(FORTUNE Magazine) – NEW DESIGN TRENDS sweep through Detroit about once a decade. The rocket ship shapes of the 1960s begat the sharp-cornered boxes of the 1970s, which gave way to the swept-back aero look of the 1980s. Catch a trend, and cars shoot out of the showroom like drag racers. Miss it, and they back up all the way to the factory. Ford, the first U.S. automaker to gamble on the latest style, cannot build new cars fast enough to meet demand. The rakish Lincoln Continental, aimed at the country club crowd, has been a sellout since it was introduced last December. The doorstop-shaped Probe, a sporty fastback with the same power train and platform as Mazda's MX-6, is outselling the Japanese car four to one. On December 26, exactly three years after the introduction of the Taurus -- the car that popularized the aero look -- Ford will launch the 1989 Thunderbird and its sister car, the Mercury Cougar. Automotive journalists have already pronounced the T-bird, with its aggressive appearance and taut ride, a triumph. The boffo reception vaults Ford into the ranks of the world's auto design leaders, right up there with the Italians. Traditionally more interested in mass production than aesthetics, American manufacturers in many industries have lagged behind the international competition. Ford is one company making a concerted effort to catch up (for other U.S. design leaders, see the following story). Ford's achievement, unimaginable a few years ago, owes something to luck as well as to smarts. The automaker gambled on a new look when its domestic competitors were in disarray. It has been surprisingly successful too in borrowing styling elements from West Germany's BMW and Audi. But Ford does not intend to rely on good fortune any longer. It has devised an entirely new procedure for giving birth to new products called ''Concept to Customer.'' Ford is spending more time on blue-skying new concepts and less on readying a car for production, and designers are getting more say about the engineering that goes into it. Though the first fruits of the new process will not be visible until the early 1990s, Jack Telnack, 51, Ford's smartly tailored top designer, says, ''Concept to Customer is changing our corporate culture -- the timing of new products, the way we work with each other.'' Dan Dimancescu, a Cambridge, Massachusetts, technology consultant who is familiar with Ford's new method, says he's impressed. ''GM has something called the '4 Phase' process,'' Dimancescu says, ''but it is far less sophisticated.'' (GM confirms that 4 Phase got under way early this year.) Determined to stay out front in styling, Ford is already leaving the aero look behind and developing a different theme for the next decade. Telnack's challenge will be to express aerodynamic principles in a novel way. Since Ford cars can hardly become more drag-free without turning into wingless warplanes, he is investigating the creation of entirely new proportions. Says the design boss: ''We are going beyond styling and cosmetics to find real customer benefits.'' The roomy, drop-nosed new Thunderbird provides some clues about future directions. ''Styling sells,'' a cherished Detroit maxim, is truer now than at any time since the 1950s. Gasoline is cheap, performance is important, and customers are choosing cars that have a special look. Says James Mateyka, a vice president of the Booz Allen & Hamilton management consulting firm: ''Quality and customer satisfaction with the treatment he gets from the dealer, taken , together, are less important than 'best in class' design.'' That's just as well in Ford's case, because plants are running overtime and critics are complaining about bugs. Ford fares poorly in customer satisfaction surveys conducted by J.D. Power & Associates. Though the Lincoln ranks sixth in the latest ranking, the Ford division came in 28th, well behind Hyundai (13) and not far ahead of Yugo (34th and last). Ford says the survey places too little emphasis on vehicle quality -- where Ford shows up well on the Power figures -- and too much weight on dealer performance, which the automaker has been making strenuous efforts to improve. The company also lags behind GM, as well as European and Japanese automakers, in the development of advanced engines and transmissions. A lead in design provides a potential kicker for Ford's already healthy profits. The new Thunderbird and Cougar together cost about $1 billion for product development and tooling, and analysts expect the company to sell as many as 300,000 annually. That would nearly match the selling rate of GM's three new midsize coupes -- the Pontiac Grand Prix, Oldsmobile Cutlass Supreme, and Buick Regal -- on which the No. 1 automaker spent $3 billion. As GM has learned, it takes more than a burst of new designs to move iron. Ronald Glantz, a security analyst at San Francisco's Montgomery Securities, points out that General Motors has slipped another tenth of a percent in U.S. market share this year, to 34.5%, even though it has brought out eight new models in the past 18 months. Ford, which has only two new models (Continental and Probe), has gained 1.1 points to 20.8%. Remarkably, the Taurus and its sibling, the Sable, are selling 34% faster than when first launched.

