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McDonald's new CEO knows order of business

| Wednesday, Nov. 24, 2004

CHICAGO -- McDonald's Corp.'s choice of an insider to replace ailing Chief Executive Officer Charlie Bell should keep the company on the path that has led to a sales rebound in the past two years, analysts said Tuesday.

New McDonald's CEO Jim Skinner had worked closely with Bell and his predecessor, Jim Cantalupo. He also oversaw many of the same corporate changes in Japan that are credited for turning around U.S. sales, said McDonald's spokesman Walt Riker.

Bell, 44, who was diagnosed with colon cancer soon after he was named CEO, stepped down Monday to focus on battling the disease.

"Choosing an insider is an indication that we like the way things are going already, and we want someone who's well versed in what we're doing," said Morningstar Inc. analyst Carl Sibilski about the company's decision.

Skinner, Bell and Cantalupo are the "big three" who helped change company strategy to focus on existing restaurants, new menu items and new marketing campaigns, Riker said.

Cantalupo died of an apparent heart attack in April.

Skinner, 60, began as a restaurant manager trainee in 1971 and most recently was a vice chairman overseeing McDonald's operations in Asia, the Middle East, Africa and Latin America.

In a message to employees and franchise owners yesterday, Skinner called his appointment bittersweet because of Bell's illness. He promised to continue to focus on customers and existing restaurants.

"For our customers' sake, we must prove once again that our system demonstrates remarkable strength and resiliency during even the most trying of times," Skinner wrote.

In Japan, Skinner helped launch new menu items, such as the McGrand line of bigger burgers and a white-meat chicken filet. He oversaw the remodeling of 800 restaurants and slowed restaurant openings to focus on existing locations -- a key to the strategy Cantalupo and Bell had for U.S. sales growth.

Japan sales were up by 4.5 percent in the third quarter -- exceeding the industry average, Riker said.

"He's had real impact in his leadership there," the spokesman said. "You're going to see more of the same."

Richard Adams, an independent franchise consultant in California who works closely with McDonald's operators, said he doesn't expect Skinner to stay in the top job for long.

"The impression everybody had over the past several years is that Skinner had one foot out the door to retirement," said Adams, a former McDonald's franchising executive and franchisee.

McDonald's spokeswoman Lisa Howard, however, said Skinner's move is permanent.

U.S. franchise owners do not know Skinner well because he has spent many years in the international market, Adams said.

Franchise owners are more concerned with the promotion of Mike Roberts, CEO of McDonald's USA, to the position of president and chief operating officer -- a possible stepping stone to CEO, Adams said. Roberts was involved in the rollout of a new cooking system in 1999 that caused friction between the company and some franchise owners.

Howard, the corporate spokeswoman, said relationships between the company and its operators are good. She said any talk of past problems is "completely out of step with the current reality."

Larry Tripplett, chairman of the National Black McDonald's Operators Association, said he has worked well with Roberts and welcomes his promotion.

"Mike Roberts probably knows what he has to do move things forward, so I have confidence in Mike," said Tripplett, who operates seven McDonald's restaurants in the San Francisco area.

Analysts said they expect the change in leadership to have little impact on the company's stock because the promotions don't amount to a shift in focus.

McDonald's shares yesterday rose 72 cents, or 2.5 percent, to close at $30.10 on the New York Stock Exchange -- near the high end of their 52-week trading range of $23.01 to $30.99.

Analyst Peter Oakes of Piper Jaffray & Co., which does investment banking work for McDonald's, said the company's growth strategy is sound.

"We do not anticipate a change in direction related to those efforts and management's newfound adherence to capital discipline," Oakes wrote to investors.

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