Ford's Green Push Is Paying Big Dividends

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Ford (NYSE: F  ) CEO Alan Mulally rightfully gets credit for driving the automaker's remarkable turnaround. While many of the pieces were in place before his arrival in 2006, Mulally was the one who made it happen: He appointed the key executives, drove the reorganization, asked the right questions, and -- more than anyone else -- brought Ford back from the brink of disaster to solid profitability.

One aspect of Ford's revival that is somewhat underplayed is the company's commitment to greener transportation. Mulally had a lot to do with that, but much of it started with his predecessor -- Bill Ford, now Ford's executive chairman.

Bill Ford, Henry's great-grandson, is an environmentalist, and he recognized early on that rising gas prices were going to force changes in America's auto-buying habits -- changes that the automaker had to be prepared to meet.

Fortunately for Ford and its shareholders, the company's preparations were quite good -- and as gas prices bump up against $4 a gallon, they're starting to pay big dividends.

A green vision driving solid, accessible products
Ford had never offered a really great small car here in the U.S., but Mulally recognized early on that the company was going to have to diversify its product offerings beyond its (very good) trucks and SUVs. As part of the "One Ford" plan to streamline Ford's best offerings into a single, global product line, Europe would be the source of Ford's global small cars going forward -- and they have turned up a couple of strong contenders in the current Fiesta and Focus.

The Focus, in particular, has done well lately after a slow start. While sales of rivals like Honda's (NYSE: HMC  ) Civic have boomed, the Focus has held its own, with very strong totals in the past few months. In fact, demand has risen to the point where Ford is putting the factory that builds the Focus on a round-the-clock schedule starting in May.

The Focus is turning into a big win for Ford, all the more so because it's a profitable, American-made product. But Ford's green efforts go well beyond small cars. A hybrid version of the Fusion midsize sedan has been a steady seller -- and the new-generation Fusion, due this fall, will come in an advanced "plug-in" hybrid version that Ford says will have a better mileage rating than General Motors' (NYSE: GM  ) much-touted Chevy Volt.

Trucks and SUVs haven't been left out, either. A few years back, Ford made a big investment in advanced-turbocharging technology, the foundation of a line of new engines it has since rolled out under the "EcoBoost" brand. In V6 form, the EcoBoost gives Ford's full-size pickups the power of a V8 -- but with significantly better mileage. And a four-cylinder variant is available in SUVs like the Explorer, offering much better fuel economy than the sixes and eights that were standard fare just a few years ago.

Strong competitive standing as fuel prices rise
In a way, Ford's timing was perfect. While archrival GM has some strong fuel-efficient offerings such as the popular Chevy Cruze compact, the General is still struggling to catch up with Ford in categories such as full-sized trucks and SUVs. GM lost a lot of product-development time during its descent and fall into bankruptcy, and its U.S. product portfolio won't really catch up to Ford's for at least a year, maybe two or more.

Meanwhile, Toyota (NYSE: TM  ) still has a strong reputation for fuel efficiency, and strong entries such as the Prius will do well as gas prices continue to rise. But in some other categories, products such as the Corolla have been eclipsed by the strength of competitors such as the Focus, strength that appears to have caught Toyota (and Honda, to some extent) off guard.

Toyota will up its game, of course, as will Honda and (eventually) General Motors. But right now, Ford's in an enviable position -- a full lineup of fresh products, most of which arrived to glowing reviews, and nearly all of which are at or near the top of their classes in fuel economy. Shareholders have to be encouraged by Ford's chances as gas prices continue to rise.

Think gas prices will continue to climb? If so, oil giants such as ExxonMobil (NYSE: XOM  ) could prove to be profitable companies to own. While Exxon has made significant investments to become the largest natural gas producer, it still holds around 50% of its reserves in liquids such as petroleum. It has also proved itself as one of the best operators in the global energy market over the past few decades. For more great stock ideas in the energy sector, check out The Motley Fool's new special report, "The Only Energy Stock You'll Ever Need." It's completely free for Fool readers, but only for a limited time -- get yours now.

Fool contributor John Rosevear owns shares of Ford and General Motors. Follow him on Twitter at @jrosevear. Motley Fool newsletter services have recommended buying shares of ExxonMobil, Ford, and General Motors and creating a synthetic long position in Ford. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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  • Report this Comment On March 12, 2012, at 2:24 AM, kmacattack wrote:

