021208 Struggling McDonald's ousts its CEO

Plagued by continued sales declines and a loss of more than $40 billion in shareholder wealth on his watch, McDonald's announced Thursday that Chairman and CEO Jack Greenberg would be replaced by former vice chairman James Cantalupo on Jan. 1.

As recently as last March, the company said in a regulatory filing that Greenberg, 60, had agreed to stay on as chief executive through 2005.

Greenberg, who became just the company's fourth chairman since 1955 when he replaced Michael Quinlan in 1999, has been unable to fix the fast-food machine he inherited after a 17-year rise through the ranks at the Oak Brook, Ill.-based company.

Now, it will be up to Cantalupo, a 28-year McDonald's veteran before quitting last year, to try to fix the company that runs about 33,000 restaurants worldwide. Cantalupo, 59, had been considered the only other contender when Quinlan stepped down. Neither Greenberg nor Cantalupo returned calls.

''In spite of many efforts and a lot of hard work to turn things around -- including new cooking (systems), reorganizations and billions of dollars spent on media -- sales are still soft,'' says longtime restaurant analyst Allan Hickok, U.S. Bancorp Piper Jaffray. ''Unfortunately for Jack Greenberg there's a long-held view he was not dealt a good hand.''

Now the same could be said for Cantalupo. In November the company, which long wooed Wall Street with growth, said it would close as many as 175 restaurants and lay off 600 employees. McDonald's just met its lowered earnings outlook for the third quarter and warned it would fall short of its 2002 forecasts.

Same-store sales are down 1.5% through October. The stock is down 30% this year alone, and 59% during Greenberg's tenure at the top. Shares closed up 2% at $18.78 Thursday.

Some observers expressed disappointment that the struggling company did not look for new talent.

''Given the fact that he was vice chairman of the company, he probably had some say in what McDonald's has done, and it hasn't done well for the company,'' says Bill Cottrell, manager of a large capital portfolio for the Ohio State Teachers Retirement System, which owns 2.5 million shares. ''I would like to have seen someone take a fresh look at the company. It's such a powerful brand, and it's a great franchise system that seems to have lost its way.''

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