Turning around a company the size of Ford (F 3.89%) in three years is like turning a battle ship around in a mile. That's something a Navy cadet would quickly tell you is impossible. That's what Alan Mulally and his team has accomplished since 2006 when it took out over $18 billion in loans to restructure the company that had once upon a time revolutionized the automotive industry. Mulally was new to the auto industry, but knew what it would take for the company to be successful as he assembled his "One Ford" vision. Below are two key points to his plan that are in full swing today. Expect them to change the look of Ford's bottom-line profits drastically by mid-decade.
Aggressively restructure to operate profitably at the current demand and changing model mix
Consider this: Years ago when these economies of scale and operating efficiencies were just beginning, it was the main factor for Ford to return to profitability just one year after General Motors (GM 3.07%) and Chrysler filed for bankruptcy – and two years ahead of schedule. Ford now says it can break even in if U.S. sales reach 10 million units. Now that America's sales are projected to top 15.3 million in 2013, think of the extra dollars that will be flowing to Ford's bottom line.
Ford is now accelerating its plan and is targeting 85% of global sales to be from nine core platforms by the end of this year – a year earlier than planned. I know that doesn't mean much to you, so here's a comparison. General Motors plans to halve the number of its platforms by 2018, down to 14. That's one heck of a step behind, and a large reason why Ford's profit margins continue to embarrass its Detroit counterpart.
Accelerate development of new products our customers want and value
Ford just announced its Focus model totaled over 1 million units sold worldwide. The Fiesta earned the top spot as the best-selling subcompact vehicle globally, and is attracting a newer younger consumer to Ford products. Ford is ahead of competitors in establishing its future blood line of customers. Between those two models, it totaled over 1.7 million registrations globally in 2012. According to Jim Farley, Ford's executive vice president of global marketing, sales, and service:
Focus and Fiesta represent the culmination of our One Ford global product strategy. Our global products are resonating with consumers – especially in the best-selling, most competitive segments – with their unique combination of fuel efficiency, high quality, rich content and fun-to-drive personalities. Through One Ford, we're able to bring economies of scale and fantastic value to customers all around the world.
I don't have enough room in this article to share with you all the success of numerous other vehicles this year. The Fusion, Escape, and Explorer have all had record sales months already in the first quarter 2013. Critics are raving about the vehicles, and consumers are buying them up in droves. Gone are the days when no one wanted to buy a Ford vehicle – and thank goodness for that.
I'll leave you with this, as proof consumer attitudes are changing. Last weekend my neighbor pulled in showing off his brand new Ford Fusion as I was attempting to attach an aftermarket piece to my Mustang. He has no idea I cover the auto industry and walked up to say, "This Fusion is one heck of a car, I can't believe Ford makes it." He continued, "At your age you'd be better off investing in Ford stock than in your Ford Mustang." I smirked and replied "Yeah? Thanks for the tip". I then thought to myself – I'm way ahead of you, sir, but glad the world is catching on.
If you take one thing away from this, look into Ford and consider it for your portfolio. Maybe you can get in at a better price, and maybe not. But I strongly believe in as little as three years if you didn't buy in soon, you'll be kicking yourself.