    Ford has long built the "Rolls Royce" of trucks, from the F150, which has been America's number one selling truck for over 30 years in a row. The "Super Duty" trucks, the F250 and F350 with Ford's "Power Stroke" diesels have been the best in class heavy duty pickups for a very long time as well. The Focus and Fusions are both tremendous cars. Both achieve superb gas mileage, handle extremely well, and offer great value compared to cars costing up to $15,000 more. I'm hoping that Ford will introduce a line of Compressed Natural Gas vehicles, because the CNG option will cut the operating cost per mile by at least 50 percent. CNG is selling locally for $0.78 per gallon versus $3.59 for gas and nearly $4.00 for diesel. The great news is that the natonal CNG fuel network is being built in rapid fashion, thanks to a $450 million cash infusion to Clean Energy Fuels Corp (CLNE) from natural gas producers Chesapeake Energy and two other players, who all kicked in $150 million each. The funding is paying for 450 stations to be built at existing Pilot truck stops, thanks to an exclusive agreement between Clean Energy and Pilot. The primary goal is to convert the nations trucking fleet from dirty burning OPEC imported diesel to clean burning 100 % American made CNG. This will cut our OPEC imports by 50 percent in 5 years, and cut our total trade deficit by 1/3 at the same time. And, for the first time ever, the manipulated, monopolistic and price fixed Big oil, Koch brothers refining, and OPEC "unholy alliance" will no longer be able to screw Americans to the wall with outrageous fuel prices. The lifted cost of OPEC oil is about $2.50 per barrel, and we are told that the "wholesale" price is $106.00 per barrrel? Sandridge Energy chairman recently said that Sandridge is producing oil in Oklahoma at a cost of $6.50 per barrel, which doesn't have to be shipped by tanker across the ocean. The republican politicians have been carrying water for Big oil forever, and for good reason. Mitch McConnell received a "contribution" of almost $500,000 in 2009 from the Big oil and Koch brothers lobbyists. This was just before the energy bill which would have opened up the energy market in the US to competition was coming up for a vote. There were 59 votes "yes" in the senate for the bill, which had passed the house a year earlier with nearly 300 votes, and President Obama was making speeches every day asking for it's passage. But McConnell decided that we shouldn't end the monopoly enjoyed by Big oil, and should continue business as usual as far as taking care of America's energy needs. "Drill Baby Drill" is the battle cry of Big oil, which is understandable, because that strategy still leaves the big oil companies in full control of the monopoly with no threat of competition. After McConnell's second filibuster, on Nov. 17th 2010, it was apparant that the American Power Act was stuck in the Senate. Now, the bill has been stripped of all other technologies except Natural gas to try and get it passed, but McConnell is still carrying the water for Big oil. The Koch brothers were lobbying hard last week saying that with the deficits we have, we did not need to be spending money on subsidizing new energy sources. But, strangely enough, they said nothing about the hundreds of billions in government subsidies given to big oil interests every year. Big oil doesn't need taxpayer funded welfare. They are making billions per year without the subsidies. Why not end the oil company subsidies, especially on huge multi national oil companies, and transfer the tax credits to the development of natural gas and other green and renewable energy forms? WE could develop a powerful economic engine based on designing, manufacturing and exporting new energy technologies to an energy starved world. But the problem is that big oil will lose TRILLIONS OF DOLLARS IN PROFITS, and Big Oil and the Kochs will spend any amount of money to buy lobbyists who will then buy politicians with SUPER PAC "campaign contributions". If big oil is allowed to win this battle, America will lose. When they were making record profits in 2007 and 2008, Americans were losing their houses, jobs, cars, and the shirts off of their backs, largely due to the effects of gasoline prices which escalated 700 percent from early 2000 until 2007. When they were ceaning up, America was headed for a near depression. There is a direct relationship because everything bought, sold, manufactured and shipped in this country is affected greatly by energy costs.

  • Report this Comment On March 12, 2012, at 2:38 AM, kmacattack wrote:

    lrmacds, you are exactly right. Ford's Focus, Fusion, etc. are as good or better than any cars built in any country by any car company. Chevy and Chrysler are also building great cars now. I for one am very grateful that the American auto indistry was saved. It turned out to be the right thing to do. We need to bring much of the manufacturing base back to the US, such as the steel industry for example.

    Chinese steel is pure crap. My CharBroil "commercial series stainless steel" gas grill is a prime example. The $300 piece of junk began rusting out within a few months, including the "stainless steel" itself. The company said on their website that "stainless steel" doesn't mean it won't rust. The grates were Porcelain on steel, and the porcelain began flaking off into the food within months. The entire interior is rusted out and falling apart. But for about $200, the company will sell me more "made in China" replacement parts which will replace the parts which are completely disintegrated, excluding the lower doors on which the "stainless steel" is nearly rusted through. When I was young, "ChineseJunk" was a type of fishing boat. Now, the definition has changed to "merchandise sold at Wal Mart and other "big box" retailers.

    Referring to the Prius, I've heard that they are a pretty good car. However, my son is parts manager for a 60 year old 4 wheel drive shop in town. He tells me that parts for Toyota and other foreign 4 wheel drive vehicles often are of inferior quality, and when they fail cost sometimes 5 times the cost of the same type of part for a Ford, GM, or Jeep vehicle.

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