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The Sole Reason Behind Ford Motor Company's Resurgence

Ford's (NYSE: F  ) doing many things right these days, a night and day change from how the company was operating just a decade ago. Its small vehicles, like the Fiesta, Focus, and Fusion, are gaining market share in segments historically dominated by Japanese rivals. Ford's big bet on SUVs has paid off and the Escape has gone from an American success story to a global one. Ultimately, Ford's success comes down to one key reason: CEO Alan Mulally.

Ford's CEO Alan Mulally's approval rating. Information and Photo Credit: Glassdoor

It's not surprising Mulally has high rankings from Glassdoor. He orchestrated one of the greatest turnarounds in American business history. When Mulally came on board in 2006 he set forth his "One Ford" plan that enabled the Blue Oval to reverse its $30 billion in losses between 2006 and 2008, delivering a profit in 2009 -- the same year rivals General Motors and Chrysler filed for bankruptcy. 

One key point in Mulally's "One Ford" plan was to "aggressively restructure to operate profitably at the current demand and changing model mix." Ford has consolidated its number of vehicle platforms quickly and aims to have 85% of global sales from nine core platforms by the end of this year. Today, Ford builds vehicles on 15 platforms and has the freshest lineup in the industry; by 2017, almost all of its vehicles will be built on as few as nine platforms. That compares favorably to rival General Motors (NYSE: GM  ) which hopes to halve the number of its platforms to 14 by 2018.

Improving Ford's operating efficiency has been a huge boost to its bottom line and is one reason the automaker has consistently produced North America margins above 10%, while General Motors aims to accomplish that feat in a few years' time.

That's just scratching the surface of what Mulally has accomplished, but even more important is what he's working on now.

Mulally is committed to staying with Ford at least through 2014, and during that time he'll focus on efforts to turn around two big problems, which are both much smaller than the troubles Ford faced in 2006 as the recession loomed. 

One of the biggest things Mulally and Ford can do to improve the automaker's bottom line quickly is to reverse losses in Europe. Simply breaking even last year would have sent the company's bottom line surging $1.7 billion, a huge amount. While Ford plans to break even in Europe by 2015, it's making progress faster than anticipated.

Ford's losses in Europe for the third quarter totaled $228 million, which was a $240 million improvement from last year and $120 million better than the previous quarter. It turns out that Mulally and his team's quick decision to cut capacity by 18% in the region is paying off and will save as much as $500 million annually. While Europe's market struggles to rebound, Ford's riding the success of its smaller and fuel efficient vehicles to send wholesale volume and revenue up 5% and 12%, respectively, in the third quarter .

Ford's turnaround in the U.S. and Europe isn't the only such effort that Mulally is tackling.

Ford desperately needs its Lincoln brand to return to relevance. The brand consistently ranks among the industry's best in consumer loyalty, but it does not offer enough options as consumers' purchasing power grows and they look to enter the luxury market. That's because during the recession and the focus on Ford's main brand, the company was forced to cut investments on Lincoln. Sales plummeted.

Now that the U.S. is surging and profits are flowing for Ford, it can turn its focus to reviving the all but dead luxury line. The Lincoln MKZ launched earlier this year; once dealerships received sufficient stock, the sales have rebounded significantly.

Graph by author. Information from Ford's monthly sales releases. 

Ford this week unveiled the 2015 Lincoln MKC, the second redesign in Lincoln's revival strategy, which it hopes will drive big sales in one of the fastest growing segments in the world: SUVs.

Ultimately, Ford is in its best financial shape in roughly a decade, and it has Mulally's "One Ford" plan to thank for its resurgence. Mulally is nearing retirement having witnessed Ford's dividend being reinstated and doubled, as well as returning to investment grade by all four major credit rating agencies. Before he makes his grand exit he'll likely see Europe break even, Ford's market share in China double to 6%, and Ford resume its place among the globe's prominent automakers. 

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Read/Post Comments (11) | Recommend This Article (7)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On November 14, 2013, at 9:09 PM, guysisson wrote:

    They are currently building the best cars on the planet. That is why they are doing so well. It is as simple as that.

  • Report this Comment On November 14, 2013, at 9:33 PM, armadillarodeo wrote:

    The reason Ford has made a resurgence is because Obama backed GM in a a heavy government bailout. No one wants a Government Motors product.

  • Report this Comment On November 14, 2013, at 9:54 PM, JamesG wrote:

    The Sole Reason Behind Ford Motor Company's Resurgence?

    Liberal Federal Reserve interest rates and the DNC throwing the unions under the bus.

  • Report this Comment On November 14, 2013, at 10:04 PM, andyco79 wrote:

    They aren't according to Consumer Reports, who ranks them in the worse quality of any American brand and the second and third worse in quality in all car brands. Mini is the worst. GM was in the middle the top of the ratings and Chrysler products even beat Ford. JD Power agrees with Consumer Reports. If they were the best, they'd be No. 1 in the US and No. 1 in the world. They aren't. They rank behind GM in the US where they've been for 86 years. They rank fifth in the word behind Toyota, GM, Volkwagen, and Hyundai. Go to Youtube and search "New Ford Problems" and the plethora of videos will show you the quality issues with Fords. It just might make you Ford people sick. There are hardly any new GM vehicle video complaints on there. Most of the Fords on there are from 2009 and coming forward. Creative accounting moves on Ford's part will only go so far as their shoddy products will catch up to them. They need to park the "trying to beat GM mentality" and the GM hatred of some of their leadership. They are just trying to push as many vehicles out their factories, instead they need to invest more time in building quality vehicles and be happy where they are. GM is building quality vehicles and I can vouch for both GM's quality and Ford's shoddy quality as I own/owned my fair share of both. GM, Ford, and Chrysler need to form a pact, stop the infighting, and take back the 54% of the US auto market share from the Japanese.

