The CEO, who was rumoured to be in the running to become Microsoft's next leader, told The Associated Press Tuesday that he won't leave the Dearborn, Mich., automaker before the end of 2014.
"I would like to end the Microsoft speculation because I have no other plans to do anything other than serve Ford," Mulally said in an interview.
When asked if this should end investor concern about his departure, Mulally said, "You don't have to worry about me leaving." Mulally wouldn't say if he had talked to Microsoft about becoming CEO. But he said the speculation was a distraction for Ford.
Mulally is credited with returning Ford Motor Co. to profitability and changing the company's culture, putting an end to widespread executive infighting. Mulally said he will stick with the plan to stay at Ford through at least the end of 2014. When Ford announced that plan in November 2012, it also promoted Mark Fields to chief operating officer, making him the likely successor to Mulally.
Over the last few months, there have been numerous reports that Mulally was on the short list of candidates to replace Microsoft Corp. CEO Steve Ballmer. Microsoft announced in August that Ballmer plans to step down as CEO.
Daniel Ives, an analyst at FBR Capital Markets, said in an email that Mulally's decision was a negative for Microsoft because he was the front-runner for the CEO job. But Microsoft wouldn't say Tuesday if Mulally's announcement came as a surprise.
"Out of respect for the process and the potential candidates, we don't comment on individual names," a Microsoft spokesman told the AP.
Ford shares rose 21 cents to $15.59 in after-hours trading. Microsoft shares fell 47 cents to $36.94.
Mulally's withdrawal from Microsoft's CEO derby further shrinks the pool of company outsiders who have been touted as Ballmer's potential successor.
Steve Mollenkopf, the chief operating officer of smartphone chip maker Qualcomm Inc., was identified as a top candidate in a Bloomberg News report last month. But Qualcomm quickly squelched the speculation by announcing plans to promote Mollenkopf to CEO in March.
With Mulally out of the running, some of Ballmer's top lieutenants might have a better chance of replacing their boss. The list of internal candidates includes Satya Nadella, who oversees the Microsoft's lucrative business of selling computer servers and online services to other companies and government agencies, and Tony Bates, who joined Microsoft in 2011 when the company paid $8.5 billion for video calling service Skype.
Microsoft's pending acquisition of Nokia's smartphone business also has spurred talk that Nokia CEO Stephen Elop will replace Ballmer. Elop left Microsoft in 2010 to join Nokia, a mobile phone pioneer that continued to lose market share to Apple Inc.'s iPhone and Android devices under Elop's leadership.
Mulally, 68, was trained as an aeronautical engineer. He spent 36 years at Boeing Co. — and was president of the company's commercial airplane division — before Ford Chairman Bill Ford lured him to the struggling automaker in 2006. He overcame skepticism about being an outsider in the insular ranks of Detroit car guys by quickly pinpointing the reasons why Ford was losing billions each year. Just months into his tenure, he mortgaged all of Ford's assets — including its Blue Oval logo — for a $23.5 billion loan to fund a massive restructuring. It was a prescient move that helped Ford avoid the fate of General Motors and Chrysler, which both filed for bankruptcy protection in 2009.
During his tenure, Ford has earned $32.9 billion in pretax profit and its shares have more than doubled. The company expects to earn $8.5 billion before taxes in 2013. But it spooked some investors last month when it said pretax profits would be slightly lower in 2014 as it launches 23 vehicles worldwide.
Mulally said Tuesday that the 2014 results will be "absolutely consistent with us investing even more in the enterprise for long-term profitable growth."
Erik Gordon, a business and law professor at the University of Michigan, said decision to stay ensures an orderly transition to a new CEO.
"It's important for a company as complex as Ford to do that," he said.
Mulally said he has allowed Fields to take over leadership of Ford's now-famous Thursday management meetings — he's even moved over one chair. But he still shares day-to-day leadership with Fields, concentrating more on long-term strategic issues such as meeting government fuel economy standards, connectivity of cars and trucks and rebuilding the company's Lincoln luxury brand.
"I've been really focused on the growth around the world," Mulally said, pointing out expansion in China, the Middle East and Africa.
His influence is everywhere at Ford. Many workers carry the wallet-sized "One Ford" cards he had printed, spelling out his expectation that employees work together to accelerate new vehicle development and profits.
Mulally has been richly rewarded for his efforts, with total compensation of more than $174.45 million in his seven years at Ford. His pay has been a sore point for some workers, and UAW President Bob King once called it "outrageous." But Mulally has defended his compensation, saying that it's entirely tied to the success of the company.
AP Technology Writer Michael Liedtke in San Francisco contributed to this story.