Mulally is staying: Another boost for Ford

  @FortuneMagazine January 8, 2014: 10:19 AM ET
alan mullaly

Alan Mulally is not going anywhere anytime soon.

(Fortune)

Top executives from European and Asian automakers will be flying into Detroit this weekend for the first big international car show of 2014. This year they will see two things that haven't been visible in nearly a decade: a resurgent city of Detroit and newly robust U.S. car manufacturers, led by Ford Motor (F, Fortune 500).

Now officially bankrupt, the Motor City is undergoing a painful restructuring of its finances and operations under a state-appointed emergency manager. But there has been a spurt of real estate activity in downtown neighborhoods, and Cobo Arena, home of the North American International Auto Show, has undergone a $267 million makeover. Its centerpiece -- an 80-foot high atrium that looks out on the Detroit River -- matches the one in General Motors' (GM, Fortune 500) headquarters complex up the street.

As for Ford, it enjoyed a blowout year in 2013, gaining market share in the U.S., China, and India, and piling up more than $8 billion in operating profits. Its momentum should serve it well as it cruises into the new year with a record number of all-new and revamped products, led by the 13th generation of America's favorite vehicle: the F-150 pickup.

There have been a few bumps along the way. Glitches in its MyFord Touch instrument panel controls have kept its quality ratings low, repeated recalls of its popular Escape crossover will cost it an estimated $300 million, and CEO Alan Mulally generated some unwanted notoriety when for weeks he refused to take himself out of the running to succeed Steve Ballmer at Microsoft (MSFT, Fortune 500).

Mulally finally flattened the distraction on Tuesday, telling the Associated Press, "I would like to end the Microsoft speculation because I have no other plans to do anything other than serve Ford. You don't have to worry about me leaving." Now 68, Mulally is expected to stay at Ford through the remainder of 2014.

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So Ford sails into the New Year with the wind at its back. In the U.S., more cars and trucks wore a blue oval in 2013 than any other brand, and Ford Motor gained almost half a point of market share. The Escape crossover ranked as the tenth most popular vehicle sold in America despite seven recalls, and the midsize Ford Fusion scooted right behind it, as its sales exploded in December, up 27%. In Europe, results have stabilized with an improving economy, and Ford has recorded better results over the past five months. In China, Ford boosted sales 50%, passing Toyota (TM) and Honda (HMC); and a new product surge in India produced sales some months that were as much as a third stronger than in the previous period.

Unlike in prior years, Ford's impressive volume is not coming at the expense of profits. Ford has enjoyed pretax operating margins greater than 10% in six of the last seven quarters, and it out-earned General Motors despite lower production.

Ford Mustang goes global

Also unlike prior years, Ford is generating some buzz. The world's manufacturers will be unveiling more than 50 new cars and trucks at the Detroit show, but none will be more significant -- or more closely watched -- than the all-new version of America's favorite vehicle: the F-series pickup. In continuous production since 1948, it has outperformed the Model T and generated more profits for the Ford family than any other vehicle.

Design-wise, trucks are assembled from basic components -- cab, chassis, bed, powertrain, and wheels -- and don't change much from decade to decade. Strength, durability, and towing capacity are big selling points, which explains the omnipresent cowboy imagery and tag lines like "Ford Tough." But Ford is betting that future truck buyers will also value fuel economy.

It's taken the risky step of replacing much of the steel in the F-series with lightweight aluminum and promises a weight reduction of some 700 pounds. That's all good, but the new truck will be more expensive -- as much as $800 -- and more difficult to build. Automotive News reports the two plants that make the F-150 will be shut down longer than usual to change over to the new model, and the need for a smooth launch is critical.

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The car business is as much about sizzle as steak, and Ford has that covered too. At the Detroit show, journalists, enthusiasts, and potential customers will get the opportunity to see up close the latest iteration of the original pony car, the Mustang. The 2015 model has been modernized with a more sophisticated design and upgraded components like an independent rear so that it can be sold overseas as well as in the U.S. The initial response is enthusiastic. The new car received wide praise when it was unveiled at a half dozen locations around the world in December.

All this prosperity is allowing Ford to expand. The company plans to hire 5,000 workers in the U.S. -- including 3,300 white-collar staff, such as engineers - and 6,000 workers in Asia. This will be the most people Ford has hired in one year since 2000.

The other two members of the old Big Three are heading into the Detroit show under their own heads of steam. General Motors has bought out the last of the U.S. Treasury's shares, meaning an end to its much disliked sobriquet of "Government Motors." Even more significant -- it can show off a shiny new management team headed by CEO Mary Barra. For its part, Chrysler will be fully integrated with Fiat after acquiring shares owned by UAW's health care trust. It will show its long-awaited and much needed replacement for the Chrysler 200, based on a Fiat platform.

With U.S. car sales expected to grow to an annual rate of 16 million, there should be plenty of sales to go around for everybody. But nobody is better positioned to take advantage than Ford -- and now, it won't have the added distraction of breaking in a new CEO. To top of page



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