Ford fixes its own problems

For Ford Motor Co., the past year really has been the best of times and the worst of times.

Like the rest of the auto industry, Ford sales plummeted worldwide. But the Dearborn automaker also scored major points with American consumers by foregoing a federal bailout and avoiding bankruptcy.

That good will, together with a strong lineup of new cars and trucks, meant Ford fell neither as far nor as fast as the rest of the industry. The company was finally able to pull out of a market share nosedive that began in the mid-1990s. In fact, it gained market share here and abroad while raising the average transaction price of its vehicles.

Influential surveyors including Consumer Reports and J.D. Power and Associates have lauded Ford's quality gains, delivering important endorsements to products such as the Ford Fusion and Fusion Hybrid.

Wall Street has taken notice, too, pushing the price of Ford shares north of $8.50 a year after they bottomed out at just over a buck.

"It's really gratifying to see that everybody is appreciating the Ford plan, plus the progress we are making on the plan," CEO Alan Mulally told The Detroit News.

The question now is can Ford's gains be sustained?

"Absolutely," Mulally said. He recently boosted the company's financial forecast and now expects to be "solidly profitable" by 2011. But Mulally also warned that 2010 will be a challenging year for Ford and the rest of the auto industry.

Sales remain depressed around the world. For Ford and its competitors, that means less revenue at a time when they need to spend more money to meet new fuel economy and emissions regulations.

Ford also faces some unique challenges.

General Motors Co. and Chrysler Group LLC may have damaged their credibility with consumers by filing for Chapter 11, but they also were able to eliminate billions of dollars in debt in bankruptcy court. Moreover, Ford will be more vulnerable in 2011 during the next round of national contract talks with the United Auto Workers after failing to secure the strike protection its crosstown rivals negotiated with the union as part of their government bailouts.

Still, there is no question that Ford has emerged from the turmoil of the past year as the strongest American automaker.

While GM and Chrysler begged for taxpayer aid, Ford, which bet everything on a massive $23 billion financing deal just before the global credit markets seized up, did what America loves best -- pulled itself up by its bootstraps.

That was enough to convince many consumers to visit a Ford showroom.

What they found was a new generation of cars and crossovers that boasted world-class quality and left the automaker's previous ho-hum designs in the dust. Not only was Ford fixing its problems without Washington's help, it was offering cars that rivaled Japan's best.

A year ago, Ford's share of the U.S. light vehicle market was 12.4 percent. Now, it stands at 14.6 percent. More importantly, Ford made those gains without resorting to big incentives. As GM and Chrysler slashed sticker prices and increased rebates, Ford cut back on incentives and raised the price of some of its most popular vehicles. As a result, the company increased its net pricing -- what consumers pay for vehicles, minus any incentives -- by $3.8 billion at the end of September.

"The momentum that we've gained is primarily around the products that we've introduced into the marketplace because, at the end of the day, customers are coming in to buy a product. They're not coming in because a company either did or did not take (taxpayer) money," said Ford Americas President Mark Fields. "At the same time, we've also gotten the benefit of customers saying, 'You know what, we feel good about Ford because you are doing this on your own.'"

Maintaining its momentum will require Ford to keep delivering new and better products, said analyst Aaron Bragman of IHS Global Insight in Troy.

"That's really going to be critical for them going forward," he said. "As we start to see the market rebound, the competition is going to be fierce. But Ford is in a good position because they do have a lot of new product. That's one of the key things that Mulally did -- accelerate the cycle plan."

Next year will see Ford introduce the first in a series of small cars from Europe that are the backbone of its future product strategy. If Ford is to meet its turnaround goals, they need to be an unqualified success.

Jim Farley, Ford's chief marketing officer, is confident they will be. He said the U.S. marketplace changed dramatically over the past year, and so did Ford's place in it. Instead of competing with GM and Chrysler, he said Ford is now competing with Toyota Motor Corp. and Honda Motor Co.

"That's a new place for us in the U.S.," he said. "The good will for the company grew when we decided that we didn't need help. There was a lot more people paying attention to Ford."

But Farley said Ford's work is far from finished -- especially when it comes to consumers' perception of the Blue Oval, which remains colored by years of disappointing products.

"It took a lot of time to get where we are," Farley said. "It's going to take a lot of time to get customers back. But we really have seen tremendous progress."