Ford makes right calls, rebounds in tough year; to parade new ‘world car’ at Detroit auto show

Ford looks smart, brings new Focus to Detroit show

DEARBORN, Mich. — In a year that humbled most automakers in America, Ford came out looking smart.

As 2009 unfolded, auto sales slowed, General Motors and Chrysler nearly collapsed and Toyota faced safety questions after its largest U.S. recall ever. But Ford Motor Co. turned a third-quarter profit, gained market share and saw sales jump 33 percent in December. It was a big turnaround for the second-largest U.S. automaker, which three years ago teetered on the brink of financial ruin.

Thanks to some shrewd moves, Ford is blazing a trail for its Detroit rivals. Under CEO Alan Mulally, Ford borrowed billions before credit markets froze, allowing it to quickly invest in cars and trucks that have stabilized its sales. It also trimmed its lineup, streamlined development and began standardizing most parts for its cars no matter where they’re sold in the world.

Those efforts are culminating in the launch of the 2012 Ford Focus at the Detroit auto show this week. Ford hopes the car becomes the standard for how to economically build a vehicle for the world.

This new “world car” shares about 80 percent of its components with twin models in Europe and Asia. Because of the way the 106-year-old company was organized, previous models of the Focus were designed separately by region and didn’t share many parts.

While Ford’s global product development mimics systems already used by the Japanese, Germany’s Volkswagen AG and others, it’s far ahead of domestic competitors. Chrysler LLC, which sells relatively few cars outside North America, only recently gained the kind of global reach that Ford has had, when Italian automaker Fiat SpA took control. General Motors Corp. has a global product development system, but it’s struggling to shed brands and put a new management team in place.

Ford is on track to beat others in the globalization race. Michael Robinet, vice president of global vehicle forecasts at CSM Worldwide, predicts that by 2015, Ford will be making 719,000 cars off of every vehicle underbody it has compared with an industry average of 450,000. Toyota Motor Co. will be making 835,000.

“Ford truly has a global brand, which GM doesn’t have,” said Erich Merkle, president of the consulting company autoconomy.com. “You don’t buy a GM. You buy a Chevrolet or an Opel or a Daewoo or a Buick. Their brands are very fragmented around the world.”

Ford had similar problems in 2006, when it had 97 different vehicle nameplates and was saddled with costly labor agreements, sliding market share and a dysfunctional bureaucracy. Mulally, hired from Boeing Co. by Chairman Bill Ford Jr., developed a plan to cut brands such as Jaguar and Volvo and focus on just 20 nameplates, while controlling labor costs and combining Ford’s global design and engineering. The changes have transformed Ford.

Money saved by sharing parts globally gets pumped back into new technology, such as hybrid batteries and better air bags, that can be spread more quickly across a common lineup. Fewer designs mean fewer glitches and costly repairs. And U.S. buyers will now see more small cars because Ford believes it can make a profit on them. Ford says it has cut vehicle development costs by 60 percent since 2006.

Mulally, 64, said his years at Boeing helped him immediately grasp what Ford needed to do.

“You’d never have a 737 that would be different for the United States and Europe. I mean, it’s a plane,” he told The Associated Press in a recent interview. “It’s exactly the same if you’re Ford and you’re a global player.”

Other players have been doing this for years. A wider version of Honda Motor Co.’s Japanese Accord is sold as the Acura TSX in the U.S., while Nissan Motor Co.’s Versa is sold as the Tiida and the Latio in Europe, Asia, South Africa and South America. These automakers have reaped profits from small cars because they stopped designing individual versions for each market.

The Focus builds on what Ford began with the Fiesta subcompact, which went on sale first in Europe and Asia and will hit U.S. showrooms this summer. The car shares 65 percent of its parts worldwide. Mulally said 10 percent to 15 percent of parts will always be different because of regional tastes.

Meanwhile, the 2012 Focus goes on sale worldwide early next year, and Ford hopes its stylish design, handy hatchback and fuel economy keep the car a strong seller. It was the third best-selling small car in the U.S. last year, behind the Toyota Corolla and the Honda Civic. Ford has sold 9 million Focuses worldwide since the car’s introduction ten years ago.

The changes in product development wouldn’t have been possible without another Mulally decision: Borrowing $23.5 billion in 2006 so that even in an economic downturn, Ford could continue a revamp of its products that began in 2005. Mulally dumped brands so the automaker could concentrate on Ford, Lincoln and Mercury. The company plugged away, even as it posted the worst loss in its history — $14.6 billion — in 2008.

“We took those losses and we borrowed that money so we could do this transformation,” Mulally said. “In the automobile business, like nothing I’ve ever seen, you cannot get behind.” Chrysler and GM also borrowed money for restructuring, but years later, and from the government.

Ford, the 52-year-old chairman, says Mulally’s plan is succeeding, unlike past turnaround efforts, because it is narrowly focused on core brands, involves everyone and proceeds methodically instead of taking risks.

“This is about risk elimination, because the bets we place in this company are so huge that we need to make sure that everything is as thoroughly vetted as they can possibly be,” he told the AP at Ford’s Dearborn headquarters.

Ford isn’t out of the woods. It still has a staggering $27 billion in debt, far more than GM and Chrysler because it wasn’t able to shed it in bankruptcy proceedings. It also doesn’t expect a full-year profit until 2011.

But Bill Ford and Mulally say they are sticking to their debt repayment plans and prefer their position to a bankruptcy filing or federal aid.

“We have the ability to run our company with no oversight other than from the shareholders,” Bill Ford said.

And — they hope — from the customers, who will be eyeing the Ford of the future this week in Detroit.

(This version CORRECTS model year for Focus after Ford issued a revision to its announcement.)