With Its Back Against the Wall, Ford Responds

Recently in an article by AutoNews, I noticed a really interesting paragraph that detailed how vehicle design has saved Ford (NYSE: F  ) not once, but multiple times. In an interview with AutoNews, J Mays, Ford's chief designer, mentioned that the company was "brought to its knees" by the war effort, and it was revived partially with the Thunderbird in the '50s. After that it was the Mustang's turn in the '60s and Taurus in the '80s. The Explorer and other gas-guzzling SUVs sold extremely well in the '90s, but that's when things began to go downhill.

Every time Ford has found itself up against the wall, Mays said, "it's been design that has somehow allowed them to emerge as a successful company again." 

It wasn't until recently, more than a decade after things began to sour, that new design innovation was needed to save Ford after years of bad management, poor-quality vehicles, and the lingering effects of a recession.

Passing the baton
After all those iconic vehicles Mays mentioned, for Ford to revive itself again, it needed to pass the baton to new vehicles that today's consumers demand. So let's look at exactly where the baton was passed, and when.


*2013 is projected based on sales through April. 

The Explorer, Mustang, and Taurus all declined right as the Fusion and Escape took the sales lead in 2006. I circled this on the line graph for one reason. Can you guess why? If you guessed that's the year Alan Mulally was introduced as CEO and created his "One Ford" vision, you're correct.

His vision had two key factors. One was to aggressively restructure operations to become sustainably profitable. It was an aggressive move at the time, but Mulally sold off multiple brands, including Jaguar and Aston Martin -- leaving only the Blue Oval and Lincoln.

Mulally also decided that it was too inefficient for each vehicle to have its own platform. By year's end, the plan is to have 85% of global sales from nine core platforms, helping improve margins and operational efficiency. Restructuring on the back of its own private loans, Ford, under Mulally's vision, turned the ship around from more than $30 billion in losses from 2006 to 2008 to being profitable in 2009. That's impressive, so we'll check off Point No. 1 of Mulally's vision.

Second was to create valuable vehicles that consumers demanded. Enter the Fusion and Escape. According to the AutoNews data center, for the first four months of 2013 compared with 2012, the Fusion is up 25%. It's clearly eating away at Toyota's longtime leading market share, represented by the Camry, which saw sales decline 7% in the same time frame. 

The Escape is up 31% in the U.S. for the first four months compared with last year's numbers, and it has a chance to break 300,000 in annual sales with the Fusion -- a feat that, aside from the F-series, a Ford vehicle hasn't accomplished in almost a decade. What's even more exciting about these two vehicles is that their success isn't limited to the U.S. -- it's translating overseas. That's a feat that Ford vehicles have struggled to accomplish until now.

Speaking of the F-Series, that's one vehicle Mays didn't mention, but in reality it's the biggest reason Ford has remained a viable company. To see how dominant it is, consider that analysts estimate America's No. 1 vehicle to bring in as much as 60% of Ford's profits. Here's a visual representation of its sales importance.


*2013 is projected on sales numbers through April.

Bottom line
In the AutoNews interview, Mays was exactly right: Ford manages to design vehicles just when it needs to turn things around, and 2006 was no different.

On second thought, I take that back -- it was different. This time, Ford designed many vehicles that are reviving the company, not just one. Ford's Fiesta and Focus are breaking ground globally, with the Focus challenging for the No. 1 spot in global nameplate sales. The Escape and Fusion are benefiting from consumers who want valuable, fuel-efficient, and flashy rides, while the F-Series remains Ford's champion vehicle, hauling in massive profits consistently.

One thing is for sure: Ford has been revived again, and brighter days are ahead. Here's to hoping we never see a similar situation to 2006-2008 again.

If you're concerned that Ford's turnaround has run its course, relax -- there's good reason to think that the Blue Oval still has big growth opportunities ahead. We've outlined those opportunities in detail, in the Fool's premium Ford research service. If you're looking for some freshly updated guidance to Ford's prospects in coming years, you've come to the right place -- click here to get started now.


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