Ford’s foresight puts carmaker in pole position

Roland Jones • Profile • E-mail

As Chrysler makes its way through bankruptcy court and General Motors tries to avoid the same fate, Ford is emerging as the strongest of the “Big Three” automakers.

Ford has taken no federal bailout money, but it’s pulling ahead of its rivals because of well-timed financial planning and a focused and attractive mix of product. The automaker also is profiting from the troubles at GM and Chrysler.

“[Ford’s Chief Executive Alan] Mulally went out and got credit when it was available, and he has positioned the automaker with a global strategy using the Fiesta and the Focus,” said George Magliano, director of automotive industry research at IHS Global Insight. “So they have gone way up the ladder, and of course they look a lot better because they didn’t ask for a bailout.”

Ford is pushing ahead with its plan to build small compact modern cars for the U.S. market.

On Wednesday the automaker said it will invest $550 million to convert its old Michigan Truck Plant into a facility that will build its next-generation Focus, which expected to roll off the line next year. The plant will also make a new battery-electric version of the Focus for the North American market. That vehicle is expected to debut in 2011.

The move could help sustain Ford’s sales momentum. North American auto sales remain dismal, but Ford added market share in April, thanks to record sales of its fuel-efficient midsize Fusion. And with Chrysler in bankruptcy and likely to see sales continue to plummet, Ford will continue to gain, analysts say.

Ford sales were down 32 percent from a year earlier, but that was good enough to push past Toyota to reclaim its position as the nation’s No. 2 car company, with 16 percent of the market. GM, the largest automaker with 21 percent of the market, saw sales drop 34 percent. Chrysler, which filed for a government-engineered bankruptcy Thursday, reported the sharpest decline among major automakers, falling 48 percent.

Key to Ford’s success is its strong cash position. Two years ago, having just arrived in Detroit from Boeing and profiting from a stronger credit market, Ford’s Chief Executive Alan Mulally mortgaged every conceivable asset owned by the automaker — including the iconic blue oval Ford logo — to the tune of $23 billion to finance its turnaround plan.

Today, Ford has around $30 billion on hand, enough to finance its day-to-day operating needs until sometime in 2010, when the auto market is expected to pick up again, according to analysts.

Ford also has managed its product mix effectively, notes Tom Appel, associate publisher of Consumer Guide Automotive, a guide for car buyers. In mid-2008, when the price of gasoline topped $4 a gallon for the first time, Ford was best-placed out of all the big U.S. automakers to “roll into the recession” and handle the sharp rise in gas prices, he said.

While Chrysler had developed a suite of compact and midsize cars, including the Dodge Avenger and the Jeep Compass, that all looked similar and unrefined, and were not especially fuel-efficient, Ford and GM were producing stronger vehicles in these categories, Appel said.

Ford’s Fusion and Mercury Milan, in particular, were perfect for when the recession hit and car-buyers “got conservative,” he said. Dodge’s midsize Avenger sold 1,400 units in April, but the Ford Fusion sold 18,000 units, Appel added. Ford also managed to work nice new interiors into the vehicles, and they have benefited from good press surrounding the introduction of the Ford Fusion hybrid.

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