6 key tasks for Ford recovery

Qtr. profit is good start, but it's too early to celebrate

Ford's Alan Mulally: "Every year we want to make an improvement over the previous year. It will never be over."
DETROIT — Cost-cutting largely drove Ford Motor Co.'s surprise first-quarter improvement, but CEO Alan Mulally has a lot to do to achieve a full turnaround.

Mulally told Automotive News last week that it's way too early for a "Mission Accomplished" banner.

"The way to judge the performance, I think, is that every year we want to make an improvement over the previous year," Mulally said. "It will never be over."

Ford garnered lots of praise for posting a $100 million net profit in the first quarter. But company leaders say results will worsen during the rest of 2008, leading Ford to a third straight annual loss.

Ford says it remains on target to post a profit in 2009. But the company isn't likely to realize substantial long-term profitability until the next decade, when a rash of new products arrive.

Here are six things that would will keep Mulally's plan on track:

1. The automaker must more fully leverage its global engineering and manufacturing resources.

Reducing platforms and sharing full vehicles across markets is the core of Mulally's One Ford strategy. He expects global platforms and shared cars and crossovers to drive major cost savings. Global vehicles are planned in the subcompact, compact, mid-sized and large rear-wheel-drive segments.

2. Ford must invest in the right segments and match its global vehicles to consumer expectations from region to region.

Ford's thriving European business seems to have met that goal, so the U.S. market will be the biggest test. The first global car for North America is the subcompact Fiesta sedan in 2010. Hatchback versions go on sale in Europe and Asia later this year. A concept of the U.S. car, dubbed Verve, drew favorable reviews this year.

3. Ford must find the floor in its U.S. market share.

Share continues to fall, though the rate of decline has slowed. Ford said it lost 0.1 percent of total share and 0.3 percent of retail share in the first quarter, compared with the first quarter of 2007. First-quarter total share was 15.0 percent, according to Ford. Executives expect the number to slide into the low 14 percent range for all of 2008.

Market share may not bottom out this year, Mulally told Automotive News. But, he said, "If we can stabilize this over the next year, we'll be on our way."

4. The automaker must get back on U.S. customers' consideration lists.

A big chunk of buyers don't shop Ford vehicles. Mulally has said changing that is perhaps the company's biggest challenge and the reason he hired marketing chief Jim Farley away from Toyota last fall.

Farley introduced the new "Drive One" advertising campaign earlier this month to try to persuade consumers to reconsider Ford. Ford is aiming to change buyers' minds by touting quality gains and safety and technology features.

To maintain any traction created by that campaign, Ford must launch upcoming vehicles free from glitches. The next test will be the 2009 Ford Flex crossover and 2009 Lincoln MKS sedan; both go on sale this summer.

5. The consolidation of Ford's U.S. dealer network must increase sales and profits at surviving stores.

Ford needs healthy dealerships that don't have to fight a handful of nearby same-brand stores for a shrinking number of sales. Ford trimmed 340 domestic-brand stores in 2006 and 2007. Farley has said Ford should complete the consolidation in the next two years.

6. The U.S. economy must rebound without too much delay.

Last week Ford trimmed its industry light-vehicle sales forecast for 2008 to 15.0 to 15.3 million vehicles, down from 15.7 million. And while Mulally says Ford borrowed enough money to survive two straight years of a 15.0 million market, a protracted downturn would stress Ford's recovery severely.

Mulally means Ford's $23.4-billion financing package, which he calls "the biggest home-improvement loan in the history of mankind." Only when Ford is banking healthy profits and can pay back its debt does the real celebrating begin. 

You can reach Amy Wilson at awilson@crain.com

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