The Sole Reason Behind Ford Motor Company's Resurgence
Ford's doing many things right these days, a night and day change from how the company was operating just a decade ago. Its small vehicles, like the Fiesta, Focus, and Fusion, are gaining market share in segments historically dominated by Japanese rivals. Ford's big bet on SUVs has paid off and the Escape has gone from an American success story to a global one. Ultimately, Ford's success comes down to one key reason: CEO Alan Mulally.
It's not surprising Mulally has high rankings from Glassdoor. He orchestrated one of the greatest turnarounds in American business history. When Mulally came on board in 2006 he set forth his "One Ford" plan that enabled the Blue Oval to reverse its $30 billion in losses between 2006 and 2008, delivering a profit in 2009 -- the same year rivals General Motors and Chrysler filed for bankruptcy.
One key point in Mulally's "One Ford" plan was to "aggressively restructure to operate profitably at the current demand and changing model mix." Ford has consolidated its number of vehicle platforms quickly and aims to have 85% of global sales from nine core platforms by the end of this year. Today, Ford builds vehicles on 15 platforms and has the freshest lineup in the industry; by 2017, almost all of its vehicles will be built on as few as nine platforms. That compares favorably to rival General Motors which hopes to halve the number of its platforms to 14 by 2018.
Improving Ford's operating efficiency has been a huge boost to its bottom line and is one reason the automaker has consistently produced North America margins above 10%, while General Motors aims to accomplish that feat in a few years' time.
That's just scratching the surface of what Mulally has accomplished, but even more important is what he's working on now.
Mulally is committed to staying with Ford at least through 2014, and during that time he'll focus on efforts to turn around two big problems, which are both much smaller than the troubles Ford faced in 2006 as the recession loomed.
One of the biggest things Mulally and Ford can do to improve the automaker's bottom line quickly is to reverse losses in Europe. Simply breaking even last year would have sent the company's bottom line surging $1.7 billion, a huge amount. While Ford plans to break even in Europe by 2015, it's making progress faster than anticipated.
Ford's losses in Europe for the third quarter totaled $228 million, which was a $240 million improvement from last year and $120 million better than the previous quarter. It turns out that Mulally and his team's quick decision to cut capacity by 18% in the region is paying off and will save as much as $500 million annually. While Europe's market struggles to rebound, Ford's riding the success of its smaller and fuel efficient vehicles to send wholesale volume and revenue up 5% and 12%, respectively, in the third quarter .
Ford's turnaround in the U.S. and Europe isn't the only such effort that Mulally is tackling.
Ford desperately needs its Lincoln brand to return to relevance. The brand consistently ranks among the industry's best in consumer loyalty, but it does not offer enough options as consumers' purchasing power grows and they look to enter the luxury market. That's because during the recession and the focus on Ford's main brand, the company was forced to cut investments on Lincoln. Sales plummeted.
Now that the U.S. is surging and profits are flowing for Ford, it can turn its focus to reviving the all but dead luxury line. The Lincoln MKZ launched earlier this year; once dealerships received sufficient stock, the sales have rebounded significantly.
Ford this week unveiled the 2015 Lincoln MKC, the second redesign in Lincoln's revival strategy, which it hopes will drive big sales in one of the fastest growing segments in the world: SUVs.
Ultimately, Ford is in its best financial shape in roughly a decade, and it has Mulally's "One Ford" plan to thank for its resurgence. Mulally is nearing retirement having witnessed Ford's dividend being reinstated and doubled, as well as returning to investment grade by all four major credit rating agencies. Before he makes his grand exit he'll likely see Europe break even, Ford's market share in China double to 6%, and Ford resume its place among the globe's prominent automakers.
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The article The Sole Reason Behind Ford Motor Company's Resurgence originally appeared on Fool.com.Fool contributor Daniel Miller owns shares of Ford and General Motors. The Motley Fool recommends Ford and General Motors. The Motley Fool owns shares of Ford. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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