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NEW YORK (CNNMoney.com) -- Ford Motor Co. Tuesday surprised the auto industry by tapping senior Boeing executive Alan Mulally as its new chief executive officer, succeeding current CEO Bill Ford, who will stay on as chairman.

Mulally, 61, who heads Boeing's commercial airplane unit, will become president and CEO of Ford immediately as the struggling automaker gets set to unveil a huge overhaul of its North American auto operations.

Bill Ford will remain chairman at the troubled automaker as Alan Mulally takes over as CEO. Mulally was most recently executive vice president at Boeing (Charts).

Shares of Ford (Charts) rose about 1.5 percent on the New York Stock Exchange Tuesday and surged another 2 percent or so in after-hours trading.

The announcement came after the close of regular trading.

Industry analysts said that Bill Ford, the 49-year-old great-grandson of company founder Henry Ford, was making a smart move but that more would be needed to halt the slide in market share for the nation's No. 2 automaker.

"I think Bill Ford was under some pressure to bring in additional leadership," Tim Ghriskey at Solaris Asset Management, an investment firm, told Reuters. "He remains as executive chairman, still very much in control, but I think this step to bring in new management from outside the company is a smart, mature action ... to move the company on to the next step."

Ghriskey noted that GM has made more headway in restructuring than has Ford.

"My point with Ford is and always has been, they wouldn't be in this position if they didn't have these problems on the product side," Erich Merkle, analyst at IRN Inc., told the news agency. "What Ford has to do on the product side is to get back to an understanding of why people purchase cars and take more risks in terms of design."

Bill Ford told employees just recently that the company needs a new business model and is considering turning to outside executives and making alliances with other carmakers, according to a Financial Times report on Sunday citing a memo it said was sent to staff.

The FT reported on its Web site that in the memo, sent to Ford employees ahead of a turnaround plan to be unveiled later this month, Bill Ford said: "The business model that sustained us for decades is no longer sufficient to sustain profitability."

In a televised press conference Ford told reporters that he picked Mulally for his experience in turning around Boeing after the company's difficulties following September 11.

"I went to [Ford's] board and told them I had too much to do," he said. "In this environment, with a relatively young management team facing tough times, I felt that we could benefit from leadership of someone who had been through tough times successfully."

Asked why he chose someone from outside the organization, Ford said that wasn't one of the central criteria guiding his decision.

"It wasn't about inside versus outside. I was more focused on who was the best candidate," he told reporters. "Business skills are by and large transferable, especially with someone with an industrial background who's focused on the customer."

Upon taking over as CEO in 2001, Ford pledged that the company would take a leadership role in environmental issues. Under his watch, Ford introduced the hybrid Ford Escape and Mercury Mariner SUVs and announced plans to create hybrid versions of cars like the Ford Fusion and Mercury Milan sedans.

But the company has pulled back from plans, announced a year ago, to build 250,000 hybrid vehicles a year. Instead, the company said it would take a broader-based approach including building more diesel and ethanol-burning vehicles.

Meanwhile, sales of some of its most profitable vehicles, like the recently redesigned Explorer and Expedition SUVs, have fallen. Despite a redesign that improved the vehicle's ride and handling, sales of the Explorer have tumbled about 31 percent this year.

The automaker said last week that it wanted to sell its Aston Martin line - the car made famous in the James Bond movies - to free up funds to invest in its other brands amid a sharp downturn in sales.

Ford declared last month it was cutting production plans and said 10 North American plants will be shut for extended periods much of the rest of the year as it tries to cut costs and deal with slumping sales of its light trucks. (Full story).