At almost every turn, Mulcahy had to ignore conventional wisdom. Xerox is an old-fashioned company, the sort of place where workers still have retirement parties and retirees still have reunions. The average tenure of a Xerox employee is 14 years, double the overall corporate average. When the CEO of one of Mulcahy's biggest lenders said she would have to kill the culture to succeed, Mulcahy shot back, "I am the culture. If I can't figure out how to bring the culture with me, I'm the wrong person for the job." She appealed to employees with missionary zeal, in videos and in person--what Burns called a "laying on of hands." She implored them to "save each dollar as if it were your own." She ended every appearance with a nudge: "Remember, by my calculations, there are [she fills in the number] selling days left in the quarter." She rewarded those who stuck it out not only by refusing to abolish raises but with symbolic gestures as well; last year she gave all employees their birthdays off.

The gentle pressure was vintage Mulcahy. Work hard. Measure the results. Tell the truth. Be brutally honest. (One of Mulcahy's first brutally honest remarks--that the Xerox business model was not sustainable--sent the stock down 26% in one day.) She knew she couldn't gild the lily. "Anne told us everything, stuff we really didn't want to know," says Burns. Like how close they were to running out of cash. Burns, the mother of two children ages 10 and 14, remembers going home one night and telling her husband, Lloyd Bean, a Xerox scientist, that "we could lose our house. We could lose everything." Bean replied: "Xerox isn't going anywhere, sweetheart. It's up to you to make sure that doesn't happen."

If Mulcahy ever thought bankruptcy was an option, she never let on. She dug in her heels every time the workout advisors brought it up. "A lot of people will try to convince you that there are advantages to Chapter 11," she says. "I was like, 'Don't even go there.' Whatever you think the advantages are from a financial standpoint, I think they are dismal and demoralizing for a company that wants desperately to turn around and regain its reputation." Joe Mancini says some of the early meetings got so tense that he thought the workout experts might "go away and not be our advisors." Basically, he recalls, they didn't think Mulcahy had the balls to take the draconian actions needed to keep Xerox afloat.

But she did. In June 2001 she shut down the desktop division; these were people she had hired and a business she had created. "There was no good script," she says. "The company was in a lot of trouble. They weren't the ones accountable for the problem. You couldn't follow a string of logic for them." The only thing she could do, she says, "was to take the hit personally. I hung out, walked the halls, and told them I was sorry."

In the fall Mulcahy made a presentation to Xerox's 56 bankers, assuring them that the company would pay back its $7 billion revolving credit. She had never faced a crowd so hostile. When she concluded her address she was met with deadly silence. "Man, what does it take to get a smile out of these guys?" she asked, taking her seat. Between clenched teeth the banker next to her replied: "Seven billion dollars."

She also resolved Xerox's accounting scandal. Soon after becoming CEO, she replaced her auditors and cleaned house in the finance department. In April 2002, Xerox agreed to a record $10 million fine to settle charges that it defrauded investors by improperly accelerating revenues, overstated earnings by using "cookie-jar" reserves, and disguised loans as asset sales, among other things. The SEC also rebuked the company for being uncooperative. Xerox did not admit or deny wrongdoing, but the settlement pained Mulcahy. She says she was never questioned, subpoenaed, or deposed by the SEC, but has been named as a defendant in several shareholder lawsuits. (In early June former CEOs Allaire and Thoman and four other former Xerox executives settled individual SEC charges that between 1997 and 2000 they used improper accounting to defraud investors. Although they neither admitted nor denied wrongdoing, they agreed to pay more than $22 million in penalties and fines.)

After the settlement Xerox had 90 days to restate four years of results. The company had brand-new auditors and no CFO. In two years Mulcahy had not taken off a single weekend. Even if she made it through the re-audit, Xerox faced another difficult deadline: It had to renegotiate its revolving credit agreement by Oct. 22, the day after Mulcahy's 50th birthday. In June the ratings agencies had downgraded Xerox debt deeper into junk. One day last summer Mulcahy saw a picture of herself in a Time article that grouped her with Tyco's Dennis Kozlowski and WorldCom's Bernie Ebbers. "I just remember staring at it and saying, 'How did this happen?' " she says.

