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.

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.

Even more important, Magna clearly is nonpareil among suppliers in complete assembly of niche vehicles at its state-of-the-art plant in Gratz, Austria. The Saab 9-3 convertible, Jeep Grand Cherokee and BMWX3 are among the seven different models, from four separate manufacturers, that Magna assembles.

Because of such connections with automakers, Magna lays claim to being the industry's only "Tier 0.5" supplier. "Magna is extremely well-positioned for the next decade," says Steve Girsky, a veteran auto-industry analyst for Morgan Stanley. "They've got a big backlog of business, a lot of technology and balance-sheet strength unmatched in the industry."

What Magna hasn't had, that Hogan was expected to bring, are two major advantages: the ability to present a single face to OEMs that don't like to deal separately with Magna's various operating units, and vast experience with Asian manufacturers at a time when every major automotive supplier across the globe must figure out how to succeed in those markets.

Until very recently, it was largely unthinkable that Hogan ever would call anywhere but GM home. Colleagues and friends alike know him for his loyalty. He's a devout Catholic who considers a monsignor from Champaign-Urbana, Ill., one of his most important mentors. The University of Illinois has benefited greatly from his success. He was the senior manager of the football team and now underwrites a full scholarship for a student athlete there. Hogan still flies to Champaign-Urbana several times a semester to teach a business class and then back to his home near Detroit, where he lives with his wife and three children.

In some ways, Hogan was a poster boy for GM careerism. GM paid for his education at Illinois and for his MBA at Harvard Business School. Yet, even as he cut an upward swath through one of the most bureaucratic and tradition-bound behemoths in the corporate world, Hogan became known as a change agent. "He's really a General Electric-type of guy who did well at GM: He relentlessly pursued betterment and change, change, change," says Larry Doyle, president and CEO of Utilimaster, a Wakarusa, Ind.-based supplier of truck bodies. "He was kind of a maverick there, a change agent, a very unique character within that enormous, dinosauric bureaucracy."

Hogan also is associated with the long, long hours he puts in. "I've never seen anybody work harder," says Rob Fairchild, COO of J.F. Hubert Enterprises in Troy, Mich., which supplies parts. "You don't meet with him unless you've got a specific piece of business to discuss."

Asia is Hogan's biggest immediate challenge. If anything, the importance of Asian markets is growing, not only as a source of demand for autos but also, even more immediately, as a base for low-cost suppliers. The freshest reminder of that came from GM's Wagoner, who announced in April that the company would be much more aggressive about pricing from its suppliers.

Magna has relatively little presence in Asia despite the fact that many OEMs and other Tier Ones have been mining the region for suppliers for many years. The trick for Hogan will be to convert his global experience into sourcing relationships in Asia that lend themselves to the kind of tight integration that Magna enjoys with OEMs in Europe and North America. "You have to find those parts that nest well," Hogan says. "If you don't, you can find advantages in sourcing but lose them in logistics."

Just as important to Stronach is that Hogan is able to package the advantages of Magna as a whole. Largely as a way to incentivize ambitious executives, several years ago Stronach began fracturing Magna into highly autonomous operating units whose bottom-line results redounded significantly in the compensation of the chiefs who ran them. Thus, for example, Walker "left" Magna five years ago to run Intier Automotive, Magna's interiors and seating-components division, before now returning as co-CEO at age 48.

Presenting a Single Face

But Magna found that the fierce independence of these fiefdoms made it difficult to make a convincing case to OEMs that Magna's overall scale and capabilities could benefit them. "It's just more challenging to work with if you're an OEM," Hogan says. "They would almost all prefer to deal with Magna as one entity."

Stronach has just spent $1 billion to recapture the three units that Magna spun off from 1995 to 2001. Still, Magna's decentralization could hurt the company when it comes to important goals in North America such as possibly supplying Toyota with some assembly capacity as it decides how to go about fulfilling its expanding market share in the United States and makes an historic run at besting GM as the world's largest automotive manufacturer. "Mark doesn't want to compete with Toyota, GM or others," Doyle says. "He'll try to figure out a way to supply systems and low-volume niche vehicles. He's got the clever strategic mind to do that."

So it's up to Hogan to present a single face to manufacturers while also allowing Magna's operating groups to continue to run more or less independently. One way he's trying to accomplish this is to continue to call Detroit home instead of moving to Toronto. Another is to schedule regular high-level pow-wows with auto executives that he calls "technical overviews" of Magna's capabilities. That's how Hogan schmoozed Chrysler CEO Dieter Zetsche and Ford's group vice president of product creation, Phil Martens, earlier this year. "The OEMs will continue to outsource noncore manufacturing and assembly as they try to shed structural costs," Hogan says. "That puts us in a good position because very few companies can do that sort of sophisticated integration. We have bumper-to-bumper abilities."

Magna's management culture is colorful. Stronach is an Austrian immigrant tool-and-die maker who began building in 1957 what grew into Magna. But in the last several years. Stronach has been distracted by other interests, including thoroughbred horse breeding. For a time, his daughter, Belinda Stronach, was Magna's CEO, but she left last year to enter Canadian politics.

For his part, Hogan didn't know the specifies of the April thunderbolt announcement. But he also professes that it doesn't change the most important thing: Magna will still be run by a cadre of talented executives. And it seems clear that Hogan will remain one of them.

RELATED ARTICLE: Magna International

HQ: Aurora, Ontario

Current-year expectations: Sales for 2005 should be $22 billion to $23.5 billion, the company says. Earnings per share should be about $7, according to Banc of America Securities analyst Ron Tadross, down from an earlier projection of $7.50.

Last year's numbers: Magna's 2004 sales were $20.7 billion, and net income was $686 million.

Performance trend: The company has posted a 22 percent compounded annual growth rate in total sales over the past 10 years.

Products and services: It assembles complete vehicles and subassembles modules. It makes metal-body components, plastic-body panels, lighting components, drivetrain components and other parts.

Operations: About 81,000 employees in 223 manufacturing operations and 56 product-development and engineering centers in 22 countries.

Advantages: Magna is nearly debt-free, has a commanding position among automotive supplier-integrators and is free of union pension and health care obligations.

Issues: The company remains heavily dependent on the U.S. Big Three while other companies, especially Toyota, are growing much faster. Succession to founder Frank Stronach is not yet clear.

Source: Chief Executive