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In just a few years, Detroit icon Ford (NYSE: F ) has gone from being a broken has-been on bankruptcy's doorstep to one of the world's most focused and admired companies. Many elements have contributed to Ford's turnaround, but one of the most important is also one of the simplest: recasting Ford's far-flung holdings as one single company.
In a recent presentation, a senior Ford executive gave some details on the state of the company's "One Ford" turnaround efforts. Several points were of interest to investors.
A look at a work in progress
Jim Farley, Ford's chief marketing officer -- or, officially, "group vice president of global marketing sales and service" -- reviewed the key components of Ford's plan in a presentation to analysts this week. Some highlights:
Profitability on lower volumes. Ford has reduced structural costs by more than $10 billion and will have reduced its production capacity by 40% by the end of next year. Ford now has fewer factories, but each is producing more vehicles -- a development that has allowed it to be profitable at near-record-low sales levels.
That sea change is likely to make for impressive margins as sales rates continue to recover. And that hasn't escaped Wall Street's notice. A Barclays analyst upgraded Ford on Thursday, citing "the fundamental increase in Ford's earnings power even in a slower growth environment."
Migration to global platforms. In industry-speak, a platform is a set of common dimensions that apply to vehicles and manufacturing. Cars built on the same platform may be quite different from one another, but they typically share parts under the skin, cost less to develop, and can be built on the same assembly line. One of Ford's goals has been to reduce the number of platforms in use globally, to save on engineering and development costs -- and to make the best use of each engineering group's strengths, allowing Ford to sell its best products throughout the world.
For instance: Ford's Fusion is a popular midsize sedan available in the United States, Canada, and much of Latin America. It shares a platform with the Mazda6 -- Ford controlled Mazda for several years -- and with similar Lincoln and Mercury models. Ford's Mondeo, meanwhile, is a popular midsize sedan available in Europe, Australia, and several other parts of the world. It's roughly the same size as the Fusion, and it even looks somewhat similar, but it's a completely different car, developed in conjunction with another former Ford property, Volvo.
In other words, Ford spent millions developing two separate midsize-sedan platforms, just as it developed two separate Fiestas (one for Europe, one for Latin America), two separate versions of the Focus (one for North America, one for Europe), and so on in the past.
CEO Alan Mulally's goal, put simply, is to knock that off once and for all. The much-acclaimed new-to-the-U.S. Fiesta is not really an all-new car; it's a variation of the Fiesta that Ford started building in Germany in 2008 -- the same car, and the same "guts," with minor styling and trim changes to suit local needs. Likewise, the upcoming all-new Focus is the same as the new Focus that will launch in Europe next year; even the upcoming Focus Electric, developed in conjunction with Magna International (NYSE: MGA ) , will be a "global" model sold in North America, Europe, and Asia.
Ford has tried this strategy before with the original Mondeo, which was also sold in the United States as the Ford Contour. But it's never done so with this level of sophistication, and never with this kind of total corporate commitment. And the approach is already producing impressive results.
The greening of Ford. Farley's presentation noted that Ford's fleet-average fuel economy has improved by 19.2% since 2004, a rate that outpaces all of its key North American competitors. On one hand, that's not saying much. Honda's (NYSE: HMC ) fuel economy was already quite good in 2004, when Old Ford was still pigging out on SUV sales. But on the other hand, fuel efficiency is a huge deal for Ford right now. Farley said that Ford intends to make its "EcoBoost" technology -- a series of advanced, fuel-efficient turbocharged engines -- available in every product.
Green technology is big business -- just ask Toyota (NYSE: TM ) , where Farley worked before joining Ford in 2007 -- and Ford is already showing signs that it will be a leader as the focus on automotive fuel efficiency continues to sharpen in the coming years.
The sincerest form of flattery
Ford's management is a long way from declaring victory. However, all signs indicate that the company's immense debt load is well under control, and it's been clear for a while that the turnaround is already producing impressive results. Ford's products are putting in a strong showing. Market share and "residual values," the value of a recent used car, are both solidly on the upswing, as Farley noted, and Ford is more profitable than it has been in years, despite the weak sales environment.
But perhaps the most sincere compliment for "One Ford" has come from across town. New General Motors CEO Dan Akerson outlined his own plans in a press conference on Thursday, and they're (unsurprisingly) Ford-like: to implement a clear, unified global strategy that allows GM to contain costs, be nimble, and to go on the offensive against competitors.
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