Ford's Green Push Is Paying Big Dividends

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Ford (NYS: F) CEO Alan Mulally rightfully gets credit for driving the automaker's remarkable turnaround. While many of the pieces were in place before his arrival in 2006, Mulally was the one who made it happen: He appointed the key executives, drove the reorganization, asked the right questions, and -- more than anyone else -- brought Ford back from the brink of disaster to solid profitability.

One aspect of Ford's revival that is somewhat underplayed is the company's commitment to greener transportation. Mulally had a lot to do with that, but much of it started with his predecessor -- Bill Ford, now Ford's executive chairman.

Bill Ford, Henry's great-grandson, is an environmentalist, and he recognized early on that rising gas prices were going to force changes in America's auto-buying habits -- changes that the automaker had to be prepared to meet.

Fortunately for Ford and its shareholders, the company's preparations were quite good -- and as gas prices bump up against $4 a gallon, they're starting to pay big dividends.

A green vision driving solid, accessible products
Ford had never offered a really great small car here in the U.S., but Mulally recognized early on that the company was going to have to diversify its product offerings beyond its (very good) trucks and SUVs. As part of the "One Ford" plan to streamline Ford's best offerings into a single, global product line, Europe would be the source of Ford's global small cars going forward -- and they have turned up a couple of strong contenders in the current Fiesta and Focus.

The Focus, in particular, has done well lately after a slow start. While sales of rivals like Honda's (NYS: HMC) Civic have boomed, the Focus has held its own, with very strong totals in the past few months. In fact, demand has risen to the point where Ford is putting the factory that builds the Focus on a round-the-clock schedule starting in May.

The Focus is turning into a big win for Ford, all the more so because it's a profitable, American-made product. But Ford's green efforts go well beyond small cars. A hybrid version of the Fusion midsize sedan has been a steady seller -- and the new-generation Fusion, due this fall, will come in an advanced "plug-in" hybrid version that Ford says will have a better mileage rating than General Motors' (NYS: GM) much-touted Chevy Volt.

Trucks and SUVs haven't been left out, either. A few years back, Ford made a big investment in advanced-turbocharging technology, the foundation of a line of new engines it has since rolled out under the "EcoBoost" brand. In V6 form, the EcoBoost gives Ford's full-size pickups the power of a V8 -- but with significantly better mileage. And a four-cylinder variant is available in SUVs like the Explorer, offering much better fuel economy than the sixes and eights that were standard fare just a few years ago.

Strong competitive standing as fuel prices rise
In a way, Ford's timing was perfect. While archrival GM has some strong fuel-efficient offerings such as the popular Chevy Cruze compact, the General is still struggling to catch up with Ford in categories such as full-sized trucks and SUVs. GM lost a lot of product-development time during its descent and fall into bankruptcy, and its U.S. product portfolio won't really catch up to Ford's for at least a year, maybe two or more.

Meanwhile, Toyota (NYS: TM) still has a strong reputation for fuel efficiency, and strong entries such as the Prius will do well as gas prices continue to rise. But in some other categories, products such as the Corolla have been eclipsed by the strength of competitors such as the Focus, strength that appears to have caught Toyota (and Honda, to some extent) off guard.

Toyota will up its game, of course, as will Honda and (eventually) General Motors. But right now, Ford's in an enviable position -- a full lineup of fresh products, most of which arrived to glowing reviews, and nearly all of which are at or near the top of their classes in fuel economy. Shareholders have to be encouraged by Ford's chances as gas prices continue to rise.

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At the time this article was published Fool contributor John Rosevear owns shares of Ford and General Motors. Follow him on Twitter at@jrosevear.Motley Fool newsletter serviceshave recommended buying shares of ExxonMobil, Ford, and General Motors and creating a synthetic long position in Ford. Try any of our Foolish newsletter servicesfree for 30 days. We Fools don't all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.

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