(Money Magazine) -- The auto industry is struggling not just here, but around the world. Yet you couldn't tell that from Ford lately. While rivals GM and Chrysler scrambled for bailout funds in 2008, Ford said, "No thanks."
In January, the company reported its first full-year profit since 2005. And with Toyota suffering from headline-grabbing defects, Ford gets to showcase its quality improvements.
Still, with massive debt and the car market down more than 30% from a few years ago, the company faces a bumpy road.
Winning back share
The automaker has a chance to gain more market share due to its competitors' woes.
Toyota's recall of more than 8 million vehicles (for acceleration problems linked to 56 deaths) gives Ford -- which lost its No. 2 ranking for U.S. sales to Toyota in 2007 -- a chance to regain ground.
Even before Toyota's problems surfaced, Ford's share had been on the rise, according to TrueCar.com. And in February its sales jumped 43%.
Chalk it up to improvements Ford has made in its quality. This year, Consumer Reports recommended more Ford models than Toyota vehicles.
The Ford Fusion also beat the Toyota Camry in the magazine's 2009 reliability survey. Says Morningstar equity analyst David Whiston: "We now expect Ford to outsell Toyota in the U.S. this year."
Fixing its mix
Long known for trucks, Ford is shifting its lineup for fuel-conscious consumers.
Gas prices are down from their $4-a-gallon peak, but Ford is betting fuel-conscious consumers are here to stay. The firm is continuing to speed up development of hybrid and electric technologies. And it's bringing the Fiesta -- and its 40-mpg highway rating -- from Europe.
"We previously made a pretty big bet on large vehicles, but we're trying to rebalance our lineup so we don't lose market share every time gas prices spike," says CFO Lewis Booth.
It's a gamble. "They'll be in deep trouble if Americans don't like it," says Gerald Meyers, former chairman of American Motors. Plus, it's unclear if Ford can find a way to make as much profit on each small car as it does per SUV.
Paying for the past
Although Ford has turned the corner on profits, its debt remains worrisomely high.
Ford was the only U.S. automaker not to declare bankruptcy. Still, it hasn't been a smooth ride. From 2001 to 2008, Ford lost $31 billion. And the firm's automotive division still sits on more than $34 billion in debt.
About $8 billion of that comes due in 2013, and Ford is in a race to grow its way out of trouble. "We recognize we have too much debt on our balance sheet, but we think the best way to fix that is by rebuilding our business," says Booth.
Ford posted a $2.7 billion profit in 2009, following a $14.8 billion loss the prior year. Analysts predict profits will continue to grow, to $3.6 billion in 2010. But if earnings hit a speed bump, Ford could be right back in the hot seat, worrying about its debt burden.
Land O'Lakes CEO Beth Ford charts her career path, from her first job to becoming the first openly gay CEO at a Fortune 500 company in an interview with CNN's Boss Files. More
Honda and General Motors are creating a new generation of fully autonomous vehicles. More
In 1998, Ntsiki Biyela won a scholarship to study wine making. Now she's about to launch her own brand. More
Whether you hedge inflation or look for a return that outpaces inflation, here's how to prepare. More