FORD'S EMERGENCE as a design force marks a major role reversal in Detroit. GM had been the styling leader since the early 1920s, when Alfred P. Sloan Jr. instituted the annual model change and Henry Ford stubbornly refused to alter the decade-old Model T or offer another color besides black. For years afterward Ford and Chrysler generally avoided daring designs that might not sell. Now confidence radiates from Ford's design center in Dearborn, incongruously located behind the gates of the Henry Ford Museum. Executives express surprise that competitors have been so slow to capitalize on the aero style. Says Fritz Mayhew, 46, the boyish-looking head of design for Ford's North American operations: ''One of the messages we got early on when we started this look + came from GM designers we know who said, 'Thank God you guys were able to do this. We've been trying to convince our management to do it for years.' '' GM caters to aero aficionados with some of its new models, but it is exploring multiple styling themes. In one 1989 Buick model, for example, designers have resurrected a look from a decade ago and tacked on 11 inches of sheet metal. Ford's breakthrough has come from the changes it has made in its design philosophy and development process. In 1979, Philip Caldwell, who had just replaced Henry Ford II as CEO, pronounced the new models ''cold, alligator- shoe cars.'' Then-president Donald Petersen gave Telnack the famous order to ''design the kind of cars you would like to drive.'' Petersen, now CEO, recalled in a September speech at a Stanford University symposium: ''We had made so many mistakes in the past by following this or that trend, this or that competitor. Finally we realized that we should not be driven by other people's choices but by our customers. We've been going our own way ever since.'' PETERSEN MAKES a particular point of championing the company's current approach. He calls it ''design as strategy.'' Says Ronald C. Hill, a GM alumnus who heads the industrial design department at the Art Center College in Pasadena, California: ''Just because you are the CEO of Ford, GM, or Chrysler doesn't mean you have good design judgment. In the case of Petersen, there is evidence that he does.''

When it developed the Taurus, Ford scrapped a system known as sequential engineering that had been the norm in Detroit for decades. Product planners first described a new car's functions, features, and target customers. Working from those specifications, designers created clay mockups. Engineers devised the mechanical components to fit the mock-ups and passed the plans to manufacturing experts, who tried to figure out how to build the cars. Sequential engineering caused internal bickering and missed deadlines. Sometimes the manufacturing folks didn't see the cars they were going to build until eight or nine months before production started. With the Taurus, Ford introduced the concept of concurrent engineering. Members of ''Team Taurus'' -- designers, engineers, production specialists, and other groups -- began working together early in the development process. It became rarer for one group to create a problem for another, but snafus still occurred. Engineering the side windows, which fit flush with the doors, took six months longer than intended. In the new Concept to Customer approach, the Team Taurus methods are being refined and the development cycle compressed. Ancient vertical hierarchies that separated design from manufacturing and engineering continue to be eroded, a process Petersen calls ''chimney breaking.'' Designers get even deeper into the nitty-gritty of product development than they did in the Taurus project. Working side by side with power train engineers and manufacturing experts, they acquire a thorough understanding of the car's mechanical components and the way it will be built by the time they create the clay model. No longer is the design center off-limits to engineers. A Ford stylist is as likely to spend his time with chassis specialists as he is with other designers. One danger in Concept to Customer is that the designers' creativity will be compromised. Engineers can throw up technical objections early in a car's development. Telnack professes not to be worried. Says he: ''If an aesthetic line has to change to make a functional change, so be it. Engineers are part of the team.'' If the new Thunderbird is any guide, teamwork pays. Designers and engineers shrank the engine bay so that the section of the body where the hood meets the windshield could be lowered by three inches. That small reduction improves driver visibility and reduces wind resistance. This is measured by the coefficient of drag. The T-bird, with a C.D. of .31 in its least expensive configuration -- expected to be priced around $17,000 -- is slipperier than a $74,545 Porsche 928, with a C.D. of .34. The T-bird team also stretched the wheelbase, which improved the