Poor's in Toronto.

The difference, to Hogan's benefit, is that Magna faces those pressures with a better arsenal of inherent attributes than perhaps any of the other largest North American suppliers, including ArvinMeritor, Johnson Controls and Lear. Magna is debt-free in large part because Stronach determined to go that route after the company nearly went bankrupt in the 1980s.

The company also has higher margins than those competitors, analysts say, largely because of a decentralized management culture in which many executives and managers own equity and where everyone including production workers enjoy Magna's distribution of up to 10 percent of profits. The philosophy that Stronach calls "Fair Enterprise" also has helped Magna resist organization of its employees by the United Auto Workers. "The drive for excellence at the operational level is tangible at Magna," Hogan says. "Everyone knows that the results at their plant will end up in their pockets." The drawback is that "we leave some things on the table when it comes to economies of scale, affecting our competitiveness in purchasing and logistics. But we're willing to do that."

Among the large supplier "integrators," Magna arguably is the most advanced in providing auto manufacturers with subassembly of modules, such as the complete interiors that a Magna unit puts together for the several Cadillac models built by GM at its new Lansing, Mich., plant.