  • Report this Comment On November 15, 2013, at 1:30 AM, 123motley wrote:

    The Lincoln brand needs a new look. The front end of a whale needs to go and possibly completely change the emblem unlike Cadillac has not done. Bring back the large town car with an American designer for that group of buyers. Then bring in an Italian or European designer for the European look for Lincoln's higher end cars and suvs. Go European on those designs by possibly using Lamborghini, Bugatti designers to create the look of a modern luxury Lincoln.

  • Report this Comment On November 15, 2013, at 3:05 AM, GaryDMN wrote:

    The sole reason is Mazda designs. Their top selling cars and the small SUVs are Mazda designs. Partnering with Mazda was a truly brilliant move on Fords part.

  • Report this Comment On November 15, 2013, at 7:04 AM, lem2004 wrote:

    @ andyco79 Very good comment.A lot of people are just blinded by their hatred for GM,if they would go look and test drive GM cars they would see what you are talking about.I think over time GM will do quite well.

  • Report this Comment On November 15, 2013, at 7:46 AM, dimestop wrote:

    Hey, "nice going Ford" ...seems like you're beating out the Japanese...ONLY THERE'S "ONE SMALL PROBLEM FOR YOU in doing that...

    take a trip down memory lane: back to the day of Henry Ford and the introduction of the "Model T" and "mass production."

    Well, a comparison for you WOULD BE THAT YOU HAVE "BUILT" THE "BEST HORSEDRAWN STAGECOACH" IN THE WORLD...outdoing every other "stagecoach" manufacturer... (wow your maybe "king of the horsey set"...

    only problem for you is that the "coming paradigm shift" of our era... is "to PURE ELEC VEHICLE" ...AND unfortunately for you...(like it was for the horsey set in Henry Ford's time)...YOUR VEHICLE OFFERINGS ARE ABOUT TO BECOME "LARGELY IRRELEVANT."

    the "new paradigm for OUR CURRENT ERA" ...WILL BE THE "DOMINANCE OF THE PURE ELEC VEHICLE"...AND "TESLA" CONTROLS THAT...just like back in the day "Henry Ford controlled the "Model T" ...


    YOUR "HYBRID OFFERINGS along with other guzzlers doing this...are kind of LIKE THE "HORSEY STAGECOACH SET" ...coming up with the "PONY EXPRESS" ...looked GOOD for a "short time" ...WAS AN IMPROVEMENT OVER SLOWER "STAGECOACH MAIL DELIVERY"..but in the END ...


    well, IT PUT THE "PONY EXPRESS" OUT OF BUSINESS...pretty quickly...




    so..."BY-BY GUZZLER (including Hybrids) TESLA going to replace you...and it's ramping up worldwide already...

    PURE EV... going to "replace guzzler WORLDWIDE in this "our NEW ERA PARADIGM SHIFT TO "PURE ELEC VEHICLE"... (with some help from Kandi, Toyota, and Mercedes...who wisely "see the paradigm shift to this coming...and are already becoming acomodative to this sea-change to "pure ev."......

  • Report this Comment On November 16, 2013, at 6:42 AM, Aikion wrote:

    To Dimestop, We are a long way off from an all Electric car replacing current technology,

    Fords turn around is because Alan Mulally was the right man for the job, in fact we need more CEO's like him who are true leaders and understand the business they are in.

    Take a look at CNBM Ford Rebuilding an American ICON, his leadership is what saved Ford, and the UNION should be thankful and not go back to their old ways of asking for the moon. Grant you this also goes for leadership (CEO's) who take over American companies and get a huge bonus for terrible work while screwing the workers who built the companies. all thanks to a greedy Wall Street, who want double digit returns and do not care how they get it, which in most cases are put on the back of the workers by longer work hours less benefits , and offshoring their jobs for cheaper labor.

  • Report this Comment On November 16, 2013, at 10:46 AM, badlandsbabe wrote:

    My family switched to Ford after the GM bailout. We bought 2 F150s and 2 Escapes, trading in a Silverado, 2 Toyotas and an older Ford. I am sure the writer is correct about the CEOs geneus in running the company to produce a profit, but wonder how many buyers were influenced to buy Ford for "political" reasons as we were. Would be interesting if a poll were done. BTW we are totally happy with the product and have had no problems. Will stick with Ford.

  • Report this Comment On November 16, 2013, at 3:17 PM, luckyagain wrote:

    The biggest reason for Ford doing so well is that CEO Alan Mulally borrowed a boatload of money in 2006 just before the Great Recession started. Without all of this money, Ford would have followed GM and Chrysler into bankruptcy. With this borrowed money, he was able to let Ford continue to update their cars during the the dark days of 2007 and 2008. Everything else flowed from that decision. It was literally a bet the company and it paid off. Of course if it had gone sour, then Ford would have gone bankrupt too.

    So many people fixated on the bankruptcy of GM and Chrysler and the decision of the government to keep them alive. The simple truth is that if GM and Chrysler had gone into liquidation instead of reorganization, the auto industry in the US would have disappeared. Hundreds of second and third tier auto parts manufactures would have gone bankrupt too. Without these second and third tier auto parts companies, Toyota, Honda and all of the rest would have folded shop and left the US. That is just how capitalism works.

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