ride and left more room between the front and rear wheels for the passenger compartment. But it shortened the overall length by reducing the overhang at both ends. The car is more stable because the wheels are closer to the corners of the body. Bucking the trend to front-wheel drive, Ford stayed with traditional rear-wheel drive. Reason: Many performance cars have it, and T- bird fans prefer it. One glitch developed when a glove compartment switch failed to open the fuel door on 30 of 250 preproduction cars. Ford decided to take the switch off early models. TO REDUCE such mishaps, Telnack has started brainstorming new models as long as 6 1/2 years before production begins. Along with a few other marketing experts and engineers, he is trying to sort out basic vehicle proportions and ensure that new mechanical components are bug-free. The goal is to move more conceptual work upstream. Even though a replacement for the 1989 Thunderbird will not be out until 1997 and product development ordinarily wouldn't start until 1992, preliminary work will begin next year. That should minimize delays in the development phase, which Ford hopes to telescope to four years, matching the Japanese. Development took five to six years in the late 1970s. And just what might a post-aero car look like? Even more so, in a way, but Telnack adds: ''We're trying to get maximum space for the driver, passengers, and luggage, and minimum space for the mechanicals. We're also trying to take weight out, get more fuel efficiency, and make the car crashworthy.'' Cars will also take on a more organic look: Front and rear windows will flow into hoods and decks, and the wheels will be more of a piece with the entire design than mere appendages. Ford is turbocharging its design process with the help of a West Coast styling studio. Says Telnack: ''I really do believe that the sun rises in the west.'' Only Ford uses an independent contractor, Concept Center California, to ensure that it gets a fresh viewpoint. In addition, Ford's contractor works only on actual vehicle programs and wastes no time on futuristic show cars. Its Thunderbird design competed against two others from Dearborn, and had a strong influence on the final version. Since the best designs in the world are failures if they do not sell, automakers research them by showing mockups to customers at new-car clinics. Ford scrapped fender skirts and a hatchback for the Thunderbird after receiving negative customer comments, and it reinstated an old-style push-pull headlight switch because customers like it better than more modern rocker or rotary switches. Ford is trying to accelerate the soundings so it can get them even earlier in the design process. This year it may well be giving clinic attendees confidential glimpses of a car that will not be sold until 1993 and that could remain in production until 2001. Ford has to be careful here: The customer is often wrong. As Fritz Mayhew points out, ''If you slavishly follow what he says, you will produce today's cars. People have to feel a little bit uncomfortable about a design.'' A certain amount of clairvoyance is required to interpret what is learned in clinics. Ford once subjected participants to an imaginary television news program set several years in the future in an ^ effort to make them look ahead. But once the news program was over, viewers forgot about the future. Ford designers stumbled with the slow-selling Lincoln Mark VII introduced in 1984, which customers find too cramped inside and too poky for a luxury car. But another clunky design, the Lincoln Town Car, has been a showroom hit. Virtually unchanged in a decade, it looks more like a brick than an arrow. Ford trims some interiors with wood-grained plastic, a practice hardly likely to win it a place in the Museum of Modern Art. Ford is not altering its winning aero design without trepidation. Says Philip Benton, 59, who heads worldwide auto operations: ''We could build on the aero look and be reasonably successful for a number of years. But everybody is on to that look, so we have to get onto something that is different. That is a very risky venture, but we have to do it.'' Benton notes that Ford was burned badly in Europe with the futuristic but unpopular 1982 Sierra. A version sold in the U.S. as the Merkur XR4Ti proved equally slow- selling and will be discontinued at year's end. It is a cliche, but no less true for being so, that competition among all automakers will stiffen in the 1990s. The Japanese are becoming ever more adept at developing cars that appeal to North American tastes, and they will be less exposed to crazy currency swings as they add capacity in the U.S. GM shows signs of emerging from its long funk. Job No. 1 for Ford will be to keep coming up with new cars that are noticeably different -- and get them into its showrooms without any glitches.

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