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Mark Fields will replace Alan Mulally as Ford Motor Co. CEO and president when Mulally retires July 1.

The company announced the transition Thursday at a news conference at its headquarters in Dearborn, Mich., attended by hundreds of employees along with Mulally, Fields and Ford Executive Chairman Bill Ford, who were all smiles on stage. The board met to finalize the decision Wednesday, and Mulally joked that he may have made and seconded the motion himself.

Mulally has been Ford’s longest-standing CEO not named Henry Ford. Mulally joined the company in September 2006 from Boeing Co. just as the industry and the American economy were headed for the deepest economic crisis since the Great Depression.

In this carefully orchestrated and unusually smooth transition of power, Bill Ford was effusive in his praise for Mulally.

“We know Alan is a hall of fame CEO … . But most hall of fame CEOs cannot let go. They do a great job and then go kicking and screaming, and chaos ensues,” Bill Ford said.

“Alan’s last act is his finest act,” he said of the plans to hand power to Fields.

Mulally, 68, said that in addition to retiring as president and CEO, he is also resigning his seat on the board of directors. Fields will assume all three posts.

Bill Ford said that the board looked at outside candidates but that he was pleased that Fields, the company’s chief operating officer, emerged as the best candidate.

As for Mulally’s next steps, “I haven’t decided,” he said. “The retirement thing sounds good too,” said the man who was in the running last year to run Microsoft Corp. and is expected to pepper his retirement with further board and corporate work for companies eager to tap his management skills.

He will continue to watch Ford’s progress under his successor. “I’ll be their best cheerleader,” Mulally said.

While the transition has long been expected, the moment marks a historic turning point. Mulally, who in 2006 was a newcomer to the industry, will be remembered for leading the company through a massive and painful turnaround.

Fields now comes in as a battle-tested, well-prepared executive who learned much from Mulally.

“I never had anyone else follow me around who wanted to know everything,” Mulally said of working with Fields. “I have nothing left to teach him.”

Every executive is different, Fields said. But he plans to continue to run the company using the same principles, vision and strategic plan put in place by Mulally.

Fields said he will not name a new COO or make any changes to the leadership team, which he said shares a level of camaraderie and trust that was rare through most of his career.

“I don’t plan on making any changes because it is a strong team.”

Bill Ford said the need for a vision, a better corporate culture and a leadership team honed to follow the plan was a priority from Mulally’s first day on the job.

“From the first day we discussed Ford’s transformation eight years ago, Alan and I agreed that developing the next generation of leaders and ensuring an orderly CEO succession were among our highest priorities,” he said. “Mark has transformed several of our operations around the world into much stronger businesses during his 25 years at Ford. Now, Mark is ready to lead our company into the future as CEO.”

Mulally received a standing ovation as he took the stage.

“We did it,” he said in reference to the turnaround and the smooth CEO transition.

Mulally boldly chose to borrow $23.5 billion just as the economy was beginning to crash. It proved enough to fuel his turnaround plan without the taxpayer support and bankruptcies that General Motors and Chrysler negotiated in 2009.

Mulally sold or shuttered Volvo, Jaguar, Land Rover, Aston Martin and Mercury to focus on Ford and Lincoln.

Originally, Mulally said he planned to stay in the top job through the end of the year and as recently as Friday said there were no changes to his plans.

“The reason that we have moved … this up, from the guidance we gave, is that we are absolutely fully confident that … the team is in place,” Mulally said. “It really is a confidence that we have that now is the time to do it.”

Fields, 53, is a New Jersey native with degrees from Rutgers and Harvard. He worked for IBM briefly before joining Ford Motor in 1989.

He commutes from Florida, where his family resides.