But there were some sweet moments too. Older son Michael, 20, had taken a summer job at a bank and was keeping his eye on the news wires. Whenever a Xerox headline crossed, he'd call Mulcahy to give her a heads-up. On another occasion, Mulcahy got home late to hear a voicemail from Jim Firestone, a senior vice president and her top strategist. Firestone is a buttoned-down former IBMer--all business, no chitchat--the last person she would have expected to call. "At the end of the day, you just have to ask yourself, Is there anything more I could have done today that would have made a difference for Xerox?" the message said. "If the answer is no, then you've got to stop and go home and get some sleep. Because if it survives, it survives. And if it doesn't, you have to be able to live with yourself and say maybe it wasn't there to be had." She says the call meant the world to her: "I was just torturing myself with this stuff."

About then Mulcahy's luck began to turn. With the SEC matter settled, she was able to recruit a new CFO, Larry Zimmerman, a former finance vice president from IBM who joined Xerox last June. The company had considered many ways to improve its balance sheet, but Zimmerman and Mulcahy made a pact: They would not do anything that they did not understand. They decided against moving debt off the balance sheet. "It's more financial engineering than it is business fundamentals," says Mulcahy. By October the company had struck a deal with GE's lending arm to provide $5 billion in financing.

The good news began to come in bunches. Margins improved, and costs came down. The company had some profitable quarters. The culture that critics told Mulcahy she had to break rallied round her instead. In Texas sales teams had abandoned expensive incentives and awarded car washes (by colleagues) to top producers. "People were holding prayer groups," she says incredulously. "They were saying the rosary for me." Says Timothy R. Coleman, a senior managing director at Blackstone: "She was leading by example. Everybody at Xerox knew she was working hard, and that she was working hard for them."

Coleman became a convert: "Anne met her plan, she beat her plan, she had taken the costs out, and she did it in spades." Some of Xerox's biggest lenders, which had been so angry when she drew down her entire credit line by the end of 2000, began to soften. J.P. Morgan Chase assigned a couple of bankers to help renegotiate the credit agreement, and Citibank and BankOne signed on. Mulcahy spent hours jawboning bank executives. She got down to the last couple of holdouts and was beside herself. "I had done everything. I had talked to their CEOs and chairmen. I begged. I harassed them. I said, 'We have 54 [out of 56] banks signed up, and you can't get there? I don't get it!' " In desperation she called Citi's Sandy Weill. "I need your help," she said.

"But I've already signed up."

"I need you to pick up the phone and call a couple of people for me." She had her deal by the end of June, four whole months before her birthday.

The debt deal doesn't allow much room for error. Xerox's annual interest expenses rose by $140 million this year, and it has less borrowing power. Litigation resulting from the accounting scandals is still pending. The economy continues to be soft, while competition is stiffer than ever. "The cycles will just speed up," says Matthew Espe, CEO of Ikon Office Solutions, a document-services distributor of brands like Canon and Ricoh. "If you're a one-trick pony [like Xerox], you're swimming against the tide."

Mulcahy knows her battle isn't over. She worries about "sustaining the energy and intensity of the place." With CEO credibility tenuous, she takes nothing for granted. She doesn't feel entitled, not even on the corporate jet. "This is a bag-carrying environment," says Mulcahy, who not only carries her own but becomes a flight attendant the minute the seatbelt sign goes off (Xerox laid off the real one). "Beer? Wine? Soft drinks?" she asks, handing out napkins. "I cook more here than I do at home," she adds.

All companies go through cycles, but only great companies come out stronger. Mulcahy's goal, having brought Xerox back from the dead, is to make it great again. "There is something about resilience," she says. "The ability to address issues, to keep brands and heritages and jobs in place. I keep hoping that's the story that will emerge here. If this company becomes great again, that's a good story."

It would be more than that. It would be a major miracle.

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